Release Date: April 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Worldwide sales increased by 3.9%, with a notable growth of 7.8% in the U.S.
- Adjusted net earnings and adjusted diluted earnings per share increased by 3.8% and 12.4%, respectively, compared to the first quarter of 2023.
- Innovative Medicine sales grew by 2.5% worldwide, driven by key brands and uptake from recently launched products.
- MedTech sales increased by 6.3% worldwide, with strong growth in the U.S. and outside of the U.S.
- Successful regulatory and clinical milestones were achieved, including FDA approvals and positive study results for multiple products.
Negative Points
- Sales outside of the U.S. declined by 0.3%, indicating challenges in international markets.
- Excluding the impact of the COVID-19 vaccine, sales growth in Europe was only 6%, showing a potential slowdown.
- Unfavorable patient mix in XARELTO and competitive pressures led to decreased sales in some areas of the Innovative Medicine business.
- Contact Lenses declined by 2.3%, driven by U.S. stocking dynamics and partially offset by product performance.
- The effective tax rate increased to 16.5% from 15.9% in the same period last year, indicating a higher tax burden.
Q & A Highlights
Q: What was the net impact from onetime items on MedTech's Q1 growth, and what are the expectations for procedures and growth for the rest of the year?
A: Timothy Schmid - Senior Key Executive, explained that MedTech's 6.3% growth in Q1 had some noise due to onetime items, including an 80 basis points impact from fewer selling days and a 300 basis points impact from a revenue recognition change in the U.S. Orthopedics business. Despite these, the company expects high single-digit growth for the remainder of 2024, with confidence in the underlying health of the Vision portfolio despite Q1's performance being affected by U.S. distributor inventory contraction in contact lenses.
Q: Can you provide more context on the growth of Privado and the progress of drug price negotiations with Medicare under the IRA?
A: Jennifer Taubert - Senior Key Executive, shared that SPRAVATO's growth was strong, with over 70% growth in Q1, as it continues to perform well for patients with treatment-resistant depression. Regarding the IRA, she stated that the company is working with the government to ensure patient access and that the products involved in the process are not the company's future growth drivers. Despite the IRA, J&J remains confident in achieving its $57 billion commitment and delivering above-market growth from 2025 to 2030.
Q: What is the outlook for the multiple myeloma franchise, including CARVYKTI, TECVAYLI, and [Talve]?
A: Joaquin Duato - CEO, highlighted the strength of J&J's multiple myeloma franchise, with key brands like DARZALEX, TREMFYA, and [Erlida] growing over 20%. Jennifer Taubert added that CARVYKTI saw over 100% growth compared to Q1 2023, with strong demand and recent FDA approval for the second-line setting. TECVAYLI's launch is going well globally, and [Talve] is also experiencing strong uptake. J&J anticipates continued growth for these assets, especially in the second half of the year.
Q: How should we think about the growth of TECVAYLI, which has been somewhat flattish over the last couple of quarters?
A: Jennifer Taubert explained that TECVAYLI's launch is performing well in the later line settings and is competitive. The product is seeing strong uptake globally, and J&J has high expectations for its continued growth and performance.
Q: What's the appetite for further M&A following the Shockwave acquisition, and is there a greater sense of urgency to add bolt-on transactions?
A: Joaquin Duato - CEO, stated that J&J's M&A strategy is long-term and will remain disciplined, focusing on opportunities that improve the standard of care, are consistent with in-house capabilities, enable entry into higher growth markets, and deliver compelling financial results for shareholders. He emphasized that J&J's M&A strategy is a cornerstone of its value creation and will not change.
Q: Can you unpack the positive and negative parts of the Vision Care business?
A: An Unidentified Company Representative addressed the Q1 performance of Vision Care, attributing the contraction to U.S. distributor inventory adjustments in contact lenses. Despite this, the company remains confident in the underlying health of the Vision portfolio and expects high single-digit growth for 2024.
Q: What drove the strong growth in the Pulmonary Hypertension business this quarter?
A: Jennifer Taubert mentioned that both Opsumit and Uptravi delivered strong growth due to volume, share gains, and favorable patient mix. She also highlighted the approval of Upsinbi, the first combination tablet for PAH, and expressed optimism for the continued productivity of J&J's Pulmonary Hypertension assets.
Q: What is the outlook for Orthopedics, specifically hips and knees, given the strong growth this quarter?
A: Timothy Schmid discussed the robust market for Orthopedics and the impact of procedural backlog benefiting the business. He highlighted the success of the [Veles] platform in knees and expects high single-digit growth in hips and knees for the remainder of the year.
Q: Can you provide color on the performance of the cardiovascular and EP segments, particularly regarding product launches and competitive environment?
A: An Unidentified Company Representative spoke about the growth in cardiovascular and EP, with over 20% growth in both the U.S. and ex U.S. markets. The trust in J&J's RF technology and the progress in PFA were noted as key drivers, with expectations for FDA approval by the end of the year or early next year.
Q: What are the expectations for the bladder cancer data and the impact of the INVEGA SUSTENNA Kalpana litigation?
A: John Reed - Senior Key Executive, shared optimism for the drug-device combo for early bladder cancer, with impressive complete response rates and durability. He mentioned an upcoming presentation at the AUA and a filing expected early next year. Jennifer Taubert addressed the INVEGA SUSTENNA litigation, expressing confidence in the strength of the patents and the ongoing defense of the intellectual property.
