J&J profit jumps, earnings forecast raised

Johnson & Johnson's first-quarter earnings have jumped 20 per cent on higher sales of prescription drugs and medical devices, prompting it to raise its full-year profit forecast.

But the diversified healthcare company said the forecast assumes slower earnings growth for the rest of the year as its blockbuster Cypher drug-coated stent faces mounting competition from a new Boston Scientific's rival product, Taxus.

J&J, based in New Brunswick, New Jersey, earned US$2.49 billion, or 83 cents per share, in the first quarter, up from $2.07 billion, or 69 cents per share, a year earlier. The performance, helped by Cypher, surpassed the average forecast of 80 cents per share among analysts polled by Reuters.

J&J raised its 2004 earnings forecast to as high as $3 a share from a previous estimate of $2.95. Although that reflects profit growth of 13 per cent, it is a slowdown from the 21 per cent growth posted in 2003.

Moreover, analysts said profit growth will likely taper off to about 10 per cent in 2005 as Cypher cedes more ground to Taxus and J&J's Duragesic skin patch for pain faces generic competition.

Bank of America analyst Glenn Novarro said annual sales of Cypher will peak this year at about $2 billion, and that J&J will likely acquire other medical devices or prescription drugs in the coming year as new sources of earnings growth.

Earnings growth in 2006 and beyond will also hinge on success of experimental drugs now being tested, Novarro said.

"J&J is typically very secretive about its drug pipeline, but if we find out there's a potential blockbuster within it, that would help investors overlook the expected slowdown of earnings next year," Novarro said.

J&J shares closed up 19 cents to $51.39 on the New York Stock Exchange.

"The company's first-quarter sales growth was impressive, but even more encouraging was J&J's ability to control expenses, which were at least $200 million less than we had expected," said Merrill Lynch analyst Daniel Lemaitre.

Much of the savings came from hundreds of US job cuts in recent months under an early-retirement program begun last year.

Drug sales strong

Global revenue from prescription drugs rose 15 per cent to $5.38 billion as most of the company's key drugs posted strong gains.

Sales of schizophrenia drug Risperdal jumped 15 per cent despite stiff competition from a new rival treatment sold by Bristol-Myers Squibb, while sales of epilepsy treatment Topamax jumped 38 per cent.

Revenue from arthritis treatment Remicade rose 13 per cent.

Combined sales of J&J's anaemia drugs Procrit and Eprex slumped 6 per cent amid competition from Amgen's rival treatments.