(Adds detail, background.)
By Peter Loftus
Johnson & Johnson (JNJ) eked out a 1.1% increase in
third-quarter profit, despite generic competition for several
former big sellers pushing revenue below expectations.
Earnings, though, beat Wall Street's views, prompting the
health-care-products maker to boost its 2009 target.
The weakness in J&J’s pharmaceutical unit was partially
offset by sales growth in the company's medical-device unit. For
the second quarter in a row, device sales were higher than
pharmaceutical sales. Last quarter was the first time in about 10
years that had happened.
J&J's diversified business model has proved to be a buffer
against some of the negative trends that have hurt competitors more
concentrated in the pharmaceutical industry.
Still, 2009 has shaped up to be one of the health giant's more
difficult years, with all three of its main business units showing
signs of weakness. Heightened generic competition has hurt its
prescription-drug business, while unfavorable currency-exchange
rates have pulled down sales growth for consumer-healthcare and
medical-device products as well.
In premarket trading, J&J shares fell 1.7% premarket to
$61.50.
J&J, whose products range from Band-Aids to the Procrit
anemia drug, said profit rose to $3.35 billion, or $1.20 a share,
from $3.31 billion, or $1.17 a share, a year earlier. Analysts
surveyed by Thomson Reuters were expecting, on average, earnings of
$1.13 a share.
After the better-than-expected results, J&J raised its
per-share earnings guidance to between $4.54 and $4.59, up from its
prior target - first given in January and repeatedly affirmed since
- was $4.45 to $4.55.
Earnings were helped by cost cuts. Earlier this year J&J cut
about 900 jobs from its U.S. pharmaceuticals unit, and in August
the company consolidated its management structure.
Revenue fell 5.3% to $15.08 billion, below the Thomson Reuters
estimate of $15.22 billion, as 2.5 percentage points of the decline
coming from currency changes. U.S. sales fell 8.1%. International
sales dropped 2.5% but rose 2.4% on a constant-currency basis.
Drug sales fell 14% to $5.3 billion, due largely to generic
competition. That included a 19% drop in the U.S. The declines
included antipsychotic Risperdal and epilepsy and migraine
treatment Topamax, both of which lost patent exclusivity in the
past year.
J&J has tried to offset the pharmaceutical weakness by
trying to bring new drugs to market - with successes and setbacks
alike - and by acquiring or licensing experimental drugs that could
hit the market in the future. For example, J&J paid $885
million for an 18% stake in Elan Corp. (ELN).
The latest quarter saw the formerly fast-growing consumer
health-care unit post a 2.7% sales drop to $4 billion; excluding
currency changes, it would have reported 1.1% growth.
The device unit, which includes contact lenses and diabetes test
strips, saw sales rise 2.3% to $5.8 billion; excluding currency
impacts, unit sales rose 4.1%.
Drug-coated stent sales remained weak, falling 7.2% to continue
a trend from recent quarters amid increased competition in the U.S.
Revenue slumped 10% domestically. J&J late last month said it
wrung a $716 million payment from Boston Scientific Corp. (BSX) to
settle more than a dozen stent patent-infringement lawsuits, most
of which will be recorded in the fourth quarter.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
(Mike Barris contributed to this report.)