Johnson & Johnson (JNJ, Financial) is the world’s largest maker of healthcare products. It reported its third quarter earnings on October 14, exceeding analysts’ expectations by posting revenue worth $18.5 billion, a 5% jump compared to the same quarter last year. CEO Alex Gorsky said, “Our strong third-quarter performance reflects the continued success of our new products and the strength of our core business. We are making deliberate portfolio choices, positioning us well for achieving our near-term priorities and our long-term growth drivers.”
Let us dive in and find out what were the key drivers behind such a successful quarter. But before that, a brief quarter recap might be handy.Ă‚
Overwhelming third quarter
The company reported revenue of $18.5 billion which exceeded last year's $17.6 billion reported for the quarter. Net income also saw a steep increase of 59% to $4.75 billion, or $1.66 per share, from $2.98 billion, or $1.04 a share, reported a year ago. Earnings excluding one-time items stood at $1.50 a share beating the average Bloomberg analysts’ estimate by $0.06 per share.
Johnson & Johnson has done well in executing pharmaceutical launches, with Olysio for Hepatitis C and Xarelto, a blood thinner, driving the strong growth seen in the company’s pharmaceutical segment.
Domestic sales improved 11.6%, while international sales decreased 0.3% reflecting the negative currency impact of 1.3% and low operational growth of only 1%. During the quarter, the company divested the Ortho-Clinical diagnostic business line. Excluding the impact of this divestiture, worldwide, domestic and international sales was 8.4%, 14.8% and 3.1% respectively.
The company increased its earnings guidance for the entire year to between $5.92 per share to $5.97 per share, excluding the impact of any special items.
The positive contributors to the operational results were sales of OTC products in the Oral Care business, and launch of new products that were re-emphasized by the strength of the core products. Let’s find out how these factors are acting as the key drivers driving J&J's success story.
Core products in the sales pipeline
Last year, the company launched the Olysia drug for treatment of chronic Hepatitis C in adult patients. This medicine has been the blockbuster medicine for the company in the last few quarters, post its introduction into the market. Interestingly, this single pill sold $796 million in the quarter.
The hepatitis C drugs are the most expensive in the world, and J&J has made wonders with this drug launch. The company pledges to remain competitive in the hepatitis C category. The company wants to maintain the flow of Olysia in the marketplace to continue to provide multiple treatment options to consumers.
Additional contributors to operational sales growth was Stelara, a biologic approved for the treatment of moderate to severe plaque psoriasis, Remicade for treatment of immune-mediated inflammatory diseases, and Invega for treatment of schizophrenia in adults.
Acquisition to provide further boost
During the quarter, the company acquired Covagen AG, a privately held biopharmaceutical company specializing in the development of multispecific protein therapeutics through the FynamAb technology platform. The company also announced the definitive agreement to acquire Alios BioPharma Inc., a biopharmaceutical company focused on developing therapies for viral diseases for approximately $1.75 billion in cash. This transaction is expected to be completed by the end of this year.
Final takeaway
The products launched till date by have received a great response from the market and Johnson & Johnson is a brand famous amongst almost every segment. The company embraces research and science to bring in innovative ideas, products and services to advance the health of people. Truly, the company looks focussed on touching the lives of over a billion people across the globe on a daily basis. And that’s why such factors do serve as the key force driving J&J’s growth story to newer heights.
