ohnson & Johnson Wins Second Trial Over Levaquin Claims

Johnson & Johnson properly warned of the risks of its antibiotic Levaquin and isn't responsible for a tendon injury sustained by an 84-year-old man, a Minneapolis jury said.Calvin Christensen, who said he ruptured the Achilles tendon in his right foot after taking the drug while hospitalized with pneumonia, sued the company and its Ortho- McNeil Pharmaceutical unit in 2007. Christensen said the companies downplayed the risks of Levaquin to boost the drug's sales.Johnson & Johnson denied any failure to warn and contended Christensen needed Levaquin to treat the pneumonia. The Minneapolis federal court jury rejected his claim today. Christensen was seeking unspecified compensatory and punitive damages."The jury took a good, hard look at all the evidence and correctly concluded that Ortho-McNeil-Janssen Pharmaceuticals, Inc. acted responsibly and properly in disclosing the risks associated with this effective and life-saving medicine," James B. Irwin, a lawyer for the company said in a statement after the verdict.Christensen's case is the second of more than 2,500 pending claims in U.S. courts to go to trial over allegations that Levaquin caused tendon damage in patients and that the company failed to adequately disclose the risk. J&J and Ortho-McNeil lost the first trial when a separate Minneapolis jury awarded $1.8 million to an 82-year-old man who ruptured both Achilles tendons.Ron Goldser, a lawyer for the plaintiff, said in a brief interview that his side is "disappointed."The U.S. Food and Drug Administration in 2008 required an upgraded warning on tendon damage posed by Levaquin and similar drugs. Christensen claimed the warning should have been enhanced earlier and that Johnson & Johnson and Ortho-McNeil, now Ortho- McNeil-Janssen, targeted the elderly for drug sales.The Christensen trial began June 1.The lawsuit is Christensen v. Johnson & Johnson, 07-03960, combined for trial in In re Levaquin Products Liability Litigation, 08-md-01943, U.S. District Court, District of Minnesota (Minneapolis).

J&J, Takeda recall batches of cancer drug Velcade

Johnson & Johnson and Millennium Pharmaceuticals are recalling thousands of vials of the cancer drug Velcade sold in Europe, the United States, Japan and Malaysia after receiving reports of white particles seen floating in vials of the medicine.

The particles were found in batches of the drug distributed between January and June of this year.

They have been identified as a polyester-like material related to a component of the manufacturing process performed by a contract manufacturer for Millennium, which is now a unit of Japan's Takeda Pharmaceutical Co.

Velcade, known chemically as bortezomib, is approved to treat multiple myeloma and relapsed mantle cell lymphoma. It is sold by Millennium in the United States and by J&J unit Janssen-Cilag in Europe and the rest of the world.

The recall was the latest to hit J&J, which has been plagued by massive recalls of numerous consumer products, such as Children's Tylenol and Motrin, keeping those medicines off pharmacy shelves for months.

10,000 hip replacement patients told their operations may need to be reversed after receiving faulty implants Read more: http://www.dailymail.co.uk/n

Pharmaceutical giant Johnson & Johnson is facing a multi-million-pound legal claim after thousands of British patients were told that their hip replacement operations will need to be reversed.

Many patients have been in excruciating pain – with some unable to walk – since having the operation, and now some of those affected are preparing a class action against Johnson & Johnson's orthopaedic branch, DePuy, in a case which could cost the company £350million.

More than 10,000 patients have been recalled to hospital to have their operations reviewed because components used to cushion and fix the artificial joint were causing tumours and depositing toxic metal in the blood.

Global drug majors bid for India's Paras

A clutch of global pharmaceutical majors have tendered bids for a majority stake in Indian drug-maker Paras Pharma , a report said Tuesday.

British giant GlaxoSmithKline , France's Sanofi-Aventis, Swiss multinational Novartis, and US-based Johnson and Johnson have all made bids for the over-the-counter drug major, reports said, citing sources close to the bidding process.

The initial bids ranged between the 600 and 700 million-dollar mark, one source told the newspaper, undershooting the expected valuation of close to one billion dollars.

"Serious players such as Japan's Taisho Pharmaceuticals are expected to join the race," one of the sources added.

Paras owns popular brands in the Indian market like anti-cold medication D'Cold and pain-relieving ointment Moov.

A Novartis spokesman contacted by AFP refused to comment on the report.

Johnson & Johnson Honors 2009 Recipient of The Dr. Paul Janssen Award for Biomedical...

BEERSE, Belgium, - Johnson & Johnson today honored the career achievements of Axel Ullrich, Ph.D., with the 2009 Dr. Paul Janssen Award for Biomedical Research. Dr. Ullrich received this award for his scientific discoveries that led to innovative new drugs including Herceptin((R)) (trastuzumab)*, a personalized medicine therapy, which was the first to target a specific type of breast cancer. Dr. Ullrich also led the development of the first drug created through gene cloning, a recombinant human insulin for treating diabetes which arguably marked the beginning of the

biotechnology age. Dr. Ullrich, director for the Department of Molecular Biology, Max Planck Institute of Biochemistry in Germany, was presented with the Award during a ceremony at The Dr. Paul Janssen Research Center in Beerse,Belgium, where he received the $100,000 prize.

"Dr. Ullrich's pioneering research translated genomics-based discoveries into new treatments that improve the lives of millions of patients," said Harlan Weisman, M.D., chief science and technology officer, Medical Devices & Diagnostics, Johnson & Johnson. "The 2009 Award recognizes his commitment to advancing translational research, an approach that embodies the spirit of Dr.Paul Janssen, who himself pioneered the development of more than 80 different

medicines."

