Health care giant Johnson & Johnson (JNJ, Financial) posted sluggish sales for the first quarter of the year, offsetting an increase in profit. Sales were squeezed by pressure to reduce drug prices and a global decline in sales of health products.
Despite these factors, the company raised its forecast for the year, pinning its hopes on its $30 billion acquisition of Actelion Ltd. (XSWX:ATLNE, Financial), a Swiss biopharmaceutical company. The company also benefits from several smaller acquisitions and the ongoing restructuring of its medical device segment.
Shares of Johnson & Johnson were down 3.56% to $121.25 in early afternoon trading. The stock hit a low of $121.10 earlier in the morning and was lower in premarket trading.
Net income came in at $4.42 billion, or $1.61 per share. The company posted $4.46 billion in net income, or $1.59 per share, during the same period last year.
Adjusted earnings totaled $1.83 per share, beating Wall Street estimates by six cents. Revenue increased by 1.6% to $17.77 billion, missing estimates of $18.01 billion.
The company's prescription drug business saw a 0.8% increase in sales, climbing to $8.3 billion. But sales of the company's top-selling drug Remicade declined by 6% to $1.7 billion. Biosimilar versions of the drug have hurt sales in Europe, where these competing drugs have been available for much longer than in the United States.
Consumer product sales increased by 1% in the quarter, coming in at $3.3 billion. Sales of medical devices and diagnostic equipment also increased by 3%, coming in at $6.3 billion.
Spending for marketing, manufacturing, research and development and administration increased by just one or two percent.
Johnson & Johnson CFO Dominic Caruso said revenue was also hurt by consumer demands for lower prices on certain prescription drugs. Increased competition in cardiovascular and diabetes medications has ramped up pricing pressure.
Caruso said the diabetes market is "very price sensitive" and that "prices have been declining for some time."
Falling prices and stiff competition has forced Johnson & Johnson to consider selling its diabetes care business. The company would still sell Invokana, its diabetes pill, despite concerns from the U.S. Food & Drug Administration and fears of future product liability claims. The drug's sales tumbled 13% to $284 million in the quarter.
Johnson and Johnson raised its full-year earnings forecast to the $7 to $7.15 per share range. In January, the company projected earnings to come in between $6.08 and $7.08 per share. Analysts were expecting shares to come in at $7.07.
The health care giant also increased its revenue forecast to between $75.4 billion and $76.1 billion. Initially, it was projecting revenue of $74.1 billion to $74.8 billion.
Johnson and Johnson completed several acquisitions during the quarter, including Abott Medical Optics, Megadyne Medical Products Inc. and Torax Medical Inc.
Megadyne designs, develops and manufactures electrosurgical tools. Torax manufactures and markets LINX Reflux Management System, a device used in the surgical treatment of gastroesophageal reflux disease.
The company announced on Tuesday that its acquisition of Actelion is expected to close in the second quarter. The acquisition of the company marks Johnson & Johnson's biggest deal to date.
Disclosure: Writer does not have any interests in companies mentioned.
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