Shares of Johnson & Johnson (JNJ) are trading up 0.4% at $90.18 at 1:38 p.m. today after the healthcare giant reported better-than-forecast earnings.
Associated Press Reuters has the details on Johnson & Johnson’s numbers:
Excluding special items, J&J earned $1.36 per share. Analysts on average, had expected $1.32 per share, according to Thomson Reuters I/B/E/S. The company took special charges of about $900 million in the quarter, related largely to legal expenses and merger-related costs…
Global drug revenue jumped almost 10 percent to $7.04 billion…But sales of the company’s medical devices were hurt by patients’ continuing reluctance to undergo elective surgeries and other procedures in a weak economy. Division sales fell 2 percent to $6.93 billion.
Color S&P Capital IQ’s Herman Saftlas impressed. He writes:
We were impressed by pharmaceutical sales growth of 9.9%, driven by newer drugs such as Invega, Simponi, Stelara, and Velade. However, consumer sales rose only 0.8%, and device sales fell 2.0%. Looking to 2014, we see strong momentum in drugs, with growth in emerging markets and the return of OTC products helping consumer sales, and new products and Synthes synergies benefiting devices.
Leerink Swann’s Danielle Antalffy and Robert Marcus call J&J’s report a “clean” beat. They write:
JNJ’s EPS beat was clean, helped by sales outperformance and better-than-expected gross margins as the company continues to deliver positive operating leverage. Overall, JNJ continues to ride the back of strong Pharma performance as recent product launches continue to exceed expectations. And while below-consensus MD&D sales could perpetuate concerns that broader MedTech utilization trends remain weak, strong Surgical sales could actually signal potentially
positive volume trends overall. While JNJ suffers several “weak” spots — primarily in MD&D — the company should continue to benefit from positive tailwinds within Pharma and the ongoing Consumer turnaround, pushing shares higher still.
As important as the report is for J&J, it’s also revealing about the state of other companies. Vertex Pharmaceuticals (VRTX), for instance, gets 26% royalties off of sales of Incivo HCV. Those sales came in at just $76 million, below the forecast for sales of $145 million, write RBC Capital Market’s Michael Yee and team. They believe that “suggests a potential $18M revenue shortfall for Q3 revs vs consensus. Adjusting similarly for Q4 towards new lower run-rate, this would be $0.18 EPS downward impact. Share of Vertex have dropped 1.1% to $72.91 today.
J&J’s Velcade sales could be a good sign for Celgene (CELG) shareholders, according to Yee and team:
Velcade ex-US sales were $404M, up +7% Q/Q, likely due to continued growth with new SubQ formulation (much lower neuropathy tox) and EU approval as induction therapy in combination w/ dex or thalomid-dex in “first line” transplant eligible MM patients (EU approved August 2013). We think CELG puts up a solid Q3 too driven by market growth and increasing duration of therapy.
Celgene has gained 1% to $155.95 today.
Johnson & Johnson’s sales of hip and knee replacements could also signal good times for other makers of those products. Needham’s Mike Matson explains:
Orthopaedics sales of $2.28B grew by 1.1% (all growth rates are Y/Y unless otherwise specified) constant currency (CC) vs. 3% CC organic growth in 2Q13 and missed consensus of $2.35B. JNJ’s worldwide hip growth was 6% CC vs. 4% CC in 2Q13 and its worldwide knee growth was 3% CC vs. 2% CC in 2Q13. We think JNJ’s results and commentary are positive for [Stryker (SYK) and Zimmer Holdings (ZMH)].
Stryker has dropped 0.8% to $70.22, while Zimmer has fallen 0.9% to $86.84.
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