Keep an Eye on Biogen, Johnson & Johnson, and Merck Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Good morning, fellow Foolish investors! Let's take a look at Biogen (NASDAQ: BIIB  ) , Johnson & Johnson (NYSE: JNJ  ) , and Merck (NYSE: MRK  ) -- which could all make health care headlines this morning.

Biogen and Samsung Biologics move to commercialize anti-TNF drugs in Europe
The first story this morning is a huge one -- Biogen Idec and Samsung Biologics' joint venture, Samsung Bioepis, is moving forward to commercialize anti-TNF (tumor necrosis factor) biosimilar product candidates in Europe.

Anti-TNF biologic drugs, such as Johnson & Johnson and Merck's Remicade, AbbVie's Humira, and Amgen's Enbrel are some of the top-selling blockbuster drugs on the market today. All three are anti-inflammatory drugs aimed at treating arthritis and psoriasis, and they cost approximately $20,000 per year.

To understand how alarming the prospect of biosimilar anti-TNF drugs in Europe are for these three companies, simply take a look at how much these companies depend on these drugs, and how close they are to a patent cliff in Europe.


Anti-TNF drug

2012 Sales

U.S. Patent Expiration

European Patent Expiration

Johnson & Johnson


$6.14 billion





$2.08 billion





$4.38 billion





$4.24 billion



Source: Company annual reports.

Hospira (UNKNOWN: HSP.DL  ) and its South Korean partner Celltrion already noticed this golden opportunity, and won EU approval for Inflectra -- the first biosimilar version of Remicade -- back in September. Hospira intends to slowly roll out Inflectra from Eastern Europe and into key Western European markets by 2015 as Remicade's patents expire.

Approximately $2 billion of Remicade's $8.2 billion in sales last year came from Europe -- which means that Inflectra could become a big problem for Johnson & Johnson and Merck by 2015. Last year, Remicade sales accounted for 24% and 5% of Johnson & Johnson and Merck's pharmaceutical revenue, respectively.

Now it appears that Biogen, which generates more than half of its revenue from multiple sclerosis drugs, and Samsung Biologics, which also recently signed a distribution deal with Roche, are shrewdly targeting Hospira, Celltrion, and the big three anti-TNF drug manufacturers in Europe.

Biogen will commercialize the upcoming product candidates across Europe, which could help diversify its drug portfolio away from MS treatments. Biogen already sells Rituxan, a blood cancer drug co-marketed with Roche which is also approved as a treatment for rheumatoid arthritis.

Therefore, Johnson & Johnson, AbbVie, and Amgen investors should keep a very close eye on further developments in other biosimilar anti-TNF drugs from Hospira and Biogen.

Merck's animal health segment reports a positive opinion of Bravecto in Europe
Meanwhile, Merck's animal health division reported that the Committee for Medicinal Products for Veterinary Use of the European Medicines Agency has recommended the approval of its veterinary medicinal product Bravecto.

Bravecto is a chewable tablet for dogs that protects dogs from flea and tick infestations. The drug has been found to have immediate and persistent flea and tick-killing activity for up to 12 weeks. Common side effects for dogs include mild gastrointestinal effects.

Bravecto's upcoming approval could help generate some positive publicity for Merck's Animal Health division, after Zilmax, a beta-agonist to improve the quality of beef, was withdrawn from the market after it was found to cause lameness in cattle.

Merck's animal health segment generated $898 million in revenues last quarter -- a 3% gain from the prior year quarter. The segment accounts for 8% of the company's top line.

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