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J&J Rethinks Guidant Deal; Profit Rises 12% in Quarter

October 19, 2005|From Associated Press

TRENTON, N.J. — Johnson & Johnson's chief financial officer said Tuesday that the company was considering alternatives to its planned acquisition of troubled heart device maker Guidant Corp. as J&J posted a 12% jump in third-quarter profit amid strong overseas sales.

The acquisition, originally set to close in September, has been in question because of Guidant's repeated recalls of pacemakers and defibrillators.

The comments by J&J CFO Robert J. Daretta were the first public indication the $25.4-billion deal might be in trouble, rather than just delayed. Shares of Indianapolis-based Guidant plunged $8.28, or 11.4%, to $64.10. Shares of New Brunswick, N.J.-based J&J fell 3 cents to $62.97.

"As it relates to the previously announced product recalls at Guidant and the related regulatory investigations and other developments, we believe that these are serious matters," Daretta told analysts during a conference call. "In light of these matters and their impact, we are continuing to consider the alternatives under our merger agreement."

Guidant spokesman Steve Tragash declined to comment.

Since June, Guidant has recalled or issued warnings on about 88,000 heart defibrillators and almost 200,000 pacemakers because of reported malfunctions. The company is under fire for waiting years to alert doctors and patients about possible flaws in some products.

On Tuesday, J&J reported that its third-quarter net income increased to $2.63 billion, or 87 cents a share, for the July-September period from $2.34 billion, or 78 cents, a year ago. J&J said revenue rose 7% to $12.31 billion.

Analysts surveyed by Thomson Financial expected earnings per share of 86 cents on revenue of $12.51 billion.

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