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J&J's Q3 FY07 earnings hit by restructuring costs

Johnson & Johnson posts Q3 FY07 sales of USD 15bn, an increase of 12.7 per cent on Q3 FY07, but net earnings are hit by a restructuring charge of USD 528m

Johnson & Johnson (J&J) revealed Q3 FY07 sales of USD 15bn, an increase of 12.7 per cent on Q3 FY07, but net earnings were hit by a restructuring charge of USD 528m announced back in July 2007.

Operational growth was 9.7 per cent with currency effects contributing 3.0 per cent.

Domestic sales were up 5.8 per cent, while international sales increased 21.5 per cent, reflecting operational growth of 14.7 per cent and a positive currency impact of 6.8 per cent. On a pro-forma basis, including the net impact of the acquisition of Pfizer Consumer Healthcare in both periods, worldwide sales increased 2.4 per cent operationally.

Net earnings and diluted earnings per share for the third quarter of 2007 were USD 2.5bn and USD 0.88, representing decreases of 7.7 per cent and 6.4 per cent, caused by the restructuring charge. Excluding the impact of the charges, net earnings for the current quarter were USD 3.1bn and diluted earnings per share were USD 1.06, representing increases of 7.0 per cent and 8.2 per cent, respectively.

Increased EPS guidance and unit sales
J&J has increased its earnings guidance for FY07, which excludes the impact of in- process R&D charges, restructuring charges or other special items, to between USD 4.10 and USD 4.13 per share.

J&J's global medical devices and diagnostics unit posted sales of USD 5.2bn in Q3 FY07, which represented a 6.0 per cent increase on Q3 FY06. US sales increased 2.4 per cent, while international sales increased 9.8 per cent. In Q3, J&J secured FDA approval for its Realize Adjustable Gastric Band, a surgical implant for the treatment of morbid obesity. The FDA also approved the Genesearch Breast Lymph Node Assay, an intra-operative and gene-based test to detect the spread of breast cancer into the lymph nodes.

Worldwide pharmaceutical sales of USD 6.1bn for Q3 were 3.7 per cent up on the prior year's quarter. Domestic sales decreased 2.0 per cent, while international sales increased 14.4 per cent. The growth reflects strong sales of Topamax, an antiepileptic and a treatment for the prevention of migraine headaches.

Growth was impacted by lower sales of anti-anaemia drug Procrit, due to a decline in the market caused by an FDA-imposed labelling change made in March 2007, as well as a decision made by the Centers for Medicare & Medicaid Services (CMS) to reduce reimbursement coverage for the product.

Pipeline developments
In October 2007, J&J won FDA approval for intra-abdominal and urinary tract infection injectable treatment, Doribax (doripenem).

J&J also filed a new drug application in the US and EU for TMC125 (etravirine), an investigational non-nucleoside reverse transcriptase inhibitor (NNRTI), under clinical investigation for use with other ARVs as a treatment for HIV.

Other segment results
Worldwide consumer segment sales of USD 3.6bn for Q3 represented a 47.5 per cent increase on the previous year's quarter, with operational growth of 43.4 per cent and a positive impact from currency of 4.1 per cent.

Domestic sales increased 39.8 per cent, while international sales increased 54.2 per cent (46.5 per cent from operations and 7.7 per cent from currency). On a pro-forma basis, including the net impact of the acquisition of Pfizer Consumer Healthcare in both periods, worldwide sales for the Consumer segment increased 3.5 per cent operationally.

30th September 2008

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