Key Points
Johnson & Johnson's post-pandemic revenue growth has been modest, but it is now picking up steam.
Oncology drugs are the key driver of this new growth, and the long-term opportunity is significant.
Although it's growing faster than it has of late, J&J remains mostly an income investment (albeit a very good one).
It would be easy to not notice. The company isn't exactly disrupting the pharmaceutical business, after all. In fact, most investors would struggle to name a single drug the company makes.
Just dig deeper. Last quarter's results may be a glimpse of the growth that Johnson & Johnson (NYSE: JNJ) quietly has in store for patient investors.
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Cancer drugs to lead growth
You probably know the company as the name behind Tylenol, Band-Aid, and talcum powder. Johnson & Johnson actually spun off these consumer-facing brands into a stand-alone business called Kenvue back in 2023, leaving behind a prescription drug and medical device operation that some investors never knew existed. As was noted, most investors might struggle to name even just one of its drugs.
Nevertheless, it's there, and it's growing. Last quarter's operational revenue growth of 5.7% extends Q1's and last year's pace, led by the company's oncology arm, and particularly its cancer-fighting Darzalex, which saw global sales growth of nearly 19% in Q2.
And that's important. Although its oncology business has been an important profit center for some time, Johnson & Johnson aims to sell at least $50 billion in cancer drugs per year by 2030, making it the biggest name in the business.
For perspective on that figure and its growth, the company is on pace to drive record-breaking revenue of just over $100 billion this year, with roughly $30 billion of that being cancer-related.
The thing is, with its oncology business now persistently growing at a rate in the high teens, Johnson & Johnson can reach this goal, more than offsetting the rapid deterioration of Stelara's sales now that the anti-inflammation drug's patents have expired.
Still a dividend holding, but one being rebuilt to extend an impressive track record
This performance still won't qualify J&J as the sort of growth name that most investors envision when looking for a new growth investment. It's still predominantly a dividend-paying value stock, although a very good one. Indeed, with a track record of 64 consecutive years' worth of per-share dividend increases (adjusted for the Kenvue spinoff), it easily qualifies as a Dividend King.
This oncology-driven revenue growth, however, sets the stage for continued dividend increases.
And the underlying opportunity is certainly solid. An outlook from Precedence Research suggests the worldwide cancer treatment market is poised to grow at an average annualized rate of 11.3% through 2035, from $280 billion this year to over $730 billion per year at the end of this time frame. Johnson & Johnson just needs to make sure it continues capturing its fair share of this growth.
James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson and Kenvue. The Motley Fool has a disclosure policy.