The Pharmaceutical business contributed handsomely this quarter, growing 11% on an operational basis year over year. JNJ's flagship drugs, including Zytiga and Xarelto, were solid performers. However, the majority of the sales were domestic, outpacing international growth by more than two to one. This isn't cause for concern but a better balance would work wonders for organic growth. Consumer sales were sedated, growing at just 2% year over year although sales were 1% better on an operational basis. Management attributed the positive results to over-the-counter products such as Tylenol and Motrin while also citing better uptake in baby care and skin care product such as Neutrogena.
This quarter did little to damp any optimism about Johnson & Johnson's long-term prospects. In the near term, however, investors will likely remain nervous about JNJ's organic growth while demanding improvements in the medical devices business. But it seems far-fetched to assume that management won't turn things around, given JNJ's strong global presence. What's more, JNJ's strong drug business should keep growth going for the next several years. Management has done a better-than-adequate job over the past couple of years building the company's pipeline of products, many of which are now contributing to the bottom line. Zytiga and Remicade are perfect examples. But I wonder how JNJ will respond to increased competition and further threats of weakening margins. Companies including Medivation ( MDVN), which has a strong oral medication drug that rivals Zytiga, should not be taken lightly. This is where JNJ's extraordinarily well-diversified business should offset potential near-term headwinds.