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J&J's Results Beat Estimates on Strong Drug Sales

Tuesday, 15 October 2013 08:03 AM

A big jump in prescription drug sales and continued recovery of Johnson & Johnson's beleaguered consumer health business in the third quarter helped the health care giant overcome a new problem, slumping sales of its medical devices.

That was mainly due to pricing pressure in the U.S. that forced J&J to cut prices for devices including diabetes testing products and spine and hip replacement parts, and trouble integrating part of the product line and sales force of orthopedic products maker Synthes, bought last year for $20 billion in J&J's biggest acquisition ever.

The company nudged up its earnings forecast for the year, and its stock price followed. In midday trading, shares of the maker of baby shampoo and drugs for immune disorders were up 60 cents at $90.40, near its 52-week high of $94.42

J&J said Tuesday that its net income was $2.98 billion, or $1.04 per share, up from $2.97 billion, or $1.05 per share, a year earlier. Excluding one-time charges, it earned $1.36 per share. That was 4 cents per share better than analysts expected.

Revenue rose 3 percent to $17.58 billion. Analysts expected $17.43 billion.

"We are still seeing (health care) utilization rates that are essentially flat year over year," Chief Financial Officer Dominic Caruso told analysts on a conference call.

That's been a problem for the company throughout the lengthy global economic slowdown, as consumers delay elective surgical procedures and "trade down" to store brands rather than J&J's pricier Band-Aids and nonprescription medicines.

Those nonprescription drugs, responsible for most of J&J's roughly four dozen product recalls over the past four years, saw sales jump 18 percent in the U.S. and 6.4 percent worldwide as more products returned to stores. Pain relievers such as Tylenol and Motrin, which were among the products that had been recalled for reasons including wrong active ingredient levels and contamination with metal and plastic particles, fueled that growth.

Overall, the consumer health business, which also makes dental, wound and skin care items such as the Aveeno and Neutrogena lines, posted a 0.8 percent sales increase, to $3.61 billion.

Meanwhile, the decline in device sales enabled the New Brunswick, N.J., company's prescription drug business to regain its position as J&J's top revenue generator.

Prescription drug sales jumped 9.9 percent to $7.04 billion, led by big sales jumps for newer medicines including anticlotting drug Xarelto, immune disorder drug Simponi, Stelara for psoriasis, Invega Sustena for schizophrenia and Zytiga for prostate cancer.

Device sales dropped 2 percent to $6.93 billion, due to the pricing pressures and difficulty combining the Synthes sales reps and products for repairing spinal damage. J&J said it's addressing that.

Executives said J&J is developing cheaper, easier-to-use medical devices for markets such as China and India. They're among the top emerging markets — countries with big populations that are spending more on health care — that as a group are expected to provide 40 percent of device business growth in coming years.

For the second straight quarter, J&J raised its profit forecast by a few cents, to $5.44 to $5.49 per share. Analysts expect $5.46 per share.

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Johnson & Johnson reported better than expected quarterly results on strong growth for its prescription drugs, including new treatments for cancer and to prevent blood clots.
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Tuesday, 15 October 2013 08:03 AM
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