(Bloomberg) -- Johnson & Johnson opened the U.S. health-care earnings season with a stronger outlook, after its growing pharmaceutical division continued to thrive.
J&J raised its sales guidance for 2018 to $81 billion to $81.8 billion after its first-quarter profit beat analysts’ estimates.
Pharmaceutical sales, which make up about half of J&J’s revenue, once again drove growth. The company has been increasing drug sales thanks to new products including blood-cancer treatments, in spite of what Credit Suisse analyst Vamil Divan called “notable weakness” in blockbuster arthritis treatment Remicade. Sales of Remicade, now facing competition from cheaper versions known as biosimilars, are declining.
“Pharma had another strong quarter,” Chief Financial Officer Dominic Caruso said in an interview on Bloomberg TV Tuesday. “There was some concern at the end of the first quarter that pharma business might slow down but I think we alleviated all those concerns."
The New Brunswick, New Jersey-based health-care giant, which also sells medical devices and consumer health products, also announced a restructuring of its global supply chain on Tuesday. It will generate as much as $800 million in annual pretax savings by 2022 and cost as much as $2.3 billion in pretax charges, J&J said in a statement. While the company didn’t provide details on the restructuring itself, it could have an impact on its suppliers.
The shares rose less than 1 percent to $132.60 in early U.S. trading.
Remicade revenue declined to $1.39 billion, missing the $1.5 billion that analysts had anticipated. U.S. sales for the drug dropped 23 percent, an unusual decline, Caruso said, partly due to some rebate adjustments from a major payor, not specifying which company it was.
J&J didn’t provide an update on a $2.1 billion binding offer received in March from private-equity firm Platinum Equity for its glucose monitor business LifeScan. The health-care company had said the divestiture would be part of a broader effort to focus on its core offerings.
Caruso said the company will continue to evaluate its segments for where possible divestitures might make sense.
J&J said that as a result of tax reform, it plans to increase research and capital investment spending by 15 percent over the next four years to $30 billion. Caruso said the changes in tax law allowed flexibility for the company.
©2018 Bloomberg L.P.