WRAPUP 2-J&J, Novartis profits beat, but no boom ahead

* J&J Q1 EPS ex-items $1.29 vs $1.27 forecast

* Trims 2010 forecast, absorbs healthcare reform cost

* Novartis beats with flu drug sales, keeps 2010 view

* J&J shares slip 0.1 pct, Novartis up 0.1 pct
(Adds J&J CFO, analyst comments, Novartis U.S. layoffs)

By Ransdell Pierson

NEW YORK, April 20 (BestGrowthStock) – Johnson & Johnson (JNJ.N: )
and Swiss rival Novartis Holding AG (NOVN.VX: ) reported
better-than-expected quarterly earnings, but the results did
not suggest accelerating growth for the drugmakers.

J&J saw strong sales for its medical devices, while its
prescription drug sales disappointed investors “for the fourth
or fifth quarter in a row,” said Glenn Novarro, an analyst with
RBC Capital Markets.

The diversified healthcare company earned $4.53 billion, or
$1.62 per share, compared with $3.51 billion, or $1.26 per
share, in the year-earlier period.

Excluding special items, it earned $1.29 per share.
Analysts on average had expected $1.27 per share, according to
Thomson Reuters I/B/E/S.

“The beat was driven by stronger than expected revenues
across all medtech franchises,” with the exception of J&J’s
Cordis heart-device division, said Credit Suisse analyst
Catherine Arnold. She also cited surprisingly strong sales of
arthritis treatment Remicade.

J&J trimmed its full-year profit forecast to between $4.80
and $4.90 per share, excluding items, from its earlier view of
$4.85 to $4.95.

The company said the adjustment was due to changes in
foreign currency (Read more about trading foreign currency. rates, and incorporates initial costs of
recently enacted U.S. healthcare reforms that require
drugmakers to grant bigger price rebates to Medicaid patients.

Novartis reported first-quarter earnings of $1.29 per
share, beating the average estimate of $1.11. It cited strong
sales of new blood pressure drugs Exforge and Tekturna, and
cancer drugs Zometa and Femara. [ID:nLDE63F1HU]

But it did not raise its 2010 sales growth target despite
an 18 percent rise in first-quarter sales, saying big flu
vaccine shipments would dwindle through the rest of the year.

“At a first glance, (the results were a) big beat versus
consensus but mainly due to higher H1N1 flu vaccine sales,”
analysts at Julius Baer said. “Quality of the beat is therefore
rather low and not sustainable.”

Novartis also said it plans to eliminate 383 full-time U.S.
jobs, primarily at its U.S. headquarters, to streamline its
operations and prepare for generic competition for its
blockbuster Diovan blood-pressure medicine.

Investors shrugged off the results. Shares in J&J closed
down just 0.1 percent to $65.99, while Novartis’ U.S.-listed
shares (NVS.N: ) rose 0.1 percent to $53.41.


J&J is also grappling with generic competition that helped
fuel a 2.5 percent decline in global drug sales to $5.64
billion during the quarter.

Since late March of 2009, the company’s one-time
blockbuster epilepsy drug Topamax has been slammed by cheaper
copycats. Its sales plunged 75 percent to $148 million.

J&J Chief Financial Officer Dominic Caruso said the drag on
sales growth from Topamax will end in the second quarter
because the drug by then will have been competing with generics
for a full year. Operational growth of the drug business will
then be about 5 percent, he said.

“That is pretty healthy growth in the pharma business,” he

“Of course, we want to do better, but we’re in the early
stages of launches for our new products,” he said, referring to
recent introductions of arthritis treatment Simponi, Stelara
for psoriasis and other medicines.

Sales of medical devices jumped 12.5 percent to $6.23
billion in the quarter.

“Our surgery businesses all look like they’re recovering,”
Caruso said, citing an improving economy in which more
procedures are being conducted. J&J’s products include hip and
knee replacements and surgical instruments for minimally
invasive procedures.

J&J’s global company revenue rose 4 percent to $15.63
billion, in line with Wall Street forecasts, but would have
been nearly unchanged if not for foreign exchange factors.

Eli Lilly & Co (LLY.N: ) on Monday cut its 2010 forecast by
about 35 cents per share due to projected costs of the
healthcare changes. Lilly’s move stirred concerns that other
drugmakers would have to chop their profit forecasts due to
healthcare-reform costs.

But RBC’s Novarro said J&J’s small adjustment suggests
confidence it will not be greatly hurt by the costs.

Novarro said J&J’s drug business could rebound within the
next few years if J&J wins approvals for important new
products, including two potential blockbusters: Xarelto to
prevent blood clots and telaprevir for hepatitis C.

Stock Market Money

(Reporting by Ransdell Pierson, editing by Dave Zimmerman,
Maureen Bavdek and Tim Dobbyn)

WRAPUP 2-J&J, Novartis profits beat, but no boom ahead