Johnson & Johnson: Q2 highlights and key takeaways

Johnson & Johnson presented its second quarter earnings on July 18. Here's how the company plans to execute growth for the second half of the year, despite reporting sluggish sales and pricing headwinds for the second quarter.

Invokana sees pricing pressure

Johnson & Johnson reported sluggish revenue growth across all its business units for the second quarter, with pharmaceuticals sales falling 0.2 percent. Invokana was hit particularly hard, with sales falling 23 percent from last year. Management said the drop was tied to bigger discounts in managed care contracting, compounded with a label change in May that warns of the risk of amputations. (See ViewPoints: CANVAS data paints a less rosy picture for Johnson & Johnson's Invokana)

CEO Alex Gorsky emphasised that pricing pressure in the primary care sector, affecting products like Invokana that are in competitive environments, was not carrying through to differentiated speciality products like Imbruvica, Darzalex or Xarelto. Gorsky said "where you're literally adding months, years of life to patients and really making significant differences in terms of outcomes, we're seeing less pricing pressure, versus the categories where you have very large patient populations, very large incidents, used more in a primary care setting."

Banking on immunology portfolio

Despite the relatively slow sales for the second quarter, Johnson & Johnson raised its full-year earnings per share guidance, banking on accelerated growth for the second half of the year. It is expecting growth to come from Stelara in its recently added Crohn's disease indication, along with Tremfya and Darzalex. The company didn't break out sales guidance for the newly-approved Tremfya, or how it plans to outcompete favourites in psoriasis like Novartis' Cosentyx or Eli Lilly's Talz. Johnson & Johnson did signal that rather than pit the antibody against Stelara in the psoriasis marketplace, it will focus its attention on expanding Stelara uptake in its relatively recent Crohn's disease approval. The company reported a 22 percent growth in Stelara sales; Gorsky said "a lot of that came from Crohns." He told a conference call that Crohns disease has "high prevalence, a lot of unmet medical need," and the company has "very strong data that's going to allow us to continue to grow STELARA…at a very significant rate going forward." (See ViewPoints: Tremfya provides Johnson & Johnson a chance to double down in psoriasis)

Darzalex, meanwhile, saw its sales nearly double from last year, with Gorsky saying it had "strong" uptake in its newly added second and third line multiple myeloma indications. The company is looking ahead for further growth as it adds new indications to the label with upcoming data releases.

Looking ahead to a data-heavy second half

The company is looking ahead to upcoming data events to revitalise its second half; it has already announced positive results from the Phase III COMPASS trial of the anticoagulant Xarelto, but plans to release the data this year. Johnson & Johnson has identified the compound as one of its growth drivers, but will need the COMPASS data to differentiate it from competitors like Eliquis from Bristol-Myers Squibb and Pfizer. Also on the docket are the TRANSFORM2 and TRANSFORM3 studies for esketamine in depression, first line data for Imbruvica in diffuse large B-cell lymphoma (DLBCL), and importantly, first line data for Darzalex in multiple myeloma. (See ViewPoints: Having hit the doldrums, COMPASS may chart a course to new growth for Bayer, Johnson & Johnson’s Xarelto)

Holding biosimilars at bay

Despite two FDA-approved biosimilar versions of Remicade, Johnson & Johnson says it hasn't yet felt the brunt of the impact, and doesn't expect to in the near term. It reported a year-over-year decline of 14 percent in global Remicade sales, but CFO Dominic Caruso was undeterred, saying the decline reflected prior period price adjustments. He said "excluding that, Remicade's only down about 5 percent," adding that the drop "is much lower than I think us and any of you had expected for erosion of Remicade, which we all targeted to be somewhere between 10 percent and 15 percent."

Celltrion's Inflectra biosimilar was approved last year, and Samsung Bioepis' Renflexis was approved in April. Caruso said the company can't yet predict the impact of Renflexis on Remicade sales, as the product has yet to be launched or priced. However, he said the company feels "pretty good that Remicade erosion overall, even with the entrance of a new biosimilar, will be less than we previously expected."

Management goes to Washington

Gorsky emphasised on the conference call that he and the company are actively engaged in Washington D.C. as many health policy issues are coming to a head, "spending a lot of time…making sure that we're educating lawmakers with facts regarding the overall healthcare system." He took a classic pharma stance on drug pricing, saying that "we understand the concern about the cost of healthcare and believe we have a responsibility to ensure our products are both assessable and representative of the outcomes and value they deliver," but he emphasised that "these medicines represent only about 15 percent of overall healthcare spending."

Gorsky was specifically referring to concern over a potential executive order on drug pricing, though the trepidation may not be necessary, as the order is speculated to be largely industry-friendly. (See ViewPoints: Executive order on “drug pricing” rumoured to be on the way – more bark than bite?)

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