Johnson & Johnson Raises Profit Expectations but Faces Dual Challenges from Hurricanes and Supply Shortages, Stock Price Rises 3%

Johnson & Johnson raised its 2024 profit and sales forecast on Tuesday, following strong oncology drug sales and quarterly results that beat Wall Street expectations. During the quarter, J&J's global sales of cancer drugs increased by nearly 19%, including sales of multiple myeloma treatment Darzalex, which exceeded the $3 billion mark, an increase of 20.7%, or more than $500 million. According to analysts, Darzalex is expected to generate nearly $11 billion in revenue this year, compared with their previous estimate of $2.92 billion in the third quarter.

Joe Wolk, Johnson & Johnson's chief financial officer, noted that continued adoption of the subcutaneous version of Darzalex significantly reduced the duration of treatment and received regulatory approval to expand its use, which provided strong support for the improved sales performance. However, the company also noted that the after-effects of Hurricane Helen impacted business in the final weeks of the quarter, particularly in affected areas such as western North Carolina and Florida. At the same time, the company is closely monitoring the shortage of intravenous fluids, a problem exacerbated by flooding in Helene that paralyzed Baxter International's new plant in Marion, North Carolina, limiting intravenous supplies nationwide.

Tim Schmid, global chairman of J&J's medical devices business, said: "The recently announced shortage of intravenous saline, if sustained, could have an impact on surgical procedures across our portfolio."

In the face of the challenges, the New Jersey-based healthcare group maintained a solid financial performance, raising its profit forecast for the year by 10 cents to $10.15 a share (excluding a 24-cent charge related to its acquisition of medical device maker V-Wave). The company also expects sales for the year to be in the range of $89.4 billion to $89.8 billion, up from its previous forecast range of $89.2 billion to $89.6 billion. However, after accounting for merger-related charges, the company now expects earnings per share in the range of $9.86 to $9.96, slightly lower than its previous forecast of $10 to $10.10.

Despite the challenges, Johnson & Johnson's market performance remained strong, with shares rising nearly 3% to $166.14 on a day when the broader market was down. In addition, although sales of the best-selling psoriasis drug Stelara fell 6.6 percent to $2.68 billion in the third quarter, its performance still beat analysts' expectations of $2.43 billion. Stelara has long been an important growth engine for J&J, with analysts forecasting sales of more than $10 billion this year. By 2025, however, Stelara's sales are expected to fall to about $7 billion as competition for as many as six biosimilars intensifies in the U.S. market.

Still, Johnson & Johnson is confident about its future, saying it is confident of achieving "more than $57 billion in pharmaceutical sales" by 2025. Analysts expect drug sales to reach $56.77 billion next year. Barclays analyst Matt Miksic believes the target seems reasonable given the strong performance of the pharmaceutical division this quarter. In addition, J&J's cancer cell therapy Carvykti also achieved strong results, with sales of $286 million, beating expectations of $239 million. Although tight supply has limited Carvykti's sales growth, J&J said it is actively taking steps to increase capacity at its New Jersey and Belgium plants to meet market demand.

In the medical devices segment, quarterly sales rose 5.8 percent to $7.9 billion, showing solid growth even though the figure was slightly below analysts' expectations of $8.05 billion.