Johnson & Johnson Looks Fit to Investors

But Michelmore also said J&J will fare better than many of its peers in terms of drug patent expirations. Between 2004 and 2008, J&J will lose patents for drugs whose sales last year totaled $2.88 billion. That's 7% of corporate sales; the average big drug company will lose patent protection on drugs worth 16% of last year's corporate sales.

Michelmore said she is more optimistic than the Wall Street consensus about J&J's experimental drugs. "We believe that the company does have a legitimate pipeline," she said, adding that her optimism will depend on the clinical-trial progress for drugs treating schizophrenia, premature ejaculation and certain cancers as well as on J&J's ability to secure FDA approval for extra uses for existing drugs. Since her report was published, the FDA said J&J could begin marketing its Topamax epilepsy drug as a migraine headache treatment.

Like Prudential's Faulkner, Michelmore said she has detected "acquisition angst" among investors who fear J&J will make a dilutive acquisition soon. "Although an acquisition in the next six months is possible, we do not agree that it must be large and/or dilutive," she said.

>To order reprints of this article, click here: Reprints