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Johnson & Johnson Reports Strong Q1 Earnings Amid Rebound in Demand for Surgeries

J&J’s Medtech Business Experiencing Rebound in Demand for Surgeries Among Older Adults

An entry sign to the Johnson & Johnson campus shows their logo in Irvine, California on August 28, 2019.

J&J’s Medtech Division Experiencing Surge in Demand

J&J’s medtech division provides devices for surgeries, orthopedics, and vision. The company is benefiting from a rebound in demand for nonurgent surgeries among older adults, who deferred those procedures during the Covid pandemic. That increased demand has been observed by health insurers like Humana, UnitedHealth Group, and Elevance Health.

J&J CFO Joseph Wolk stated that consumers may be pulling back in other areas but “don’t want to compromise when it comes to their health, their mobility, their ability to live a fulfilling life.” He mentioned that the company has seen elevated procedure levels due to Covid, and they haven’t witnessed any backtracking of that.

J&J’s First Quarter Financial Results

J&J’s financial results for the first quarter compared to Wall Street expectations were as follows:

  • Earnings per share: $2.71 adjusted vs. $2.64 expected
  • Revenue: $21.38 billion vs. $21.4 billion expected

J&J’s financial results are considered a bellwether for the broader health sector. The company reported $21.38 billion in total sales for the first three months of 2024, reflecting over 2% growth compared to the same quarter in 2023.

J&J Strengthens Position in the Cardiovascular Space

Recently, J&J completed its $13.1 billion acquisition of heart device firm Shockwave Medical, aiming to become a leader in four rapidly growing cardiovascular technology categories. This acquisition follows J&J’s previous acquisitions of Abiomed for $16.6 billion and Laminar for $400 million over the past two years, enhancing their medical devices business.

During the first quarter, J&J’s medical devices business generated sales of $7.82 billion, up more than 4% year over year. The growth was fueled by the acquisition of Abiomed and the contribution of electrophysiological products, wound closure products, orthopedic trauma devices, and contact lenses.

Pharmaceutical Sales and Patents

J&J reported $13.56 billion in pharmaceutical sales, reflecting around 1% year-over-year growth. Excluding sales of its unpopular Covid vaccine, revenue in the pharmaceutical division grew almost 7%. The growth was driven by sales of drugs such as Darzalex, Erleada, Carvykti, and other oncology treatments.

However, first-quarter sales of J&J’s blockbuster drug Stelara, which is used to treat chronic and potentially disabling conditions such as Crohn’s disease, were relatively flat compared to the same period a year ago. Stelara brought in $2.45 billion in sales for the quarter.

Last year, J&J started to lose patent protection on Stelara, opening the market to cheaper biosimilar competitors. Yet, the company has reached settlement agreements with Amgen and other drugmakers to delay the launch of some Stelara copycats until 2025.

Talc-Based Product Lawsuits and Settlements

J&J’s first-quarter results were reported amidst investor concerns over the thousands of lawsuits alleging the company’s talc-based products caused ovarian cancer and several deaths due to contamination with the carcinogen asbestos. J&J is assuming all talc-related liabilities that arise in the U.S. and Canada.

Last year, the company set aside around $400 million to resolve U.S. state consumer protection claims related to its talc-based products. However, the settlement does not resolve the lawsuits, some of which are scheduled to go to trial during this year.

J&J’s CFO referred to a federal judge’s ruling in March that allows the company to contest scientific evidence linking its talc products to ovarian cancer, considering it a “very significant development.” He expressed the belief that the evidence brought against J&J is “junk science,” but acknowledged it is challenging to foresee the timeline for a broad resolution to the ongoing litigation.

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