Recently, Johnson & Johnson (JNJ) announced that the risk of hospitalization was lower in schizophrenia patients treated with its Risperdal Consta (risperidone) compared to those treated with other antipsychotics over a period of 12 months. The encouraging data on Risperdal Consta, which is marketed worldwide by Johnson & Johnson and manufactured by Alkermes, Inc. (ALKS), were presented at the European Congress of Psychiatry in Vienna.
Data revealed that treatment with Risperdal Consta, a long-acting injectable antipsychotic, resulted in a 34% reduction in hospitalization compared to other antipsychotic therapies. Data also demonstrated that Johnson & Johnson/Alkermes’ therapy brought down the risk of hospitalization by 47% as against other long-acting first generation antipsychotics.
We note that Risperdal Consta was developed by Alkermes using the Medisorb delivery system and is approved for the treatment of schizophrenia and bipolar disorder. Alkermes receives royalty as well as manufacturing revenues for Risperdal Consta.
Sales of Risperdal Consta came in at $1.5 billion in 2010, up 5.3% year over year. The increase was attributable to the strong showing in ex-US markets, particularly Japan. We believe that the encouraging data on Risperdal Consta will further boost the sales of the drug.
Neutral on Johnson & Johnson and Alkermes
Currently, we have a Neutral outlook on Johnson & Johnson supported by the Zacks #3 Rank carried by the company in the short run (Hold rating).
Johnson & Johnson has recently been impacted by a series of over-the-counter (OTC) product recalls, pricing austerity in the European Union (EU) and generic competition. Although we expect Johnson & Johnson to continue facing headwinds in the form of EU pricing pressure, manufacturing issues and US healthcare reform, we believe that the company’s diversified business model, lack of cyclicality, strong financial position will help it overcome the challenges.
Johnson & Johnson has been trying to offset the declining sales of some of its important products by bringing in new products through in-licensing deals and acquisitions.
We are also Neutral on Alkermes in the long-run. The company, like Johnson & Johnson, carries a Zacks #3 Rank in the short-run. Alkermes, which faced two action dates in October 2010, received mixed reactions from the US Food and Drug Administration (FDA).
While Vivitrol was approved for the prevention of relapse to opioid dependence after opioid detoxification, diabetes candidate Bydureon was refused approval with the candidate receiving a second complete response letter. We believe that this has pushed back the US launch of Bydureon by at least 1.5-2 years, provided there are no additional stumbling blocks.
Going forward, we expect investor focus to remain on the approval process for Bydureon and see limited upside potential from current levels. Consequently, we have a ‘Neutral’ stance on Alkermes.
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