J&J’s New Products Drive Sales, Ups FY16 Guidance

Drug major’s Q3 FY16 sales grew by 4.2% Y-o-Y to $17.8 billion

j0Johnson & Johnson Inc. (NYSE: JNJ), the world’s biggest maker of healthcare products, announced its Q3 FY16 financial results on October 18th, 2016.

Headquartered in New Brunswick, New Jersey, Johnson & Johnson researches, develops, manufactures, and sells healthcare products worldwide. It operates through three segments: Consumer, Pharmaceutical, and Medical Devices.

j1The Consumer segment offers baby care products under the JOHNSON’S brand name; oral care products under the LISTERINE brand name; skin care products under the AVEENO, CLEAN & CLEAR, DABAO, JOHNSON’S Adult, LE PETITE MARSEILLAIS, LUBRIDERM, NEUTROGENA, and RoC brand names; women’s health products, wound care products, including adhesive bandages under the BAND-AID brand name and first aid products under NEOSPORIN brand name.

The Pharmaceutical segment offers various products in the areas of immunology, infectious diseases and vaccines, neuroscience, oncology, and cardiovascular and metabolic diseases.

The Medical Devices segment offers orthopedic products; general surgery, biosurgical, endomechanical, and energy products; electrophysiology products to treat cardiovascular disease; sterilization and disinfection products. Read more about J&J’s financial results below.

Q3 FY16 financial highlights

Source: Johnson & Johnson
Source: Johnson & Johnson

Johnson & Johnson reported better-than-expected Q3 FY16 results and revised upwards its full-year FY16 guidance. The drug behemoth’s Q3 FY16 sales grew by 4.2% Y-o-Y to $17.8 billion. Operational sales during the reporting quarter grew 4.3% and the negative impact of currency was 0.1%. While domestic sales jumped 6.7%, international sales rose 1.5%, reflecting operational growth of 1.7% and a negative currency impact of 0.2%.

On an operational basis, excluding the impact of acquisitions, divestitures and hepatitis C sales, global sales grew 5.9%, domestic sales jumped 7.3%, and international sales rose 4.2% during Q3 FY16. Operations in Venezuela negatively impacted worldwide operational sales growth by 30 basis points, and international sales growth by 70 basis points.

For Q3 FY16, net earnings and diluted EPS came in at $4.3 billion and $1.53, respectively. Excluding after-tax intangible amortization expense and special items, adjusted net earnings for the reporting quarter grew 12.2% to $4.7 billion and adjusted diluted EPS grew 12.8% to $1.68 versus the prior year period. On an operational basis, adjusted diluted EPS also grew 12.8%.

Segmental highlights

The pharma bellwether’s worldwide Consumer sales decreased by 1.6% Y-o-Y to $3.3 billion, consisting of an operational increase of 0.1% and a negative impact from currency of 1.7%. Domestic sales rose 1.1%, while international sales fell 3.3%, reflecting an operational decrease of 0.6% and a negative currency impact of 2.7%. Excluding the net impact of acquisitions and divestitures, on an operational basis, worldwide sales decreased 0.4%, domestic sales fell 1.5% and international sales inched up 0.3%. Operations in Venezuela negatively impacted worldwide Consumer operational sales growth by 110 basis points and international sales growth by 180 basis points during the reporting quarter.

Source: Johnson & Johnson
Source: Johnson & Johnson

Worldwide operational results, excluding the net impact of acquisitions and divestitures, were negatively impacted by lower trade inventory levels, primarily in the U.S. Sales in this segment were driven by LISTERINE oral care products, AVEENO skin care products, and digestive health products and international smoking aids products.

Source: Johnson & Johnson
Source: Johnson & Johnson

Worldwide Pharmaceutical sales jumped 9.2% to $8.4 billion, with an operational growth of 9.0% and benefiting from a positive currency impact of 0.2%. Domestic sales jumped 11.8% and international sales grew 5.4%, reflecting an operational rise of 5.0% and a positive currency impact of 0.4%. Excluding the net impact of acquisitions, divestitures and hepatitis C sales, on an operational basis, worldwide sales surged 10.7%, domestic sales rose 13.0%, and international sales grew 7.0% during the reporting quarter.

Worldwide operational results, excluding the net impact of acquisitions, divestitures and hepatitis C sales, were driven by new products including IMBRUVICA (ibrutinib), an oral, once-daily therapy approved for use in treating certain B-cell malignancies, a type of blood or lymph node cancer; DARZALEX (daratumumab), for the treatment of patients with multiple myeloma; and XARELTO (rivaroxaban), an oral anticoagulant.

