Updated from 7:47 a.m. EDT
Johnson & Johnson
produced second-quarter earnings that beat Wall Street's estimates even though the company's drug-coated stent and anemia-treatment businesses took big hits.
The health care giant on Tuesday reported earnings of $1.05 a share, topping the consensus estimate by 5 cents. Sales for the quarter of $15.13 billion beat the average analyst forecast of $15.06 billion, according to Thomson First Call.
The company beat its own earnings estimate of $1.02 a share thanks to controlling costs and achieving stronger-than-expected sales for some products, "even in the face of our sales challenges" in the stent and anemia-drug areas, said Dominic Caruso, the chief financial officer, in a telephone conference call with analysts.
Compared to the same quarter last year, J&J's earnings per share rose 10.5% and its sales climbed 13.2%. Net income of $3.08 billion was 9.3% higher than the year-ago period.
By late morning, J&J's stock was down $1.01, or 1.6%, to $62.79.
Sales growth was aided by the acquisition of
consumer health business in December. Second-quarter sales of consumer products rose 48.6% from last year to $3.56 billion. On a pro forma basis, which assumes J&J had owned the Pfizer unit last year, sales gained 4.6%.
J&J also said it was sticking with its full-year earnings estimate of $4.02 to $4.07 -- the consensus is $4.04 -- due to uncertainty over its anemia drug Procrit. Last year, Procrit accounted for 6% of corporate revenue.
"We are being slightly conservative," said Caruso, because of reviews by the Food and Drug Administration and by the federal Centers for Medicare and Medicaid Service.
The FDA is examining whether Procrit, which is sold as Eprex in foreign markets, should be subject to new restrictions due to concerns about greater risks of death, blood clots, strokes and heart attacks.
The agency's review also affects Aranesp and Epogen from
. Procrit is the same as Epogen, and J&J licenses the drug from Amgen.
Meanwhile, CMS has proposed
less favorable reimbursement rates for the anemia drugs being given to cancer patients. Caruso called the payment guidelines "pretty harsh." A final ruling hasn't yet been made.
The controversy over the anemia drugs caused Procrit's U.S. sales to sink by 14% year over year to $449 million. However, Eprex's sales gained 2% in overseas markets to $309 million. Amgen will issue second-quarter results on July 26.
A weakening U.S. stent market, greater competition overseas and pricing pressures combined to depress sales of Cypher, the drug-coated stent inserted into arteries to improve blood flow. In the U.S., Cypher's sales dropped 41% to $210 million. Outside the U.S., sales fell 30% to $240 million.
Caruso said J&J is taking steps to improve the manufacturing of Cypher. Next year, J&J expects to start human trials of a stent from Conor Medsystems, which
J&J recently acquired for $1.4 billion.
One experimental stent from Conor recently failed in a clinical trial when compared with the Taxus stent from
. J&J attributed the test's failure to the drug used in the Conor stent to prevent arteries from reclogging. Next year's clinical trial will use a different drug.
Despite the stent and anemia-drug setbacks, J&J said several big drugs posted healthy gains. Sales of Topamax, for epilepsy and migraine headaches, rose 16% to $578 million, and sales of Remicade, for conditions including rheumatoid arthritis and Crohn's disease, rose 12% to $869 million. Revenue from the schizophrenia franchise, primarily Risperdal, climbed 7% to $1.14 billion.
Caruso said J&J had no timetable to complete the buyback of up to $10 billion in stock, which was announced last week. Caruso said the repurchase would be the largest in J&J's history, adding that the earnings-per-share impact this year would be "modest."
The buyback represents about 5.5% of J&J's market capitalization.