J&J Staying on Message

Second-quarter sales totaled $12.8 billion, up 11%.
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Updated from 8:50 a.m. EDT

Johnson & Johnson

(JNJ) - Get Report

beat consensus quarterly estimates and raised its full-year guidance, citing improved sales in its medical devices segment and the strong performance of certain pharmaceuticals.

The company posted earnings of $2.7 billion, or 89 cents a share, on Tuesday. Excluding certain charges, the company earned 93 cents a share. Sales for the quarter totaled $12.8 billion, up 11% over the prior year. A year ago, earnings were $2.5 billion, or 82 cents a share.

Analysts expected a profit of 91 cents a share on sales of $12.6 billion for the quarter.

J&J increased its profit outlook for the year to $3.44 to $3.47 a share from the $3.41 to $3.43 range it previously provided.

While the news appeared positive, investors were taking a cautious approach. J&J shares were recently up 8 cents to $64.68.

The Guidant Matter

The New Brunswick, N.J., company's medical devices segment brought in sales of $4.9 billion in the quarter, up 19.7% from a year ago. J&J said better manufacturing efficiencies helped the division.

The Cordis medical devices business saw operating sales growth of 50% compared with the second quarter a year earlier, which includes growth of 32% in the U.S. and 73% abroad, with especially strong sales in Japan.

The Cypher stent captured 40% of the drug-eluting stent market, the company said during its conference call Tuesday, but the key growth driver in the devices segment was sales of endoscopy products, the thin tube-like instruments used to observe the interior of an organ or to perform minor surgery.

J&J says it can capture 50% of the drug-eluting stent market by the fourth quarter, with some share gains this quarter.

Lately, J&J has been drawing attention not for its existing devices business, but for one that it plans to acquire --

Guidant

(GDT)

. On Monday and for the third time in recent weeks, Guidant told doctors that problems may arise in some of its heart devices. The company said the Food and Drug Administration might classify the action as a recall.

The latest warning from the company concerned certain lines of older pacemakers. During the conference call, J&J said it should resolve the acquisition of Guidant by the end of this quarter, but it couldn't speculate on exactly how the product recall matters would be concluded.

The Guidant acquisition pact is valued at $25.4 billion, or $76 a share.

Where the Growth Is

While worldwide pharmaceutical sales were $5.6 billion for the second quarter and represented an increase over the prior year of 3.7%, domestic pharmaceutical sales alone declined 1.3%.

J&J's sales growth reflects the solid performance of the antipsychotic Risperdal, the immunosuppressant Remicade, the antiepileptic drug Topamax, the anti-infective Levaquin and the attention deficit hyperactivity disorder drug Concerta, according to the company's press release.

But sales of heart drug Natrecor sank about 20% for the quarter and sales of contraceptives fell 19%.

The company's Duragesic pain patch was hurt by generic competition in the U.S., J&J says. Duragesic patches came under fire Monday after the Food and Drug Administration announced an

investigation of a number of deaths that might be related to the use of the patches, but the concern may have been tempered since, according to the company, it now holds only 30% of the market because of generic alternatives.

A recent FDA study showed a link between the use of Risperdal and pituitary tumors, but the company says quarterly sales of that product were strong and it didn't see a direct effect as a result of those findings. However, a recent FDA letter notifying doctors of possible side effects of Natrecor, such as compromised kidney function and even death, caused a significant drop in sales of that drug.

Worldwide consumer segment sales rose 13.9% to $2.3 billion for the quarter, boosted in part by the reclassification of some over-the-counter drugs as consumer products.