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Bloomberg Reports:

"J&J 3rd-Qtr Profit Rises to 80 Cents a Shr: Instant Insight

J&J 3rd-Qtr Profit Rises to 80 Cents a Shr: Instant Insight
New Brunswick, New Jersey, Oct. 19 (Bloomberg) -- Johnson & Johnson, the world's No. 1 maker of medical devices, reported third-quarter earnings. Here's a summary:

Expected Market Reaction

Limited. Third-quarter profit for the maker of Band-Aids and Tylenol rose 14 percent to $1.1 billion, or 80 cents a share, from $961 million, or 70 cents, a year earlier. Results beat the 78-cent average estimate of analysts surveyed by First Call Corp. Sales rose 18 percent to $6.75 billion from $5.72 billion.

Behind the Numbers

J&J is looking to new products to raise its sales, although some of its older established drugs still remain the biggest contributors to profit. J&J earlier this month made its biggest acquisition ever, buying the biotech company Centocor Inc. for $4.9 billion. That gives J&J a new drug, the clot-preventer ReoPro, used in hospitals to treat people undergoing an artery- opening procedure.

Under William Weldon, who was named to lead J&J's drug business last year, J&J also entered a pact with Pharmacia & Upjohn Inc. to help introduce a new depression drug in the U.S.

J&J and another partner, Japan's Eisai Inc. this month introduced Aciphex, a medicine for a severe gastrointestinal disease. In September, J&J filed for U.S. approval of an Alzheimer's disease drug developed by its partner, Shire Pharmaceuticals Group Plc.

Setbacks

Still, J&J has had setbacks in its drug research. One of the most recent was in a late-stage test of Regranex gel, already approved for diabetic foot ulcers, as a treatment for bedsores. Older products such as Procrit, an anemia treatment licensed from Amgen Inc., did the most to boost third-quarter drug sales, analysts said. Sales of J&J's schizophrenia pill Risperdal and antibiotics such as Levaquin also have been rising.

New products already are making a difference in J&J's medical-device business, analysts said. This unit sells products ranging from radioactive ``seeds' used to treat prostate cancer to artificial knees and hips.

Led by James Lenehan, the medical-device business is selling more orthopedic products as a result of the 1998 acquisition of DePuy Inc. for $3.5 billion. Its Cordis medical-device unit is also developing new products used in the artery-clearing procedure known as angioplasty. Last month, the company won U.S. approval for its CrossFlex LC stent, a small metal-mesh tube used to prop open once-clogged arteries.

J&J pioneered use of stents, starting what has grown in less than a decade to a market with about $2 billion in annual sales. J&J lost dominance in the stent market in the past few years as rivals such as Guidant Corp. introduced more flexible devices. These were easier for doctors to thread into clogged and often hardened arteries.

The CrossFlex and other new stents under development will help J&J's Cordis unit better compete with rivals in the stent market, analysts said.

J&J also has introduced new products in its consumer business, including Neutrogena lipsticks. J&J also introduced cholesterol-reducing Benecol spreads, which are licensed from Finland's Raisio Oyj. In August, U.S. officials approved J&J's new sweetener Splenda.

What the Experts Say ``You're seeing a resurgence in the Cordis business. It's a function of them learning from their past,' said Brian Kim, an analyst with CS First Boston, before the company reported. ``They focused too much on their first stent and didn't have an extensive pipeline. Now, they're moving more rapidly to introduce new differentiated products.' ``The staple drugs, Risperdal and Procrit and Levaquin, are doing well, but beyond that, the pipeline's still a little skimpy compared to other drug companies,' added Kim, who has a ``hold' rating on J&J.

Previous Market Reaction

J&J shares rose 1/2 to 96 7/16 on July 20 after it reported that second-quarter profit rose 15 percent to $1.16 billion, or 84 cents a share.

Market Performance

J&J shares have risen 13 percent this year as it brings out new products, such as Benecol and Aciphex. In the same time, the AMEX Pharmaceutical Index has fallen 6.3 percent."


Spriteman
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No. of Recommendations: 1
Here's a better article with more facts about the quarter, not just commentary.

"Johnson & Johnson 3rd-Quarter Net Rises 14% on Drugs (Update1)
(Adds analyst comment in 4th paragraph; updates shares.)

New Brunswick, New Jersey, Oct. 19 (Bloomberg) -- Johnson & Johnson, the world's No. 1 maker of medical products, said third- quarter profit rose 14 percent as it sold more drugs, such as the anemia treatment Procrit, and more medical devices.

Net income for the maker of Tylenol and Band-Aids rose to $1.1 billion, or 80 cents a share, from $961 million, or 70 cents, in the year-earlier period. That beat the 78-cent average estimate of analysts polled by First Call Corp. J&J said its sales rose 18 percent to $6.75 billion from $5.72 billion.

J&J's medical-devices sales rose 20 percent to $2.45 billion from $2.04 billion. Sales in the drug unit rose 24 percent to $2.6 billion from $2.1 billion, spurred by Procrit, an anemia drug licensed from Amgen Inc. New Brunswick, New Jersey-based J&J also had rising sales of the schizophrenia pill Risperdal and antibiotics such as Levaquin. ``The staple drugs, Risperdal and Procrit and Levaquin, are doing well, but beyond that, the pipeline's still a little skimpy compared to other drug companies,' said Brian Kim, an analyst with CS First Boston who has a ``hold' rating on J&J.

J&J's $3.5 billion purchase of orthopedics maker DePuy Inc. last November helped bolster its medical-devices unit after J&J fell behind in the market for angioplasty products. Sales in its consumer division, which includes non-prescription medicines and personal-care products, rose 7.4 percent to $1.7 billion from $1.59 billion.

J&J is looking to new products to raise its sales, though some of its older drugs remain the biggest contributors to profit. J&J earlier this month made its biggest acquisition, the biotech company Centocor Inc. for $4.9 billion. That gives J&J a new drug, the clot-preventer ReoPro, used in hospitals to treat people undergoing an artery-opening procedure.

Stents

J&J pioneered the use of stents, tiny metal-mesh tubes that prop open once-clogged arteries, starting what has grown in less than a decade to a market with about $2 billion in annual sales. J&J lost dominance in the stent market in the past few years as rivals such as Guidant Corp. introduced more-flexible devices. These were easier for doctors to thread into clogged and often hardened arteries.

The CrossFlex and other new stents under development will help J&J's Cordis unit better compete with rivals in the stent market, analysts said.

J&J also has introduced new products in its consumer business, including Neutrogena lipsticks. It also introduced cholesterol-reducing Benecol spreads, which are licensed from Finland's Raisio Oyj. In August, U.S. officials approved J&J's new sweetener Splenda.

Shares of J&J rose 3 3/8 to 97 7/8 in early trading. J&J shares have risen 13 percent this year, based on yesterday's closing price."


The market seems to like the earnings, and currently the stock is up over 4. J&J has done a great job of managing expectations, enabling them to beat earnings expectations every quarter this year. You would think that the analyst would catch on that J&J is growing faster, but they don't.

Spriteman

PS - I thought that the Centocor would lower earnings this year by about 15 cents a share. Did I hear that wrong, or will that "charge" occur in the fourth quarter?
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