Johnson & Johnson (JNJ) Q1 2023 outcomes

Johnson&Johnson Shares fell on Tuesday after the company reported adjusted earnings and revenue that beat Wall Street expectations but lowered its sales guidance for its pharmaceuticals business.

J&J, whose financial results are a guide for many healthcare companies, said its sales for the quarter rose 5.6% from the year-ago quarter.

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The consumer goods giant reported a net loss of $68 million, or 3 cents a share, related to its talc baby powder debt and costs related to the upcoming spin-off of its consumer health business. This compares to net income of $5.2 billion, or $1.93 per share, for the same period a year ago. Excluding certain items, adjusted earnings per share were $2.68 for the period.

Here’s how J&J’s results compare to Wall Street expectations, based on a poll of analysts by Refinitiv:

  • Earnings per share: Adjusted $2.68 versus $2.50 expected
  • Revenue: $24.75 billion versus $23.67 billion expected

J&J slightly lowered its pharmaceutical sales target for 2025 to $57 million, down from the $60 million the company forecast two years ago. J&J executives cited currency dynamics in an earnings call, noting that currency headwinds had a negative impact of about $3 billion on the pharmaceutical business in 2022.

The stock closed nearly 3% lower on Tuesday. Shares are down more than 9% for the year to close, putting the company’s market value at about $420 billion.

J&J is now forecasting 2023 sales of $97.9 billion to $98.9 billion, about $1 billion more than the guidance given in January. The company raised its full-year adjusted earnings outlook to $10.60-$10.70 per share from a previous guidance of $10.45-$10.65.

CFO Joseph Wolk told CNBC on Tuesday that J&J raised its guidance due to strong growth in all three businesses — consumer health, pharmaceuticals, and medical devices.

“If you think about how we started the year and forecast in January, we were responsibly cautious,” he said on Squawk Box. “First quarter growth was much stronger than fourth quarter growth for all three businesses and our positions are changing to responsibly optimistic at this time. We feel very good for 2023.”

He added that data on J&J’s cancer drug was being produced Multiple myeloma and procedural data in its medical devices division gives the company “a very, very good sense of what lies beyond 2023.”

J&J reported pharmaceutical sales of $13.4 billion, up more than 4% from the year-ago quarter. The company said the surge was driven by sales of Darzalex, a biologic used to treat multiple myeloma, and blockbuster drug Stelara, used to treat a range of immune-mediated inflammatory diseases.

J&J will lose patent protection for Stelara later this year. During a conference call, Wolk said the company is “committed to growing through the loss.”

Revenue from the company’s medical device business rose to nearly $7.5 billion, up 7.3% from the first quarter of 2022. J&J said its December last year acquisition of Abiomed, a cardiovascular medical technology company, did that rise fueled.

J&J’s consumer health business, which will be spun off into a separate public company this year, reported sales of about $3.8 billion. That unit grew 7.4% compared to the prior-year period, driven primarily by over-the-counter products like Tylenol and skin health products under brands like Neutrogena and Aveeno.

Wolk told CNBC the company is making “great strides” in separating from its consumer health business. But J&J hasn’t been clear on exactly when the split will happen.

J&J also announced that its board of directors approved a 5.3% quarterly dividend increase to $1.19 per share based on the company’s strong performance in 2022.

The New Brunswick, NJ-based company entered this earnings season with rising shares after offering more clarity on the long-running legal battle surrounding its talc-based baby powder products. Earlier this month, J&J proposed paying nearly $9 billion over the next 25 years to settle thousands of allegations that its baby powder and other talc products caused cancer.

J&J’s subsidiary, LTL Management, also filed for Chapter 11 bankruptcy protection earlier this month after its first attempt was thwarted.

Wolk said during a conference call the company will take the proposed reorganization plan to bankruptcy court in mid-May. He expressed confidence that applicants will vote to approve the plan, noting that 60,000 applicants have already committed to it.

The company expects to win a small but “vocal minority” of plaintiff attorneys opposed to the plan, added J&J’s assistant general counsel Andrew White.

Wolk continued to deny the Talk allegations, calling it “regrettable” that J&J “has to invest dollars in quite frankly unsubstantiated scientific claims.”

Lawsuits allege that the company’s talc products were contaminated with the carcinogen asbestos, which caused ovarian cancer in thousands of people. Some suits link multiple deaths to J&J talc products.

Read J&J’s full earnings report.

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