Johnson & Johnson's first-quarter profit uncharacteristically fell 8.6 percent, hurt by sharply unfavorable exchange rates, a major divestiture and competition to its new hepatitis C drug.
The results from the world's biggest maker of health care products still surpassed Wall Street expectations. However, Johnson & Johnson reduced its full-year profit forecast, saying it now expects earnings of $6.04 to $6.19 per share, down from $6.12 to $6.27.
Shares initially jumped 13 percent, but in late morning trading were up 12 cents to $100.67.
Like many multinational corporations, the New Brunswick, New Jersey-based company is being pinched by the strong dollar, which reduces the value of products sold in local currencies around the world. The effect was extreme in the first quarter, when currency rates reduced the value of overseas sales by a whopping 13.2 percent, for a net decline of 12. 4 percent, to $8.68 billion. Meanwhile, U.S. sales climbed 5.9 percent, to $8.69 billion.
Edward Jones analyst Ashtyn Evans said she anticipates other multinational drugmakers, which report their results over the next couple weeks, to cite similar currency effects, though not as pronounced as at J&J, which gets half its revenue overseas. She noted Johnson & Johnson is expecting currency rates, if they hold steady, to cut earnings per share by a stunning 60 cents over 2015.
"I think it was a solid quarter for the company," mainly due to the strength of the U.S. prescription drug business, said Evans, who maintains a "Buy" rating on J&J.
The maker of BandAids, drugs and medical devices posted net income of $4.32 billion, or $1.53 per share. Adjusted for one-time gains and costs, that came to $1.56 per share, three cents better than the average estimate of analysts surveyed by Zacks Investment Research.
J&J's revenue fell 4.1 percent to $17.37 billion, but still beat forecasts for $17.31 billion.
Sales of prescription drugs, J&J's biggest segment, rose 3 percent to $7.73 billion. That was driven by strong sales of new products, including Invokana for type 2 diabetes and Xarelto for preventing heart attacks and strokes. J&J also benefited from growth in biologic drug Stelara for plaque psoriasis and psoriatic arthritis, biologic drugs Simponi and Remicade for various immune disorders, and the long-acting injectable schizophrena drug Invega Sustenna.
However, sales of hepatitis C drug Olysio fell by two-thirds in the U.S. and declined in Japan, for a total drop of 34 percent to $234 million. That was due to surging sales of Gilead Science Inc.'s rival drugs, Sovaldi and Harvoni, which together are raking in billions each quarter, and to a lesser extent, AbbVie Inc.'s Viekira Pak.
The company noted that during the first quarter, it acquired X01 Limited, which is developing an anticlotting drug that could be a successor to blockbuster Xarelto, and got U.S. approval for a new combination HIV drug called Prezcobix.
Consumer product sales fell 4.7 percent to $3.39 billion. Sales of medical devices and diagnostic products plunged 11.4 percent to $6.26 billion, partly because of the sale of the Ortho Clinical Diagnostics business.
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