J&J cuts guidance as strong dollar hits sales

Johnson & Johnson has cut its full-year earnings guidance as the strengthening of the US dollar caused a dip in first-quarter sales.

The US healthcare group conducts half its business overseas, leaving it exposed to the greenback's appreciation to near-12 year highs against the euro.

Alex Gorsky, chief executive, said underlying performance was strong as earnings, excluding one-off items, of $1.56 a share beat analysts' consensus forecast of $1.53.

But this represented a near-7 per cent decline from the same period last year due to the strong dollar. At an operational level sales rose 3.1 per cent, but once converted to dollars they were down 4.1 per cent at $17.4bn.

The results highlighted the currency headwinds facing US multinationals as domestic growth accelerates - driving the dollar 22 per cent higher against a basket of rival currencies over the past 12 months, according to Bloomberg data.

Maxim Jacobs, analyst at Edison, said that J&J's geographic and product diversification - usually a bulwark against volatility - was "now a weakness upon which the strong dollar can take its toll on both sales and profits".

However, Mr Jacobs, said the cut in guidance for 2015 was "just a blip on the radar" and that the group's long-term outlook remained solid.

J&J, whose products span baby oil and painkillers to cancer drugs and knee implants, adjusted its forecast for full-year earnings to a range of $6.04 to $6.19 a share, from a previous prediction of $6.12 to $6.27.

The cut was no surprise to investors who nudged the stock up 0.3 per cent to $100.81 in New York trading.

Jeffrey Holford, analyst at Jefferies, said underlying results were "decent," with a strong performance in the pharmaceuticals division offsetting weaker numbers from the medical devices and diagnostics unit.

Drug sales were helped by strong growth in two new products - Invokana for diabetes and Imbruvica for leukaemia.

J&J recently lost out to AbbVie in a bidding war for Pharmacyclics, the biotech company that developed Imbruvica, but will continue to benefit from sales of the drug through a marketing alliance with Pharmacyclics.

Growth in new products helped offset a steep decline in Olysio, which has faced competition from a new generation of hepatitis C drugs made by Gilead Sciences and AbbVie.

J&J's blockbuster arthritis medicine, Remicade, also saw a slight fall in sales after the expiry of its patent in Europe opened the way for lower-cost competition from "biosimilar" versions of the drug.

Celltrion of South Korea is pushing to secure regulatory approval for its Remicade copycat in the US. But Dominic Caruso, J&J chief financial officer, said the group did not expect competition to arrive this year.

He said J&J would "pursue all available avenues" to press its argument that the Celltrion product infringes on Remicade's patents.

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