With Merck set to report its Q2 2013 results at the end of the month, it is (for me, at least!) always a fun parlor game to look at its comparables (those multinational pharma/med companies reporting results more rapidly than Merck) — to get some “Kentucky windage” on where Merck’s major franchises might come out — in a few weeks’ time.
Of course, J&J’s operations do not map directly onto Merck’s — especially in the snese that J&J has a proportionately very-large diagnostics/medical equipment portfolio of businesses, compared to Whitehouse Station. Even so, J&J does operate at the same scale — and in most of the same geographies — as Merck, so as to its financial metrics, it is a relatively reliable “canary in the coal mine“.
I would argue that J&J’s experience — on foreign currencies translation — is particularly analogous to Merck’s. [That is, both hedge pretty prudently, where it is not wildly-expensive to do so.] And so, J&J just reported a nearly 3 per cent erosion in international sales revenue growth rates, due solely to the effect of the strong US dollar. See this non-GAAP to GAAP reconcilation table (a PDF file).
Don’t misunderstand — J&J just posted largely terrific Q2 results, given the still recovering world markets, and the uncertainty around Obamacare implementation here in the US. So, I expect a strong quarter from Whitehouse Station, as well.
I do think currencies will be a drag on reported revenue — even with significant hedging activity underway. Remember, you heard it here first. [I would sure love to know how Invokana® uptake is progressing, but it is not yet material to overall J&J — having just been approved by FDA in March. That franchise, as I’ve repeatedly said, will likely materially-eat into Januvia® US sales growth, over time — and significantly more than Wall Street consensus currently foecasts.]
Now we wait for Pfizer — then Merck, at month’s end.