Working at Genentech, Inc. more than 25 years ago, Ullrich developed genetically engineered human insulin, the first therapeutic derived from gene cloning. This insulin is structurally identical to the naturally occurring form, and acts more quickly and with fewer allergic reactions than insulin made from other sources. Ullrich and collaborators discovered later that decade that the neu/HER2 gene is amplified and overexpressed in more than 30 percent of invasive, or more aggressive, breast cancers. HER2 was chosen for the development of an entirely novel cancer therapy, culminating in the production of an anti-HER2 monoclonal antibody that since 1998 has been used successfully to treat patients with metastatic breast cancer. This was the first targeted drug developed on the basis of a newly discovered gene associated with a cancer causing function in humans.

In the early 1990s, Ullrich identified the signaling system involved in regulating tumor angiogenesis, the growth of blood vessels in tumors. He discovered that inhibiting a key player in the signaling system (called vascular endothelial growth factor receptor or VEGFR) suppresses the generation of blood vessels in tumors and slows down cancer cell growth. Years later, a small molecule inhibitor of the VEGFR2 kinase function was developed,from which a derivative was approved in 2006 for the treatment of kidney carcinoma and gastro-intestinal stromal tumors.

"It is an honor to be recognized with an award of this stature," said Ullrich. "Dr. Paul was a highly respected scientist whose work continues to extend and improve the lives of people all over the world. I am truly humbled to be selected as the recipient of an award whose namesake carries on his tremendous legacy."

"Dr. Ullrich is one of the few basic scientists whose work directly affects the lives of countless patients suffering from major chronic diseases," said Paul Stoffels, M.D., global head, Research & Development, Pharmaceuticals, Johnson & Johnson. "We are proud to present The Dr. Paul Janssen Award to such a passionate pioneer in biomedical research."

Ullrich has previously received prestigious honors and awards, including the Robert Koch Prize, the Bruce F. Cain Memorial Award of the American Association of Cancer Research and the King Faisal Prize of Medicine.

J&J Wins Appeal Reviving Patent on Ultracet Drug

Johnson & Johnson won an appeals court ruling that it can try to use its patent on the Ultracet painkiller to block generic-drug makers including Teva Pharmaceutical Industries Ltd. from selling copies of the drug.

The U.S. Court of Appeals for the Federal Circuit in Washington overturned a finding that the patent was invalid and sent the case back to a lower court for trial. The court did affirm that one aspect of the patent was invalid.

Teva’s Barr unit and Caraco Pharmaceutical Laboratories Ltd. have been selling copies of the medicine for more than three years. New Brunswick, New Jersey-based J&J, the world’s largest health-products company, was trying to get the generic medicines pulled from the market.

Ultracet combines acetaminophen, the main ingredient in Johnson & Johnson’s Tylenol, with tramadol hydrochloride, a compound used in the painkiller Ultram. The patent, which expires in August 2011, covers the ratio between the two components.

The Federal Circuit, in a 2-1 ruling, said there were “material questions of fact” as to whether the combination would have been obvious to researchers. Circuit Judge Haldane Robert Mayer disagreed, saying the patent “does nothing more than combine two well-known pain relievers” into a single tablet.

‘Pleased With Decision’

Johnson & Johnson is “pleased with the decision and looks forward to the additional court proceedings,” said Greg Panico, a spokesman for the company.

Teva spokeswoman Denise Bradley declined to comment, and a representative for Caraco didn’t immediately return a call seeking comment.

Detroit-based Caraco is owned by Sun Pharmaceutical Industries Ltd. of Mumbai. Teva, based in Petah Tikva, Israel, is the world’s biggest generic-drug maker.

The case is Ortho-McNeil Pharmaceutical Inc. v. Teva Pharmaceutical Industries Ltd., 2008-1549 and 2008-1550, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Ortho-McNeil Pharmaceutical Inc. v. Kali Laboratories Inc., 6cv3533, U.S. District Court for the District of New Jersey

Sunesis adds to board after private placement

New Enterprise Associates, which invested $2.3 million in Sunesis Pharmaceuticals Inc. during a recent private placement, put Helen Kim on the Sunesis board.

Kim is CEO of TRF Pharma Inc., a privately held business. In the past she was president and CEO of Kosan Biosciences Inc., which was sold to Bristol-Myers Squibb (NYSE: BMY) in 2008.

She also worked previously for Chiron Corp., Protein Design Labs, Affymax and Onyx Pharmaceuticals.

Dan Swisher is CEO of South San Francisco-based Sunesis (NASDAQ: SNSS).

Earlier this month Johnson & Johnson Pharmaceutical Research & Development LLC terminated a research deal between the two that dates back to May 3, 2002. Though Sunesis was paid some money up front and through 2005 under that deal, it hadn’t been paid anything since December 2005.

Johnson & Johnson gave 180 days notice, so that deal ends Jan. 13, 2010.

Teva, JNJ settle birth control pill patent lawsuit

NEW YORK -Teva Pharmaceutical Industries Ltd. said Friday it will be able to launch a generic version of a popular birth control pill under terms of a patent settlement with Johnson & Johnson.

The Israeli drugmaker said it will be able to relaunch its version of the drug Ortho-Tri-Cyclen Lo on Dec. 31, 2015. Teva started selling its pill, called Tri-Lo Sprintec, earlier this month after gaining marketing approval from the Food and Drug Administration. Johnson & Johnson then sued Teva for patent infringement, and Teva halted shipments.

Teva said it will make a royalty payment to Johnson & Johnson, and in return, it will get a release for the previous sales. It did not disclose the size of the payment.

