J&J shares lose ground on fears of Pfizer's answer to Remicade

By Ransdell Pierson

(Reuters) - Booming pharmaceutical sales drove strong quarterly results for Johnson & Johnson (NYSE: JNJ), but the company's shares fell more than 2 percent on worries that its blockbuster Remicade arthritis drug would soon face cheaper competition.

Pfizer Inc (NYSE: PFE) late on Monday said it would begin U.S. shipments of Inflectra, its biosimilar form of Remicade, by late November at a 15 percent discount to J&J's current wholesale prices.

With annual U.S. sales of about $5 billion and its wide use to also treat Crohn's disease and psoriasis, Remicade is J&J's biggest product. Biosimilar drugs are close copies intended to provide savings compared with costly branded products. Inflectra is already available in Europe.

J&J is appealing an August federal court decision that invalidated a U.S. Remicade patent, setting the stage for a February court battle with Pfizer. Should Pfizer launch Inflectra and later lose the court fight, that could entitle J&J to triple damages. In the meantime, analysts predicted U.S. Remicade sales will fall 15 to 20 percent next year, even though J&J on Tuesday predicted the vast majority of patients taking Remicade are unlikely to switch to a biosimilar. "There's fear what happens to Remicade," said Guggenheim Securities analyst Tony Butler. "It will lose some market share." But Edward Jones analyst Ashtyn Evans predicted J&J's annual pharmaceutical sales will grow in the "high single digit" percentage range over the next 3 to 5 years, despite Remicade's decline, as newer drugs for inflammatory conditions and cancer continue post strong sales.

J&J shares fell 2.6 percent to $115.43 in afternoon trade. In the third quarter, J&J revenue rose to $17.82 billion from $17.10 billion a year earlier. Its pharmaceutical sales jumped 9.2 percent to $8.40 billion, with strong growth for its new Imbruvica and Darzalex cancer drugs and its blood thinner Xarelto. U.S. sales of Remicade jumped 9.4 percent to $1.22 billion. Global medical device sales rose 1.1 percent to $6.16 billion in the quarter, while consumer product sales fell 1.6 percent to $3.26 billion. J&J raised the lower end of its full-year 2016 profit forecast to $6.68 per share from $6.63 a share. It retained the upper end at $6.73 per share. The company's net earnings rose to $4.27 billion, or $1.53 per share, in the third quarter, from $3.36 billion, or $1.20 per share, a year earlier. Excluding special items, J&J earned $1.68 per share, topping the average analyst forecast of $1.66 per share, according to Thomson Reuters I/B/E/S.

(Additional reporting by Natalie Grover in Bengaluru; Editing by Sriraj Kalluvila and W Simon)

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