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Key Takeaways From JNJ's (JNJ) Q4 Earnings Presentation
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Johnson & Johnson (JNJ - Free Report) reported fourth-quarter and full-year 2024 results on Jan 23. The drug and medical devices giant beat the Zacks Consensus Estimate for both earnings as well as sales in the fourth quarter.
In August, J&J completely separated its Consumer Health business into a newly listed company called Kenvue (KVUE - Free Report) , which now operates as a separate and fully independent company.
After completion of the exchange offer, J&J now has a 9.5% stake (approximately 180 million shares) in Kenvue’s common stock, which it may monetize in a tax-efficient manner in 2024.
With the complete separation of the Consumer Health segment, J&J has now become a two-sector company focused on the Pharmaceutical and MedTech fields.
Here, we discuss some key takeaways from the fourth-quarter 2023 conference call.
J&J’s Innovative Medicines (previously referred to as Pharmaceutical) unit outperformed expectations, with sales of several key drugs like Darzalex, Stelara, Tremfya and Imbruvica beating estimates. Sales of all these drugs were driven by market share gains. Importantly, the delay in the launch of biosimilar versions of the blockbuster drug Stelara benefited J&J’s top line. In May, J&J settled its litigation with Amgen (AMGN - Free Report) , as a result of which J&J does not anticipate the launch of a biosimilar version of Stelara in the United States until January 2025.
In addition, the rapid adoption of new products such as Carvykti, Tecvayli, Talvey and Spravato also contributed to top-line growth. The sales growth was partially dampened by lower sales of Imbruvica, the COVID vaccine and generic/biosimilar competition to drugs like Zytiga and Remicade.
In 2024, J&J expects to record above-market growth in the Innovative Medicine unit, for the 13th consecutive quarter. The growth is expected to be driven by key products like Darzalex, Tremfya and Erleada and the rapid adoption of new products. Innovative Medicine sales growth is expected to be slightly stronger in the first half of the year compared to the second half due to the potential entry of Stelara biosimilars in Europe in mid-2024. In fact, J&J expects the Innovative Medicine business to grow 5% to 7% from 2025 to 2030.
The MedTech segment also beat the Zacks Consensus Estimate. Sales in the MedTech businesses continued to benefit from strong procedure recovery and new products, which were partially offset by international sanctions in Russia and volume-based procurement issues in China in some categories.
In 2024, in the MedTech segment, J&J expects operational sales growth to be relatively consistent. Procedure volumes are expected to be above pre-COVID levels, with a modest impact of Russia sanctions in the first half.
J&J re-confirmed its full-year adjusted earnings and sales growth guidance that it had issued in December. In 2024, J&J expects total revenues in the range of $87.8 billion-$88.6 billion, which indicates growth in the range of 4.5%-5.5%, driven by both its Innovative Medicine and MedTech segments. Operational sales growth is expected in the range of 5%-6%. Adjusted earnings per share are expected in the range of $10.55-$10.75. The earnings range implies growth in the range of 6.4%-8.4%.
Adjusted pretax operating margins are expected to improve approximately 50 basis points from 2023. However, J&J’s chief financial officer, Joseph Wolk, mentioned on the call that potential Stelara biosimilar launches in Europe in the second half and some lingering inflationary costs in the MedTech inventory are expected to hurt margins.
On the call, the company also mentioned that it had spent $3 billion for more than 50 smaller licensing partnerships or deals in 2023. Earlier this month, J&J announced a definitive agreement to acquire Ambrx Biopharma for a total equity value of approximately $2.0 billion.
The acquisition will strengthen J&J’s oncology pipeline by adding Ambrx’s lead pipeline candidate, ARX517, a prostate-specific membrane antigen targeting antibody drug conjugate (ADC), being developed for metastatic castration-resistant prostate cancer. Ambrx is developing next-generation ADCs by leveraging its proprietary synthetic biology technology that effectively kills cancer cells and limits toxicities associated with chemotherapy treatment.
