Johnson & Johnson's Q4 sales boosted by new drugs; annual guidance comes in below estimates

Johnson & Johnson announced Tuesday that fourth-quarter sales of prescription drugs rose 2.1 percent year-over-year to $8.2 billion, with growth driven by revenue from new products including Imbruvica, Darzalex and Xarelto. The company's overall sales in the three-month period lifted 1.7 percent to $18.1 billion, although the figure came in below analyst estimates of around $18.3 billion.

"We are pleased to report that we accelerated our adjusted growth for 2016 over the prior year," commented CEO Alex Gorsky, adding "the strong adjusted sales and [earnings per share] growth was driven by the impressive performance of our pharmaceutical business and continued momentum in our medical device business." In the quarter, net earnings jumped 18.6 percent to $3.8 billion.

For specific products, quarterly sales of Remicade slipped 3.3 percent year-over-year to $1.6 billion, slightly below analyst estimates. Last year, Pfizer launched a biosimilar version of the product, called Inflectra, at a 15-percent discount to the current wholesaler acquisition cost of Remicade. Meanwhile, three-monthly revenue from Stelara increased 18.5 percent to $879 million, although the figure missed analyst forecasts of $882 million.

Johnson & Johnson added that quarterly sales of Xarelto climbed 21.1 percent year-over-year to $598 million, while revenue from Imbruvica surged 47.2 percent to $346 million. Meanwhile, three-monthly sales of Darzalex reached $200 million.

For the full year, sales of prescription medicines increased 6.5 percent to $33.5 billion, with the company's overall revenue lifting 2.6 percent to $71.9 billion. Further, net earnings for 2016 rose 7.3 percent to $16.5 billion.

Commenting on the results, Leerink analysts said the quarter highlighted some worrying signs for Johnson & Johnson, especially when it comes to its pharmaceutical division. "While the miss is likely at least in part due to some mis-modeling of a greater foreign exchange impact exiting the year and extra selling days in the fourth quarter of 2015, this performance could heighten investor anxiety around [Johnson & Johnson's] dependence on pharma -- now over 45 percent of total sales globally -- given increasing competition for major drugs, i.e. Remicade (just under 10 percent of total sales), and increasing scrutiny around drug pricing," wrote Danielle Antalffy and Rebecca Wang. However, the analysts noted that "one quarter doesn't make a trend," adding "given the importance of the pharma business to [Johnson & Johnson's] growth trajectory, this is certainly a trend we will be watching in order to assess the company's ability to drive sustainable mid-single-digit sales growth and even faster [earnings per share] growth."

For 2017, Johnson & Johnson indicated that sales are expected to be in the range of $74.1 billion to $74.8 billion, reflecting growth of 4 percent to 5 percent over the prior year, with earnings per share between $6.93 and $7.08. Analysts predict annual revenue of $75.1 billion, on earnings of $7.11 per share. Chief financial officer Dominic Caruso attributed the lower-than-expected forecast "solely to currency," suggesting that analysts may not have adjusted their numbers.

Earlier this month, sources suggested that Johnson & Johnson reached a tentative agreement on a price to purchase Actelion, with the companies still discussing the value of a new unit that would house the Swiss company's R&D assets. Caruso said Tuesday that the talks are ongoing, without providing further details.