Teva, the world's largest generic drugmaker by revenue, said it will be able to launch Tri-Lo Sprintec earlier than Dec. 31, 2015, under some circumstances. It said the settlement will not take effect until a court enters a judgment upholding Johnson & Johnson's patents, which are scheduled to expire in 2019.

Ortho-Tri-Cyclen is marketed by Johnson & Johnson's Ortho-McNeill-Janssen unit, and Teva said U.S. sales were $400 million in the 12 months ended March 31.

In afternoon trading, Teva shares were unchanged at $50.19. Earlier, they set an annual high of $50.68. Johnson & Johnson stock rose 61 cents to $60.83

Drug industry, Pfizer lead in health lobbying

WASHINGTON — The drug industry's trade group and one of the nation's biggest pharmaceutical companies reported spending more money than other health care organizations on lobbying in the second quarter of this year.

With the fight over President Barack Obama's effort to revamp the nation's health care system escalating, the Pharmaceutical Research and Manufacturers of America said it spent $6.2 million lobbying in April, May and June, according to reports to Congress due Monday. Pfizer Inc., the New York-based producer of numerous drugs, ranked second in the health care sector at $5.6 million.

In reports filed by 11 p.m. Monday, 22 health-related associations and companies had reported spending at least $1 million each lobbying during the quarter.

The stakes are huge for the health industry. Congressional Democrats are pushing legislation that could cost roughly $1 trillion over the coming decade, paid for in part by cuts in federal health care programs such as Medicare. Lobbyists have been flooding Capitol Hill for months, and many interest groups have already invested millions of dollars in ad campaigns favoring or opposing various portions of the emerging bills.

According to the nonpartisan Center for Responsive Politics, the health sector reported spending $127 million in lobbying during the first three months of this year, more than any other area.

It can take many days for all the reports to be filed. In the second quarter of 2008, 28 health care concerns reported spending at least $1 million lobbying.

Of the thousands of reports filed by Monday evening covering lobbying on all subjects, only three organizations reported spending more during the second quarter than PhRMA, the drug industry trade group. The American Coalition for Clean Coal Electricity reported spending $11.3 million lobbying at a time when Congress is considering energy legislation. The U.S. Chamber of Commerce, the nation's largest business group, reported spending $7.4 million, and the General Electric Co. reported $7.2 million in lobbying expenditures.

Including its latest report, PhRMA has now spent $13.1 million lobbying so far this year. Pfizer has reported $11.7 million in lobbying expenses for 2009.

Other top lobbying spenders among health-related organizations for this year's second quarter included the American Medical Association, $4 million; Eli Lilly and Co., $3.6 million; the American Hospital Association, $3.5 million, and the Blue Cross and Blue Shield Association, $2.8 million.

Also, GlaxoSmithKline, $2.3 million; CVS Caremark Inc., $2 million; Bayer Corp. and America's Health Insurance Plans, representing the health insurance industry, $1.9 million each; Novartis and the Biotechnology Industry Organization, each $1.8 million, and Metlife Group Inc., $1.7 million.

Also, Sanofi-Aventis U.S. Inc. reported spending $1.6 million in the second quarter; Johnson & Johnson Services Inc. $1.6 million; Merck & Co. Inc. $1.5 million; F. Hoffman-La Roche Ltd. and its affiliates, $1.5 million; the American College of Radiology Association, Wellpoint Inc. and Astrazeneca Pharmaceuticals LP, each $1.2 million, and Siemens Corp. and UnitedHealth Group Inc., $1 million each.

Affymax: independent committee positive on anemia drug

* Independent committee recommends drug trial to continue

* Still sees NDA filing in 2010

Affymax Inc (AFFY.O) said an independent data monitoring committee recommended the continuation of the company's late-stage trials of its experimental drug to treat anemia in chronic renal failure patients.

The biotechnology company, which is co-developing the drug Hematide with Japan's Takeda Pharmaceutical Co Ltd (4502.T), said the committee informed Affymax that safety data from two late-stage studies, called EMERALD and PEARL, support continuation of the studies.

Last August, Affymax and Takeda said they would stop developing the drug for the treatment of chemotherapy-induced anemia due to uncertain regulatory landscapes.

Hematide, a synthetic drug that would compete with biologic anemia medicines that have faced restrictions over safety and potential overuse concerns, is administered just once a month.

That could be a major advantage over current standard treatments from Amgen Inc (AMGN.O) and Johnson & Johnson (JNJ.N), which are given with dialysis about three times a week.

Affymax said it still expects to file for regulatory approval of the drug in 2010.

Shares of the company closed at $18.30 Friday on Nasdaq.

Teva launches version of JNJ birth control pill

NEW YORK - Generic drug maker Teva Pharmaceutical Industries Ltd. said Wednesday it started shipping a generic version of Ortho Tri-Cyclen, a birth control pill marketed by Johnson & Johnson.

Teva made an "at-risk launch" of the drug after the Food and Drug Administration approved its version. Johnson & Johnson is suing Teva for infringing on the patents of the original version, which are set to expire in 2019. Teva plans to sell its version under the name Tri-Lo Sprintec.

Teva said it has 180-day marketing exclusivity on its generic, meaning no other generic version can be launched for the next six months. It says sales of U.S. Ortho Tri-Cyclen totaled $400 million in the 12 months ended March 31.

Jerusalem-based Teva is the world's largest generic drug maker by revenue. Ortho Tri-Cyclen is sold by Johnson & Johnson's Ortho McNeil Janssen division.

In morning trading, Teva shares picked up 78 cents to $50.12. The day's high of $50.20 was a new 52-week mark. Johnson & Johnson shares dipped 2 cents to $56.78.

