Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Johnson & Johnson (JNJ, Financial) reported worldwide sales of $22.4 billion for Q2 2024, a 6.6% increase year-over-year.
- Innovative medicine sales grew by 7.8%, driven by key brands and new product launches, with 10 assets delivering double-digit growth.
- MedTech sales increased by 4.4%, supported by new product introductions and strong procedure volumes.
- The company achieved significant clinical and regulatory milestones, including FDA approval for CARVYKTI in earlier lines of therapy.
- Johnson & Johnson (JNJ) increased its full-year 2024 operational sales guidance by $500 million, reflecting the completion of the Shockwave acquisition.
Negative Points
- Net earnings for the quarter were $4.7 billion, with diluted earnings per share decreasing to $1.93 from $2.05 a year ago.
- MedTech growth fell below expectations, with a revised growth forecast closer to 6% for 2024, down from the upper range of 5% to 7%.
- Cost of product sold margin deleveraged by 60 basis points due to product mix and macroeconomic factors.
- The effective tax rate increased to 18.5% from 14.7% in the same period last year, driven by unfavorable one-time international audit settlements.
- The company faces competitive pressures in several areas, including neuroscience and MedTech, impacting overall performance.
Q & A Highlights
Q: Can you provide more details on the upcoming milestones for RYBREVANT and its potential in the frontline setting for non-small cell lung cancer?
A: Jennifer Taubert, Executive Vice President, Worldwide Chairman, Innovative Medicine, emphasized the significant unmet need in frontline non-small cell lung cancer, noting that about a quarter of patients never make it to second-line therapy. She highlighted the promising data on progression-free survival (PFS) and the new subcutaneous dosing, which together are expected to make RYBREVANT a strong contender in the frontline setting.
Q: What drove the reduction in the expected growth for MedTech in 2024, and what is the outlook for the second half?
A: Tim Schmid, Executive Vice President, Worldwide Chairman of MedTech, attributed the reduction to challenges in the vision segment and performance in China. He noted sequential improvement in vision and expressed confidence in the second half, driven by innovation in contact lenses and premium intraocular lenses, as well as strong performance in orthopedics and cardiovascular segments.
Q: How does the efficacy and durability of nipocalimab compare to other FcRns and mechanisms of action on the market?
A: John Reed, Executive Vice President of Innovative Medicine, R&D, highlighted the sustained disease control and consistent efficacy of nipocalimab in Sjogren's disease. Jennifer Taubert added that nipocalimab has demonstrated clinical effect in four auto-antibody driven diseases and is the only FcRn blocker with proof-of-concept in all three segments of auto-antibody driven diseases, reinforcing its potential as a $5 billion-plus asset.
Q: Can you provide more color on the impact of the competitive PFA system on the EP business and the outlook for the second half?
A: Tim Schmid acknowledged the competition but emphasized the strength of their RF technology and the upcoming launch of their PFA technology. He highlighted the benefits of their CARTO 3 Version 8 mapping system and the broad portfolio of PFA offerings, which are expected to maintain their leadership position in the market.
Q: What is the impact of IRA negotiation for STELARA and XARELTO, and your confidence in DARZALEX FASPRO being treated separately?
A: Jennifer Taubert expressed confidence that DARZALEX FASPRO will be treated separately from DARZALEX IV. She noted that while the IRA price setting process and Part D redesign will have a net unfavorable impact in 2025, the company remains confident in its growth guidance of 3%-plus for 2025 and 5% to 7% through 2030.
Q: How do you view China as a growth driver for MedTech given the evolving market dynamics and challenges?
A: Joaquin Duato, Chairman of the Board, Chief Executive Officer, emphasized the long-term commitment to China despite current challenges. Tim Schmid noted the short-term impact of VBP and the anti-corruption campaign but expressed confidence in the long-term growth potential driven by the large patient population and ongoing innovation.
Q: Can you comment on the J&J US pharma exposure to efforts by plans to extract greater rebates in 2025?
A: Jennifer Taubert stated that while the company is still working with payers, the anticipated impact has been factored into their growth guidance. Joseph Wolk added that the company's focus on innovation and access ensures that they can manage the impact of increased rebates.
Q: What is the outlook for procedure volume trends and pricing in MedTech for the second half?
A: Tim Schmid noted that procedure volumes have normalized and the company expects growth in line with long-term expectations. He acknowledged the impact of inflation on pricing but emphasized the company's ability to secure premium pricing for differentiated innovations, particularly in cardiovascular and electrophysiology.
Q: Can you unpack the growth in hips and knees in orthopedics and the factors driving this performance?
A: Tim Schmid attributed the growth to innovation, particularly in the VELYS Hip Navigation and KINCISE systems for hips and the VELYS system for knees. He highlighted the strong market leadership and the ongoing expansion of the portfolio, including new indications and robotics in orthopedics.
Q: How do you reconcile the inventory destocking in contact lenses with the expected demand outlook?
A: Tim Schmid explained that the inventory destocking was specific to the contact lens business and was a short-term issue. He expressed confidence in the long-term demand outlook, driven by the company's market leadership and ongoing innovation in the contact lens portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
