FDA Decision Day for J&J's Risperdal Replacement

Excerpt from our One-Page WSJ Summary:

A J&J Copycat Could Extend Old Drug's Life

Summary: Similar to what many drug makers have done in recent years, Johnson & Johnson (JNJ) is hoping to rework an older, successful drug that is about to lose its patent and go generic. Risperdal, a schizophrenia drug, was J&J's best-selling product last year, bringing in $3.55 billion. J&J is now attempting to market paliperidone, which it claims is a significant improvement over Risperdal, and if approved by the FDA today could add five years of marketing life to what otherwise would have gone generic. A generic version could hurt sales of paliperidone -- which doesn't have a marketing name yet -- by up to 30% or the amount that was sold to Medicaid. Both Wall Street and the medical community are voicing their doubts over paliperidone, saying J&J has largely failed to prove it's any better than Risperdal. In addition to its clinical tests of paliperidone versus a placebo, J&J said it has begun a test against AstraZeneca's (AZN) Seroquel, which is the most widely prescribed antipsychotic drug in the U.S. Still, critics contend that J&J has not put paliperidone directly against Risperdal.
Related links: Full WSJ article • Drug Companies Threatened By Proposed Patent Legislation • J&J Sues Boston Scientific and Abbott Labs Over Guidant Deal • Johnson & Johnson -- 73 Consecutive Years of Sales Increases! • Changes to Berkshire Hathaway's Holdings: J&J in, Lexmark Out
Potentially impacted stocks and ETFs: The FDA's decision today has obvious implications for shares of both J&J and AstraZeneca. Other firms known to have "reworked" a drug to extend market life include: AstraZeneca (AZN), Forest Laboratories (FRX), Schering-Plough (SGP) and Wyeth (WYE). As of Aug. 31st, J&J was the second largest holding of iShares Dow Jones US Healthcare ETF (IYH) at 11.17% of net assets. It was also the 2nd largest holding of iShares S&P Global Healthcare ETF (IXJ) at 8.08% of assets; AstraZeneca was 6th largest at 4.29%. And it was the 2nd largest holding of Health Care Select Sect SPDR (XLV) at 12.54%. (Source: Morningstar.com)

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