Pharmaceuticals Outscore Other Sectors in New Climate Scorecard

MANCHESTER, - The pharmaceutical industry has emerged as a leader in measuring and reporting its carbon footprint compared to other sectors, according to the latest Climate Counts Scorecard released today. 

But although the industry as a whole outscored more than a dozen other sectors, it still needs to improve its performance in reducing its greenhouse gas emissions and taking a policy stance on climate legislation, Climate Counts found. 

AstraZeneca and Johnson & Johnson sat at the top of the heap, with scores of 76 and 75 out of 100 points, respectively.

The pharmaceutical sector as a whole outperformed 13 other sectors, with more than 87 percent of the companies earning a “striding” icon -- the highest rating possible. The sector excelled in the “review” and “report” categories, but shows room for improvement in the “reduce” and “policy” sections. 

“The high climate marks earned by the pharmaceutical industry are yet more proof that climate action and profit can be the prescription for climate change,” Climate Counts Executive Director Wood Turner said in a statement today. “Still, while the sector has done well at measuring its impact and talking about climate change, we’re still not seeing the kinds of greenhouse gas emissions reductions we’d expect.” 

The nonprofit has now evaluated 14 sectors on 22 criteria to determine corporate climate change commitment, including measuring and reducing impacts, supporting climate laws and communicating their efforts. Sectors and the companies within them are assigned a rating -- striding, starting or stuck -- that allows consumers to compare companies against their peers. 

The sector scored an overall average of 55.6, the highest industry score of any industry. Thirteen out of 15 companies evaluated earned a “striding” rating. That compares to the lowest scoring sector -- toys and children’s equipment -- where eight out of 13 companies analyzed received a score of zero. 

More than 120 companies representing some 3,000 brands have been analyzed by Climate Counts, a nonprofit launched in June 2007 and comprised of business and climate experts. (Full disclosure: GreenBiz.com Executive Editor Joel Makower is a Climate Counts board member.) 

Other sectors to receive a scorecard include airlines, beverages and beer, consumer shipping, food products, hotels, Internet and software, apparel and accessories, commercial banking, electronics, food services, household products, toys and children’s equipment, and media.

J&J upbeat on drugs business, cites new medicines

NEW BRUNSWICK, New Jersey - Johnson & Johnson, fighting to break out of an earnings slump, told investors on Thursday that it aims to seek approvals for almost a dozen new medicines by 2013 -- including a promising new treatment for hepatitis C it will submit to regulators by next year.

Between 2011 and 2013, the diversified health products maker plans to seek U.S. approvals for treatments for diabetes, tuberculosis, attention deficit disorder, pain and obesity.

During a meeting for analysts to review its pharmaceutical operations, executives said J&J (JNJ.N) had an industry-leading experimental drugs pipeline, and they outlined plans to address five therapeutic areas.

"We are very optimistic about our future," Sheri McCoy, worldwide chairman of pharmaceuticals, said at the meeting in J&J's hometown of New Brunswick, New Jersey.

With its overall prescription drug sales falling because of patent lapses, J&J has projected flat earnings this year -- in contrast to the double-digit earnings growth it has consistently achieved in past years.

J&J is relying on its array of consumer products and medical devices to keep at least on an even keel.

But Wall Street is optimistic that J&J's prescription drugs will again be an engine of revenue and earnings growth starting next year.

EARNINGS OPTIMISM

Morgan Stanley analysts expect earnings to rise by 12 percent in 2010, 10 percent in 2011 and 12 percent in 2012, with new medicines and other products adding about $6 billion to sales by 2012.

"Nothing we've heard today will affect J&J's 2009 or 2010 outlook, but it's good to see that things are getting into Phase III trials or progressing through the FDA," said Robert Dunne, a hedge fund manager with Viscogliosi Brothers.

Dunne said a number of promising J&J drugs have "flamed out" in past years, failing in late-stage studies. But he said the company's current drug pipeline seems more reliable.

"The number of products provides a cushion, and the company seems more careful and thoughtful about what they are doing," Dunne said.

By next year, J&J plans to seek European approval for hepatitis C drug telaprevir, a high-profile drug that it licensed from Vertex Pharmaceuticals Inc (VRTX.O).

In clinical trials, the drug combined with currently used medicines has shown great promise in eliminating the disease in both patients who have not previously been treated and in more difficult patients for whom prior treatment has failed.

J&J also plans to seek U.S. approval by next year for HIV drug TMC 278 and plans to advance its Type 2 diabetes drug, canagliflozin, into late-stage clinical trials later this year.

Analysts are optimistic about recently approved arthritis drug Simponi and expect U.S. approvals in coming months of psoriasis drug Stelara and blood clot preventer Xarelto, being developed with German drugmaker Bayer AG (BAYG.DE).

The company said it expects this month to launch a new treatment for moderate to severe pain called Nucynta that has been approved by U.S. regulators.

J&J, whose first-quarter earnings fell slightly due to generic competition for its Risperdal schizophrenia drug and waning demand for its anemia medicines, is now under even greater pressure due to the expiration in March of the U.S. patent on its $2.5 billion-a-year Topamax epilepsy drug.

Credit Suisse analyst Catherine Arnold said earlier this week that investor reaction to J&J's pharmaceutical review could move its shares close to $60 -- or bring them back down below $55.

J&J shares fell 46 cents to $55.70 in morning trading on the New York Stock Exchange. They are down about 6.5 percent this year, a slightly worse decline than that of the American Stock Exchange Pharmaceutical index .DRG.

