Johnson & Johnson (JNJ): Is This Pharmaceutical Giant About To Lose Its Cornerstone Drug?

One-third of the market expected

Last year Remicade generated over $2 billion in sales on the European continent. Under the brand name Inflectra, Hospira expects to begin launching its generic drug in stages in 2013, in countries where Remicade patents are not in force, including eastern, central, and Nordic regions. However, a recent patent extension granted to J&J immortalizes Remicade from competition in major markets such as the United Kingdom, Germany, France, Spain, and Italy until February 2015; after which Hospira plans to expand into these markets. Projections show Hospira’s generic capturing over a third of the European market after approval, representing roughly $666 million, a significant amount of revenue for a company only currently valued at slightly over $6 billion.

Turning back to the United States, the patent for Remicade is not set to expire until 2018, securing a major revenue stream for years to come. This protection of J&J’s drug in the United States also effectively protects Celebrex and Humira from cheap competition in a major market, the United States, until 2018.

The Foolish bottom line

Generics can be devastating to pharmaceutical companies. History proves that over and over again. Johnson & Johnson (NYSE:JNJ)’s largest drug, Remicade, is facing mounting threats from Hospira and its genetic version, Inflectra. As a result of the competition that takes place between similar drugs to treat the same conditions, AbbVie and Pfizer will also be affected by a rollout of Inflectra, which would introduce cheaper competition into the marketplace. AbbVie is of particular concern as a result of its heavy dependence on Humira.

All in all, the news of the EMU’s support for Hospira’s generic version of Remicade is disadvantageous to Johnson & Johnson (NYSE:JNJ), AbbVie, and Pfizer. However, the strategic patents the companies possess in major markets should protect their revenue streams in the near future, giving the companies years to compensate for the potential revenue loss through research and development. Thus, the news recently relayed from the EMU is by no means a reason for investors in the highlighted companies to push the panic button.

Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

The article Is This Pharmaceutical Giant About To Lose Its Cornerstone Drug? originally appeared on Fool.com.

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