The Homa Files

Excerpted from Forbes “J&J Gets Proactive About Bad News” by Lisa LaMotta, September 27, 2008

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Sometimes being proactive can be your best bet in countering a bad situation.

In an effort to be transparent, the U.S. Food and Drug Administration has been rigorous in issuing early communications to the public whenever problems, large or small, arise that are even remotely related to a drug. These early communications often come out before the FDA has had time to investigate the underlying cause of the problem, and they can have detrimental effects on a pharmaceutical company and its pipeline.

The latest drug to be part of an early communication is Johnson & Johnson’s Eprex, or epoetin alfa, which is approved for the treatment of anemia and is currently being tested in high doses to treat patients who have had an ischemic stroke. The FDA announced on Friday that it had received preliminary information from a study that J&J is conducting in Germany, which showed patients taking Eprex in high doses, about 40,000 units daily for three days, had a higher incidence of death than those in the placebo group. About 14.0% of the Eprex patients died, compared with 9.0% of the placebo group patients.

J&J is also taking a transparent approach, which seems to have limited the damage to its shares. Its subsidiary Ortho Biotech issued a statement last week informing the FDA of the abnormal occurrences in the data…The FDA has yet to determine the underlying cause of the deaths and whether it’s related to the high doses of Eprex…Shares of J&J were little changed, rising 4 cents, to $69.40.

This hasn’t had a large effect on J&J thus far, but other companies have not been so lucky. Amylin Pharmaceuticals has been under fire for deaths reported by the FDA that were loosely linked to its blockbuster diabetes drug Byetta. While the cause of most of the deaths has been attributed to factors other than Byetta, Amylin’s share price has dropped dramatically, about 39.3% since the news broke in August.

Edit by SAC

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In late 1982 Johnson & Johnson recalled over 30 million bottles of Tylenol after several bottles were found laced with cyanide in Chicago, IL.  J&J has been widely praised for its reaction, which included the recall of $100 million worth of product, heavy use of PR, and paid advertising to communicate with consumers followed by reformatted product packaging and heavy use of promotions for the product re-launch.  After dropping from 35% to 8% market share at the time of the incident Tylenol regained its market share within a year. 

The J&J Credo, which speaks to putting its people and consumers first always has guided the company’s decisions since 1943; long before the Tylenol incident of 1982 and through the Eprex situation today.   

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Full article:
http://www.forbes.com/2008/09/27/jnj-fda-closer-markets-equity-cx_lal_0926markets34.html

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