Johnson & Johnson preformed better than analysts had predicted, but profits in the United States were down for the third quarter. Predictions showed that Johnson & Johnson would earn $1.21 per share, yet the company hit $1.24 per share.
Overseas revenue rose by 16.4% while only rising 6.8% in the US. The revenue increase overseas is a bit misleading, however, appearing so strong because of the weak US dollar. "Results were in line,” Atlantic Equities analyst Richard Purkiss told Reuters, “but not the sort of quality that people would have wanted."
Johnson & Johnson has three divisions - pharmaceuticals, consumer health care, and medical devices and diagnostics. And while pharmaceuticals is still Johnson & Johnson strongest division, all three had decreased sales.
Pharmaceutical sales were boosted by its new drugs for treating psoriasis, arthritis, prostate cancer and hepatitis C. During the same time period, sales of other pharmaceuticals dropped. There was a severe shortage of the chemotherapy drug Doxil, and the company was involved in a lawsuit over its antibiotic Levaquin. A drop in surgeries and doctor visits over the past two years has also impacted sales.
Globally, third quarter pharmaceutical revenue was $5.98 billion.
Consumer health care sales were hurt by a series of product recalls. Recalls of popular name brands Tylenol, Motrin, Rolaids, Benadryl and Zyrtec over the past two years have hurt the company’s reputation. Many brands have yet to return to store shelves. Consumers have switched to competitor’s brands, generics and store brands.
Consumer health care sales were $3.74 billion.
The medical devices and diagnostics division was harmed by the recall of artificial hip implants and also by Johnson & Johnson’s decision to stop making heart stents.
Medical devices and diagnostics sales were $6.28 billion.
The Silver Lining
It is not all bad news for Johnson & Johnson: the company is remodeling its San Diego pharmaceutical and development facility to create an innovation center, named Janssen Labs at San Diego, which will house 18-20 biotech and health IT companies.
The companies will range from start-ups to venture capital-backed companies, and will have their own office space, while sharing a common area that includes science equipment as well as office equipment.
Diego Miralles, who oversees the center, told Xconomy: “Everybody says the business model is broken. This is just one of many efforts that should be in place to help the biotech sector develop a better business model.”
The center is scheduled to open in the first quarter of 2012.
In addition, Johnson & Johnson recenlty won the Levaquin lawsuit, which alleged it and the company that markets its drugs, Ortho-McNeil-Janssen Pharmaceuticals, failure to warn doctors about two side effects of Levaquin, tendonitis and tendon ruptures. In mid-October, jurors ruled the companies were not guilty of any wrongdoing and had included the proper warnings.
Johnson & Johnson predicts profits for the year will be $65 billion.
Key Statistics – Global Generics Pharmaceutical Market (source: IMS Institute for Healthcare Informatics)
- The worldwide pharmaceutical should hit $1 trillion in the next three years, and see the $1.1 trillion mark by 2015.
- In 2015, the US share of global pharmaceutical spending is expected to drop to 31%, compared to 41% in 2005.
- Spending from the top-five European national markets should fall from 20% to 13% over the next four years.
- Generic drugs sales are expected to rise to 39% in 2015 compared to 20% in 2005.