Johnson & Johnson reported fourth quarter earnings that beat expectations. Johnson & Johnson CFO Joe Wolk joins Yahoo Finance Live to discuss.
ZACK GUZMAN: But let’s continue the earnings conversation with Johnson & Johnson, the health giant this morning topping expectations on its top and bottom lines with revenue rising about 8% over last year’s quarter to hit nearly $22 and 1/2 billion. The company also expecting to announce efficacy data on its vaccine candidate next week.
For more on that, the quarter ahead, let’s bring in Johnson & Johnson chief revenue officer– chief financial officer, I should say– Joseph Wolk, alongside Yahoo Finance’s Adam Shapiro, who will kick things off for us here in this one, Adam.
ADAM SHAPIRO: Thank you, Zack. And it’s good to see you, Joe. Congratulations on the quarter.
JOE WOLK: Thank you, Adam. It’s a pleasure to be here.
ADAM SHAPIRO: When the CEO, Alex Gorsky, pointed out good health is pivotal to our society, security, and prosperity as a society, it was no wonder that most of the questions at the beginning of the earnings call were about the vaccine. So you’ve announced next week, early next week, we’re going to get the phase III study data on the vaccine. I’m curious, what is the status of Johnson & Johnson’s ability to deliver the 100 million doses– I think it’s by the end of April– and a billion doses this year?
JOE WOLK: Yep, so, Adam, we– as stated on the conference call, there was a lot of questions about our vaccine. The data should be available. It was a 45,000-person study across three continents, eight countries, which are inclusive of South Africa and Brazil. So maybe we’ll have some insights with respect to some of the new strains that we’re seeing. We’ll let the scientists talk about that in the next couple of days.
We are very much on track to meet the capacity requirements. Understandably, there’s a lot of enthusiasm and questions around our ability to supply because of the one-shot nature of our vaccine, as well as the, I’ll say, limited refrigeration requirements compared to some others that are out there. And so, some have labeled this as potentially a game changer in our fight against the pandemic.
We are on track to meet our commitments to the US this year for the first half of this year. That’s 100 million doses. To the EU, we’ll begin shipping in April. That’s 200 million doses for the balance of 2021. And we also have an agreement with the Global Alliance for Vaccines and Immunizations to deliver 500 million vaccines, about 200 million– up to 200 million this year. Shipments for those will probably begin in the second half. But our supply chain leadership team has done a great job expanding capacity. We hope to have seven sites up and running by the end of the second quarter.
ADAM SHAPIRO: And just as a tease to what we’re going to get next week, I know the New England Journal of Medicine published just two weeks ago preliminary data that showed 90% of the study participants as of day 29 had 100%– they were aged 18 to 55– had the antibodies that you would hope would be generated. So that’s not the data that’s coming next week. We hope it’s replicated there. But I’m curious, between the government and your subsidiary, Janssen, J&J has got in this partnership $2.6 billion– is that correct– invested in delivering this vaccine to all of us. Is that accurate?
JOE WOLK: The numbers are fluctuating right now, as you can imagine, Adam. We’re waiting to see the data. The manufacturing capacity also has to be included in those costs. But it is several hundred million dollars at this point in terms of what we’ve encountered and incurred in 2020. We’ll see how 2021 plays out.
And that’s why I’m a little bit hesitant to give you a number. Because if there are new strains as we learn more about the durability, there’s a number of fluid dynamics that still have to play out. And we’ll be in a better position to answer that as we learn more about the data that we get from this first ensemble study and then subsequent studies as time proceeds.
AKIKO FUJITA: Joe, it’s good to talk to you today. Looking specifically at your pharmaceutical business, we’re looking at a revenue of $12.2 billion in the quarter, about a 15% increase year on year. How much more of a jump are we expecting on that front tied directly to this vaccine?
JOE WOLK: Well, right now, our forecast and our outlook for 2021 does not include any revenue that we may garner from the distribution of vaccine sales. We thought that was a little premature at this time. It’s not a commentary on what we think the prospects of data efficacy will be. It’s just something that it’s still fluid.
You can imagine, because of the not for profit selling price that we’ve committed to, to our firm orders for signed agreements that are currently in place, the volume you eventually have is going to determine what that selling price is. So we’ve steered the investment committee– or the investment community– to look towards our first quarter earnings call in April. We’ll be able to have some of these dynamics a little bit tighter and some variables more solidified.
