J&J, under 'accelerating' generic and biosim attack, expects growth to bottom out in 2019

Johnson & Johnson's pharma business has been beating the market for years now, but that's about to change. A wave of patent expirations will put a drag on J&J's top-performing unit this year as the drugmaker looks to ramp up newer meds, execs said Tuesday.

The good news? After it gets past the patent losses, J&J expects "well-above market growth" in pharma, CFO Joe Wolk said.

While J&J has several new meds on the upswing, older drugs face accelerating competition from generic drugs and biosimilars. That competition means J&J will likely face a “trough” year in 2019, Wolk said during the company's first-quarter earnings call.

Immunology blockbuster Remicade, previously J&J’s top med by sales, slipped 15.5% in the quarter in the U.S. as biosims continue to take hold. The brand held on to a 92% share of the market, J&J pharma chair Jennifer Taubert said on the call, but at “lower and very competitive” prices than before biosim competition hit the scene. The drug still generated $1.1 billion worldwide in the first quarter.

Prostate cancer med Zytiga is also facing off against new competition, and it showed. Sales plummeted by 55% in the U.S. to just $185 million. Lucky for J&J, the drug grew a bit outside the U.S. to cushion the blow to global sales, which came in at $679 million.

The anemia remedy Procrit is now under biosim assault, too, and it ceded 22% of its sales in the U.S. to land at $148 million.

Those aren't the only drugs under assault, either. Looking ahead, pulmonary arterial hypertension med Tracleer and multiple myeloma blockbuster Velcade will likely face copycat competition "in the coming months,” Wolk said. Those drugs are already slowing down sales-wise, J&J’s first-quarter results show. 

But the company does boast several newer drugs that are taking big leaps forward. Thanks to a 32.4% jump to $1.4 billion in sales, its immunology med Stelara ranked as J&J’s biggest Q1 seller. In oncology, Darzalex sales rocketed by 45.5% to $629 million, while Imbruvica posted a 33.5% sales increase to $784 million. 

Xarelto—which had been a reliable growth engine until just recently, thanks to in-class challenger Eliquis—suffered further this quarter from new Medicare rules. In an early indication that the "doughnut hole" change implemented by Congress will cost drugmakers, Xarelto generated “surprisingly light” sales, Credit Suisse analyst Vamil Divan wrote in a Tuesday note. The med’s sales slipped 6.3% in the period to $542 million.  

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On the conference call, Taubert said the “doughnut hole” change in Medicare Part D—which forces drugmakers to offer up bigger discounts in the coverage gap—took a bite out of the drug’s sales for the quarter. Pharma companies fought the change, but in a rare loss for the industry's powerful lobbyists, failed to convince Congress to reverse course.

Overall in the first quarter, J&J posted sales of $20 billion, essentially flat compared with 2018’s first quarter. J&J’s pharma business outperformed consumer and medical devices, growing 4.1% to more than $10.2 billion. J&J's consumer and medical devices each posted sales declines. And earnings fell to $1.39 per share, a 13% slip.

J&J upped its 2019 sales guidance slightly to between $82 billion and $82.8 billion and tightened up its expectations for adjusted earnings per share to $8.53 to $8.63.

Looking ahead, J&J has blockbuster hopes for a couple of brand new launches, once they gain speed. Last month, its depression drug Spravato nabbed an FDA approval, and 800 treatment centers are now authorized to administer it, Taubert said. Analysts have said the drug, derived from ketamine and only approved for use under a provider's supervision, could generate $3 billion. And just last week, J&J scored an FDA nod for Balversa, the first targeted drug for bladder cancer. Analysts believe it can generate $1 billion or more at peak.  

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But as analysts make their projections for the current quarter, Wolk offered up a word of caution. Last year, J&J posted its best sales during Q2, setting up a tough year-over-year comparison. Plus, the company expects generic and biosim competition to accelerate, he said.