(Bloomberg) -- Johnson & Johnson cut its full-year profit forecast to account for costs tied to a spate of recent acquisitions.
The company now expects 2024 adjusted operational earnings of US$10.05 a share, down from the $10.68 a share midpoint estimate it issued in April, according to a statement Wednesday. A 5 cents per share gain from improved performance will be more than offset by costs of 68 cents a share tied to three purchases, it said.
While some of those expenses may have been treated as special items in the past, financial regulators frowned on that and the company changed its approach, Chief Financial Officer Joe Wolk said in an interview.
Second-quarter adjusted earnings were $2.82 a share, the New Brunswick, New Jersey-based company said, beating the average forecast of $2.71 from analysts. While drug sales were slightly ahead of estimates and medical device revenue fell a bit short, spending on research and development was about 15 per cent below expectations.
The company said it would generate operational sales of $89.4 billion in 2024, an increase of 6.4 per cent from a year earlier, after its $13.1 billion buyout of the device firm Shockwave Medical. J&J also bought Proteologix Inc. in June and the experimental eczema treatment NM26 from privately held Numab Therapeutics in July.
J&J’s share price has fallen about 3.7 per cent this year on concerns about Stelara, a top-selling anti-inflammatory medicine that will soon face lower-price competition in the U.S. and Europe, and ongoing litigation with people who claim the company’s talc-based baby powder caused their cancers.
“We acknowledge there are a few overhangs,” Wolk said in an interview. “I think we’re very well-positioned to manage that and to grow even in the first year of Stelara losing exclusivity.”
Talc settlement
The company has proposed settling the majority of the outstanding talc claims by paying out more than $6 billion over 25 years. Plaintiffs have until July 26 to vote in favor of the deal, and J&J needs the support of at least 75 per cent of claimants to move forward.
The company is “cautiously optimistic” the settlement will go through, Wolk said.
J&J is counting on its medicines for cancer and autoimmune disease to make up for Stelara’s impending decline. Darzalex, a multiple myeloma treatment that’s now J&J’s biggest drug, beat analysts’ projections in the second quarter, as did the psoriasis treatment Tremfya and prostate cancer medicine Erleada.
Overall drug sales of $14.5 billion beat the average estimate of analysts surveyed by Bloomberg. Medical devices contributed just under $8 billion, falling slightly short of expectations.
The company, which has spent nearly $35 billion on acquisitions in the last 18 months, will be “opportunistic” in looking for deals to expand its pipeline, Wolk said.
“It’s a luxury I have as CFO that we don’t have to do anything out of desperation,” he said. “We think in terms of years, not necessarily quarters here.”
Last year, J&J split from its consumer health division, which makes Tylenol and Listerine, to focus on the higher-margin pharmaceutical and medical devices businesses.
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