Johnson & Johnson Tuesday said third-quarter profit fell, hurt by restructuring charges and weak demand for its Procrit anemia drug, but the results handily beat Wall Street expectations.
The diversified healthcare company said it earned $2.5 billion, or 88 cents per share, in the quarter, compared with $2.76 billion, or 94 cents per share, in the year-earlier period.
Excluding special items, including the $528 million after-tax restructuring charge, J&J earned $1.06 per share. Analysts on average expected 99 cents per share, according to Reuters Estimates.
The company in July said it would cut 4 percent of its work force amid declining sales of Procrit and stents used to prop open coronary arteries. The restructuring is also meant to buttress the company ahead of patent expirations on schizophrenia treatment Risperdal and its epilepsy drug Topamax in 2008 and 2009, respectively.
"J&J's third-quarter results reflect the broad-based nature of the company's portfolio and the cost-cutting ability of the company," Bank of America analyst Glenn Novarro said in a research note.
Novarro said he believes investors "are underestimating J&J's earnings power" and that over the next three years the company can generate annual earnings-per-share growth of almost 10 percent despite the coming patent expirations on Risperdal and Topamax.
In view of the better-than-expected quarterly results, the company slightly raised its full-year 2007 profit forecast to between $4.10 and $4.13 per share.
Third-quarter sales jumped almost 13 percent to $14.97 billion, about $100 million higher than the Reuters Estimates forecast.
Global sales of prescription drugs rose 3.7 percent to $6.1 billion, but would have grown only 1.2 percent if not for positive foreign exchange factors.
Procrit sales plunged 27 percent to $380 million, hurt by studies showing that overly high doses of such anemia drugs can increase the risk of death among some patients.
A number of other J&J drugs lost ground due to competition from cheaper generics, including its Duragesic pain patch, whose sales fell 23 percent to $107 million.
But Topamax revenue jumped 14 percent to $498 million, while Remicade rose 7.5 percent to $648 million.
Sales of medical devices and diagnostics rose 6 percent to $5.2 billion, with sharply higher demand for J&J's disposable contact lenses, blood glucose monitoring and insulin delivery devices, orthopedic devices and products used in minimally invasive surgery.
But U.S. sales of the company's drug-coated Cypher stent fell more than 40 percent amid lingering concerns that such devices can increase the long-term risk of blood clots that cause heart attacks, and plunged by a similar magnitude overseas amid growing competition from rival products.
Revenue from J&J's consumer health-care products jumped almost 48 percent in the quarter to $3.6 billion, bolstered by the recent acquisition of Pfizer's array of consumer brands -- including Listerine mouthwash. Excluding the new Pfizer brands, consumer product sales would have risen 3.5 percent, J&J said.