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Outlook Lifts Johnson & Johnson

Third-quarter sales rise nearly 8%, and the stock hits a 52-week high.

Updated from 8:54 a.m. EDT

Johnson & Johnson

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reported better-than-expected earnings and revenue in the third quarter, due to sales growth across a number of its segments.

Overall, the health-care giant reported sales of $13.3 billion for the quarter, a gain of nearly 8% year over year. Earnings reached $2.8 billion, or 94 cents a share. Excluding $115 million in charges related to its acquisitions of Ensure Medical and Colbar LifeScience, the company earned $2.9 billion, or 98 cents a share.

Analysts were expecting earnings of 93 cents a share on $13.1 billion in revenue. Shares of J&J rose $1.15, or 1.8%, to $66.08, setting a 52-week high. Volume was more than twice as heavy as usual.

Sales in the company's medical devices and diagnostics segment were $5 billion for the quarter, up 7.1% from the prior year. Driving the growth were J&J's Ethicon surgery devices and women's health products, Vistakon disposable contact lenses, its DePuy orthopedic business and LifeScan's blood-glucose monitoring and insulin-delivery products.

However, revenue from its Cordis medical-device business fell 2% after studies showed a higher-than-expected occurrence of blood clots from a condition known as late-stent thrombosis in patients with its drug-coated stents.

Stents are wire mesh tubes used to prop open arteries that have been cleared of blockages. Drug-coated stents, like the Cordis Cypher and

Boston Scientific's

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Taxus, are coated with agents intended to prevent reclogging.

J&J's pharmaceuticals sales were $5.9 billion, up 7.8% following strong sales of the antipsychotic drug Risperdal, the inflammatory disease drug Remicade, the epilepsy and migraine fighter Topamax, and Concerta, a treatment for attention deficit hyperactivity disorder.

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Remicade, a drug approved for a total of 13 different conditions, saw its sales rise 24%, with a 15% increase in the U.S. and a more than 70% gain elsewhere. Topamax sales were also a key driver of growth, owing to its increased use as a treatment for migraines.

However, following the patent expiration of its anemia drug Procrit, known as Eprex outside of the U.S., sales of the drug declined 7%. J&J says Procrit's market share has dropped to 33% from 49%.

Sales of the pain patch Duragesic, oral contraceptives, the painkiller Ultracet and the antifungal drug Sporanox were disappointing, J&J said.

Among contraceptives, "clearly the year-over-year declines are a reflection of the decrease in the use of

Ortho Evra," the company's birth-control patch, Chief Financial Officer Bob Darretta said during a conference call. Sales of the product took a hit amid concerns that it could be linked to a higher risk of blood clots and other complications. Darretta expects to see sales growth eventually return.

The company plans to file a patent extension on Risperdal for pediatric use next year because its existing patent is set to expire at the end of 2007.

J&J's consumer segment brought in sales of $2.5 billion, up 10.1% from a year ago. Sales growth reflects the launch of McNeil's reformulated over-the-counter Tylenol upper respiratory products, as well as strength in baby, child-care and skin-care products.

The company's consumer business recently added a number of brands through its acquisition of


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consumer products division over the summer.

"Each of our business segments -- pharmaceuticals, medical devices and diagnostics and consumer products -- contributed to our solid third-quarter results," said William Weldon, J&J's chairman and CEO, in a prepared statement. "Our strategic principle of being broadly based in human health care products continues to serve us well."

The company said it's on track to report 8%-10% growth in earnings for all of this year, which would amount to $3.65 to $3.72 a share, Darretta said. He added that he was "comfortable" with analysts' profit estimates of between $3.72 and $3.74 a share.

J&J will provide a more thorough update on its businesses at its annual investor meeting in January.