10-QPeriod: Q2 FY2022

JOHNSON & JOHNSON Quarterly Report for Q2 Ended Apr 3, 2022

Filed April 29, 2022For Securities:JNJ

Summary

Johnson & Johnson reported solid revenue growth in the first quarter of 2022, driven by strong performance in its Pharmaceutical and MedTech segments, which more than offset a slight decline in Consumer Health sales. Total sales increased by 5.0% to $23.4 billion, with operational growth contributing significantly, despite a negative currency impact. The company demonstrated robust operational sales growth across its key segments, with Pharmaceuticals up 9.3% and MedTech up 8.5%. While the company's net earnings saw a decrease compared to the prior year's first quarter, this was largely attributed to significant non-recurring items, including an intangible asset impairment charge and changes in the fair value of securities. Excluding these factors, the underlying operational performance remains strong. The company also highlighted its ongoing commitment to shareholder returns through dividends and share repurchases, and provided an update on its strategic plan to separate the Consumer Health business, expected to be completed within 18-24 months.

Financial Highlights

54 data points
Beta

Revenue

$19.84B

69.7% Gross Margin

Net Income

$5.15B

26.0% Net Margin

EPS (Diluted)

$1.93

Total Assets

$178.35B

Cash & Equivalents

$10.46B

Free Cash Flow

$3.37B

Financial Statements
Beta
Revenue$19.84B
Cost of Revenue$7.60B
Gross Profit$13.82B
SG&A Expenses$5.94B
Operating Income$4.57B
Interest Expense$10.00M
Net Income$5.15B
EPS (Basic)$1.96
EPS (Diluted)$1.93
Shares Outstanding (Basic)2.63B
Shares Outstanding (Diluted)2.67B

Key Highlights

  • 1Total sales increased by 5.0% to $23.4 billion compared to the prior year's first quarter.
  • 2Pharmaceutical segment sales grew by 9.3% operationally, driven by strong performance in Oncology and Infectious Diseases (including the COVID-19 vaccine).
  • 3MedTech segment sales saw a 8.5% operational increase, reflecting market recovery and new product uptake across its franchises.
  • 4Consumer Health segment sales decreased by 1.5%, impacted by supply constraints, divestitures, and increased marketing expenses.
  • 5Net earnings decreased by 17.2% to $5.1 billion, primarily due to a $0.6 billion impairment charge for an in-process R&D asset and unfavorable changes in the fair value of securities.
  • 6The company announced its intention to separate its Consumer Health business, targeting completion within 18-24 months.
  • 7Cash flow from operations remained strong at $4.0 billion, supporting dividends and share repurchases.

Frequently Asked Questions

Revenue growth was primarily driven by the Pharmaceutical and MedTech segments, which experienced strong operational sales increases of 9.3% and 8.5%, respectively. Key contributors included strong performance in oncology drugs like DARZALEX and ERLEADA, infectious disease treatments including the COVID-19 vaccine, and the recovery and new product momentum in the MedTech segment.

The decrease in net earnings was primarily due to non-recurring items. A significant factor was an intangible asset impairment charge of $0.6 billion related to the bermekimab in-process R&D asset. Additionally, changes in the fair value of securities negatively impacted earnings by $0.4 billion, and consumer health separation costs contributed to the decline.

Johnson & Johnson announced its intention to separate its Consumer Health business, aiming to create a new, publicly traded company. This strategic separation is targeted for completion within 18 to 24 months from the announcement date, allowing each business to pursue its own growth strategies more effectively.

The company maintained strong liquidity, with cash and cash equivalents of $10.5 billion and marketable securities of $19.9 billion. Cash flow from operations was $4.0 billion, which supported dividend payments of $2.8 billion and share repurchases of $1.6 billion. The company also has access to a $10 billion credit facility and does not foresee significant incremental risk to its liquidity profile, despite ongoing commitments for opioid litigation settlements and talc-related liabilities.