Johnson & Johnson turned in a solid first quarter Tuesday, topping analysts' profit and revenue estimates and increasing its 2014 earnings forecast by 5 cents a share. The highlight of its three business units was, far and away, pharmaceuticals, the only one to post an increase in revenue.
Worldwide drug sales for the New Brunswick, N.J.-based company jumped 11 percent to $7.5 billion, topping the Street's $7.1 billion estimate. The biggest contributors were Stelara, a drug for psoriasis; Invega Sustenna, for schizophrenia; Prezista, for HIV; and Velcade, for cancer. A suite of newer medicines also contributed, J&J said, including Olysio, for hepatitis C, and Zytiga, for prostate cancer.
That this unit outperformed and that these drugs were the main contributors is significant, highlighting a trend in the U.S. toward specialty pharmaceuticals—typically higher-priced drugs that have been the subject of increasing scrutiny from physicians, patient groups and, most recently, Congress.
Last month, Rep. Henry Waxman, a Democrat from California, and two other congressmen sent a letter to Gilead Sciences about the price of its recently approved medicine for hepatitis C, Sovaldi. The drug has drawn attention for its $84,000 price tag, equating to about $1,000 a day for the 12-week duration of treatment.
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J&J's Olysio, which costs $66,360 for a 12-week course of treatment, exceeded the expectations of both J&J and the Street in the first quarter. It drew $354 million in revenue, compared with Wells Fargo analyst Lawrence Biegelsen's $23 million estimate.
"Olysio has done remarkably well," J&J Chief Financial Officer Dominic Caruso said Tuesday on a conference call with analysts. "It's done better than we suspected."
Excluding special items, J&J earned $1.54 per share. Analysts, on average, were expecting $1.48 per share, according to Thomson Reuters I/B/E/S. Sales rose 3.5 percent to $18.1 billion in the quarter, topping Wall Street forecasts of $18 billion.
J&J said it now expects its full-year earnings to be between $5.80 and $5.90 per share, up from its prior forecast of $5.75 to $5.85 per share given in January.
J&J's results dovetail with a report Tuesday from industry researcher IMS Institute for Healthcare Informatics. It showed prescription drug spending in the U.S. last year rose 3.2 percent to $329.2 billion, driven by the rising costs of specialty drugs, particularly those for cancer, diabetes, autoimmune diseases and multiple sclerosis.
There were 10 new cancer drugs approved in 2013, the most in a decade, including J&J's Imbruvica, a leukemia therapy J&J sells with Sunnyvale, Calif.-based Pharmacyclics.
Last year, the industry saw a record number of new orphan drugs for diseases affecting small numbers of patients with few treatment options, IMS said. Those drugs bring remarkable improvement to patients' quality of life, the report said, while also traditionally coming with very high price tags.
J&J's shares opened up 1.1 percent to $98.18. (Click here to get the latest quotes for J&J.)
—By CNBC's Meg Tirrell.