How JNJ Gets To $85 Billion: Devices, Pharma, or Consumer?

Johnson & Johnson (NYSE: JNJ) revenue grew at a CAGR of 4.1% from $70.0 billion in 2015 to $82.0 billion in 2019, and it is estimated to top $85 billion in 2020, led by its pharmaceuticals business, which is expected to be the single-biggest revenue driver with $44.8 billion in revenues (accounting for 52% of total revenues), which is 1.7x the size of its Medical Devices business, and 3.2x the size of its Consumer Healthcare Business. Pharmaceuticals will also be the fastest growing segment, adding $8.6 billion over 2017-2020 (92% of $9.3 billion in incremental revenues). Medical Devices will add $0.5 billion (5% of the $9.3 billion in incremental revenue), and Consumer Healthcare will add $0.2 billion or 3% of the total incremental revenue, according to our estimates. In this note we focus on the company’s key revenue sources, historical segment revenues, and forecast. Look at our interactive dashboard analysis on Johnson & Johnson Revenues for more details, parts of which are highlighted below.

Johnson & Johnson’s Revenue Has Been On A Rise Over The Last Few Years

• Johnson & Johnson’s total revenue grew from $70.1 billion in 2015 to $82.1 billion in 2019.
• This growth was largely led by its pharmaceuticals business, which added $11 billion in sales during the same period, primarily driven by the company’s oncology drugs portfolio, led by Imbruvica and Darzalex drugs.
• The acquisition of Actellion also aided the revenue growth in 2018. It added over $2.5 billion in sales in 2018.
• Looking forward, the revenues could grow at a CAGR of 3.6% to $91.2 billion in 2022, led by continued growth in some of the drugs, such as Imbruvica and Darzalex.
• However, the overall growth rate will be slightly lower than the rate seen between 2015 and 2019, as the company faces biosimilar competition for some of its key drugs, including Zytiga and Remicade.

Comparing Johnson & Johnson’s Sales Growth To Its Peers

• Johnson & Johnson’s sales grew at a CAGR of 4.1% between 2015 and 2019, higher than Pfizer’s but slower than Roche and Merck.
• Roche’s sales grew at a CAGR of 5.3%, Pfizer at 1.5%, and Merck’s 4.4% over the same period.

Johnson & Johnson’s Immunology And Oncology Portfolios Will Likely Aid Near Term Growth

• Johnson & Johnson’s pharmaceuticals sales grew from $31.4 billion in 2015 to $42.2 billion in 2019, led by its oncology drugs portfolio.
• We estimate it to grow to $48.3 billion in 2022, led by continued growth in its immunology and oncology portfolios.
• The near term growth will likely be led primarily by five drugs ~ Imbruvica, Darzalex, Stelara, Simponi, and Opsumit, which combined will likely garner sales of over $25 billion or 51% of the total expected pharmaceuticals sales in 2022.
• However, some of the company’s big ticket older drugs, including Remicade, Invega, Zytiga, Xarleto, and Prezista are expected to see decline, as they face biosimilar/generic competition, and increased competition from other pharmaceuticals companies.

Johnson & Johnson’s Medical Devices Sales Have Been Impacted By Acquisition And Divestiture Over The Recent Years

• Medical Devices sales grew from $25.1 billion in 2015 to $26.0 billion in 2019, partly aided by the acquisition of Abbott Medical Optics.
• The decline in 2019 sales can be attributed to the divestiture of Diabetes Care business last year.
• Looking forward, we estimate the segment revenues to grow to around $28.5 billion in 2022, primarily led by interventional solutions, and vision care sales.
• Interventional solutions sales have grown at a CAGR of 18% over the last 3 years, and we expect the annual growth to be in double digits for next few years, led by the company’s electrophysiology business.

Consumer Healthcare Sales Have Grown At A CAGR of <1% Between 2015 And 2019

• Johnson & Johnson’s consumer healthcare sales have grown slightly from $13.5 billion in 2015 to $13.9 billion in 2019.
• The growth rate was also impacted by the litigations against the company’s talc products. In fact, the company in 2019 recalled its baby powder on asbestos concerns.
• Looking forward, we forecast the sales to grow to $14.5 billion in 2022, led by the company’s beauty segment, which should benefit from the acquisitions of DR.CI:LABO, and continued growth in Neutrogena and Aveeno brands.

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