Johnson & Johnson Posts Solid Q3 Numbers Led By Ramp Up In Oncology Drugs
Johnson & Johnson’s (NYSE:JNJ) stock increased by over 3% following its Q3 2017 earnings announcement, effectively adding $13 billion in market cap. The results were largely in line with expectations, with a ramp up in key oncology drug sales, benefits from the Actelion acquisition, and forex gains. The company slightly raised its full year 2017 guidance to an EPS range of $7.25 – $7.30 from $7.12 – $7.22 earlier. We continue to believe that oncology drugs will be the key growth driver for J&J in the near term. Oncology drugs revenues saw a growth of 25% in Q3 2017, led by a ramp up in sales of Darzalex and Imbruvica.
Beyond oncology, Stelara’s Q3 performance within immunology is notable with a 38% jump in sales. This can be primarily be attributed to two factors – 7% growth in the U.S. immunology market size and 1.8 points of market share gains for Stelara led by strong adoption for the newer Crohn’s disease indication, according to the company’s management.
We have a price estimate of $133 for J&J. This reflects our slightly increased full year sales forecast for oncology and immunology drugs, primarily Darzalex, Imbruvica and Stelara. These numbers were updated based on the recent quarterly earnings announcement. We now estimate full year earnings of $7.30 for J&J.
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Looking forward, we expect Imbruvica and Darzalex to continue to accelerate their ramp up in the coming quarters. Remicade is still holding its ground against Inflectra. Physicians still seem to have a strong preference for the drug compared to its biosimilar, and this should bode well for the company. With Actelion, J&J now has access to some high-margin medicines and it is seeing positive growth and share gains both in Uptravi and Opsumit.
There are reasons to remain cautious amid the enthusiasm about the ramp up in some of the pharma drugs. J&J is facing pricing pressure in its Managed Care contracting and Medicaid sales channel, which has led to a decline in sales of its once fast-growing drugs Invokana. The medical devices segment hasn’t seen a meaningful trigger, and continues to drag along at a slow pace. We don’t expect a lot from the Consumer business in the near term, as it is facing strong competition from both big brands and private labels.
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