Pharmaceutical group spent $6.9M lobbying in 1Q

The pharmaceutical industry's main trade group spent more than $6.9 million lobbying in the first quarter on aspects of health care reform, the country's new health secretary and other issues, according to a recent disclosure report.

The Pharmaceutical Research and Manufacturers of America spent $3.6 million on lobbying in the year-ago period. The group's members include Pfizer Inc., Merck & Co., Johnson & Johnson and more than two dozen other U.S. and foreign companies.

PhRMA lobbied on healthcare-related aspects of the 2010 federal budget, the federal stimulus plan, the budgets of health-related agencies, measures on health information technology and a proposal requiring research comparing effectiveness of different medical treatments.

The group also lobbied Congress on the confirmation of Kansas Gov. Kathleen Sebelius as secretary of health and human services, ahead of her approval by Congress on April 28.

The trade group lobbied on multiple bills to allow generic versions of expensive biologic drugs, patent law reform, and a proposal to try a pilot program to provide expertise in patent cases to local district justices.

PhRMA also lobbied on legislation regarding the safety of medicines imported from other countries, reauthorization of the State Children's Health Insurance Program, pricing of drugs sold under the Medicaid program, and proposed requirements to disclose consulting and speaking fees and other payments to physicians.

Other lobbying targets included bills on international patent protection and trade adjustment assistance, according to a disclosure report filed April 20 with the House clerk's office.

Besides Congress, PhRMA lobbied the Department of Health and Human Services and several of its agencies, the Commerce Department, the Patent and Trademark office and the U.S. Trade Representative.

Among those registered to lobby on the trade group's behalf in the first quarter were: Jennifer Swenson, former legislative director for Sen. Pat Roberts, R-Kan.; Matt Sulkala, former senior legislative assistant to Rep. Allen Boyd, D-Fla.; Valerie Jewett, former legislative director to Rep. Rodney Frelinguysen, R-N.J.; Michael Woody, formerly a professional staffer on the Senate Health, Education, Labor & Pensions Committee; and David Boyer, who had served in about a half-dozen positions in the Food and Drug Administration, the White House and elsewhere.

Two U.S. IPOs Lined Up For June

Two IPOs are lined up for the U.S. markets this month, with a medical data software company and a Chinese water treatment equipment supplier preparing to go public.

The first initial public offering that is expected, from New York-based Medidata Solutions Inc., is scheduled to begin trading June 18 on the Nasdaq under the symbol MDSO. The other, Beijing's Duoyuan Global Water Inc., is slated to launch on the New York Stock Exchange under the symbol DGW some time during the week of June 22. Both offerings are small; Medidata is seeking to raise as much as $82 million, while Duoyuan is aiming for $75 million.

So far, June appears to be shaping up as a repeat of April and May in terms of U.S. IPO volume; there were three deals completed in each of those months.

Medidata Solutions makes software that pharmaceutical and medical-device companies use to manage information from their clinical trials; its customers include Johnson & Johnson (JNJ), AstraZeneca PLC (AZN), Amgen Inc. (AMGN), Astellas Pharma Inc. (ALPMF) and Takeda Pharmaceutical Co. (TKPHF). Although its revenue has been rising rapidly, the company has a history of annual operating and net losses dating back to its inception.

Duoyuan Global Water, which distributes its water treatment equipment throughout 28 Chinese provinces, shows both revenue and profit gains. Revenue rose 40% on increased product demand and net income jumped 63% in 2008 compared to 2007. The company cites population growth and industrialization as factors that are driving demand for water treatment in the country.

Make-or-Break Time for Cancer Drugs

Some 60% of new cancer drugs are developed in the labs of biotech firms, many of them startups. But this has been a year of living miserably for the biotech industry, and hundreds of these cancer-focused companies are close to folding as investors flee, stock prices sink to near-nothing, and operating cash dwindles.

Their future, and that of a lot of nascent cancer drugs, could be decided at a giant medical conference starting in Orlando on May 29. Some 30,000 oncologists, scientists, stock analysts, and venture capitalists are expected to attend the annual meeting of the American Society of Clinical Oncology (ASCO), the premier showcase for reports of human trials of cancer drugs. Share prices can soar or crash on the quality of the data presented, and struggling biotechs with promising drugs will be trolling the meeting for investors and pharmaceutical partners.

Whether they find financial support matters to the broader medical community, because biotechs that fail to do so could end up shelving treatments that might save lives. "Companies that have three drugs in the pipeline may end up going down to two," says Dr. Mark Monane, a biotech analyst with Needham & Co. "Or they may test a drug in only two [cancer types] instead of three or four." Because there is so much serendipity in drug discovery, the drug candidate that gets dropped in a cash crunch might, in fact, have the greatest potential, says Glen Giovannetti, head of Ernst & Young's biotech consulting team. "You could see a slowing of innovation."

Anticipation of positive results at ASCO has brightened the prospects of some drugs. After brief summaries of upcoming presentations were released on May 14, the stocks of several biotechs shot up, among them Cougar Biotechnology (CGRB) and OncoGenex Pharmaceuticals (AGXI), both close to running out of cash.

Cougar no longer needs to worry—Johnson & Johnson (JNJ) announced on May 21 that it would pay close to $1 billion for the six-year-old Los Angeles company. The biotech is in the final stages of testing a drug, Abiraterone, that has shown promise against late-stage prostate cancer.

OncoGenex's stock hit new highs five days in a row in late May, going from $4 a share in April to $14, in anticipation of the ASCO presentation on its own prostate cancer drug, OGX-11. In early trials the drug appeared to help patients live longer, but OncoGenex had only $9.4 million in cash at the end of March, not enough to fund the next round of clinical trials. Biotech analysts say ASCO gives the company a good chance to find a financing deal.

