1. Johnson & Johnson
Headquarters: New Brunswick, New Jersey
2016 revenues: $71.89 billion
2015 revenues: $70.04 billion
Johnson & Johnson has its challenges: a biosimilar aimed at its top-selling drug, a diabetes unit it is not sure it wants anymore and some new meds whose growth has not been able to overcome headwinds. But CEO Alex Gorsky says things will be better this year, and J&J has a track record that suggests they should.
The company is noted for cranking out good meds on a regular basis, following up with strong launches and a stock market performance that keeps shareholders pacified.
J&J’s 2016 sales of $71.9 billion did not get the company back to its peak of $74.3 billion posted in 2014, but worldwide pharmaceutical sales of $33.5 billion accounted for 6.5% growth in that sector. That was helped by cancer med Imbruvica, which had a standout year with $1.2 billion in sales, up 86%.
The first-in-class BTK inhibitor, which J&J shares with AbbVie, is a good example of the kinds of solid bets on new meds that J&J is known for making. It is forecast by EvaluatePharma to be the third best-selling cancer med in the world by 2022 with an estimated $8.29 billion in sales.
The drugmaker certainly came into this year in better shape than in 2016, when its lagging medical device business took a big whack out of earnings, leading it to announce 3,000 jobs cuts to right the ship. Between that and lagging sales of some of its new meds, one of its big investors was pushing for a three-way split.
Devices continue to be one of its challenges. Sales in the company’s Diabetes Care unit last year dropped 7.2% to $1.8 billion—no doubt contributing to the company’s announcement that it has launched “a process to evaluate potential strategic options” for the business.
While not everything has turned up roses in the last year, J&J did make some important strides. The biggest step was its complicated $30 billion deal with Swiss biotech Actelion, negotiations for which started in 2016 and were finalized in January of this year. Investors are counting on the deal to provide the sales oomph that J&J has lacked in the last couple of years.
For its $280 a share, J&J gets the Swiss biotech’s portfolio of marketed meds, which includes pulmonary arterial hypertension up-and-comers Opsumit and Uptravi. What it does not get is full ownership of Actelion’s pipeline, which CEO Jean-Paul Clozel would not relinquish. Instead, the R&D unit will be spun off into a standalone company, based and listed in Switzerland, with J&J receiving a sizable minority stake.
Still, once the deal is complete, J&J is expected to see an immediate, and much-needed, revenue boost from Opsumit and Uptravi, which raked in more than $1 billion last year.
J&J will need that, and perhaps more, given that autoimmune med Remicade, its top-selling drug with $6.9 billion in sales last year, is now under attack by a biosimilar. Pfizer launched Inflectra late last year, listing it at a 15% discount to Remicade’s wholesale acquisition cost, or $946.28 per 100-mg vial.
Whatever its challenges, J&J continues to get a lot of love from the Street because of a strong record of good stock market returns. Last year, its shares were up 12%, sandwiched between GlaxoSmithKline at 14% and Merck at 11%. It was seen as a “safe haven” in an uncertain market and gets good grades for its strong record of getting new meds to market and having a sales team that knows what to do once they launch.
And Gorsky says in 2017, that sales team should help it achieve 4% to 5% growth in revenues to a range of $74.1 billion to $74.8 billion and adjusted earnings of $6.93 to $7.08 per share.