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Summary

  • Very few firms have a more attractive investment profile than Johnson & Johnson.
  • Johnson & Johnson boasts a cash-flow-derived Valuentum Dividend Cushion score of 2.2, and we don’t see us removing it from the Dividend Growth portfolio anytime soon.
  • Let's also take a look at its patent expiration profile for a few of its large drugs.

Very few firms have a more attractive investment profile than Johnson & Johnson (NYSE:JNJ). On Tuesday, the consumer products and healthcare company showed us why when it reported better-than-expected first-quarter performance on both the top and bottom lines. The company continues to drive outperformance in the Dividend Growth portfolio as it approaches $100 per share.

Operating sales during the period jumped 5.3% compared to the same quarter a year ago, consisting of 2.2% domestic expansion and 7.9% international growth. Excluding one-time items, net earnings for the quarter came in at $4.4 billion and diluted earnings per share came in at $1.54, representing advances of 7.8% and 6.9%, respectively, compared to last year's quarter. Management credited successful new product launches and continued growth in key products for the strong showing.

Though consumer sales faced an operational sales decline and its medical devices businesses put up flat performance, operational sales in the company's pharmaceutical business advanced an impressive 12.2%. Leading the charge were STELARA®, a biological treatment of moderate to severe plaque psoriasis and psoriatic arthritis, INVEGA®SUSTENNA®/XEPLION®, a once-monthly, long-acting, injectable atypical anti-psychotic for the treatment of schizophrenia, PREZISTA®, a treatment for HIV, and VELCADE®, a treatment for multiple myeloma. New products such as OLYSIO™/SOVRIAD™ (hepatitis C), ZYTIGA (prostate cancer), XARELTO (anticoagulant), and INVOKANA (type 2 diabetes) also performed nicely.

Looking ahead, Johnson & Johnson raised its earnings guidance for the full-year to the range of $5.80-$5.90, up from the previously-issued and conservative range of $5.75-$5.85. We think the company's patent expiration profile offers some nice comfort for investors, as its fastest-growing drugs won't come off exclusivity for some time. In the first quarter alone, Johnson & Johnson's largest drug REMICADE generated nearly $1 billion in just the US, while PREZISTA and STELARA, for example, witnessed sales increases of 21.3% and 31.8% in the first quarter, respectively. Here's a breakdown of the profile.

REMICADE - US: patent exclusivity remains until September 2018; in majority of EU countries (including France, UK, Germany, Italy, Spain) the firm has exclusivity until February 2015.

PREZISTA - US: November 2017; EU: August 2018.

STELARA - US: September 2023; EU: Jan 2024.

ZYTIGA - US: December 2016; EU: September 2022.

XARELTO - US: Feb 2021; the firm does not have European rights (Bayer has them).

SIMPONI - US: Feb 2024; EU: October 2024.

Valuentum's Take

Johnson & Johnson's pharmaceutical portfolio continues to do well, and its patent expiration profile provides some comfort to the investment community. The company's pipeline of new opportunities continues to be robust, with the FDA approving IMBRUVICA (leukemia) and the European Commission granting conditional approval of SIRTURO (tuberculosis) in the EU during the first quarter. Johnson & Johnson boasts a cash-flow-derived Valuentum Dividend Cushion score of 2.2, and we don't see us removing it from the Dividend Growth portfolio anytime soon (if you don't know what the Dividend Cushion is, please find out here). We continue to like shares.

Source: Why Johnson & Johnson's Patent Expiration Profile Is Fantastic

Additional disclosure: JNJ is included in the Dividend Growth portfolio.