- Pharma giant J&J avoided the full weight of biosimilar competition to its top-selling drug Remicade (infliximab) for at least another quarter, reporting Tuesday only a 6% drop in worldwide first quarter sales from a year earlier.
- But weaker-than-expected performance from Stelara (ustekinumab), Zytiga (abiraterone acetate) and Xarelto (rivaroxaban)— all top brands for the drugmaker — weighed on pharmaceutical sales overall and triggered a 3.5% slide in the company's stock during morning trading.
- Looking forward to the rest of 2017, J&J raised its sales guidance to reflect the expected impact of closing its $30 billion acquisition of the Swiss biotech Actelion later this year, forecasting $75.4 billion to $76.1 billion in annual revenues.
As the first pharma company to report earnings each quarter, J&J is usually looked to as a indicator of macro-level trends affecting the industry as a whole.
At the moment, ongoing scrutiny of drug pricing along with the potential for corporate tax reform in the U.S. are top of mind for investors and analysts alike, as both issues promise to broadly impact the sector.
Despite public backlash against pharma pricing practices, J&J doesn't anticipate making any dramatic changes to its methodologies for determining the cost of medicines, said Dominic Caruso, chief financial officer, on a call with analysts Tuesday morning.
In February, J&J released its first transparency report in a bid to expand disclosures on its pricing practices — a strategy adopted by several other drugmakers to stave off criticism. While the average annual list price of J&J medicines increased by 8% to nearly 10% a year since 2012, net price increases were in the lower single digits.
Caruso noted that the majority of J&J's portfolio in areas like oncology and immunology is made of specialty medicines, which generally command higher prices than the more competitive primary care sectors. In cardiovascular and metabolic diseases, however, Caruso acknowledged J&J is feeling the impact of greater payer pressure and higher competition on price.
Global sales of Xarelto, for example, fell by nearly 10% compared to a year prior as higher access discounts and the timing of "donut hole" costs in Medicare prescription drug coverage offset a higher market share. Sales of Inovkana and Invokamet fell due in part to discounts in managed care channels.
While the acquisition of Actelion does beef up J&J's cardiovascular offerings, Caruso explained the company sees Actelion's marketed drugs for pulmonary aterial hypertension as specialty medicines and therefore less impacted by payer pushback.
Elsewhere, the pharma confirmed it continues to review strategic options for its diabetes care business, which includes LifeScan, Inc., Animas Corp., and Calibra Medical, Inc. Those options include potential partnerships or outright divestiture, Caruso said, reflecting the more adverse pricing shifts in that space.
On tax reform, Caruso said legislative efforts appear stalled as members of Congress wait for further guidance from the White House. But J&J is encouraged by the direction of lawmakers' discussions, and supports (unsurprisingly) a lower corporate tax reform as well as shifting to a territorial tax system.
Overall, first quarter sales across all business units increased 1.6% to $17.77 billion, coming in below market expectations due to the weaker performance from pharmaceuticals and consumer sales.
More positively, the entry of Pfizer's Remicade biosimilar continues to have only a limited impact on J&J's Remicade sales. Pfizer launched Inflectra (infliximab-dyyb) in October, but physicians have so far appeared unwilling to switch patients from branded Remicade to the biosimilar, Caruso said.
Noting that Inflectra is not approved as an interchangeable product, Caruso told analysts to expect a slow shift away from Remicade. That will buy J&J time to cushion the blow, but puts pressure on newer medicines and the Actelion pick-up to deliver higher growth.