With each passing quarter, Johnson & Johnson is strengthening its pharmaceutical business due to the continued uptake of its current products and new launches. While the growth in the company’s consumer and medical devices & diagnostics segments has flattened out, the surge in the sale of its drugs catering to immunology, oncology and infectious diseases has kept the wheel spinning. If we look at only the pharmaceutical business, Johnson & Johnson has performed better than many of its peers in recent years. The company expects to grow its overall revenues by 4.5% to 5.5% in 2014, including the impact of currency movements. The pricing pressure is likely to continue, but there are some specific drugs on which Johnson & Johnson can rely.
Our price estimate for Johnson & Johnson stands at $96, implying a discount of about 5% to the market price.
See our complete analysis for Johnson & Johnson
Simponi And Stelara Are Immunology’s Growth Engines
In Q1 2014, J&J's immunology drug sales increased 6.3% globally. This was significantly below the figure for Q1 2013 and can be attributed to almost flat sales for Remicade which is J&J’s biggest drug. In this context, Simponi and Stelara become even more important. Worldwide sales for these drugs jumped 9.3% and 31.8% respectively, amounting to roughly $715 million. This represented 30% of the company’s immunology revenues and we expect this percentage to increase going forward. The overall immunology drug market is growing and the international markets present large potential. We expect the company to benefit from these trends as Simponi and Stelara continue to take market share. The immunology segment constitutes 12% of Johnson & Johnson’s value according to our estimates.
For now, the revenues are well protected. The growth is likely to slow down when Remicade, expected to cross $6.4 billion in sales this year, loses its Europe patent in February 2015. The region accounts for a significant proportion of the drug’s sales. The European Commision has already approved a lower priced version of Remicade for the treatment of rheumatoid arthritis.
Launch Of Olysio For Hepatitis C Treatment
Johnson & Johnson’s recently launched Hepatitis C drug, Olysio, has done better than expected, and echoes the success of Gilead Sciences’ drug Sovaldi. Olysio’s sales for Q1 2014 stood at $354 million, making it the second biggest anti-infective drug for the company within a short period of time. Gilead Sciences is currently the market leader in Hepatits C treatment, and is on its way to make a fortune selling its breakthrough drug Sovaldi. The drug’s sales for 2014 may amount to anywhere between $7 billion to $12 billion, according to ISI Group. This suggests strong growth potential for Johnson & Johnson’s new drug, which has also been recommended by Liver Society for concurrent dosage with Sovaldi.
The demand for Olysio is likely to be high as close to 150 million people suffer from Hepatitis C globally. The overall market for Hepatitis C treatment could reach $20 billion by 2020 and Gilead Sciences could capture around 80% of this market according to Deutsche Bank, unless viable alternatives emerge.
Velcade And Zytiga Becoming Oncology Stalwarts
Oncology or cancer therapeutics, is one of the key growth segments for J&J and for the pharmaceutical industry in general. Zytiga has surpassed Velcade to become Johnson & Johnson’s biggest oncology drug. While Velcade’s sales grew by 15.8% in Q1 2014 amounting to $408 million, Zytiga’s revenue surged by 48.8% to $512 million. Together, these two drugs constitute roughly 85% of the company’s oncology revenues and continue to gain market share. In the U.S., Zytiga increased its share in the metastatic castration resistant prostate cancer market to 34%, besides benefiting from the overall market growth. The drug was approved to treat both chemo refractory and chemo naïve metastatic castration resistant prostate cancer last year. Prostate cancer is the second most common cancer in men worldwide and is among the leading causes of death.
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2009 |
2010 |
2011 |
2012 |
|
Streaming Content Costs as % of Revenue |
3% |
7% |
22% |
44% |
Total Content Costs as % of Revenue |
13% |
14% |
25% |
46% |
Streaming Content Obligations as % of Revenue |
60% |
122% |
156% |
|
Total Streaming Content Obligations ($ Million) |
1,299 |
3,907 |
5,634 |
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