Plenty of other struggling biotechs are counting on networking opportunities at ASCO as well, among them Poniard Pharmaceuticals (PARD), Sunesis Pharmaceuticals (SNSS), and Cell Therapeutics (CTIC). Cell hopes to file with the Food & Drug Administration in June for approval of Pixantrone, a treatment for late-stage non-Hodgkin's lymphoma.

It's something of a miracle, though, that the company is still in business. Just before Cell ran out of cash last fall an unnamed investor came to its rescue. In February it sold off the rights to the one drug it had on the market in order to keep its doors open. The stock collapsed from $50 a share two years ago to as low as 6 cents in February. "It's been ugly times the last 12 months," admits Chief Executive Officer Dr. James A. Bianco .

Bianco says positive data from ASCO will change all that, and already the stock has climbed to $1.24 since the clinical trial summary on Pixantrone was released on May 14. "ASCO provides a forum where the data can speak for itself," says Bianco

Johnson & Johnson to Host Pharmaceutical Business Review

NEW BRUNSWICK, - Johnson & Johnson (NYSE: JNJ) will host a review of its Pharmaceutical business for the investment community, beginning at 8:30 a.m. (Eastern Time) on Thursday, June 4th.

Sheri McCoy, Worldwide Chairman, Pharmaceuticals Group for Johnson & Johnson, will host the meeting at the Hyatt Regency Hotel in New Brunswick, N.J. The meeting will feature presentations from various senior leaders in the Pharmaceuticals business and research and development organizations.

Investors and other interested parties may access this meeting by visiting the Johnson & Johnson website at www.investor.jnj.com for a simultaneous webcast of the presentations. A webcast and podcast replay will be available approximately two hours after the live webcast.

Financing Activity May Lift Cloud Hanging over Biotech Industry

Although investors are grasping at any positive sign of improvement in the economy to push a market rally forward, the recession is still very much with us. A rally in the beginning of last week fizzled ahead of the holiday weekend as investors remained concerned about the U.S. government's interventions to stimulate the economy. But while biotech leaders from all over the world gathered at the 2009 BIO International Convention in Atlanta, financing activity in the sector raised hope that the cloud hanging over the industry may be lifting a little.

Public markets remain dry, but companies raising venture capital and private equity financings are having quite a bit of success. Small U.S. public companies are tapping the private markets and seem to be especially fond of registered direct offerings, with six of the nine PIPEs completed last week structured in this manner.

Venture capital investment had a strong showing during the week with 15 deals. In one of the largest ever rounds of venture financing, newly formed Clovis Oncology, based in Boulder, Colorado, announced that it had secured $145 million in start-up financing. The company, founded by former executives of Pharmion Corporation, is focused on acquiring, develop and marketing innovative anti-cancer compounds in all stages of clinical development. Investors in Clovis include Domain Associates, New Enterprise Associates (NEA), Versant Ventures, Aberdare Ventures, Abingworth, Frazier Healthcare Ventures, ProQuest Investments and the Company's management team. Pharmion was acquired by Celgene (CELG) in 2008 for $2.9 billion.

Molecular imaging products developer Avid Radiopharmaceuticals completed the first closing of a $34.5 million Series D financing led by Alta Partners, Also participating in the financing were existing investors AllianceBernstein, Safeguard Scientifics, Pfizer Venture Investments, Lilly Ventures, RK Ventures Group, LLC and BioAdvance (Biotechnology Greenhouse of Southeastern Pennsylvania).

Philadelphia-based Avid will use the proceeds to fund the completion of the development and, if approved, to commercialize its Alzheimer’s amyloid imaging compound. The funding will also allow it to continue it mid-stage clinical development of its Parkinson’s disease imaging compound. In conjunction with the progress of its clinical trials, Avid is providing its amyloid imaging compound to measure amyloid burden as a biomarker in Phase II and Phase III trials of experimental drug under development by several major pharmaceutical company collaborators.

Specialty pharma Sagent Pharmaceuticals raised $30 million in a second Series A financing extension with pre-existing and new strategic investors. The round was again led by Vivo Ventures. With more than 200 products in development, Sagent, based in Schaumburg, Illinois, focuses on injectable products, and has filed more than 70 aNDAs to date, according to the company’s CEO Jeffrey Yordon. He expects to have more than 20 products in the market by the end of the year.

The pharmaceutical industry continued its biotech buying spree as Johnson & Johnson (JNJ) said it will acquire Cougar Biotechnology (CGRB) for approximately $1 billion in a cash tender offer to gain access to a late-stage, first-in-class prostate cancer treatment. Cougar is currently conducting two late-stage trials for abiraterone acetate, a first in class compound for the treatment of prostate cancer. The Los Angeles-based biopharmaceutical company has compounds in development for the treatment of prostate cancer, as well as breast cancer and multiple myeloma, will work with Ortho Biotech Oncology Research & Development, a unit of Centocor Research & Development, a Johnson & Johnson company.

Cambridge, Massachusetts biotech Elixir Pharmaceuticals (ELXR) completed a $12 million equity financing and entered into an agreement with Novartis (NVS) granting the pharma an exclusive option to acquire Elixir following the successful completion of a Phase 2a clinical study of Elixir’s lead oral ghrelin antagonist, currently in preclinical, IND-enabling studies. The deal with Novartis could exceed $500 million and also includes Novartis' right to an exclusive worldwide license under pre-agreed conditions.

