JOHNSON AND JOHNSON

transcript

JOHNSON AND JOHNSONBy : Siraj Haq

JOHNSON AND JOHNSONPresentation includes:

Company historyCorporate structureManagement structureEmployee relations policiesFinancial analysisStock historyState of industry, andCompetition analysis.

Current issue to be addressed:• The current issue of product recalls is addressed in this presentation, along with

discussing possible solutions in solving this problem.

COMPANY HISTORY• Founded in 1886 • Johnson & Johnson

(JNJ) was founded by the Johnson brothers , in New Brunswick, NJ. • From left to right,

Robert Wood Johnson, James Wood Johnson, and Edward Mead Johnson

COMPANY HISTORY

• “Modern Methods of Antiseptic Wound Treatment” was published in 1988

• served as the guide in antiseptic surgery field

COMPANY HISTORY• In year 1894

• Maternity kits were launched to make childbirth safer.

• In the same year, the company introduced baby powder to the market, which began the company’s movement into baby products.

COMPANY HISTORY• In year 1932• Robert Wood Johnson II, son of the original

founder, took over the company • Served as the chairman until 1963. • Robert Jr. was a WWII Army General.• Believed in decentralization• Under his management, the managers were

given substantial freedom, and company believed and stuck to this way in conducting business to this day

COMPANY HISTORY

In 1944, the company went public and joined the New

York Stock Exchange.

In 1957, the company launched its first facility in

India.

In 1961, Janssen Pharmaceuticals in Belgium also joined the JNJ family

COMPANY HISTORYBetween 1989 and 2006 JNJ acquired

•Neutrogena Corporation•Kodak’s Clinical Diagnostics•Cordis Corporation•Tibotec-Virco BVBA•Centocor and •Pfizer Consumer Healthcare

COMPANY HISTORY

COMPANY HISTORY - PRESENTToday the Johnson and Johnson Family of Companies ranks as:

• The world’s sixth-largest consumer health company• The world’s largest and most diverse medical devices and diagnostics

company• The world’s fifth-largest biologics company, and• The world’s eighth-largest pharmaceuticals company

JNJ employs over 180,000 people across the United States. Worldwide, Johnson & Johnson is made up of over 275 companies located across 60 countries.

COMPANY PROFILEThe company’s

profile consists of three major market

segments: Consumer Products Medical Diagnostics

& DevicesPharmaceutical

Products.

CONSUMER PRODUCTSThe consumer products are available to the general public for purchase and can be found in grocery stores, drug stores, and other retail outlets.

The first component of the consumer segment is baby products, which consist of

popular lines likeJohnson’s ® Destin ® and Prim’age

CONSUMER PRODUCTSThe consumer segment also consists of cosmetic care product lines like

Neutrogena ® Aveeno ®

Clean & Clear ® Bebe ®

Roco ® Rogaine ® Lubriderm ® Visine ®

and Acuvue ®

CONSUMER PRODUCTS also includes wound care

and topicals, Oral Healthcare products, Womens products and Eye products. Examples of a few include big brands

like • Band-Aid ® Bengay ® Neosporin ® Listerine ®

Rembrandt ® K-Y ® Carefree® Tylenol ® Zyrtec ® Benadryl ®

Splenda ® and Lactaid ®

MEDICAL DEVICES & DIAGNOSTICS

Orthopedic products includeimplants, joint replacements, and sports medicine products.

Lifesaving medical surgery products include

cardiovascular disease products, coronary disease products, peripheral vascular and obstructive disease products (stents), and neurovascular surgery products.

MEDICAL DEVICES & DIAGNOSTICS

Diagnostic tools include

products for arrhythmias and diabetes, blood glucose monitors,

and insulin delivery devices.

Surgical room products include general surgery products, bariatric surgery tools, urologic surgery tools, hernia surgery tools, aesthetics products, surgical instruments, and infection prevention products

PHARMACEUTICAL PRODUCTS

JNJ invested $5.1 billion in 2011 for research in new drugs. The company focuses on a vast variety of therapeutic

areas including cardiovascular, internal Medicine, immunology, central nervous system, infectious diseases,

and oncology. The company also has a robust pipeline of popular

products likeAciphex ® Remicaide ® Risperdal ® Duragesic ®

Procrit ® and Topamax®

COMPANY STRUCTURE

The Board of Directors:

THE BOARD OF DIRECTORS

Alex Gorsky, CEO

Mary Sue Coleman

James G. Cullen

Ian E. Davis

Michael M. Johns

Susan Lindquist

Anne Mulcahy

Leo F Mullin

William Perez

THE SIX COMMITTEES

Compensation and denefits Committee

Nominating and corporate Governance Committee

Finance Committee

Regulatory, Compliance & Government

Affairs Committee

Science, Technology, & Sustainability Committee

Audit CommitteeThe Consumer,

Pharmaceutical, and Medical Devices & Diagnostic Segments are then each managed individually and usually regionally

EMPLOYEE RELATIONS POLICIES• Employees are the company’s greatest asset.

