Strong Q2 from J&J as pandemic-hit sales, profit recover

Johnson & Johnson’s second-quarter profit soared 73 per cent, thanks to strong sales growth across all of its businesses as hospitals and the rest of the health care industry continued recovering from the coronavirus pandemic’s impact.

The health care giant handily topped Wall Street expectations and hiked its 2021 sales and profit forecasts sharply..

The world’s biggest maker of health care products on Wednesday reported second-quarter net income of US$6.28 billion, or US$2.35 per share, up from US$3.63 billion, or US$1.36 per share, a year earlier.

Adjusted income came to US$6.63 billion, or US$2.48 per share, blowing past Wall Street projections for US$2.28 per share.

Revenue totalled a whopping US$23.31 billion, up 27.1 per cent from 2020′s second quarter.

The one weak spot was dismal sales of J&J’s COVID-19 vaccine, which brought in just US$164 million in the quarter and $264 million so far this year.

In this photo illustration a medical syringe and a vial with fake coronavirus vaccine seen in front of the Johnson & Johnson logo. Sales of J&J’s COVID-19 vaccine has been lower than expected. (Photo: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

The vaccine has been plagued by concerns about some very rare side effects and the shutdown of the Maryland factory of J&J’s US contract manufacturer, Emergent BioSolutions, due to contamination problems that led to tens of millions of vaccine doses having to be trashed. It’s unclear when — or if — the US Food and Drug Administration will allow the factory to resume production, which was halted in mid-April.

J&J has the only authorised vaccine that only requires one shot, so it had been expected to play a huge role in vaccinating people in rural areas and developing countries. Instead, the company has fallen far short of its supply commitments to the US, other governments and a World Health Organization-backed programme to get affordable vaccines to poor and middle-income countries. However, J&J recently got approval to make more vaccine doses at its newly expanded factory in the Netherlands.

Company executives said they expect total 2021 COVID-19 vaccine sales of roughly US$2.5 billion, mostly in the fourth quarter.

“The company’s earnings growth has accelerated, driven by newly launched drugs and a decreasing impact from patent losses”

— Ashtyn Evans, analyst, Edward Jones

“We hope this will be the start of what we expect to become a vibrant vaccine business over time,” Jennifer Taubert, head of the prescription medicine business, told analysts on a call to discuss the quarter’s results, adding that the company is developing vaccines for HIV, sepsis and respiratory syncytial virus.

Johnson & Johnson noted recent studies show the vaccine works well against coronavirus variants and protects people for at least eight months. The company said it’s selling its vaccine on a non-profit basis, for US$5 to US$8 per dose.

J&J, based in New Brunswick, New Jersey, said foreign sales jumped 29.5 per cent to US$11.39 billion, while US sales rose 24.9 per cent to US$11.92 billion.

J&J’s medical device and diagnostics division had been a laggard amid a lengthy restructuring and the pandemic leading people to delay scheduled surgeries and other care. It turned in the best performance in the quarter, with revenue jumping 62.7% to $6.98 billion.

Still, the company warned that some U.S. hospital systems are again delaying elective procedures as infections and hospitalizations increase amid the latest surge, caused by the highly transmissible delta variant.

Johnson & Johnson products (Photo: marketing91.com)

The maker of cancer drugs Darzalex and Imbruvica reported that prescription drug sales, long the company’s main growth driver, rose 17.2 per cent to US$12.6 billion.

Sales of consumer health products like Tylenol and Band-Aids, which have been buoyed during the pandemic by medicine cabinet stocking and an increased focus on wellness, climbed 13.3 per cent to US$3.74 billion.

“The company’s earnings growth has accelerated, driven by newly launched drugs and a decreasing impact from patent losses,” Edward Jones analyst Ashtyn Evans wrote to investors, adding that the current stock price doesn’t fully reflect the growth of J&J’s new products.

Evans, noting recent headlines about lawsuits over J&J’s talc products and a potential US$5 billion settlement with states over its sales of opioid painkillers Duragesic and Nucynta, said progress in ending that litigation should reduce uncertainty about the stock.

Overall sales had a 4.1 per cent benefit from favourable currency exchange rates. During the quarter, J&J’s effective tax rate declined to 5.8 per cent and the company paid shareholders US$2.8 billion in dividends.

During the quarter, the FDA approved J&J’s Rybrevant, the first targeted treatment for non-small cell lung cancer that has certain genetic mutations.

Johnson & Johnson said it expects adjusted full-year earnings in the range of US$9.60 to US$9.70 per share, up from its April forecast of US$9.42 to US$9.57. It expects revenue in the range of US$93.8 billion to US$94.6 billion, up from US$90.6 billion to US$91.6 billion.

In afternoon trading yesterday, J&J shares rose 82 cents to US$169.27.