Competition Is Concerning for Johnson & Johnson

In the quarter, total operational sales increased 6% year over year, driven by robust drug sales (up 11%), but upcoming generic and biosimilar pressures will likely slow this growth despite solid new drug launches. Strong growth in immunology and oncology drove the results. Further, immunology drug Stelara posted 33% growth and while the drug will likely lose market share to better psoriasis drugs, including new IL-17 and IL-23 therapies, the drug’s new indication in Crohn’s disease will likely lead to relatively stable growth. In oncology, the recent launch of Imbruvica continues to trend well, and the addition of another blood cancer drug, Darzalex, should help offset generic competition to Zytiga and Velcade expected over the next two years.

Outside of the drug group, the consumer and device segments posted close to 3% growth after adjusting for inventory changes. We don’t see organic growth increasing much beyond this level of growth, which may lead to more acquisitions in these areas. However, we do expect efficiency improvements to drive earnings contributions for these groups.

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