• Treating their employees well is one of their top priorities, because it is the employees who help the company progress and flourish.

• The company does not tolerate discrimination on the basis of gender, age, race, nationality, sexual orientation, physical ability, and thinking styles.

EMPLOYEE RELATIONS POLICIESDiversity University

In order to educate employees about the value of diversityEmployees are required to complete training modules that demonstrate diversity and the company’s commitment.

The Office of Diversity & Inclusion for employees who may have any concerns

EMPLOYEE RELATIONS POLICIESEmployees Resource Group

Voluntary, employee-led group based on similar interests and goals. Allows for a forum for employees to pass ideas off of and further develop

professionally. The company also supports Mentoring Programs that pair employees with

mentors, to further develop both professionally and personally.

• one of the top 50 companies for Latinas, and • one of the top 100 companies for working mothers for the past 26

consecutive years

FINANCIAL ANALYSISTOTAL REVENUE NET INCOME

Source : Hoover’s Online database http://eres.medaille.edu:2292/H/company360/overview.html

FINANCIAL ANALYSIS• The price per ratios compare how

well the company is related to the price of its shares. • Having a high return on assets and

on equity shows that the company’s management is utilizing its resources properly and efficiently.• The current ratio, measures the

liquidity and ability to pay off debts, and since anything over 1 is a good sign, JNJ is doing very well.

Financial

Ratios

Price/Sales Ratio 3.41

Price/Book Ratio 3.52

Price/Earnings Ratio 21.14

Price/Cash Flow Ratio 14.90

Return On Assets 9.24%

Return On Equity 17.81

Current Ratio 1.90

STOCK HISTORY• The current stock price for the

company is $85.22. This demonstrates Johnson & Johnson’s ability to grow, since the stock was valued at $65.17 in March of 2012 and $50 in January of 2009.• JNJ pays a dividend of $2.44 for its

2,795,320 outstanding shares, and not many companies are able to accomplish these stats in today’s economic down times

Last Close 26-Apr-

$85.22

52-Week High $85.22

52-Week Low $61.71

60-Month Beta 0.55

Market Cap $227,902.36 M

Shares Outstanding 2,795.32M

Dividend Rate $2.44

Dividend Yield 2.94%

STOCK HISTORY• Stock prices of Johnson and Johnson, over past 10 years

(04-12)

STATE OF INDUSTRY – CONSUMER PRODUCTS

• Companies in this industry manufacture cosmetics, grooming products, and toiletries. • The demand for personal

care products is expected to grow at a constant rate since the demand to look good is constant.

STATE OF INDUSTRY – CONSUMER PRODUCTS

• The aging population may help the company further grow as more money is spent on cosmetics and anti-aging products. • Hoovers Financial forecasted

that this industry will grow at a compounded rate of 4 percent between 2013 and 2017

STATE OF INDUSTRY – PHARMACEUTICAL PRODUCTS

• Companies that develop, manufacture, and market pharmaceutical drugs.• Currently, the demand for

pharmaceuticals are on the rise with a rise in cancer, HIV/AIDs, and other rare diseases. • Hoovers Financial forecasted the

industry will grow at a compounded rate of 5 percent between 2013 and 2017

STATE OF INDUSTRY – MEDICAL DEVICES AND DIAGNOSTICS

• Manufacture surgical and medical equipment, dental equipment, and surgical appliances. • New technology helps ensure that

medical procedures are safer, more accurate, and easier in many cases. • The industry is expected to grow

as new technology is developed. The industry is forecasted to grow at a compounded rate of 5 percent between 2013 and 2017.

COMPETITION ANALYSIS2012 Annual Sales and Net profit margins of JNJ and its biggest competitors.

TOTAL REVENUE NET profit margins

“RECALLS”Current issue to be Addressed

THE ISSUE OF RECALLS• JNJ has been under the spotlight for numerous product recalls that pose a safety threat to its patients and consumers. • JNJ needs to make the necessary adjustments, as the numerous product recalls and associated lawsuits has put the company in an unfavorable position as well has cost the company and its investors billions of Dollars.

‘DUE CARE’ THEORY“Ethics of care” the company is prompt to recall products to ensure consumer and patient safety. Although there is little guarantee of all defective products being pulled off shelves, and the message is conveyed to all product users. “Due Care Theory”As the manufacturer and being trusted/depended on by the consumers, it’s the duty of JNJ to take care that consumers are not harmed by JNJs product.

WHAT IS A RECALL??

The Food and Drug

Administration (FDA) defines a recall as

“a firm’s voluntary

removal or correction of a

marketed product that the FDA considers to be in violation of

the FD&C Act and against

which FDA could initiate legal

action”

RECALLS – AN INDUSTRY WIDE PROBLEM

•Provides regulatory oversight•Proposed strategy•Effective Communication is established with patients, physicians, hospitals, risk managers, Consignees, and the FDA. •Lastly, FDA is responsible for the audit effectiveness of the recall, witnessing if the recalled product is properly destroyed or reconditioned using the approved reconditioning plan

The Food and Drug Administr

ation (FDA)

over sees all the

process of a

Recall.

