Johnson & Johnson's performance exceeds expectations; Middle East conflict drags down medical device sales

Michael Erman

Reuters, October 13 - Johnson & Johnson (JNJ.N) reported slightly higher-than-expected profits on Tuesday, mainly thanks to strong sales of its immunology drug Tremfya, but geopolitical issues, including the Middle East conflict, weighed on its medical devices business.

According to data from the London Stock Exchange Group (LSEG), the company’s third-quarter revenue was $25.4 billion, higher than analysts’ average estimate of $25.28 billion. Adjusted earnings per share of $2.59 also exceeded Wall Street expectations of $2.54.

Pharmaceutical sales jumped 7.7% this quarter to $16.76 billion. The medical technology division’s sales rose just 2.5% to a total of $8.6 billion. Outside the US, sales in this sector were basically flat.

Johnson & Johnson Chief Financial Officer Joe Wolk said in an interview that the Middle East conflict (link), tightening measures in Europe, and pricing issues in the Chinese market continue to put pressure on international performance, “but the impact may be a bit more pronounced.”

He said that while the Middle East conflict has driven fuel costs up sharply both domestically and internationally, there has not yet been an impact on the company’s own costs, but sales in the region have already taken a hit.

“These countries still value and truly want to have high-end healthcare systems, such as Kuwait, the UAE, and Saudi Arabia. They are proud to have sound and high-quality healthcare systems,” Wolk said. “But now, their budgets are being redirected toward defense spending.”

Sales of its Abiomed heart pump business also remained sluggish following a UK study earlier this year (link) that raised questions about the use of the Impella pump in certain high-risk coronary surgeries.

Tremfya’s sales rose 68% to $2.4 billion, beating analysts’ expectations of around $2.19 billion; while sales of Stelara, which faces competition from generics, fell 54% to $716 million, but still remained well above Wall Street’s estimate of $591 million. With its recent approval for inflammatory bowel disease, Tremfya is increasingly offsetting Stelara’s lost revenue.

Sales of the blood cancer drug Darzalex increased by about 16% to $4.24 billion, missing analysts’ forecast of $4.4 billion.

The company raised the midpoint of its full-year reported sales forecast from the previous $101.1 billion to about $101.2 billion. At the same time, the company raised its adjusted earnings per share guidance range, with the new midpoint at $11.10, up from the previous $11.04.

Shares of Johnson & Johnson closed at $263.73 on Monday. So far this year, the company’s share price has risen by 27%, outperforming the broader market and most of its healthcare industry peers.

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