Are Antibiotics Dead Weight for Johnson & Johnson (JNJ)?

Johnson & Johnson (NYSE:JNJ) may offer well-known personal care products such as Listerine and Neutrogena, but it also boasts an impressive portfolio of market-leading therapeutic compounds. The health-care leader was one of the few to show growth in both worldwide pharmaceutical sales and earnings last year; they grew to $25 billion and $3.86 per share, respectively. The company finds itself in an enviable position heading into 2013 as one of the best-positioned companies to tackle the patent cliff head-on.

Even with the recent success, there is no time to rest on laurels in the highly competitive landscape of pharma and biotech. The industry’s most successful drugs are under constant pressure from generics, which are either already on the market, or timing their entrance for the moment exclusivity is lost. Luckily, 2012 showed that several new drugs are already shaping up to be critical driving forces in the company’s future. Today, we will look at the company’s fallen star Levaquin.

Does antibiotic mean anti-profit?
There is a common conception that antibiotics are not worth the time, effort, or costs associated with development. Of course, the industry’s infatuation with blockbuster drugs does little to curtail that opinion. In 2012, Johnson & Johnson (NYSE:JNJ)’s infectious disease segment brought in $3.19 billion in worldwide sales, although it’s important to note that the segment includes antivirals and other non-antibiotic therapies.

Source: Johnson & Johnson

The segment grew a minuscule 0.16% during 2011. However, if we disregard the falling star Levaquin, it actually grew at a 21.6% clip — the fastest of any pharmaceutical revenue stream. HIV therapies Intelence and Prezista grew just enough to offset the decline of Levaquin.

The bad news for antibiotics
You could say that cherry-picking sales data doesn’t prove or disprove anything — and you would be right. While there is favorable growth in anti-viral medicine, the outlook for antibiotics is not so great. I recently hinted at the dismal attitude around developing new antibiotics. Companies such as Abbott Laboratories (NYSE:ABT) are more interested in diagnosing infections than treating them. Even its pharmaceutical spinoff AbbVie has a pipeline devoid of antibiotics, choosing instead to focus on anti-virals.