Johnson & Johnson cuts full-year guidance due to impact of COVID-19 pandemic

Headline results for the first quarter:

Prescription drug sales

$11.1 billion

+8.7%

Overall revenue

$20.7 billion (forecasts of $19.7 billion)

+3.3%

Profit

$5.8 billion

+54.6%

Note: All changes are versus the prior-year period unless otherwise stated

What the company said:

"We are mobilising our resources across the company in the fight against the COVID-19 pandemic," remarked CEO Alex Gorsky, adding "we are committed to beginning production at risk imminently and bringing an affordable and accessible vaccine to the public on a not-for-profit basis for emergency pandemic use."

Last month, Johnson & Johnson announced the selection of a lead COVID-19 vaccine candidate from constructs it has been working on since January, with plans to initiate a Phase I study at the latest by September. "The vaccine is our biggest focus," said chief financial officer Joe Wolk, with the company aiming to have 600 million to 800 million doses available in the first half of next year alone.

Wolk noted that the company's pharmaceutical portfolio saw an up-tick in the quarter as patients stockpiled medicines. Meanwhile, Kathleen Widmer, chairman of Johnson & Johnson's North America consumer-health unit, indicated that demand for a number of its consumer brands, such as Tylenol and Motrin, is at a record level. As a result, the company is ramping up production, with Widmer explaining "we've been making a series of minute-by-minute, day-by-day decisions to maximise the supply and inventory of our high demand products, especially Tylenol."

Other results:

  • US pharmaceutical revenue: $6.1 billion, up 8.6%
  • International pharmaceutical revenue: $5.1 billion, up 8.8%
  • Immunology product sales: $3.6 billion, up 11.9%
    • Stelara: $1.8 billion, up 29.5%, driven by "strong uptake" in Crohn's disease and increased COVID-19-related demand
    • Remicade: $990 million, down 10.2%, hit by increased rebates/discounts and biosimilar competition, with US sales falling 19.3% to $625 million
    • Simponi/Simponi Aria: $529 million, up 1.1%
    • Tremfya: $296 million, up 36.4%
  • Oncology product sales: $3 billion, up 19.7%
    • Imbruvica: $1 billion, up 31.6%, led by a rise in patient uptake globally, higher market share primarily in first-line chronic lymphocytic leukaemia and increased COVID-19 demand related to longer scrips being written
    • Darzalex: $937 million, up 49%, due to "strong market growth and share gains" in the US and EU
    • Zytiga: $690 million, up 1.6%, with growth partially offset by lower sales in the US due to generic competition
  • Invega Sustenna/Xeplion/Invega Trinza/Trevicta: $883 million, up 11.7%, led by new patient starts
  • Pulmonary hypertension products: $745 million, up 13.7%, with growth for Opsumit and Uptravi from continued share gains, market growth and increased COVID-19 related demand, while sales of Tracleer fell due to generic competition and cannibalisation from Opsumit
  • Xarelto: $527 million, down 2.7%, affected by increased rebates including channel mix dynamics, partially offset by market growth and increased COVID-19 demand due to longer scrips being written
  • Prezista/Prezcobix/Rezolsta/Symtuza: $579 million, up 10.8%, with strong sales of Symtuza and increased COVID-19 demand across the infectious disease portfolio partially offset by increased competition for Prezista, Prezcobix and Rezolsta
  • Consumer health: $3.6 billion, up 9.2%, boosted by "increased demand" for products such as Tylenol, Motrin and Zyrtec due to the COVID-19 pandemic

Looking ahead:

Johnson & Johnson now expects earnings per share this year of between $7.50 and $7.90, with sales in the range of $77.5 billion to $80.5 billion, with the guidance lowered due to the impact of the COVID-19 pandemic and investments that the company is making to combat the coronavirus. Johnson & Johnson previously forecast earnings of between $8.95 and $9.10, with sales in the range of $85.4 billion to $86.2 billion. Analysts predict annual earnings of $8.27 per share, on revenue of around $81.1 billion.

With regards the pharmaceutical division, the drugmaker noted that the guidance assumes "smaller levels of disruption associated with delayed diagnosis and new patient starts." Wolk added that Johnson & Johnson does not expect the COVID-19 pandemic to lead to any major clinical trial disruptions for its experimental medicines.

Company executives indicated that they expect the worst impact on its operations as a result of the pandemic this quarter, with recovery starting toward year-end. Meanwhile, along with the focus on the pandemic, Johnson & Johnson still plans to file applications this year for approval of four drugs, which Wolk suggested "bodes really well for 2020 and beyond."

What analysts said:

"Results were stronger than expected for the first quarter," with strong sales across Johnson & Johnson's major businesses, according to Edward Jones analyst Ashtyn Evans, but she added the focus is on the impact of the coronavirus. Meanwhile, "demand for consumer healthcare has been strong, particularly for over-the-counter drugs like Tylenol," Evans noted, although she anticipates "some decline in sales for drugs administered by doctors," such as infused cancer drugs.

 

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