J&J takes $13.6 billion charge related to new U.S. tax law

FAN Editor
FILE PHOTO: Johnson and Johnson logo is seen at an office building in Singapore
FILE PHOTO: The Johnson and Johnson logo is seen at an office building in Singapore January 17, 2018. REUTERS/Thomas White/File Photo

January 23, 2018

(Reuters) – Johnson & Johnson, one of the world’s largest drugmakers, on Tuesday said that it would take a $13.6-billion charge related to the new U.S. tax law and plans to bring back billions of dollars from overseas immediately.

U.S. President Donald Trump signed the law late last year, and many large U.S. corporations and drugmakers have said they will take advantage of its new, lower tax rate on repatriated foreign earnings and cash.

J&J last publicly reported a year ago that it had $66 billion in undistributed international earnings and on Tuesday said it had $16 billion in cash outside the United States.

The company, based in New Brunswick, New Jersey, plans to move $12 billion of that cash immediately, J&J CFO Dominic Caruso said during a conference call with analysts to discuss fourth-quarter earnings.

He said much of that will be used to pay down debt and also to fund U.S. operations.

J&J’s tax hit is the biggest announced for the pharmaceutical industry so far. Drugmaker Amgen Inc <AMGN.O>, for instance, said it would take a charge of more than $6 billion, while rival Pfizer Inc. has not yet given details on its tax plans.

Shares of J&J fell 2.2 percent to $144.93 in morning trading.

QUARTERLY LOSS

The company reported a quarterly loss due to charge, but beat analysts’ profit estimates excluding that and other items, helped by growth in new cancer drugs and profitable treatments that J&J gained with its $30-billion purchase of Actelion last year.

International operations accounted for nearly a half of J&J’s total fourth-quarter sales of $20.20 billion, which was up 11.5 percent from a year earlier.

Higher sales of cancer drugs Darzalex and Imbruvica, and psoriasis drug Tremfya helped drive a 17.6 percent rise in pharmaceuticals sales to $9.68 billion, the company said.

High-margin treatments from Actelion, which was acquired by J&J for $30 billion in 2016, accounted for about a quarter of the pharmaceutical unit’s sales growth.

Sales at J&J’s consumer products unit, which makes Band-Aids, Neutrogena beauty products and Tylenol, rose 3.1 percent to $3.5 billion.

The net loss was $10.71 billion, or $3.99 per share, for the latest quarter, compared with a profit of $3.81 billion, or $1.38 per share, a year earlier.

Excluding items, J&J earned $1.74 per share, slightly above the analysts’ average estimate of $1.72 per share, according to Thomson Reuters I/B/E/S.

J&J forecast an adjusted profit of $8 to $8.20 per share on revenue of $80.6 billion to $81.4 billion for 2018.

Analysts on average were expecting a profit of $7.87 per share and revenue of $80.7 billion.

(Reporting by Michael Erman in New York and Divya Grover in Bengaluru; Editing by Anil D’Silva and Nick Zieminski)

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