Worldwide revenue for Johnson & Johnson rose 5% to $18.5 billion in the third quarter of 2014, compared to $17.5 billion in the third quarter of 2013. U.S. sales jumped 11.6% during the same three months of this year, the company said.
Net earnings for the third quarter reached $4.7 billion, compared to $2.9 billion in the same period a year earlier, and included a net gain of about $1.1 billion related to the divestiture of Ortho-Clinical Diagnostics to the Carlyle Group for $4 billion. The sale closed in the third quarter.
Pharmaceutical sales were a bright spot for the company, rising 18.1% to $8.3 billion in the third quarter of 2014. Remicade, a therapy commonly used to treat patients with rheumatoid arthritis, as well as multiple other conditions and diseases, remains Johnson & Johnson's top-selling drug, with sales of $1.7 billion during the quarter.
But growth did not extend to the medical device business, where device sales and diagnostics fell 5.2% to $6.6 billion in the third quarter. In the U.S., the loss was more pronounced, with revenues falling 6.5% to $2.9 billion. During an earnings call, Louise Mehrotra, Johnson & Johnson's vice president of investor relations, attributed the decline to lower sales of vision-care products, falling revenue for surgical products and women's and urology technologies, as well as ongoing pricing pressure in the U.S.
Device manufacturers are confronting pricing pressure from hospitals and other U.S. healthcare providers as they seek to offset reimbursement cuts and lower utilization rates. At the same time, some drug companies have reported significant growth in sales of new therapies, notably new treatments for hepatitis C, which cost thousands of dollars more than traditional treatments.
Even though pricing pressure is expected to remain a concern for manufacturers, as well as an ongoing part of contract negotiations, low, single-digit increases in hospital utilization rates over the last two quarters may signal the possibility of stronger growth in the future for Johnson & Johnson and other device makers.
“We remain confident as economies recover and as healthcare reform gains momentum in the U.S. and abroad, utilization rates are going to increase,” said Dominic Caruso, Johnson & Johnson's chief financial officer.
Still, the modest increase in utilization rates hasn't led to significant shifts in medical device sales and surgical supplies for Johnson & Johnson. Surgical product sales fell nearly 4% for the quarter in the U.S. to $564 million, while the suture business reported “modest single-digit growth” that was offset by price pressure, Caruso said during the call.
U.S sales of hip implants rose 3%, while revenue brought in from knee implant sales went up 5%. Both categories faced pricing pressure. Total sales of orthopedic devices in the U.S. rose 3.2% to $1.2 billion. But Matt Miksic, an analyst for Piper Jaffray and Co., noted in a research note that positive orthopedic and spine results were a “pleasant surprise in a traditionally slow quarter.”
Biomet, a Warsaw, Ind.-based orthopedic manufacturer, also reported better-than-expected results for the third quarter, Miksic said. Last week the company reported that net sales rose 6% to $774.8 million in its first quarter of 2015, with sales of knee implants rising 4.3% and hip products up 3.8%.
Johnson & Johnson's device business also faced a negative impact from the withdrawal of its power morcellators because of growing concerns that the device can spread unknown and unsuspected cancers in women undergoing minimally invasive hysterectomies or surgical removal of uterine fibroids.
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