UPDATE: Johnson & Johnson 3Q Net Up 1.1%; Boosts 09 Outlook
(Adds detail, background.)
By Peter Loftus
DOW JONES NEWSWIRES
Johnson & Johnson (JNJ) eked out a 1.1% increase in third-quarter profit,
despite generic competition for several former big sellers pushing revenue below
expectations.
Earnings, though, beat Wall Street's views, prompting the health-care-products
maker to boost its 2009 target.
The weakness in J&J's pharmaceutical unit was partially offset by sales growth
in the company's medical-device unit. For the second quarter in a row, device
sales were higher than pharmaceutical sales. Last quarter was the first time in
about 10 years that had happened.
J&J's diversified business model has proved to be a buffer against some of the
negative trends that have hurt competitors more concentrated in the
pharmaceutical industry.
Still, 2009 has shaped up to be one of the health giant's more difficult
years, with all three of its main business units showing signs of weakness.
Heightened generic competition has hurt its prescription-drug business, while
unfavorable currency-exchange rates have pulled down sales growth for consumer-
healthcare and medical-device products as well.
In premarket trading, J&J shares fell 1.7% premarket to $61.50.
J&J, whose products range from Band-Aids to the Procrit anemia drug, said
profit rose to $3.35 billion, or $1.20 a share, from $3.31 billion, or $1.17 a
share, a year earlier. Analysts surveyed by Thomson Reuters were expecting, on
average, earnings of $1.13 a share.
After the better-than-expected results, J&J raised its per-share earnings
guidance to between $4.54 and $4.59, up from its prior target - first given in
January and repeatedly affirmed since - was $4.45 to $4.55.
Earnings were helped by cost cuts. Earlier this year J&J cut about 900 jobs
from its U.S. pharmaceuticals unit, and in August the company consolidated its
management structure.
Revenue fell 5.3% to $15.08 billion, below the Thomson Reuters estimate of $
15.22 billion, as 2.5 percentage points of the decline coming from currency
changes. U.S. sales fell 8.1%. International sales dropped 2.5% but rose 2.4% on
a constant-currency basis.
Drug sales fell 14% to $5.3 billion, due largely to generic competition. That
included a 19% drop in the U.S. The declines included antipsychotic Risperdal
and epilepsy and migraine treatment Topamax, both of which lost patent
exclusivity in the past year.
J&J has tried to offset the pharmaceutical weakness by trying to bring new
drugs to market - with successes and setbacks alike - and by acquiring or
licensing experimental drugs that could hit the market in the future. For
example, J&J paid $885 million for an 18% stake in Elan Corp. (ELN).
The latest quarter saw the formerly fast-growing consumer health-care unit
post a 2.7% sales drop to $4 billion; excluding currency changes, it would have
reported 1.1% growth.
The device unit, which includes contact lenses and diabetes test strips, saw
sales rise 2.3% to $5.8 billion; excluding currency impacts, unit sales rose
4.1%.
Drug-coated stent sales remained weak, falling 27% to continue a trend from
recent quarters amid increased competition in the U.S. Revenue slumped 10%
domestically. J&J late last month said it wrung a $716 million payment from
Boston Scientific Corp. (BSX) to settle more than a dozen stent patent-
infringement lawsuits, most of which will be recorded in the fourth quarter.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289; peter.loftus@dowjones.com
(Mike Barris contributed to this report.)
Corrected October 13, 200910:52 ET (14:52 GMT)
(END) Dow Jones Newswires
10-13-090854ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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