Elixir is developing small molecule drugs that mimic these longevity responses to treat a range of age-related diseases, including the major metabolic diseases. In addition to its oral ghrelin antagonist program, Elixir has two product candidates which have recently completed Phase 3 clinical trials for the treatment of type 2 diabetes.

Finally, pharmaceutical companies are determined to be major players in the generics market. Novartis is acquiring the specialty generic injectables business of Austria's EBEWE Pharma for $1.2 billion, strengthening its Sandoz generic division's global platform of generic oncology medicines. And Pfizer (PFE) entered into licensing agreements with two pharmaceutical companies based in India, Aurobindo Pharma and Claris Lifesciences, in a move that strengthens its position in generic medications in emerging markets.

Johnson & Johnson: Strong Pipeline, Compelling Valuation

Business Summary:

Johnson & Johnson (JNJ) has three business units, all of them focused on healthcare. The pharmaceutical business develops new chemical and biological compounds used in the prevention and treatment of various diseases. The medical devices and diagnostics business develops products used to diagnose and treat various health problems. The consumer health care segment owns many valuable brands such as the J&J baby care product line, Neutrogena, Listerine, and Tylenol.

Analysis of Pharmaceutical Pipeline:

One of the reasons the barrier to entry is so high in the pharmaceutical industry is that new drug trials are very expensive, and often do not result in a profitable product. This raises the question of whether a company has a sufficiently robust development pipeline to replace existing drugs that go off patent. The average effective patent lifetime for a new drug is 11.5 years (“Effective Patent Life in Pharmaceuticals”, Henry G. Grabowski, 2000). \

However, most drugs do continue to generate revenue after they go off patent; a study conducted in the mid-1990’s showed that revenue fell by 43% the first year after patent expiry, and 42% the next year, and roughly 10% annually thereafter. On the other hand, sometimes a generic manufacturer can successfully challenge a patent in court, so let’s leave the effective life at 11.5 years.

Consequently, with an evenly distributed patent expiration schedule (often an optimistic assumption), we can expect, on average, 8.7% of the company’s pharmaceutical revenue to be lost each year.

Looking at a paper (“The Distribution of Sales Revenues from Pharmaceutical Innovation”, Grabowski, 2000) that investigated the revenue of new products introduced from 1988-1992 in the U.S., it appears that the mean revenue generated by new products was around $150M in 1992 dollars. Let’s assume that global sales were around twice that, or $300M in 1992 dollars. In 2008 dollars, this would be around $450M per new product.

Therefore a company losing 8.7% of it’s pharmaceutical revenue each year would need to introduce a number of new drugs each year equal to total pharmaceutical sales (in millions of dollars) multiplied by 8.7% and divided by $450M.

Johnson & Johnson (JNJ) had 2008 pharmaceutical sales of $24,500M, so they would need to introduce - on average - roughly 4.7 drugs every year to replace drugs going off patent.

Looking at their 2008 development pipeline published on 4/15/2009, we find that they have either filed or had approved 17 compounds, which gives them a comfortable margin. The margin is probably necessary, as the actual distribution of new drug revenue is highly volatile, with only 3 out of 10 recouping development costs. Their phase III pipeline has 20 compounds, and we might expect 2/3 of these to become new products over the next couple of years (see “Research and Development in the Pharmaceutical Industry”, CBO 2006 page 23, figure 3-2).

Since this is a rough analysis, let’s do a differential analysis with several other pharmaceutical companies. Both Johnson & Johnson and Novartis (NVS) break down a drug’s status between the U.S. and E.U. markets, so in order to make a like for like comparison between the other companies, I only counted each drug once. If a compound was approved in one region and submitted for approval in another, I counted it as a single approval.

Likewise, if a compound was submitted for approval in one region and is in phase III in another, I counted it as a single submission.

The pipeline data for Novartis and Abbott Labs (ABT) is from their 20-F and 10-K filings, respectively, and the pipeline data for the other companies comes from their pipeline updates on their company website.

The following table indicates each company’s 2008 revenue from pharmaceutical sales, the estimated number of new products needed each year to keep pharmaceutical revenue constant (revenue * 0.087 / 450), and the status of each company’s drug pipeline at the date indicated in the first column.

The last column indicates the percentage of pharmaceutical revenue attributed to each company’s best selling drug. It is pretty clear from the differential analysis that J&J has one of the best drug pipelines in the industry.

Valuation:

Using my valuation model - which aside from a small adjustment for a company’s financial strength roughly assumes a ratio of intrinsic value to demonstrated earnings power equal to that of an average company – I estimate JNJ’s per-share intrinsic value to be $76.

This is an estimate of the sum of the expected value of future discounted cashflows (in today’s dollars) accruing to an owner of a share of the company’s common stock, and uses a real (inflation adjusted) 5.5% discount rate.

At the market close on 5/22/2009, JNJ’s share price was $54.77, giving a ratio of estimated intrinsic to market value equal to 1.4, and a price to sustainable earnings ratio equal to 12.1. The algorithm for calculating sustainable earnings per share and my valuation model used in estimating intrinsic value can be found on my website.

The following table illustrates JNJ’s ten-year operating history. I calculate return on adjusted assets as the ten-year average of operating profit (adjusted for non-recurring items) divided by adjusted assets, where assets are adjusted by subtracting goodwill and other non-amortizable intangible assets (such as certain trademarks).

Operating margin is calculated as the ten-year average of adjusted operating profit divided by revenue, and return on retained earnings is calculated as the ratio of the difference between last year’s adjusted earnings per share and adjusted earnings per share ten years ago (both in today’s dollars) to the sum of the adjusted earnings retained over the ten years, also in today’s dollars.


I believe JNJ’s future prospects are good for several reasons.

