Johnson & Johnson

Johnson & Johnson hiked prices to boost their margins and help funnel billions to their shareholders

Johnson & Johnson told analysts that their sales increase “were primarily driven by strategic price increases.” “Jessica Moore — Vice President, Investor Relations: Beginning with consumer health. Worldwide consumer health sales of $3.8 billion decreased 0.4%, with an increase of 2.1% in the U.S. and a decline of 2.3% outside the U.S. Excluding translational currency, worldwide operational sales growth increased 4.7%. And outside the U.S., operational sales growth increased 6.7%. Excluding the impact of acquisitions and divestitures, worldwide growth was 4.8%. Results were primarily driven by strategic price increases; growth in OTC due to a strong cold, cough, and flu season; and OUS growth in Neutrogena and Aveeno due to market growth and new product launches. This growth was partially offset by supply constraints in the U.S. and suspension of sales of personal care products in Russia” (Johnson & Johnson Q3 2022 Earnings Call, 10/18/2022)

Johnson & Johnson said their “consumer health margins improved from 24.2% to 24.3% despite inflationary pressures, driven by price actions and investment prioritization.” “Jessica Moore — Vice President, Investor Relations: MedTech margins remained flat at 25.5%. Commodity inflation and increased investment in research and development were offset by supply chain efficiencies in sales, marketing, and administrative leveraging. Finally, consumer health margins improved from 24.2% to 24.3% despite inflationary pressures, driven by price actions and investment prioritization. This concludes the sales and earnings portion of the Johnson & Johnson third quarter results.” (Johnson & Johnson Q3 2022 Earnings Call, 10/18/2022)

A Johnson & Johnson EVP told analysts ”Our strategy is working. Our pricing actions were realized, supply chain constraints eased, and we are also against easier prior-year comparables.” “Thibaut Mongon — Executive Vice President, Worldwide Chairman of Consumer Health: Thank you, Joe, and good morning to all of you. We are indeed very proud of the achievements we have completed so far in 2022. As we shared with you throughout the year, we told you that consumer health would deliver improved performance starting in the second half of the year, and that is exactly what you saw with our good performance in the third quarter. Our strategy is working. Our pricing actions were realized, supply chain constraints eased, and we are also against easier prior-year comparables. Our third quarter results reflect those dynamics and really demonstrate our ability to achieve results despite the macroeconomic environment that Joe referenced and that continues to be volatile. And all of this thanks to the strength of our brands and the quality of our teams.” (Johnson & Johnson Q3 2022 Earnings Call, 10/18/2022)

Johnson & Johnson used their price hikes to pay for $13 billion in stock buybacks and dividends for their investors.“Joe Wolk — Executive Vice President and Chief Financial Officer: Yeah. Larry, regarding M&A, well, first off, let me start with just reiterating the strong free cash flow that we have year to date, over $13 billion. Also very proud of the fact that we’ve been able to distribute nearly $11 billion to shareholders through the form of our dividend program, as well as the repurchase program that was announced just mid last month. So we feel really good on that front. But as you likely noticed in today’s comments, we still hold $34 billion of cash, which positions us extremely well to continue exercising that lever of capital allocation around acquisitions or significant collaborations going forward. So our priorities have not changed. In fact, maybe we’re even a little bit more bullish and eager to do something. But as folks come to know us, we’re not going to do anything haphazardly.” (Johnson & Johnson Q3 2022 Earnings Call, 10/18/2022)

Johnson & Johnson said it was benefitting from price increases that would continue through 2022

Johnson & Johnson said worldwide growth was “primarily driven by strategic price increases growth in OTC outside the U.S. due to a strong cold, cough and flu season and digestive health category recovery.” “Jessica Moore — Vice President, Investor Relations: Operational sales growth, which excludes the effect of translational currency, increased 2.3% as currency had a negative impact of 3.6 points. Excluding the impact of acquisitions and divestitures, worldwide growth was 2.9%. Results were primarily driven by strategic price increases growth in OTC outside the U.S. due to a strong cold, cough and flu season and digestive health category recovery.” (Johnson & Johnson Q2 2022 Earnings Call, 7/19/2022)

Johnson & Johnson predicted higher growth thanks to more “strategic price increases in the back half of the year” “Jessica Moore — Vice President, Investor Relations: Back to the current year. In terms of 2022 quarterly phasing considerations for your models, we continue to estimate that the back half will improve over the first half with a slight bias for higher growth in Q4 over Q3. In consumer health, we have seen quarter-over-quarter reduction in supply disruptions that we anticipate will continue. We also expect to see the benefit of recent strategic price increases in the back half of the year.” (Johnson & Johnson Q2 2022 Earnings Call, 7/19/2022)

Johnson & Johnson said it was able to hike prices even as consumers cut spending in other areas

Johnson & Johnson’s CFO justified “targeted price increases” even as consumers cut spending because “when it comes healthcare, better health, looking better, products like Aveeno, Neutrogena, Tylenol, Listerine, they seem to do really well, and consumers will prioritize those.”“Joe Wolk — Executive Vice President, Chief Financial Officer: Sure. Yes. So the targeted price increases we referred to, Joanne, and thanks for the question. In consumer, that’s kind of keeping consistent with the peer set to offset the inflationary pressures. We do know that while folks are looking to more generally cut back spending that’s been in entertainment, dining out, when it comes healthcare, better health, looking better, products like Aveeno, Neutrogena, Tylenol, Listerine, they seem to do really well, and consumers will prioritize those. With specifically to MedTech, as you probably appreciate, a lot of our portfolio is really governed by contracts that are already in place with hospital systems. So it’s difficult, unless there is certain inflationary clauses within those contracts. That’s what we mean when we say targeted. It’s very selective, and I would say it’s probably not the majority of the hospital volumes or hospital contracting that you may say. Joaquin, you want to talk about volumes?” (Johnson & Johnson Q2 2022 Earnings Call, 7/19/2022)

Johnson & Johnson’s CEO warned analysts at length about Democratic drug pricing plans for Medicare

Johnson & Johnson’s CEO warned that Senate drug pricing legislation “have a significant detrimental effect on the ability of the industry of the companies to be able to invest in R&D and to develop new medicines.” Joaquin Duato — Chief Executive Officer: Thank you for the question and a great question. First, it’s difficult for us to comment on the content of the legislation or the feasibility of that legislation passing. There’s been a lot of ups and downs there. While we are very closely following the dynamics, the situation is still fluid. So it’s difficult for us to comment on the actual legislation or in the feasibility. Now if we believe that the legislation is going to base on the language that we know from the Senate Finance Committee, as you pointed out, that will have a significant detrimental effect on the ability of the industry of the companies to be able to invest in R&D and to develop new medicines. Just for perspective, the biopharmaceutical industry invested about $120 billion in R&D in 2020. Johnson & Johnson, ourselves, in our pharmaceutical business, we invested $12 billion R&D in 2021.” (Johnson & Johnson Q2 2022 Earnings Call, 7/19/2022)

Johnson & Johnson’s CEO: “We can tell you that the type of legislation that was proposed by the Senate Finance Committee with Medicare price setting will have a chilling effect in innovation that will be translated in less new medicines for patients.” Joaquin Duato — Chief Executive Officer: So as a company that invests heavily in R&D, we can tell you that the type of legislation that was proposed by the Senate Finance Committee with Medicare price setting will have a chilling effect in innovation that will be translated in less new medicines for patients. Again, for perspective, since 2000, the pharmaceutical industry has introduced about 1,000 new medicines. The impact that this will have may affect the advances that we have in multiple areas that are still needed to be able to advance patient care. So it’s a very seamless situation that will affect innovation, will affect our ability to invest in R&D and to develop new medicines. “ (Johnson & Johnson Q2 2022 Earnings Call, 7/19/2022)

