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Must-Read Notes on Johnson & Johnson’s 1Q17 Earnings

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Must-Read Notes on Johnson & Johnson’s 1Q17 Earnings PART 4 OF 7

Johnson & Johnson’s Pharmaceuticals Segment’s 1Q17 Earnings

Pharmaceuticals segment

Johnson & Johnson’s (JNJ) Pharmaceuticals segment is made up of the immunology, infectious disease, neuroscience, oncology, and cardiovascular and metabolics franchises.

Johnson &amp; Johnson’s Pharmaceuticals Segment&#8217;s 1Q17 Earnings

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Immunology franchise

The major blockbuster drugs under the immunology franchise are Remicade, Stelara, and Simponi/Simponi Aria. The immunology franchise reported revenue of $2.9 billion in 1Q17, including an operational rise of 0.6% and a 0.1% positive impact of foreign exchange.

The immunology franchise had a strong performance in US markets, including increased penetration for Stelara and Simponi Aria. The franchise has also shown positive growth across major international markets. However, Remicade’s revenue continued to fall due to its loss of market share to biosimilars.

Stelara competes with Amgen (AMGN) and Pfizer’s (PFE) Enbrel and Abbott Laboratories’ (ABT) Humira.

Infectious disease franchise

The infectious disease franchise consists mainly of HIV and hepatitis C (or HCV) products. Its HIV products include Prezista, Prezcobix, and the new drug Odefsey, and its HCV products include Olysio, Sovraid, and Invico. 

The franchise’s revenue fell 3.5% to $749 million in 1Q17, including an operational fall of 2.6% due to lower sales of its HCV products. During 1Q17, JNJ reported strong sales of Prezcobix and Odefsey.

Neuroscience franchise

The neuroscience franchise consists of drugs such as Concerta, Invega Sustenna, and Xeplion. The franchise’s revenue fell 3.4% to $1.5 billion in 1Q17, including an operational fall of 2.7%. 

Invega Trinza and Xeplion were the franchise’s growth drivers for long-acting injectable products in the quarter. However, the franchise’s US sales were affected by lower sales of Invega due to competing products and its divestiture of Noramco, its API (active pharmaceutical ingredient) business.

Oncology franchise

The oncology franchise saw a revenue rise of 17.7% to $1.6 billion in 1Q17, including an operational rise of 19.3%. This growth was driven by the strong performances of Darzalex and Imbruvica, partially offset by lower Zytiga sales. Imbruvica competes with Gilead Sciences’ (GILD) Zydelig.

Cardiovascular and metabolics franchise

The cardiovascular and metabolics franchise reported a revenue fall of 7.2% to $1.5 billion in 1Q17, driven by the lower sales of Invokana due to discounts in its managed care channels, partially offset by its increased sales of Xarelto. Xarelto, a blood thinner, competes with Boehringer Ingelheim’s Pradaxa and Bristol-Myers Squibb (BMY) and Pfizer’s (PFE) Eliquis. Invokana, a diabetes drug, competes with AstraZeneca’s Farxiga.

To divest risk, investors can consider ETFs such as the iShares US Pharmaceuticals ETF (IHE), which holds 9.4% of its portfolio in Johnson & Johnson.

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