THE DEPUY ASR HIP IMPLANT RECALL

• As a result of the complications, failure rates, and recall, the company now faces over 10,000 lawsuits with regards to the DePuy hip replacement.

• In a recent hearing, the company lost its first DePuY ASR lawsuit. The company is responsible for paying the plaintiff $8.3 million in damages.

• With estimated over 30,000 patients transplanted with this device, JNJ might suffer a loss totaling in billions.

NEGLIGENCE ??It is believed that the company was aware of the poor design of the product - the metal cup and ball components that would rub against each other, resulting in metallic debris in the surrounding tissue. The metallic debris could lead to tissue and bone damage.

PROPOSED CHANGES ?

According to the FDA:

•JNJ should take time to look into the results of clinical trials and appropriate product quality information before bringing the product to market…•ensure proper use of s tatis tical methods and cross verification of the analys is in order to analyze the true risk posed by the product…•the data should be cross referenced across different data sources in order to identif y the extent and quality of problem.•If a problem is identified, appropriate actions should be taken to correct the safety problem. •Once the corrective action has been ins tituted, the company should perform a re-analys is of the product to ensure that the problem has truly been solved and the corrective action will result in a better safety for the patient.

PROPOSED CHANGES

Hany Demian, Active chief of the FDA Recall Branch, asks the recalling firms to follow these guidelines to minimize further complications and losses:

• Assess problem early and develop an efficient recall strategy • Contact suppliers and customers that ordered and/or received the recalled product. • If necessary, issue a press release clearly stating the risks associated with the recall.• Supply all necessary information to minimize health risks to consumers• Take action to prevent any future recalls• Keep the FDA involved and up to date regarding the current recall.

“ROOT CAUSE ANALYSIS”

Create a problem statement, and

identifying the device failure mechanism

Brainstorming all the possible causes, and narrowing down to identify the primary

causes

Using the information gathered, create causal chain to identify the root cause of the problem at

FUTURE OF JOHNSON AND JOHSNON??

The recalls have obviously negatively

impacted the company in terms of both reputation

and financials.

Therefore, it is imperative that Johnson & Johnson implement strategies

mentioned in this report and follow protocols to

prevent and better control the product

recalls issue.

REFERENCES• • Causey, M. (2013, February 11). Study: FDA enforcement growing for medical device companies. AssurX Blog. Retrieved April 27, 2013, from

http://blog.assurx.com/2013/02/11/study-fda-enforcement-growing-for-medical-device-companies/• Demian, H. (n.d.). Preventing and addressing problems in the medical device recalls. Retrieved April 8, 2013, from

http://www.fda.gov/MedicalDevices/Safety/RecallsCorrectionsRemovals/default.htm• Hoovers Online Database (2013a). Competitive landscape. Retrieved April 9, 2013, from

http://eres.medaille.edu:2292/H/company360/competitiveLandscape.html• Hoovers Online Database (2013b). History overview. Retrieved April 9, 2013, from http://eres.medaille.edu:2292/H/company360/history.html• Hoovers Online Database (2013c). Industry overview. Retrieved April 9, 2013, from

http://eres.medaille.edu:2292/H/industry360/overview.html?industryId=1192• Hoovers Online Database (2013d). Stock quote and chart. Retrieved April 9, 2013, from• http://eres.medaille.edu:2292/H/company360/detailedStockQuote.html• Johnson & Johnson (2013a). Board of directors. Retrieved April 7, 2013, from http://www.investor.jnj.com/governance/board.cfm• Johnson & Johnson (2013b). Company structure. Retrieved April 7, 2013, from http://www.jnj.com/connect/about-jnj/company-structure/• Johnson & Johnson (2013c). Our company. Retrieved April 7, 2013, from www.jnj.com/connect/about-jnj/• Johnson & Johnson (2013d). Our history timeline. Retrieved April 7, 2013, from http://www.jnj.com/connect/about-jnj/company-history/• Johnson & Johnson (2013e). Our people and diversity. Retrieved April 7, 2013, from http://www.jnj.com/connect/about-jnj/diversity/• Lawson, A. (2013, March 19). DePuy hip lawsuits, Johnson & Johnson loses ASR lawsuit. Injury Lawyer News. Retrieved April 7, 2013, from

http://injurylawyer-news.com/2013/03/johnson-johnson-loses-first-depuy-asr-lawsuit/• Silverman, E. (2013, April 5). A real false alarm: Johnson & Johnson recalls another product | Pharmalive. Pharmalive | The Pulse of the Pharmaceutical

Industry. Retrieved April 9, 2013, from http://www.pharmalive.com/real-false-alarm-johnson-johnson-recalls-another-product

QUESTIONS ???

JOHNSON AND JOHNSON

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