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J&J Stock Falls Most in 5 Months on 2014 Profit Forecast

Photographer: Scott Eells/Bloomberg

Johnson & Johnson forecast 2014 profit of $5.75 to $5.85 a share, excluding one-time items. Close

Johnson & Johnson forecast 2014 profit of $5.75 to $5.85 a share, excluding one-time items.

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Photographer: Scott Eells/Bloomberg

Johnson & Johnson forecast 2014 profit of $5.75 to $5.85 a share, excluding one-time items.

Johnson & Johnson (JNJ), the world’s biggest maker of health-care products, fell after the company’s 2014 earnings forecast was lower than analysts’ estimates.

Profit this year may be $5.75 to $5.85 a share, excluding one-time items, New Brunswick, New Jersey-based J&J said today. The outlook was below the $5.86 average of 18 analysts’ estimates compiled by Bloomberg. The stock declined 1.1 percent to close at $94.03 in New York.

The Japanese yen, which fell in value about 18 percent against the U.S. dollar in 2013, will have a greater effect on J&J this year, and the forecast reflects that, Chief Financial Officer Dominic Caruso said at a meeting with analysts in New York today. Interest expenses are expected to be higher than some anticipate, and a weaker health-care environment may hurt prices, the company said.

“While 2014 guidance disappointed the Street, we think guidance looks conservative,” said Derrick Sung, a Sanford C. Bernstein & Co. analyst, in a note to investors.

The company announced a program to save $1 billion over the next three years by consolidating programs in areas like human resources, procurement and finance. The effort will hold down costs by reducing the number of employees and shifting some services to lower-cost areas of the world, Caruso said.

Health Law

“The savings we’d use to reinvest in the business or offset what we think is inevitable, which is pricing pressures in the health care environment,” Caruso said.

The company paid $1 billion in taxes and fees to help fund the U.S. Patient Protection and Affordable Care Act in 2013 and the cost probably will rise, Chief Executive Officer Alex Gorsky said. The pressure from hospitals and insurers to keep prices down, even as the expense of developing new drugs continues to rise, must be taken into account, he said.

J&J’s fourth-quarter net income gained 37 percent to $3.52 billion, or $1.23 a share, from $2.57 billion, or 91 cents, a year earlier, the company said. Earnings excluding one-time items beat by 4 cents the $1.20 average of 16 analysts’ estimates compiled by Bloomberg.

Over-the-Counter

J&J has brought new medicines to the market the past two years while it integrated the 2012 acquisition of closely held device maker Synthes Inc., the largest purchase in company history. The company last week received a $4.15 billion offer for its lone diagnostics division from Carlyle Group LP, following competitors such as Pfizer Inc. in divesting units that aren’t market leaders.

Fourth-quarter revenue increased 4.5 percent to $18.4 billion from $17.6 billion a year earlier. J&J’s results benefited from a tax benefit of $707 million, or 25 cents a share, from writing off the Scios unit after its cumulative losses exceeded its net worth during the quarter.

Sales of consumer goods and over-the-counter medicines, including Tylenol and Motrin, climbed 2.8 percent to $3.75 billion as the company made progress in returning recalled products to U.S. store shelves.

“We are restoring a reliable supply of OTC products to the U.S. marketplace,” Gorsky said at the meeting. “We are starting to see them gain traction once they are back in the market,” he said. “We met our goal of returning approximately 75 percent of our planned product portfolio to store shelves.”

Hepatitis C

Demand for prescription drugs gained 12 percent to 7.3 billion, helped by the prostate cancer drug Zytiga, the schizophrenia treatment Invega Sustenna, the arthritis medicine Simponi, the psoriasis drug Stelara and the diabetes drug Invokana.

J&J and Medivir AB won approval in November for the hepatitis C therapy Olysio, the first approved pill designed to be a more convenient therapy with fewer side effects than current treatments. Gilead Sciences Inc. also has won approval of its new pill in a competitive market for hepatitis C therapies that may generate $100 billion over a decade.

While the blood thinner Xarelto has been one of J&J’s newest and fastest-growing medicines, the company failed Jan. 16 to win the backing of a U.S. advisory panel to expand approval for patients with serious chest pain or mild heart attacks. J&J and its partner Bayer AG are trying for the third time to gain Food and Drug Administration clearance for those patients.

To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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