How Will Johnson & Johnson’s Pharmaceutical Segment Do in 4Q15?
Why Johnson & Johnson’s 4Q15 Revenue May Fall
Pharmaceuticals segment
Johnson & Johnson’s (JNJ) pharmaceutical segment comprises of its immunology, infectious disease, neuroscience, oncology, and cardiovascular and metabolics franchises.
Immunology franchise
The major blockbuster drugs under this franchise are Remicade, Stelara, and Simponi/Simponi Aria.
Remicade, the blockbuster drug for treatment of arthritis, has shown a decline in revenues, as its biosimilar versions have been introduced in the market. However, revenues for Remicade are expected to increase following label expansion in the Japan market and absorption of the impact of patent expiry by other markets.
Both Stelara and Simponi/Simponi Aria have an annual revenue of over a billion dollars. The company expects Stelara, a drug for treatment of psoriasis, to grow at 15% annually with strong growth in the US markets as well as international markets. Stelara competes with Amgen’s (AMGN) and Pfizer’s (PFE) Enbrel and Abbott’s (ABT) Humira.
Revenues for Simponi/Simponi Aria are expected to increase due to increased market penetration of the drugs.
Infectious disease franchise
The company’s infectious disease franchise consists mainly of HIV products and Hepatitis C products. Products that treat the Hepatitis C virus (or HCV) include Olysio, Sovraid, and Invico. The revenues for HCV products have substantially declined as a result of increased competition in the US markets.
The revenues for HIV products including Prezista and Prezcobix are expected to increase during 4Q15, following the launch of Prezcobix and increased demand for HIV products.
Neuroscience franchise
The neuroscience franchise consists of drugs like Concerta, Invega Sustenna, and Xeplion. Concerta revenues are expected to see positive growth due to the reclassification of generic competitors in the US market while other drugs like Invega Sustenna and Xeplion are expected to have positive growth following higher demand in long-acting injectable products worldwide.
Oncology franchise
Zytiga and Imbruvica are the blockbuster drugs in the company’s oncology franchise. The revenues for Zytiga are expected to increase in global markets except the European markets. Zytiga competes with Dendreon’s (DNDN) Provenge.
Revenues for Imbruvica are expected to increase following the approval of new indications in the US and Europe markets. Imbruvica competes with Gilead Sciences’ (GILD) Zydelig.
Cardiovascular and metabolics franchise
The key products for the cardiovascular and metabolics franchise are Xarelto and Invokana.
Xarelto is a leader in the US oral anticoagulant market with ~16% share in the broader oral anticoagulant market. Similarly, Invokana and Invokamet have a 6% share in the US market.
Xarelto, a blood thinner, competes with Boehringer Ingelheim’s Pradaxa as well as Bristol-Myers Squibb’s (BMY) and Pfizer’s (PFE) Eliquis. Invokana, a diabetes drug, competes with AstraZeneca’s Farxiga.
Investors can consider ETFs like the iShare US Pharmaceuticals ETF (IHE), which holds 10.8% of its portfolio in JNJ, or the Fidelity MSCI Healthcare Index ETF (FHLC), which holds 8.8% of its portfolio in JNJ, in order to divest company-specific risk.
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