Dive Brief:
- Johnson & Johnson drastically lowered its sales and profit outlook for the year as it expects its medical device business to be battered by the impact of patients delaying procedures due to the coronavirus pandemic.
- Its pharmaceutical business will experience "a small level of disruption" due to shifts in prescribing and treatment practices but the effects will not be as profound, executives said. Drugs infused in healthcare facilities and new prescriptions will be affected as patients avoid entering hospitals and doctors' offices.
- The New Jersey-based big pharma said its forecast assumes the biggest impact will be in the second quarter of 2020. The company anticipates the economy will recover in the third quarter and the virus will not return with a similar intensity once governments lift stay-at-home orders and social distancing measures.
Dive Insight:
The takeaway for the broader pharma sector might be one of cautious optimism. Pharmaceutical division sales for J&J rose 9% to $11 billion in the first quarter of 2020 compared to the same period in 2019.
Finance chief Joseph Wolk said there were some changes in consumption patterns. Hospitals and pharmacies stocked up on drugs that they feared would be in short supply in the midst of the pandemic, while pharmacy benefit managers shifted some patients from 30-day to 90-day prescriptions to adjust for social distancing guidelines. This means some sales that might have been recorded in the second quarter occurred in the first quarter.
For drugs administered in healthcare facilities — typically biologics that require intravenous infusions — social distancing has required changes in appointment schedules to reduce the number of immuno-compromised patients in the medical centers, Wolk said.
For J&J, the main products affected by changes at infusion centers are Remicade and Simponi. Remicade sales have been pressured by biosimilar competition and fell 10% in the first quarter of 2020 from 2019, while Simponi sales were steady at a 1% increase.
Looking ahead in 2020, a 30% drop in physician appointments as patients delay care until infection rates drop could result in a "small level of disruption" for the pharma business, Wolk said.
The medical devices business, on the other hand, dropped 8% overall to $6 billion during the period.
As a result, the company slashed its guidance for 2020 sales to between $77.5 billion and $80.5 billion, considerably lower than the $85.4 billion to $86.2 billion it previously set out in January. Measured by the midpoint of those ranges, the forecast cut amounts to $6.8 billion and would represent a 5.5% decline in sales over 2019 figures.
Wolk said J&J assumes the medical and economic impact of the coronavirus pandemic will be focused sharply in the second quarter, coinciding with mid- and late-April peak infection rates in the U.S. and many European countries.
By fall, hospital and physician appointments will be "more permissible" because infection rates will have diminished and the health care system will have a better capacity to test, treat and track COVID-19.
Meanwhile, the company thinks unemployment will ease later in the year as the pandemic recedes, providing patients with insurance coverage and better purchasing power to pay for health care needs.