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Will Solid Pharma Unit Performance Drive J&J (JNJ) Q1 Earnings?

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Johnson & Johnson JNJ has been working on strengthening its Pharma segment, which has been driving revenues over the past few quarters. In J&J’s Pharma segment, its oncology drugs, Imbruvica and Darzalex as well as psoriasis treatment drug, Stelara, are likely to have driven sales growth in first-quarter due to increased penetration and new indications.

Market share gains and strong market growth are likely to have driven Imbruvica’s sales. J&J markets Imbruvica in partnership with AbbVie ABBV.

Meanwhile, share gains across all lines of therapy and increased adoption of the subcutaneous formulation are expected to have boosted Darzalex’ sales in the quarter. Crohn's disease indication and growth from ulcerative colitis indication are likely to have driven Stelara’s sales.

The Zacks Consensus Estimate for Imbruvica, Darzalex and Stelara is pegged at $1.2 billion, $1.22 billion and $2.18 billion, respectively.

J&J’s stock has risen 1.9% this year so far against a decrease of 0.5% for the industry.

Other core products like Invega Sustenna, J&J’s pulmonary arterial hypertension (PAH) drugs and new drugs, Erleada and Tremfya might have contributed to growth.

The Zacks Consensus Estimate for Invega Sustenna, PAH drugs, Erleada and Tremfya are $942 million, $841 million, $234 million and $405 million, respectively.

All these products are helping J&J’s Pharma segment deliver above-market performance despite generic/biosimilar competition to drugs like Zytiga and Remicade and some negative impact of COVID-19. It remains to be seen if the positive trend has continued in this quarter. J&J markets Remicade in partnership with Merck MRK.

Moreover, sales of some other key drugs like Xarelto and Invokana/Invokamet improved in the second half of 2020 after declining in the past few quarters. It remains to be seen if the positive trend continued in the first quarter of 2021.

Regarding its pharmaceutical pipeline, J&J made decent progress in the first quarter. It gained FDA approval for Ponvory (ponesimod), an oral treatment for relapsing forms of multiple sclerosis (RMS) in March, and for Glaxo’s GSK long-acting injectable HIV regimen, Cabenuva, in January. Cabenuva is combination of Glaxo’s cabotegravir and J&J’s Edurant (rilpivirine) for the treatment of HIV-1 infection in virologically suppressed adults.

Most importantly, in February, the FDA granted Emergency Use Authorization to its single-dose COVID-19 vaccine candidate for people aged 18 and older. In March, the European Commission granted Conditional Marketing Authorization to the vaccine. However, the vaccine has not yet been rolled out in European countries. Investors will look for updates on initial sales numbers for J&J’s COVID-19 vaccine.

Also, the vaccine is under scrutiny for possible links to very rare cases of blood clots in the brain. On Apr 13, the FDA and U.S. Centers for Disease Control and Prevention (“CDC”) jointly issued a statement to recommend a temporary pause in the use of J&J’s vaccine in the United States as they review six reports of “rare and severe” blood clots in a few individuals who had taken the J&J one-shot COVID-19 vaccine. Investors are expected to ask numerous questions on the issue at the conference call.

Importantly, in the first-quarter earnings call, investors will also focus on whether J&J provides an updated business outlook for 2021.

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