Despite 9 percent profit jump, problems hurt Johnson & Johnson

Health care products maker Johnson & Johnson on Tuesday posted a 9 percent increase in second-quarter profit, as a big sales boost from buying Pfizer Inc.'s consumer health products line offset a continuing decline in sales of its key stent and a top drug.

Johnson & Johnson shares fell $1.15, or 1.8 percent, to $62.65 in afternoon trading.

The New Brunswick, N.J.-based maker of contraceptives, contact lenses, prescription drugs and baby products reported net income of $3.08 billion, or $1.05 per share, up from $2.82 billion, or 95 cents a share, a year earlier.

The consensus forecast of analysts surveyed by Thomson Financial was for earnings of $1 per share. Those estimates typically exclude one-time items.

Sales totaled $15.13 billion, up from $13.36 billion a year earlier. Analysts had been expecting sales of $15.06 billion.

Excluding the December acquisition of Pfizer Consumer Healthcare, sales were up 3.6 percent, and favorable currency exchange rates boosted revenues by 2.4 percent.

"This is not an encouraging story," said analyst Steve Brozak of WBB Securities, citing the latest sales declines for J&J's anemia drug and for Cypher, its drug-coated stent.

Such stents _ tiny mesh scaffolds that prop heart arteries and slowly release a drug to keep them from reclogging _ had become hugely popular in recent years, revolutionizing heart treatment.

But since last fall, reports from federal health advisers and medical researchers have raised safety questions. Among other things, research has shown most patients with drug-coated stents face a higher risk of heart attacks and death than patients with bare-metal stents, and that all stent users had an increased risk of blood clots.

As a result, the overall market for drug-coated stents has been shrinking, and Cypher's second-quarter U.S. sales were down 41 percent at $210 million, compared with a year ago; worldwide, sales totaled $450 million, with a 44 percent market share. In the first quarter of 2006, Cypher had sales of $717 million and a 51 percent global market share.

"There's no simple or straightforward answer to these problems, and it isn't going to get better," Brozak said.

Meanwhile, combined revenues from anemia treatments Procrit, or Eprex _ its name in other countries _ dipped 6 percent to $758 million. It had been J&J's top-selling drug until 2005 and had sales of $4 billion back in 2003.

Consumer product sales were the bright spot, jumping nearly 49 percent to $3.56 billion, while sales of prescription drug sales increased nearly 6 percent to $6.15 billion. Sales of medical devices and diagnostic products rose 5 percent to $5.42 billion.

Top-selling prescription drugs included Topamax for epilepsy, Concerta for attention deficit hyperactivity disorder, Risperdal and other anti-psychotic drugs, and Remicade for arthritis and other inflammatory immune disorders.

"We can offset certain challenges in parts of our business with performance in others," Chief Financial Officer Dominic Caruso told analysts during a conference call, touting "the value of our broad-based business."

For the first six months of the year, net income totaled $5.65 billion, or $1.93 per share, down nearly 8 percent from $6.13 billion, or $2.05 per share, in the first half of 2006. Higher overhead and lower interest income were among the factors depressing the bottom line in the first half.

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On the Net: http://www.jnj.com