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Will J&J's Pharma Unit Perform Above Market to Drive Q1 Result?

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Zacks Equity Research
·3 min read
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Johnson & Johnson JNJ has been consistently working on strengthening its Pharma segment, which has been driving revenues over the last few quarters. In J&J’s Pharma segment, its oncology drugs, namely Imbruvica and Darzalex as well as psoriasis treatment, Stelara, are likely to have boosted sales growth in the first quarter of 2020 on increased penetration and new indications. However, sales of Imbruvica and Stelara were slightly lower than expectations in the fourth quarter of 2019. It remains to be seen if the sales of these two drugs recovered in the first quarter.

J&J’s stock has declined 3.2% this year so far compared with a decrease of 6.6% for the industry.

 

 

The Zacks Consensus Estimate for Imbruvica, Darzalex and Stelara is pegged at $997 million, $783 million and $1.66 billion, respectively. Notably, J&J markets Imbruvica in partnership with AbbVie ABBV.

Other core products like Simponi/Simponi Aria and Invega Sustenna plusnew drugs, namely immunology medicine Tremfya and prostate cancer drug Erleada are also likely to have contributed to growth. All these products are helping J&J’s Pharma segment deliver an above-market performance despite currency headwinds and the impact of biosimilar and generic competition on sales of some key drugs like Zytiga, Remicade, Procrit/Eprex.  It remains to be seen if this positive trend continued in the coronavirus-impacted quarter. Notably, J&J markets Remicade in partnership with Merck MRK

Meanwhile, sales of J&J’s some other drugs like Invokana/Invokamet and Xarelto have been soft since the last few quarters. Xarelto’s sales have been declining with prescription growth beingoffset by increased discounts and rebates. We do not expect much improvement in first-quarter sales of these drugs.

J&J gained the FDA approval for two new drugs, namely Spravato (esketamine) for treatment-resistant depression and Balversa (erdafitinib) for metastatic urothelial cancer in 2019. Regarding Spravato, on fourth-quarter conference call, management had said that patient demand is building and new patient starts show a steady increase each month. Investors will look for sales numbers of these new drugs during the upcoming conference call.

In relation to its pharmaceutical pipeline, J&J made a decent progress in the first quarter. It submitted regulatory applications in the United States and Europe for its pipeline candidate ponesimod for treating adults with relapsing forms of multiple sclerosis (RMS). It also filed a supplemental biologics license application (sBLA) to the FDA, seeking label expansion approval of Darzalex in combination with Amgen’s AMGN Kyprolis plus dexamethasone (DKd)  in patients with relapsed/refractory multiple myeloma as second to fourth-line treatment option. It also secured a nod from Europe for expanded use of its drugs Stelara and Erleada.

Importantly, on first-quarter earnings call, investors will also be keen to check if J&J provides an updated business outlook for 2020 after including the impact of coronavirus. (Read More: J&J Q1 Earnings May Indicate Coronavirus Impact on Pharma)

J&J has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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