Johnson & Johnson said Tuesday that its first-quarter profit jumped 12.5 percent on lower spending on research, sales and administration and a boost from selling rights to a drug. Its revenue slipped due to generic competition.
The health care giant yet again said it will take longer than anticipated to return many recalled consumer products to stores and to rebuild a factory that made them because of serious quality problems there. The company initially said Tylenol, Motrin and other nonprescription drugs would all return to store shelves by mid-2012, but the latest delay pushes that back to well into next year.
The costs to rebuild the factory, and for extra regulatory inspections of two others that make J&J's nonprescription drugs, are coming in higher than expected, although company executives did not give details.
On the bright side, Chief Financial Officer Dominic Caruso said hospital procedures and visits to doctors recently began rising modestly after significant declines during the recession. That swing should help boost sales of J&J's prescription drugs and medical devices including surgical tools and joint replacements.
Johnson & Johnson said net income rose to $3.91 billion, or $1.41 per share, from $3.48 billion, or $1.25 per share, in 2011's first quarter.
Excluding costs related to J&J's pending $21 billion acquisition of orthopedics device maker Synthes and a benefit from currency exchange rates, the company earned $1.37 per share.
Revenue dipped 0.2 percent to $16.14 billion from $16.17 billion.
According to a survey by FactSet, analysts expected lower adjusted earnings of $1.35 per share on higher revenue of $16.28 billion.
The New Brunswick, N.J., company raised its annual profit forecast by 2 cents to $5.07 to $5.17 per share, excluding one-time items. Analysts expect earnings per share of $5.11 for the year.
Caruso also forecast that revenue for the full year will be up slightly, to $66.5 billion to $68 billion. That's after the manufacturing problems and the recession caused sales to fall in two of the last three years. Analysts expect revenue of $67.3 billion.
Its shares slipped 14 cents to $63.84 in afternoon trading. Its shares have fallen from $66.21 per share in early April but are up from their 52-week low of $59.08 in early August.
Its first-quarter earnings got a lift from a 5.4 percent decline in spending on research and development to $1.65 million. That was mainly because J&J didn't have to make any milestone payments to partners from whom it has licensed rights to experimental drugs, Caruso said.
Costs for sales, marketing and administration dipped nearly 1 percent to $5.02 million, as the company continues its belt-tightening.
Also helping earnings was an increase in "other income" to $611 million from $3.8 million a year ago. That was mainly from the sale of high blood pressure drug Bystolic to Forest Laboratories Inc. for $357 million during the quarter.
Total U.S. revenue fell 5 percent to $7.22 billion. That decline was offset by a 4 percent rise in international sales, mostly in North and South America outside the U.S.
Revenue rose 1.2 percent for prescription drugs to $6.13 billion as sales from new medicines made up for lower sales from two medicines that got generic competition last spring, Levaquin for serious infections and Concerta for attention deficit disorder.
But revenue was down in J&J's other two businesses. Sales of medical devices and diagnostic equipment, the company's biggest segment, slipped 0.3 percent to $6.41 billion. Consumer product sales fell 2.4 percent to $3.6 billion, due to the many products still not back in stores.
The company has been plagued by nearly 30 recalls since September 2009 for Tylenol and a host of other nonprescription medicines, plus faulty hip implants and contact lenses and a couple of its prescription drugs.
J&J continues to lose hundreds of millions of dollars a year in revenue because of the manufacturing quality problems. The company is operating under increased government oversight and was forced to gut and rebuild a huge factory in suburban Philadelphia.
It's also recently been hit by a fine of more than $1.1 billion from an Arkansas judge for downplaying and concealing risks of its former blockbuster schizophrenia drug Risperdal, such as major weight gain and developing diabetes. That ruling, could affect dozens of pending lawsuits over the drug, many by states seeking reimbursement for what their Medicaid programs paid for the drug.
The company said Tuesday that it is seeking to have the verdict dismissed and will appeal if it doesn't succeed, stating that the penalty is excessive and "not justified by the evidence presented at the trial."
In December, a South Carolina judge upheld a $327 million civil penalty against J&J over Risperdal, and in January the company reached a $158 million settlement with Texas in which it didn't admit fault. J&J also is negotiating a settlement with the federal government that's expected to exceed $1 billion.
William C. Weldon, who will step down after a decade as CEO on April 26, said in a statement that he has "great confidence in the prospects of our business to deliver sustainable growth, well into the future."