Updated from 9:35 a.m. EDT

Diversified health care giant

Johnson & Johnson

(JNJ) - Get Report

saidsecond-quarter earnings rose 12.5%, led by strong sales across all three ofits major business units.

Second-quarter net income totaled $1.7 billion, or 54 cents per share,compared to net income of $1.5 billion, or 45 cents per share, in thesecondquarter last year.

Excluding special charges related to acquisitions, net income reached$1.8 billion, or 60 cents per share in the second quarter. On this basis,Johnson & Johnson beat Wall Street analysts' expectations by 2 cents pershare, according to Thomson Financial/First Call.

Second-quarter total revenue rose nearly 11% to $9.1 billion, again,topping Wall Street estimates of about $8.9 billion.

Pharmaceutical sales grew 10% to $4.3 billion, bolstered by strongsalesgrowth of its anemia-fighting drug, Procrit/Eprex, as well Remicade, usedtotreat rheumatoid arthritis and Crohn's disease, the company said.

Second-quarter sales in its medical-device division rose almost 14% to$3.2 billion, while consumer product sales increased nearly 8% to $1.6billion.

Johnson & Johnson increased guidance for 2002 guidance by 2 cents to$2.25 per share, representing 18% year-over-year growth. For 2003, thecompany forecast an earnings range of $2.55-$2.60 per share. Wall Streetanalysts are looking for earnings of $2.23 per share and $2.59 per share in2002 and 2003, respectively.

One upcoming challenge to that growth will be the defense of itsimportant Procrit/Eprex franchise, which contributed $3.43 billion inrevenue to the company last year. Later this week, the Food and DrugAdministration is expected to endorse the use of

Amgen's

(AMGN) - Get Report

ownanemia-fighting drug, Aranesp, for use in oncology patients. This willallowAmgen to compete directly against Johnson & Johnson in the lucrative U.S.cancer market.

Amgen, which Tuesday announced it had closed its merger with

Immunex

(IMNX)

, hasalready started to take on Johnson & Johnson, telling doctors that Aranespis safer than Procrit/Eprex, which has been linked to 78 cases of pure redblood cell aplasia, a serious medical condition. Amgen's Aranesp and itsolder cousin drug, Epogen, have only been linked to four cases of thecondition, according to Amgen.

Now that Immunex has been acquired by Amgen, the biotech firm's rivalrywith Johnson & Johnson will extend into the rheumatoid arthritis market --with Amgen's Enbrel competing against Johnson & Johnson's Remicade.

Shares of Johnson & Johnson are up $2.01, or 4%, to $51.01 in recenttrading.