Updated from 9 a.m. EDT

Health care giant

Johnson & Johnson

(JNJ) - Get Report

said third-quarter profits rose 19%, bolstered byincreased sales across all three of its major business units.

Third-quarter net income totaled $1.8 billion, or 60 cents per share,up from $1.5 billion, or 50 cents per share, in the third quarter lastyear. Results beat Wall Street analysts' expectations by a penny, accordingto Thomson Financial/First Call.

Third-quarter total revenue rose nearly 13% to $9.1 billion, toppingthe Wall Street consensus estimate of about $9 billion.

On its conference call with analysts, Johnson & Johnson officials upped 2002 earnings guidance to $2.26 per share, an increase of a penny per share from its previous forecast. Wall Street currently expects 2002 earnings of $2.25 per share.

For 2003, Johnson & Johnson officials cautioned analysts against raising current earnings guidance above the current consensus estimate of $2.61 per share, representing 15% growth over 2002 earnings.

Back to the third quarter results, pharmaceutical sales jumped 16% to $4.3 billion, bolstered by strongsales growth of Remicade, used to treat rheumatoid arthritis, and theantipsychotic drug Risperdal, the company said.

Sales of Procrit/Eprex, the company's anemia-fighting drugs, rose 7% to $1.1 billion in the third quarter. International sales of Eprex totaled $320 million, an increase of 12%, but slightly below Wall Street estimates of $325 million.

On its conference call with analysts, Johnson & Johnson officials acknowledged that Eprex sales were being impacted negatively by the drug's linkage to about 141 cases of pure red cell aplasia, a serious side effect that causes severe anemia in patients. The company said it intends to release an update on the number of PRCA cases next week, although the company claims that the rate of new PRCA cases, compared to last year, is flat to slightly negative.

The Eprex/Procrit franchise is getting a lot of scrutiny from analysts because Amgen's new anemia drug, Aranesp, is expected to provide strong competition, especially in the oncology market.

Third-quarter sales in its medical-device division rose almost 13% to$3.1 billion, while consumer product sales added 3% to $1.7 billion.

Next week, an FDA advisory panel will review Johnson & Johnson's newdrug-coated stent, dubbed Cypher. Last month, the company released positiveefficacy and safety data on the medical device at a closely watched medicalmeeting. If approved by the FDA early next year, the Cypher stent could beJohnson & Johnson's next blockbuster product, potentially generating morethan $1 billion in peak annual sales, analysts say.

From an operations standpoint, Johnson & Johnson appears to be hittingon all cylinders, but that has created an expensive stock. After falling toa near-term low on July 19, the stock has risen 38%, far outpacing its S&Pbrethren and making it the most expensive stock in the large-cappharmaceutical universe. Johnson & Johnson closed Monday at $57.83, puttingit at a pricey 29 times trailing earnings. Tuesday's close was $59.56, up 1.73 or 2.99%.