J&J Drugs & Drug-Coated Stents Take A Big Hit


Dow component and giant healthcare company--you really can't lump it in with big pharma because it sells drugs, medical devices and consumer products--Johnson & Johnson reported earnings this morning. JNJ beat on the bottom line, missed on the top line and provided 2009 earnings guidance that's below the Street.

A big part of the light sales was due to generic competition, especially for the anti-psychotic Risperdal, and weakness in the anemia franchise Procrit from lingering safety and insurance reimbursement issues.

In a blast email to clients Deutsche Bank biotech analyst Mark Schoenebaum says the read-through to Amgen , which sells similar anemia drugs, "seems to indicate Amgen 4Q (fourth quarter) consensus estimates are in the right range." In the U.S., JNJ's fourth-quarter overall drug sales fell 13 percent, Risperdal revenue plummeted 84 percent and Procrit's numbers dipped four percent.

And the new competition in the multi-billion dollar drug-coated stent space is really hurting JNJ's device business.

On the conference call, the company said that sales of its drug-coated stent called Cypher sank a whopping 63 percent and the price was six percent lower in the fourth quarter than it was the year before. Medtronic , Abbott Labs and Boston Scientific also make drug-coated stents. Analysts say the launch of the newest model shared by ABT and BSX has gone better than expected. We should get an indication of that when ABT reports earnings Wednesday morning. On the plus side, JNJ said that stent procedures, which had gone down over drug-coated device safety and efficacy concerns, rebounded approximately four percent in the fourth quarter versus the same period a year ago. And the company indicated that later this year it will have new test results on a next-generation drug-coated stent that essentially dissolves.

With a company as big and diversified as JNJ, you'd expect to see some macro-economic indicators. In his prepared remarks, JNJ Chairman and CEO Bill Weldon said in certain parts of the company he is "seeing some signs that consumers and patients are becoming more frugal." He singled out diabetes blood-sugar test strips. In the U.S. in the fourth quarter JNJ's diabetes care device and diagnostics sales went down 18-and-a-half percent. Unless those patients are going somewhere else for that stuff, that's not good for diabetics, JNJ and other companies that cater to that market.

Dendreon Update

In a follow-up to my post from late last week, shares of DNDN hit a new intra-day low this morning.

Jonathan Aschoff at Brean Murray Carret & Co. put out a research note to clients this morning to "strongly reiterate" his sell rating and price target of a buck. He believes the earlier-than-expected milestone reached in the pivotal clinical trial of the company's experimental prostate cancer treatment isn't bullish for the final results now expected in April. Brean makes a market in DNDN and would like to do investment banking for the company. But despite the wall that's been put up between research and banking, I can't imagine Dendreon--or any company for that matter--giving a firm with that kind of bearish position the business, so to speak.

    • J&J Profit Rises, 2009 Profit View Disappoints

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