Johnson & Johnson doesn’t expect the recession’s effects to worsen and is counting on new drugs to stanch losses to generic rivals before the year ends, Chief Financial Officer Dominic Caruso said.
J&J affirmed its 2009 profit forecast of $4.45 to $4.55 a share, showing the world’s biggest health care company planned well for the sour economy, Caruso said in an interview today. First-quarter sales sank 7.2 percent, partly because of competition for the New Brunswick, New Jersey-based company’s prescription drugs and heart stents. The slide should ease by the end of the year if J&J wins approvals for treatments for arthritis, psoriasis and blood clots, Caruso said.
The recession, and competition from generic copies of two of J&J’s biggest drugs, “basically played out like we thought it was going to play out, and we were able to deliver very solid results,” Caruso said. “I don’t know how long the recession’s going to last, but ‘as expected’ is a good comment.”
Johnson & Johnson, the first major health-care company to report first-quarter results, rose 22 cents to $51.37 in New York Stock Exchange composite trading at 4:15 p.m. The shares have lost 22 percent in the last year.
Federal Reserve Chairman Ben S. Bernanke said today in a speech that the “sharp decline” in the U.S. economy is slowing, which may indicate a move toward the beginning of a recovery.
Beating Expectations
J&J’s first-quarter profit of $3.5 billion, or $1.26 a share, beat analysts’ estimates by 4 cents. Earnings fell 2.5 percent as generic rivals siphoned drug sales and the dollar’s strength eroded the value of business outside the U.S. J&J beat estimates by cutting jobs, research and administrative spending, said Michael Weinstein, a JPMorgan Chase & Co. analyst, in a note.
“The company is clearly taking the necessary actions to maintain its profitability objectives in the face of a very challenging revenue environment,” Weinstein wrote today.
J&J said last week it would eliminate about 900 jobs in its pharmaceutical unit, in addition to 4,400 positions it began paring in 2007.
Drug division sales dropped 10.1 percent, as top-selling antipsychotic Risperdal and migraine medication Topamax lost patents against lower-cost generic copies. Revenue slipped 37 percent for the artery-opening stent Cypher, overtaken by competitors made by Boston Scientific Corp. and Abbott Laboratories. J&J expects results of a study of its new stent next month, he said.
Consumer product sales also slumped from a year ago, when retailers increased orders of allergy pill Zyrtec in advance of its entering the over-the-counter market.
‘Not so Bad’
Without the patent losses, year-earlier Zyrtec stockpiling, slowing stent sales and the currency effects, J&J’s sales increased 4 percent over the previous year, Caruso said.
“For a business our size in this global economic slowdown, that’s not so bad,” Caruso said.
The company expects regulatory decisions in the U.S. later this year on new drugs that should help turn around the pharmaceutical division, Caruso said. The Food and Drug Administration is to decide on rheumatoid arthritis medication golimumab in April, anti-clotting pill rivaroxaban in May, psoriasis treatment ustekinumab in July, and schizophrenia drug paliperidone palmitate by September, he said.
“Over the next six months, those are four very important drugs for us,” Caruso said. He declined to predict how much those drugs might generate or when pharmaceutical unit sales would rise.
The recession has eaten into J&J’s sales of contact lenses, diabetes test strips and some over-the-counter drugstore products as consumers switched to cheaper brands. The DePuy division’s artificial hips and knees posted a 0.4 percent sales rise to $1.29 billion.
“I don’t want to tell you every part of the business is firing on all cylinders,” Caruso said. “Our broad-based model, a diversity of businesses, has probably insulated us from an economic downturn like this.”
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