First, all three of JNJ’s business lines have relatively high barriers to entry.

Second, I believe that JNJ’s decentralized management structure will create an environment where the company is likely to create new innovations in all three of JNJ’s business lines.

Third, the company’s revenue diversification should provide earnings stability in that if the pharmaceutical pipeline gets temporarily lean, the effect will be muted due to the contribution of the medical device and consumer products businesses.

Fourth, JNJ has a very strong balance sheet, and the company’s AAA credit rating gives it a low cost of debt capital that can be used, in conjunction with retained earnings, to finance acquisitions.

Another positive for JNJ’s future prospects is the aging population in the United States, Japan, and Europe; this should lead to a strong demand in the health care market for the foreseeable future, and the total available market for health care could easily grow faster than global GDP. Older people tend to require more medical care, which should positively affect the demand for both pharmaceuticals and medical devices due to the aging population in the company’s core markets, while the overall global increase in population should increase the demand for the company’s consumer products.

One risk to JNJ’s competitive position is that generic drug manufacturers sometimes attempt to market generic substitutes when a drug is still on patent (this is done through what is called an Abbreviated New Drug Application); this can reduce revenue from a product until the matter is resolved in court. A mitigating factor is that to date, there really is not any significant competition from generic medical devices.

Another potential risk is that if the United States goes to a single payer health care system, JNJ will lose bargaining power with its customers. In a future article, I will present some research that makes a case that this is not as large a threat as many think.

It is pretty clear from JNJ’s ten-year operating history and future prospects that this is an exceptional company, and our estimate of intrinsic value – which assumes a ratio of intrinsic value to demonstrated earnings power equal to that of an average company – is probably conservative.

I have owned the company’s shares since early 2003, and although the share price is currently close to what it was six year’s ago, the increase in earnings and dividends has been more than satisfactory, and I have been using the recent (late ’08 and early ’09) drop in JNJ’s share price to accumulate more shares.

Pharmaceutical companies stand to make profit from ‘swine flu'

A Boston-based company, Emerging Portfolio Fund Research Global, Inc. (EPFR), a provider of fund flows and asset allocation data to financial institutions around the world, reported on May 1 that health-care and biotechnical companies recorded their first week of stock price increases since February.

According to market watchers, the biotech industries stock section was one of the few groups that hadn't been participating in the recent market rally.

The Canadian Money Forum in a report “Swine Flu Effects on the Market” said the initial stock market reaction to the news that the “swine flu” could become a pandemic was to cause aviation stocks to fall, but for pharmaceutical stocks there was a rise, especially those companies that made flu vaccines such as the United Kingdom-based company GlaxoSmithKline.

According to Business Week, GlaxoSmithKline, the makers of Relenza, the other popular antiviral, stock increased by eight percent.

Also, according to Business Week, the makers of Tamiflu, Roche reported their shares were up four percent since April 27.

MarketWatch.com said GlaxoSmithKline stock fell 20-cents a share to $30.56 on the afternoon of May1.

The World Health Organization said in a press release that both companies had approached the UN organization about readiness to deploy their antiviral stock inventories.

EPFR said that as the cases of H1N1 infections expand governments must plan for vaccine production and tap emergency stockpiles of antiviral medicine.

The Wall Street Journal reported on May 1, the United Kingdom had enough Tamiflu to treat 33 million people, or 54 percent; France had enough Tamiflu to also treat 54 percent of its population; Japan had on hand enough to treat 28 percent of its people; while the U.S. had enough to inoculate 50 million people or 16 percent. The WSJ said that the World Health Organization reported that it had enough antiviral to treat one million on the African continent; however, no cases have been reported there at Final Call press time. Analysts say assuming Tamiflu stocks need replenishing it could come at a cost of $388 million. Critics of the big pharmaceuticals say they want to use the media attention on the flu crisis to draw attention to the corporate practices of the agriculture and pharmaceutical industries placing business before health.

Some supporters of the big pharmaceuticals say profits earned should be seen for what they really are–an ordinary operating cost–not a windfall of cash made on the backs of the needy.

“People are going to buy the over the counter products such as Tylenol for headaches, masks, cleaning solutions and hand sanitizer to reduce their personal anxiety; and this means cash in the register for companies such as 3M, makers of the masks,” stated Rudolph Muhammad, a New York City disaster preparedness activist and a member of the Nation of Islam National Ministry of Health.

The WSJ Health Blog said a representative from 3M told them they were racing to meet demand for its N95 respiratory mask. Three-M was quoted on the New York Stock Exchange on May 1 at $57.88 a share, up 49 percent since news of the H1N1 virus surfaced.

Johnson & Johnson, makers of Purell hand sanitizer, also reported that their stock rose 49 percent on the NYSE and was now quoted at $52.54 a share.

Market analysts say that while 70 percent of the world's antiviral drugs are produced in Europe, there is an interesting competition developing between the Alabama-based BioCryst Pharmaceuticals Inc. and the Maryland-based biotech company, Novavax, Inc. in who may be capable of being the fastest in developing a new vaccine to combat H1N1.

Since news broke that Tamiflu and Relenza may not be capable of preventing H1N1, the stock of both companies has risen, with Novavax shares doubling to $2.55 a share, while BioCryst stock rose $1.67 or 75.6 percent to $3.88.

Novavax in a press release said they had contacted the Centers for Disease Control and Prevention claiming they can produce a new vaccine from the emerging strain of the flu virus in 12 weeks.

Another bio-tech company, the Quidel Corp. makers of the QuickVue rapid flu test, reports a rise in their stock of forty-nine cents or a 5.1 percent increase to $10.03.