Johnson & Johnson CFO Joseph Wolk
Johnson & Johnson CFO Joe Wolk said at the company's latest business review May 15 that its pharmaceutical arm is expected to rise "comfortably above" $50 billion in sales by 2023 on the back of new products and a wide range of volume-driven growth.
The leaders painted a picture at the healthcare behemoth's full-day presentation of a company poised for continued growth into the next decade, and industry analysts tended to agree.
"We are very confident in the health of our pharmaceutical business," Wolk said. "We are operating from a position of strength, with eight consecutive years of operational sales growth at an annual compounded growth rate of 8.9%, almost two times the 4.6% of the global branded market over that same period of time."
Leerink analyst Danielle Antalffy said Johnson & Johnson's pharmaceutical division was the company's clear growth driver. The company as a whole pulled in sales of more than $81 billion in 2018, $40.7 billion of which came from the pharma arm.
"Pharma (now over 50% of total J&J sales) will continue to be a consistent growth engine over the next few years, and one that is relatively more insulated from the broader market headwinds around healthcare reform and pricing vs. many competitors given that now 100% growth is volume-driven vs. price-driven," Antalffy said in a May 16 note.
Ten potential blockbusters by 2023
Executives said the pharmaceutical division would not be resting on its laurels but pushing out a pipeline of potential blockbusters to be filed for regulatory approval by 2023.
The global head of research and development at Johnson & Johnson's Janssen Pharmaceutical Ltd., Mathai Mammen, noted 10 pipeline products that could accrue more than $1 billion each in projected peak sales.
Cancer treatments will carry much of that weight, with two new prospects in multiple myeloma, one in acute myeloid leukemia, one in non-small cell lung cancer, one in prostate cancer and another in solid tumors.
Picking up the rest of the 10 are treatments for retinal disease, Crohn's disease, respiratory syncytial virus and major depressive disorder.
For shorter-term growth, Wolk touted the company's 18 new products since 2011 that have been major contributors to the pharmaceutical upside despite competitive pressure from biosimilars and generics.
Optimism despite industry woes
Analysts were quick to qualify the bullish expectations with problems facing the pharmaceutical industry overall, including pricing pressure, generic and biosimilar competition, and one that has plagued Johnson & Johnson in particular lately: litigation concerns.
"The primary risks to our J&J rating and target price are a slowdown in some of the key pharma growth drivers or disappointing data from ongoing clinical trials, significant changes to how drugs are priced in the U.S., and surprising verdicts in the ongoing talc litigation," Credit Suisse analyst Vamil Divan said.
But overall, the breadth of the New Jersey company's range and the massive amounts of cash on hand would provide a backstop for most unexpected pains, analysts said.
Divan mentioned that Johnson & Johnson has a high potential for business development to gain early-stage products from other sources. He also said that, in terms of pricing reform, the company would be looking for "evolution, and not a revolution" to avoid losses.
Mostly, analysts were encouraged by the company's bullishness, particularly after a conservative outlook issued during the 2018 full-year earnings call in January.
"In our view, J&J will remain a relative safe haven in a volatile market as investors and companies digest the potential impact from a relatively new administration driving political uncertainty both in the U.S. and abroad," Antalffy said. "With a solid dividend yield of about 2.6%, we believe J&J should continue to deliver above average returns to shareholders."