Resilient under Trump's tariff threat Johnson & Johnson (JNJ.US) raises full-year revenue guidelines

The Zhitong Finance App learned that Johnson & Johnson (JNJ.US) announced financial results for the first quarter. The company's adjusted earnings per share for the first quarter increased 2.2% to $2.77, exceeding analysts' average expectations; revenue increased 2.3% year over year to US$21.9 billion, which also exceeded Wall Street's expectations. Meanwhile, despite Trump's decisive imposition of tariffs on the pharmaceutical industry, Johnson & Johnson has maintained a stable profit outlook.

Johnson & Johnson Chief Financial Officer Joe Wolk said in an interview that the US government announced an investigation into drug imports, which is widely viewed as the first step in taxing the industry, and may actually be beneficial. He said the survey may show that most drugs shipped to the US are cheap generic drugs rather than innovative treatments sold by Johnson & Johnson.

Looking ahead, Johnson & Johnson raised its full-year revenue guidance. The company raised its full-year revenue guidance from $89.2 billion to $90 billion released three months ago to $91 billion to $91.8 billion, which is higher than market expectations. The company attributed the increase in guidelines to the addition of the antipsychotic Caplyta.

Second, the company expects full-year adjusted earnings of between $10.50 and $10.70 per share, including expenses of 25 cents per share, to reflect its recent acquisition of bidirectional depression drug manufacturer Intra-Cellular Therapies for nearly $15 billion.

Seeking Alpha analyst Edmund Ingham believes that the company's decision to raise expectations for the whole year reflects management's long-term confidence. Ingham added: “A slight disappointment may be the year-over-year decline in international revenue, but taken into account, this is a strong performance by the world's largest healthcare company, kicking off the earnings season for major pharmaceutical companies.”

Patents and litigation

Johnson & Johnson is facing a multi-billion dollar patent cliff, and its second-largest drug for psoriasis, Stelara for Crohn's disease, is facing non-brand competition in the US and Europe. The company is counting on newer medications, including its best-selling blood cancer treatment Darzalex and autoimmune treatment Tremfya, to make up for this drop in revenue.

Johnson & Johnson's innovative pharmaceuticals division recorded sales of $13.9 billion, up about 2% year over year, exceeding Bloomberg analysts' expectations of $13.4 billion. Sales of Stelara, a treatment for Crohn's disease, fell 34% year over year to $1.6 billion, in line with market expectations of $1.6 billion. Darzalex's revenue for the quarter exceeded expectations, up 20% year over year to reach $3.2 billion, and Tremfya's sales also exceeded expectations, reaching $956 million.

Sales of the antipsychotic drug Invega Sustenna were $903 million, down about 15% year over year, compared to analysts' forecast of $1.1 billion. Remicade, a treatment for autoimmune diseases, had sales of US$467 million, up 8% year over year, compared with market expectations of US$364.1 million.

The revenue of Carvykti, a cancer cell therapy developed in collaboration with Johnson & Johnson and Legendary Biotech (LEGN.US), was US$369 million, and revenue of Xarelto, a blood thinner developed in collaboration with Bayer, was US$690 million, an increase of about 33% over the previous year, higher than market expectations of US$521.1 million.

Meanwhile, Tecvayli, a bispecific antibody developed by Johnson & Johnson in collaboration with Ligand Pharma (LGND.US), brought in revenue of US$151 million, an increase of about 13% year over year, while sales of the lymphoma treatment drug Imbruvica fell about 10% year over year to US$709 million, exceeding analysts' forecasts of US$680.3 million. Rybrevant, a lung cancer treatment drug developed by Johnson & Johnson in collaboration with Genmab (GMAB.US), had sales of US$141 million.

However, the company still has legal risks in the pharmaceutical business. At the end of last month, a federal judge in Texas denied Johnson & Johnson's third attempt to get the subsidiary it created to declare bankruptcy to settle tens of thousands of lawsuits alleging that the company's talcum powder caused cancer. The proposal aims to end the lawsuit alleging that its baby powder and other talc products caused ovarian cancer, that is the third time that the company's bankruptcy strategy has failed in court. This means that the company's future in litigation is uncertain.

Wall Street has been concerned about the potential impact of tariffs on the pharmaceutical industry, and Trump accuses the pharmaceutical industry of dangerously shifting its manufacturing overseas and charging excessive fees in the US. Although pharmaceuticals were excluded from Trump's initial tariff list, the US government has promised to impose tariffs on this area over the next few months.

Wolk believes that the US Department of Commerce's investigation into drug imports may indicate that drug makers do not pose a threat to national security, thereby protecting the company from future tariffs, but not everyone is optimistic.

Analysts say Johnson & Johnson's global size and reliance on medical devices may make it particularly vulnerable to tariffs. Medical devices will also be hit by tariffs. Meanwhile, its medical device business unit's revenue was $8 billion, up about 2% year over year, compared to market expectations of $8.2 billion.

The company said last month that it will invest more than 55 billion US dollars in the US over the next four years. Since Trump took office, other companies have also promised to invest more in the US. Johnson & Johnson did not say how it will allocate this funding, but only that it will be spread over manufacturing, R&D expenses, and technology investments.