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Key Takeaways From JNJ's (JNJ) Q4 Earnings Presentation
Johnson & Johnson (JNJ - Free Report) reported fourth-quarter and full-year 2024 results on Jan 23. The drug and medical devices giant beat the Zacks Consensus Estimate for both earnings as well as sales in the fourth quarter.
In August, J&J completely separated its Consumer Health business into a newly listed company called Kenvue (KVUE - Free Report) , which now operates as a separate and fully independent company.
After completion of the exchange offer, J&J now has a 9.5% stake (approximately 180 million shares) in Kenvue’s common stock, which it may monetize in a tax-efficient manner in 2024.
With the complete separation of the Consumer Health segment, J&J has now become a two-sector company focused on the Pharmaceutical and MedTech fields.
Here, we discuss some key takeaways from the fourth-quarter 2023 conference call.
J&J’s Innovative Medicines (previously referred to as Pharmaceutical) unit outperformed expectations, with sales of several key drugs like Darzalex, Stelara, Tremfya and Imbruvica beating estimates. Sales of all these drugs were driven by market share gains. Importantly, the delay in the launch of biosimilar versions of the blockbuster drug Stelara benefited J&J’s top line. In May, J&J settled its litigation with Amgen (AMGN - Free Report) , as a result of which J&J does not anticipate the launch of a biosimilar version of Stelara in the United States until January 2025.
In addition, the rapid adoption of new products such as Carvykti, Tecvayli, Talvey and Spravato also contributed to top-line growth. The sales growth was partially dampened by lower sales of Imbruvica, the COVID vaccine and generic/biosimilar competition to drugs like Zytiga and Remicade.
In 2024, J&J expects to record above-market growth in the Innovative Medicine unit, for the 13th consecutive quarter. The growth is expected to be driven by key products like Darzalex, Tremfya and Erleada and the rapid adoption of new products. Innovative Medicine sales growth is expected to be slightly stronger in the first half of the year compared to the second half due to the potential entry of Stelara biosimilars in Europe in mid-2024. In fact, J&J expects the Innovative Medicine business to grow 5% to 7% from 2025 to 2030.
The MedTech segment also beat the Zacks Consensus Estimate. Sales in the MedTech businesses continued to benefit from strong procedure recovery and new products, which were partially offset by international sanctions in Russia and volume-based procurement issues in China in some categories.
In 2024, in the MedTech segment, J&J expects operational sales growth to be relatively consistent. Procedure volumes are expected to be above pre-COVID levels, with a modest impact of Russia sanctions in the first half.
J&J re-confirmed its full-year adjusted earnings and sales growth guidance that it had issued in December. In 2024, J&J expects total revenues in the range of $87.8 billion-$88.6 billion, which indicates growth in the range of 4.5%-5.5%, driven by both its Innovative Medicine and MedTech segments. Operational sales growth is expected in the range of 5%-6%. Adjusted earnings per share are expected in the range of $10.55-$10.75. The earnings range implies growth in the range of 6.4%-8.4%.
Adjusted pretax operating margins are expected to improve approximately 50 basis points from 2023. However, J&J’s chief financial officer, Joseph Wolk, mentioned on the call that potential Stelara biosimilar launches in Europe in the second half and some lingering inflationary costs in the MedTech inventory are expected to hurt margins.
On the call, the company also mentioned that it had spent $3 billion for more than 50 smaller licensing partnerships or deals in 2023. Earlier this month, J&J announced a definitive agreement to acquire Ambrx Biopharma for a total equity value of approximately $2.0 billion.
The acquisition will strengthen J&J’s oncology pipeline by adding Ambrx’s lead pipeline candidate, ARX517, a prostate-specific membrane antigen targeting antibody drug conjugate (ADC), being developed for metastatic castration-resistant prostate cancer. Ambrx is developing next-generation ADCs by leveraging its proprietary synthetic biology technology that effectively kills cancer cells and limits toxicities associated with chemotherapy treatment.