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J&J Sets in Motion Drug/Biotech Q1 Earnings: 3 Stocks to Buy
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Johnson & Johnson (JNJ - Free Report) is usually the first pharma company to report quarterly earnings. On Tuesday, J&J reported mixed first-quarter results, beating estimates for earnings but missing the same for sales. The company, however, cut its guidance for the year.
Mixed Performance of J&J’s Segments
J&J’s Pharmaceuticals unit’s adjusted operational sales growth remained above-market levels though its sales fell short of market expectations, mainly because of lower-than-expected sales of J&J’s single-shot COVID-19 vaccine.
Key products, such as Darzalex and Stelara, and other core products like Invega Sustenna and new drugs, Erleada and Tremfya, contributed significantly to sales growth. The sales growth was, however, dampened by lower sales of key medicines, Imbruvica and Xarelto and generic/biosimilar competition to drugs like Zytiga and Remicade as well as lower COVID-19 vaccine sales.
Nonetheless, J&J continues to expect its Pharmaceutical business to deliver market-leading adjusted operational sales growth in 2022 driven by drugs like Darzalex, Tremfya, Stelara, Erleada and the newly launched Rybrevant.
Sales in the J&J’s MedTech (previously Medical Devices) segment improved, driven by a faster-than-expected market recovery, better commercial execution and new product launches. J&J saw a steady uptick in surgical procedures in the first quarter with the easing of COVID restrictions in several countries.
In the MedTech unit, J&J expects continued market recovery and uptake from the products launched in 2022. Second-half sales of the MedTech unit are expected to be stronger than the first half.
In the Consumer segment, higher sales of over-the-counter (OTC) products were partially offset by external supply constraints (due to raw material availability and labor shortages), which hurt sales of the skin health and beauty franchise.
In the Consumer segment, J&J expects supply constraints and inflationary pressure to continue to linger throughout the remainder of 2022. However, the impact is expected to be more pronounced in the first half of the year. Second-half sales are expected to be stronger than the first half.
Lowers Financial Outlook
J&J lowered its earnings and sales expectations for 2022, mainly citing the greater-than-expected negative impact from currency movements. However, the negative impact of lower COVID vaccine sales might have contributed to the lowered sales outlook for the year.
Excluding revenues from the COVID-19 vaccine, J&J expects to generate revenues from its base business in the range of $94.8 billion to $95.8 billion, lower than $95.9 billion to $96.9 billion guided previously. The adjusted earnings per share guidance was lowered from a range of $10.40-$10.60 per share to $10.15-$10.35.
What Does J&J’s Results Mean for Others?
J&J is usually the first of the big drugmakers to report earnings in any quarter. Investors typically look at J&J’s results to get an idea about how the rest of the drug/biotech companies as well as some medical device makers will fare.
Importantly, the faster-than-expected recovery and improved sales of J&J’s MedTech segment caught investors’ attention. It clearly suggests that the recovery of the Medical Devices industry is underway with an improvement in procedure volume. The MedTech segment’s better-than-expected sales are seen as a positive sign for other Medical device companies.
On the first-quarter conference call, J&J said that the market demand for all COVID-19 vaccines is currently challenged by the global supply surplus and vaccine hesitancy in developing markets. The fact that sales of its COVID-19 vaccine were much below expectations due to lower demand suggests that other COVID vaccine makers, Pfizer/BioNTech, Moderna and AstraZeneca may also see slightly lower-than-expected sales of their vaccines.
Overall, despite mixed results, a guidance cut and softer Pharmaceuticals sales, J&J’s earnings call left investors feeling encouraged about a positive 2022, especially the second half, both for J&J as well as for the drug, biotech and medical devices industry.
Lilly’s stock has risen 6.5% this year so far compared with an increase of 6.6% for the industry.
Image Source: Zacks Investment Research
Estimates for Lilly’s 2022 earnings have gone up from $8.71 to $8.78 while those for 2023 have increased from $9.78 to $9.92 per share over the past 30 days.
