J&J Pegs Its Long-Term Growth Potential On Prevention

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During Johnson & Johnson’s Pharmaceutical Business Review Wednesday, several executives from the healthcare-products giant made a case to Wall Street analysts that its pipeline of new drugs is strong enough to drive strong short-term sales and profit growth. But behind the scenes, the company is making a huge bet that focusing on disease prevention will be the key to its long-term growth.

At today’s meeting, J&J announced a lofty goal of filing 10 completely new drugs and 19 line extensions for FDA approval by 2019. The potential short-term growth drivers include daratumumab for multiple myeloma, sirukumab for rheumatoid arthritis and guselkumab for psoriasis, the company said. In announcing the plan, its executives pointed to the recent track record of Janssen, its pharma unit, which has launched 14 drugs since 2009, half of which are predicted to earn the “blockbuster” label this year by bringing in $1 billion in sales a piece.

Before introducing the unit chiefs who would delve into J&J’s late-stage pipeline, William Hait, global head of Janssen R&D, made a nod towards the company’s long-term strategy. “Looking into the future, we at Janssen can envision a world without disease and have made substantial investments to make that vision a reality,” he said. Hait told investors the company has set up prevention-focused research units, staffed by scientists who are “imagining a healthier future where suffering from a disease is a historical artifact.”

J&J’s analyst confab arrived amid a mix of triumphs and challenges for the company’s drug business. On Tuesday, the FDA approved Invega Trinza, a long-acting version of J&J’s schizophrenia blockbuster Invega (paliperidone palmitate) that only has to be administered four times a year. Many analysts predict the product will be among the company’s short-term growth drivers, as the overall market for long-acting anti-psychotics is booming.

But just a few days before the approval, on May 15, the FDA announced that it is exploring safety concerns regarding diabetes drugs that are in a class known as “SGL2 inhibitors.” These drugs, which include J&J’s hit product Invokana (canagliflozin), may raise the risk of ketoacidosis, a dangerous elevation of blood acids, the agency said. The FDA is now considering whether or not the drugs’ labels need to be changed, it added. That could put pressure on sales of Invokana, which came in at $278 million in the first quarter of this year—nearly triple its sales in the same period a year ago.

And J&J has been suffering from competitive pressure, particularly on its top-selling drug, Remicade, a rheumatoid arthritis treatment that’s facing biosimilar rivals. Its hepatitis C treatment Olysio is quickly losing ground to newer, more effective drugs like Gilead Sciences’ Sovaldi. During the first quarter, which J&J reported April 14, its sales fell 4% year-over-year to $17.4 billion and its net profit dropped from $4.73 billion ($1.64 per share) to $4.32 billion ($1.53 per share). Citing unfavorable currency exchange rates, the company cut its full-year earnings-per-share estimate to $6.04 to $6.19 from $6.12 to $6.27. Analysts on average expect J&J’s full-year sales to dip 5% to $70.5 billion.

It may seem strange that one of the world’s most storied makers of prescription and over-the-counter products to treat diseases sees a big future in preventing them, but it does, Hait said in a phone interview prior to today’s meeting. That’s because the company’s leadership believes that getting to the root of what causes the world’s most vexing diseases will help J&J come up with whole new classes of therapies—drugs, devices, and the like—to interrupt those processes.

William Hait, global head of Janssen R&D (Credit: photo courtesy of J&J)

“The basic idea is that people are interested in learning what their DNA sequence tells them about their susceptibility to disease,” Hait says. “If we could go from susceptibility to understanding risk, then the problem becomes what do you do about it? I believe the first company that begins to answer that question with a variety of different types of products will be the major healthcare company of the future.”

So Hait is overseeing the creation of three new units at J&J. The first is the Janssen Prevention Center, which will be headquartered in the Netherlands, with outposts in the U.S. and U.K. The center will focus on developing vaccines—both to prevent disease, Hait says, and to treat it—and will capitalize on expertise J&J acquired when it bought Crucell in 2011.

J&J is also creating a startup incubator that it calls the Disease Interception Accelerator. The mission of the center, Hait says, is to capitalize on the rapidly growing understanding of how each person’s genetic makeup predicts their risk of disease—and then invent ways to reverse or slow down the progression of those illnesses.

Those interventions won’t necessarily be drugs, Hait says. “Being part of Johnson & Johnson, we can make consumer products and all sorts of devices,” he says. “We have an array of capabilities. Drugs and vaccines may be part of it, but we’re agnostic to the approach.”

In February, J&J announced the first major initiative of the Disease Interception Accelerator: The company will work with the association JDRF to develop new diagnostic and therapeutic approaches to Type 1 diabetes. Their goal is to figure out how to halt the loss of insulin-producing cells—in essence stopping the disease before it causes insulin dependence.

The third new prevention-focused initiative is the Janssen Human Microbiome Institute, which is focused on studying the vast population of bacteria that live in everyone’s guts. Scientists specializing in the microbiome believe it plays a role in several diseases, and therefore could open up new routes of both prevention and treatment. J&J was one of the first companies to make a major commitment to microbiome research, forming research partnerships with microbiome startups such as Vedanta Biosciences and Second Genome. The new J&J unit will build upon those alliances, Hait says.

These new prevention-focused units are part of an ongoing quest at J&J to look for growth in unconventional places. Just last month, J&J signed up with IBM to use Watson artificial intelligence—the basis of the robot that won Jeopardy—to create a concierge service that will prepare patients for knee surgery and to help them recover from it.

Investors, for now, seem to be taking a wait-and-see stance on J&J’s growth strategy. The company’s stock price, which has been flat to slightly down since the beginning of the year, nudged up by about $0.63 in pre-market trading on Wednesday to $104.59.

Source: Forbes