J&J shares lose ground on fears of Pfizer's answer to Remicade

The logo of healthcare company Johnson & Johnson is seen in front of an office building in Zug, Switzerland July 20, 2016. REUTERS/Arnd Wiegmann

(Reuters) - Booming pharmaceutical sales drove strong quarterly results for Johnson & Johnson JNJ.N, but the company's shares fell more than 2 percent on worries that its blockbuster Remicade arthritis drug would soon face cheaper competition.

Pfizer Inc PFE.N late on Monday said it would begin U.S. shipments of Inflectra, its biosimilar form of Remicade, by late November at a 15 percent discount to J&J's current wholesale prices.

With annual U.S. sales of about $5 billion and its wide use to also treat Crohn’s disease and psoriasis, Remicade is J&J’s biggest product. Biosimilar drugs are close copies intended to provide savings compared with costly branded products. Inflectra is already available in Europe.

J&J is appealing an August federal court decision that invalidated a U.S. Remicade patent, setting the stage for a February court battle with Pfizer. Should Pfizer launch Inflectra and later lose the court fight, that could entitle J&J to triple damages. In the meantime, analysts predicted U.S. Remicade sales will fall 15 to 20 percent next year, even though J&J on Tuesday predicted the vast majority of patients taking Remicade are unlikely to switch to a biosimilar. “There’s fear what happens to Remicade,” said Guggenheim Securities analyst Tony Butler. “It will lose some market share.” But Edward Jones analyst Ashtyn Evans predicted J&J’s annual pharmaceutical sales will grow in the “high single digit” percentage range over the next 3 to 5 years, despite Remicade’s decline, as newer drugs for inflammatory conditions and cancer continue post strong sales.

J&J shares fell 2.6 percent to $115.43 in afternoon trade. In the third quarter, J&J revenue rose to $17.82 billion from $17.10 billion a year earlier. Its pharmaceutical sales jumped 9.2 percent to $8.40 billion, with strong growth for its new Imbruvica and Darzalex cancer drugs and its blood thinner Xarelto. U.S. sales of Remicade jumped 9.4 percent to $1.22 billion. Global medical device sales rose 1.1 percent to $6.16 billion in the quarter, while consumer product sales fell 1.6 percent to $3.26 billion. J&J raised the lower end of its full-year 2016 profit forecast to $6.68 per share from $6.63 a share. It retained the upper end at $6.73 per share. The company’s net earnings rose to $4.27 billion, or $1.53 per share, in the third quarter, from $3.36 billion, or $1.20 per share, a year earlier. Excluding special items, J&J earned $1.68 per share, topping the average analyst forecast of $1.66 per share, according to Thomson Reuters I/B/E/S.

Additional reporting by Natalie Grover in Bengaluru; Editing by Sriraj Kalluvila and W Simon