Johnson & Johnson earnings: Drug sales in focus amid worry about generic competition

Johnson & Johnson is set to announce first-quarter earnings Tuesday morning ahead of the market open.

Shares of the health products giant have underperformed the market in recent months. J&J’s JNJ, +0.49%  stock has gained 5.6% in the year to date, while the Dow Jones Industrial DJIA, -0.11%  has gained 13.2%. The S&P 500 SPX, -0.10%  has notched 15.7% in gains.

Concerns over potential product liability shook investors’ confidence in December after Reuters reported that J&J knew for decades that its baby powder had at times tested positive for small amounts of asbestos. Even before that, J&J was facing thousands of lawsuits over the safety of its talc-containing baby powder. In July, a jury awarded $4.7 billion in damages to 22 women and their families who blamed their cases of ovarian cancer on asbestos in J&J’s talc products, though the company is appealing the verdicts.

Investors are also concerned about generic competition for some of J&J’s drugs, such as anti-inflammatory drug Remicade and prostate-cancer drug Zytiga. J&J said in January that it expects such competition to reduce sales by $3 billion in 2019.

However, analysts at RBC Capital Markets said in a note last week that they believe the rest of the J&J’s drug roster and the company’s historically strong international sales should “more than offset” any erosion in those sales. They also noted J&J will soon have more sources of drug revenue, thanks to the FDA’s recent approvals of Spravato for major depressive disorder and Imbruvica as part of a combination therapy for chronic lymphocytic leukemia and small lymphocytic lymphoma. The company’s drug Erleada was also approved in the European Union to treat patients with non-metastatic prostate cancer that’s unresponsive to androgen depletion therapy.

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