Tue | Jan 22, 2019

Prescription drugs, lower taxes power J&J earnings

Published:Wednesday | October 17, 2018 | 12:00 AM
A selection of Johnson & Johnson products. AP

A jump in prescription drug sales and a sharply reduced tax bill boosted Johnson & Johnson's (J&J) third-quarter sales and profit, which beat Wall Street expectations.

The world's biggest maker of healthcare products on Tuesday also slightly raised its profit forecast for the year.

The New Brunswick, New Jersey maker of baby products, biotech drugs and medical devices reported net income of US$3.93 billion, or US$1.44 per share, up 4.5 per cent from a year earlier.

Earnings, excluding US$1.7 billion in one-time gains and costs, came to US$2.05 per share, or two cents better than analysts expected.

Revenue was US$20.35 billion, up 3.6 per cent, which also exceeded analyst forecasts for US$19.91 billion.

J&J's prescription drug business posted sales of US$10.35 billion, up 6.7 per cent, mainly due to higher sales of its cancer drugs, including Darzalex, Imbruvica and Zytiga.

During the quarter, Imbruvica won US regulatory approval for a new use, treating a rare cancer called Waldenstrom's macroglobulinemia, and the Food and Drug Administration also approved a three-drug combination pill for treating HIV, Symtuza.

J&J also applied for United States and European Union approval of its closely watched experimental drug esketamine for treatment-resistant depression. The nasal-spray drug works much more quickly than other antidepressants and likely will be a big seller if approved.

Asked about a new government proposal that TV ads for brand-name drugs state the list price, pharmaceutical business head Jennifer Taubert told analysts on a conference call that J&J believes patients should have access to that information. But she said patients might not seek a treatment because of a high price, echoing the key industry trade group's position.

The group, aiming to put its spin on the issue Monday, instead proposed putting prices and information on patients' likely out-of-pocket expenses and available financial aid on a website for each advertised drug.

Sales of consumer health products such as Tylenol and Band-Aids edged up 1.8 per cent to US$3.42 billion.

The medical devices and diagnostics business, which is being restructured, reported a 0.2 per cent sales dip to US$6.59 billion. Sales were driven by Acuvue contact lenses, surgical implements and wound-closure products.

US and international sales both rose about 3.5 per cent, to US$10.66 billion and US$9.68 billion, respectively. J&J noted that unfavourable currency exchange rates reduced revenue by 1.9 per cent.

Thanks to the federal tax cut this year, J&J's effective tax rate plunged to 11.1 per cent, barely half the 21.4 per cent rate in the year-ago quarter, reducing its tax bill by US$537 million to US$489 million.

Edward Jones analyst Ashtyn, calling the results strong, wrote to investors that she expects the prescription drug segment's many new drugs to drive overall company growth. Medicine sales make up nearly half of total revenue and should increase by the mid- to high-single digits, slightly above expected growth across the pharmaceutical industry, Evans noted.

The company said it now expects full-year earnings in the range of US$8.13 to US$8.18 per share, with revenue in the range of US$81 billion to US$81.4 billion. In July, J&J forecast 2018 earnings per share of US$8.07 to US$8.18 and revenue of US$80.5 billion to US$81.3 billion.