Originally created 07/20/02

Inquiry of drug results in losses



NEW BRUNSWICK, N.J. - Shares of Johnson & Johnson plunged Friday after a published report said a criminal investigation had been launched into one of the company's factories in Puerto Rico.

The factory manufactures the anemia drug Eprex, which has been linked to serious illnesses in Europe and Canada, The New York Times reported in Friday's editions. It said the investigation by the Food and Drug Administration and the Justice Department was linked to a whistleblower lawsuit filed by a fired factory worker.

In a prepared statement, the company said it was aware of a government investigation, "presumably related to the lawsuit."

"While we are unaware of the precise nature of the FDA investigation, the company has offered its cooperation to all parties concerned," the company said.

FDA spokesman Brad Stone said the agency would neither confirm nor deny that an investigation was under way.

On the New York Stock Exchange, J&J shares lost 15.9 percent, or $7.88 a share, to close Friday at $41.85.

"It looks like an overreaction, but it's not surprising, given that the markets are so jittery," said Hemant K. Shah, an independent industry analyst from Warren, N.J. "The basic business of this company remains very strong, almost across the board."

The drug Eprex is used in Europe and Canada to raise levels of red blood cells in people undergoing kidney dialysis or suffering from anemia caused by chemotherapy. An equivalent drug - sold by Johnson & Johnson as Procrit and Amgen as Epogen - is used in the United States.

Over the past few months, the Times said, an increasing number of Eprex users have lost the ability to produce red blood cells altogether. That condition, called red cell aplasia, leaves them dependent on blood transfusions to survive.

There have been 141 suspected cases of red cell aplasia in Eprex users, the newspaper said. Johnson & Johnson estimates the frequency at 1.14 cases for every 10,000 patient-years of use. Almost all cases occurred in kidney failure patients who injected the drug under their skin, rather than taking it intravenously.

Only a few cases have appeared in U.S. patients using the equivalent drug, which is usually taken intravenously.

According to the Times, former Johnson & Johnson employee Hector Arce claims he was asked to falsify data to cover up manufacturing lapses and was suspended several days before an interview with FDA inspectors.

Johnson & Johnson said Mr. Arce was a utility worker with no manufacturing responsibilities. The company said it has found no support for his allegations, and intends to defend itself vigorously against them.

Even if the allegations were true, the company said, they would not have affected the integrity of the product.

U.S. District Court Judge Jaime Pieras Jr., who is presiding over the lawsuit in Puerto Rico, has twice asked the government to file reports under seal "regarding the status of its criminal investigation," the story said.

Attorney Juan H. Saavedra Castro, who is representing Mr. Arce, told the newspaper, "The case has been stayed pending this criminal investigation."