Source: Johnson & Johnson
Despite two of Johnson & Johnson's (JNJ +1.98%) best-selling drugs facing stiffer competition, the company still managed to deliver encouraging sales and earnings during the fourth quarter. After adjusting for currency conversion headwinds, J&J reported that its revenue increased 3.9% year-over-year to $18.3 billion in the quarter, leading to earnings per share, after adjusting for one-time items, of $1.27, up 2.4% from last year.
Managing risk
J&J racked up just shy of $8 billion in sales from its various drugs last quarter, up 13.9% from last year after adjusting for currency. The company reported significant sales growth for its autoimmune drugs Simponi and Stelara, which saw sales climb 36% and 31% year-over year to $346 million and $545 million, respectively. J&J also enjoyed a 19.4% jump in revenue to $418 million for its new, long-lasting schizophrenia drug Invega Sustenna.
That's a solid showing, but J&J's prostate cancer drug Zytiga and hepatitis C drug Olysio are likely the focus of investors today given that both drugs are being challenged by competitors. Zytiga, which is approved as a post chemotherapy and pre chemotherapy prostate cancer treatment, is angling for scripts against Medivation and Astellas' Xtandi, which was previously approved in post chemotherapy patients and won a label expansion for pre chemotherapy use in September. Olysio, which posted significant sales in the first nine months of the year thanks to use alongside Gilead Sciences' top selling hep C drug Sovaldi, is under pressure from Gilead Sciences' next generation drug Harvoni, which launched in October, and AbbVie's Viekira Pak, which won FDA approval in December.
Of the two drugs, Zytiga did a better job of out-maneuvering threats. Despite Xtandi's availability for use in pre-chemotherapy patients during the quarter, Zytiga still generated sales of $595 million for J&J in Q4. Importantly, although Zytiga's quarter-over-quarter growth slowed from 6.68% in the fourth quarter of 2013 to 4.75% last quarter, it still represented growth -- something many feared wouldn't happen.
Olysio's performance was more disappointing. Olysio's sales dropped from $796 million in the third quarter to $321 million in the fourth quarter. The drop shouldn't be a surprise given that J&J has been upfront on its conference calls regarding their expectation for a significant decline in Olysio revenue following Harvoni's launch. After all, doctors aren't very likely to prescribe Sovaldi plus Olysio when they can just prescribe Harvoni -- a single pill that boasts mid 90% cure rates and costs less. Given that backdrop, it may be more of a surprise that Olysio's sales didn't fall further. Regardless, Olysio is likely to continue to see its sales fall from here given that AbbVie's Viekira Pak is also available for use in hepatitis C genotype 1 patients now.
Johnson & Johnson
Big exposure
J&J is one of the globe's biggest drugmakers, but it also generates billions of dollars in sales from consumer goods and medical devices and equipment.
J&J's consumer goods business posted sales of $3.6 billion in the fourth quarter, up 0.9% after removing negative headwinds from currency adjustments. Sales of its consumer goods products in the U.S. were particularly solid at $1.29 billion, up 2.5% year-over-year. Those U.S. results were buoyed by 9% growth in over-the-counter products like Tylenol, Motrin, and Zyrtec.
J&J's results in its medical device business were less enticing. Medical device revenue dropped 9% to $6.65 billion. Even after adjusting for the negative affects of currency, sales still declined by 4.3%. However, investors should know that the sales drop includes the loss of $452 million in revenue associated with its exit from the diagnostics business last June. The brightest spot among J&J's medical device business was arguably cardiovascular, which saw its sales grow 9.8% ex-currency to $558 million from $534 million a year ago.
Connecting dots
The company's widespread presence across healthcare makes it a staple in investor portfolios, and it also means that J&J has one of the most robust R&D operations in the industry. As a result, J&J's pipeline continues to deliver new therapies that help offset risks. For example, sales of the company's anticoagulant Xarelto soared 58% to $428 million and revenue from the oncology drugs that J&J doesn't break out sales for specifically jumped from $94 million to $199 million year-over-year. That suggests that while J&J will be navigating some challenges in 2015, it isn't likely to lose its gold-standard status among investors anytime soon.
