Healthcare investors who began 2019 with fear and trepidation can rest a little easier thanks to second-quarter earnings reports from GlaxoSmithKline(NYSE:GSK), Johnson & Johnson (NYSE:JNJ), and Thermo Fisher Scientific (NYSE:TMO). All three healthcare giants began the year with less-than-enthusiastic forward outlooks that they keep revising upwards.
Can these businesses keep their trains rolling uphill? Let’s look at the sources of optimism to find out…
Thermo Fisher Scientific: Now serving viral vectors
Rising demand for gene-sequencing services has helped push Thermo Fisher Scientific’s bottom line 110% higher over the past five years, and the company’s still adding ancillary services useful to just about anyone that needs to measure something really small. The company remains a market-leading provider of machines that identify the chemical identity of residue samples scraped from crime scenes plus heaps of applications with fewer thrills but better cash flows.
Thermo Fisher’s latest effort to stay ahead of the curve led the company to acquire a leading viral vector contract development and manufacturing organization (CDMO) for $1.7 billion in cash earlier this year. Strands of DNA won’t survive in the bloodstream for a minute without a delivery vehicle for protection, and non-replicating viruses always get the job.
Every organization that knows what to do with a custom viral vector also has some relationship with Thermo Fisher already. A new revenue stream from gene therapy developers looking for a place to put their DNA and continued growth across all reporting segments inspired management to raise its outlook for 2019. Now the company thinks total revenue could reach $25.5 billion at the high end of its guided range, which isn’t much higher than the company expected this January. Closer to the bottom line, though, the company thinks adjusted earnings could rise as high as $12.26 per share or 10% more than last year.
Johnson & Johnson: Surprise performances
Johnson & Johnson began 2019 with a grim outlook in response to a loss of exclusivity for its top-selling product, Remicade and some of the same pricing pressures that are troubling many of its peers. In January, J&J predicted annual sales, excluding currency fluctuations, would rise by 0.5% at the middle of its guided range while adjusted earnings per share would rise just 4.9% this year. Now, the company expects a 1.5% sales increase and a 7.3% gain on the bottom line.
In the first half of 2019, sales of J&J’s anti-inflammatory injection, Remicade, fell 19% year over year to $2.2 billion. The $500 million hole that biosimilar competition poked through the company’s income statement was entirely filled by Stelara sales, which jumped 23% to $3.0 billion over the same time frame.
Tremfya, a psoriasis injection that entered a crowded market in late 2017, is finally starting to take flight thanks to a new and improved auto-injector. In the first half of 2019, Tremfya sales jumped 128% to $452 million.
Immunology isn’t the only pharmaceutical area with drug launches exceeding expectations several years after their initial launches. Year-over-year sales of J&J’s leukemia tablet, Imbruvica, jumped 34% to $1.6 billion in the first half, and multiple myeloma treatment Darzalex jumped 49% to $1.4 billion…
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