Imbruvica And Darzalex Are of Key Importance For J&J’s Future Growth

by Trefis Team
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Johnson & Johnson
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Johnson & Johnson (NYSE:JNJ) derives around 55% of its value from its Pharmaceuticals business, according to our estimates. Within pharma, the oncology segment is of key importance and we expect that it will continue to drive growth for the company in the coming years. The company’s key oncology drugs include Darzalex, Imbruvica, Valcade and Zytiga. J&J collaborations with AbbVie for Imbruvica and with GenMab for Darzalex are paying off well.  The chart below shows the oncology drug revenue growth over the last 6 years.

Our price estimate of $126 for Johnson & Johnson is slightly below the current market price of $135.

Imbruvica

Imbruvica is used for the treatment of chronic lymphocytic leukemia and mantle cell lymphoma. Compared to traditional chemotherapy, Imbruvica reduces previously untreated chronic lymphocytic leukemia patient’s risk of death by a massive 85% in patients aged 65 or above. J&J shares the drug’s marketing rights with AbbVie, which is highly optimistic about Imbruvica’s prospects and expects overall peak sales to reach $11 billion. This implies that J&J’s share of peak sales could hit $4-5 billion. Expansion to additional indications will help, as the drug is being tested for multiple line extensions in phase 3. Last month, the FDA gave second-line approval to Imbruvica for chronic graft-versus-host disease (cGVHD). However, we remain fairly conservative in our forecast and expect the drug’s sales to increase from $1.25 billion in 2016 to $3.8 billion by 2023.

Darzalex

Darzalex was approved by the FDA in late 2015, and is estimated to have peak sales potential of as much as $7 billion. The drug was co-developed by J&J and GenMab, but J&J has exclusive marketing rights worldwide. Darzalex is a first-in-class immunotherapy for multiple myeloma. As of January 2017, the phase 3 pipeline contained trials for three line extensions for the drug. Some of these are likely to make it through the FDA approval process and will aid the drug’s revenue growth. The clinical data presented in late 2015 (after the drug’s approval) further strengthened its prospects. We currently estimate Darzalex sales to increase from $572 million in 2016 to over $4 billion by 2023.

Velcade

Velcade is a type of chemo drug, approved by the FDA for the treatment of multiple myeloma and mantle cell lymphoma. Velcade was developed by Takeda Pharmaceuticals. In July 2017, a U.S. appeals court in a ruling reversed the lower court decision and stated that the patent of Takeda is valid, thus allowing Takeda to sell Velcade exclusively in the U.S. till 2022. [1] It should be noted that Velcade is marketed by J&J outside the U.S. As generic drug makers launch the low cost version of Velcade in international markets, J&J’s revenues are expected to nosedive. We currently estimate the Velcade revenues for J&J to decline sharply from $1.2 billion in 2016 to $150 million in 2023.

Zytiga

Zytiga is used in combination with prednisone to treat metastatic castration-resistant prostate cancer (mCRPC). Last week, J&J announced the submission of a supplemental new drug application to the U.S. FDA seeking to expand the use of Zytinga in combination with prednisone to include treatment of patients with high-risk metastatic hormone naïve prostate cancer or newly diagnosed, high-risk metastatic hormone sensitive prostate cancer. [2] While Zytinga is currently protected for exclusivity in most markets until 2027, it faces stiff competition from Pfizer’s (NYSE: PFE) Xtandi. Pfizer last week reported new data from a trial showing Xtandi delays the spread of prostate cancer in non-metastatic patients, which is a positive development for Pfizer. [3] Xtandi could hit peak sales of $5 billion, according to a report. [4] Owing to the competition, we estimate J&J’s Zytiga revenues to decline from $2.26 billion on 2016 to $1.6 billion in 2023.

The chart below shows how different oncology drug revenues will shape up in the coming years, according to our estimates.

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Notes:
  1. U.S. court upholds Takeda patent on cancer drug Velcade, Reuters, July 17, 2017 []
  2. Janssen Press Release, Sep 14, 2017 []
  3. Pfizer’s Press Release, Sep 14, 2017 []
  4. How Pfizer Inc. Makes Most of Its Money, Fox Business, Apr 17, 2017 []
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