Johnson & Johnson reported a 25% drop in profit and declining sales in the fourth quarter as demand for its Covid-19 vaccine waned, while providing a cautious forecast for sales growth. as the company undergoes a major transformation.
The New Brunswick, NJ, health care products company said on Tuesday quarterly revenue fell 4.4% to $23.71 billion due to lower vaccine sales and a stronger dollar, below estimates from analysts of $23.9 billion, according to FactSet.
Earnings were $1.33 a share, down from $1.77 a share a year earlier, as J&J also incurred costs related to its Covid vaccine and plans to spin off its consumer health business into a standalone company. . Excluding one-time items, adjusted earnings were $2.35 per share, beating analyst expectations of $2.23 per share.
J&J, whose financial results are considered a benchmark for many healthcare sectors, said it expects sales to rise about 5% to $96.9 billion to $97.9 billion in 2023.
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The company continues to experience pressure on sales due to staff shortages at hospitals, which have limited the growth of procedures using J&J products, while inflation has increased J&J’s expenses. The company expects sales and profit growth to be stronger in the second half of the year than in the first half.
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“We’re taking a lot of carryover from the inflationary hit we had in 2022,” J&J Chief Financial Officer Joseph Wolk said on a conference call with analysts on Tuesday.
The company has cut production of its Covid-19 vaccine amid falling demand. While the J&J shot was one of the first to become available in 2021, it wasn’t used as widely as versions from Moderna Inc., Pfizer Inc., or BioNTech SE, with manufacturing issues limiting the shot’s availability and risk. of a rare but serious blood clotting condition that discourages some people from using it. J&J has not released an updated Covid-19 booster shot.
Global sales of J&J’s Covid-19 vaccine fell 57% to $689 million for the fourth quarter. Vaccine sales came only from outside the US and none were reported for the US in the last quarter.
At the same time, J&J incurred $821 million in vaccine-related costs, including exiting its manufacturing contracts with other companies.
Mr Wolk said in an interview that the vaccine is mainly used in Africa and that the company will continue to provide doses under advance purchase contracts until 2023.
J&J’s largest unit, pharmaceuticals, posted fourth-quarter sales of $13.16 billion, down 7.4% from a year earlier. Cancer drug sales gains were more than offset by a decline in sales of the Covid-19 vaccine and other drugs, including treatments for autoimmune diseases.
The company’s medical device unit had sales of $6.78 billion, 1.2% less than the previous year. Declines in sales of surgical products offset gains in certain products used in cardiac procedures.
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J&J’s consumer health product sales increased 1% to $3.77 billion in the quarter, as sales of over-the-counter medications, including Tylenol, increased during a tough cold and flu season.
J&J is in the process of turning its consumer health business into a new company called Kenvue, which will house some of the company’s best-known consumer brands, such as Band-Aid bandages and Tylenol medicines.
The plan to spin off the consumer business is one of the biggest changes in J&J’s history and will leave the remaining company focused on pharmaceuticals and medical devices.
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Earlier this month, J&J filed documents with securities regulators to prepare for a potential initial public offering of up to around 20% of Kenvue’s shares. If J&J decides to go ahead with an initial public offering, it could take place within the next two quarters, and the company would plan to fully spin off Kenvue sometime during 2023, Wolk said.
J&J shares fell 0.5% to $167.31 in morning trading.