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JOHNSON & JOHNSON (JNJ) |
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| Table of Contents |
| Intro and Overview |
| Introduction |
| Business Overview |
| Business Segments |
| Trends and Forces |
| Key Trends and Forces |
| Competition |
The consumer health market is expanding as consumers are taking greater responsibility and interest in their own health. Johnson & Johnson owns highly successful brands such as Tylenol, Band-Aid, and Neutrogena. The acquisition of Pfizer's Consumer Healthcare division in 2006 and addition of brands such as Listerine, Lubriderm, Visine, and Neosporin further solidified Johnson & Johnson dominance in consumer health care.
The company's pharmaceutical segment faces many of the challenges that face all pharmaceutical companies, including issues surrounding patent expiration and FDA approval. Johnson & Johnson's pharmaceutical segment had the largest decline in sales in 2009, 8.9%. This decline was largely due to the entry of generic competition to compete with blockbusters Topamax and Risperdal. In addition, there are constant threats of litigation and a growing pressure in the US and abroad to lower the price of medication.
History
Johnson & Johnson Corporation was founded in 1886 by Robert Wood Johnson, an American entrepreneur and Industrialist. Inspired by the developing scientific understanding of proper of sanitation, Johnson aimed to make antiseptic surgical procedures easier. Through numerous targeted acquisitions and research over the next century, the company steadily diversified its business to encompass pharmaceutical, medical devices, and consumer packaged goods.
Business Overview
Johnson & Johnson has interests in a broad spectrum of the health care market, and takes a decentralized approach to managing its 250 operating companies and franchises. In the company's continuing effort to diversify its business and increase profits, Johnson & Johnson is constantly acquiring new companies, including 8 in the last year alone. In 2009, worldwide sales totaled $61.9 billion, making Johnson & Johnson the second largest manufacturer of health care products, behind Pfizer.
Earnings Updates
In Q2 of 2010, Johnson & Johnson reported net earnings of $3.449 billion, a 7.5% growth from the same quarter of 2009. While the company continued to see a decline in revenue from its pharmaceutical and consumer segments (-14.3 and -2.0%, respectively), growth in its medical devices segment reached 3.2%.[1] Recall of Tylenol, Motrin, and other products (27.5% decrease in revenue from OTC/Nutritionals in the US for Q2 2010 compared to previous year[1]) was cited as the reason behind the company lowering its 2010 forecast from $4.80 to $4.90 in earnings per share to a new range of $4.65 to $4.75. [2]
In Q1 of 2010, Johnson & Johnson reported earnings of $4.53 billion, a 29% growth from the same quarter of 2009. While the company continued to see a decline in revenue from its pharmaceutical and consumer segments (-5.7 and -3.7%, respectively), growth in its medical devices segment reached 8.1%.[3] While earnings beat analyst estimates, Johnson & Johnson lowered its 2010 forecast by $0.05 per share due to initial costs from the new healthcare legislation. This forecast cut, however, was less than the cuts made by rivals Eli Lilly and Company (LLY) and Novartis AG (NVS).[4]
In Q4 of 2009, Johnson & Johnson reported total sales of $16.55 billion, a growth of 9% over the same quarter of 2008. Net earnings, however, only amounted to $2.2 billion, a decrease of 18.8%. The profits decrease was largely due to a $850 million restructuring charge that the company took. Earnings generally beat analyst estimates for the quarter. J&J also announced its 2010 projections, which forecast earnings growth of 7%, a modest projection relative to analyst estimates.[5]
Johnson & Johnson's 2009 struggle continued in Q3, as sales ($15.1 billion) decreased 5.3% from Q3 2008.[6] J&J's poor domestic performance (8.1% sales decline) was the reason for the sales decline, as the firm is still trying to handle "tough economic conditions."[6]. JNJ is optimistic for the rest of it's fiscal year, however, as it made two acquisitions and had four new drugs become FDA approved.[6]
Johnson & Johnson's 2009 second quarter net income fell by 3.5% to $3.21 billion compared to $3.33 billion a year ago. Quarterly sales fell by 7.4 percent to $15.24 billion, down from $16.45 billion the year before but above expectations of $15 billion. The decline is partially attributable to two major patent expiries (Risperdal and Topamax), as well as a decline 4.5% in consumer products revenue. [7]
Acquisitons
- On December 1, 2008, Johnson & Johnson announced plans to purchase breast-implant maker Mentor (MNT) for $1.07 billion. Mentor's revenues were lower in 2008, attributable largely to decreased spending on cosmetics due to the 2008 global recession. The acquisition will allow J&J to enter the market of medical cosmetics, both through Mentor's breast implant business and through its wrinkle remover PurTox, a rival to Allergan (AGN)'s Botox. [8](Read more about Johnson & Johnson's key trends and forces...)
