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J&J’s Nonprescription Business Could Soon Get a Lift

July 16, 2015
Life sciences
A Philadelphia-area Johnson & Johnson factory at the center of dozens of product recalls in recent years is getting close to reopening after a long overhaul, the company said Tuesday, a big step in J&J’s efforts to revive its non-prescription-medicines business.
 
The Fort Washington, Pa., plant was closed in 2010 after J&J recalled more than 135 million medicine bottles when customers found, for instance, tiny metal particles floating in children’s Tylenol. Since then, J&J has been spending tens of millions of dollars upgrading the plant, which J&J said recently underwent the Food and Drug Administration inspections needed to get an OK to reopen.
 
The recalls tarnished J&J’s image and prompted the company to upgrade its supply chain, rework its portfolio of over-the-counter medicines and agree in 2011 to tough FDA oversight. The company lost billions of dollars in sales after pulling products from retail shelves.
 
“We think we’ve made a lot of progress” turning around the company’s consumer-health business, J&J CEO Alex Gorsky said. A J&J spokesman said there was no timetable for the FDA to decide on allowing the plant to reopen.
 
Executives gave an update as J&J reported second-quarter profit of $4.5 billion, or $1.61 a share, up from $4.3 billion, or $1.51 a share, a year earlier. Excluding certain items, per-share earnings were $1.71 in the latest quarter.
 
Revenue fell 8.8% to $17.79 billion, in part due to the impact of a stronger dollar, which J&J said had a negative impact of 7.9% in the quarter. Another big factor was competition for J&J’s Olysio hepatitis C treatment, which had surprisingly large sales last year until a rival pill from Gilead Sciences Inc. hit the market.
 
Quality problems began surfacing at J&J’s McNeil consumer-health business in 2009. Now 80% of the recalled brands have returned to the market, according to Sandra Peterson, the J&J executive overseeing the consumer-health business’s turnaround. Ms. Peterson indicated the company was gaining market share after rejiggering the product portfolio and taking steps to build up key brands.
 
FDA certification of the Fort Washington plant would allow J&J to resume manufacturing there. Ms. Peterson said the FDA has already signed off on two other manufacturing plants—in Las Piedras, Puerto Rico, and Lancaster, Pa.—that were also under agency oversight with the Fort Washington facility. Products made in those two plants will no longer be subject to regular inspections by a third party, but there will be spot inspections, a J&J spokesman said.
 
For the quarter, sales at the consumer-health unit fell 7% to $3.5 billion, largely due to a 9.3% currency hit.
 
In its prescription drug unit, meanwhile, J&J is preparing for the threat of lower-priced competition in the U.S. from “biosimilar” versions of its blockbuster anti-inflammatory drug Remicade. Mr. Gorsky said J&J planned to vigorously defend a patent expiring in 2018, and said the company expected doctors to refrain from switching the 70 % of Remicade patients well-controlled by the therapy.
 
“Biosimilars are not generics, and we expect the biosimilar market to behave quite differently,” Mr. Gorsky said on a conference call with analysts and investors.
 
Prescription pharmaceuticals remained the New Brunswick, N.J., company’s bright spot. The $7.9 billion in quarterly sales were helped by new prescription drugs including the blood thinner Xarelto and diabetes medicine Invokana and cancer therapy Imbruvica. Executives indicated the business was poised for further growth, saying seven recently launched drugs should each surpass $1 billion in annual sales.
 
Yet J&J’s medical-device business continued to struggle, posting a sales decline of 12.2% to $6.36 billion, reflecting an operational decrease of 4.7% and a negative currency impact of 7.5%. Mr. Gorsky said increasing hospital surgery rates in the U.S. and around the world augured well for medical devices, and sales of hip and knee parts were already increasing in the mid-single digits.
 
By Jonathan D. Rockoff and Chelsey Dulaney
 

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