In a health care sector dominated by treatments for obesity, hypertension, and other ailments in the spotlight of today's high-flying society, it's often lost in the news when a company makes a splash into treating long-feared diseases still active in the world. Johnson & Johnson (NYSE:JNJ) isn't most companies, and besides being the colossus of the sector, the company's just won backing from the Food and Drug Administration in finding a new treatment to an age-old problem.
Testing positive for J&J
In an 18-0 ruling on efficacy, the FDA advisory committee voted in favor of Johnson & Johnson's bedaquiline, a drug to combat multidrug-resistant tuberculosis. TB isn't something often seen in the U.S. and other developed nations, but the World Health Organization still reported more than 300,000 cases of multidrug-resistant TB in 2011 around the globe.
The advisory committee wasn't so in step over safety, with a vote in favor of bedaquiline at 11-7. Nonetheless, J&J's Janssen branch, the maker of bedaquiline, is hoping for an accelerated approval of the drug. As the FDA often follows the advisory committee's recommendation, that's very much a possibility for the first new treatment for TB in decades, which J&J has also submitted to the EU for approval.
Footholds in the developing world
This isn't a drug that's going to reach blockbuster status. Investment firm Cowen & Co. projected that bedaquiline could record peak sales of around several hundred million dollars -- a nice sum, but not enough to really move the needle at a company the size of J&J, which took in more than $65 billion in revenues last year.
However, don't write this deal off as nothing. With nearly 60% of multidrug-resistant TB cases occurring in China, Russia, and India, J&J has the chance to make inroads on growing pharmaceutical markets in some of the strongest developing economies in the world. China, in particular, is worth the investment: With accounting firm KPMG expecting China to leapfrog Japan as the second-largest pharmaceutical market by 2015, J&J's smart to find untapped ways to lay down roots in the fast-growing Asian economy.
From an investment standpoint, it's also key for Johnson & Johnson to maintain its presence in the quiet antibiotic market. With few competitors besides big pharma rivals in AstraZeneca (NYSE:AZN) and GlaxoSmithKline (NYSE:GSK) making inroads in antibiotics, J&J can't be faulted for cementing its position in this overlooked but critical market. It's just one part of J&J's massive portfolio, but it's one that the company is right not to ignore.
Another cog in the machine
Overall, while the advisory committee's recommendation won't move markets, it's just another signifier of Johnson & Johnson's strengths across the health care sector. Bedaquiline may not be the blockbuster that many more ballyhooed drugs are, but if the FDA follows the advisory committee's recommendation and approves the drug, it's one more important cog to Johnson & Johnson's machine that stretches from consumer products to medical devices to pharmaceuticals and back. For many disadvantaged people in developing nations, this drug could be a lifesaver.
Plus, what investor's saying no to another $300 million in sales for such a solid company?
Fool contributor Dan Carroll has no positions in the stocks mentioned above. The Motley Fool owns shares of AstraZeneca plc (ADR), GlaxoSmithKline, and Johnson & Johnson. Motley Fool newsletter services recommend GlaxoSmithKline and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.