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Can Johnson & Johnson Hold Its Ground in the Multiple Myeloma Market?

Johnson & Johnson (NYSE: JNJ  ) may offer well-known personal care products such as Listerine and Neutrogena, but it also boasts an impressive portfolio of market leading therapeutic compounds. The health care leader was one of the few to show growth in both worldwide pharmaceutical sales and earnings last year, which grew to $25 billion and $3.86 per share respectively. It finds itself in an enviable position heading into 2013 as one of the best-positioned companies to tackle the patent cliff head on.

Even with the recent success there is no time to rest on laurels in the highly competitive landscape of pharma and biotech. The industry's most successful drugs are under constant pressure from generics, which are either already on the market or timing their entrance for the moment exclusivity is lost. Luckily, 2012 showed that several new drugs are already shaping up to be critical driving forces in the company's future. Today we will look at Velcade, the shining star in the company's oncology segment.

The bigger, the better
Velcade, which is approved for multiple myeloma, was the fastest growing blockbuster for Johnson & Johnson in 2012. It also made up 57% of total oncology sales.  

Source: Johnson & Johnson 2012 earnings.

While sales growth may slow in coming years the drug is still expected to be a driving force in company's pharmaceutical business. It can certainly pay to be a leader. Decision Resources, a leading pharmaceutical and health care advisory firm, estimates that the multiple myeloma market will grow from just $4.4 billion in 2011 to $7.2 billion in 2021.  

Non-obvious competition
Velcade's only major competition is Celgene's (NASDAQ: CELG  ) Revlimid. However, once a drug is recognized as a leading therapy there is more to look forward to than simple stand-alone sales. If one drug can enhance a patient's chances of survival, then what can combining it with another promising drug do?

That's the question being asked by companies such as Onyx Pharmaceuticals (UNKNOWN: ONXX.DL  ) , Bristol-Myers Squibb (NYSE: BMY  ) , and AbbVie (NYSE: ABBV  )  -- all of which are developing combinational multiple myeloma therapies. Unfortunately for Velcade, all of the above companies are being tested with Revlimid. Johnson & Johnson's drug is only being combined with Aeterna Zentaris' perifosine -- which failed in recent cancer trials -- and Novartis' panobinostat.

Decision Resources estimates that Revlimid could experience sales growth of $1.6 billion from combinational therapies by 2021, while Velcade could only generate an additional $70 million. The figures are just one firm's estimates, but they suggest Velcade's combinational therapy potential is not very high at the moment.

An exception to the rule?
Velcade was the first proteasome inhibitor approved in the United States, but being a pioneer has its drawbacks. The drug will lose total exclusivity in early 2014. Despite the looming date for generic competition, analysts widely expect the drug to hold its ground in the market, even against newer drugs like Onyx's recently approved Kyprolis.  

Even Johnson & Johnson thinks Velcade could reach $2 billion in sales in the next few years, which may be easily attainable given recent approval in Europe (link opens PDF). Even then, the drug may have a difficult time keeping pace with the company's up-and-comer oncology treatment Zytiga, whose sales exploded 219% last year and narrowly missed the $1 billion blockbuster threshold. 

Intrigued by those eye-popping numbers? You can find out more about the prospects for J&J's pipeline and if the company is a well-diversified giant that's perfect for your portfolio. Make sure you understand the full story behind the stock, along with its key opportunities and risks, by checking out our brand new premium report on Johnson & Johnson. To claim your copy simply click here now for instant access.


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