Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Johnson & Johnson has been flirting with share-price records throughout 2017. 

It hit a new one Tuesday after it reported third-quarter earnings results that beat Wall Street sales and profit expectations. J&J raised its full-year earnings outlook and reported growth in all three of its business lines. Even the news it was spiking two prominent drug programs wasn't enough to derail its blue-chip momentum. 

Ascent
Johnson & Johnson continues to push its record share price to new heights
Source: Bloomberg

At some point, J&J's aging blockbuster inflammation drug Remicade will face serious U.S. competition. But, whether due to what Pfizer Inc. says are anti-competitive practices or not, the drug has been remarkably resilient. Sales fell just 1.3 percent in the U.S. from a year earlier, flattering solid growth in total drug sales.

Pharma revenue grew by 6.7 percent from a year ago, excluding divestitures and acquisitions, most notably the nearly $30 billion purchase of Actelion Ltd. earlier this year. J&J's other medicines -- most notably its newer cancer drugs and inflammation drug Stelara -- are growing so rapidly that it should be able to weather any hit Remicade eventually takes.   

That growth makes it easier for J&J to cut programs that aren't working, to its long-term benefit. The company decided to no longer seek FDA approval for an arthritis drug after the agency demanded more clinical data, and it gave up on a blood-cancer drug after trial data disappointed. A company more desperate for a success may have thrown more good money after bad. 

Steady
Remicade's resilience and rapid new-drug growth are flattering J&J's pharma unit
Source: Bloomberg

At times in the past, J&J's drug unit has had to make up for weak performance in its consumer and device businesses. But those are less of a drag lately, thanks partly to some deal-making. J&J has spent more than $7 billion over the past year and a half on consumer-focused Vogue International and Abbot Laboratories Inc.'s medical-optics business. But the consumer and device businesses both managed to grow in the quarter, even excluding the impact of acquisitions and divestitures.

They'll Take It
J&J's other units can't quite measure up to its pharma business, but things are improving
Source: Bloomberg

With Merck KGaA and Pfizer putting their consumer businesses on the market, there are plenty of opportunities for J&J to invest even more in these units. And the company's huge cash flows mean it doesn't have to wait, even after splurging on Actelion. 

Cash to Splash
Even after spending a massive sum on Actelion, J&J has room to keep buying
Source: Bloomberg

Share-price highs are easy to dismiss in the current market, where records are often hit for no apparent reason. But J&J's is earned. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net