J&J profit edges past Street view after deals delay Stelara competition

Johnson & Johnson on Tuesday reported quarterly results just above Wall Street expectations, helped by strong sales of its blockbuster psoriasis drug Stelara, which is expected to face fresh U.S. competition from biosimilar versions next year. Separately, the New Jersey-based drugmaker has tentatively agreed to pay about $700 million to settle an investigation brought by more than 40 states into the marketing of its talc products, according to the Wall Street Journal.

J&J's worldwide vice president of litigation said in a statement that the company continues to pursue several paths to achieve a comprehensive and final resolution of the talc litigation. "As was leaked last week, that progress includes an agreement in principle that the company reached with a consortium of 43 State Attorneys General to resolve their talc claims," he said. A key Stelara patent expired in the United States last year, but J&J struck deals with competitors to delay the launches of their biosimilars until 2025. Amgen will be the first to launch its near-copy, Wezlana, next year.

Analysts have said the delay in biosimilar launches would make Stelara a larger contributor to J&J's 2024 and 2025 sales than previously anticipated. Sales of the drug are expected to be $10.54 billion in 2024, down 3% from the $10.86 billion in 2023. Fourth-quarter Stelara sales came in at $2.75 billion, topping analysts' estimates of $2.63 billion.

J&J said it expects entry of Stelara biosimilars in Europe toward the middle of 2024. Asked on a call with analysts and investors about the company's appetite for acquisitions this year, CEO Joaquin Duato said J&J was well positioned to "entertain many types of deals."

"As you know, we have the parameters of making sure that they are a strategic fit, so that we've got scientific expertise and insights," he said. "Familiarity with the space has proven to be our most successful platforms." The fourth-quarter results did not reveal any "major surprises," JP Morgan analyst Chris Schott said, adding that the company's pharmaceutical segment was well positioned to generate mid-single-digit growth through 2030 despite pending Stelara competition.

MEDICAL DEVICES REBOUND J&J's medical device business, which has benefited from a resurgence in demand for joint replacement and other surgeries delayed during the COVID-19 pandemic, generated revenue of $7.67 billion, topping estimates of $7.49 billion, according to LSEG data.

Chief Financial Officer Joseph Wolk in an interview said not only had demand for medical devices rebounded since the end of the pandemic, but that it had risen further in December. J&J recorded an $84 million charge in the quarter related to a restructuring program for its orthopedics business. As part of that project, J&J plans to exit certain markets and stop selling some orthopedic products.

J&J's cancer treatment Carvykti, which had sales of $159 million for the quarter, belongs to a class known as CAR-T therapies that have come under scrutiny over a safety issue. The company said it was working with the U.S. Food and Drug Administration to update its prescribing information after the agency sent a notice requiring CAR-T therapy makers to add a serious safety warning over a potential link to secondary malignancies.

Wolk said the drugmaker stills expects Carvykti to reach peak sales of at least $5 billion, despite that safety warning. The healthcare conglomerate posted a fourth-quarter profit of $2.29 per share that topped analysts' expectations by one cent, according to LSEG. Quarterly revenue of $21.40 billion narrowly beat estimates of $21.01 billion.

J&J also reaffirmed its adjusted operating profit forecast of $10.55 to $10.75 per share for 2024. Its shares, which have shed 3.7% in the past 12 months, were down another 2% to $159.22 on Tuesday.

Jeff Jonas, portfolio manager at Gabelli Funds, said he expected to see "a little bit of a sell-off today" given expectations for the company's performance were high going into the quarter and its results were largely in line. Quarterly sales of $2.55 billion for multiple myeloma drug Darzalex were in line with Wall Street expectations, while Carvykti sales fell short. Sales of $910 million for its other psoriasis treatment, Tremfya, topped analysts' forecasts.

J&J's pharmaceutical unit booked sales of $13.72 billion, topping projections of $13.43 billion.