J&J Tops Estimates as Drug Sales Expand Before Dollar Effect

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Johnson & Johnson beat first-quarter profit estimates as sales of arthritis and psoriasis drugs helped the pharmaceutical unit expand, excluding the effects of a stronger dollar that has cut into international revenue.

Second-quarter earnings, excluding one-time items, were $1.71 a share, 4 cents above the average of 15 analysts’ estimates compiled by Bloomberg. Revenue was $17.8 billion, down 8.8 percent a year ago and in line with projections.

Drug sales fell 6.6 percent to $7.95 billion, though they were up 1 percent excluding currency changes. Revenue from J&J’s best-selling drug, rheumatoid arthritis treatment Remicade, jumped 6.6 percent in the U.S., and a newer drug for the condition, Simponi, surged 30 percent.

Those gains, along with a 9.3 percent sales increase for psoriasis drug Stelara, helped make up for a drop in revenue from Olysio. The hepatitis C pill has faced tougher competition from Gilead Sciences Inc.

J&J is focused on replenishing its pipeline of drugs, which have surpassed medical devices and consumer health goods to become the company’s biggest unit. After losing patent protection on drugs with $8 billion a year in sales since the early 2000s, J&J has introduced 14 new compounds since 2009.

“Johnson & Johnson is doing a superior job of managing their way through this compared to many other consumer staple companies,” said Bill Smead, chief executive officer of Smead Capital Management, which holds J&J shares. He sees the strong U.S. dollar as an impediment to growth for multinational consumer companies and pointed to J&J’s diversity as a source of strength.

Consumer Growth

Sales in J&J’s medical-device unit fell 12 percent from a year earlier to $6.36 billion, though currency accounted for almost two-thirds of that decline. The consumer business, which includes over-the-counter drugs like Tylenol, was down 7 percent to $3.48 billion, but would have grown 2.3 percent if not for the stronger dollar.

The company raised its earnings forecast for the year to a range of $6.10 to $6.20 a share, up from $6.04 to $6.19. Analysts had estimated $6.14 a share.

At the end of the second quarter, the U.S. Dollar Index, which tracks the greenback against six major currencies, had surged 20 percent from a year earlier amid the growth of the world’s biggest economy. That has hurt net sales across the U.S. pharmaceutical industry, since drug companies have to translate revenue from abroad into dollars.

Among the drugs J&J has under development are daratumumab, a treatment for the blood cancer multiple myeloma that is on the FDA’s fast track for approval. Esketamine, for depression, and ARN-509, for prostate cancer, are in clinical trials.

Net income slid to $4.81 billion, or $1.71 a share, from $5.13 billion, or $1.78, a year earlier.

J&J shares rose less than 1 percent in early trading. They had dropped 4.8 percent in the past year through Monday.

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