Johnson & Johnson
‘s fourth-quarter financial results, which the company reported early Tuesday, met Wall Street expectations, but the stock slipped 2.1% in morning trading.
The company largely reiterated full-year 2024 guidance provided last month at an investor event. While shares were flat in the premarket hours, they began to slide during the company’s earnings call, which began at 8:30 a.m.
Johnson & Johnson reported fourth-quarter sales of $21.4 billion, slightly above the FactSet analyst consensus estimate for $21 billion. Adjusted earnings per share were $2.29, edging out the consensus estimate for $2.28.
The company expects operational sales of $88.6 billion in 2024, and adjusted operational earnings of $10.65 per share, generally confirming guidance it issued in December.
Johnson & Johnson is the first big biopharma company to report earnings for the fourth quarter, and generally serves as a bellwether for the sector. Tuesday’s report raises no major red flags for the coming earnings season, and seems to point to strong results for its medical-device peers in the fourth quarter.
The company’s MedTech business, which sells medical devices used in surgeries, saw sales increase 13.4% on an operational basis compared to the same quarter last year.
Johnson & Johnson Chief Financial Officer Joe Wolk told Barron’s early Tuesday that the sales results for the segment may have in part reflected the surge in healthcare utilization in the fourth quarter that managed care companies reported earlier this month.
“It was a little bit higher, given that you didn’t have a pandemic dynamic,” Wolk said. “It was probably more elevated than previous fourth quarters.”
Sales for Johnson & Johnson’s pharmaceutical business, which it calls “innovative medicine,” were $13.7 billion for the quarter, up 4% on an operational basis.
Johnson & Johnson split off its consumer-health division in 2023; it is now a standalone public company called
Kenvue.
Sales of the company’s best-selling medicine, Stelara, which treats a number of immune-mediated conditions, were $2.8 billion in the quarter, up 14.5% on an operational basis from a year ago.
Stelara is slated to face biosimilar competition in 2025, and could be subject to Medicare price negotiations in 2026. Wolk said that the company will be able to grow through the loss of Stelara exclusivity.
“People wondered if we would be able to power through Stelara’s [loss of exclusivity],” Wolk said. “We’ve got a stable of assets, quite frankly, across immunology, oncology, neuroscience, that are going to not only power us through and be able to digest it, but actually grow through the loss of exclusivity.”
Investors may not be fully convinced. In an email to investors on Tuesday morning, Mizuho healthcare equity strategist Jared Holz wrote that he has heard from ”many investors” that Johnson & Johnson’s pharmaceutical portfolio “could use some improvement given both generic entrants across the portfolio and the [Medicare drug price negotiations] going into effect.”
Asked about whether the company is looking to M&A to shore up its revenue ahead of the expected drop-off in Stelara sales, Wolk said that he felt no pressure to do so. The company’s growth expectations, he said, take into account the loss of exclusivity of Stelara and other drugs, and the drug-price-negotiation program.
“We don’t have to do M&A,” Wolk said. “We’re looking to those areas that we’ve got a specific scientific expertise.”
One lingering question is the litigation the company faces from consumers who claim they were injured by the company’s talc products. Johnson & Johnson has repeatedly asserted that its talc products were safe and didn’t cause cancer. The company has failed in repeated bids to move the claims into the bankruptcy system. Worries over the litigation have dragged on for years, and the company has so far proven unable to put them to rest.
Wolk said that the company’s strategy for the talc litigation remains the same. He said that Johnson & Johnson plans to file a third time for bankruptcy for a subsidiary that holds the talc liabilities, something that the company’s worldwide vice president of litigation, Erik Haas, had said at the investor day in December.
Wolk also said that the company had reached an agreement in principle with a group of state attorneys general to settle talc-related claims, a deal first reported early this month by Bloomberg. “That’s an important step to get some of this behind us in a responsible, reasonable way,” Wolk said.
Johnson & Johnson shares are down 3.5% over the past 12 months, significantly trailing the
S&P 500,
which is up 20.7% over the same period.
Earlier this month, managed-care companies
Humana
and
UnitedHealth Group
reported higher-than-expected use of healthcare services by U.S. seniors enrolled in their Medicare Advantage programs in the fourth quarter. That could have boosted the fourth-quarter results of Johnson & Johnson, whose products are used by hospitals in surgeries.
Write to Josh Nathan-Kazis at [email protected]
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