07/14/2015 17:36 EDT | Updated 07/14/2016 01:12 EDT

US consumer biz, one-time gain help Johnson & Johnson posts 2Q profit, beat Street views

Johnson & Johnson's recovering U.S. consumer health business, following years of recalls that kept Tylenol, Motrin and other marque brands off store shelves, put a much-needed Band-Aid over a rough second quarter.

Sales dropped across every other business segment, unusual for the world's top maker of health care products, which also sells prescription medicines and medical devices. Even within consumer health, global revenue declined for normally steady categories, including wound, skin and baby care products. But U.S. consumer health sales rose nearly 3 per cent, versus a 9 per cent decline in total revenue.

J&J is beset by the near-death of Olysio, a new hepatitis C medicine expected to bring in billions, plus revenue lost to multiple divestitures and unfavourable currency exchange rates that slashed worldwide sales nearly 8 per cent.

"Operational results were solid" after stripping out all those problems, said Edward Jones analysts Ashtyn Evans, "but we have to see some stronger growth in" prescription drugs.

The New Brunswick, New Jersey-based company beat Wall Street's low expectations, helped by a one-time gain of $931 million from the recent divestiture of painkiller Nucynta and other special items. It tweaked its 2015 profit forecast to $6.10 to $6.20 per share excluding one-time items. In January, it forecast $6.12 to $6.27 per share.

It's seeing strong growth from key newer prescription drugs — anticlotting medicine Xarelto, long-acting schizophrenia injection Invega Sustena and immune disorder drugs Stelara and Simponi. J&J just applied to the Food and Drug Administration for approval of biologic drug daratumumab, a likely multibillion seller for blood cancer multiple myeloma.

It also touted potential future breakthroughs in areas such as robotic surgery from recent partnerships with technology giants IBM, Google and Apple. And CEO Alex Gorsky said U.S. surgeries and hospital admissions are up a few per cent for the fourth straight quarter, which boosts sales of many company products.

But Wall Street focused on Tuesday's results, driving shares down 94 cents to $99.33 in afternoon trading.

Johnson & Johnson posted a 4.4 per cent increase in second-quarter profit, to $4.52 billion. Earnings per share, adjusted for one-time costs, came to $1.71, 2 cents over analysts' estimates.

After years struggling to turn around its U.S. consumer health business following dozens of product recalls since 2009, sales in the quarter hit $1.36 billion. J&J now has more than 80 per cent of those products back in stores, consumer head Sandi Peterson told analysts during a conference call, adding that its diabetes and vision care businesses also are "well positioned in attractive markets" and gaining share after some struggles.

J&J's nonprescription drug factory in Fort Washington, Pennsylvania, that had to be gutted and rebuilt has passed an FDA inspection and awaits approval to begin manufacturing, Peterson said.

J&J posted total revenue of $17.79 billion in the quarter, edging forecasts for $17.7 billion.

Revenue fell 7 per cent to $3.5 billion for consumer health care, 6.6 per cent to $7.9 billion for prescription drugs and 12.2 per cent to $6.4 billion for medical devices.

Sales were hurt by last year's sale of J&J's Ortho Clinical Diagnostics business and Olysio sales plunging to $264 million from $831 million a year ago, as U.S. sales dropped 93 per cent.

Olysio was approved in November 2013, two years after Merck & Co.'s Victrelis and Vertex Pharmaceuticals In.'s Incivo. The three were considered huge improvements over decade-old, yearlong treatments that required six to 12 pills a day and periodic injections and caused side effects many patients couldn't endure. The three pills shortened treatment time and boosted mediocre cure rates to about 80 per cent.

But since 2013, Gilead Sciences Inc. introduced Sovaldi and then Harvoni, and AbbVie Inc. launched Viekira Pak. They boosted cure rates above 90 per cent and cut treatment to eight to 12 weeks. While they cost up to $100,000 per treatment course, those drugs, particularly Gilead's, soon cornered the market. Merck has stopped promoting Victrelis and J&J, which bought rights to Incivo on the cheap in November 2013, has stopped reporting its now-minimal sales.


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Linda A. Johnson, The Associated Press