By Ransdell Pierson
April 16 Johnson & Johnson beat Wall Street's
quarterly profit estimates on sharply lower taxes, strong sales
of prescription drugs and a revival of over-the-counter
medicines that had been recalled over quality control problems.
Newer prescription medicines, including prostate cancer drug
Zytiga, psoriasis drug Stelara, and Incivo for hepatitis C made
J&J shares rose 1.7 percent to $83.13 in mid-day trading.
"Overall, the company's first-quarter performance was
clearly a positive, with pharmaceuticals firing on all cylinders
and more than making up for disappointment with medical
devices," said Edward Jones analyst Judson Clark. He was also
optimistic that over-the-counter medicines would continue to
regain lost ground this year.
U.S. sales of over-the-counter (OTC) medicines, including
painkillers Tylenol and Motrin, jumped 14 percent, allowing the
broader consumer products business to eke out a 2.4 percent
sales gain in the quarter.
"It's a strong start to the year that increases the chances
that J&J will meet its 2013 profit forecast," Morningstar
analyst Damien Conover said.
Sales at the OTC division had plunged over the last three
years after J&J recalled products made at plants in Pennsylvania
and Puerto Rico that were shown to have foreign particles or
incorrect concentrations of active ingredients.
Although costly plant upgrades were still underway, Conover
noted other factories have geared up production of Tylenol,
Motrin and other OTC products in the meantime, allowing J&J to
restock drugstore shelves.
Chief Financial Officer Dominic Caruso said on a conference
call with analysts that a "strong flu season" bolstered sales of
OTC products. He predicted 75 percent of recalled OTC brands
would be back on the U.S. market by the end of 2013.
MEDICAL DEVICES DISAPPOINT
J&J earned $3.5 billion, or $1.22 per share, compared with
$3.91 billion, or $1.41 per share, in the year-earlier quarter.
Excluding special items, including litigation expenses of
$529 million, J&J earned $1.44 per share. Analysts, on average,
expected $1.40 per share, according to Thomson Reuters I/B/E/S.
Global company sales rose 8.5 percent to $17.50 billion,
slightly higher than the $17.42 billion expected by Wall Street.
They would have risen by 9.8 percent, if not for the stronger
dollar, which hurts the value of sales in overseas markets.
Prescription drugs sales rose 10.4 percent to $6.77 billion.
Stelara sales leapt 57 percent to $346 million, while Incivo's
rose 23 percent to $162 million. Sales of Zytiga jumped 72
percent to $344 million.
Global sales of medical devices rose 10.2 percent to $7.06
billion, helped by the addition of new trauma-treating products
from its recent acquisition of Synthes Inc.
Rick Wise, an analyst at Stifel Nicolaus, had predicted a 16
percent increase in the sales, and attributed the shortfall to
fewer general and orthopedic surgeries being performed.
"J&J said procedure volumes were soft, and they're not
expecting much of a recovery this year," said Wise, who noted
that many patients were delaying surgeries because of higher
He said the trend cited by J&J appeared to be hitting shares
of rival device makers.
Stryker Corp fell 0.5 percent to $64.98, while
Zimmer Holdings Inc slipped 0.3 percent to $73.48.
J&J stuck to its earlier full-year 2013 profit forecast of
$5.35 to $5.45 per share. It earned $5.10 per share last year.