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TheStreet Open House

J&J 2Q Profit Down By Half On Lower Sales, Charges

Stocks in this article: JNJMDCO

LINDA A. JOHNSON

Health care giant Johnson & Johnson, struggling with tough market conditions, ongoing manufacturing problems and other issues, lowered its profit forecast for the year after posting second-quarter net income that dropped by half due to a slew of litigation and acquisition-related charges.

The maker of Band-Aids, medical devices and prescription drugs, its iconic image tarnished by legal and manufacturing lapses, on Tuesday noted some positive signs. They include small increases in hospital admissions and surgical procedures in the U.S. Despite that, revenue dipped by 0.7 percent due to lower sales in the U.S. and for consumer health products worldwide.

The results beat analysts' expectations for adjusted profit by a penny, but fell short of the revenue forecast by nearly $250 million.

Many J&J nonprescription products remain off the market due to about three dozen recalls since September 2009. The company said Tuesday that they won't all be back in stores until sometime next year. Two of its consumer health product factories are operating at reduced capacity due to increased government scrutiny and the third is being rebuilt from the ground up. J&J noted remediation costs this year have been higher than expected.

"We remain committed to and optimistic about the future of our (over-the-counter) business," new CEO Alex Gorsky told analysts on a conference call Tuesday, adding that there's strong consumer demand for products that are back in stores, such as some versions of Tylenol.

Gorsky gave what amounted to a long pep talk about the company's great opportunities, despite continuing pressure from government and other health plans to reduce prices. His priorities include resolving the manufacturing problems, building on recent approvals and other success in the prescription drug business, and integrating Swiss orthopedics device maker Synthes. The company bought Synthes in June for $19.7 billion, its largest acquisition ever, and Synthes product sales in the quarter's last couple of weeks boosted revenue by 1.2 percent.

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