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Johnson & Johnson
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PUBLICATION DATE: 8 Jan 2016
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Johnson & Johnson
TABLE OF CONTENTS
TABLE OF CONTENTS
Johnson & Johnson Johnson & Johnson
Company Overview
Johnson & Johnson (J&J or 'the company') is one of the world's largest providers of diverse healthproducts. The company is engaged in the research, development, manufacture and sale of consumerhealth care products, pharmaceuticals, and medical devices. J&J has over 265 operating companiesin the Americas, Europe, Asia Pacific and Africa. It is headquartered in New Brunswick, New Jerseyand employed about 126,500 people as of December 28, 2014.
The company recorded revenues of $74,331 million in the financial year ended December 2014(FY2014), an increase of 4.2% over FY2013. The operating profit of the company was $20,959million in FY2014, an increase of 14.1% over FY2013. The net profit was $16,323 million in FY2014,an increase of 18% over FY2013.
KEY FACTS
Head Office
Johnson & JohnsonOne Johnson & Johnson PlazaNew BrunswickNew Jersey 08933USA Web Address
Revenue / turnover
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New York Ticker
Johnson & Johnson Johnson & Johnson
SWOT Analysis
J&J is one of the world's largest providers of diverse health products. The company is engaged inthe research, development, manufacture and sale of consumer health care products, pharmaceuticals,and medical devices. J&J's leadership position in various categories enables it to penetrate newmarkets as new product launches become easier. However, the healthcare reforms could affect thecompany's revenues in near future.
Leadership position in diverse healthcare Product recalls may dent J&J's brand image segmentsStrong R&D enabling J&J to launchinnovative productsStrong brand portfolioStrong financial performance Acquisitions and collaborations to Healthcare reform in the US could strengthen the offerings of the company negatively impact J&J's profitability Product approvals likely to help the Cost containment pressure in healthcare company in catering to unmet medical needsGrowing pharmaceuticals market in the US Leadership position in diverse healthcare segments J&J is one of the largest and diversified healthcare companies in the world. It is also one of thelargest medical device companies. Globally, J&J is the fifth largest pharmaceutical company, andthe sixth largest biotech company and consumer health care company. The company also holdsleadership positions across several categories, including antithrombotic agents, antipsychotic(injectables), baby and kids care, biosurgicals, disposable contact lenses, electrophysiologydiagnostics and catheters, endo-mechanical, endoscopy, hormone antagonists, infection prevention,lo-cal sweetener, minimally invasive surgery, oral rinses, orthopaedics (trauma/hips/shoulders),OTC, SGLT2 inhibitors, sutures, systemic antipsoriasis products, and wound care. Approximately70% of sales are derived from products/businesses that have number one or number two globalmarket share position. Strong market leadership enhances the company's brand image and enablesit to penetrate new markets as new product launches become easier.
Johnson & Johnson Johnson & Johnson
SWOT Analysis
Strong R&D enabling J&J to launch innovative products The company has significantly invested in R&D, which has helped it to launch innovative productsat regular intervals. The company invested $8.5 billion (11.4% of sales), $8.2 billion and $7.7 billionin its R&D activities for FY2014, FY2013 and FY2012, respectively. J&J's continued investments inR&D yielded many new pharmaceutical products, including Olysio/Sovriad (simeprevir), forcombination treatment of chronic hepatitis C in adult patients; Xarelto (rivaroxaban), an oralanticoagulant; Zytiga (abiraterone acetate), an oral, once-daily medication for use in combinationwith prednisone for the treatment of metastatic, castration-resistant prostate cancer; Invokana(canagliflozin), for the treatment of adults with type 2 diabetes; and Imbruvica (ibrutinib), an oral,once-daily therapy approved for use in treating certain B-cell malignancies, or blood cancers.
J&J's emphasis on R&D has also led to innovations in its medical devices and consumer platforms.
In FY2014, the new product approvals and launches under medical devices segment include AnimasVibe insulin pump and Continuous Glucose Monitoring system for the management of insulin-requiringdiabetes in adults ages 18 and older; the Incraft AAA Stent Graft System used in the treatment ofabdominal aortic aneurysms (AAA) in Europe and Canada; the Saber PTA Dilatation Catheter totreat Peripheral Arterial disease; and Thermocool Smarttouch Catheter for treatment of patientssuffering from drug-resistant paroxysmal atrial fibrillation. The company's new product launches inthe consumer segment include Women's Rogaine, Zyrtec dissolve tablets and various newformulations of Listerine, and re-launched brands such as Tylenol PM.
New products introduced within the past five years accounted for about 25% of 2014 sales. Hence,the company's commitment to technological innovation as reflected in its R&D investments and afocus on new product development not only strengthens its market position but also helps thecompany keep its product pipeline robust.
Strong brand portfolio The company developed a broad and strong portfolio of brands. Most of the company's brands haveleading market positions. For instance, Xarelto is the number one prescribed novel oral anticoagulantbrand across all specialties and channels. Invokana is the number one US brand in endocrinology.
