Johnson & Johnson Shows Focus On Strengthening Its Business Upon Its Consumer Health Unit Spinoff

On Tuesday, Johnson & Johnson (NYSE:JNJ) delivered a rather mixed first quarter report. Adjusted earnings surpassed estimates as sales in its medical devices business surged, while revenue was almost in line with estimates. First quarter results came shortly after JNJ’s expansion in the cardiovascular space with the $13.1 billion acquisition of heart device firm Shockwave Medical Inc (NASDAQ:SWAV).

First Quarter Highlights

For the period ended in March, the healthcare company posted a revenue of $21.38 billion, almost in line with LSEG’s estimate of $21.4 billion. During the first three months of the year, revenue rose more than 2% YoY. JNJ reported a net income of $5.35 billion, or $2.20 per share, with adjusted income amounting to $2.71, surpassing LSEG’s estimate of $2.64. It is quite a difference compared to last year’s comparable quarter when JNJ posted a net loss due to costs related to its controversial talc baby powder liabilities that led to the spinoff of its consumer health unit. This quarter’s success is owed to the thriving medical devices business that brought $7.82 to the revenue table, rising more than 4% on a YoY basis, with JNJ attributing the YoY rise to the acquisition of Abiomed.

On a less bright note, JNJ reported weak sales of vision care products and surgical devices. Vision products unit reported sales dropped 3.3% to $1.26 billion, but JNJ is confident that there will be tremendous improvement going forward.

JNJ is also going strong against cancer.

Meanwhile, pharmaceutical sales brought in sales of $13.56 billion and grew about 1% YoY. However, the segment was brought down by its unpopular Covid vaccine as without it, pharmaceutical sales grew almost 7%. This growth is greatly owed to its cancer drugs, namely Darzalex, that treats multiple myeloma, and Erleada, a treatment forprostate cancer treatmet, along with other other oncology treatments such as Carvykti, a cell therapy that has been approved for a certain blood cancer. Analysts expect Dazalex to bring in sales of more than $11 billion this year, followed by Carvykti with $1.15 billion.

For two years now, JNJ has been making quite a few pushes into the cardiovascular space to strengthen the medical devices business upon the split from the consumer unit, as before Shockwave Medical, it already got Abiomed andLaminar.  During the reported quarter, medical devices unit reported revenue of $7.82 billion boosted by strongdemand for Abiomed heart pumps, as well as devices used in wound closure surgeries, but analysts expected $7.88 billion.

But, the latest quarter shows it is also strengthening its position in the cancer battle, joining the efforts of Pfizer Inc (NYSE:PFE) and Moderna Inc (NASDAQ:MRNA) who are also turning to oncology to fight falling sales of Covid products. Both Pfizer and Moderna are betting big on cancer drugs to turn business around. Pfizer acquired the cancer drug maker specialist Seagen, thanks to which it expects to have at least eight blockbuster medicines by the end of the decade. Pfizer is going against four main types of cancer: breast cancer; genitourinary cancer, thoracic cancer, and hematology-oncology cancer. Meanwhile, Moderna developed an individualized cancer vaccine with Merck. Last year, Moderna reported mid-stage results of the combined treatment that were promising against melanoma. Last week, Moderna reported the treatment showed a positive response in an early-stage trial also in patients suffering from a type of head and neck cancer. Unsurprisingly, Moderna shares rose to a three month high upon the news last Tuesday.

A Narrowed Full Year Guidance

JNJ guided for full year sales between $88 billion to $88.4 billion, narrowing down its prior range from $87.8 billion to $88.6 billion. As for adjusted earnings, JNJ provided a range between $10.57 and $10.72 per share, also narrowing down its prior forecast that was between $10.55 and $10.75. However, considering that the acquisition of Shockwave Medical is expected to close in the middle of the year, it will undoubtedly alter JNJ’s full year guidance.

JNJ is often viewed as a reflection of the healthcare industry trends. With its latest results, the pharmaceutical giantshowed the sector is determined in finally winning the battle against cancer.

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