Celltrion threat on Remicade in U.S. no sweat for J&J

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Key executives on Johnson & Johnson's ($JNJ) April 19 earnings call are convinced they have the legal firepower to invoke patents to halt the launch of a Remicade biosimilar in the U.S. this year by Incheon-based Celltrion.

The South Korean firm announced earlier this month that it won a U.S. FDA nod for a biosimilar of Remicade (infliximab), calling its version of the intravenously administered rheumatoid arthritis drug Inflectra (infliximab-dyyb).

Celltrion has been selling a Remicade biosimilar in Europe since 2015 under the name Inflectra as part of a marketing pact with Hospira, now owned by Pfizer ($PFE).

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Dominic Caruso, chief financial officer, and Louise Mehrotra, vice president of investor relations, handled a flurry of questions on the approval and swatted them away one by one for the impact on earnings assumptions in 2016.

CEO Alex Gorsky was not on the call.

Caruso did note in response to a question on the 180-day notice period that follows such approvals that the word was in. "Yes, we have received that from Celltrion."

But Caruso made it plain he expects the party to continue.

"As a reminder, our sales guidance for 2016 assumes no biosimilar entrant for Procrit or Remicade in the U.S.," he said, adding that "our assumption with regard to Remicade biosimilar remains unchanged, even with the recent FDA approval of Inflectra, due to our intellectual property which we intend to defend."

And when pressed further on the house view that no Remicade biosimilar will hit the U.S. in 2016, Caruso was even more detailed in response to a question from Josh Jennings, an analyst with Cowen and Company.

"You're right, Josh, we don't expect biosimilar competition in 2016," Caruso said. "As you know, we have several patents that we intend to defend. For example, the U.S. patent, the 471 patent, extends to 2018 and another patent that we have extends to 2027."

To be sure, Inflectra remains part of legal cases related to the U.S. Biologics Price Competition and Innovation Act for certain Remicade patents held by Johnson & Johnson that extend beyond the main expiry at the end of June. A similar challenge led to a 6-month delay in product sales launch in the case of Zarxio (filgrastim-sndz).

Earlier, Mehrotra cited strong growth figures for Remicade around the globe.

"Combined Remicade export sales and international sales grew approximately 11%. Sales to distribution partners were up approximately 5%," Mehrotra said.

"Sales to our international direct markets were up approximately 17%, due primarily to strong double-digit growth in the Western Hemisphere, excluding the U.S., primarily driven by timing of shipments and market growth."

Finally, Caruso gave a small update on China where a slowdown in the fourth quarter of 2015 caught some attention.

"China, again just to put it in perspective, it's about 5% overall business," Caruso said, in a near repeat of comments made in January.

"And a slowdown in the economy, actually last year, is what caused some distributor inventory to be at relatively high levels. That distributor inventory is beginning to bleed off; we saw that in the first quarter. And we think that bleed-off will be completed shortly so we don't expect to see a continued impact of that for the rest of the year."

- here's the earnings release from J&J

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