J&J forecasts weak annual profit, misses revenue estimates

By Manas Mishra and Saumya Joseph

(Reuters) - Johnson & Johnson on Wednesday forecast 2020 profit below Wall Street estimates and said increased competition for its off-patent treatments could somewhat limit growth in the top-earning pharmaceuticals unit.

Shares of the healthcare conglomerate fell nearly 2% to $146.62 after it reported a rare miss on quarterly revenue, as sales of cancer drug Imbruvica and psoriasis treatment Stelara came in below lofty Wall Street estimates.

J&J's pharmaceuticals unit, which makes up half of the company's overall sales, has powered much of its recent growth.

However, generic competition for medicines such as prostate cancer drug Zytiga, coupled with pressure to hold down prescription drug price increases in the United States, has weighed on revenue.

Chief Financial Officer Joseph Wolk said the company still expects sales growth to accelerate in 2020, but it will "probably not be as robust as we would have thought this time last year."

He said J&J did not take as big a hit from generic and biosimilar competition in 2019 as feared, and that the company hoped its off-patent branded products could maintain market share into 2020.

J&J expects full-year 2020 adjusted earnings of $8.95 to $9.10 per share, with a midpoint below current analysts' average estimates at the top of the range.

Important newer drugs posted double-digit sales gains in the fourth quarter but missed analysts' forecasts.

Stelara rose 17.7% to $1.70 billion, short of Credit Suisse's estimate of $1.79 billion, while Imbruvica sales jumped 24.5% to $875 million, but still came up short of the brokerage's estimate of $907 million.

Pharmaceutical sales rose 3.5% to $10.55 billion in the fourth quarter, but failed to reach Wall Street estimates of $10.63 billion, according Refinitiv data.

Overall sales rose 1.7% to $20.75 billion, below the average analyst estimate of $20.80 billion, marking the company's first revenue miss in at least eight quarters.

The company said it will not actively participate in a U.S. Food and Drug Administration hearing early next month to discuss testing methods for talc.

"We certainly welcome any discussion around the safety and efficacy of the product... I can say that our current internal testing methods exceed that of current FDA standards for cosmetic talc," Wolk said.

The company faces thousands of lawsuits alleging that its talc products, including baby powder, caused cancer. J&J has maintained that the products are safe and do not contain cancer-causing contaminants.

Excluding items, J&J earned $1.88 per share, beating the average analyst estimate by a cent, according to IBES data from Refinitiv.

(Reporting by Manas Mishra and Saumya Sibi Joseph in Bengaluru; Editing by Saumyadeb Chakrabarty and Bill Berkrot)