|Table of Contents|
|Intro and Overview|
|Trends and Forces|
|Key Trends and Forces|
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.
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.
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.
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.
Johnson & Johnson's 2009 struggle continued in Q3, as sales ($15.1 billion) decreased 5.3% from Q3 2008. 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.". 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.
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. 
The company consists of three major divisions: consumer healthcare, medical devices, and pharmaceuticals.
The Pharmaceutical division is the largest of the three business segments, bringing in $22.5 billion in revenue for 2009. 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 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.
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.
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. 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.
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.
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. 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. 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.
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.
Invega was approved in 2007 by the FDA to treat schizophrenia. Invega contains the same active ingredient as Risperdal and has been criticized as not being any different from its predecessor. J&J retains exclusivity for Invega until April 27, 2010.
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. 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.
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. 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.