By Jaimy Lee
MarketWatch photo illustration/iStockphoto
This article is part of a series tracking the effects of the COVID-19 pandemic on major businesses, and will be updated. It was originally published April 10.
Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +1.99% is, in many ways, the benchmark company for the performance of publicly traded, health-care companies.
Not only is it usually the first large one to report earnings every season, the three divisions (medical devices, pharmaceuticals, and consumer) of its wildly diversified business each tell a different story about the state of the health-care industry, both in the U.S. and abroad. Factor in the expected impact of the COVID-19 pandemic, and J&J’s story for the first quarter of 2020 will likely set the stage for what to expect from other drugmakers, biotechnology companies, medical-device manufacturers and beauty and over-the-counter brands.
J&J investors will likely be paying close attention to what the company says about surgical volume, drug sales at a time when fewer new prescriptions are being written and doctor’s visits for non-COVID-19 reasons have dramatically showed, R&D productivity (other drugmakers like Eli Lilly & Co. /zigman2/quotes/200106384/composite LLY -0.78% and Vertex Pharmaceuticals Inc. /zigman2/quotes/202259802/composite VRTX -3.27% have halted new clinical trials), and commercial strategies when sales reps are at home and many medical meetings have been canceled or moved online. Company officials have already reported slowdowns in elective procedures in China, Europe, Japan, and South Korea.
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“To a large extent there is, I would say, more diligence around who enters the institutions. And we’re starting to see some slowdown in elective procedures,” Ciro Roemer, chair of J&J’s medical devices business in North America, said March 11 at a virtual investor conference, according to a FactSet transcript of the call.
Like many other drugmakers, J&J is working on several COVID-19 projects, tapping into some of the knowledge that it used to develop its investigational Ebola Virus Disease vaccine, which is being used in the outbreak in the Democratic Republic of the Congo, and vaccine constructs for the Zika virus and HIV. The company recently identified a vaccine candidate; it and BARDA plan to jointly pour $1 billion into developing and testing the candidate. It’s also examining its own portfolio of experimental and approved antivirals as potential treatments for the disease and partnering with the Prisma Health hospital system in South Carolina to make a ventilator expansion device.
What the numbers are saying
Revenue: Analysts surveyed by FactSet expect $19.7 billion in first-quarter revenue for the first quarter of 2020, compared with a previous consensus forecast of $19.8 billion. For the full year, analysts now model $79.1 billion, down from the previous consensus of $81.7 billion.
Earnings: Analysts expect $2.02 a share in earnings for the quarter, down from a previous forecast of $2.03, according to the FactSet consensus. For the full year, analysts predict $7.90 earnings per share, which is below the original consensus outlook of $8.42 for 2020.
Stock movement: J&J’s stock has dropped 3.2% over the last three months, compared with the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.94% , which has tumbled 14.3%. Of the 19 analysts tracked by FactSet who cover J&J, seven rate the stock a buy, four rate it a hold, and two rate it as overweight, with an average price target of $155.35 as of April 10.
What the company is saying
March 30: J&J plans to initiate Phase 1 clinical trials for its COVID-19 vaccine candidate by September, telling investors that the vaccine could be available for emergency use at the start of next year, and that it is upping its manufacturing capabilities to prepare. That said, the company said it’s “committed to bringing an affordable vaccine to the public on a not-for-profit basis for emergency pandemic use.”
March 31: “This would ordinarily take about five years, but as we all know these are very different times…We’ve got a team of scientists literally working around the clock since January,” J&J CEO Alex Gorsky told Fox News .
What analysts are saying
• “For JNJ, the 2021 sales/EPS cut is slightly more dramatic, as we assume some of the non-urgent orthopedics procedures (hips/knees) are never recovered.” – SVB Leerink analysts Danielle Antalffy and Rebecca Wang wrote on April 8
• Expect a first-quarter sales slowdown for Darzalex, a multiple myeloma drug that received FDA approval in June of last year, “which we expect to be roughly flat sequentially … due to pandemic-related headwinds.” — SunTrust Robinson Humphrey’s Asthika Goonewardene wrote April 6
• “JNJ has a diversified supply chain as well as significant inventory on its products and we do not expect any product shortages within JNJ’s branded pharma portfolio. In addition, we see relatively inelastic prescription demand for JNJ’s core product portfolio particularly in areas such as oncology and immunology.” – J .P. Morgan analysts in an April 3 note