J&J’s dour outlook spells trouble for biopharma

After a disastrous end to 2018 biopharma watchers are hoping for an easier ride this year. But the early signs from Johnson & Johnson, which kicked off earnings season today, are not good. True, the company beat analysts' expectations – just – in the fourth quarter, but its guidance for 2019 sales of $80.4-81.2bn disappointed. The company highlighted pricing pressure and biosimilar and generic competition as particular headwinds for its pharma division, which is far from good news for others in the space contending with similar issues. Cut-price competition is expected to hit its business to the tune of $3-3.5bn next year. J&J has so far managed to avoid the worst of the biosimilar onslaught, using discounting and bundling for its Remicade brand; indeed, the company boasted today that its product was still responsible for 93% of infliximab volume share. Executives comments on pricing were also ominous: J&J saw net drug price decreases of over 6% in 2018. The company would not give a forecast for 2019, but admitted that these discounts would continue. This suggests that even nascent efforts in the US to restrain price hikes are having an effect. Investors did not like the sound of that, and pushed J&J shares down almost 2% in response. 

The current sellside view for J&J
  Worldwide sales by division ($bn)
  2018a 2019e 2020e
      Pharmaceuticals 40.71 41.89 43.88
      Consumer 13.85 14.41 14.93
      Medical devices 26.99 27.48 28.47
Total revenues 81.58 83.78 87.27
Source: EvaluatePharma.

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