J&J Q3 earnings beat expectations, make progress on talc liabilities

By Robert Langreth

Johnson & Johnson reported stronger-than-expected third-quarter earnings, driven by surging sales of cancer medicine Darzalex. 
 

The company also lowered its full-year guidance to account for a medical device acquisition, according to a statement Tuesday.
 

J&J is working to maintain growth as it faces the loss of exclusivity for the psoriasis treatment Stelara. Biosimilar copies of the drug entered the European market this summer, and US launches are expected early next year. Still, the company has been bolstered by new approvals expanding the use of its cancer and immunology medicines. 
 

Adjusted profit was $2.42 a share, surpassing Wall Street’s average estimate of $2.19. Pharmaceutical revenue rose almost 5 per cent, exceeding expectations by more than $400 million, with sales of myeloma treatment Darzalex surging over 20 per cent. 
 

Joe Wolk, J&J’s chief financial officer, said the results leave the company “in a good position to finish the year strong.” 

The shares fell 0.1 per cent at the New York market open. They had gained 3.1 per cent this year through Monday’s close. 
 

J&J has made progress in addressing litigation related to talc in its legacy products, a longstanding burden on investor sentiment. In September, 83 per cent of claimants accepted its roughly $8 billion settlement offer. In a favorable legal ruling this month, a federal bankruptcy judge in Texas said he’ll keep a J&J subsidiary handling the talc claims in his court, helping the company avoid a New Jersey appeals court that previously ruled against it.
 

Guidance Cut 
 

During the quarter, J&J said it would pay up to $1.7 billion for V-Wave Ltd., which is developing an implanted device for heart failure. The company cut its adjusted 2024 earnings guidance for the year to $9.88 to $9.98 a share, down from the earlier guidance that bottomed out at $9.97 a share. J&J attributed the forecast cut to the deal.
 

What Bloomberg Intelligence Says:
 

Johnson & Johnson’s 10-cent midpoint adjusted EPS raise due to improved operational performance looks paltry given a 24-cent beat in 3Q, yet likely hints at caution about lead product Stelara, for which it expects US biosimilars in January, likely prompting 4Q wholesaler destocking. A 1 per cent sales beat was due to the Pharma unit being 3 per cent better and Devices 2 per cent light, but the 11 per cent 3Q adjusted EPS beat was largely litigation income-related as R&D spending increased.
 

— John Murphy, BI pharma analyst. Read the research here. 
 

Last year, J&J spun off its consumer health division to create Kenvue Inc., allowing it to focus on more profitable prescription drug and medical device segments. Since then, J&J has pursued numerous acquisitions, including the $13.1 billion purchase of heart device maker Shockwave Medical and a $1.25 billion deal in May for an atopic dermatitis drug from Numab Therapeutics AG.
 

Although revenue from Shockwave and other acquisitions helped J&J’s medical device revenue grow almost 6 per cent, it was slightly below estimates. Asia-Pacific sales were hurt by an ongoing doctor strike in South Korea, Wolk noted.
 

J&J is still seeking “smaller tuck-in deals” that offer the best value, Wolk said in an interview, though the company remains open to larger acquisitions. “We have an appetite, but it is not anything we are going to stretch for.”