Johnson & Johnson reported a slightly higher-than-expected profit on Tuesday, driven by strong sales of its immune disease treatment, Tremfya, and said it plans to spin off its hips-and-knees business next year.
The company said late last year it intended to spin off its orthopedics unit, DePuy Synthes, into a standalone company, marking its second major spinoff as it sharpens its focus on higher-growth healthcare segments.
Chief Financial Officer Joe Wolk said in an interview with CNBC that the company is targeting mid-2027 for the spinoff.
“We’re not cash strapped. We don’t have to pursue a deal that maybe is not optimal,” Wolk told CNBC.
“We can sit this out for a little bit, separate the business sometime next year.”
Global alternative asset manager Apollo Global Management is in talks to acquire the orthopedics unit in a ​deal that could value it at close to $20 billion, Bloomberg News reported in September.
The company’s shares fell 2% before the bell.
Middle East conflict weighs on MedTech
J&J CFO Wolk told Reuters in an interview that the Middle East conflict, austerity measures in Europe, and pricing in China continued to weigh on international results, “but maybe in a little bit more pronounced way.”
He said the Middle East conflict, which has driven up fuel costs at home and abroad, has not yet affected the company’s costs but has hurt sales in the region.
“These are countries that still value and actually want premium healthcare systems, think Kuwait, UAE, Saudi Arabia. They pride themselves on having solid healthcare, very good healthcare,” Wolk said. “But their budgets now are being resourced and allocated towards defense.”
Medical technology division sales rose only 2.5% to $8.6 billion overall, but missed estimates of $8.71 billion, according to LSEG data. Outside the U.S., the division’s sales were essentially flat.
In MedTech, cardio and surgery drove the miss, J.P. Morgan analyst Chris Schott said.
The company raised its full-year reported sales forecast to about $101.2 billion at the midpoint, up from $101.1 billion previously. It increased its adjusted earnings forecast range with a new midpoint of $11.10 per share, up from $11.04.
Sales at its Abiomed heart pump business also remained slow after a UK study earlier this year raised questions about using Impella pumps during certain high-risk ​coronary procedures.
Quarterly pharmaceutical sales jumped 7.7% to $16.76 billion.
Tremfya sales rose 68% to $2.4 billion, beating analysts’ estimates of about $2.19 billion, while Stelara sales, which face generic competition, fell 54% to $716 million, still well above Wall Street expectations of $591 million. Tremfya has increasingly replaced lost Stelara revenue following recent approvals in inflammatory bowel diseases.
Sales of blood cancer treatment Darzalex rose about 16% to $4.24 billion, short of analyst expectations of $4.4 billion.
J&J shares closed at $263.73 on Monday. They have risen 27% this year, outperforming both the broader market and most healthcare peers.
The company posted third-quarter revenue of $25.4 billion, above analysts’ average estimate of $25.28 billion, and adjusted earnings of $2.59 per share also topped Wall Street expectations of $2.54.