A big jump in prescription drug sales, particularly overseas, helped Johnson & Johnson swing to a large fourth-quarter profit after posting a huge loss a year earlier, when it took a $13.6 billion charge related to the late-2017 U.S. tax overhaul.
The world's biggest maker of healthcare products also benefited from an effective tax rate of 2.6% for the latest quarter, amounting to just $80 million. That was the main reason J&J topped Wall Street profit expectations, Credit Suisse analyst Vamil Divan wrote to investors.
The company also reported lower spending on research and development, restructuring and interest charges. But currency exchange rates have swung from boosting revenue to a drag, reducing revenue by 2.3% in the quarter.
In midday trading, J&J shares fell $2.40, or 1.8%, to $128.29.
The maker of baby shampoo and biotech drugs on Tuesday reported net income of $3.04 billion, or $1.12 per share, for 2018's fourth quarter. A year earlier, J&J reported a rare net loss — $10.71 billion, or $3.99 per share. That was due to the $13.6 billion charge, for a tax payment on years of accumulated foreign earnings amounting to more than $66 billion, brought back to the U.S. at low tax rates.
Earnings in the latest quarter, adjusted for one-time gains and costs, came to $1.97 per share, 2 cents better than expected.
The New Brunswick, New Jersey-based company said revenue totaled $20.39 billion, 1% above 2017's fourth quarter.
J&J's prescription drug business saw sales jump 5.3% to $10.19 billion. Sales of cancer drugs including Darzalex, Imbruviga and Zytiga jumped 22% to a total of $2.49 billion, and sales of Remicade, Simponi and Stelara, for rheumatoid arthritis and other immune disorders, rose 8.3% to a total of $3.34 billion.
"We promised improved performance in 2018, and we delivered," Chief Executive Alex Gorsky told analysts during a conference call.
Gorsky said the company now has 26 prescription drugs generating at least $1 billion a year. However, three of those and two other big sellers are getting cheaper competition, either generic pills or near-copies of injected drugs, including Zytiga and top seller Remicade, which together brought in nearly $9 billion last year. And J&J says it's getting less net revenue across its medicines portfolio as insurers and prescription benefit managers continue pressing for bigger discounts and rebates.
"Sales growth is decelerating," Edward Jones analyst Ashtyn Evans wrote to investors, adding she still expects J&J's drugs business to grow more than the rest of the market over the long term.
Meanwhile, two experimental drugs — esketamine for treatment-resistant depression and erdafitinib for bladder cancer — await U.S. Food and Drug Administration approval. J&J is hoping the lengthy partial government shutdown doesn't delay those decisions.
Johnson & Johnson's consumer health business posted flat sales of $3.54 billion, while sales of the medical devices and diagnostics dropped 4.4% to $6.67 billion.
For all of 2018, Johnson & Johnson reported revenue of $81.58 billion, up 6.7%, and net income of $15.3 billion, or $5.61 per share.
Johnson & Johnson expects full-year earnings between $8.50 and $8.65 per share, with revenue between $80.4 billion and $81.2 billion. Industry analysts have projected per-share earnings of $8.60 and revenue of about $82.6 billion.