Johnson & Johnson (JNJ) -1.20%
JNJ topped earnings estimates for the fourth quarter, but their revenues and outlook for 2009 were below expectations.
The economic recession, unfavorable currency exchange rates and generic drug competition hurt fourth quarter revenue and factored into the 2009 outlook, which left open the possibility of a decline from 2008 earnings.
The sales decline was led by a drop of 11.1 percent for prescription drugs, in which cheaper copycat pills displaced Risperdal (its top-selling antipsychotic) and Topamax (migraine pill). Also hurting the U.S. pharmaceuticals market was increasing layoffs that left more people without drug-benefit plans.
JNJ noted that consumers and patients are becoming more frugal. Hospitals are chopping purchases and JNJ has seen sales slow on products ranging from contact lenses to diabetes test strips.
The company’s diversified business model has served it well in comparison to rivals more concentrated in the pharmaceutical industry, and the company will exploit cheap market valuations to make acquisitions. CEO William Weldon identified two areas where JNJ are more likely to be acquisitive: health information-technology companies and companies that specialize in wellness and disease prevention.
JNJ’s strength lies in innovation and diversification. JNJ’s strength across diverse health care niches should offset head winds in pharmaceuticals.
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Peter Lazaroff, Junior Analyst
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