It’s Earnings Season. Here’s What to Watch for Following J&J Beat

Johnson & Johnson kicked off the third-quarter earnings season on Tuesday. J&J is often seen as the bellwether for the biopharma industry, the canary in the coal mine as it were, that analysts use to gauge the performance of other companies in the sector. Being first out of the earnings gate comes with awesome responsibility and weight.

J&J saw solid Q3 growth that exceeded Wall Street’s expectations, with sales of nearly $22.5 billion representing a 5.2% increase from the same quarter last year. Adjusted earnings per share (EPS) dropped 9% year-over-year to $2.42, but this still beat analysts’ expectations. Oncology, which brought in $5.38 billion in sales, stood out as the biggest growth driver, with multiple myeloma therapy Darzalex emerging as the company’s top pharma asset with more than $3 billion in Q3 sales worldwide.

One company that is expected to bring more positive news is Eli Lilly, which may announce this quarter that it has finally pulled ahead of Novo Nordisk in the two-horse weight loss drug race between Zepbound and Wegovy. Q2 earnings showed that the competition between the pharma giants’ weight-loss drugs is getting closer with Lilly closing the market share gap, and the writing is now on the wall as the obesity drug shortage ends for Lilly and continues for Novo.

BMO Capital Markets analyst Evan Seigerman wrote this week of Q3 results to “expect bifurcation in the obesity duopoly, with Lilly potentially pulling ahead given easing supply dynamics” while “Wegovy scripts could suggest underperformance as manufacturing capacity remains constrained.”

Mark your calendars: Lilly reports Q3 results on Oct. 30 and Novo Nordisk reveals its financial numbers on Nov. 6.

Pfizer is another Big Pharma that is expected to beat expectations—likely more so than J&J. In a report to investors this week, Guggenheim Securities analysts said they see Pfizer as a winner with “significant upside potential” to consensus numbers based on increased demand for COVID-19 products. “We see significant potential for upside on the upcoming earnings release given dynamics for key products in the third quarter, most notably Comirnaty and Paxlovid,” according to Guggenheim, which forecasts Q3 sales of $16.95 billion and EPS of $0.78, significantly above the current FactSet consensus sales of $14.74 billion and EPS of $0.59, respectively. Pfizer will report its results for the quarter on Oct. 29.

I’ll be listening to Friday’s webcast with Jefferies analysts who will be going over their Q3 expectations for other large-cap pharma and biotech companies, including Bristol Myers Squibb, Merck and Regeneron. Their insights are too late for this week’s column, but the firm has already weighed in on Amgen (AMGN), Biogen (BIIB), Gilead Sciences (GILD), Moderna (MRNA) and Vertex Pharmaceuticals (VRTX). And here is where we start to see some of those Q3 duds, in particular, Moderna.

Jefferies analysts in a report this week wrote that Q3 “seems mixed or a tad messy though fundamentals and our thesis are well intact here: we like AMGN and GILD and have been bullish all year; BIIB is having issues on Leqembi and needs another M&A deal; VRTX is fine and LSR chronic pain data should be positive though stock reflected a lot already in valuation and stock run; MRNA has profitability issues and guidance is murky—COVID jabs seems to be ‘peaking early’ as well, which isn’t a positive.”

Jefferies’ outlook for Moderna is decidedly negative following Q2 results, when the company lowered 2024 guidance, and “more so now” after last month’s annual R&D Day, “when they gave lower 2025 guidance and $1B cost cuts aren’t occurring until 2027.”

Jefferies analysts also noted that respiratory syncytial virus (RSV) scripts and guidance are “essentially negligible” for 2024, while it remains “unclear” if Moderna will be able to secure contracting in 2025 due to strong competition from GSK and Pfizer. Add to these challenges the uncertainty about what RSV vaccine recommendations will look like next season. “The key concern here is that they continue to burn cash (while spending is still high $5-6B) and they pushed out profitability until 2028 vs 2026 prior guidance,” the analysts wrote.

Adding to the company’s problems, we learned this week that rival GSK has filed two lawsuits against Moderna, alleging that the vaccine developer has used protected mRNA technology for its COVID-19 vaccine Spikevax and RSV shot mResvia. Moderna is scheduled to report Q3 financial results on Nov. 7.

Looking beyond Q3 earnings, the biopharma industry in general—like other sectors of the U.S. economy—is closely watching the presidential election to be held Nov 5. Seigerman wrote this week that Q3 earnings “feels like the calm before the storm with many investors on the sidelines ahead of the U.S. election.”