- Johnson & Johnson expects competitive challenges from generic and biosimilar copies of its prescription medicines to be strongest in 2019, yet still posted quarterly drug revenues during the first three months that beat Wall Street forecasts.
- Sales of J&J's blockbuster prostate cancer drug Zytiga fell by more than half in the U.S., reflecting the impact of a full quarter of generic competition following a district court ruling last October that opened the door to copycat rivals. That hit to drug revenues adds to pressure J&J has felt on sales of Remicade in the U.S., where two biosimilars to the anti-inflammatory biologic have launched.
- Yet fast growth from drugs like Stelara, Tremfya and the blood cancer drug Imbruvica more than made up for those losses, pushing total drug sales up 4.3% year over year in the U.S. and up 7.9% worldwide on an operational basis.
J&J's stronger-than-expected drug sales — despite rising competition — appeared to relieve investors, who sent shares in the bellwether pharma up by as much as 3% Tuesday morning.
The first quarter can be tough for drugmakers, and J&J faced the additional headwind of multiple generic entrants challenging what was its third best-selling drug this time a year ago.
Competition to Zytiga (abiraterone acetate) and Remicade (infliximab) is set to build this year, while drugs like Tracleer (bosentan) and Velcade (bortezomib) will soon face generics of their own in the U.S.
"I would say 2019 is when we would expect the largest impact from generic and biosimilar erosion," said Joseph Wolk, J&J's chief financial officer on an April 16 earnings call. "I see 2019 as a trough."
Earlier this year, J&J said it anticipates a $3 billion hit to sales due to generic and biosimilar competition.
So far, the pharma has been able to hold on to much of the Remicade market, although it has had to make concessions on price. For Zytiga, however, Wolk indicated sales declines would like accelerate throughout the year.
Yet investors might be forgiven for missing the impact. Drug sales still rose by nearly 8% excluding the impact from currency changes — a rate Credit Suisse analyst Vamil Divan noted was in line with the recent trend.
"Given some of the concerns that we believe investors have had on the outlook for biopharma companies heading into 1Q19 earnings, we believe these results should be somewhat of a relief," Divan wrote in a note to clients.
In immunology, sales of Stelara (ustekinumab) and Tremfya (guselkumab) rose strongly, while J&J continued to benefit from growth from cancer drugs Imbruvica (ibrutinib) and Darzalex (daratumumab).
The pressure is on, however, for J&J — along with its pharma peers — to source growth from increased uptake rather than higher pricing.
Drug prices have remained under the microscope and J&J pharma head Jennifer Taubert was among seven pharma executives called before the Senate Finance committee last month in February to answer lawmakers' questions.
At that hearing and elsewhere, J&J detailed the marked decline in net prices for its products in the U.S., even as it continued to raise list prices by a healthy average of 6.3% in 2018. That gap, according to J&J, is due to the $21 billion in rebates and discounts it provided to payers last year.
J&J does its best to paint those numbers in a favorable light of course. While the weighted average net price decline was 6.8% last year, the median figure was a drop of just 1.9%, responses for the record to the Finance committee show.
Still, the widening gap between list and net prices help to explain J&J's enthusiastic support for the Trump administrations' proposal to eliminate drug rebates paid to insurers in Medicare and Medicaid.
"We are suppositive of the administration's efforts on rebate reform and we're looking at how we could implement that in a really rapid way," said Taubert on J&J's earnings call.
When asked what effect such a proposal might have on prices, Taubert largely demurred, noting options could include having rebates flow to patients at the pharmacy or lowering list prices going forward.
In its response to the Finance committee, J&J noted either option would involve renegotiating contracts and could depend on whether elimination of rebates happens only in federal health plans or in the market more broadly.