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JNJ CFO: We’re certain vaccine demand will increase

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Yahoo Finance’s Adam Shapiro speaks with Johnson & Johnson CFO, Joseph Wolk, about the company’s latest earnings report and vaccine outlook.

Video Transcript

JULIE HYMAN: Shares of Johnson & Johnson are trading slightly higher in premarket trading after the company came out with numbers and also raised its profit forecast for the full year. Our Adam Shapiro had a chance to talk to the company's chief financial officer. He is here with us now. Good morning, Adam.

ADAM SHAPIRO: Hey, Julie. J&J had a pretty good quarter. I mean they're beating on all cylinders. The sales were up to $23.3 billion and that's up 27.1% compared to second quarter of 2020. That's to be expected. Medical devices has recovered. But there's a lot of questions about what's going to happen with the COVID-19 vaccine. So here's what Joe Wolk told us.

JOSEPH WOLK: What I would say is the results across Johnson & Johnson is, at least during my tenure as CFO, I don't know that we've ever been in a healthier position. All segments are really clicking on all cylinders. You've mentioned medical devices. So we knew coming into the quarter, it was going to be strong, right? The comps were going to be favorable to Q2 of last year when elective procedures were essentially shut down. But you look at the underlying business, and you compare it to, let's say, a more normal quarter of Q2 2019, that business is up 7%. Pharmaceuticals is up 17%. And consumers up 6% versus that same time horizon.

In medical devices, specifically, in addition to the favorable comps, we're seeing just better execution. We are leading in some market share where we were already leaders. We're taking share where we weren't leaders. And we just have a much better level of cadence and innovation coming out. So we've got 17 new product launches in that segment-- on pace to have 25 this year. And over the last two years, it's been closer to above 30. So we're in very good shape. Ashley McEvoy and her team have done a great job, and we're seeing great growth where we've placed investments. Specifically, in areas like Asia-Pacific, as well as here in the US.

ADAM SHAPIRO: You brought up pharmaceuticals, $12.59 billion in the quarter. Infectious diseases, which includes the COVID vaccine, $1 billion. But in your guidance-- and we should point out-- you raised for your guidance $90 billion to 90.8 billion. But if you include the COVID-19 vaccine that J&J has, $92.5 billion to $93.3 billion. You're really expecting demand for the vaccine to increase, aren't you?

JOSEPH WOLK: We know-- It's not only an expectation, it's almost a certainty, quite frankly, given the advance purchase agreements that we have around the world. There is a lot of people who see benefit with the one shot. Certainly, we had very strong data published in the New England Journal of Medicine a few weeks ago that was peer-reviewed, Indicating that the durability is at least eight months-- better than other vaccines that are out there. And it really is taking on all variants inclusive of the new Delta variant.

ADAM SHAPIRO: When we talk about the vaccine, you talked about peer-review. There's a study which has not been peer-reviewed that says it might require-- your vaccine might require a booster shot. We should point out Pfizer's vaccine, they've said they're going to want people to get a booster shot. Where does J&J stand on that?

JOSEPH WOLK: Yeah, so we saw the study last night as well, Adam. I think we all have to be just a little bit cautious on a test tube study that looks at one element of protection. The data that I just referenced really looks at neutralizing antibodies, as well as T cell activity for complete immunity protection. We know that that's very solid data, again, peer-reviewed, as you noted. And I think it's really the responsible act to rely on health officials who have all the data at their fingertips to determine when and if boosters are needed for any of the vaccines. At this point they haven't done that yet.

ADAM SHAPIRO: I want to switch gears, when we move from the vaccine to other issues. There are the reports, which are not confirmed, that you're looking at perhaps spinning off the talcum powder and affiliated talc products into a separate business. Then put that new entity into bankruptcy as a way to deal with-- I think Reuters was the entity that broke the story-- something like 30,000 plaintiffs. How do you protect the balance sheet, the company-- the world's third largest pharmaceutical company-- from lawsuits, whether they have merit or not, from constant litigation?

JOSEPH WOLK: Yeah, so let's speak specifically about the talc. We're going to continue to defend the safety of that product based on decades of independent research by some of the best institutions in the world that prove that product was safe. With respect to the current Reuters report, we can only speculate that now attorneys are speculating about our legal strategies. They're probably somewhat frustrated with the Daubert ruling hearing of last year, where much of the so-called expert testimony from the plaintiff's attorneys that was being offered in these suits has been barred from being presented, as well as experts themselves. So we're going to continue to defend based on the safety record and let science dictate.

ADAM SHAPIRO: And it's not been announced yet, but a lot of news organizations are reporting a potential opioid settlement. This would certainly remove a cloud from the balance sheet, would it not? Can you share with us when this might be coming down the pike?

JOSEPH WOLK: Yeah, so obviously there are a number of parties involved in that. Adam, it's really been two years now that we've been on record saying that we've offered a settlement, we've reserved for it fully, so we'd like to see that come to conclusion in short order. But it is a complicated process, and we'll let that play out. But it's really not new news from a Johnson & Johnson perspective. We've certainly communicated this with the investment community and more broadly, in hopes of finding a settlement.

ADAM SHAPIRO: Hi, Julie. Once again, one of the reasons you saw shares slightly higher right now is their full year guidance now. Sales being anywhere between $90 billion and $90.8 billion. But when you add in sales of the COVID-19 vaccine, that's going to be at the higher end-- $93.3 billion. So Johnson & Johnson-- the pandemic certainly not behind all of us, but as we talked about in the interview with Joe Wolk, perhaps the worst of it is behind us. Julie?

JULIE HYMAN: Yeah, and Adam, just to put a fine point on what you were just saying-- obviously the COVID-19 is important, the vaccine is important for Johnson & Johnson, just as it is for Pfizer. But it is an enormous company. So it's important for revenues more at the margin than anything else. This is not a game changing product for the company.

ADAM SHAPIRO: No, the biggest driver within the pharmaceutical unit is oncology pharmaceuticals. So, and we talked about that, their research and development is really based in the cancer fighting drugs. But the COVID-19 vaccine, which by the way the CDC says has about a 66% efficacy against COVID-19, it is not the financial driver.

JULIE HYMAN: Right. Adam, great to see you. Thanks for being with us here this morning and bringing us that interview.