What's Happening With Johnson & Johnson's Pharmaceuticals Business?

Johnson & Johnson's (NYSE: JNJ) pharmaceuticals business in on pace to account for half of the company's sales, and it's a major source of the company's earnings. However, the company faces stiffening competition, and that's forcing J&J to respond with price cuts. Can J&J overcome those headwinds?

In this clip from The Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes is joined by Todd Campbell to discuss what drugs did best and worst for J&J in Q1, and what could happen next in the segment.

A full transcript follows the video.

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This video was recorded on April 19, 2017.

Kristine Harjes:The third and final segment ofJohnson & Johnson, and the one thatI think we would probably have the best time talking about,just because it's more along the lines of what wenormally discuss, that would be the pharmaceutical segment,which is calledJanssen. This one grew some 2% operationally in the first quarter. It isby far the most important part of this company. It's about 46% of total revenue. I can absolutely see itbecoming over 50%,maybe even within the next year.

Todd Campbell:Yeah,this is also a big driverof their profitability. Just bymaking changes inhow they do manufacturing, and stayingpretty tight-fisted when it comes to spending, andbecause of the way the mix broke outbetween biologicsand small molecules. Biologics are usuallya little bit more margin-friendly. They were able to boost marginsin their pharmaceutical units by 4%, 400basis points. That's pretty extraordinary -- and pretty good. Top line, like you said, on a reported basis, the growth reallywasn't that great. It was up 1%. Domestic sales were down slightly. International sales were up. There were some puts and some takes here as well. Some very strong-performing drugs, and some drugs, maybe, thatinvestors should be keeping an eye onto see whether or not they find some footing, or see whether or not sales continue to decline.

Kristine Harjes owns shares of Johnson & Johnson. Todd Campbell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy.