J&J Beats Profit Target

First-quarter earnings and revenue are better than expected, and full-year outlook rises.
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Updated from 9:24 a.m. EDT

Johnson & Johnson

(JNJ) - Get Report

beat first-quarter earnings and revenue estimates, despite generic-drug pressures on its pharmaceutical sales, and raised its full-year outlook Tuesday.

The company also touched briefly on Takeda's recently announced acquisition of

Millennium Pharmaceuticals

(MLNM)

, its partner for multiple myeloma drug Velcade, and the expected impact of a bleak economy.

Shares of the New Brunswick, N.J.-based company, which rose slightly in premarket trading with the report, recently were trading down 0.3% at $65.52.

J&J reported earning $3.6 billion, or $1.26 a share, on revenue of $16.2 billion, compared to 88 cents a share on revenue of $15.03 billion in the year-ago quarter.

Not including an after-tax, in-process R&D charge of $807 million related to the acquisition of Conor Medsystems, the company said earnings in the recent quarter increased 6.4% -- or 8.6% on a per-share basis -- compared to the 2007 quarter.

Analysts surveyed by Thomson Financial were looking for earnings of $1.20 a share on $15.8 billion in revenue.

Worldwide consumer sales increased 16.2% to $4.1 billion, benefitting from a 6.3% impact from currency. Domestic sales increased 11.7% and international sales increased 20.2%, year over year. Pharmaceutical sales increased just 3.3% worldwide -- domestic sales decreased 0.9% while international sales increased 7.9%.

Generic-drug competition was one culprit pressuring pharmaceutical sales. Sales of antipsychotic Risperdal oral, pain patch Duragesic and a proton pump inhibitor for gastrointestinal disorders, Pariet, were among those product sales hurt by generic competition.

Also, sales of anemia drug Procrit negatively affected quarterly results due to changes in labels and reimbursement in addition to a Food and Drug Administration advisory panel that met in the quarter and voted to further restrict the use of such drugs in cancer patients.

Meanwhile, the launch of over-the-counter Zyrtec in addition to strong sales of biologic Remicade, multiple myeloma treatment Velcade, antipsychotic Risperdal Consta and attention deficit hyperactivity disorder drug Concerta helped to bolster revenue.

Although, the company noted that stocking accounted for about 2/3 of sales of Remicade and over-the-counter Zyrtec.

Per the recent news that its Velcade partner Millennium will be acquired by Japan's Takeda, J&J noted that it is the sole marketing partner outside the U.S., and that arrangement shouldn't be impacted. (It recorded $182 million in first-quarter international sales of Velcade, up 64% year over year.)

However, it co-promotes the drug inside the U.S., and that deal has annual expiration dates at which time both parties have the option to renew. "We'd be happy to continue co-promoting the product with Millennium or the new entity," executives noted in the Tuesday conference call.

Back to sales, medical devices and diagnostics sales increased 7.2% to $5.7 billion. The company said on the call that the price of drug-eluting stents has decreased 6% in the U.S. and 7% outside the U.S.

Also on the revenue side, the company noted on its conference call that procedure volumes were down in the recent quarter but that it was too early to indentify a trend. With regard to a possible economic factor, executives said on the call that across all of J&J's businesses there has been very little correlation to economic trends in the past, although this is a unique environment.

On the spend side, R&D increased 4% year over year, which represents less-pronounced growth than prior years, and the company said to expect that pharma spending will continue to moderate as pipeline products begin to move through the regular market.

Looking ahead, J&J raised its earnings guidance for full-year 2008 to a range of $4.40 to $4.45 a share, before items, up from the company's previous forecast of $4.38 to $4.44 a share. Analysts had pegged $4.44 a share on roughly $63.75 billion in revenue.

The company noted on the conference call that first-quarter stocking of Zyrtec and also continued generic pressures in the U.S. are built into full-year guidance.

"Our strategy of being broadly based remains one of the keys to our consistent long-term performance," said J&J CEO William Weldon in a press release.

Know What You Own

: J&J operates in the drug manufacturers and health-care industry, and some of the other stocks in its field include

Merck

(MRK) - Get Report

,

Pfizer

(PFE) - Get Report

,

Bristol-Myers Squibb

(BMY) - Get Report

,

Novartis

(NVS) - Get Report

and

Procter & Gamble

(PG) - Get Report

. These stocks were recently trading at $41.32, -0.19%, $20.67, +0.54%, $21.53, -0.09%, $47.30, +1.81% and $70.15, +0.04%, respectively. For more on the value of knowing what you own, visit TheStreet.com's

Investing A-to-Z

section.