With first-quarter earnings and post-ASCO excitement over, we're at the time when many pharmaceutical companies host R&D days to discuss the future prospects of their drug development programs. On Thursday, Johnson & Johnson (NYSE: JNJ) held an analyst meeting to discuss its pharmaceutical segment and show how it will maintain its $23 billion in pharmaceutical sales in the future.
Key to JNJ's future is its late-stage pipeline, which consists of many drug candidates to treat blockbuster indications. Most exciting are the infectious disease compounds like telaprevir, created by Vertex Pharmaceuticals (Nasdaq: VRTX), and JNJ's two phase 3 HIV compounds. The HIV drugs, which should both be in phase 3 studies sometime this year, are supposed to have similar efficacy to current near billion-dollar drugs like Bristol-Myers' (NYSE: BMY) Sustiva. Another compound to watch for is the thrombosis drug rivaroxaban that Johnson & Johnson is developing with Bayer (NYSE: BAY). After fairly successful phase 2 testing, the first phase 3 results will be out later this year. Besides telaprevir, rivaroxaban is the most innovative of the JNJ pipeline compounds. Interestingly, all of the above-mentioned drugs come from Johnson & Johnson partnerships or acquisitions.
As for its marketed drugs, JNJ's pharmaceutical segment sales gained 11% in the first quarter of 2007 after a 4% rise for all of 2006. Its pharma sales could come under pressure due to all of the negativity surrounding its second-best seller, Procrit. The company's top drug, Risperdal Consta, will lose patent protection next year, opening the door for generic competitors. Together these two compounds accounted for nearly a third of JNJ's pharmaceutical sales last year.
The good news for Johnson & Johnson investors is that the rest of its pharmaceutical segment is healthy. Topamax should remain on its blistering double-digit annual sales growth rate and could possibly be the third highest-grossing drug for JNJ by the end of the year. Even in the face of increased competition from Abbott Laboratories' (NYSE: ABT) Humira, Remicade sales are holding up -- albeit at a much reduced growth rate.
While there are concerns about other parts of Johnson & Johnson (for example, its medical device segment), its pharmaceutical division has a robust pipeline of compounds in development that should pay off in the long haul. However, investors should still be prepared for some near-term bumpiness with its top-selling drugs.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.
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