Johnson & Johnson reported better-than-expected fourth-quarter earnings on Tuesday, due in part to a favorable tax rate, and said it is considering selling a $2 billion-a-year diagnostics business. The diversified healthcare company said it may sell its Ortho Clinical Diagnostics business, which makes everything from tests to determine blood type to laboratory equipment, or turn it into a stand-alone company. The strategy comes as drugmakers are shedding businesses and cutting costs due to overseas price controls and pressure on payments from insurers and the government. Pfizer Inc., for instance, is spinning off its animal health products business, and Abbott Laboratories has split off its drugs unit. Debbie Wang, an analyst with Morningstar, said the J&J diagnostics unit “is a slower grower, and if you’re not one of the leaders, it’s very difficult to compete in that area.” J&J said it earned $1.19 per share, excluding one-time items, in the fourth quarter, beating analysts’ average estimate of $1.17. A favorable tax rate and cost controls boosted results, according to Piper Jaffray analyst Matt Miksic. He also cited very strong growth in sales of J&J’s traditional artificial hips and of artificial knees, whose combined U.S. sales rose 7 percent despite disruptions from Superstorm Sandy in the quarter. Including a charge of $800 million, related mostly to recalls of defective “metal-on-metal” hip replacement devices made by its DePuy Orthopedics unit, J&J earned $2.6 billion, or 91 cents per share. That compared with $218 million, or 8 cents per share, a year earlier, when the company took charges of more than $3 billion, including $800 million for medical costs related to the same recalls. All-metal hip implants were developed to be more durable than traditional implants but have failed at a high rate. In some cases, they have shed metal fragments that have disabled patients. Traditional implants combine a ceramic or metal ball with a plastic socket. As many as 500,000 Americans are estimated to have received metal-on-metal hip replacements in the last five years, with J&J the largest manufacturer of such products.
