Rapid Release Gels, Arthritis Formulation Put Tylenol In US OTC Analgesic Lead
Executive Summary
Tylenol brand consumption grows 10% on sales of Rapid Release Gel and Tylenol Arthritis, reaching top spot among analgesic products in the US, J&J says. Retailers' inventory builds as a result of prior-year supply constraints driven by Hurricane Maria also helped drive growth.
OTC Tylenol brand sales grew by more than 15% in the first quarter, reclaiming its position as the top nonprescription analgesic in the US, says Johnson & Johnson.
The acetaminophen-containing brand showed 10% consumption growth on sales of Rapid Release Gel (500 mg), launched in 2017, and Tylenol Arthritis, marketed for more than a decade, the firm announced on April 16 with its 2019 first-quarter sales and earnings results.
“While we observed some broad market softness during the quarter, we are encouraged by our ability to garner share in key areas like OTC, where Tylenol regained its status as the number one brand of analgesics,” said Chief Financial Officer Joseph Wolk during a same-day earnings briefing.
Tylenol’s move to the top spot represents a big jump for the brand. For 2018, Tylenol had approximate sales of $335.3m, behind Pfizer Inc.’s Advil (ibuprofen) with sales of $472m but ahead of Bayer AG’s Aleve (naproxen) at $331.2m and Bayer Aspirin (acetylsalicylic acid) at $220.7m, according to 2019 data from market research firm Statica. However, private label continues to dominate branded analgesics, with sales of $1.2bn, the market researcher noted.
Rapid Release has been promoted since its debut with TV and online ads highlighting the product’s “laser-drilled holes” designed to accelerate the release of acetaminophen once taken. (Also see "International Headwinds Counter J&J's Consumer Growth Confidence" - Pink Sheet, 19 Jul, 2017.)
The Tylenol brand has been rebounding steadily since J&J in 2011 withdrew most varieties of the brand as well as Motrin (ibuprofen) products from store shelves after a string of product recalls in 2010 and 2011 prompted a good manufacturing practice investigation by the FDA and the closure of one OTC product facility and partial closures of two others.
The firm, which changed its consumer business name from McNeil Consumer Health to J&J Consumer Inc. in 2016 and is operating under a consent decree with the FDA until 2021, announced in 2017 it had remediated the three manufacturing sites and had returned all recalled product lines to store shelves. (Also see "J&J Promotes Preventive Care, Wellness In US Health Debate" - Pink Sheet, 26 Jan, 2017.)
J&J OTCs Up 5.5% Worldwide
In the US, the New Brunswick, N.J.-based global pharmaceutical, medical device and consumer health firm’s OTC share growth is outpacing category growth, but it didn’t specify sales for the region. In addition to Tylenol sales, inventory builds as a result of prior-year supply constraints driven by Hurricane Maria also drove growth, said Investor Relations Vice President Chris DelOrefice.
Worldwide, OTC medicine sales advanced 5.5%, or 3% adjusted for the impact of the purchase of the Zarbees Naturals supplement line, which it acquired in 2018 and “continues to perform well,” the firm said. (Also see "Adding Zarbee's, J&J Gains Natural Market Footprint, Claims Credibility" - HBW Insight, 30 Jul, 2018.)
Consumer health segment sales worldwide reached $3.32bn, up 2.2% excluding the impact of currency exchange; including the impact, sales slipped 2.4%. In addition to analgesic sales, digestive health and anti-smoking aid sales drove the unit's results.
J&J's consumer products continue to grow share in the e-commerce channel, outpacing category growth rates in the channel with strong double-digit growth across all regions, DelOrefice said.
Its beauty product sales grew 3.6% in the quarter, up almost 1%. “Priority brands within the franchise continue to deliver strong performance with both OGx and Maui Moisture along with Neutrogena delivering above-market growth globally with sales growth of over 4%,” DelOrefice said.
In the US, Neutrogena is growing share across all major categories, including facial cleansing and moisturizing treatment, acne treatment and sun protection, he added.
However, the consumer segment overall decelerated in the quarter. “Some of that is related to the seasonality and the structure of our portfolio. If you look at our OTC business, while we are very pleased with our performance overall for the quarter, we saw some softness due to the cold and flu season in Russia and Western Europe,” Wolk said.
The baby care segment also performed poorly, declining 7.4% globally. DelOrefice said US declines primarily were from Aveeno, driven by channel shifts and market softness, while ex-US declines primarily were due to retail destocking as the Johnson’s Baby relaunch expands. (Also see "J&J Relaunches Johnson’s Baby Care As Greener, Gentler, With Fewer Ingredients " - HBW Insight, 1 Aug, 2018.)
J&J says although the worldwide consumer market contracted up to 1%, it expects the market to rebound in the remainder of 2019 and reach 2% growth.
The firm’s medical device business offset its weaker consumer health sales, driving J&J'S total sales in the January-March period up 3.9% operationally basis and up 0.1% reported to $20.1bn.
In a same-day report, BMO Capital Markets analyst Joanne Wuensch said J&J’s consumer sales were below analysts' $3.41bn consensus estimate. While Wuensch noted the firm’s e-commerce strategy is “gaining momentum,” Morningstar analyst Damien Conover said its "strong brand power is not holding up as well in the increasingly important online sale channel.”