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Covid-19 Vaccines Offer Drug Makers Chance at Salvation, Financial and Beyond

For a long time, drug makers have been the most hated industry in America. Companies are blamed for gouging prices on lifesaving drugs and enriching themselves through the opioid crisis, among other sins.

Now, with pharmaceutical companies racing to find vaccines to end the coronavirus pandemic, the industry is hoping to redeem itself in the public’s mind.

The primary goal, of course, is to rescue the world from the grips of a vicious virus. But a big fringe benefit is to get public credit — and to use an improved image to fend off government efforts to more heavily regulate the industry.

Consider Johnson & Johnson, one of the world’s largest health care companies.

In recent years, its reputation has been battered by accusations that products like its artificial hips and talcum powder have harmed customers. In 2019, an Oklahoma judge ordered the company to pay $572 million for contributing to the opioid epidemic.

This spring, Johnson & Johnson jumped into the hunt for a Covid-19 vaccine; its candidate is now in the final stage of clinical trials. (On Monday, the company said it had temporarily paused the study after a participant became sick with an unexplained illness.)

Regardless of whether the vaccine ever comes to market, the company is looking to create a surge of positive publicity from its work. Its chief executive, Alex Gorsky, went on the “Today” show this spring and called Johnson & Johnson’s lab workers heroes. The company has produced a slick, self-promotional online video series, “The Road to a Vaccine,” featuring feel-good interviews with the company’s scientists and segments on issues like whether it is safe to send children back to school.

Johnson & Johnson’s efforts to develop a vaccine will show that “J&J is a company full of people with heart and soul who are doing this 24-7, with all their science and know-how,” Dr. Paul Stoffels, the company’s chief scientific officer, said in an interview. While the company’s image at times has been “trashed,” he said, “I hope that we can get to a better reputation.”

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Credit…Brendan Mcdermid/Reuters

That is a widely held sentiment across the pharmaceutical industry. Companies are looking for public makeovers as a political battle over drug price controls looms. Others are seizing the once-in-a-generation opportunity to raise money for future projects from investors and the government.

For an industry demonized by consumers and politicians, the hunt for a vaccine “offers a path to redemption,” said J. Stephen Morrison, a senior vice president at the Center for Strategic and International Studies, a think tank in Washington.

Last fall, a Gallup poll found that drug makers had the worst reputation of any American industry. Americans were twice as likely to rate the industry negatively as positively. Drug companies were even less popular than the federal government.

The pandemic — and the high hopes for a fast, safe, effective vaccine — appears to be changing that perception, at least for now. This spring, other opinion polls showed that Americans’ views of the industry were improving.

When Gallup released the results of this year’s annual survey, conducted in the first half of August, the results confirmed that the pharmaceutical industry’s reputation had gotten a bit better. Now, it is second-to-last, having inched past the U.S. government.

Public opinion matters. The industry is facing a fight in Washington over price controls, which could take a bite out of companies’ profits in the United States. The latest salvo came last month when President Trump issued an executive order that called for capping the costs of some prescription drugs.

The industry’s largest trade group, the Pharmaceutical Research and Manufacturers of America, is fighting back by invoking the industry’s effort to fight the coronavirus. It denounced Mr. Trump’s executive order as “a reckless attack on the very companies working around the clock to beat Covid-19.”

Kim Monk, managing director of Capital Alpha Partners, a policy research firm based in Washington, said that finding a safe and effective vaccine could help drug companies in their campaign to stave off price controls. “You don’t even need to say it,” she said. “It’s part of the strategy.”

To be sure, the race for a coronavirus vaccine is much more than a public relations play. Scientists at pharmaceutical companies take great pride in their work to combat human suffering. And there is immense prestige involved in being among the first to successfully conquer a devastating global pandemic.

There are also potentially enormous profits on the line.

Vaccines are often thought of as the pharmaceutical industry’s sleepy, low-profit backwater, but that is not always the case, said Dr. David Bishai, a professor of health economics at Johns Hopkins University’s school of public health.

Prevnar, a vaccine to prevent pneumococcal disease, which leads to ear and sinus infections, is Pfizer’s top-selling product, responsible for nearly $6 billion in revenue last year.

Merck’s Gardasil, which protects against human papillomavirus, a sexually transmitted disease that can cause cervical cancer, generated close to $4 billion in sales last year, making it the company’s third-best seller.

While drug makers generally do not disclose what they earn on individual drugs, two of the world’s largest pharmaceutical companies, GlaxoSmithKline and Sanofi, have said in securities filings that the profit margins in their vaccine divisions are greater than in their other lines of business.

