J&J earnings disappoint, with no word on Actelion deal
- Johnson & Johnson will expand its disclosures on drug pricing and R&D expenses, sketching the outlines of a planned transparency report to be released later this year on a fourth-quarter earnings call with analysts Tuesday morning.
- Company CEO Alex Gorsky touted J&J's "responsible approach" to pricing, noting it has generally increased prices at a rate lower than its peers and restricted hikes to single digits.
- The pharma giant offered no comments on ongoing negotiations with Swiss biotech Actelion over a potential takeover, leaving investors to focus on fourth-quarter revenue figures which came in below market expectations at $18.1 billion.
Big pharma seems to have coalesced around limiting annual drug price increases to below 10%, with a number of companies such as Allergan and AbbVie announcing pledges to limit hikes to single digits. While the optics of such increases are certainly better than the double-digit hikes commonly seen before, critics have questioned whether the limits will win pharma any friends in an economy still stuck around 2% inflation.
"We have maintained a responsible approach to pharmaceutical pricing, generally limiting aggregate annual price increases to single digit percentages, below those of our competitive set," said company CEO Alex Gorsky.
J&J's planned report will include further details on the company's pricing practices, R&D expenses and clinical data underpinning the value the company sees in its medicines, Gorsky said on Tuesday's call.
As the first major pharma to report earnings each quarter, J&J is often looked to as a barometer of the industry as a whole. Lower-than-expected top-line revenue and softer sales from J&J's pharmaceutical unit did not spark any market enthusiasm, however, with the company stock falling over 2% in early trading.
Total pharmaceutical revenues increased by 2.1% to $8.2 billion, driven by stronger performance in oncology and immunology. Higher sales of the anti-inflammation drugs Stelara (ustekinumab) and Simponi (golimumab) helped to offset slightly lower sales of top-earner Remicade (infliximab).
J&J said it hasn't yet seen a significant competitive impact from Pfizer and Celltrion's biosimilar of Remicade, which could steal market share from J&J over time.
Elsewhere, cancer drugs Darzalex (daratumumab) and Imbruvica (ibrutinib) continued to grow strongly.
But declining sales from J&J's infectious disease, neuroscience and cardiovascular segments weighed on overall pharma unit growth.
J&J also announced it is considering strategic options for its diabetes care division, which includes LifeScan, Inc., Animas Corp., and Calibra Medical, Inc. The subsidiaries make a number of diabetes-related devices, including glucose monitoring systems and insulin pumps. While Gorsky emphasized J&J's continued interest in diabetes (such as with Invokana), he said broader market dynamics including pricing prompted a hard look at the division.
J&J forecast 2017 sales between $74.1 billion and $74.8 billion, which again came in below market consensus for the company.
Sealing a deal for Actelion would certainly give a lift to revenues, although J&J would have to pay up. Reports from Reuters have indicated a deal could value Actelion (or some portion of it) at over $250 per share.
J&J said it had roughly $15 billion in net cash, with $27 billion in debt offsetting $42 billion in cash, equivalents and short-term marketable securities.
Deal or no deal, Gorsky indicated on the call that J&J would continue to look for other potential M&A opportunities. Yet, he seemed to downplay the idea of more "transformative" M&A in response to an analyst question, saying large transactions tend to be more challenging.
Follow Ned Pagliarulo on Twitter