Johnson & Johnson Beats Estimates With Cost Cuts
Johnson & Johnson posted better-than-expected first-quarter earnings on Tuesday, sending its shares higher, as aggressive cost cutting helped offset plunging sales of anemia drugs hit by safety concerns and medicines facing generic competition.
Strong demand for the company's vast array of consumer products, including a new over-the-counter form of Pfizer's Zyrtec antihistamine and an array of products recently acquired from Pfizer, boosted results.
"The (consumer) business does not seem to be affected by trends in the economy," Chief Financial Officer Dominic Caruso said in a conference call with analysts.
The diversified health care company earned $3.6 billion, or $1.26 per share, up from $2.57 billion, or 88 cents per share, a year earlier, when it took several merger-related charges.
Analysts polled by Reuters Estimates, on average, had expected a profit of $1.20 per share excluding special items.
J&J said global sales rose 7.7 percent to $16.2 billion, beating analysts' average forecast of $15.85 billion.
Sales of prescription drugs rose 3.3 percent to $6.4 billion but would have slipped 0.6 percent if not for the favorable impact of the weak dollar.
Sales of the consumer brands jumped 16 percent to almost $4.1 billion.
Revenue from medical devices rose 7.2 percent to $5.7 billion, but would have risen only 1.4 percent if not for the weak dollar.
Combined sales of anemia drugs Procrit and Eprex fell 23 percent to $629 million in the quarter, hurt by concerns that overuse of such medicines can increase the risk of adverse events and death.
Sales of Duragesic, a skin patch for pain now competing with cheaper generics, also fell 23 percent, to $233 million.
Schizophrenia treatment Risperdal, once the company's biggest drug, fell almost 7 percent to $809 million amid growing competition with other drugs.
But sales of arthritis treatment Remicade leaped almost 37 percent to $998 million. Topamax, for epilepsy, rose almost 6 percent to $646 million.
The company raised its 2008 earnings forecast slightly, to a range of $4.40 to $4.45 per share, reflecting growth of up to 7 percent. That represents a slowdown, however, from growth of more than 10 percent last year. Its previous forecast was $4.39 to $4.44 per share.
J.P. Morgan analyst Michael Weinstein has predicted US Procrit sales will plunge almost 40 percent this year to $1 billion, half the sales seen in 2006. He sees overseas revenue of Eprex falling 10 percent to $1.1 billion.
Moreover, J&J is bracing for generic competition by June for Risperdal and by March 2009 for Topamax, and the expected approval of Abbott Laboratories Inc'sXience stent could hurt sales of J&J's Cypher product.
Launches of new J&J medicines -- including a new psoriasis drug, an antibiotic called ceftobiprole and the once-monthly injectable schizophrenia drug paliperidone -- are expected to help offset some of those sales declines.
Even so, Weinstein expects company pharmaceutical sales to slip 1 percent this year and more than 5 percent next year before growing again in 2010.