Johnson & Johnson said the final price offers it has received under the IRA won’t affect the long-term sales growth projection it gave last year, making it the latest drugmaker to suggest it can manage the impact of the law.
“While we are not in alignment with IRA and the price-setting process, those numbers have been included in the guidance that we provided last year,” worldwide chairman of innovative medicine Jennifer Taubert said on the company’s quarterly earnings call Wednesday.
Drugmakers have been walking a fine line between arguing against the law in court, and reassuring investors that they can largely deal with its impacts through smart investing and management of their pipelines.
“Whether it’s IRA or part D redesign, things of that nature, we certainly can digest those because of the investments we make all along in R&D,” CFO Joe Wolk said in an interview with Yahoo Finance later Wednesday.
J&J, for example, has downplayed the future financial importance of its products that are up for Medicare price negotiations — Xarelto, Stelara and AbbVie-partnered Imbruvica. In December, it called them “not major catalysts or growth drivers in the second half of the decade.” At the time, the drugmaker said it was confident in its goal of $57 billion in 2025 revenue and a 5% to 7% compound annual growth rate through 2030.
A handful of other drugmakers have made related remarks. Bristol Myers Squibb’s CEO has said the company can “more than compensate” for the law’s impact with its pipeline development, and AstraZeneca’s CEO in February called the early talks with the government “relatively encouraging.”
While the government’s deadline to submit a final offer was July 15, manufacturers have until July 31 to respond, according to CMS’ guidance. It is not immediately clear whether J&J has accepted the offer. The company did not respond to requests for comment. CMS has said that negotiated prices will be published by Sept. 1, though they won’t go into effect until 2026.
This quarter, Stelara, an immunosuppressant for psoriasis, generated $2.9 billion, and blood thinner Xarelto earned $587 million.
J&J is one of several companies that have sued the federal government over the IRA. In April, a New Jersey federal judge rejected the constitutional arguments at the core of its case, though the company has appealed the decision. The ruling marked one in a series of wins for the federal government in similar lawsuits brought by Bristol Myers, J&J, AstraZeneca, Boehringer Ingelheim and a handful of other organizations including industry trade group PhRMA.
The company’s reassurance that it would stick with its long-term targets, plus other positive news, boosted its shares $JNJ nearly 4% on a day when the broader market was down.
Analysts pointed out several positives, including that the quarter’s revenue of $22.4 billion was in line with consensus, and that a multibillion-dollar settlement over claims that J&J’s talc products cause cancer might finally be drawing to a close.
The claimants in the talc litigation are voting on whether to support the settlement and bankruptcy plan, with a July 26 deadline. J&J has agreed to pay ovarian cancer claimants about $6.5 billion, or $8 billion nominally over 25 years. If ultimately agreed to, the settlement would resolve over 99% of all the pending talc lawsuits in the US. Wolk said in Wednesday’s investors call that J&J is confident they will hit the 75% voting requirement to close the deal.
“Once that process concludes, we plan to make a public announcement on the next steps regarding a prepackaged bankruptcy filing,” Wolk added.
Leerink Partners analysts wrote that “if the talc overhang is largely lifted, it should be a positive for investor perception.”
Stelara revenue for the quarter was also $2.9 billion, up 3% year over year, and Darzalex revenue was $2.9 billion, up 18% year over year, with Jefferies analysts writing that Spravato’s second-quarter sales jumped 21% to $272 million, moving in the direction of company management’s peak sales guidance of $1 billion to $5 billion.
“Spravato’s strong sales trajectory supports the notion psychedelics can become commercially viable for mental health,” Jefferies wrote.