Johnson & Johnson (NYSE: JNJ) had some good news for analysts in its third quarter earnings report. Profits rose to $2.98 billion on revenues of Things are going well for new drugs but its medical device division is suffering under the weight of the Affordable Care Act and fewer surgical procedures. Here’s a highlight of five of the most interesting news bits.
Ouch that Affordable Care Act really smarts $1 billion dollars. That’s how much Barclay PLC analyst Tony Butler estimates the law will cost the big pharma and medical device maker this year, according to a Bloomberg newswire story. He arrived at that figure by adding up lower drug prices for Medicare recipients, rebates as part of Medicaid, and the medical device tax — a 2.3 percent tax on medical device sales.
Medical device sales were weaker. Fewer people opted for elective surgery and that helped drive down medical device revenues — that and the aforementioned medical device tax but there was no one cause. CNBC quoted Edward Jones analyst Judson Clark who said the weakest part of its medical device division was medical diagnostics. “The weakness in devices appears to be broad-based, with not just one thing bringing them down.” But it could boost sales in this sector with anticipated sales volume that will come from selling cheaper priced devices in emerging markets like China and India. Global medical devices and diagnostics sales amounted to $6.9 billion for the quarter. That was 2 percent less than the previous year. Sales in the U.S. market fell the most — 4.2 percent.
With the Rise of AI, What IP Disputes in Healthcare Are Likely to Emerge?
Munck Wilson Mandala Partner Greg Howison shared his perspective on some of the legal ramifications around AI, IP, connected devices and the data they generate, in response to emailed questions.
4 new drugs set to drive future growth J&J’s medical device side is much larger than its drug development division. Even so the pharmaceutical side outshined devices this quarter. Drug sales rose nearly 10 percent to more than $7 billion. Morningstar analyst Damien Conover said immunology drug Simponi and psoriasis drug Stelara, along with cardiovascular anti-clotting drug Xarelto and diabetes drug Invokana to improve glycemic control, are well positioned for strong long-term growth. “We expect to see a continuation of the quarter’s strength in recently launched drugs for several more quarters,” his report said. Invega Sustena for schizophrenia and Zytiga for prostate cancer also helped boost sales.
Litigation expense balloon The amount J&J forked out for legal bills in the third quarter was a startling $872 million compared with $89 million for the same period last year. It accounted for nearly half of what it has paid in legal bills for the nine months through September. Lawsuits tied to the improper marketing of Risperdal and complications caused by DePuy artificial hips drove those costs. But consumer products, in the form of drug recalls, also counted for some of them.
Consumer products: how badly will its logistics issues impact longterm growth? The consumer division showed signs of recovery from an embarassing series of recalls over problems afflicting its distribution centers. Associated Press referenced Erik Gordon, an analyst at University of Michigan’s Ross School of Business. He speculated whether the mild recovery the division had this quarter showed long-term promise. “They’ve lost four years of business and may never get it all back.”
