Johnson & Johnson's Pharma Business Fuels Sales Growth -- Update
July 17 2018 - 12:44PM
Dow Jones News
By Peter Loftus and Allison Prang
Strong sales of Johnson & Johnson's cancer drugs and other
medicines helped boost the company's revenue and earnings for the
latest quarter, but the health-products giant's U.S. consumer
business continued to struggle.
Sales in the pharmaceuticals unit rose 19.9% globally, the
largest increase among J&J segments. Cancer-drug sales rose
42.2%, helped by big gains for the Zytiga prostate-cancer drug and
Darzalex, a blood-cancer treatment.
J&J's pharmaceutical sales topped analysts' expectations
despite what executives said was a continued decline in average net
U.S. pricing after discounts and rebates. Chief Financial Officer
Joe Wolk said on a conference call with analysts that average U.S.
net pricing could decline 4% to 6% this year, after a 4.6% drop
last year.
J&J shares surged 4% to $128.65 in midday trading after the
earnings report, though the stock is still down 7.9% year to date
on investors' concerns about slower growth in other parts of
J&J's diversified business, including consumer products.
Global sales in J&J's consumer unit inched up 0.7% to $3.5
billion. U.S. consumer sales fell 0.7%.
Within the consumer unit, the baby-care division, which sells
well-known brands such as Johnson's baby shampoo, saw global sales
drop 7.7% for the quarter. J&J is in the process of introducing
new versions of its baby-care products, and inventory moves hurt
sales for the quarter.
J&J Chief Executive Alex Gorsky called the consumer-segment
results disappointing. "We need to perform better here," he told
analysts on a conference call.
J&J's medical-device sales rose 3.7% to $6.97 billion for
the quarter. Sales of surgery and vision products increased, while
orthopedics dropped.
Overall, J&J said its sales rose 11% from a year earlier to
$20.83 billion for the second quarter.
The New Jersey-based company said it now expects sales to be
between $80.5 billion and $81.3 billion for the year, compared with
its prior estimates of between $81 billion and $81.8 billion.
J&J said Tuesday that its sales will receive a
smaller-than-expected benefit from currency fluctuations.
J&J's profit rose 3.3% to $3.95 billion, or $1.45 a
share.
The company narrowed its full-year profit target to between
$8.07 a share and $8.17 a share on an adjusted basis, compared with
its previous estimates of between $8 a share and $8.20 a share.
J&J also reported $57 million in restructuring costs in the
second quarter, up from $11 million a year earlier.
By 2022, J&J aims to cut between $600 million and $800
million in supply-chain costs a year, which the company expects
will result in as much $2.3 billion in charges over the next few
years.
A jury in St. Louis last week awarded $4.69 billion to women and
their families who alleged that the firm's talcum powder caused
ovarian cancer, the biggest award so far in powder litigation that
involves more than 6,000 cases. The company plans to appeal last
week's verdict.
Mr. Gorsky defended the baby powder on Tuesday, saying, "We
remain confident that our products do not contain asbestos and do
not cause ovarian cancer."
The company announced about a month ago that it accepted a
roughly $2.1 billion offer to sell its blood-glucose monitoring
equipment business, LifeScan, to private-equity firm Platinum
Equity.
J&J also recently got an offer from Fortive Corp. to buy
Advanced Sterilization Products for $2.7 billion. J&J said at
the time it had four months to decide to take the
industrial-equipment maker up on its offer.
Write to Peter Loftus at peter.loftus@wsj.com and Allison Prang
at allison.prang@wsj.com
(END) Dow Jones Newswires
July 17, 2018 12:29 ET (16:29 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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