J&J Boosts Guidance

The company continues to boast of stronger growth in foreign sales.
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Johnson & Johnson

(JNJ) - Get Report

posted a strong first quarter and boosted full-year guidance by a few pennies a share.

J&J, which also agreed Tuesday to buy an antibiotic developer for $245 million in cash, cited solid sales of its medical devices, diagnostic products and consumer products. Revenue growth in foreign markets significantly outran domestic sales gains.

For the three months ended March 31, J&J said it earned $2.93 billion, or 97 cents a share, on revenue of $12.83 billion. The consensus of analysts polled by Thomson First Call expected a profit of $2.77 billion, or 92 cents a share, on revenue of $12.54 billion.

For the same period last year, J&J earned $2.49 billion, or 83 cents a share, on revenue of $11.56 billion.

The company said its medical devices and diagnostic products units produced sales of $4.8 billion, up 16% from the same period a year ago. The biggest gain came from foreign markets, where sales soared by 25.4%.

Sales of consumer products rose 11.4% to $2.28 billion. Again, international markets paced the growth with a revenue gain of 20.7%.

Prescription pharmaceuticals, J&J's biggest division, produced the smallest revenue gain -- up 7% to $5.76 billion. Once again, foreign markets paced sales with a 13.8% increase over the same period last year.

"Our strategic principle of being broadly based continues to serve us well," CEO William C. Weldon said in a prepared statement.

Six of seven operating units in the medical devices and diagnostics category produced quarterly sales gains of 15% or better. The laggard was the Cordis unit, which makes, among other things, drug-coated arterial stents. The total sales gain was 10%, as U.S. sales dropped 19% while overseas sales gained 72%.

Cordis' performance was hurt by lower sales in the U.S. market for J&J's Cypher stent, whose U.S. revenue was $317 million, down 27% from the first quarter of 2004. Short cited competition from

Boston Scientific's

(BSX) - Get Report

drug-coated Taxus stent, which entered the U.S. market in March 2004. J&J's Cypher had been available in the U.S. since April 2003.

Short said J&J has about 38% to 40% of the U.S. drug-coated stent market. J&J has 50% of the foreign market excluding Japan, where Cypher is the only drug-coated stent available. For the quarter, Cypher produced $300 million in overseas sales, including $116 million in Japan.

Among pharmaceuticals, generic competition took an expected toll on sales of the pain-relief patch Duragesic, as worldwide sales slipped 1% to $450 million. The real damage was in the U.S. market, where sales fell 27% to $194 million.

Competition from brand-name drugs continued to erode revenue of the Procrit/Eprex anemia drug franchise, whose total revenue fell 14% to $836 million. The U.S. component dropped 18% to $565 million.

Growth came from the epilepsy drug Topamax, which reported that sales rose 24% worldwide to $406 million; Remicade, for rheumatoid arthritis and Crohn's disease, up 24% to $577 million worldwide; and the antipsychotic Risperdal, whose worldwide sales gained 16% to $844 million. Risperdal has supplanted Procrit/Eprex as J&J's best-selling drug.

The first quarter was strong enough to encourage J&J to raise its full-year earnings guidance to a range of $3.41 to $3.43 a share, from the previous $3.38 to $3.41. The Wall Street consensus is $3.40. Finance chief Robert J. Darretta said on a conference call that sales growth will be "in the top end of the range" that J&J has pegged at 5%-7%.

EPS calculations exclude future acquisitions, including J&J's pending purchase of

Guidant

(GDT)

. The cash and stock deal goes before Guidant shareholders April 27. It still must be approved by U.S. and foreign regulators. The European Union agency that reviews mergers and acquisitions must decide by April 22 whether to approve the deal or seek additional information.

Darretta said he expected the agency will seek more data, adding another 90 working days to the approval process. Assuming there are no extra delays or difficulties, the Guidant-J&J deal probably will close late in the third quarter.

J&J also agreed to buy Peninsula Pharmaceuticals, which is working on developing antibiotics to treat life-threatening infections, for $245 million in cash.

In early trading Tuesday, J&J's stock slipped 19 cents to $68.85.