Stelara is the number one biologic in Psoriasis. Invega Sustenna brand is the number one prescribedlong-acting antipsychotic therapy for Schizophrenia. Zytica brand is the number one prescribed noveloral for metastatic castrate resistant prostate cancer. Imbruvica brand is the number one prescribedtherapy in second line+ CLL and MCL indications. Further, Simponi and Simponi Aria brands, firstand only subcutaneous and intravenous anti-TNF MAb, outpaced the global market with 30%operational growth in FY2014. A strong brand portfolio, therefore, enables the company to retain astrong bargaining position with retailers.
Strong financial performance J&J has a strong financial position indicated by growing revenues despite the economic downturnand its consequences. The company has witnessed a continuous growth in its revenues over manyyears. Its revenues increased at a compound annual growth rate (CAGR) of 5% from $61,587 million Johnson & Johnson Johnson & Johnson
SWOT Analysis
in FY2010 to $74,331 million in FY2014. As compared to FY2013, the revenues increased 4.2% inFY2014. The growth in revenues was attributed to the increase in sales of both the US as well asinternational companies; and increase in sales of some of its products. The company's profitabilityalso increased significantly. The operating profit and net profit grew by 14.1% and 18%, respectively,in FY2014 over FY2013. Thus, strong financial performance will provide the company with financialflexibility and also help in expansion activities.
Product recalls may dent J&J's brand image The company has recalled several of its products. For instance, in FY2013, J&J initiated a voluntaryrecall of millions of oral contraceptive Cilest (ethinylestradiol and norgestimate) in 43 countriesoutside the US. In FY2014, the company's Ethicon division recalled laparoscopic power morcellators,a surgical tool, due to spreading of cancer in women. During the same time, J&J recalled 13,500bottles of Xarelto, which is used to prevent blood clots and strokes, due to uncontrollable bleedingthat led to deaths. In August 2015, the company's Ethicon Endo-Surgery unit recalled about 14 unitsof the Sedasys Computer Assisted Personalized Sedation System due to degradation of plasticmaterial of the Sedasys System Control Unit. Such product recalls may dent J&J's brand imagebesides having a negative impact on its revenue growth.
Acquisitions and collaborations to strengthen the offerings of the company J&J made various acquisitions recently. For instance, in December 2015, the company, in collaborationwith Verily Life Sciences, formed Verb Surgical, an independent surgical solutions company. VerbSurgical intends to develop a broad surgical solutions platform that will incorporate robotic capabilitiesand medical device technology for operating room professionals. Earlier, in the same month, thecompany acquired Novira, a privately-held biopharmaceutical company that develops novel therapiesfor treatment of chronic hepatitis B virus infection. The acquisition included Novira's portfolio of novelantivirals, including NVR 3-778. Novira became part of the Infectious Diseases and VaccinesTherapeutic Area of the Janssen Pharmaceutical Companies of the company. In November 2015,Biosense Webster acquired Coherex Medical, a privately-held medical device company that developsCoherex WaveCrest Left Atrial Appendage Occlusion System. The addition of Coherex WaveCrestSystem complements Biosense Webster's portfolio of therapeutic solutions for the treatment of thepatients suffering from atrial fibrillation. In March 2015, Ethicon entered into a strategic alliance withGoogle to develop surgical robotics for the benefit of surgeons, patients and health care systems.
In the same month, Janssen Pharmaceuticals acquired XO1 Limited, a privately-held virtualbiopharmaceutical company that develops the anti-thrombin antibody ichorcumab. The acquisitionexpands Janssen Pharmaceuticals' cardiovascular disease portfolio.
Johnson & Johnson Johnson & Johnson
SWOT Analysis
In November 2014, J&J acquired Alios BioPharma, a privately-held clinical stage biopharmaceuticalcompany focused on developing therapies for viral diseases. In the same month, AstraZeneca,Pharmacyclics and Janssen entered into clinical trial collaboration to evaluate the efficacy and safetyof AstraZeneca's investigational anti-PD-L1 immune checkpoint inhibitor, MEDI4736, in combinationwith Imbruvica (ibrutinib), an oral Bruton's tyrosine kinase inhibitor, co-developed andco-commercialized by Pharmacyclics and Janssen Biotech. Thus, the acquisitions and collaborationsof the company are likely to strengthen its offerings.
Product approvals likely to help the company in catering to unmet medical needs The company has received approvals for most of its products. For instance, in December 2014,Animas Corporation received FDA's approval for the Animas Vibe insulin pump and CGM system,which is used for the management of insulin-requiring diabetes in adults ages 18 and older. AnimasVibe allows patients to view glucose data and administer insulin directly from the pump.
Janssen Biotech received an approval from FDA for Imbruvica capsules, which is the first therapyto treat patients with Waldenstrom's macroglobulinemia, a rare, indolent type of B-cell lymphoma,in January 2015. In the same month, Janssen Therapeutics, division of Janssen Products, receivedan approval from FDA for Prezcobix tablets to treat HIV-1 along with other antiretroviral agents.
