Johnson & Johnson Likely To Post Solid Q4 Led By Ramp Up In Oncology Drug Sales

by Trefis Team
Johnson & Johnson
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Johnson & Johnson (NYSE:JNJ) is set to report its Q4 2017 earnings on January 23, and we expect the company to post solid numbers, primarily led by continued growth in oncology drug sales, which saw growth of 25% in the previous quarter. It will also be interesting to see the trends in the company’s immunology drug Stelara, which saw a 38% jump in sales in the previous quarter, led by market share gains. We currently estimate full year Oncology drug sales to be over $7 billion, over 45% of which can be attributed to Imbruvica and Darzalex. These two drugs are likely to be key growth drivers for J&J in the coming years, with peak sales being touted to be around $4-5 billion for Imbruvica (J&J’s share) and $9 billion for Darzalex.

The company should also benefit from its $30 billion acquisition of Swiss biotech Actelion in June last year. Actelion has provided J&J access to some high-margin medicines, since the company focuses on rare diseases which tend to have more price protection and fewer competitors. Beyond pharmaceuticals, the medical devices and consumer business will likely continue to drag along at a modest pace. The medical devices segment hasn’t seen a meaningful growth trigger, while the consumer business is facing strong competition from both big brands and private labels (Also see – A Look At Johnson & Johnson’s Medical Devices Segment). While we remain optimistic about J&J’s overall performance, pricing issues and competitive pressure may keep growth in check in the fourth quarter.

Looking forward, most of the major pharmaceutical companies, including J&J, should benefit from lower tax rates. The companies will see a significant impact from changes in their effective tax rates, and this could allow these companies to potentially increase R&D investments with the freed up cash, and more projects may become economically viable – as the expectation of greater future profits due to a lower tax rate could potentially encourage more risk-taking. You can look at our dashboard for pharma companies’ value sensitivity to changes in tax ratesIt will be interesting to see the company’s commentary on freed up cash.

Our price estimate of $126 for Johnson & Johnson is around 10% below the current market price.

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