J&J 3Q net rises slightly on higher medicine sales

October 15, 2013 by Linda A. Johnson

A big jump in prescription drug sales and continued recovery of Johnson & Johnson's beleaguered consumer health business in the third quarter helped the health care giant overcome a new problem: slumping sales of its medical devices.

That was mainly due to pricing pressure in the U.S. that forced J&J to cut prices for devices including diabetes testing products and spine and hip replacement parts, and trouble integrating part of orthopedic products maker Synthes, bought last year for $20 billion in J&J's biggest acquisition.

The maker of baby shampoo and immune disorder drugs nudged up its earnings forecast for 2013. In afternoon trading, shares rose 61 cents to $90.41, near its 52-week high of $94.42.

J&J said Tuesday that net income was $2.98 billion, or $1.04 per share, up from $2.97 billion, or $1.05 per share, a year earlier. Excluding charges, it earned $1.36 per share, 4 cents per share more than expected.

Revenue rose 3 percent to $17.58 billion. Analysts expected $17.43 billion.

"We are still seeing (health care) utilization rates that are essentially flat year over year," Chief Financial Officer Dominic Caruso told analysts on a conference call.

That's been a problem throughout the lengthy global economic slowdown, as consumers delay elective surgical procedures and "trade down" to store brands rather than J&J's pricier Band-Aids and nonprescription medicines.

Those nonprescription drugs, responsible for most of J&J's roughly four dozen product recalls over the past four years, saw jump 18 percent in the U.S. and 6.4 percent worldwide as more products were returned to stores. Pain relievers such as Tylenol and Motrin, among the products recalled for reasons including wrong active ingredient levels and contamination with metal and plastic particles, fueled that growth.

The consumer health business, which also makes dental, wound and skin care items such as the Aveeno and Neutrogena lines, boosted sales 0.8 percent to $3.61 billion.

The decline in device sales enabled the New Brunswick, New Jersey, company's prescription drug business to regain its position as J&J's top revenue generator.

Drug sales rose 9.9 percent to $7.04 billion, led by big jumps for newer medicines including anticlotting drug Xarelto, immune disorder drug Simponi, Stelara for psoriasis, Invega Sustena for schizophrenia and Zytiga for prostate cancer.

"The new drug sales are particularly impressive," said Erik Gordon, a professor and analyst at University of Michigan's Ross School of Business. But he said J&J can't seem to get its consumer products business "moving quickly. They've lost four years of business and may never get it all back."

Analyst Steve Brozak of WBB Securities was encouraged by J&J's $2.3 billion in sales of medicines for arthritis and inflammatory disorders, and its push into cancer medicines. Both are growth areas and cancer drugs command big profits.

Device sales dropped 2 percent to $6.93 billion, due to the pricing pressures and difficulty integrating the Synthes sales reps and products for repairing spinal damage. J&J said it's addressing that.

It's developing cheaper, easier-to-use for markets such as China and India. They're among the top emerging markets—countries with big populations that are spending more on —that are expected to provide 40 percent of device business growth in coming years.

Edward Jones analyst Judson Clark said J&J is acknowledging the industry can't hit its earlier rosy profit expectations in emerging markets.

"People who can't afford a $100 medicine also can't afford to pay list price for replacement knees," Clark said, but noted device sales were up 0.3 percent excluding the effect of unfavorable currency exchange rates.

For the second straight quarter, J&J raised its profit forecast by a few cents, to $5.44 to $5.49 per share. Analysts expect $5.46 per share.

Explore further: J&J 2Q profit jumps on higher sales, lower charges

Related Stories

J&J 2Q profit jumps on higher sales, lower charges

July 16, 2013
Health care giant Johnson & Johnson's second-quarter profit more than doubled, thanks to higher sales of medicines and medical devices as it recovers from recalls and manufacturing problems that cut into sales.

J&J Q3 net income drops 7 percent on higher costs

October 16, 2012
Johnson & Johnson's third-quarter profit fell 7 percent as increased research and production costs offset higher sales for its medicines and medical devices and new revenue from its biggest acquisition ever.

J&J 4Q profit jumps on higher sales, lower charges (Update)

January 22, 2013
Higher sales of prescription drugs and medical devices helped Johnson & Johnson post a much bigger fourth-quarter profit than a year ago, when a slew of charges depressed results.

Merck 2Q profit tumbles on charges, lower revenue (Update)

July 30, 2013
Drugmaker Merck & Co.'s second-quarter profit fell by half as generic competition slashed revenue from several older medicines and sales of its top drug barely budged.

Amgen 2Q net dips on higher research, other costs (Update)

July 30, 2013
Amgen Inc. said Tuesday that its second-quarter profit dipped 1 percent as higher spending on research, production and other items offset rising sales of its medicines.

Recommended for you

Best of Last Year—The top Medical Xpress articles of 2017

December 20, 2017
It was a good year for medical research as a team at the German center for Neurodegenerative Diseases, Magdeburg, found that dancing can reverse the signs of aging in the brain. Any exercise helps, the team found, but dancing ...

Pickled in 'cognac', Chopin's heart gives up its secrets

November 26, 2017
The heart of Frederic Chopin, among the world's most cherished musical virtuosos, may finally have given up the cause of his untimely death.

Sugar industry withheld evidence of sucrose's health effects nearly 50 years ago

November 21, 2017
A U.S. sugar industry trade group appears to have pulled the plug on a study that was producing animal evidence linking sucrose to disease nearly 50 years ago, researchers argue in a paper publishing on November 21 in the ...

Female researchers pay more attention to sex and gender in medicine

November 7, 2017
When women participate in a medical research paper, that research is more likely to take into account the differences between the way men and women react to diseases and treatments, according to a new study by Stanford researchers.

Drug therapy from lethal bacteria could reduce kidney transplant rejection

August 3, 2017
An experimental treatment derived from a potentially deadly microorganism may provide lifesaving help for kidney transplant patients, according to an international study led by investigators at Cedars-Sinai.

Exploring the potential of human echolocation

June 25, 2017
People who are visually impaired will often use a cane to feel out their surroundings. With training and practice, people can learn to use the pitch, loudness and timbre of echoes from the cane or other sounds to navigate ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.