Watson Pharmaceuticals ($WPI) and Johnson & Johnson ($JNJ) have come to an accord on Concerta. J&J will let Watson launch a generic version of the blockbuster ADHD drug next May, as long as Watson allows J&J to supply the drug through 2014. The deal gives J&J a share of the revenues from generic Concerta, which will help ease the pain of sales lost to generic competition.
Unfortunately for J&J, the supply deal won't ease all the pain, analysts said. J.P. Morgan's Michael Weinstein told Dow Jones that the patent settlement cuts his sales forecast for J&J by some $185 million and his earnings forecast by two cents per share. Most industry observers hadn't expected Concerta competition to hit next year.
J&J's sales force will also suffer on the deal; spokeswoman Kara Russell told the news service that the Concerta sales staff will be cut by about 220 as a direct result. The company will keep a "limited" Concerta sales force on hand, she said.
Meanwhile, the deal is a boon for Watson: J.P. Morgan's Chris Schott told Dow Jones that the authorized generic could add more than 75 cents to annualized EPS. And the company can proceed with its plans to make its own version Concerta, for launch when the J&J supply deal ends.