Johnson & Johnson CEO Joaquin Duato sold 2023 as a “remarkable year” on an earnings call with investors Tuesday. But the pharmaceutical giant faces looming difficulties that hang over its performance, including incoming biosimilar competition to its blockbuster immune drug Stelara and a $700 million settlement over claims the company’s talc product caused cancer.
As far as last year goes, J&J narrowly beat Wall Street’s expectations with $85.2 billion in revenue. Pharma sales grow 9.5% in the fourth quarter compared to the same period the year before. Cancer treatments and immunology medicines like Stelara made up the bulk of that revenue.
As one of the largest pharma companies and often the first in the sector to report earnings each quarter, J&J is often considered a sort of bellwether for the industry.
With a key patent expiration last year, Stelara is expected to begin losing revenue as biosimilars enter the European market per deals J&J made with competitors. Because Stelara is such a large product for J&J, earning more than $10 billion in sales last year, the drug’s patent cliff represents a significant threat.
“We expect innovative medicine sales growth to be slightly stronger in the first half of the year compared to the second half, given the anticipated entry of Stelara biosimilars in Europe towards the middle of the year,” Duato said Tuesday.
J&J is counting on a slate of new medicines to pick up any slack, including its mainstay multiple myeloma drug Darzalex, as well as the CAR-T cell therapy Carvykti and newer treatments like the multiple myeloma drugs Tecvayli and Talvey.
J&J spun off its consumer health unit Kenvue in 2023 and is now a two-pronged drug and device maker. But the transaction, via Kenvue’s IPO and debt offering, generated more than $13 billion for J&J.
J&J’s biggest deal of 2023 was a $16.6 billion acquisition of the medical device company Abiomed. Still, Duato highlighted the company’s pace of drug partnerships and collaborations, which he claimed don’t always earn the same kind of attention as multibillion-dollar deals.
On the pharma side, Duato said J&J’s strategy is to “find more opportunities to create value at an earlier stage,” such as through focusing on building scientific expertise in specific areas. The company’s partnership with China’s Legend Biotech to develop Carvykti is now paying off, for instance.
J&J’s preference remains “in areas in which we have internal capabilities and know-how,” Duato said, citing the $2 billion purchase of antibody-drug conjugate specialist Ambrx at the beginning of 2024.
J&J invested more than $15 billion in R&D. On top of that, J&J committed more than $3 billion to dealmaking in the last 12 months, CFO Joseph Wolk said.
Looking forward, J&J expects operational sales growth of between 5% and 6% in 2024, boosting revenue to as much as $89 billion across both pharma and medtech arms.
“In innovative medicine, we expect 2024 to deliver a 13th consecutive year of above-market growth driven by market share gains from key brands such as Darzalex, Tremfya and Erleada, as well as continued adoption of recently launched newer products such as Carvykti, Tecvayli, Talvey and Spravato,” Wolk said.
