Tags: johnson | earnings | healthcare | profit

Johnson & Johnson Forecasts Profit Decline on Competition

Tuesday, 20 January 2015 04:45 PM

Johnson & Johnson, the world’s biggest maker of healthcare products, forecast lower earnings in 2015 as competition cuts into revenue for some of its best-selling drugs. The shares slumped the most in three months.

Adjusted profit this year will reach $6.12 to $6.27 a share, the company said today. That figure excludes an estimated charge of 32 cents a share for intangible amortization costs — an expense Johnson Johnson previously included in its pro forma results. Incorporating that figure, 2015 earnings would be $5.80 to $5.95 a share, compared with 2014 adjusted profit of $5.97 a share.

“It’s not uncommon for J&J to be a little more conservative as they start the year,” Tony Butler, an analyst at Guggenheim Securities LLC, said of the 2015 forecast. He said it’s not clear whether there is some “underlying weakness” that the company is worried about.

Last January, J&J forecast 2014 adjusted earnings of $5.75 to $5.85 a share, then increased the outlook throughout the year.

The company is seeking to replenish its product lineup as drugs such as hepatitis C treatment Olysio and blood thinner Xarelto face new competition. Jami Rubin, an analyst at Goldman Sachs Group Inc., lowered her recommendation to sell from neutral on Jan. 15 because she sees the company bringing fewer new drugs to market this year than in previous years, she said in a note.

Shares of J&J fell 2.6 percent to $101.29 at the close in New York, the biggest one-day drop since October. The shares have risen 6.6 percent in the past 12 months.

Tougher Competition

J&J’s accounting decision on intangible amortization means the company is no longer deducting the changing cost of hard-to-value assets like trademarks and patents in the company’s adjusted earnings.

The drugmaker is facing increased competition in its pharmaceutical business, the industry leader for the past several years. Sales of Olysio plummeted to $321 million in the quarter, down from $796 million in the previous three months, as the hepatitis C drug faced new competition from Gilead Sciences Inc.’s Harvoni that combined two drugs in one pill.

“The most important change has been demand in hepatitis C for Olysio,” Butler said. “Once Gilead launched Harvoni as a single pill, effectively that becomes the product du jour.”

The strengthening dollar also hit J&J harder than expected, leading the company to miss sales estimates in all three of its major businesses, said Glenn Novarro, an analyst at RBC Capital Markets in New York. The company’s forecast probably reflects the worse-than-expected foreign-exchange pressure, he wrote in a note to investors.

Drug Sales

Fourth-quarter earnings of $1.27 a share, excluding one-time items, beat the $1.26 average of analysts’ estimates compiled by Bloomberg. Revenue decreased 0.6 percent to $18.3 billion, compared with the $18.5 billion average projection. Without currency fluctuations, sales would’ve risen 3.9 percent, J&J said.

Prescription drug revenue rose 9.6 percent to $8 billion in the quarter, weighed down by a 2.7 percent decline outside the U.S.

The medical device and diagnostic unit saw sales fall 9 percent to $6.65 billion in the fourth quarter. Sales of consumer goods and over-the-counter medicine, including Tylenol and Motrin, dropped 3.9 percent to $3.61 billion.

Net income fell to $2.52 billion, or 89 cents a share, from $3.52 billion, or $1.23, a year earlier. Profit was reduced in the quarter by litigation expenses and costs from the acquisition of Synthes Inc., among other items.

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Johnson & Johnson, the world's biggest maker of healthcare products, forecast lower earnings in 2015 as competition cuts into revenue for some of its best-selling drugs. The shares slumped the most in three months.
johnson, earnings, healthcare, profit
Tuesday, 20 January 2015 04:45 PM
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