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Investors Are Likely To Focus On ‘What's New' During Johnson & Johnson's Second Quarter Earnings

What is our expectation from Johnson & Johnson's ( JNJ ) Q2 2015 earnings? While we believe that J&J's results will be impacted negatively by exchange rate movements, the company will try to focus on the sales ramp up of its new drugs during its earnings conference call on July 14th to send a positive signal to analysts and investors. With Remicade going off patent and Olysio's sales plummeting, J&J needs new catalysts to drive its growth. Considering the stunted progress and increased competition in medical devices market, these new catalysts have to be in the form of successful new drug launches or significant expansion in the application of current drugs. This is why the sales trajectory of new drugs and near-to-mid-term potential of the drug pipeline are going to be of key importance as J&J releases its second quarter results. If there is nothing exciting to look forward to, our hypothesis of the company's stock hitting the ceiling will be re-affirmed (read Has Johnson & Johnson's Stock Peaked? )

Our current price estimate for Johnson & Johnson stands at $105 , which is at 5% premium to the market price.

See our complete analysis for Johnson & Johnson

Our current price estimate factors in a reasonably good performance from J&J's current immunology and oncology drugs. Remicade accounts for roughly 25% of J&J's pharmaceutical revenues and the new biosimilar launched in Europe will create some competitive pressure. The drug saw an operational (excluding currency effects) decline of more than 6% in the first quarter. However, the U.S. business from Remicade is much bigger for J&J and, considering that the biosimilar will be introduced only to new patients, the overall impact can be gradual. So, the decline in Remicade's revenues will be spread out over the next few years. Other immunology drugs such as Simponi and Stelara are growing fast. J&J's oncology division, although small, is doing well. The addition of Imbruvica is likely to help.

However, these factors are not enough to trigger an upward stock movement. What J&J needs is something of the potential that Olysio displayed in its early days. In other words, the only realistic upside trigger that we see is potential new drug launches that become successful. J&J plans to file at least 10 new drugs for regulatory approval by 2019, each of which has the potential to become a blockbuster product with annual sales of more than $1 billion. The company has also announced its plans of 40 line extensions of current and new drugs. It is noteworthy that the FDA recently granted approval to Invega Trinza under priority review. Additionally, J&J has initiated the biologic licensing application for immuno-oncology drug daratumumab for treatment of multiple myeloma.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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