Thanks for saving and sharing that article from Friday. One would think such changes would be damaging to an analysts reputation. But perhaps the boss wanted JNJ to be downgraded.
I listened to the conference call with half an ear and found it to be what I would expect of a successful large company like JNJ. Very competant, very comfortable answering questions and predicting ultimate strengths without needing to brag or exaggerate their position. But as I noted in a previous post, my interest was largely with the drug eluting stents and particularly Cypher.
First is the statement from someones article on the PR saying that sales at the Cordis unit doubled from the 3rd quarter and reached $896mm. I don't quite recall but believe sales of Cypher were something like $240mm in Q3 so about half of that division's sales would have been non cypher and presumeably the same $250mm would still be non Cypher. The analysis is pretty tenuous, but with uncoated stents giving up share to DES, I would sort of guess that there would not have been much non Cypher sales growth in the 4th quarter. And thus I deduce about $600mm or more of Cypher sales in the third quarter.
Then we had the comments on forward guidance in the Q&A session when it was pointed out that sales in 04 would probably increase at a rate in the high single digits, eps would be higher than that, and that the first quarter would be disproportionately high in both sales and earnings (relative to all of 04) due to Cypher. From this I deduce that they agree with most investors that BSX will be approved and begin sales at the beginning of the second quarter. But, of course, management evinced confidence that they would be able to handle whatever offensive BSX could mount.
The answer also included an interesting comment by Bill regarding the likelihood of using price to maintain market share though he would not commit to what market share they expected to maintain. He said something like they would be providing sufficiently attractive and technologically superior products to hold share without price cuts. And then there was a particular notation that "select", the next generation and more easily used stent which has now been on sale in Europe, has been "very, very favorably received". (I know what very, very means when Irwin Jacobs says it, but not JNJ--but I get the impression these guys don't gush or brag much).
Cypher is certainly a very important product and DES will probably comprise a portion of JNJ sales in the high single digits this quarter and still higher profit share.
A final note of interest to me was that the consumer products area had a large and unexpected contribution to the total profitability scene this last quarter (apparently, I heard them say it without checking the numbers yet) and in the last question management suggested that consumer would probably be of less significance than the pharmaceuticals and devices (I don't remember the exact division title) and diagnostics as 04 progressed. I like consumer products as a buffer for the more technologically oriented divisions as it provides a strength in times of poor patent position which most other competitors don't have. I sleep well as long as the price of JNJ is not at too high a PE.
Lance |
