J&J Outlines Growth Strategy and Updates Drug Pipeline Advances

US healthcare major Johnson & Johnson (J&J) has conducted an investor meeting during which the firm's growth plans for its pharmaceutical division were unveiled. The firm said in its segmental overview that it is seeking four diversified strategies to boost growth in the near term. This includes differentiated medicines, building a transformational pipeline, strengthening geographic presence, and investing in organisational capabilities and human resources. Key take-aways are as follows:

• J&J ranks eighth on the world's largest pharmaceutical company table, and is the fifth largest biotech firm globally.
• Between 2009 and 2011, the firm has launched or is in the process of launching six new products. Of these, two are pending regulatory review in the European Union, and two are in registration in key unspecified markets.
• The firm's pharmaceutical business expects to file 11 new drugs and over 30 line extensions between 2011–15, including Dacogen (decitabine), bapineuzumab IV, canagliflozin, siltuximab, and sirukumab.
• The therapeutic areas targeted for the new products in the medium term include oncology, neuroscience, and infectious diseases and vaccines.
• Investments in emerging markets are to increase, namely Brazil and China.
• The firm also plans to accelerate growth in Japan—globally the second largest pharma market—with seven new product launches in 2011 and boosting its partnership with Takeda Pharma (Japan).
• The firm expects new products launched from 2009 to account for more than one third of the product portfolio from the current 10%. In 2010, mature and regional products accounted for more than half of the product portfolio.
• The firm claims to lead the pharma industry in terms of US launch sales (2009 to March 2011) with USD1.116 billion followed by Pfizer at USD1.055 billion and Takeda at USD715 million.
• The firm also said it leads in terms of market share in the immunology segment, at close to 35% ahead of Amgen and Abbott Laboratories.
• Key therapy franchises driving growth in the first quarter of 2011 were immunology, long-acting antipsychotics, oncology, and HIV/AIDS.
• J&J estimates that it is in a "favourable competitive position" in terms of patent expiry of blockbuster drugs, coming seventh among the top ten global pharma firms during 2011–15.
• The global pharma industry is expected to grow from USD80 billion in 2010 to USD1 trillion by 2015, with 60% of growth coming from emerging markets.

Source: J&J

Outlook and Implications

The pharma major's move to set up a meeting with the investing community is in an effort to quash any lingering doubts over its medium-term growth, and to reiterate that the firm is backing its pharmaceutical business to continue to deliver in the medium-to-long term. This is so because, in the past three years, J&J has witnessed declining sales from this division, so much so that other businesses—namely, medical devices and consumer health/nutrition—have out-performed in terms of sales, increasing their contribution to overall revenues. The reason behind the pharma division's decline is a combination of regulatory factors, such as health reform in the US, the economic downturn affecting reimbursement and pricing levels, and product safety issues. Besides this, market competition has increased in the form of higher generic drug uptake and J&J's own blockbuster drugs facing patent expiry and losing market exclusivity.

The firm has sought to address these aspects by primarily betting on two elements—new products, and improving its geographical footprint. The list of new products slated for introduction in the next five years looks promising, and is expected to add to revenues. However, whether it will be able to successfully replace and improve the overall growth trajectory will be keenly watched. The firm's focus on emerging markets is aided by the estimation that 60% of future growth in the global market is expected to come from certain regions. J&J is well poised to take advantage of its operational expertise in certain emerging countries such as India. The firm is expected to pursue acquisitions and a partnership strategy to improve its presence in Latin America and the rest of Asia, and to push for higher revenues from emerging markets generally. In this endeavour, the firm is also expected to increase its brand name portfolio in these markets in the near term.