Johnson & Johnson Beats Estimates Despite Looming Biosimilar Competition for Stelara

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Healthcare giant Johnson & Johnson (JNJ.N) delivered positive second-quarter results, exceeding analyst expectations for both revenue and profit. This strong performance was driven by robust sales of the company’s pharmaceutical products, particularly cancer treatment Darzalex and the blockbuster psoriasis drug Stelara.

Stelara: A Lucrative Drug Facing Future Challenges

Stelara has been a major contributor to J&J’s revenue growth for years, with analysts projecting sales to surpass $10 billion in 2024. However, this dominance is expected to face a challenge in 2025 with the anticipated launch of up to six biosimilar versions of the drug in the U.S. market. Biosimilars are highly similar versions of existing brand-name drugs, often sold at lower prices.

Despite this impending competition, J&J remains confident in its pharmaceutical business.  CFO Joe Wolk anticipates finalizing contracts within the next three months that will determine insurance coverage for Stelara in the U.S. during 2025. He emphasized the company’s commitment to achieving growth in the pharmaceutical sector despite the upcoming biosimilar competition.

Q2 Performance Highlights

Stelara sales exhibited modest growth in Q2, reaching $2.89 billion and exceeding analyst estimates.  Darzalex continued its impressive trajectory, with sales surging by 18.4% to $2.88 billion, surpassing analyst expectations as well.

Wolk acknowledged that the second half of 2024 is likely to see a slowdown in pharmaceutical sales growth as biosimilar versions of Stelara enter the European market later this month.

Looking at the broader picture, J&J’s total revenue of $22.4 billion surpassed analyst estimates.  Adjusted earnings per share also exceeded expectations, coming in at $2.82 per share.  The company raised its full-year 2024 sales forecast to a range of $89.2 billion to $89.6 billion, reflecting its positive outlook.

Medical Devices: Room for Improvement

While the pharmaceutical sector thrived, J&J’s medical technology business presented a mixed picture. Sales in this segment climbed slightly to $7.96 billion, falling short of analyst expectations of $8.17 billion.  Sales of surgical devices experienced a decline compared to the previous year.

Investors, like James Harlow from Novare Capital Management, expressed a desire for faster growth within the medical device unit. J&J attributed the slowdown in this sector to competition, supply constraints, and a decrease in demand for bariatric procedures.  CFO Wolk also mentioned lower-than-anticipated sales from the vision care business and in China. Negotiations with China regarding bulk buying of medical devices are ongoing, and Wolk acknowledged that this process could pose short-term challenges for J&J.

Talc Lawsuit Saga Continues

J&J investors are also awaiting a resolution on the ongoing lawsuits surrounding the company’s talc products.  The company is facing tens of thousands of lawsuits alleging that these products caused cancer. Claimants have a deadline approaching on July 26th to vote on J&J’s proposed third attempt at a bankruptcy maneuver for a subsidiary.  This maneuver aims to limit the company’s liability and establish a fund for potential victims.

Wolk reported positive developments related to the talc litigation, with endorsements received from three major law firms representing claimants in recent weeks.

Looking Ahead: Balancing Growth and Challenges

J&J’s second-quarter performance demonstrates the company’s strong position in the pharmaceutical market. However, the looming threat of biosimilar competition for Stelara and ongoing challenges within the medical device unit require strategic navigation. Investors are also closely watching the progress of the talc lawsuit situation. J&J’s ability to navigate these challenges and capitalize on future opportunities will be crucial for its continued success.