J&J beats earnings estimates; Middle East conflict weighs on medical device sales

Johnson & Johnson JNJ-N reported a slightly higher-than-expected profit on Tuesday, driven by strong sales of immune disease treatment Tremfya, but geopolitical issues including the Middle East conflict were a drag on its medical devices business.

The company posted third-quarter revenue of US$25.4-billion, above analysts’ average estimate of US$25.28-billion, according to LSEG data. Adjusted earnings of US$2.59 per share also topped Wall Street expectations of US$2.54.

Pharmaceutical sales jumped 7.7 per cent in the quarter to US$16.76-billion. Medical technology division sales rose only 2.5 per cent to US$8.6-billion overall. Outside the U.S., sales in the division were basically flat.

J&J chief financial officer Joe Wolk, in an interview, said the Mideast conflict, austerity measures in Europe and pricing in China continued to weigh on results internationally, “but maybe in a little bit more pronounced way.”

He said the Mideast conflict, which has led to soaring fuel costs at home and abroad, has yet to impact the company’s costs, but has hurt sales in the region.

“These are countries that still value and actually want premium health care systems, think Kuwait, UAE, Saudi Arabia. They pride themselves on having solid health care, very good health care,” Wolk said. “But their budgets now are being resourced and allocated towards defence.”

Sales at its Abiomed heart pump business also remained slow after a U.K. study earlier this year raised questions about the use of Impella pumps during certain high-risk coronary procedures.

Tremfya sales rose 68 per cent to US$2.4-billion, exceeding analyst estimates of about US$2.19-billion, while sales of Stelara, which is facing generic competition, fell 54 per cent to US$716-million, still well above Wall Street expectations of US$591-million. Tremfya has increasingly replaced lost Stelara revenue following recent approvals in inflammatory bowel diseases.

Sales of blood cancer treatment Darzalex rose about 16 per cent to US$4.24-billion, short of analyst expectations of US$4.4-billion.

The company raised its full-year forecast for reported sales to about US$101.2-billion at the midpoint, from US$101.1-billion previously. It increased its adjusted earnings forecast range with a new midpoint of US$11.10 per share, up from US$11.04.

J&J shares closed at US$263.73 on Monday. They have risen 27 per cent this year, outperforming both the broader market and most health care peers.