Johnson & Johnson sales rise, but profits fall during third quarter

Mixed results: Recently acquired Synthes helped sales, while this McNeil plant, which is currently shut down, did not.
Mixed results: Recently acquired Synthes helped sales, while this McNeil plant, which is currently shut down, did not.
Posted: October 18, 2012

Johnson & Johnson's third-quarter overall sales grew 6.5 percent and profits dropped 7.3 percent compared with the same period in 2011, as two of the health care giant's Philadelphia-area businesses were key elements in the good-and-bad financial picture.

J&J is famous for Tylenol, Band-Aid bandages and shampoos, but this consumer segment is the last of the three divisions in sales, in part because the McNeil Consumer Healthcare facility in Fort Washington has been shut down since 2010, and the entire consumer unit is operating under legal restrictions.

Factoring in currency rates, total consumer sales dropped 4.3 percent to almost $3.6 billion.

The medical devices and diagnostics division is now the biggest in sales revenue, thanks in part to the acquisition of medical device-maker Synthes, whose U.S. headquarters is in West Chester. J&J completed the $19.7 billion acquisition of Synthes on June 14, so the third quarter was the first with Synthes sales contributing for all three months.

Worldwide sales in that division rose 12.5 percent to almost $7.1 billion. J&J officials would not give out the raw numbers, but said Synthes products contributed to 12.2 percent of the worldwide operational sales growth in the division.

The pharmaceutical division, the third of three, increased sales by 7 percent to $6.4 billion in the third quarter.

Total third-quarter sales were nearly $17.1 billion, a 6.5 percent increase from the $16 billion in the same period of 2011. The profit was $2.968 billion in the period vs. $3.202 billion in 2011.

Litigation, research and integration of Synthes ($135 million) were among the onetime costs that hurt earnings, the company said.

The stock closed the day up 95 cents to $69.55.

Former workers at the McNeil facility in Fort Washington previously told The Inquirer that J&J efforts to squeeze profits out of the operation led to problems resulting in dozens of recalls. The plant halted production in April 2010 and will need approval from the U.S. Food and Drug Administration and a federal judge before it can resume sending over-the-counter medicine to stores. The McNeil plants in Lancaster and Las Piedras, Puerto Rico, are operating, but under restrictions, so fewer products make it to shelves.

J&J chief financial officer Dominic Caruso said Tuesday, as he has in the past several quarters, that the repair process will continue through the latter part of 2013.

But, as chief executive officer Alex Gorsky said in July, the company has no plans to divest any of the three divisions, consumer products included. In September, J&J hired former Bayer executive Sandra Peterson to run the consumer division.

"We feel good about having a broad-based portfolio in health care," Caruso said in a conference call with analysts.

The last of four former Synthes executives was released from jail in September. They were sent to prison for their role in an illegal clinical trial of bone cement in 2003-04, during which three patients died on the operating table. The families of the three patients are suing the company, the executives who went to prison, and former CEO and chairman Hansjorg Wyss.

"I'd prefer a jury render a decision," said lawyer Greg Rueb, whose firm represents two of the three families, "so their conduct is out there for everyone to see."


Contact staff writer David Sell at dsell@ phillynews.com or 215-854-4506. Read his blog at www.philly.com/phillypharma and on Twitter @phillypharma.

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