(Bloomberg) -- Johnson & Johnson warned Wall Street about the perils of the strong dollar. Now the drug and device maker is saying analysts failed to hear the message.
The shares fell by as much as 4.1% on Wednesday after J&J’s 2025 forecast, dragged down by the strong dollar, came in short of expectations. That’s because less than half of the analysts who cover the company updated their estimates to reflect the dollar’s surging value, according to executives.
Chief Executive Officer Joaquin Duato spelled it out last week at the industry’s largest investor conference, noting the current exchange rate and the precise effect each penny of fluctuation would have on 2025 earnings. Still, analysts’ average view was about $1 billion above the midpoint of J&J’s guidance.
“The company’s perspective is just factual,” Mizuho Securities’ Jared Holz said in an interview. “They’re saying: ‘We’ve been steering you in this direction. You guys chose not to drive in that lane, and now you’re unhappy we’re in a different lane than you.’”
This year’s sales will be $89.2 billion to $90 billion, the company said Wednesday, with the surging dollar hurting growth by 2%. Adjusted earnings will be $10.50 to $10.70 a share, reduced 25 cents a share by currencies.
The stock’s slump, J&J’s biggest intraday in almost 1 1/2 years, is “a little frustrating,” Chief Financial Officer Joe Wolk said in an interview with Bloomberg TV, as fourth-quarter sales and profits outpaced projections.
Patent Cliff
The stock reaction is likely short-term, John Boylan, an analyst at Edward Jones, said in an interview. “Health care in general has done pretty well the past couple of days, and this could be a bit of a giveback as investors look to other sectors.”
J&J is grappling with a multibillion-dollar patent cliff as its second-biggest drug, the psoriasis treatment Stelara, faces off-brand competition in the US and Europe. The company is counting on newer medicines, including Darzalex, its top-selling treatment for blood cancer, and the autoimmune treatment Tremfya, to make up for the decline.
What Bloomberg Intelligence Says:
Johnson & Johnson’s in-line 2025 guidance — on a reported basis, excluding its assumed two percentage points of Forex headwind — is encouraging for a company historically conservative in its outlook.
— BI analysts John Murphy and Sam Fazeli. Read the research here.
Darzalex brought in $3.08 billion in the fourth quarter, a more-than 20% increase from a year earlier. The company’s medical devices were another bright spot, growing nearly 7% to $8.19 billion on the quarter.
Quarterly adjusted earnings were $2.04 a share and revenue was $22.5 billion, slightly ahead of analyst projections compiled by Bloomberg.
Bullish on Trump
Earlier this month, J&J agreed to pay nearly $15 billion for Intra-Cellular Therapies Inc., which makes an approved medicine for bipolar depression. The drug, Caplyta, could be a “wonder pill,” Wolk said, with the potential to reach $5 billion in annual revenue if it proves effective in other conditions.
“We want to be No. 1 in neuro,” Wolk said, pointing to Spravato, J&J’s approved treatment for major depressive disorder, and medicines in development for Alzheimer’s disease and other related conditions.
The company is awaiting court approval of an $8 billion deal that would settle thousands of claims related to its talc products. Final word could come this quarter, which would remove one of investors’ long-term concerns about J&J’s business.
Three of J&J’s drugs, including Stelara, were among the first 10 medicines up for US government price negotiations and will see a decline in 2026. None of the company’s products made the latest list of 15 drugs slated for cuts in 2027. J&J hasn’t joined its peers in asking the incoming Trump administration to pause pricing negotiation, Wolk said, and the company is “bullish” about the industry’s future under Trump.
“I think there are opportunities when you have a pro-business, pro-innovation administration wanting to learn about the dynamics of a specific industry,” he said. “We see positive momentum in the type of dialogue they hope to have.”
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