Johnson & Johnson (JNJ 1.49%) generates billions of dollars by selling consumer goods and medical devices, but its pharmaceuticals business is the one that's most likely to drive the company's growth in the coming year. Here's why Remicade, Xarelto, Imbruvica, Darzalex, and Stelara may have the biggest impact on the company's financials in 2017.
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No. 1: Remicade
Autoimmune drug Remicade's $1.8 billion in sales represented more than 20% of Johnson & Johnson's total $8.4 billion in global pharmaceutical sales during the third quarter, and that could be a problem for the company given that Pfizer launched a Remicade biosimilar, Inflectra, in the U.S. in November.
Remicade generates $1.2 billion per quarter in the U.S., where it will now have to compete against Inflectra, and given that Inflectra launched with a 15% cheaper price tag, there's reason to think Remicade's sales could fall and create a headwind that's tough to overcome.
During the company's third-quarter conference call, management reminded investors that Remicade's market share in other markets where it's competing against biosimilars is still roughly 90%. Obviously, if Remicade can maintain a similar share in the U.S., then any headwinds caused by Inflectra's launch will be more easily overcome. However, there's no guarantee Johnson & Johnson won't have to cut prices substantially to maintain its market share, or that insurers won't encourage patients to swap to Inflectra by giving it preferential treatment in their drug formularies compared to Remicade. Because there's uncertainty, investors will want to pay close attention to Remicade's sales trajectory over the coming four quarters.
No. 2: Xarelto
With $529 million in Q3 sales, the anticoagulant Xarelto is already one of Johnson & Johnson's top sellers. Yet, despite its impressive $2 billion annualized run rate, there could still be room for sales to climb.
In the third quarter, Xarelto's total prescription market share was just 17.5%, up 1.7% year over year. Xarelto's market share growth came mostly at the expense of warfarin, a decades-old drug that remains the most prescribed anticoagulant on the market, with a share of about 55%, down from 62% in Q3 2015.
Because Xarelto is effective, requires less testing, and has fewer dietary restrictions than warfarin, I don't think it's a stretch to think sales could continue growing meaningfully in 2017. After all, Xarelto's delivered double-digit sales growth in every year since launching in 2011, and third-quarter sales were up a healthy 14.8% from a year ago.
No. 3: Imbruvica
Johnson & Johnson co-markets Imbruvica with AbbVie Inc., and despite having to split Imbruvia with AbbVie, it's still accounting for a significant share of Johnson & Johnson's product sales growth.
Imbruvica sales increased 92% globally in the third quarter, resulting in Johnson & Johnson reporting $349 million in sales from the drug in the period. The expansion of Imbruvica's label to include earlier use in leukemia has made it a leading therapy in chronic lymphocytic leukemia, mantle cell lymphoma, and Waldenstom macroglobulinemia, and that should help propel sales higher this year.
In the future, Johnson & Johnson plans seven new label expansion filings, including four that could add $500 million or more to Imbruvica's annual sales.
No. 4 Darzalex
Three months after its launch, Darzalex has already become the most prescribed fourth-line therapy in multiple myeloma, a multibillion-dollar per year indication.
Johnson & Johnson pegs Darzalex as one of 10 new drugs it believes has billion-dollar blockbuster potential, but achieving that goal will rely on expanding Darzalex's use earlier in this indication.
In February, Johnson & Johnson should find out if it's able to take a big step toward its goal. After trials showed that using Darzalex's alongside the most commonly used multiple myeloma drug, Revlimid, improved outcomes, Johnson & Johnson filed for approval for this combination as a second-line treatment last August. An approval could significantly boost Darzalex's sales, given that Revlimid's sales are targeted to eclipse $8 billion this year.
No. 5: Stelara
Stelara's sales improved 32.8% year over year to $814 million in the third quarter, and revenue could increase even more this year, following the FDA's approval of its use in Crohn's disease last September.
Stelara is the first biologic approved for Crohn's disease that targets interleukin-12 and IL-23 cytokines, and the drug's efficacy and novel mechanism of action has Johnson & Johnson anticipating that it will quickly win favor with doctors and patients. According to management, between 70% and 80% of Crohn's disease patients taking anti-TNFs, including the top-selling Humira, are inadequately responding to treatment at the one-year mark.
Since there's an unmet need for new biologics that work better, and the market's anticipated growing 50% over the coming decade, management thinks this label expansion alone could add $500 million to Stelara's sales.
