The unprecedented events of 2022 profoundly impacted the healthcare sector, with companies like Johnson & Johnson facing immense challenges and opportunities in equal measure. As one of the world’s largest and most diversified healthcare companies, Johnson & Johnson had to navigate this complex landscape while continuing to deliver life-saving products and solutions to millions across the globe.
The highly anticipated Q1 2023 earnings call offered an invaluable opportunity to gain insights into the company’s financial performance, strategic direction, and prospects. As we tuned in, we were captivated by the wealth of information shared by Johnson & Johnson’s top executives, shedding light on the company’s resilience and growth in these extraordinary times.
This article presents the key takeaways from the Johnson & Johnson Q1 2023 earnings call, highlighting the most pertinent information for stakeholders and industry observers alike.
Performance
- Worldwide sales for Q1 2023 were $24.7 billion, a 5.6% increase compared to Q1 2022
- Operational sales, excluding currency translation, increased by 9%
- In the U.S., sales increased by 9.7%. In regions outside the U.S., reported sales increased by 1.8%, while operational sales increased by 8.3%
- Consumer Health sales increased 7.4% worldwide, driven by global strategic price increases across all franchises
- Pharmaceutical sales increased 4.2% worldwide, with growth in key brands and recently launched products.
- MedTech sales increased 7.3% worldwide, driven by global procedure growth, recently launched products, and commercial execution
- Net loss for Q1 2023 was $68 million, and basic loss per share was $0.03, primarily driven by a $6.9 billion charge related to the talc settlement proposal.
- Adjusted net earnings for Q1 2023 were $7.1 billion, and adjusted diluted earnings per share was $2.68, a 0.4% increase compared to Q1 2022. On an operational basis, adjusted diluted earnings per share increased by 3%
Management commentary on the 2023 outlook
In 2023, the company is focusing on the successful separation of its Consumer Health business and management is expecting several pipeline advancements in its Pharmaceutical and MedTech businesses.
The Pharmaceutical segment saw a strong first quarter, driven by key assets and new launches. The company announced positive results in the CARTITUDE-4 study for CARVYKTI and the Phase IIb Frontier 1 study for oral IL-23. However, the investigational RSV adult vaccine program was discontinued to focus on medicines with greater potential benefits.
The MedTech business saw strong sales growth, advancing pipeline programs and acquiring Abiomed. In Orthopaedics, the company obtained CE Mark for the VELYS Robotic-Assisted Solution. The consumer health business saw double-digit growth in the first quarter, and the company is on track to complete its separation in 2023.
The full-year 2023 guidance is raised to 5.5%-6.5% operational sales growth, with sales guidance excluding contributions from the COVID-19 vaccine. Adjusted earnings per share guidance are increased by $0.05 per share, with a range of $10.50-$10.60 on a constant currency basis.
Question & Answer
Larry Biegelsen from Wells Fargo asked two questions regarding the company’s guidance. Firstly, he inquired about the shift from expecting a better second half of the year to more stable growth in MedTech and pharma.
Johnson & Johnson’s CFO Joseph Wolk clarified that they have moved from being responsibly cautious to responsibly optimistic due to their team’s ability to manage resources effectively and the company’s separation process. He mentioned that Q1 results were stronger than anticipated, which led to a more consistent growth approach throughout the year. He also noted that pharmaceutical pricing was unfavourable but not as much as they had expected.
Johnson & Johnson’s Worldwide Chairman of Medtech Ashley McEvoy added that procedures are trending above pre-COVID levels, except in China, where there was a downturn in December, January, and February. However, in March, China recovered to pre-COVID levels, leading to a more stable growth expectation throughout the year.
Matt Miksic from Barclays asked about the strong growth in the U.S. knee market and what factors drove it, such as the robot or other product launches.
Johnson & Johnson’s Worldwide Chairman of Medtech Ashley McEvoy responded by expressing pleasure in the 12% growth in the U.S. knee market and highlighted the balanced growth across the company’s business segments. She mentioned the industry’s strong performance, with procedures in recovery mode, and cited Abiomed’s 22% standalone growth in the first quarter.
She pointed out the strong performance of various business segments, such as BWI (up 13%), global vision (up 8%), and the U.S. business (growing north of 8%) fueled by ortho performance (up 6%) and surgery (up 6%). Additionally, 6 of the company’s 12 $1 billion platforms grew double digits in the United States in the quarter.
Ashley then discussed three innovations: pulse field ablation, Abiomed, and robotics. She shared updates on the VELYS robotic system, now the fastest-growing knee robotic system in the United States. The company has completed over 20,000 procedures with VELYS and is taking a systems approach to hips, shoulders, and spine.
Terence Flynn from Morgan Stanley asked about progress towards the 75% threshold in the talc litigation
Johnson & Johnson’s CFO Joseph Walk reiterated the company’s stance on the product’s safety and obtained the support of 60,000 to 70,000 claimants for the proposal. He expressed disappointment at allocating resources to address baseless scientific claims but acknowledged the need for a solution to bring certainty and efficiency.
Johnson & Johnson’s Assistant General Counsel Andrew White, , stated they are confident in their position, with over 60,000 claimants supporting the plan. They expect to present a reorganisation plan to the court within the next 30 days and quickly move to a vote. They believe they will gain even more support and reach the 75% threshold once the plan is out for a vote.