Johnson & Johnson Lost Its Court Battle But Won The Q2 Match

Last Thursday, Johnson & Johnson JNJ has topped earnings estimates and uplifted its full-year guidance on the back of a strong medtech sales momentum. The healthcare conglomerate reported strong results with plenty of legal anxiety in the air owed to thousands of lawsuits claiming its products, mainly the talc-based baby powder, caused cancer. Upon second quarter results, JNJ ended Thursday 6% higher.

Second Quarter Highlights

Revenue of $25.53 billion topped the expected $24.63 billion as sales grew 6.3% YoY. Net income rose from $4.8 billion in 2022’s Q2 to $5.14 billion. Adjusted earnings per share amounted to $2.80, also exceeding the estimated $2.62.

Medtech Was The Star Of Q2

This unit produces devices for surgeries, orthopedics and vision. It benefited from the increased demand for nonurgent surgeries that got deferred during the previous years, due to the havoc that COVID-19 caused on the medical system. Insurance companies UnitedHealth Group Incorporated UNH also observed this trend. The revenue from the medical devices business expanded 12.9% YoY to $7.79 billion. J&J management elaborated that growth was fueled by electrophysiological products, remedies that close wounds and devices that treat orthopedic trauma and serious injuries of the skeletal or muscular system. J&J’s December acquisition of Abiomed, a cardiovascular medical technology company, in December contributed to the sales growth, showing the success of the company’s efforts to boost the growth of the med tech business.

Pharma

Pharmaceutical sales also grew 3% YoY and brought $13.73 billion to the revenue table. With the unit developing drugs that range across diseases, its best performers were the biologic treatment of multiple myeloma, a prostate cancer treatment, and the blockbuster drug Stelara that treats various immune-mediated inflammatory diseases. However, growth was somewhat offset by declining sales of an arthritis drug, Remicade that is threatened by lower-priced competitors. Interestingly, this was the first quarter without any U.S. sales from the Covid vaccine as J&J honored its commitments under the government contracts. With experimental drugs moving towards FDA approval, the division is confident of meeting its 2025 annual sales target of $57 million.

Full Year Guidance

J&J is guiding for 2023 sales in the range between $98.80 billion and$99.80 billion, raising the guidance it issued in April by $1 billion. Adjusted earnings outlook was also lifted from the range between $10.60 to $10.70 per share to a new range between $10.70 to $10.80. This guidance includes the performance of the company’s consumer health business that has been acting as an independent company since May, Kenvue. The legendary baby powder and other talc-related products that are claimed to have been contaminated by Azbestors are now under Kenvue’s umbrella. But J&J is still the one carrying the talc-related liabilities in the U.S. and Canada.

The Consumer Health Business

The unit brought in $4.01 billion of sales that rose 5.4% YoY due to pain relievers and upper respiratory decongestive remedies, as well as the beauty and skin health products under the Neutrogena brand.

Another Failed Attempt To Resolve The Azbestos Contamination Scandal

After a federal appeals court rejected an earlier bid J&J’s subsidiary, LTL Management, filed for bankruptcy in New Jersey in April, offering to pay nearly $9 billion to settle more than 38,000 lawsuits in an effort to prevent new cases from coming forward. Although the majority of litigation cases have been halted during the bankruptcy proceedings, a bankruptcy court allowed a trial in Oakland, California, to proceed. On Tuesday, a jury decided that J&J is obliged to pay $18.8 million to a man who claims to have gotten cancer from exposure to its baby powder. According to J&J’s vice president of litigation, Erik Haas, stated that the company will appeal the verdict which is irreconcilable with decades of J&J’s vice president of litigation, Erik Haas, said during the earnings call that the company plans to appeal the verdict that is irreconcilable with decades of independent scientific evaluations that confirmed Johnson & Johnson’s baby powder is safe without traces of asbestos. Haas also added that the company will not be paying the verdict fee while the bankruptcy proceedings are still ongoing, with the decision having zero impact on the process.

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