Weak J&J forecast sours strong quarterly results

By Ransdell Pierson

NEW YORK (Reuters) - Johnson & Johnson (JNJ.N) on Tuesday stuck with its 2007 earnings forecast despite surprisingly strong second-quarter results, sending shares down more than 1.7 percent.

Industry analysts cited concern over sharply lower quarterly sales of J&J's Procrit anemia drug amid safety concerns and continuing lower sales of the company's Cypher stent used to prop open heart arteries that have been cleared of plaque.

"Despite the second-quarter upside, management left 2007 earnings guidance unchanged," JP Morgan analyst Mike Weinstein said, adding that Procrit and Cypher will likely hold back sales growth.

J&J has reliably posted double-digit annual profit growth until recently, helped by product diversification. But it is now forecasting single-digit gains, also due to generic competition for its Duragesic pain patch and rival copycats overseas for its Risperdal schizophrenia drug.

The diversified health-care company said it still expects earnings this year, excluding special items, of $4.02 to $4.07 per share. That translates into growth of up to 8.2 percent.

It earned $3.08 billion in the quarter, or $1.05 per share, compared with $2.82 billion, or 95 cents per share, in the year-ago period.

Analysts on average expected $1 per share, according to Reuters Estimates.

"At first glance, the earnings look pretty strong," said Russell Croft, portfolio manager of Croft-Leominster Value Fund.

Noting that J&J's international sales rose 18 percent, Croft said: "One of the reasons why we like the stock (is that) almost half of their sales come from outside the U.S."

Quarterly global sales rose 13.2 percent to $15.13 billion, in line with Wall Street expectations of $15.06 billion, with positive foreign exchange factors contributing 2.4 percent of the growth.

Global pharmaceutical revenue rose 5.8 percent to $6.1 billion, fueled by sales of epilepsy drug Topamax, arthritis treatment Remicade and Risperdal.

But U.S. sales of Procrit fell 14 percent to $449 million, following widely publicized reports of deaths among patients taking higher doses of such drugs that boost numbers of red blood cells.

Medical device sales rose 5.1 percent to $5.4 billion, as higher sales of disposable contact lenses, glucose monitoring devices and surgical and wound-care products offset continuing sales declines for Cypher.

J&J said the number of U.S. procedures involving its stents fell 13 percent in the quarter, and that prices of the tiny devices slipped 3 percent.

Global sales of consumer products jumped almost 49 percent to $3.6 billion, as J&J began selling an array of brands acquired from Pfizer Inc. (PFE.N) in December, including Listerine mouthwash and the Sudafed allergy pill.