Johnson & Johnson (NYSE:JNJ) beat analyst second quarter earnings estimates last week, with an impressive quarterly net income increase of 13% and mostly optimistic projections going forward. So why, you may ask, did the shares tank by 2%?

As so often happens in the financial universe, I believe the reaction had more to do with perception than reality. There is also the "sell the news" mentality that pervades the industry, with so many fickle investors and money managers chasing the next big story and quickly losing interest in anticipated news that has become relatively boring reality. The earnings report was actually good, with strong growth shown in the company's key segments and promising projections.

A possible reason why
If there was a focal point of the earnings and the sell-off, it has to do with one of JNJ's most promising, newsworthy and profitable new drugs; the hepatitis C drug Olysio (who on earth thinks up the crazy names for these drugs anyway?). Olysio has been a home run for JNJ so far, achieving the lofty "blockbuster" status ($1 billion + in sales). But the share-spanking pessimism we see stems in part from the fear that competition will begin to put a damper on this drug's sales and dent the company's overall profits.

Competitors in the "hep C" space include Gilead Sciences (NASDAQ:GILD), Bristol-Myers Squibb, AbbVie, and Merck. In particular, Gilead's remarkably promising hep C drug Sovaldi is a bit of a two-edged sword for Olysio. After all, a good bit of Olysio's success results from the drug being prescribed off-label in combination with Gilead's Sovaldi, as a treatment for type 1 hepatitis c. However, the combination of Gilead's Sovaldi and ledipasvir (which may be approved later this year) more or less could make Olysio obsolete, and the approval for this combination is expected pretty soon (Gilead filed for approval back in February).

So the bottom line is that investors should view Olysio as a wonderful revenue enhancer which has helped JNJ sock away a few billion in their cash war chest. However, we should substantially discount the potential value of this drug for future JNJ earnings.

Let's take a step back and look at the big picture for JNJ. After all this pharmaceutical and consumer product behemoth is far from a one-trick pony. The company's pharmaceutical segment shows especially promising prospects due to strong showings in immunology, oncology and infectious diseases drugs. You can see a better view of the company's big picture from the following graphic of JNJ's pharmaceutical division Janssen, showing the market leading strength in new product launches and the impressive resultant revenue growth:

Source: Johnson & Johnson second quarter earnings presentation. 

So, what should a Foolish investor take-away from the JNJ earnings report? If you want exposure in the pharmaceutical industry, there are certainly worse companies than JNJ for your portfolio.

However, investors should consider Olysio's ending benefit to the company's revenues when looking forward. Although JNJ would be an acceptable addition to an investor's health care portfolio, Gilead may be a stronger bet for future growth prospects due to the strong potential its drug combinations hold for capturing a large segment of the hepatitis c market, as well as strong potential growth in HIV.