- On May 21, 2009, Johnson & Johnson announced that it would acquire cancer company, Cougar Biotechnology for $1 billion.[9] Cougar's major pipeline drug, abiraterone acetate, is a biologic drug and is currently in phase III trials for prostate and breast cancer.[10]
- On September 17, 2009, Johnson & Johnson announced that its new subsidiary, Janssen Alzheimer Immunotherapy had completed the acquisition of Elan Corporation's Alzheimer's program for $855 million. This deal involved the purchase of ownership of Elan totalling 18.4% of the company's outstanding shares. The acquired Alzheimer's program includes bapineuzumab, an antibody therapy currently in Phase III trials and a vaccine currently in phase II trials.[11]
- On September 28, 2009, Johnson & Johnson announced that it had purchased a 18% stake in vaccine-maker, Crucell, for $440 million. As part of this deal, the two companies will focus efforts toward jointly developing flu-mAb, and antibody-based vaccine designed to fight flu variations, including the H1N1.[12]
- On December 16, 2009, Johnson & Johnson announced that it would acquire privately held Acclarent and its sinus-surgery technology for $785 million.[13] Acclarent's technology involves using an endoscopic balloon to reshape the nasal passage of patients, potentially helping to treat diseases such as sinusitis and sleep apnea.[14]
Product Recalls
On April 30, 2010, the McNeil Consumer Healthcare division of Johnson & Johnson announced that it was recalling 40 of its products, including children's Tylenol and Motrin.[15] The recall was announced following an FDA inspection of a manufacturing plant that found several deficiencies that did not meet quality standards for manufacturing pharmaceuticals. While the FDA noted that chance of adverse reactions was remote, it advised consumers to use private label medicines in place of the recalled drugs manufactured by Johnson & Johnson.[16] While the recalls represent a very small proportion of Johnson & Johnson's total revenue, the recalls could affect public perception of the company's image of quality and have led to federal investigations of the McNeil manufacturing division.[17][18]
Business Segments
The company consists of three major divisions: consumer healthcare, medical devices, and pharmaceuticals.
Pharmaceuticals: 36% of FY 2009 Revenue
The Pharmaceutical division is the largest of the three business segments, bringing in $22.5 billion in revenue for 2009.[20] Pharmaceutical products are usually prescription medications distributed to retailers, wholesalers, and health care professionals. Johnson & Johnson's pharmaceutical program is ranked third in sales in the United States and fourth in the world. It uses the same business model and faces similar challenges as other major pharmaceutical companies.
