Johnson & Johnson, the world’s largest healthcare company, blamed a stronger dollar as it forecast that 2017 profits and sales would fall below Wall Street expectations, sending the group’s shares down by more than 2 per cent.
Dominic Caruso, chief financial officer, said it appeared that many Wall Street analysts had not updated their models to account “for the negative impacts of currency movement” as J&J became the latest pharma group to warn that a stronger dollar would hurt earnings.
Earlier this month, Pfizer warned that a strengthening dollar would be “a very big challenge” for the company in 2017, sounding alarm bells for other US corporations that also generate a significant percentage of sales from overseas. A strong dollar means overseas revenues are worth less when converted into home currency.
J&J said it expected to generate adjusted earnings of between $6.93 and $7.08 per share in 2017 on revenues of $74.1bn to $74.8bn. Analysts were expecting adjusted EPS of $7.12 on revenues of $75bn.
Shares in J&J fell 2.2 per cent in early trading in New York, while Pfizer declined 1.5 per cent.
J&J also said it was exploring a sale of its diabetes care business, which makes devices such as glucose monitors and insulin pumps under the LifeScan, Animas and Calibra brands. The company will consider putting the unit — which generated sales of $1.8bn last year — into a joint venture and forming strategic alliances, as well as an outright sale.
However, J&J declined to comment on a potential takeover of Actelion, the Swiss drugmaker with which it has been locked in talks for weeks over a deal. Shares in Actelion fell 2.8 per cent on Tuesday morning, giving it a market value of 24bn Swiss francs ($24bn)
J&J reported adjusted earnings of $1.58 per share on revenues of $18.1bn for the fourth quarter of 2016, above the consensus Wall Street estimate of $1.56 and $18.3bn.
Meanwhile, Alex Gorsky, J&J chief executive, called on Donald Trump and Republican lawmakers to preserve several key parts of the Affordable Care Act as the new president sets about scrapping his predecessor’s signature healthcare reform.
Mr Gorsky said J&J was lobbying for any replacement to include elements that were hallmarks of Obamacare, such as allowing young people to be insured through their parent’s health plans and requiring insurers to sell coverage to people who are already sick.
“We are advocating for important elements like increased access, coverage of pre-existing conditions, and coverage of young people on their parents’ health plan to continue in the future,” said Mr Gorsky, who met with Mr Trump earlier this week.
Mr Trump has expressed support for such provisions, although insurers say it would be uneconomical for them to sell plans to those who are sick unless Mr Trump also continues the Obamacare rules that force healthy people to buy insurance too. Republicans have pledged to scrap this mandate.
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