Johnson & Johnson’s CEO told analysts the company was “engaging with different stakeholders in trying to educate them about the impact of this type of legislation and innovation.” ”Joaquin Duato — Chief Executive Officer: Now we are also engaging with different stakeholders in trying to educate them about the impact of this type of legislation and innovation. But at the same time, we also want to sit at the table and participate in discussions to address what we believe is the major issue, which is patient affordability and patient access, specifically in Part D. So we think that, that’s something that the industry has to address with the relevant stakeholders, and we are very willing to sit at the table and shoulder the consequences of being able to address the patient affordability issue. Now I always have — I always need to remember to you that in a price-constrained environment, Johnson & Johnson performs relatively better than most of our peers and competitors based on a number of factors. (Johnson & Johnson Q2 2022 Earnings Call, 7/19/2022)

Johnson & Johnson continued to benefit from the federally funded covid vaccine while lamenting alleged“single digit” price decreases in their pharmaceutical business 

Johnson & Johnson reported that the covid vaccine still represented roughly 4% of worldwide sales growth“Jessica Moore — Vice President, Investor Relations: Operational sales growth, which excludes the effect of translational currency, increased 12.3% as currency had a negative impact of 5.6 points. Excluding the impact of acquisitions and divestitures, Worldwide growth was 12.4%. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 8.6%. Results in the quarter were impacted by unfavorable prior period adjustments, offset by favorable discounts.” (Johnson & Johnson Q2 2022 Earnings Call, 7/19/2022)Johnson & Johnson’s CEO claimed the company’s pharmaceutical business was actually facing “mid-single-digit niche price decreases.” “Joaquin Duato — Chief Executive Officer: First, our diversification. Second, we have about half of our sales that come outside of the U.S. And third, specifically in the pharmaceutical business, we have been able to deliver above-market growth in the face of mid-single-digit niche price decreases. So we know how to grow in a difficult pricing environment.” (Johnson & Johnson Q2 2022 Earnings Call, 7/19/2022)

Johnson & Johnson hiked prices despite profits from covid vaccine

Johnson & Johnson had a “mixed” fourth quarter earnings, despite a 10% revenue increase thanks to its covid vaccine that should provide billions more in sales in 2022. “Johnson & Johnson on Tuesday projected that its Covid vaccine would generate $3 billion to $3.5 billion in sales in 2022, after posting a mixed fourth-quarter report that slightly beat on earnings estimates but missed on revenue…. On an unadjusted basis, J&J’s fourth-quarter profit surged to $4.74 billion, almost triple the $1.74 billion it earned during the same quarter the previous year. Its revenue of $24.8 billion rose 10.4% from $22.48 billion during the same quarter in 2020, mostly driven by $1.82 billion in international sales of its Covid vaccine.” (CNBC, 1/22/2021)

Johnson’s & Johnson’s pharmaceutical business saw a 14.3% increase in revenue, while consumer health had a 4.1% increase in revenue.“J&J reported $93.77 billion in sales in 2021, a 13.6% increase over the prior year. The company’s pharmaceutical division generated $52.08 billion in revenue, a 14.3% year-over-year increase. J&J’s medical devices business reported sales of $27.06 billion in 2021, a 17.9% increase compared with 2020. The consumer health section posted $14.63 billion in revenue, a 4.1% increase.” (CNBC, 1/22/2021)

Despite vaccine revenue, J&J instituted price increases where it could easily pass on costs

Johnson & Johnson’s CFO: “Similar to competitors, we are instituting price increases across our consumer health portfolio in 2022, enabling us to remain competitive…” “Joe Wolk — Executive Vice President, Chief Financial Officer: In consumer health, we are confident that our well-balanced portfolio positions us well. Consistent with current global macroeconomic trends, we are experiencing the impact of inflationary pressures, including higher input costs across our business and more significantly with respect to consumer health. These external challenges include availability and cost of certain commodities, labor and transportation. Similar to competitors, we are instituting price increases across our consumer health portfolio in 2022, enabling us to remain competitive as we continue to deliver the products that consumers love and trust.” (Johnson & Johnson Q4 2021 Earnings Call Transcript, 1/25/2022)