Lilly boasts a solid portfolio of core drugs in diabetes, autoimmune diseases and cancer. Lilly’s revenue growth is being driven by higher demand for drugs like Trulicity, Taltz, and others. It is regularly adding promising new pipeline assets through business development deals. It has an exciting pipeline of potential new medicines including tirzepatide for type II diabetes and donanemab for early Alzheimer's disease. Both candidates have multibillion dollar sales potential.
Vertex Pharmaceuticals’ stock has risen 29.9% this year against the industry’s decline of 14.7%.
Image Source: Zacks Investment Research
Estimates for Vertex Pharmaceuticals’ 2022 earnings have gone up from $14.52 to $14.58 per share, while the same for 2023 have increased from $15.31 to $15.37 per share over the past 30 days.
Vertex’s cystic franchise sales continue to grow despite the impact of the pandemic. Triple therapy, Trikafta/Kaftrio’s launch was a significant milestone for Vertex as it addresses 90% of CF patients. New reimbursement agreements in ex-U.S. markets and label expansions to younger age groups in the United States are driving Trikafta/Kaftrio sales higher. Meanwhile, Vertex has a broad clinical non-CF pipeline across six disease areas, which are progressing rapidly with data from multiple programs expected in 2022. Vertex faces only minimal competition in its core CF franchise.
Deciphera’s stock has risen 5% this year so far against the industry’s decline of 14.6%.
Image Source: Zacks Investment Research
Loss estimates for Deciphera have narrowed from $2.94 to $2.84 per share for 2022, while the same for 2023 have narrowed from $2.38 to $2.27 per share over the past 30 days.
Deciphera got a significant boost with the FDA approval for Qinlock in treating advanced gastrointestinal stromal tumors (GIST) in 2020. This is the first commercial product for the company The drug has witnessed solid uptake so far. Qinlock has also been approved in Europe for the treatment of fourth-line GIST. The nod in the EU should boost sales in the future quarters. The company is rapidly advancing its portfolio of innovative pipeline candidates. The recent restructuring initiative is also cutting costs, which is a positive.
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J&J Sets in Motion Drug/Biotech Q1 Earnings: 3 Stocks to Buy
Johnson & Johnson (JNJ - Free Report) is usually the first pharma company to report quarterly earnings. On Tuesday, J&J reported mixed first-quarter results, beating estimates for earnings but missing the same for sales. The company, however, cut its guidance for the year.
Mixed Performance of J&J’s Segments
J&J’s Pharmaceuticals unit’s adjusted operational sales growth remained above-market levels though its sales fell short of market expectations, mainly because of lower-than-expected sales of J&J’s single-shot COVID-19 vaccine.
Key products, such as Darzalex and Stelara, and other core products like Invega Sustenna and new drugs, Erleada and Tremfya, contributed significantly to sales growth. The sales growth was, however, dampened by lower sales of key medicines, Imbruvica and Xarelto and generic/biosimilar competition to drugs like Zytiga and Remicade as well as lower COVID-19 vaccine sales.
Nonetheless, J&J continues to expect its Pharmaceutical business to deliver market-leading adjusted operational sales growth in 2022 driven by drugs like Darzalex, Tremfya, Stelara, Erleada and the newly launched Rybrevant.
Sales in the J&J’s MedTech (previously Medical Devices) segment improved, driven by a faster-than-expected market recovery, better commercial execution and new product launches. J&J saw a steady uptick in surgical procedures in the first quarter with the easing of COVID restrictions in several countries.
In the MedTech unit, J&J expects continued market recovery and uptake from the products launched in 2022. Second-half sales of the MedTech unit are expected to be stronger than the first half.
In the Consumer segment, higher sales of over-the-counter (OTC) products were partially offset by external supply constraints (due to raw material availability and labor shortages), which hurt sales of the skin health and beauty franchise.
In the Consumer segment, J&J expects supply constraints and inflationary pressure to continue to linger throughout the remainder of 2022. However, the impact is expected to be more pronounced in the first half of the year. Second-half sales are expected to be stronger than the first half.
Lowers Financial Outlook
J&J lowered its earnings and sales expectations for 2022, mainly citing the greater-than-expected negative impact from currency movements. However, the negative impact of lower COVID vaccine sales might have contributed to the lowered sales outlook for the year.