ADAM SHAPIRO: Joe, sometimes good news isn’t exactly good news in totality. And help us understand something that was mentioned during the call, which had to do with consumer health, that the fact we’re all locked down and not engaging with the population led to fewer people having colds, fewer people having flus. And that impacted your sales of things like Tylenol. That’s a one-off, though. That’s not going to be a long-term thing, is it?
JOE WOLK: No, that’s correct, Adam. Some of the restrictions in place, it was specifically our children’s line of Tylenol products. Our adult Tylenol product continues to do extremely well, as does Listerine and wound care. So some of these things that are– where people are home a little bit more frequently– you can have your own conjecture as to why Listerine sales have had a banner year. But those products will continue to do well going forward. We’ve also made some new product offerings that should be more appealing to customers going forward.
ZACK GUZMAN: And Joe, I know you said you don’t want to necessarily include kind of the expectations there on the vaccine front. Again, not a nod to what we’ll expect on the efficacy data when we get it next week. But when it comes to maybe Johnson & Johnson’s positioning around profiting off of the vaccine, you guys made it clear that you don’t intend to.
Some of the other vaccine makers out there breaking from you guys, who also received government money, Moderna among them. What do those discussions sound like internally, when you’re trying to figure out what makes sense as a company after receiving federal money for research to maybe profit or not profit?
JOE WOLK: Yeah, so the commitment we’ve made was while the pandemic is front and center, right? We didn’t want access to what could potentially be a great solution to address the pandemic to get in the way of some of the discussions and certainly the clinical development. We’ll evaluate the commercial opportunity at the appropriate time. Right now, we’re focused– really, the task at hand is finalizing this very robust study of 45,000 individuals, and then manufacturing, as responsibly as we can, as much capacity as we can to make sure that vaccines are available.
We know through our decades of study in infectious diseases that one of the best things we can do, even to combat potential future strains, is to get people vaccinated. So that’s really our task at hand as we think about it. And commercial opportunities will present themselves at the right time.
ADAM SHAPIRO: Hey, Joe, help us understand going forward what’s going to happen with medical devices. COVID‘s impacted that sector for several quarters now. But you expect growth there next year?
JOE WOLK: We do. I mean, if you just look at the math, we’ll almost take you there, Adam. I mean, we were down about 33% in the second quarter when we were dealing in the early days of the pandemic. I’d be remiss if I just didn’t acknowledge the great resiliency and innovativeness of hospital systems, hospital administrators, to really make sure that they were treating COVID-19 patients, but also treating patients who were in need of serious medical procedures and diagnostics.
We know that having some of those linger too long creates a potentially worse problem. And so, they’ve done a great job. We do think that we’ll see healthy growth in 2021 for our medical device unit. And at the same time, Ashley McEvoy and her medical device team have done a great job solidifying the relationships with hospital systems. We certainly wanted to know where the pandemic stood and what their perspectives were. But we also asked them the question, what can we do to help, as one of the world’s largest healthcare providers.
ADAM SHAPIRO: And I just want to clarify something I started off with, because I was using previous press releases. When I said $2.6 billion in the partnership with (BA)RDA, the US government, and Janssen, is it $2 billion roughly in contracts and investment from (BA)RDA to help develop the vaccine?
JOE WOLK: Yeah, so there is a component where it’s about a 50-50 split with respect to development costs. And then, there are significant billions potentially at play, should we have successful efficacy data, by which they would purchase our vaccine.
ZACK GUZMAN: And real quick, Joe, just because you mentioned–
JOE WOLK: But again, that will still be a not-for-profit. I’m sorry.
ZACK GUZMAN: Yeah, and one quick last point on the drop in flu cases because we were discussing that earlier, kind of a silver lining here in the COVID efforts. You know, it could be a blip. It could maybe not, depending on how long this lasts and what booster shots might look like. But how does that appear to you, going further out, if we do, in fact, see a reduction in the way that people maybe buying some of your guys’ products to combat the flu?
JOE WOLK: Yeah, so what we saw in the early part of last year, especially with the adult Tylenol line, was what we call pantry loading. So people normally, if they are not feeling well on their way home from work or school, would pick up some Tylenol to address some cold and flu symptoms. What we saw was kind of a change in buying patterns, where people wanted to have a bottle or two on their shelves at the ready.
And we think people will be more prepared. There are learnings that come from a pandemic like this. And those are probably things that, while it was a temporary upside to our business last year, we don’t think it diminishes and turns into a downside.
ZACK GUZMAN: All right, Joe Wolk, Johnson & Johnson CFO, appreciate you coming on here, alongside Yahoo Finance’s Adam Shapiro. We’ll be watching next week if that vaccine did it. Thanks again for the time.
JOE WOLK: Thank you.