2nd UPDATE: J&J 2Q Profit Down 3.6% On Forex, Generics
14 Juillet 2009 - 4:33PM
Dow Jones News
Johnson & Johnson's (JNJ) second-quarter profit declined
nearly 4%, with sales hurt by unfavorable currency rates, generic
competition for prescription drugs and tighter consumer
spending.
Analysts and investors knew it would be a difficult quarter for
the New Brunswick, N.J., maker of Tylenol and Band-Aid, but the
results turned out better than Wall Street expected, helped by cost
cuts and higher sales of some products. And J&J reiterated its
full-year profit forecast despite incurring costs from recent
acquisitions.
J&J shares rose 62 cents, or 1%, to $58.34 Tuesday
morning.
"This was one of the most challenging quarters for
year-over-year comparisons in our history," J&J Chief Financial
Officer Dominic Caruso told analysts on a conference call. But he
said the company was financially strong and well-positioned for
long-term profitable growth.
Analysts said the upside came from cost controls, less harmful
currency rates than expected, and higher-than-expected sales of
some products, including the blockbuster drug Remicade for
arthritis and other conditions. Leerink Swann analyst Rick Wise
said results reflected "a very strong operational quarter."
J&J reported second-quarter net income of $3.2 billion, or
$1.15 a share, compared with $3.3 billion, or $1.17 a share, a year
earlier. Analysts surveyed by Thomson Reuters had expected J&J
to post second-quarter earnings of $1.11 a share.
Second-quarter sales declined 7.4% to $15.24 billion from $16.45
billion, but exceeded the Thomson estimate by about $200 million.
The relatively stronger U.S. dollar accounted for 6 percentage
points of the decline. J&J's U.S. sales dropped 6.7% while
non-U.S. sales declined 8%.
J&J's pharmaceutical unit lost its status as the company's
biggest, slipping below the medical-device and diagnostics unit for
the first time in recent memory. Pharmaceutical sales dropped 13%
to $5.5 billion, with U.S. sales declining 16.4% and non-U.S. sales
down 8.7%. The pharma division was hurt by J&J's loss of market
exclusivity for two of its top sellers, the antipsychotic
Risperdal, whose sales dropped 66%, and epilepsy and migraine
treatment Topamax, with sales down 73%.
Combined sales of anti-anemia drugs Procrit and Eprex declined
11.5% to $577 million, continuing a two-year trend of weakness
sparked by safety concerns.
Another top J&J drug, however, had a rebound. The Remicade
treatment for rheumatoid arthritis saw second-quarter sales rise
24% to $1.1 billion. Sales growth had slipped to just 3% for the
first quarter, amid signs that high-priced biologics were feeling
the pinch of tighter spending by patients. The second quarter's big
gain could be a good sign for other biologics such as Abbott
Laboratories' (ABT) Humira and Enbrel from Wyeth (WYE) and Amgen
Inc. (AMGN). Schering-Plough Corp. (SGP) markets Remicade outside
the U.S.
The device unit's sales dropped 3.1% to $5.89 billion. The DePuy
division of the device unit, which makes joint-reconstruction and
other products, had roughly flat sales of $1.3 billion. The Ethicon
surgical-products unit saw sales rise 2.1% to $1.04 billion.
Increased competition continued to hurt sales of J&J's
drug-eluting stents.
J&J's consumer unit sales fell 4.5% to $3.85 billion. Sales
dropped for baby care, oral care and skin-care products. But sales
increased for wound care products.
Caruso said the weak economy continued to take a bite out of
sales of J&J products that require consumers to pay out of
pocket, including contact lenses to diabetes test strips.
J&J hopes an economic recovery and new pharmaceutical
products will help it return to solid sales and earnings growth in
future years. The company has had a flurry of new drug applications
- with some approvals but other applications still pending.
And J&J continues to try to beef up its drug pipeline. This
month, J&J has agreed to pay $1.5 billion for a minority stake
in Elan Corp. (ELN) and control of Elan's rights to experimental
Alzheimer's-disease drugs, and it closed its $1 billion acquisition
of Cougar Biotechnology Inc., which is developing cancer drugs.
-Peter Loftus; Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com