Janssen Pharmaceuticals received an approval from FDA for Invega Trinza, a three-month injectionto treat Schizophrenia, in May 2015. Invega Trinza is the first and only four-times-a-year treatmentfor Schizophrenia. In June 2015, Janssen Biologics received the European Commission's approvalfor Simponi, which is used in the treatment of non-radiographic axial spondyloarthritis in adult patients.
In the same month, Janssen-Cilag International received an approval from European Commissionfor Stelara, which is used to treat moderate-to-severe plaque psoriasis in adolescent patients fromthe age of 12 years and older. Janssen-Cilag International received European Commission's approvalfor Imbruvica capsules that is used in the treatment of Waldenstrom's macroglobulinemia in adultpatients in July 2015. Janssen Biotech received FDA's approval to update Simponi Aria label inSeptember 2015. As per the revised label, Simponi Aria, when administered along with methotrexate,shows an improved signs of patients' physical and emotional well-being as measured by the SF-36assessment. In October 2015, Janssen Biotech received approval from FDA for Yondelis, which isused to treat patients with Metastatic Liposarcoma or Leiomyosarcoma, two common subtypes ofSoft Tissue Sarcoma. Janssen Biotech received FDA's approval for Darzalex, an injection used inthe treatment of patients with multiple myeloma, in November 2015. Darzalex is the first humanAnti-CD38 monoclonal antibody to treat multiple myeloma. These product approvals are likely tohelp J&J in catering to unmet medical needs.
Growing pharmaceuticals market in the US The US pharmaceuticals market has recorded a moderate growth in the recent years. According toMarketLine, the US pharmaceuticals market grew by 6.8% in 2014 to reach a value of $303.9 billion.
The US accounted for 35.1% of the global pharmaceuticals market value. By 2019, the USpharmaceuticals market is forecast to have a value of $390.7 billion, an increase of 28.6% since2014.
Johnson & Johnson Johnson & Johnson
SWOT Analysis
J&J offers pharmaceutical products in five therapeutic areas, including immunology, infectiousdiseases, neuroscience, oncology, and cardiovascular and metabolic diseases. The pharmaceuticalproducts are distributed to retailers, wholesalers, hospitals and health care professionals forprescription use. These products are marketed under Remicade, Simponi, Stelara, Incivo, Edurant,Invega and Zytiga, among others. The pharmaceutical segment accounted for 43.5% of the totalrevenues of the company in FY2014. Thus, J&J's focused approach to cater to the requirements ofthis market can make it a prominent player in the market.
Healthcare reform in the US could negatively impact J&J's profitability The recently enacted US Healthcare Reform could affect J&J's margins. The new law is expectedto expand access to health care to more than 32 million Americans by the end of 2020. In 2010, theminimum rebate to states participating in the Medicaid program increased from 15.1% to 23.1% onthe company's branded prescription drugs. The new law also increased the types of entities eligiblefor the federal 340B drug discount program. It requires pharmaceutical manufacturers to pay a 50%point of service discount to Medicare Part D beneficiaries when they are in the Medicare Part Dcoverage gap (also called as 'donut hole'). Also, pharmaceutical manufacturers are now required topay an annual health care reform fee. The total annual industry fee will remain $3 billion in 2015.
The fee is assessed on each company in proportion to its share of sales to certain governmentprograms, such as Medicare and Medicaid.
Under the provisions of the Patient Protection and Affordable Care Act and the Health Care andEducation Reconciliation Act of 2010, starting in 2013, the company began paying a tax deductible2.3% excise tax imposed on the sale of certain medical devices. The full-year impact of the excisetax was nearly $180 million in 2014 and about $200 million in 2013. Increased rebates on prescriptionpharmaceuticals and annual fees could affect J&J's profitability.
Cost containment pressure in healthcare spending In the recent years, there have been cutbacks in health care spending in major economies. Theongoing financial crisis and its resultant drag on economic growth continue to impact the debt burdenof many economies, most notably in Europe. With budgets under pressure and a fragile globaleconomy, stringent cost-containment measures have been implemented in countries around theworld. Concerted austerity measures were taken by governments in Germany, France, Spain, theUK, Greece and other European countries, while government-mandated price cuts were introducedin Japan, China, India, Brazil and Russia. In the US, the government imposed a fee on brandedpharmaceutical products as part of ongoing healthcare reforms and further savings are expectedover the coming years for Medicare- and Medicaid-funded medicines.
Other initiatives to contain healthcare costs include an increase in imports of drugs from lower-costcountries to higher-cost countries, shifting of the payment burden to patients through higher Johnson & Johnson Johnson & Johnson
SWOT Analysis
co-payments, limiting physicians' ability to choose among competing medicines, mandatory substitutionof generic drugs, and growing pressure on physicians to reduce the prescribing of patentedprescription medicines. These ongoing pressures are expected to affect the company's sales in thenear future.
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