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Jan 22, 2020

J&J falls after fourth-quarter sales miss analysts' target

Johnson & Johnson baby powder

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Johnson & Johnson shares fell after the health-care giant’s fourth-quarter sales trailed estimates, as some former blockbusters continued to decline in the face of new competition and its baby-care business stumbled.

  • Fourth-quarter revenue was US$20.75 billion, just short of the US$20.87 billion in sales analysts expected, on average. Arthritis drug Remicade’s sales fell 16 per cent compared to a year earlier.

Key Insights

  • J&J is likely to draw much of its growth from sales of cancer and immunology drugs in the coming year. For 2019, adjusted earnings per share are expected to be US$8.95 to US$9.10, against an average analyst estimate of US$9.09.
  • Indeed, such drugs were a bright spot in the fourth quarter. Sales of Stelara, a treatment for psoriasis, jumped 18 per cent to US$1.63 billion. Cancer drug Darzalex brought in US$830 million in the quarter, up 42 per cent from a year ago.
  • Sales of baby-care products dropped more than 26  per cent in the U.S. That business has struggled to cope with a new cluster of competitors who have appealed to shifting consumer preferences.
  • J&J has been fighting lawsuits related to opioids, talc and other products. It faces more than 100,000 suits alleging injuries and illnesses caused by its baby powder, opioid painkillers and other products, though it’s scored a few wins in the courtroom of late.
  • The company had about US$5.1 billion in litigation expenses in 2019, including a US$4 billion charge associated with a proposed deal to resolve all claims accusing the company of helping fuel the U.S. opioid epidemic. A final agreement has yet to be reached.

Market Reaction

  • The New Brunswick, New Jersey-based company’s shares declined 1.5 per cent in early trading on Wednesday. They had advanced 16 per cent in the past 12 months through Tuesday’s close.

--With assistance from Jef Feeley.