J&J Lifts Forecast As Suits Weigh On Its Shares -- WSJ
July 17 2019 - 3:02AM
Dow Jones News
By Peter Loftus and Kimberly Chin
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 17, 2019).
Johnson & Johnson raised its forecast of 2019 sales as it
reported quarterly results, but costly product litigation continues
to weigh on the health-care giant.
The New Jersey-based company's second-quarter profit rose 42% to
$5.61 billion, or $2.08 a share, compared with a year earlier. The
company received a $2 billion pretax gain in the most recent
quarter from the sale of its Advanced Sterilization Products
business to industrial-equipment maker Fortive Corp.
Excluding special items, J&J earned $2.58 a share, above the
mean estimate of analysts polled by FactSet of $2.46 a share.
Sales fell 1.3% to $20.56 billion, but were better than
analysts' expectations. J&J now expects reported sales for the
year to be between $80.8 billion and $81.6 billion, up from the
$80.4 billion to $81.2 billion previously forecast.
Still, J&J shares declined 1.6% at $132.50 on Tuesday and
the stock remains down from its December peak on concerns about
litigation over the safety of talc-containing products such as
Johnson's Baby Powder, and the company's marketing of opioids.
J&J faces more than 14,000 legal claims that use of its talc
products caused cancer, and some juries have ordered the company to
pay large monetary damages to plaintiffs. J&J is appealing the
verdicts, and says its talc products are safe and don't cause
cancer.
J&J hasn't set aside any significant amounts for potential
settlements of talc claims. But its legal defense costs are adding
up: In the second quarter, J&J recorded a charge of $190
million for talc defense costs, Chief Financial Officer Joseph Wolk
said on a conference call with analysts on Tuesday.
"We'll continue to pursue defense of the company's actions as
well as products," Mr. Wolk said.
Separately, J&J defended itself in a recent trial in
Oklahoma in which the state's attorney general alleged J&J's
actions in marketing opioid painkillers fueled the opioid epidemic.
J&J says its marketing was legally protected speech.
Wells Fargo analyst Larry Biegelsen said on the J&J
conference call the talc and opioid litigation has been an
"overhang" for J&J's stock price.
J&J's largest division, pharmaceuticals, had second-quarter
sales of $10.53 billion, up 1.7% from a year earlier.
Medical-device sales declined 6.9% to $6.49 billion, while sales of
consumer products, which include products such as Band-Aid bandages
and Tylenol medicine, increased 1.2% to $3.54 billion.
Strong sales gains for cancer drugs Darzalex and Imbruvica
helped fuel pharmaceutical sales, offsetting continued declines for
anti-inflammatory drug Remicade, which faces competition from
lower-cost biosimilar versions.
Supply disruptions hurt sales of medical devices, including a
recall of a stapler product. In the consumer segment, an increase
in sales of beauty products helped offset declines in baby-care and
women's health products.
J&J reiterated its forecast of earnings excluding certain
items of $8.53 to $8.63 a share.
The company said it is using some of the proceeds from the sale
of Advanced Sterilization Products to increase spending on research
and development, mainly in medical devices and pharmaceuticals.
Write to Peter Loftus at peter.loftus@wsj.com and Kimberly Chin
at kimberly.chin@wsj.com
(END) Dow Jones Newswires
July 17, 2019 02:47 ET (06:47 GMT)
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