The Wall Street Journal-20080123-J-J-s Net Climbs- but Patent Woes Loom
Return to: The_Wall_Street_Journal-20080123
J&J's Net Climbs, but Patent Woes Loom
Johnson & Johnson wrapped up one of the most difficult years in its history with a 9.5% rise in fourth-quarter profit, but looming patent expirations for best-selling medicines mean the worst isn't over for the company.
The New Brunswick, N.J., health-care conglomerate said sales increased 17% to $15.96 billion, with full-year sales up 15% to $61.1 billion.
J&J was blind-sided last year by safety worries that sent sales of two key products plunging. Sales of the Cypher drug-eluting stent, a heart device, dropped 31% in the fourth-quarter to $415 million, as concerns about the devices' rare tendency to cause blood clots intensified. Revenue from the Procrit anemia medicine fell 33% to $331 million in the U.S., on worries about the class of drugs to which it belongs, known as erythropoiesis-stimulating agents, or ESAs.
"When you look at the body blows we took with contractions in drug- eluting stents and the same in ESAs and the impact of generics, those are huge impacts, and we didn't expect that to happen," said Bill Weldon, J&J's chairman and chief executive. "I think the difference between 2007 and 2008 is that 2007 was somewhat of a surprise."
The years ahead pose more hurdles, even if J&J has planned for them. "People are wondering how they're going to get the growth they need in 2009, and I don't think we know the answer to that question yet," said Catherine Arnold, a health-care analyst at Credit Suisse Group.
Risperdal, an antipsychotic treatment that Credit Suisse estimates brought in $3.5 billion in 2007, loses U.S. patent protection in June. The company needs to squeeze life from that medicine, especially since its successor, Invega, continues to disappoint. In the third quarter, sales growth for the company's antipsychotics including Risperdal slowed to 9%. But in the latest quarter, sales picked up again, increasing 15% to $1.2 billion.
Another laggard in the third quarter, the anti-inflammatory medicine Remicade, rebounded as the year ended. The drug posted 6% growth in the previous quarter, but this past quarter, sales rose 16% to $908 million.
In July, J&J announced plans to lay off nearly 5,000 workers and reorganized the division that sells Cypher. Mr. Weldon said the restructuring knocked key medicines off track. "I don't think you can underestimate the disruption" that restructuring causes, he said.
Sales of another important medicine, migraine treatment Topamax, increased 23% to $652 million in the latest quarter. That product will face generic competition next year.
The 2006 acquisition of Pfizer Inc.'s consumer-health business buoyed J&J's sales. Its consumer-products sales soared nearly 50% to $3.8 billion in the fourth quarter. The Food and Drug Administration approved a prize of that deal, the rights to sell allergy medicine Zyrtec over the counter, and Mr. Weldon said he expects the medicine to be on store shelves by the end of the week.
J&J also benefited from foreign-exchange rates, which pushed up revenue figures for many of its key products.
Yesterday, the company's stock fell $1.02, or 1.5%, to $65.27 in 4 p.m. composite trading on the New York Stock Exchange.
---
Peter Loftus contributed to this article.
