J&J Lifts Forecast As Suits Weigh On Its Shares -- WSJ

By Peter Loftus and Kimberly Chin 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 17, 2019).

Johnson & Johnson raised its forecast of 2019 sales as it reported quarterly results, but costly product litigation continues to weigh on the health-care giant.

The New Jersey-based company's second-quarter profit rose 42% to $5.61 billion, or $2.08 a share, compared with a year earlier. The company received a $2 billion pretax gain in the most recent quarter from the sale of its Advanced Sterilization Products business to industrial-equipment maker Fortive Corp.

Excluding special items, J&J earned $2.58 a share, above the mean estimate of analysts polled by FactSet of $2.46 a share.

Sales fell 1.3% to $20.56 billion, but were better than analysts' expectations. J&J now expects reported sales for the year to be between $80.8 billion and $81.6 billion, up from the $80.4 billion to $81.2 billion previously forecast.

Still, J&J shares declined 1.6% at $132.50 on Tuesday and the stock remains down from its December peak on concerns about litigation over the safety of talc-containing products such as Johnson's Baby Powder, and the company's marketing of opioids.

J&J faces more than 14,000 legal claims that use of its talc products caused cancer, and some juries have ordered the company to pay large monetary damages to plaintiffs. J&J is appealing the verdicts, and says its talc products are safe and don't cause cancer.

J&J hasn't set aside any significant amounts for potential settlements of talc claims. But its legal defense costs are adding up: In the second quarter, J&J recorded a charge of $190 million for talc defense costs, Chief Financial Officer Joseph Wolk said on a conference call with analysts on Tuesday.

"We'll continue to pursue defense of the company's actions as well as products," Mr. Wolk said.

Separately, J&J defended itself in a recent trial in Oklahoma in which the state's attorney general alleged J&J's actions in marketing opioid painkillers fueled the opioid epidemic. J&J says its marketing was legally protected speech.

Wells Fargo analyst Larry Biegelsen said on the J&J conference call the talc and opioid litigation has been an "overhang" for J&J's stock price.

J&J's largest division, pharmaceuticals, had second-quarter sales of $10.53 billion, up 1.7% from a year earlier. Medical-device sales declined 6.9% to $6.49 billion, while sales of consumer products, which include products such as Band-Aid bandages and Tylenol medicine, increased 1.2% to $3.54 billion.

Strong sales gains for cancer drugs Darzalex and Imbruvica helped fuel pharmaceutical sales, offsetting continued declines for anti-inflammatory drug Remicade, which faces competition from lower-cost biosimilar versions.

Supply disruptions hurt sales of medical devices, including a recall of a stapler product. In the consumer segment, an increase in sales of beauty products helped offset declines in baby-care and women's health products.

J&J reiterated its forecast of earnings excluding certain items of $8.53 to $8.63 a share.

The company said it is using some of the proceeds from the sale of Advanced Sterilization Products to increase spending on research and development, mainly in medical devices and pharmaceuticals.

Write to Peter Loftus at [e-mail] and Kimberly Chin at [e-mail]

(END) Dow Jones Newswires

July 17, 2019 02:47 ET (06:47 GMT)

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