The company is divided in three main business units: pharmaceuticals, medical devices and consumer products. Prescription drug sales accounted for half of the $81.58 billion in revenue J&J generated in 2018.
Pharmaceutical sales continued to shine for J&J in the quarter. Sales reached $10.19 billion, surpassing the $9.99 billion analysts had expected. Anti-inflammatory treatment Stelara posted better-than-expected sales of $1.44 billion, while Simponi fell short at $482 million in sales, compared with the average estimate of $573.3 million, according to StreetAccount.
Prostate cancer drug Zytiga generated $786 million in revenue during the quarter, exceeding StreetAccount expectations of $695.5 million. A judge last year invalidated a patent on Zytiga, allowing generic versions to enter the market. Despite Zytiga’s success in the quarter, some investors worry the loss of the patent will erode future sales, Jefferies analyst Jared Holz told CNBC.
J&J’s consumer business improved slightly, matching sales estimates of $3.55 billion in the quarter, a slight improvement from the $3.54 billion in revenue it generated during the same quarter in 2017. Sales of baby care products, which includes baby powder, washes and lotions, dipped to $473 million from $490 million in the fourth quarter of 2017. J&J relaunched the line and introduced new products over the summer in hopes of spurring a comeback for the struggling segment.
Its medical device segment continued to struggle. Sales totaled $6.67 billion, short of the $6.68 billion Wall Street had anticipated and down more than 4 percent from $6.97 billion in the same period a year earlier.
J&J’s litigation expenses doubled in the quarter as the company fights back against accusations that its talc-based baby powder contained asbestos and caused mesothelioma, ovarian and other types of cancers. The company set aside $1.29 billion for legal costs during the quarter, double the $645 million it spent during the same period in the year before. For the entire year, J&J’s litigation expenses totaled $1.99 billion, a 59 percent increase from the $1.26 billion J&J spent in 2017.
A December report from Reuters brought the spotlight on J&J’s talc-based baby powder. The story claimed J&J knew for decades its talc baby powder contained asbestos. The company has repeatedly denied any wrongdoing and stands behind its namesake baby powder.
Dozens of court cases have already gone to trial. J&J has won a number of them on appeal, though a Missouri judge in August affirmed the nearly $4.7 billion jury award.
Since Reuters published its report, J&J shares have fallen by about 9.5 percent. Analysts called the sell-off overdone, saying any litigation risk would cost less than the billions of dollars J&J lost in market cap.
“We will continue to fight and defend a product that consumers use around the globe that we know to be safe, not just based on our own scientific evidence, but that from highly respected authoritative bodies across the globe,” J&J Chief Financial Officer Joseph Wolk told CNBC’s “Squawk on the Street” on Tuesday.