Pipeline Drugs Need To Fire For Johnson & Johnson’s Oncology Business

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Johnson & Johnson‘s (NYSE:JNJ) oncology business is not as strong as that of some of the other pharmaceutical companies, at least as far as future expected growth is concerned. There are a couple of successful drugs, but we expect them to face strong generic competition within the next two years. Thus, the pipeline becomes critical, especially in the wake of immuno-oncology becoming the cornerstone of the next stage of pharma growth. More specifically, we believe Daratumumab and ARN-509 will have to collectively contribute upward of $3 billion in annual sales as generic competition starts to suppress the sales growth of Velcade and Zytiga in the next two years.

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Generic Competition Is Not Far For J&J’s Current Cancer Drugs

J&J’s cancer drugs accounted for about 14% of the company’s pharmaceutical revenues in 2014, which is a significant number. However, this figure could decline going forward due to the impending patent cliff and resulting generic competition for Velcade and Zytiga.

As far as Zytiga is concerned, the drug has done well to capture more than 30% share of metastatic castrate resistant prostate cancer market in the U.S. However, the effect of growing competition from other branded drugs is starting to show up in the form of stabilizing market share. Zytiga’s composition of matter patent expires at the end of 2016, which is when the generic competition will force a revenue decline. The drug’s revenues for 2014 totaled $2.24 billion.

Velcade is already under strong competitive pressure. The drug’s sales declined slightly in 2014 totaling $1.62 billion. To add to that, a court ruling has overturned Velcade’s patent which means generic versions can enter the market by in 2017. [1]

Pipeline Drugs Will Need To Generate $3+ Billion In Annual Sales

Zytiga and Velcade together bring in close to $3.8 billion for J&J. Over the next few years, a large chunk of these sales may erode. The company will aim to fill this gap with its current pipeline of drugs, and we believe they’ll expect $3+ billion in sales from ARN-509 and Daratumumab.

J&J’s acquisition of Aragon Pharmaceuticals has allowed it to take ownership and control of Aragon’s androgen receptor antagonist program, which can complement Zytiga. Under this program, Aragon is developing a second generation androgen receptor signaling inhibitor, ARN-509, which is currently at the phase 3 development stage and could potentially become a very viable drug for treatment of castration resistant prostate cancer.

Daratumumab is currently under the FDA review. The regulatory body has granted priority review to the drug which is intended to treat multiple myeloma. The drug is especially meant for people who have been previously heavily treated for the disease and haven’t responded well.

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Notes:
  1. Takeda’s Velcade Patent Overturned in Win for Generics, Bloomberg, Aug 21 2015 []