Excluding revenues from the COVID-19 vaccine, J&J expects to generate revenues from its base business in the range of $94.8 billion to $95.8 billion, lower than $95.9 billion to $96.9 billion guided previously. The adjusted earnings per share guidance was lowered from a range of $10.40-$10.60 per share to $10.15-$10.35.
What Does J&J’s Results Mean for Others?
J&J is usually the first of the big drugmakers to report earnings in any quarter. Investors typically look at J&J’s results to get an idea about how the rest of the drug/biotech companies as well as some medical device makers will fare.
Importantly, the faster-than-expected recovery and improved sales of J&J’s MedTech segment caught investors’ attention. It clearly suggests that the recovery of the Medical Devices industry is underway with an improvement in procedure volume. The MedTech segment’s better-than-expected sales are seen as a positive sign for other Medical device companies.
On the first-quarter conference call, J&J said that the market demand for all COVID-19 vaccines is currently challenged by the global supply surplus and vaccine hesitancy in developing markets. The fact that sales of its COVID-19 vaccine were much below expectations due to lower demand suggests that other COVID vaccine makers, Pfizer/BioNTech, Moderna and AstraZeneca may also see slightly lower-than-expected sales of their vaccines.
Overall, despite mixed results, a guidance cut and softer Pharmaceuticals sales, J&J’s earnings call left investors feeling encouraged about a positive 2022, especially the second half, both for J&J as well as for the drug, biotech and medical devices industry.
3 Stocks to Buy
Here we have highlighted three drug/biotech stocks that may prove to be good buys. All the three stocks have a Zacks Rank #2 (Buy) and have seen their estimates and stock price rise. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Eli Lilly (LLY - Free Report)
Lilly’s stock has risen 6.5% this year so far compared with an increase of 6.6% for the industry.
Image Source: Zacks Investment Research
Estimates for Lilly’s 2022 earnings have gone up from $8.71 to $8.78 while those for 2023 have increased from $9.78 to $9.92 per share over the past 30 days.
Lilly boasts a solid portfolio of core drugs in diabetes, autoimmune diseases and cancer. Lilly’s revenue growth is being driven by higher demand for drugs like Trulicity, Taltz, and others. It is regularly adding promising new pipeline assets through business development deals. It has an exciting pipeline of potential new medicines including tirzepatide for type II diabetes and donanemab for early Alzheimer's disease. Both candidates have multibillion dollar sales potential.
Vertex Pharmaceuticals (VRTX - Free Report)
Vertex Pharmaceuticals’ stock has risen 29.9% this year against the industry’s decline of 14.7%.
Image Source: Zacks Investment Research
Estimates for Vertex Pharmaceuticals’ 2022 earnings have gone up from $14.52 to $14.58 per share, while the same for 2023 have increased from $15.31 to $15.37 per share over the past 30 days.
Vertex’s cystic franchise sales continue to grow despite the impact of the pandemic. Triple therapy, Trikafta/Kaftrio’s launch was a significant milestone for Vertex as it addresses 90% of CF patients. New reimbursement agreements in ex-U.S. markets and label expansions to younger age groups in the United States are driving Trikafta/Kaftrio sales higher. Meanwhile, Vertex has a broad clinical non-CF pipeline across six disease areas, which are progressing rapidly with data from multiple programs expected in 2022. Vertex faces only minimal competition in its core CF franchise.
Deciphera Pharmaceuticals (DCPH - Free Report)
Deciphera’s stock has risen 5% this year so far against the industry’s decline of 14.6%.
Image Source: Zacks Investment Research
Loss estimates for Deciphera have narrowed from $2.94 to $2.84 per share for 2022, while the same for 2023 have narrowed from $2.38 to $2.27 per share over the past 30 days.
Deciphera got a significant boost with the FDA approval for Qinlock in treating advanced gastrointestinal stromal tumors (GIST) in 2020. This is the first commercial product for the company The drug has witnessed solid uptake so far. Qinlock has also been approved in Europe for the treatment of fourth-line GIST. The nod in the EU should boost sales in the future quarters. The company is rapidly advancing its portfolio of innovative pipeline candidates. The recent restructuring initiative is also cutting costs, which is a positive.