J&J beats earnings estimates, eyes hip-knee unit spinoff by mid-2027

Johnson & Johnson reported ‌a slightly ​higher-than-expected profit on Tuesday driven by strong sales of immune disease treatment Tremfya, and said it plans to spin off its hips and knees business next year. The company had late last year said it intended to separate its orthopedics ‌unit, DePuy Synthes, into a standalone company, marking its second major spinoff as it sharpens focus on higher-growth healthcare segments.

Chief Financial Officer Joe Wolk, in an interview with CNBC, said they are targeting mid-2027 for the spinoff. "We're not cash strapped. We don't have to pursue a deal that maybe is not optimal," Wolk told CNBC.

"We can sit ‌this out for a little bit, separate the business sometime next year." Global alternative asset manager Apollo Global Management is in talks to acquire the orthopedics unit ‌in a deal that could value it at close to $20 billion, Bloomberg News reported in September.

Shares of the company fell 2% before the bell. MIDDLE EAST CONFLICT WEIGHS ON MEDTECH

J&J CFO Wolk, in an interview, told Reuters 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 healthcare systems, think Kuwait, UAE, Saudi Arabia. They pride themselves on having ⁠solid healthcare, very good healthcare," Wolk said. "But their budgets now are being resourced and allocated towards defense." Medical technology division sales rose only 2.5% to $8.6 billion overall, but missed estimates of $8.71 billion, according ​to LSEG data. Outside the US, sales in the division were basically flat.

In MedTech, the miss was largely in cardio and surgery, said J.P. Morgan ⁠analyst Chris Schott. The company raised its full-year forecast for reported sales to about $101.2 billion at the midpoint, from $101.1 billion previously. It increased its adjusted earnings forecast range with a new midpoint of $11.10 per share, up ⁠from $11.04.

Sales ​at its Abiomed heart pump business also remained slow after a UK study earlier this year raised questions about the use of Impella pumps during certain high-risk coronary procedures. Quarterly pharmaceutical sales jumped 7.7% in the quarter to $16.76 billion.

Tremfya sales rose 68% to $2.4 billion, exceeding analyst estimates of about $2.19 billion, while sales of Stelara, which is ⁠facing generic competition, fell 54% to $716 million, still well above Wall Street expectations of $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% to $4.24 billion, short of analyst expectations of $4.4 billion.

J&J shares closed at $263.73 on Monday. They have risen 27% this year, outperforming both the broader market and most healthcare peers. The company posted third-quarter revenue of $25.4 billion, above analysts' average estimate ‌of $25.28 billion, and adjusted earnings of $2.59 ‌per share also topped Wall Street expectations of $2.54.