Just yesterday, one of the biggest potential threats to Johnson & Johnson’s ($JNJ) top line moved closer to reality as Pfizer ($PFE) announced it will begin shipping a biosimilar version of J&J’s blockbuster Remicade in late November. But executives of J&J, who had been insisting they wouldn’t face biosimilar competition this year, weren’t fazed during the company’s third-quarter earnings release today, even though Remicade’s stand-out performance clearly raises questions about how healthy the top line will be if it takes a hit from Pfizer’s rival product.
Remicade, used to treat autoimmune disorders like rheumatoid arthritis, hauled in $1.8 billion during the quarter, driving a 9% overall rise in J&J’s prescription drug sales to $8.4 billion. J&J’s U.S. prescription drug sales soared 12%. Its overall revenues came in at $17.82 billion, beating the average analyst estimate of $17.71 billion, according to Zacks.
During a conference call with analysts after the earnings release, Joaquin Duato, worldwide chairman of J&J’s pharmaceuticals group, said the company is gearing up for Pfizer’s Remicade rival with a “focused biosimilar readiness plan.” That plan includes trying to delay Pfizer’s launch via an appeals process, and sending out its sales reps to preach the superiority of Remicade’s scientific track record and J&J’s extensive patient-assistance program. Remicade’s “significant long-term safety data, strong advocacy for patients and clear physician preference means that 70% of patients who are stable on Remicade are highly unlikely to switch,” Duato said.
Duato added that in markets like Australia and Brazil, where a Remicade biosimilar has been available for some time, J&J’s drug still holds a market share of more than 90%. The company also has an aggressive R&D strategy that has already produced new immunology products poised to compete with biosimilars of old blockbusters, he said. He pointed to the company’s rheumatoid arthritis treatment Simponi, which brought in worldwide sales of $481 million during the quarter, up 26.6% from the same quarter last year.
J&J had a surprisingly good quarter overall, to be sure. The company’s net income after amortization and special items soared 12% to $4.27 billion ($1.68 per share), beating estimates by 3 cents. Its medical device sales nudged up 1% to $6.16 billion. The biggest weak spot was J&J’s consumer health business, where sales dropped nearly 2% to $3.26 billion.
Analysts expect that the launch of Pfizer’s Remicade biosimilar, called Inflectra (infliximab-dyyb), will have some impact on J&J’s 2017 sales, though it’s not yet clear how big a hit the company will take. Leerink Partners analyst Danielle Antalffy released a note pointing out that Inflectra will launch at a relatively low 15% discount. Antalffy wrote, “our initial thoughts are that JNJ will be able to absorb a similar price cut and retain a good portion of Remicade sales, thus making downside to our current 2017 estimates limited.”
During the earnings call, J&J CFO Dominic Caruso addressed concerns about whether the company can maintain its growth in 2017 by predicting that its prescription drug sales will expand at a similar rate to what the company is seeing this year, and that performance in both medical devices and consumer health will improve. "We continue to pursue significant growth opportunities in terms of both penetration within existing indications, and planned line extensions," Duato added, which will help buoy that growth rate.
In addition to charting strong performance for Simponi, the company saw sales of its blood thinner, Xarelto, rise 15% during the quarter to $529 million. Sales of Stelara to treat psoriasis jumped 33% to $814 million, and the haul for cancer drug Imbruvica nearly doubled to $349 million.
J&J raised its earnings guidance for the year slightly, from $6.63 to $6.73 per share to $6.68 to $6.73. Caruso promised during the earnings call to provide more color on the company’s 2017 expectations in January. J&J’s shares opened down nearly 2% to $116.18 in morning trading.
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