Oct. 16 (Bloomberg) -- Johnson & Johnson, the world's largest health-products maker, said earnings declined less than analysts expected, and the company raised its 2007 forecast, as job cuts reduced some expenses sooner than predicted.

Third-quarter net income fell 7.7 percent to $2.55 billion, or 88 cents a share, from $2.76 billion, or 94 cents, a year earlier, the company said today in a statement. Excluding costs, J&J earned $1.06 a share, beating the average 99-cent estimate of 15 analysts surveyed by Bloomberg.

Johnson & Johnson trimmed costs as it faces generic competition to its best-selling prescription drug, the antipsychotic Risperdal, which generated $4.2 billion last year. New Brunswick, New Jersey-based J&J benefited from rising sales of drugstore products such as Listerine mouthwash and Sudafed cold pills, gained in its $16.6 billion cash acquisition of Pfizer Inc.'s consumer unit in January.

``J&J's results reflect the broad-based nature of the company and the cost-cutting ability of the company,'' said Glenn Novarro, an analyst with Bank of America in New York, in a note to clients today. ``We continue to believe that investors are underestimating J&J's earnings power.''

Johnson & Johnson fell 58 cents, or less than a percent, to $65.07 at 4:00 p.m. in New York Stock Exchange composite trading. The shares have dropped 1.4 percent this year.

Sales of the Cypher heart stent and the anemia drug Procrit fell following studies linking the products to increased risk of heart attacks. The U.S. Food and Drug Administration supports a decision by Medicare, the government health program for people 65 or older, to restrict use of Procrit, according to an agency letter released today by U.S. lawmakers.

Raising Forecast

Johnson & Johnson increased its 2007 earnings forecast to the range of $4.10 to $4.13 a share, from the prior projection of $4.02 to $4.07. The increased forecast beat the $4.05 estimate of 26 analysts surveyed by Bloomberg.

``Earnings were better than we expected,'' said Dominic Caruso, J&J's chief financial officer, in a telephone interview today. ``This year, we have seen the impact of Cypher and Procrit and we have been able through the third quarter to manage our business very well despite those pressures.''

The company in July announced a $10 billion share buyback to bolster the stock price until new products reach the market. Later that month, J&J said it would eliminate as many as 4,820 jobs, or as much as 4 percent of its workforce.

Revenue rose 13 percent to $14.9 billion, bolstered mainly by higher sales of consumer-health products. Sales from the unit, including items ranging from Band-Aid bandages to St. Joseph's aspirin, rose 48 percent to $3.62 billion.

Consumer Division

Growth in the Aveeno and Neutrogena lines of skin and beauty products and the Tylenol and Motrin painkiller brands raised sales for the consumer division.

Sales of medical devices rose 6 percent to $5.25 billion, helped by Vistakon disposable contact lenses and DePuy artificial hips and knees.

Revenue for Cordis, the J&J unit that makes Cypher heart stents, fell 21 percent to $777 million. Doctors shied away from the Cypher drug-coated stent, a tiny mesh cage used to prop open arteries, after studies linked it to heart attacks, and instead used bare-metal devices.

Cypher Plunged

J&J said U.S. sales for Cypher plunged 44 percent to $185 million in the third quarter. The New Brunswick, New Jersey-based company also said Cypher's share of the U.S. market was unchanged from a year earlier at 46 percent.

Cypher sales declined in part because of a price cut in the U.S. of about 5 percent, to $2,080, said Nick Valeriani, J&J's global chairman of medical devices and diagnostics. Drug-coated versions of the device were used in about 65 percent of stent procedures, from about 89 percent a year ago, as more physicians opted for bare-metal models, he said in a conference call today.

Pharmaceutical revenue rose 3.7 percent to $6.1 billion, helped by the antipsychotic Risperdal and the anti-inflammatory Remicade. Antipsychotics rose 8.9 percent to $1.16 billion. Remicade increased 5.5 percent to $819 million.

Use of the anemia drug Procrit slowed after studies showed it may raise the risk of heart attacks, strokes and deaths when used in high doses. The anemia drug Procrit, known as Eprex outside the U.S., dropped 15 percent to $682 million.

Regulatory Applications

J&J plans to introduce as many as 10 medicines in four years, including remedies for schizophrenia, cancer, HIV/AIDS, blood clots, diabetes and tuberculosis, the company said earlier this year. Regulatory applications for as many as half of those products may be filed by the end of this year.

Separately today, Roche Holding AG, the world's biggest maker of cancer medicines, fell the most in 13 months in Zurich trading after third-quarter revenue missed analyst estimates.

Roche's revenue climbed to 11.1 billion Swiss francs ($9.4 billion) in the quarter from 10.5 billion francs a year earlier, the company said today. Analysts surveyed by Bloomberg had a median sales estimate of 11.4 billion francs.

To contact the reporter on this story: Lisa Rapaport in New York at Lrapaport1@bloomberg.net

Last Updated: October 16, 2007 16:08 EDT