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J&J Share Rise Despite Firm Reporting Drop In Earning For Q1

J&J Share Rise Despite Firm Reporting Drop In Earning For Q1
Global healthcare giant Johnson & Johnson (J&J) reported a 14 per cent dip in its profits for its first quarter because of increasing legal costs as the company negotiates thousands of lawsuits against it over allegations that its talc baby powder was causing harm to users. the company has already expended almost $400 million to settle 25,000 cases related to its very successful product – the blood thinner Xarelto.
Despite this drop in profits, the company however reported better than expected earnings – resulting in its shares rising by 2 per cent. J&J’s first quarter net income was 14% lower at $3.75 billion, or $1.39 per share, compared to $4.37 billion, or $1.60 per share for the same period a year ago. This earning was more than the expectations of the analysts surveyed by Refinitiv at $2.03 per share.
“The strength of our first quarter results reinforce the confidence we have in our broad-based business,” Chief Financial Officer Joseph Wolk said Tuesday on a call with analysts. “We continue to manage our portfolio with discipline and make investments across the enterprise that position as well to achieve long-term sustainable growth across three vital aspects of health care.”
In recent months, J&J has been leaking money for its legal hassles. In addition to the company expending $1.29 billion during the fourth quarter over legal issues, it expended another $423 million on the same cause during the first quarter of the current year. In comparison, the company did not expend a dime on legal issues in the first quarter of 2018.
There have been thousands of cases, majorly in the United States – one of its major markets, over allegations that cancer is being caused by its talc baby powder. However, company spokesman Ernie Knewitz said that the majority of the legal expenses for the company during the first quarter was made in settlement of previous more than 25000 cases related to its blood thinner Xarelto. The company informed that the settlement amount was split with the developing partner for the product Germany’s Bayer which meant tah J&J itself had to shell out about $387.5 million on the settlement.
“While there have been several trials where juries have awarded significant verdicts against Johnson & Johnson [in the talc cases], each one that has been heard on appeal have been overturned,” Knewitz said. He however also added that just about 10 per cent of the total litigation expenses made by the company was accounted for by the talc litigation settlement in the fourth quarter which amounted to $1.29 billion.
The company reported a very slight increase in sale at $20.02 billion for the first quarter from $20.01 billion in the same period a year ago. In contrast, the market was expecting a decline to about $19.61 billion.
Prescription drug sales, which increased from $9.84 billion in first quarter of last year to $10.24 billion for the first three months of this year, accounted for over half of the total revenues generated by J&J. According to estimates compiled by StreetAccount, analysts were expecting revenue of $9.83 billion.

Christopher J. Mitchell

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