Treading on a Johnson & Johnson Product

Johnson & Johnson (NYSE: JNJ  ) will be selling a little less of its foot ulcer gel Regranex -- at least to the patients who used it the most. (Foot ulcers are slowly healing foot wounds, often suffered by diabetics.)

The company announced Friday that the Food and Drug Administration is requiring it to add a boxed warning to Regranex, saying that patients who had cancer and used three or more tubes of the gel had an increased risk of dying from cancer. The data comes from a post-marketing study in which four patients who had multiple prescriptions of Regranex died of cancer.

Clearly, the new warning will make doctors reluctant to prescribe Regranex several times to clear up a patient's recurring foot ulcer. Whether it will cause doctors to avoid the drug altogether remains to be seen. Either way, Regranex sales are small enough so that Johnson & Johnson doesn't break them out, so a decline won't likely have much of an effect on the company. That's an advantage of being large.

The very small company BioMimetic Therapeutics (Nasdaq: BMTI  ) , on the other hand, wasn't so lucky when the FDA first warned doctors about the increased risk of cancer mortality. The company's stock lost half its value because Gem21S, its drug used to regrow bone in patients with advanced gum disease, contains the same active ingredient as Regranex. Investors have obviously come to their senses and realized that, because Gem21S isn't used for chronic conditions, the risk of cancer is much lower. The stock is up 52% since I wrote that investors had overreacted.

It's clear from the increased number of communications about potential side effects that the FDA is taking its safety responsibilities seriously. Whether it's that using Merck's (NYSE: MRK  ) Singulair could be related to depression, or that TNF inhibitors such as Abbott Labs' (NYSE: ABT  ) Humira could be linked to cancer in kids, or that erectile dysfunction drugs such as Pfizer's (NYSE: PFE  ) Viagra may be making men blind and deaf, the agency seems to be reporting potential side effects no matter how serious, common (or rare), or proven they are.

With the trend of warnings from the FDA, investors will need to take the time to dig a little deeper, and hold back on their desire to sell on any bad news.