J&J beats forecasts, helped by hepatitis drug

(Reuters) - Johnson & Johnson reported better-than-expected quarterly earnings, fueled by surging sales of its new drug for hepatitis C that are expected to evaporate in coming months due to competition from a more potent and convenient combination treatment.

Sales of the J&J drug, called Olysio and approved by U.S. regulators in November, reached $796 million in the third quarter, following strong sales in the prior period.

But Morningstar analyst Damien Conover said demand for Olysio will soon crumble due to the approval on Friday of a new pill called Harvoni from Gilead Sciences Inc that can rid patients of the liver-destroying viral infection within 12 weeks.

Even so, Conover said strong quarterly sales of other relatively new J&J drugs, including its Zytiga treatment for prostate cancer and blood clot preventer Xarelto, bode well for J&J and the drug industry.

"The core drugs are doing well, with a lot of strength from newer brands, and that signifies a healthy environment for pharmaceutical stocks," Conover said.

Gilead plans to charge $94,500 for Harvoni. It combines Gilead's $84,000 pill Sovaldi with another drug, ledipasvir, and eliminates the need for two older, side-effect-laden treatments that needed to be taken along with Sovaldi.

Conover predicted Olysio sales will fall by more than 50 percent next year, as Harvoni becomes the treatment leader.

In a conference call with investors, company Chief Financial Officer Dominic Caruso said J&J plans to remain a competitor in the field, in part by testing Olysio with other drugs.

"We are committed to hepatitis C; we think the market is substantial and we're committed to investment," he said.

J&J's global drug sales jumped 18 percent in the quarter to $8.3 billion, a slight slowdown from the 21 percent growth in the second quarter.

But sales of J&J's medical devices fell 5.2 percent in the quarter to $6.6 billion, due to the recent divestiture of the company's Ortho-Clinical Diagnostics unit and a weak global economy that has curtailed demand for elective surgical procedures. And sales of company consumer products, including Tylenol, slipped 0.6 percent to $3.6 billion.

The company earned $4.75 billion, or $1.66 per share, in the quarter. That compared with $2.98 billion, or $1.04 per share, in the year-earlier period, when J&J took special charges related to legal expenses and merger-related costs.

Excluding special items, J&J earned $1.50 per share. Analysts on average expected $1.45 per share, according to Thomson Reuters I/B/E/S. A net gain from after-tax items of about $500 million was seen, mostly due to tax benefits from the Ortho-Clinical Diagnostics divestiture.

Company sales rose 5.1 percent to $18.47 billion, topping the average analyst estimate of $18.38 billion.

J&J said it now expects full-year earnings, excluding special items, of $5.92 to $5.97 per share. In July, it had previously forecast $5.85 to $5.92 per share.

Shares of J&J rose 0.7 percent in morning trading on the New York Stock Exchange.

(Reporting by Ransdell Pierson; Editing by Chizu Nomiyama and Meredith Mazzilli)