Ronny Gal, an analyst at Bernstein, estimated that sales from a coronavirus vaccine could be up to $20 billion in the first year alone. And since diseases are rarely eradicated, vaccines “tend to be a very long-term business,” he said.

Two leading drug makers have pledged to not profit from their vaccines. But those promises are laden with caveats.

Johnson & Johnson has said it will sell the vaccine on a “not-for-profit” basis for “emergency pandemic use.” But the company hasn’t explained in detail how it will define “not for profit.” In any case, when the “emergency pandemic” phase of the crisis ends, the company will no longer be bound by its pledge. Jake Sargent, a Johnson & Johnson spokesman, said the end of the emergency phase “will be defined at a future date by global health authorities.”

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Credit…Erin Schaff/The New York Times

Another major drug company, AstraZeneca, has made a similar pledge not to profit on its vaccine, which is also in large clinical trials, during the pandemic. But in a contract with one of its manufacturers, AstraZeneca has suggested that it can declare the pandemic to be over as soon as July 2021 — around the time that a successful vaccine is likely to be getting sold worldwide, according to the Financial Times.

“The company has committed to supplying the potential vaccine at no profit during this pandemic period,” said an AstraZeneca spokeswoman, Michele Meixell. “It is too early to determine pricing post-pandemic.”

The Covid-19 vaccine business is likely to be unusually lucrative because much of the risk has been taken out of the equation. The federal government has entered into deals with companies totaling more than $10 billion to develop, manufacture and distribute coronavirus vaccines. Drug companies usually spend small fortunes to market their products. But that will probably not be required to generate public interest in a coronavirus vaccine.

“If you get a vaccine and it gets recommended by the C.D.C., you barely need a sales force,” said Geoffrey Porges, the director of therapeutics research at the investment bank SVB Leerink.

A successful vaccine could be a transformative moment for unproven companies like Moderna and Novavax, which have never previously brought vaccines to market. But even being involved in the race is proving financially fruitful for smaller firms.

The German biotech firm CureVac, which says it hopes to have a successful vaccine by the end of the year, raised $245 million in August when it began trading on the Nasdaq. It is now valued at nearly $10 billion, despite never having brought a product to market.

Ms. Monk of Capital Alpha Partners said drug makers large and small are likely to benefit from any association with fighting the coronavirus. “For an industry that is not viewed favorably by the public,” she said, “this is a real opportunity for them to put on a white hat and save the world.”

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Workforce training app developer Poka adds strategic investor Schneider Electric

Poka, a workforce training app and software service for industrial companies, has added SE Ventures, the venture capital arm of the European energy and automation conglomerate Schneider Electric to its roster of backers.

The company has raised over $23 million in funding so far for its application and software services package that provides training and tips for workers on the factory floor.

The company said it would use the new funding to expand its global marketing through new distribution strategies and speed up its product development.

Since 2014, Poka has been selling its services to companies including Bosch, Danone, Mars, The Kraft Heinz Company, Johnson & Johnson and Stanley Black and Decker, the company said.

Previous backers of the Quebec City, Canada -based company include Robert Bosch Venture Capital, Groupe Leclerc, and CDPQ, according to the company.

For Poka, demand is driven by the combination of increasing automation and an aging workforce creating a skills gap in industrial facilities.

Poka was designed specifically to address the challenges and needs of large global manufacturers — many of whom are clients of Schneider Electric,” said Poka chief executive Alex Leclerc in a statement. “Our partnership gives us global reach within our target markets and provides value to our joint customers by offering them a more complete path to digital transformation.”

For SE Ventures general partner Grant Allen, the replacement of aging technologies around communication and knowledge-sharing in manufacturing facilities represented an obvious investment opportunity. “The tools and systems used to communicate, capture and share knowledge in commercial production facilities are largely outdated, leaving workers without the necessary information to be effective and safe,” said Allen.

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Johnson & Johnson to End Talc-Based Baby Powder Sales in North America

Johnson & Johnson is discontinuing North American sales of its talc-based baby powder, a product that once defined the company’s wholesome image and that it has defended for decades even as it faced thousands of lawsuits filed by patients who say it caused cancer.

The decision to wind down sales of the product is a huge concession for Johnson & Johnson, which has for more than a century promoted the powder as pure and gentle enough for babies.

The company said on Tuesday that it would allow existing bottles to be sold by retailers until they ran out. Baby powder made with cornstarch will remain available, and the company will continue to sell talc-based baby powder in other parts of the world.

