The Johnson & Johnson logo is seen at a Brussels office of the company in Diegem, Belgium, on September 21, 2023. Portal/Yves Herman/File Photo acquire license rights
Oct 17 (Portal) – Johnson & Johnson (JNJ.N) said on Tuesday it has initiated a two-year restructuring program for its orthopedics business after third-quarter medical device sales fell short of Wall Street expectations , reflecting the company’s narrower focus since spinning off its consumer health division.
J&J said it plans to exit certain markets and stop selling some orthopedic products as part of the restructuring program.
Without consumer health and given the restructuring of its orthopedics business, pressure on J&J’s big pharmaceutical division is likely to increase as the company aims to reach its goal of $57 billion in drug sales by 2025, with the first biosimilar versions of the blockbuster psoriasis drug Stelara.
J&J raised its full-year profit forecast, helped by strong sales from its pharmaceutical business, and shares of the U.S. health care group fell about 1%.
Weakness in the medical device division could play a role in the stock’s move, said Vamil Divan, an analyst at Guggenheim Partners, who called pharmaceutical sales the “most impressive” part of J&J’s quarter.
Excluding its consumer health division, J&J now expects 2023 adjusted earnings of $10.07 to $10.13 per share, up from its previous forecast of $10.00 to $10.10.
J&J reported a third-quarter profit of $21 billion from its consumer health spinoff.
The company’s pharmaceutical business reported quarterly revenue of $13.89 billion, with Stelara contributing more than 20% at $2.86 billion, above analyst estimates of $2.61 billion.
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J&J has reached settlements that delayed entry of Stelara’s biosimilar rivals until 2025, which should help the drug continue to contribute significantly to overall sales.
However, European Stelara sales could decline from the middle of next year after a key patent expires, said J&J Chief Financial Officer Joseph Wolk. “We saw a small impact.”
Sales at J&J’s medical device division were $7.46 billion, below Wall Street estimates of $7.58 billion. The company’s orthopedics business accounted for about 29% of its medical device sales in the third quarter.
Sales of the company’s abdominal surgery equipment were hurt by a decline in demand for procedures such as bariatric surgery as many obese patients turned to popular new weight-loss drugs such as Novo Nordisk’s (NOVOb.CO) Wegovy and Ozempic.
Wolk said the use of these drugs could ultimately lead patients to other procedures using J&J products.
“Today there are people who are obese who are not eligible for orthopedic surgery, hip and knee replacements or some cardiovascular procedures, and those people are now becoming later candidates,” he said.
Wolk said J&J “does not have the scientific expertise at this point” to enter the obesity drug space. He said if “the right opportunity” presents itself for a differentiated product, J&J would explore it.
J&J completed the largest restructuring in its 137-year history with the spinoff in August, but retained a 9.5% stake in its iconic consumer health business.
Excluding items, J&J reported profit of $2.66 per share, beating analysts’ expectations by 14 cents, according to LSEG.
Reporting by Bhanvi Satija and Sriparna Roy in Bengaluru and Patrick Wingrove in New York; Editing by Shounak Dasgupta and Bill Berkrot
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