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Johnson & Johnson jumped 3.7% on a tough day for markets after reporting second-quarter numbers that beat revenue and profit expectations. Second-quarter sales came in at $22.4 billion reflecting a 4.2% year-on-year. Adjusted earnings for the quarter were $2.82 per share, 11 cents above analysts' estimates.
Drug sales slightly exceeded forecasts, while medical device revenue fell short. Darzalex (multiple myeloma treatment), Tremfya (psoriasis treatment) and prostate cancer drug Erleada, all outperformed analysts' projections in the second quarter.
Investors are concerned about declining sales of Stelara, an anti-inflammatory drug soon facing cheaper competition in the US and Europe, and ongoing litigation over claims that the company's talc-based baby powder caused cancer. CFO Joe Wolk acknowledged these challenges but expressed confidence in the company's ability to manage them and continue growing even after Stelara loses patent exclusivity.
J&J now expects to generate operational sales of $89.4 billion in 2024, up 6.4% from last year, boosted by recent acquisitions. These include the $13 billion purchase of Shockwave Medical, the acquisition of Proteologix in June, and the experimental eczema treatment NM26 from Numab Therapeutics in July.
To address the talc litigation, J&J has proposed a settlement plan to pay around $6 billion over 25 years. Plaintiffs have until July 26 to vote on the deal, and J&J needs at least 75% of claimants to approve it. The company is cautiously optimistic about the settlement's approval after two previously failed attempts.
Since splitting from its consumer health division last year, J&J is left with its higher-margin pharmaceutical and medical devices businesses. The company has spent nearly $35 billion on acquisitions in the past 18 months and plans to continue pursuing strategic deals to expand its pipeline.
We remain positive on the long-term prospects of the newly streamlined J&J, which is now fully focused on life-saving drugs and medical devices. The divestment of the low-margin retail business has removed a significant drag on this pharmaceutical giant, allowing it to concentrate on its core strengths.
