Johnson & Johnson's Q1 sales of prescription drugs up 19.4 percent, besting estimates

Johnson & Johnson announced Tuesday that first-quarter sales of prescription drugs jumped 19.4 percent year-over-year to $9.8 billion, topping analyst estimates of $9.5 billion, driven by new products and the acquisition of Actelion. CEO Alex Gorsky remarked "our pharmaceutical business continues to deliver robust growth."

In the three-month period, overall sales climbed 12.6 percent to $20 billion, coming in ahead of analyst expectations of $19.5 billion, while net income slipped 1.2 percent to $4.4 billion. Chief financial officer Dominic Caruso said "there was some concern at the end of the first quarter that pharma business might slow down but I think we alleviated all those concerns."

Regarding individual products, quarterly sales of Remicade declined 16.9 percent to $1.3 billion, missing expectations of $1.5 billion. The decrease in revenue for Remicade comes after Pfizer's Hospira unit introduced a biosimilar of the drug in Europe in 2015. In addition, Merck & Co. and Samsung Bioepis launched their Remicade biosimilar under the name Renflexis in the US last year, while Celltrion has also received FDA clearance of its Remicade biosimilar Inflectra. In the US, quarterly sales of Remicade dropped 22.5 percent to $916 million, which Caruso noted was partly due to some rebate adjustments from a major payor.

Meanwhile, revenue from Zytiga jumped 61.6 percent year-over-year to $845 million, besting forecasts of $733 million, while sales of Imbruvica climbed 43.5 percent to $587 million, ahead of estimates of $395.7 million. Xarelto generated $578 million in revenue in the quarter, up 12.7 percent over the year-ago period and surpassing forecasts of $633.7 million. 

Further, sales of the myeloma therapy Darzalex surged 69.4 percent to $432 million. Johnson & Johnson additionally recorded $585 million in revenue from its portfolio of pulmonary hypertension drugs, including Opsumit and Uptravi, obtained via the takeover of Actelion. However, Johnson & Johnson also disclosed that it will discontinue late-stage development of cadazolid, which the company gained from Actelion, for the treatment of Clostridium difficile-associated diarrhoea.

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Commenting on the news, BMO Capital Markets analyst Joanne Wuensch stated "the first-quarter print should ease concerns around tempered revenue growth." In addition, Credit Suisse analyst Vamil Divan noted that the drugmaker increased revenue despite "notable weakness" for Remicade.

For the full year, Johnson & Johnson said it now expects sales in the range of between $81 billion and $81.8 billion, up from earlier guidance of $80.6 billion to $81.4 billion. Meanwhile, earnings per share are still forecast to be in the range of $8.00 to $8.20. 

The company also revealed that it is implementing cost-cutting measures in an effort to realise annual savings of $600 million to $800 million by 2022. Johnson & Johnson indicated that the actions, which will affect its global supply chain, will lead to restructuring charges of $1.9 billion to $2.3 billion. The drugmaker also indicated that following tax reform in the US, it plans to increase R&D and capital investment by 15 percent over the next four years to $30 billion.

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