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J&J sees recovery in coronavirus-hit medical devices unit at end of year

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By Manas Mishra and Saumya Joseph
·2 min read
FILE PHOTO: Johnson & Johnson products stand on a shelf in a store in New York
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By Manas Mishra and Saumya Joseph

(Reuters) - Johnson & Johnson on Tuesday said it expects its medical device business to begin recovering in the fourth quarter as elective medical procedures delayed by the coronavirus pandemic start to resume.

The U.S. healthcare conglomerate lowered its full-year 2020 forecast due to the hit to its medical device business with procedures like hip and knee replacements on hold. The division accounts for nearly 30% of its total quarterly sales.

However, investors appeared to take heart that J&J did not simply withdraw its 2020 forecasts over coronavirus uncertainty as the pandemic causes massive business disruptions around the world. It also raised the quarterly dividend to $1.01 per share, and its shares rose 5% to $146.89

J&J's forecast for 2020 adjusted earnings of $7.50 to $7.90 per share - down from its prior estimate of $8.95 to $9.10 - assumes that a return of the coronavirus outbreak in the fall will look much different than the current global health crisis.

"If the virus does return, the world should be much better prepared to test, identify and isolate it. There may also be therapeutic options available," Chief Financial Officer Joseph Wolk said on a conference call.

Wolk said he expected elective procedures and doctor visits would be largely allowed in the second half of the year, with the business seeing a lingering impact but starting to stabilize in the third quarter.

Drugmakers and medical researchers are racing to develop treatments and vaccines for the novel coronavirus, which has infected some 2 million people globally.

J&J is developing a coronavirus vaccine and plans to start human trials by September, with an eye on having it ready under an emergency use authorization in early 2021.

J&J Chief Executive Alex Gorsky said the company was developing the vaccine on a "not-for-profit" basis for emergency pandemic use.

J&J, the first major U.S. drugmaker to report earnings since the outbreak, said medical device sales in the first quarter fell 8.2% to $5.93 billion, with products used in high-margin orthopedic procedures and vision correction hit particularly hard.

Pharmaceutical sales rose 8.7% to $11.13 billion, helped by demand for cancer drugs Darzalex and Imbruvica.

Consumer health sales jumped 9.2% to $3.63 billion, driven by a surge in demand for products like Tylenol and Motrin as consumers faced with an illness that causes fever and cough stocked up on essentials.

Excluding items, J&J earned $2.30 per share, beating the average analyst estimate by 30 cents, according to IBES data from Refinitiv.

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