Johnson & Johnson (JNJ) Q2 2023 earnings report

Johnson&Johnson on Thursday reported second-quarter revenue and adjusted earnings that beat Wall Street expectations and raised its full-year guidance as sales at the company’s medical technology business soared.

The Medtech department offers devices for surgery, orthopedics and vision technology. The company is benefiting from a rebound in demand for non-urgent surgeries among older adults, who have postponed those procedures during the pandemic.

This increased demand has been observed by health insurers UnitedHealth Group and Elevance Health.

Here’s how J&J’s results compare to Wall Street expectations, based on a Refinitiv analyst poll:

  • Earnings per share: Adjusted $2.80 versus $2.62 expected
  • Revenue: $25.53 billion versus $24.62 billion expected

Shares of J&J are up nearly 5% in Thursday morning trade. The stock is down more than 5% for the year, bringing the company’s market value to around $433 billion.

J&J, whose financial results are considered a guide for the broader healthcare sector, said its revenue rose 6.3% in the quarter compared to the same period last year.

The pharma giant reported net income of $5.14 billion, or $1.96 per share. This compares to net income for the same period last year of $4.8 billion, or $1.80 per share.

Excluding certain items, adjusted earnings per share for the period were $2.80.

J&J is now forecasting full-year sales of $98.80 billion to $99.80 billion, about $1 billion more than April’s guidance.

The company raised its adjusted earnings guidance for 2023 to $10.70 to $10.80 per share from a previous guidance of $10.60 to $10.70 per share.

Full-year guidance includes results from J&J’s consumer health business, which spun off as a standalone company called Kenvue in early May.

J&J owns nearly 90% of Kenvue shares and plans to reduce its stake through an exchange offer that could start “as early as the coming days,” J&J CFO Joseph Wolk said during a earnings call.

This process will allow J&J shareholders to exchange all or a portion of their shares for Kenvue common stock.

In this illustration the Johnson & Johnson stock trading graph is seen on a smartphone screen.

Rafael Henrique | SOPA images | Light Rocket | Getty Images

Revenue from the company’s medical device business rose to $7.79 billion, up 12.9% from the second quarter of 2022.

J&J said the growth was due to electrophysiology products, which assess the heart’s electrical system and help physicians understand the cause of abnormal heart rhythms. Wound closure products and devices for orthopedic trauma or serious injuries to the skeletal or muscular system also contributed.

J&J said its December acquisition of Abiomed, a cardiovascular medical technology company, contributed to that growth.

“These strong results continue to demonstrate that our efforts to drive growth in the medical device business are working,” said Joaquin Duato, J&J CEO, during a earnings call.

Wolk added during the earnings call that recently introduced medical technology products are a “key factor” driving the company’s higher growth trajectory.

Pharmaceutical Business

J&J reported pharmaceutical sales of $13.73 billion, up more than 3% year over year. Excluding the sale of its unpopular Covid vaccine, the pharmaceutical division had sales of $13.45 billion.

The Company is focused on drug development for various disease areas.

The company said the growth came from sales of Darzalex, a biologic used to treat multiple myeloma, Erleada, a drug used to treat prostate cancer, and blockbuster drug Stelara, used to treat a range of immune-mediated inflammatory diseases.

J&J will lose patent protection for Stelara later this year.

The growth was partially offset by lower sales of arthritis drug Remicade, which faces competition from biosimilars — lower-cost drugs with a nearly identical structure.

This quarter was the first without US sales of J&J’s Covid vaccine, which brought in international sales of $285 million.

In April, the company announced that it does not expect domestic revenue in excess of what it reported in the first quarter as it has completed its government contract obligations.

Duato said J&J’s pharma pipeline is making “good progress.”

He highlighted experimental drugs like Milvexian, an oral treatment to prevent blood clots, that are close to potential Food and Drug Administration approval.

Duato said the strong pharmaceutical results and potential upcoming drug launches make J&J “very confident” of achieving the division’s $57 billion annual sales goal for 2025.

Kenvue Results, Talk Litigation

According to J&J, its consumer health business had revenue of $4.01 billion for the quarter, up 5.4% from the prior-year period.

This growth was primarily due to over-the-counter products such as Tylenol, the pain reliever Motrin, and products for the upper respiratory tract. Neutrogena branded skin health and beauty products contributed to international sales growth.

Kenvue announced its first quarterly results on Thursday.

J&J’s quarterly results come amid investor concerns over thousands of lawsuits alleging that the company’s talc-based products are contaminated with the carcinogen asbestos, which has caused ovarian cancer and multiple deaths.

These products, such as J&J’s baby powder of the same name, are now part of Kenvue. However, J&J assumes all talc-related liabilities arising in the United States and Canada.

In April, J&J’s New Jersey subsidiary, LTL Management, filed for bankruptcy and proposed paying nearly $9 billion to settle more than 38,000 lawsuits and prevent new cases from arising.

It is the company’s second attempt to settle its talc claims in bankruptcy court after a federal appeals court rejected a previous offer.

Most of the litigation was dropped during the bankruptcy proceedings. But a bankruptcy court allowed a trial to proceed in Oakland, California.

On Tuesday, a jury ruled that J&J must pay $18.8 million to a man who said he developed cancer from exposure to baby powder.

Erik Haas, J&J’s vice president of litigation, said during the conference call that the company intends to appeal the verdict. He called it “inconsistent with decades of independent scientific evaluations confirming that Johnson & Johnson baby powder is safe, contains no asbestos and does not cause cancer.”

Haas added that J&J will not pay the judgment while the bankruptcy proceedings are ongoing and “the decision has no impact on that process.”

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