Johnson & Johnson Results Driven by Pharmaceutical Sales Growth -- Update

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Johnson & Johnson reported an increase in sales for its fourth quarter, largely spurred by its pharmaceutical business, but reported a loss because of effects from the new tax law.

The company swung to a loss of $10.71 billion, or $3.99 a share, compared with a profit of $3.81 billion, or $1.38 a share, in the year-ago period. The drop was largely because of a tax provision charge of $13.27 billion.

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Excluding special items such as the tax provision, J&J's profit rose 9.5% to $4.78 billion, or $1.74 a share. Analysts polled by Thomson Reuters were expecting adjusted earnings of $1.72.

J&J, one of the largest U.S. health-products companies by revenue, said sales rose 12% to $20.2 billion. That growth was once again spurred by the company's pharmaceuticals business, where sales grew 18%.

The company's international pharmaceutical business grew by 21%, but sales in the U.S. were overall higher.

Analysts were expecting revenue of $20.07 billion.

J&J said it expects sales between $80.6 billion and $81.4 billion for 2018 and adjusted earnings per share between $8 and $8.20. Analysts had expected full-year adjusted earnings of $7.87 on revenue of $80.7 billion.

Shares rose 0.9% in premarket trading Tuesday.

In prepared remarks, Chief Executive Alex Gorsky commended the new tax law, saying it "enables Johnson & Johnson to invest in innovation at higher levels to help address the most challenging unmet medical needs" in the business.

The recent short-term government funding bill Congress passed on Monday included language suspending the 2.3% medical-device excise tax this year and in 2019. The tax, which an industry trade group J&J belongs to had lobbied against, applies to devices like artificial knees.

J&J, along with competitor Teva Pharmaceuticals, is also talking with Ohio's attorney general after the state sued the companies, alleging illegal marketing of opioid drugs. J&J has called the state's claims "baseless and unsubstantiated."

Write to Allison Prang at allison.prang@wsj.com

Johnson & Johnson sales rose in the fourth quarter, but the company reported a loss after taking a $13.6 billion charge as a result of the new U.S. tax law.

J&J expects the new law will lower its effective tax rate by 1.5 to 2.5 percentage points from the current rate of 17.2%. Analysts said the positive impact probably figured in the company's better-than-expected financial outlook for this year.

New Brunswick, N.J.,-based J&J is the latest company to report a charge as a result of the new tax law's levy on earnings made abroad, part of the overhaul's efforts to shift to a territorial system of taxation.

J&J has about $16 billion in foreign earnings it has held overseas to avoid paying taxes under the old 35% corporate tax rate. The new law will charge companies a one-time tax of 15.5% on overseas profits held in cash and liquid assets.

Chief Executive Alex Gorsky praised the tax changes for improving the competitiveness of U.S. companies and giving them more flexibility to use their cash.

He said the law will prompt J&J to increase investment "with the intent to have [the investment] substantially made in the U.S."

In the fourth quarter, J&J swung to a loss of $10.71 billion, or $3.99 a share, compared with a profit of $3.81 billion, or $1.38 a share, in the year-ago period, largely because of the tax-law charge.

Excluding special items such as the tax provision, J&J's profit rose 9.5% to $4.78 billion, or $1.74 a share. Analysts polled by Thomson Reuters were expecting adjusted earnings of $1.72.

J&J, one of the largest U.S. health-products companies by revenue and a bellwether for the health-care sector, said sales rose 12% to $20.2 billion.

The performance was driven by sales in the company's pharmaceuticals business, which rose by 18% to $9.7 billion. Sales of J&J's cancer drugs had some of the biggest gains.

Global sales of multiple-myeloma treatment Darzalex rose 86% in the quarter to $371 million, making the drug a so-called blockbuster, with annual sales over $1 billion.

But sales of arthritis therapy Remicade, J&J's longtime top-selling product, fell 10% the quarter to $1.5 billion as the company offered heavy discounts to compete with lower-priced biosimilars.

Mr. Gorsky said the company was making moves to improve the performance of its consumer-health and medical-device businesses, which haven't been performing as well as the pharmaceuticals unit.

For 2018, J&J said it expects sales between $80.6 billion and $81.4 billion and adjusted earnings per share between $8 and $8.20. Analysts had expected full-year adjusted earnings of $7.87 on revenue of $80.7 billion.

Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

January 23, 2018 12:50 ET (17:50 GMT)

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