J&J sees 'exceptional' growth amid drug successes

Johnson & Johnson trumpeted "exceptional" growth in its pharmaceuticals business on Tuesday as the US healthcare group reaps the rewards from a series of successful drug launches.

Prescription medicines have emerged as the strongest part of J&J's portfolio in recent quarters, offsetting more sluggish growth in medical devices and consumer products.

The trend accelerated in 2013, with drug revenues up 10.9 per cent at $28.1bn, helped by new products such as Zytiga, a treatment for prostate cancer.

J&J has nurtured one of the most fruitful research and development pipelines in the industry, with 13 prescription drugs launched since 2009.

Pharmaceuticals companies are under pressure to find new products to compensate for a wave of patent expiries on blockbuster drugs.

For J&J, its success in tackling the "patent cliff" has helped maintain growth after a troubled period when the group's consumer business was hit by a series of damaging recalls, ranging from Tylenol painkillers to contact lenses.

Alex Gorsky, who was appointed chief executive in 2012 to lead the turnround, said on Tuesday that 75 per cent of J&J's over-the-counter products were back on the shelves after an overhaul of its manufacturing processes.

Fourth-quarter net earnings rose 37 per cent to $3.52bn, or $1.23 per share beating Wall Street expectations. Sales were up 4.5 per cent at $18.36bn.

Danielle Antalffy, analyst at Leerink, said momentum was continuing in pharmaceuticals, while the turnround in consumer sales seemed well under way.

She added that the devices and diagnostics division, which has been hampered by price pressures in the US, appeared to be stabilising.

J&J last week agreed the sale of its ortho-clinical diagnostics unit, which includes blood testing equipment, to Carlyle, the private equity group, for $4.15bn as part of efforts to narrow the group's focus to growth businesses.

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Consumer sales rose 1.7 per cent in 2013 to $14.7bn, while revenues from devices and diagnostics were up 3.9 per cent at $28.5bn.

Analysts were disappointed by slightly weaker than expected earnings guidance for 2014, although Ms Antalffy said the group was known for its conservative forecasts. The stock was down nearly 2 per cent at $93.21 in afternoon trading.

Mr Gorsky highlighted China as one of the group's biggest sources of optimism, even as rival drug companies struggle to establish a foothold.

Actavis, the world's second-biggest generic drugmaker by market capitalisation, this month said it was pulling out of China because of its difficult business climate, while the UK's GlaxoSmithKline has been hit by a bribery investigation in the country.

But Mr Gorsky insisted China remained an "enormous" opportunity for J&J, citing forecasts that the country's spending on healthcare will rise by 14 per cent a year until 2017. The group already generates $2.8bn of annual revenues in China.

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