J&J caution on full-year sales outlook sends shares lower

Ransdell Pierson

By Ransdell Pierson

(Reuters) - Healthcare company Johnson & Johnson cautioned Tuesday that prescription-drug sales would likely lose some steam this year and forecast 2014 earnings at the lower end of Wall Street expectations, sending its shares down more than 2 percent in morning trading.

Chief Financial Officer Dominic Caruso cautioned that the rate of prescription drug sales will "decelerate" in 2014, "following such a good run last year."

The company announced the outlook to investors during a conference call reviewing its quarterly financial results.

J&J said it expects to earn $5.75 to $5.85 per share in 2014, excluding special items, compared with analysts' forecasts at the top end of that range.

The stock was at $92.93, down 2.2 percent in morning trading on the New York Stock Exchange, amid a 0.6 percent advance for the ARCA Pharmaceutical Index of large U.S. and European drugmakers.

"Things looked solid in the quarter," said Edward Jones analyst Judson Clark. "Pharmaceuticals have been strong for a while, but medical devices and diagnostics also picked up steam versus Wall Street's expectations."

"The guidance was a little disappointing, but management tends to be conservative with their initial forecast," gradually raising its forecasts during the year, Clark said.

Sales of prescription drugs in late 2013 were "exceptional," Chief Executive Alex Gorsky said. They jumped 11.8 percent to $7.3 billion in the quarter, helped by price increases and demand for Remicade and Simponi for rheumatoid arthritis, Stelara for psoriasis and Zytiga for prostate cancer.

The company, whose products span everything from medical devices to over-the-counter painkiller Tylenol, earned $3.52 billion, or $1.23 per share, in the fourth quarter.

That was higher than the $2.57 billion, or 91 cents per share, it earned in the year-earlier period, when J&J took a charge of $800 million related mostly to its recall of defective hip implants.

Excluding special items, J&J earned $1.24 per share. Analysts, on average, expected $1.20 per share, according to Thomson Reuters I/B/E/S.

Global company sales rose 4.5 percent to $18.36 billion, topping Wall Street expectations of $17.95 billion. They would have risen 6.3 percent if not for the stronger dollar, which lowers the value of sales in overseas markets.

Remicade sales jumped 13.8 percent to $1.71 billion. Simponi sales soared 40 percent to $254 million, while Stelara sales jumped 55 percent to $417 million. But sales of Concerta, a treatment for attention deficit disorder that is now facing cheaper generics, tumbled 31 percent to $169 million.

Sales of consumer products, including Listerine, Aveeno skin care products and over-the counter medicines such as Tylenol and Motrin, grew almost three percent in the quarter to $3.75 billion, after relatively flat sales in the prior quarter.

The company's other big business, of medical devices and diagnostics, posted a 1 percent decline in sales to $7.3 billion, against a 2 percent decline in the prior quarter.

"There are early signs of improvement in areas like orthopedics," Gorsky said, adding he remained confident in long-term growth of the business.

J&J's DePuy orthopedics business is struggling to regain its footing following costly recalls of its defective artificial hips. Sales of orthopedics rose 2.8 percent in the quarter to $2.46 billion.

(Reporting by Ransdell Pierson in New York; Editing by Sofina Mirza-Reid and Bernadette Baum)