- The story around Johnson and Johnson consists of three components: an eroding piece (Zytiga and Remicade), a growing piece (numerous new drug launches and line extensions), and a turnaround effort in its Consumer and Medical Devices segment
- Within the eroding piece, Remicade, Zytiga, Concerta, and Velcade face ongoing competition and loss of exclusivity that could impact sales. Invokana has also struggled.
- However, management is optimistic that an extensive pipeline of new drug launches and line extensions can offset the declines. Stelara, Tremfya, Erleada, and Esketamine are most often discussed by investors.
- Outside of the Pharmaceutical segment, management is focused on turning around the Consumer and Medical Devices segments. Results from 3Q showed that these efforts were beginning to see returns. Read More
JNJ is a massive company with many products stretching across its three segments: Pharmaceutical, Consumer, and Medical Devices.
- The Pharmaceutical segment is the key to the bull and bear thesis, as it represents a majority of revenue and operating income. A number of drugs will face generic competition in 2019, and investors are watching to see if the pipeline is robust enough to fend off revenue erosion
- Consumer and Medical Devices have lagged Pharmaceuticals growth, but management outlined a robust plan to turn the businesses around over the next several years at a recent Investor Day on May 16. These segments may become a bigger part of the story should Pharmaceutical segment growth slow, and is essential for JNJ's multiple to recover Read More
Johnson and Johnson stumbled a bit in the second half of 2016. The stock declined slightly 11% from July to late January as investors began to focus in on the Pharmaceutical segment and its growth trajectory. The segment, which represents 47% of sales, has driven much of JNJ's top-line growth over the last four years with over 10% organic growth each year. However, growth in this segment began to slow noticeably to 2% in 4Q16. Additionally, management gave segment guidance that implied growth of just 2-3% in 2017. In turn, street estimates were lowered.
What has been driving the growth moderation and the investor concerns? Read More