Johnson & Johnson's pharmaceutical portfolio contains seven drugs with 2009 revenues of over $1 billion. Some major pharmaceuticals are listed below:
Remicade
Remicade is approved for several indications, including Crohn's disease, psoriatic arthritis, and rheumatoid arthritis (see Arthritis Drug Market). In 2009, Remicade brought in $4.3 billion in sales, a growth of 14.8% from 2008. Remicade is a biologic and is not currently threatened by generics. However, legislation concerning follow-on biologics will affect Remicade in the future.[21]
Remicade (infliximab) is a recombinant anti-TNF protein in the same class as competitors, Humira (Abbott) and Enbrel (Amgen). Remicade was approved 3 years earlier than Humira, in 1999,and must be administered intravenously by a physician every 8 weeks, a process that takes around 2 hours.[22]
Topamax
Topamax brought in sales of $1.2 billion in 2009, a decline of over 50% from 2008. Topamax is used to treat epilepsy and migranes (see Antiepileptic Drug Market). The primary product patent for Topamax expired in September 2008, and the FDA granted Johnson & Johnson pediatric exclusivity for the drug into March 2009.[23] Since Johnson & Johnson's loss of market exclusivity for Topamax, generic competition has entered the market, leading to a decrease in sales for Topamax in 2009.[24]
The exact mechanism of action for Topamax is not clearly understood. However, studies indicate that Topamax blocks sodium channels in neurons and may augment the effects of the neurotransmitter, GABA, in the brain. Both of these mechanisms are known to have a calming effect on neurons.[25]
Procrit (a.k.a. Eprex)
Procrit is a drug used to treat one of the side effects of cancer treatment - a loss of red blood cells. Sales for the drug were $2.2 billion in 2009, a decline of 8.7% from 2008. Shrinking revenues are largely due to declining U.S. sales amid safety concerns regarding erythropoiesis stimulating agents (ESA's) such as Procrit.[26] Like Remicade, Procrit is a biologic, and faces less generic competition concerns in the near-term future.
Procrit is an epoetin alpha protein designed to mimic a red blood cell-producing protein naturally made in the kidney, a class of drugs called ESA's. ESA's, including Procrit's main competitor, Epogen (Amgen), are used to treat patient who experience kidney failure, which can occur naturally or from harsh medical treatments like chemotherapy.[27] In 2007, the FDA issued a warning letter against ESA's based on studies which showed a high association of serious or life threatening side effects in cancer patients taking ESA's.[28]
Risperdal
J&J's antipsychotics franchise, including the Risperdal formulations and Invega, earned revenues of $2.7 billion in 2009, a decrease of 29% from 2008 (see Antipsychotic Drug Market). Risperdal lost its patent exclusivity in March 2007, and has since seen sales decline substantially.[29]
Invega was approved in 2007 by the FDA to treat schizophrenia.[30] Invega contains the same active ingredient as Risperdal[31] and has been criticized as not being any different from its predecessor.[32] J&J retains exclusivity for Invega until April 27, 2010.[33]
Medical Devices and Diagnostics: 38% of FY 2009 Revenue
Johnson & Johnson is the world's largest developer and manufacturer of medical treatment and diagnostic devices, with annual sales of $23.6 billion in 2009.[34] This segment includes a wide variety of equipment and supplies used mostly in the professional fields, by physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. Major franchises in this division include:
DePuy: Products for reconstructing joints and traumatic skeletal injuries, including spinal deformities and bone fractures. DePuy is the largest franchise within Johnson & Johnson's medical devices segment, with sales of $5.4 billion in 2009, a 4.6% growth from 2008. DePuy Mitek, a brand of sports medicine products, has been particularly profitable.
Ethicon and Ethicon Endo-Surgery: Surgical instruments and accessories. The two groups' sales in 2009 were $4.1 billion and $4.5 billion, respectively.
Cordis: Stents, catheters, guidewires, and other surgical products. Cordis sales totaled $2.7 billion in 2009. On September 28, 2009, Boston Scientific (BSX), a major competitor to Cordis in the stents business, announced that it would pay $716.3 million to Johnson & Johnson over several patent infringement claims. Disputes continue to exist between the two companies over other patents within the stents business.[35]
Consumer Health Care: 26% of FY 2009 Revenue
Consumer products are non-prescription health care products marketed directly to the general public. Johnson & Johnson has diverse franchises in over-the-counter pharmaceuticals and nutritionals, skin care, baby & kids care, and women's health products, totaling $15.8 billion in sales in 2009.[36] Although the Consumer Health Care division is the smallest of the company's three segments, it includes some of the company's most recognizable brands such as Tylenol, Neutrogena, and Band-Aid.
