J&J’s third-quarter profits take $3B hit with massive opioid settlement

Medical justice
The $4 billion J&J plans to kick in to settle opioid-related lawsuits will cause its third-quarter net earnings to fall 55% over the same period a year ago. (Getty/yavdat)

Just three days after pledging to kick in $4 billion of a whopping $48 billion opioid settlement reached with Ohio, Johnson & Johnson is spelling out the impact of the agreement on its bottom line. And it isn’t pretty.

J&J disclosed in an SEC filing that the settlement will knock its third-quarter net earnings down from $4.8 billion to $1.8 billion, representing a 55% dip from the same period a year ago. That translates to earnings per share of $0.66—a far cry from the $1.81 the company initially reported on October 15.

J&J was one of five defendants in the Ohio bellwether opioid trial that offered a total of $48 billion to settle with that state and four others. Teva took the largest chunk of the settlement, offering $250 million in cash and $23 billion worth of buprenorphine naloxone, which is used to treat opioid addiction. The distributors McKesson, Cardinal Health and Amerisource Bergen were also involved in the settlement offer.

RELATED: J&J, Teva offer a whopping $48B combined to wrap opioid suits, but not all plaintiffs are on board

The settlement has yet to be approved, and some plaintiffs don’t appear to be completely on board with it. Ohio Attorney General Dave Yost, for one, has indicated that the settlement is inadequate.

Other state attorneys general are broadcasting their disappointment with the proposed settlement, as well. West Virginia’s attorney general, Patrick Morrisey, said on Twitter Tuesday that any settlement that fails to reflect the “unique and unprecedented” damage to his state due to opioid addiction “should be DOA.” SVB Leerink analyst Ami Fadia warned investors that there would be "a lot more wood to chop" before the settlement can be finalized.

J&J said in its filing that it “cannot predict if or when the agreement will be finalized.” J&J is not admitting wrongdoing, and the settlement would resolve any future opioid-related claim filed by states, cities and counties, it added.

The opioid settlement is a big hit on what otherwise had been a solid quarter for J&J. Revenues from the company’s pharma division grew more than 6% in the third quarter to $10.9 billion, fueled by products including Stelara for psoriasis and cancer drugs Darzalex and Imbruvica.

RELATED: Johnson & Johnson's bridging its $2B patent cliff gap with help from Stelara, Darzalex

The showing was enough to convince J&J to raise its 2019 sales guidance to a range of $83.7 billion to $84.2 billion, up from $82.4 billion to $83.2 billion. Investors were pleased, pushing the company’s shares up 2% after the earnings report.

But the company’s stock has dipped over the last week in the wake of a recall of its baby powder. J&J pulled the product off shelves on October 18 after sub-trace amounts of asbestos were found in one bottle. Investors fled, taking $16 billion off the company’s market value in one day.

The asbestos discovery was the latest woe related to J&J’s talc products, which are facing lawsuits alleging a tie to ovarian cancer and mesothelioma. J&J is also fighting lawsuits claiming that its antipsychotic drug Risperdal caused male patients to grow breasts and its pelvic mesh for women caused injuries.

In a revised earnings release, J&J reiterated its previously raised 2019 sales guidance. The company expects its adjusted EPS to come in between $8.62 and $8.67, though it’s “unable to predict with reasonable certainty the ultimate outcome of legal proceedings,” J&J warned.