It’s a Good Time to Be a Drugmaker: Why J&J Is Beating Wall Street

Source: Thinkstock

Source: Thinkstock

Johnson & Johnson (NYSE:JNJ) released its second quarter reports Tuesday, and noted an impressive 9 percent increase in revenue and a 13 percent boost in profit; the drugmaker reported $19.5 million in sales. The second quarter results are even better than the quarter previous, and easily beat consensus estimates.

The company’s success — and its weakness — during the second quarter can be attributed in part to the company’s hepatitis C treatment, Olysio, which is expected to face increased competition as rival drugmakers own hepatitis C treatments are released onto the market alongside Sovaldi and Olysio. Sales of Olysio were expected to get a boost this past quarter, and indeed, the drug’s sales doubled, reaching $725 million in Q2. Forbes notes that the drug has already achieved blockbuster status, and generated more than $1 billion in revenues for the first half of 2014.

Though Olysio has seen impressive success, investors were largely underwhelmed by the company’s heavy reliance on the drug as a driver of growth. Some investors, it seems, are skeptical of J&J’s sustainability given the likelihood that Olysio will face stiff competition.

Despite what may or may not happen in the not-too-distant future, J&J’s second quarter results are worth exploring; the company’s CEO, Alex Gorsky, credits the drugmaker’s “diversified business model,” and the “continued success of J&J’s new product launches,” as some of the main catalysts behind the company’s success this quarter.

“Significant advancements are being made in treatment options and access to care for patients and customers around the world. Our diversified business model, focus on long-term growth drivers and talented colleagues position us well in this evolving and dynamic global health care market,” Gorksy added, per the company’s 2nd quarter press release.

The company credits its positive second quarter results to the performance of popular over-the-counter staple medicines like Tylenol and Mortrin, as well as its line of consumers products like Aveeno and Neutrogena skincare products as well as Listerine brand mouthwash. All of these product lines, J&J noted, are largely responsible for the company’s operational success this quarter.

In addition to the J&J’s success with Olysio this quarter, the company also won FDA approval for their experimental medicine, Sylvant, which the drugmaker developed for the treatment of multicentric Castleman’s disease. The EUC, the regulatory body for the European Union, granted approval for J&J’s Vokanamet, a type 2 diabetes treatment.

Following the company’s strong Q2 results J&J has raised its full-year earnings per share guidance from $5.80-$5.90 to a new range of $5.85-$5.92 per share. Forbes notes that following the company’s Q2 results the company saw a slight increase in shares, gaining 0.2 percent on Tuesday; J&J is up 15 percent year to date.

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