Johnson & Johnson has often said that faulty testing, shoddy science and ill-equipped researchers are to blame for findings that its powder was contaminated with asbestos. But in recent years, thousands of people — mostly women with ovarian cancer — have said that the company did not warn them of potential risks that the company was discussing internally.

Even as it announced the withdrawal of its baby powder, the company said that it “will continue to vigorously defend the product” in court. But Johnson & Johnson acknowledged that demand for the talc-based version had slumped as consumer habits changed and concerns about the product spread.

For decades, baby powder’s main ingredient was talc, a mineral known for its softness. Sold in an iconic white bottle, its fragrance is said to be one of the most recognizable in the world.

It was only in 1980, after consumer advocates raised concerns that talc contained traces of asbestos, a known carcinogen, that the company developed a cornstarch alternative.

Krystal Kim, a Philadelphia woman who has survived two bouts of ovarian cancer that she blames on her lifelong use of the powder, said the decision to remove the product was a victory. Ms. Kim was one of a group of women who won a lawsuit against Johnson & Johnson in 2018.

“It means no more little girls are going to go through what we went through,” said Ms. Kim, who started using baby powder when she was 10 years old. “This stops now. That monster is off the shelves.”

Early lawsuits against Johnson & Johnson claimed the talc itself caused ovarian cancer, though the scientific evidence on that was never conclusive. Plaintiffs’ lawyers later shifted their focus, arguing that traces of asbestos — an indisputable and much-feared carcinogen — were present in talc and capable of causing cancer even in microscopic amounts.

Asbestos contamination can occur when talc is mined, because both minerals can be intermingled underground, and internal memos and reports unearthed during litigation revealed that the company had been concerned for at least 50 years about the possibility of traces of asbestos in its talc. Asbestos was first linked to ovarian cancer in 1958.

The revelation of these company documents also prompted inquiries by the Justice Department and Securities and Exchange Commission, as well as congressional committees and authorities in Mississippi and New Mexico.

As of late March, Johnson & Johnson faced 19,400 lawsuits related to talc body powders, many of them involving complicated science. A federal judge ruled in April that plaintiffs’ scientific experts could testify with some exceptions, a blow to Johnson & Johnson, which had been pushing to exclude the testimony in hopes of shutting down thousands of cases.

The legal record has been mixed so far. Several juries have decided against Johnson & Johnson, in one case awarding $4.7 billion to 22 women including Ms. Kim in 2018. But the company has prevailed in other cases and is appealing nearly all of the cases it has lost.

Johnson & Johnson’s talc supplier, Imerys Talc America, filed for Chapter 11 bankruptcy protection last year.

In October, Johnson & Johnson recalled 33,000 bottles of baby powder after the Food and Drug Administration said it discovered evidence of chrysotile asbestos in a bottle purchased from an online retailer. Soon after, the company said that multiple tests of the same bottle came up clean.

Nathan A. Schachtman, a lawyer who defends product liability cases and spent decades handling asbestos-related claims, said that companies often agreed to settle lawsuits or discontinue products that they believed were safe in an attempt to soothe shareholders and win back public confidence — to “buy peace,” he said.

“At some point, the shareholders don’t care whether the science is on your side,” said Mr. Schachtman, who said he was not involved in the Johnson & Johnson talc cases. “Companies have to make very practical and hard decisions about withdrawing products that they don’t think are bad products, or dropping cases because they know they can’t win them all and it’s expensive to defend them.”

On Tuesday, Johnson & Johnson said that baby powder made up half a percent of its total consumer health business in the United States and that demand for the talc-based version had slumped. The decision to discontinue the product stemmed from a re-evaluation of its product portfolio, the company said.

Mark Lanier, a lawyer who represents thousands of cancer survivors and their families who are suing Johnson & Johnson, said the company had made “the right move.”

“They can give all the reasons they want — I’m just thankful the stuff is off the market. I do believe this will save untold misery and lives,” Mr. Lanier said.

Though Johnson’s Baby Powder has long been advertised for infants and is stocked on the baby aisle along with diapers and baby shampoo, adult women have been the main purchasers in recent decades, using it on their perineum and to prevent chafing between the legs.

Thousands of women who developed ovarian cancer after long-term use of the product blamed the powder and sued the company, while a smaller number sued after developing mesothelioma, a rare and particularly vicious cancer that develops in the linings of the lungs and abdomen and is considered a signature disease of asbestos.

