Johnson & Johnson (NYSE: JNJ) shares are higher Tuesday following the release of its third-quarter results.
J&J A Bellwether For The Sector: Given the timing of J&J’s earnings release and its portfolio breadth, its earnings often serve as a bellwether for the sector, according to BofA Securities analyst Geoff Meacham.
Delving on the results, the analyst noted overall sales came in weaker than expected despite solid operational growth. Earnings per share, however, came in well ahead of expectations and the full-year sales guidance was revised at the lower end.
“Given solid underlying fundamentals, we see opportunities for sector outperformance heading into YE2021 and 1H22—especially as a number of major potential headwinds (e.g., policy reform) recede,” Meacham wrote in a note.
With earnings results looking increasingly favorable, bolstered by several new product cycles, the biopharma sector is well positioned for the rest of the year and 2022, the analyst said.
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Positive Readthrough For AbbVie, Lilly, Amgen: J&J’s inflammation and immunology franchise continued to perform solidly, generating $4.25 billion sales, exceeding the consensus estimate of $4.18 billion, Meacham said.
The I&I franchise derived strength from Crohn’s disease treatment Stelara and psoriasis drug Tremfya, the analyst said. This was despite continued erosion to Remicade.
This could bode well for J&J’s I&I peers, Meacham said. The analyst models strong uptake of Eli Lilly’s (NYSE: LLY) Taltz and Amgen, Inc.’s (NASDAQ: AMGN) Otezla.
AbbVie Inc.’s (NYSE: ABBV) Skyrizi and Rinvoq could have trouble meeting lofty expectations especially considering JAK class safety concerns, the analyst said.
The Biopharma Ratings & Price Targets: BofA has a Buy rating and $285 price target for Lilly shares.
The firm has a Buy rating and $285 price target for Amgen.
The firm has a Neutral rating and $119 price target for AbbVie.
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