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Johnson and Johnson sees lower sales, 3.5 percent dip in 2Q profit

TRENTON, N.J. -- Health care products maker Johnson & Johnson on Tuesday said its second-quarter profit fell 3.5 percent, as the global recession, weak dollar and generic competition took their toll on sales, particularly for prescription drugs.

Still, the world's most broadly based health care company handily beat Wall Street's restrained expectations, as J&J reduced spending on sales, administration and research by about 13 percent and production costs by 6 percent.

The New Brunswick, N.J.-based maker of baby shampoo, Tylenol, contraceptives and biotech drugs earned $3.21 billion, or $1.15 per share, down from $3.33 billion, or $1.17 a share, a year ago.

Revenue fell 7.4 percent to $15.24 billion from $16.45 billion a year ago. The decline was partly due to a combined drop of nearly $1 billion for two medicines -- antipsychotic drug Risperdal and epilepsy treatment Topamax -- that recently got generic competition.

Analysts polled by Thomson Reuters, on average, were looking for earnings per share of $1.11 and revenue of $15 billion.

"This was one of the most difficult years in our history," Chief Financial Officer Dominic Caruso told analysts during a conference call.

But he said operational results -- sales excluding the impact of unfavorable currency exchange rates, which cut total revenue by about 6 percent -- were better than expected.

"This is the best pharmaceutical report that you'll see out of this quarter," said analyst Steve Brozak of WBB Securities.

In an interview, Caruso said currency rates hurt the quarter's results the most, followed by lower sales of Risperdal and Topamax, each down two-thirds or more. Both lost U.S. patent protection over the past year. Excluding those factors, he said, sales would have been up roughly $770 million, or 4.6 percent.

Johnson & Johnson confirmed its 2009 profit forecast, at $4.45 to $4.55 per share, excluding items. Analysts forecast $4.51 per share, according to Thomson Reuters.

Sales declined in the U.S. and abroad, and in all three business segments.

Pharmaceutical sales fell the most, by just over 13 percent, including a U.S. drop of more than 16 percent, to a total of $5.5 billion. The few bright spots included attention deficit drug Concerta and Remicade for rheumatoid arthritis.

Sales of consumer products were down 4.5 percent at $3.85 billion. Total sales of women's health, skin care and dental products were all up operationally, but down due to exchange rates. The only consumer category that didn't drop was wound care.

"Some of our products lost market share to private-label brands in the store," Caruso told The Associated Press.

Those included sanitary napkins (J&J sells Carefree, Stayfree and o.b. tampons), the e.p.t. home pregnancy test and nutritional products.

Sales of medical devices and diagnostics fell the least, 3.1 percent, to $5.89 billion. J&J's Ortho-Clinical Diagnostics business and the Ethicon business, which sells surgical supplies and cosmetic medical products such as breast implants, saw slightly higher sales.

But currency rates and increased competition hurt sales of artery-opening stents, and pricing pressures cut revenue for diabetes testing strips and related products by 9.5 percent, even though sales volume stabilized in the quarter.

Caruso noted more pressure from hospitals to hold down prices of capital equipment, which affected some J&J medical device businesses, such as machines for sterilizing instruments.

Brozak said two recent deals -- buying Cougar Biotechnology Inc. for a potential prostate cancer drug and taking a stake in Elan Corp. for experimental Alzheimer's treatments -- show J&J is at a turning point in finding future products.

"They're going much earlier stage than they've ever had to do before," with past deals instead securing popular products, Brozak said.

Asked about Food and Drug Administration advisers two weeks ago recommending reducing the maximum dose of Tylenol because of fatal overdoses, Caruso said the company disagrees and has made its own recommendations to the FDA. U.S. adult Tylenol products alone bring in about $1 billion a year, half of that at the 500-milligram, extra strength dose in question.

For the first six months, net income slipped 3 percent to $6.72 billion or $2.41 per share, from $6.93 billion, or $2.43 per share, in the year-ago period. Revenue declined 6 percent to $30.27 billion from $32.64 billion a year earlier.

In afternoon trading, shares of Johnson & Johnson gained 23 cents to $57.95.

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