The maker of Band-Aids, medical devices and prescription drugs, its iconic image tarnished by legal and manufacturing lapses, on Tuesday noted some positive signs. They include small increases in hospital admissions and surgical procedures in the U.S. Despite that, revenue dipped by 0.7 percent due to lower sales in the U.S. and for consumer health products worldwide.
“We remain committed to and optimistic about the future of our (over-the-counter) business,” new CEO Alex Gorsky told analysts on a conference call Tuesday, adding that there’s strong consumer demand for products that are back in stores, such as some versions of Tylenol.
Gorsky gave what amounted to a long pep talk about the company’s great opportunities, despite continuing pressure from government and other health plans to reduce prices. His priorities include resolving the manufacturing problems, building on recent approvals and other success in the prescription drug business, and integrating Swiss orthopedics device maker Synthes. The company bought Synthes in June for $19.7 billion, its largest acquisition ever, and Synthes product sales in the quarter’s last couple of weeks boosted revenue by 1.2 percent.
“I am resolute to keep our credo as the foundation of Johnson & Johnson,” Gorsky said, referring to J&J’s longtime guiding principle to put patients, doctors and employees before profits.
Many critics have questioned whether J&J still follows the credo. The government is prosecuting J&J for alleged kickbacks to boost medicine sales and improper marketing of a few prescription drugs. And J&J has had to recall medicines containing the wrong amount of active ingredient or glass or metal shards.
The company, based in New Brunswick N.J., said net income was $1.41 billion, or 50 cents per share, down from $2.78 billion, or $1 per share, a year earlier. Revenue fell by 0.7 percent to $16.48 billion.
Excluding a total of $2.2 billion in after-tax charges, income was $3.63 billion, or $1.30 per share. Analysts expected earnings per share of $1.29 on revenue of $16.71 billion, according to FactSet.
The charges included include asset write-downs, costs from the Synthes purchase, more recall costs for its DePuy hip replacements and another $611 million added to J&J’s legal reserve for a potential civil settlement with the Justice Department its marketing practices. That case is expected to be finalized soon, with J&J paying a penalty in the $2 billion range.