In 2006, Johnson & Johnson bought Pfizer's Consumer Healthcare for $16.6 billion. This acquisition represents a significant expansion in Johnson & Johnson's Consumer Health Care division, adding brands such as Listerine, Sudafed, and Neosporin.
References
- ↑ 1.0 1.1 Johnson and Johnson Reports 2010 Q2 Results
- ↑ J&J Dips on Q2 Rev Miss; Cuts Year Profit View
- ↑ JNJ Q1 2010 Investor Presentation
- ↑ J&J, Novartis profits beat, but no boom ahead
- ↑ J&J results top views, but forecast weighs
- ↑ 6.0 6.1 6.2 Johnson & Johnson Reports Third-Quarter Results
- ↑ [NYTimes.com. "Johnson and Johnson's Profit Falls 3.5%." 14 July 2009.]
- ↑ Orange County Business Journal. "J&J Buying Key Allergan Rival in Medical Cosmetics." 1 Dec 2008
- ↑ Johnson & Johnson Announces Definitive Agreement to Acquire Cougar Biotechnology, Inc.
- ↑ Cougar Biotechnology - Pipeline
- ↑ Johnson & Johnson and Elan Corporation plc Announce Closing of Transaction Related to Alzheimer's Immunotherapy Program and Equity Investment
- ↑ J&J buys stake in flu-vaccine developer Crucell
- ↑ J&J to pay $785 million for sinus-surgery company
- ↑ Acclarent - About Us
- ↑ McNeil Consumer Healthcare Announces Voluntary Recall of Certain OTC Infants’ and Children's Products
- ↑ US firm recalls infant, children's Tylenol, Motrin
- ↑ FDA finds grime J&J plant, urges use of generics
- ↑ FDA widens Tylenol probe
- ↑ Johnson & Johnson Reports 2009 Fourth-Quarter and Full-Year Results
- ↑ Johnson & Johnson Reports 2009 Fourth-Quarter and Full-Year Results
- ↑ BIO: Biosimilars, Follow-On Biologics
- ↑ About Arthritis: Remicade
- ↑ FDA Orange Book: Topamax
- ↑ Johnson & Johnson Q2 2009 Earnings Call Transcript
- ↑ Help for Migranes (Topamax)
- ↑ 2008 Johnson & Johnson 10-K Annual Report, p.36
- ↑ Medications and Drugs: Epoetin Alpha
- ↑ FDA Alerts: Information on Erythropoiesis Stimulating Agents
- ↑ 2008 Johnson & Johnson 10-K Annual Report, p.36
- ↑ Johnson & Johnson 2007 10-K Annual Report, p.26
- ↑ Invega (paliperidone), Son of Risperdal (risperidone), Wins FDA Okay for Schizophrenia
- ↑ Invega: Can You Say "Patent Extender?"
- ↑ FDA Orange Book: Invega
- ↑ Johnson & Johnson Reports 2009 Fourth-Quarter and Full-Year Results
- ↑ Boston Scientific will pay J&J $716M in stent suit
- ↑ Johnson & Johnson Reports 2009 Fourth-Quarter and Full-Year Results
Bapineuzumab (Pfizer, J&J, Elan) Review http://knol.google.com/k/-/bapineuzumab-pfizer-j-j-elan-review/3fy5eowy8suq3/119#
French Le Bapineuzumab : enfin un remède contre la maladie d'Alzheimer ? http://knol.google.com/k/-/le-bapineuzumab-enfin-un-rem%C3%A8de-contre/3fy5eowy8suq3/123#
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