At Johnson & Johnson, profit falls but beats expectations

Johnson & Johnson (JNJ), the world's biggest health care company, today announced net earnings for the second quarter of 2009 declined 4.7 percent to $3.2 billion, or $1.15 per share, beating analyst estimates of $1.11 earnings per share in the second quarter. It reported earnings of $1.18 per share in the same quarter last year.

The health care giant also reported sales of $15.2 billion for the second quarter of 2009, a decrease of 7.4 percent as compared to the second quarter of 2008 mostly due to exchange rate impact. The street, on average, expected $15 billion in revenue.
"I am proud of the accomplishments of our people in continuing to deliver very solid operational results in light of the significant impacts of patent expirations and the economic environment," said William C. Weldon, Chairman and Chief Executive Officer.

Indeed, as expected, this was a tough quarter for J&J's pharmaceutical division, which posted worldwide sales of $5.5 billion in the second quarter, a 13.3 percent drop. Migraine drug Topamax was a large contributor to this decline as its sales plunged 70 percent worldwide as generic competition intensified, but it wasn't the only drug that suffered sales loss. Other drugs, however, managed to offset the Topamax sales drop, especially Concerta for ADHD, Rispersal Consta for bipolar disorder and most significant, anti-inflammatory arthritis drug Remicade, which saw sales increased 24.4 percent worldwide to pass the $1 billion mark in the quarter!

Luckily, J&J's other market segments continued to balance out the decline in the pharma division with
worldwide consumer sales recording a 4.5 percent decrease to $3.9 billion, but operationally increasing 3.1 percent. The main contributors were J&J's skin care, women's health and wound care products. Meanwhile, worldwide medical devices and diagnostics sales dropped 3.1 percent to $5.9 billion, but increased 2.9 percent operationally.

J&J has been working hard during the quarter. It plans to file for regulatory approval of three new drugs by the end of 2010, and an additional eight drugs by the end of 2013. That's no small feat. During the quarter, the U.S. Food and Drug Administration approved Simponi for the treatment of adults with moderately to severely active rheumatoid arthritis in combination with methotrexate and approved Risperdal Consta for Bipolar I Disorder.

J&J has also recently acquired a stake in Elan, which gives it access to an area where it had almost no presence, namely Alzheimer and neurodegenerative condition research. It also said it will acquire Cougar Biotechnology Inc., a development-stage company testing a potential vaccine for prostate cancer for approximately $1 billion in a cash.

CEO Weldon added, "Our investments through internal research and development, strategic partnerships and acquisitions have allowed us to build what is considered by many to be one of the best pipelines in our industry. We will continue to invest in our portfolio of innovative products to meet the needs of patients and consumers around the world."

The company also confirmed its earnings guidance for full-year 2009 of $4.45 to $4.55 per share, which excludes the impact of special items and is in line with analyst estimates of $4.51 a share. Wall Street thinks that growth will pick up in 2010 with an 8 percent jump and then another 10 percent increase by the end of 2011 when a global economic recovery should have long taken hold.

One potential setback, however, came late last month, as a panel of FDA advisers recommended reducing the maximum dose of Tylenol.

With J&J's diversity and demonstrated business model and management style it will likely remain a favorite company and stock in good and bad times alike.

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