Why Johnson & Johnson and Sequenom Inc. Could Be Today's Biggest Healthcare Stories

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Good morning fellow, Fools! It's time to check in on the movers and shakers in health care today.

Johnson & Johnson fights back over diabetes trademark

Johnson & Johnson (NYSE: JNJ  ) announced this morning that it is appealing a decision by a Chinese government agency to revoke the company's trademark for its OneTouch diabetes monitoring product. The market is apparently hopefully the decision will be reversed, with Johnson & Johnson shares up nearly 1% in premarket.

Why is this a big deal? Firstly, China's diabetes market is the biggest in the world and is still growing. Last year alone, diabetes products generated over $17 billion in sales in China. So losing the exclusive rights to the popular OneTouch monitoring system will legally allow copycats to sell their products in literally the best market on Earth. That's why Johnson & Johnson management said they were "shocked" and "very disappointed" with the decision.  

What's my take? Personally, I believe this legal battle is much ado about nothing. The Chinese government is notorious for turning a blind eye to patent infringement and market exclusivity rights, just ask Apple (NASDAQ: AAPL  ) about it's experience with the iPad in China. In sum, copycats are a way of life in China, and their effect on Johnson & Johnson's bottom line was factored into sales of OneTouch long ago.

Of course, Johnson & Johnson, like Apple, will battle to protect their rights, but it's a non-issue in the bigger scheme of things. 

Sequenom blasting off

Shares of the cutting-edge genetic analysis company Sequenom (NASDAQ: SQNM  ) are ripping higher in premarket this morning after announcing that the European Patent Office granted the company's patent application entitled "Diagnosing Fetal Chromosomal Aneuploidy Using Genomic Sequencing." The patent protects the company's novel genetic analytical methods for detecting fetal aneuploidy in the European Union, as well as in Liechtenstein, Monaco, Norway and Switzerland.

Should you join the party? Sequenom's fetal diagnostic services are arguably its most important commercial products, with revenues jumping 166% in the third quarter of 2013 compared to a year ago. And this patent helps to ensure that the company will maintain its IP superiority in the space going forward.

Even so, it's important to understand that the company's costs have long been the fly in the ointment. Despite having annual sales of over $150 million last year and shares trading at a measly two times gross sales, Sequenom shares have continued to drop because of increasing costs, resulting in a net loss per share of about $1.

Looking ahead, Sequenom has recently laid off part of its workforce and is restructuring to lower costs. They are also pushing to increase sales of their fetal diagnostic services, which appears to be getting results based on the dramatic increase in revenues for this segment. So I am cautiously optimistic that Sequenom is on the comeback trail. As such, you might want to keep this one on your watch list.

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  • Report this Comment On January 09, 2014, at 1:20 PM, biogemfinder wrote:

    q4 2013 results will again surpass expectations due to recovery of revenues from previous qs due to billing/coding issues. Combined that with lowered costs (lay off, no more expansion of lab space, or sales force), reduction of costs (efficient sequencing. larger throughput), sqnm will easily beat the q.

    The significant drop on pps due to the district judge invalidating the Lo patent will be repealed sooner or later and they will appeal.

    While the patent granting and repealing of patent invalidity are very imporntat, the most importnat fact rihgt now is SQNM continues to execute in the MaterniT21 platform and keeps its leadership and first mover advantage. It clearly has the best and most accurate test of them all. With concentrating on the providers/patients that are likley to pay and dropping the ones that don't I think the costs will keep going down and revenues will keep going up and we have a very good shot at being profitable by the end of this year!

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George Budwell

George Budwell has been writing about healthcare and biotechnology companies at the Motley Fool since 2013. His primary interests are novel small molecule drugs, next generation vaccines, and cell therapies.

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8/28/2015 4:00 PM
AAPL $113.29 Up +0.37 +0.33%
Apple CAPS Rating: ****
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Johnson & Johnson CAPS Rating: ****
SQNM $2.23 Up +0.09 +4.21%
Sequenom, Inc. CAPS Rating: **