Johnson & Johnson’s CFO: “ We are, like the competitors in the consumer space, offsetting some of those costs with select price increases in our portfolio, where we can still provide those trusted brands and products to people without really impacting the elasticity or the demand of those products overall.” “Joe Wolk — Executive Vice President, Chief Financial Officer: Yes. So Matt, let me start with some of the inflationary pressures that we’re seeing and how we’re offsetting those. So in consumer, there’s, I would say, select products within the portfolio, think skin health and beauty, as mentioned in the prepared remarks, where lubricants and things of that nature are in shorter supply. There are some, I’d say, probably increased labor costs with respect to third-party manufacturers, and we’re obviously seeing heightened transportation costs. We are, like the competitors in the consumer space, offsetting some of those costs with select price increases in our portfolio, where we can still provide those trusted brands and products to people without really impacting the elasticity or the demand of those products overall. We think we can strike that right balance as others have.” (Johnson & Johnson Q4 2021 Earnings Call Transcript, 1/25/2022)

Johnson & Johnson’s CFO: “So where we can, specifically in consumer, we’re looking to pass some of those cost increases on.” “Joe Wolk — Executive Vice President, Chief Financial Officer: So where we can, specifically in consumer, we’re looking to pass some of those cost increases on. In other spots, we continue to have supply chain initiatives, manufacturing initiatives that have been in place really for a number of years as part of our overall cost management program.” (Johnson & Johnson Q4 2021 Earnings Call Transcript, 1/25/2022)

Claiming it was restrained on pharmaceutical prices, J&J hiked prices on 29 drugs in 2022

Johnson & Johnson’s CFO said it was restrained in how it could increase prices on medical devices and pharmaceuticals, claiming their “stellar performance… was the sixth consecutive year where we actually had a negative price.” “Joe Wolk — Executive Vice President, Chief Financial Officer: In medical devices, I would say it’s around the labor input costs and some of the staffing related to COVID-19, I would say in the sense of overstaffing to some degree. But those are costs that are clearly managed. Theirs, much like pharmaceuticals, are not prices that we can increase. And then, in fact, the stellar performance that you saw in pharmaceuticals was the sixth consecutive year where we actually had negative price. So the growth that you see is more than 100% of volume due to the innovation and the ability to address unmet medical needs. And then, with medical devices, most of those, specifically in the US, are contractual by nature, so there’s limited opportunity there as well.” (Johnson & Johnson Q4 2021 Earnings Call Transcript, 1/25/2022)

Johnson and Johnson has raised prices on 29 drugs this year, with an average increase of 4.98%.  (GoodRx Health, 1/6/2022)

Over 750 drugs have seen price increases this year

So far in January 2022, GoodRX has tracked 765 brand drug price increases by an average of 4.5%. (GoodRx Health, 1/6/2022)

So far in January 2022, GoodRX has tracked 19 brand drug price increases by an average of 12.6%. (GoodRx Health, 1/6/2022)

Johnson & Johnson’s CEO had a troubling quote on “underlying demand for healthcare”

Johnson & Johnson’s CEO: “We remain optimistic on the fact that — as I commented before when I was talking about med tech, the strong underlying demand for healthcare is there. And there’s still lots to do in multiple diseases in order to address suffering and death there. So there’s a strong underlying demand for medical care.” ”Joaquin Duato — Chief Executive Officer: I would add to that that just we take into consideration some of the headwinds related to the pandemic and also macroeconomic headwinds like inflation, and that’s something that we take into consideration when we build our guidance. At the same time, we remain very optimistic on multiple fronts. We remain optimistic on the fact that — as I commented before when I was talking about med tech, the strong underlying demand for healthcare is there. And there’s still lots to do in multiple diseases in order to address suffering and death there. So there’s a strong underlying demand for medical care. And at the same time, both in med tech and in biopharmaceuticals, you see significant opportunities for scientific progress in terms of new treatment modalities that will give us the opportunity to enrich our pipelines and get to more patients. So we are optimistic about the underlying fundamentals of the new Johnson & Johnson.” (Johnson & Johnson Q4 2021 Earnings Call Transcript, 1/25/2022)