And groups that have advocated the removal of other talc-based cosmetics from the market seized on Johnson & Johnson’s decision to call for more companies to do the same.

In a statement, the Environmental Working Group advocacy organization urged other cosmetic companies to stop using talc in loose powders. The group said that it commissioned tests that last week found asbestos in two eye shadow palettes made with talc, marketed to children and sold on Amazon.

Amazon did not immediately respond to a request for comment.

The F.D.A. issued several alerts last year warning that asbestos had been discovered in several talc cosmetics products, including eye shadow sold at Claire’s, a retailer focused on teenagers.

Linda Reinstein, whose husband died of asbestos-induced mesothelioma and who now heads the Asbestos Disease Awareness Organization, called the company’s move a public health victory but said several chemical companies continued to use asbestos in manufacturing and had blocked an outright ban on it. “We can’t wait for them to follow Johnson & Johnson,” she said.

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Locatee raises $4M Series A for its workplace analytics platform

Locatee, a Swiss startup that uses existing sensors and IT infrastructures to provide employers and commercial real estate owners with detailed data about how their spaces are utilized, today announced that it has raised a $4 million Series A funding round led by San Francisco-based FYRFLY Venture Partners and Zurich-based Tomahawk VC.

“We started the company based on the experience we had with the big banks,” Locatee CEO and co-founder Thomas Kessler told me. “As users, we were introduced to this new world of working. You can work from any place. You can work from Starbucks. You can work from any area. And in the office, I did not have my own desk anymore. I could choose between meeting rooms, focus areas and so on. But that also has some challenges for managing the space.”

Corporate real estate managers often don’t understand how their buildings are utilized these days because they simply don’t have the tools to gather this data. As a result, they overprovision their office spaces and large chunks of it remain empty — which organizations then unnecessarily pay for.

What makes Locatee stand out from similar players in this space is that it integrates with existing motion sensors inside a building and other data sources, like Wi-Fi networks. For Swiss Re’s Munich office, for example, Locatee was able to work with NetCloud and integrate with the existing Cisco network infrastructure. Thanks to the data it gathered, Swiss Re was able to reduce its local office space by 10%, which Locatee says allowed the company to save about €290,000 per year.

On top of the core data analytics, Locatee also offers a number of other tools, ranging from smart signage for meeting rooms and workstations, for example, to desk finders for workers who now (or at least once they return to their offices) are often not working from a single, pre-assigned cubicle every day but who roam around a building and work from a different spot every day.

As Keller stressed, Locatee approached its first customers by trying to understand their use cases, not by trying to sell them technology. One of Locatee’s first customers was Biogen, but today, it also calls Swiss Re, Johnson & Johnson and Zurich (the financial services company, not the city) among its users.

Locatee’s data is anonymized and Kessler argues that employees don’t tend to worry about being tracked. “[Employees] have a benefit,” he said. “They have an app, for instance, where they can see available meeting rooms and desks. And they can see where colleagues are — on an opt-in basis. So it’s more like a ‘share your location’ feature like in iOS Messenger or in WhatsApp .”

With that kind of momentum, Kessler told me, finding investors was relatively easy — though it surely helped that the company closed this raise before the coronavirus pandemic hit Europe.

“Locatee’s vision to transform how space is used will ultimately elevate the quality of life for employees and can also contribute significantly to sustainable development goals,” said Philipp Stauffer, co-founder and managing director at FYRFLY Venture Partners. “Office space is only one component and increasingly all ‘work points’ matter for productivity optimization. A quantitative approach to space optimization and productivity holds both significant top- and bottom-line potential for large global organizations. Furthermore, aggregated data can help predict larger market trends, which is exciting to us.”

The company says it wants to use the new funding to become the “Google Analytics of office buildings.” And while its technology could also be used in other environments, Kessler says he wants to focus on office space for now. “There is still a lot of wasted real estate that needs to be optimized,” he said.

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Johnson & Johnson partners with BARDA to fund $1 billion in COVID-19 vaccine research

Pharmaceutical giant Johnson & Johnson is partnering with the Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services to fund over $1 billion in COVID-19 vaccine and antiviral treatment research and development, the company said on Monday.
The partnership is an expansion of an existing …

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Desperate to exit, a $10B price tag for Magic Leap is crazy

Augmented reality headset maker Magic Leap has struggled with the laws of physics and failed to get to market. Now it’s seeking an acquirer, but talks with Facebook and medical goods giant Johnson & Johnson led nowhere according to a new report from Bloomberg’s Ed Hammond.
After raising over $2 …

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