A Closer Look at Johnson & Johnson's Pharmaceuticals Business

When many investors think of Johnson & Johnson (NYSE: JNJ) , they tend to think of a slow growth company that draws in income investors with its 5-year average dividend yield of 3.3%. Yet shares of J&J have climbed 26% over the past 12 months -- handily outperforming the S&P 500's 16% gain.

J&J has emerged as a major force in all three of its business divisions -- consumer health care, medical devices, and pharmaceuticals -- which all contributed to its 172% jump in earnings and 8.5% revenue growth last quarter. J&J's pharmaceuticals business was its fastest growing division, reporting 11.7% year-over-year sales growth compared to 9.6% and 1.1% growth at its medical devices and consumer health care businesses, respectively.

In addition, its pharmaceuticals segment grew at a faster rate than its comparable peers Merck, Pfizer, and GlaxoSmithKline, as seen in the following chart.

	Pharma Segment Qty. Revenue	Year-over-year growth	Percentage of total sales
J&J	$7.0 billion	11.7%	39.1%
Pfizer	$12.1 billion	(8%)	93.8%
Merck	$9.3 billion	(12%)	84.5%
GlaxoSmithKline	$7.2 billion	2%	68.3%

Read more 

How Johnson & Johnson Plans to Win the Prostate Cancer Battle

Johnson & Johnson (NYSE: JNJ) faces stiff competition in the battle for prostate cancer market share. The company's Zytiga is enjoying rapid sales growth in second- and third-line treatment as people live longer and the number of cases diagnosed and treatments prescribed climbs. Zytiga's market growth has caught the attention of big pharmaceutical companies and a slate of young up-and-comers.

Approvals have pushed Zytiga higher

J&J landed approval from the Food and Drug Administration for Zytiga as a treatment for metastatic castration-resistant prostate cancer, or mCRPC, in April 2011. The approval gave Zytiga, which is dosed orally, pole position in prescriptions for patients who had previously been treated -- and failed -- with intravenous docetaxol. The approval stemmed from positive phase 3 trial data, which showed that patients treated with Zytiga had overall survival of 15.8 months versus 11.2 months for patients treated with placebo.

In December, Zytiga got another boost when the FDA approved the drug as a treatment that could be used before chemotherapy. That decision essentially elevated Zytiga into a sure-footed second-line treatment. In a trial of patients who had not been treated with chemotherapy, overall survival was 35.3 months versus 30.1 months on placebo. While overall survival didn't meet statistical significance, Zytiga did significantly improve the amount of time patients were able to postpone taking opiates for pain and for having to initiate chemotherapy. In follow-up data released by J&J in February, those patients saw a 47% statistically significant improvement in disease progression, with median radiographic progression-free survival of 16.5 months versus 8.3 months for the control arm. Read more

A Closer Look at Johnson & Johnson's Medical Devices Business

Most investors recognize Johnson & Johnson (NYSE: JNJ  ) as a consumer health care products company, since that segment -- which produces Tylenol, Band-Aids, Listerine, and Neutrogena -- is the most visible of its three businesses. However, J&J's consumer health care segment is actually smaller than its other two business divisions: pharmaceuticals and medical devices and diagnostics.

In this article, I will discuss the growth trajectory of J&J's medical devices and diagnostics business, its largest unit, which accounted for 41% of the company's 2012 revenue. The segment is a much diversified one.

Analyzing the medical devices and diagnostics business
The medical devices business is currently J&J's second fastest growing business segment. Let's take a look at how it fared compared to the pharmaceuticals and consumer health care segment's last quarter.

Business Segment	Revenue	Growth (YOY)	Percentage of Total Revenue
Medical Devices & Diagnostics	$7.2 billion	9.6%	40%
Pharmaceuticals	$7.0 billion	11.7%	39%
Consumer Healthcare	$3.7 billion	1.1%	21%

Read more