Source: Johnson & Johnson
Source: Johnson & Johnson

The Company’s worldwide Medical Devices sales grew 1.1% to $6.2 billion consisting of an operational increase of 0.7% and benefited from a positive currency impact of 0.4%. Domestic sales increased 1.4%; international sales increased 0.7%, which reflected an operational decline of 0.2% and a positive currency impact of 0.9%. Excluding the net impact of acquisitions and divestitures, on an operational basis, worldwide sales rose 3.1%, domestic sales grew 2.3% and international sales grew 3.9% during the reporting quarter.

Worldwide operational results, excluding the net impact of acquisitions and divestitures, were driven by electrophysiology products in the Cardiovascular business; endocutters and energy in the Advanced Surgery business; ACUVUE contact lenses in the Vision Care business; and joint reconstruction and trauma products in the Orthopaedics business.

Drug approvals

During the quarter under review, the FDA approved INVOKAMET XR (canagliflozin/metformin HCl extended-release) for first-line treatment of adults with type-2 diabetes, and STELARA (ustekinumab) for the treatment of adults with moderately to severely active Crohn’s disease. The Committee for Medicinal Products for Human Use issued a positive opinion recommending approval of STELARA for the treatment of adults with moderately to severely active Crohn’s disease.

Additionally, Johnson & Johnson submitted regulatory applications to the FDA and European Medicines Agency (EMA) for DARZALEX in combination with standard-of-care regimens for patients with multiple myeloma who have received at least one prior therapy. DARZALEX also received Breakthrough Therapy Designation from the FDA for this pending indication.

The FDA also granted Breakthrough Therapy Designation to esketamine for major depressive disorder with imminent risk for suicide. Regulatory applications for approval were also submitted to the FDA for sirukumab in rheumatoid arthritis, and to EMA for a darunavir-based single tablet regimen for the treatment of HIV-1.

Other highlights

j7Drug major Abbott laboratories Inc. (NYSE: ABT) agreed to sell its eye-surgery equipment business to Johnson & Johnson for $4.32 billion in an all-cash deal on September 16th, 2016. The deal would enable Johnson & Johnson to emerge as the second largest company in cataract surgeries, j8an $8 billion global market that is growing at a rate of about 5% annually. The strategic deal includes Abbott’s consumer eye health products, cataract surgery business and advanced laser vision (LASIK) technology and corneal care products. Abbott’s medical-optics business makes equipment used in cataract and LASIK vision-correction surgeries, as well as contact lenses. The deal is expected to close by April 2017 and is subject to customary closing conditions, including regulatory and shareholder approvals.

For Johnson & Johnson, the deal assumes significance since it has also been acquiring medical technology assets as part of efforts to accelerate growth of its Medical Devices segment, which includes its vision care business. Abbott’s medical-optics business, especially cataract-replacement lenses, is seen to complement well with Johnson & Johnson’s eye-care unit, which sells ACUVUE contact lenses, and help the Company diversify into the surgical suite of products. Johnson & Johnson’s portfolio of contact lenses and solutions is part of a $7 billion segment of the $68 billion global eye-health market.

Outlook for FY16

Johnson & Johnson raised its full-year FY16 adjusted earnings forecast to a range of $6.68 to $6.73 per share, higher than its prior forecast of $6.63 to $6.73 per share. It now expects revenue in the range of $71.5 billion to $72.2 billion, up from $71.2 billion to $71.9 billion predicted earlier. J&J expects sales to grow at a faster clip than the global healthcare market, which is expected to grow by 3% to 5% annually over the next five years.

J&J is faced with potential competition for its autoimmune blockbuster drug Remicade, after U.S regulators approved Inflectra, a cheaper version developed by Celltrion Inc. and Pfizer Inc. (NYSE: PFE), earlier this year. However, J&J and Celltrion are locked in a patent battle, which has delayed the launch of Inflectra. J&J said its sales outlook assumes no new U.S. competition for Remicade in FY16.

Stock Performance

j9Johnson & Johnson’s stock stood at $113.96, climbing 0.31%, at the close on Tuesday, October 25th, 2016, having vacillated between an intraday high of $114.16 and a low of $113.09 during the session. The stock’s trading volume was at 5,590,458 for the day. The Company’s market cap was at $315.71 billion as of Tuesday’s close.

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