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Johnson+Johnson
NYSE: JNJRecommendation: Buy
Connor Gallery
“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices.”
- JNJ Credo
November 18, 2008
“Caring for the world, one person at a time”
Johnson+JohnsonIn 3 Sentences
• Johnson and Johnson is the world’s largest comprehensive and broadly based holding company and manufacturer of health care products.
• The company engages in the research, development, and sales of pharmaceuticals and diverse consumer staple products including Band-Aid, Tylenol, and Splenda.
• With sound financials, it competes in three major areas of health care including pharmaceutical products, medical devices and diagnostics, and consumer-health products.
Johnson+JohnsonKey Facts
• Founded 1885 in New Jersey• 250 companies in 57 countries• 119,200 employees• Market Cap: $165 Billion• Net Income: $12.6 Billion• $4.42 EPS Vs. Industry Average of $2.08• Profit Margin of 19.5% Vs. Industry Average of 10%• 52wk Range:52.06 - 72.7• Current Price: $59.29
Recent Acquisitions
Johnson+Johnson
Pfizer• 2005 Sales of Personal Care and OTC - $3.9b• Acquired many brands:
LISTERENE VISINESUDAFED NICORETTENEOSPORIN ZANTAC
• All Cash Transaction - $16.6b• Contributed 7.4 % to total growth rate in 2007
• Premier Consumer Health Care Company
• Combined make up 24.6% of Health Care Spyder
Market Strength
Johnson+Johnson
• Profitability• Low downside risk
• Extremely well diversified•Defensive in down market•Huge upside potential
• Broad product categories • Brand Recognition• Plays to its key strengths• 125 years of impressive history• R&D Budget - $7b• Master at acquisitions
Johnson+JohnsonIt Sells Itself
• The company has issued quarterly dividends to shareholders since 1944
• Sales have increased for 75 consecutive years
• One of four U.S. industrials with S&P and Moody’s triple A credit rating
Johnson+JohnsonGoodwill: 1982 Tylenol Murders
• Tylenol controlled approximately 37 percent of its market. Immediately after the cyanide poisonings, its market share was reduced to 7 percent (Mitchell 1989).
• Johnson and Johnson recalled all Tylenol in the United States
• To this day, Johnson and Johnson is studied in Harvard Case Studies for crisis management
Johnson+JohnsonConsumer Products
CLEAN & CLEAR AVEENO BAND-AID LISTERINEMOTRIN IB JOHNSONSNEUTROGENA PEPCID ACREMBRANDT SPLENDASUDAFED TYLENOL
Johnson+JohnsonPharmaceutical Focuses and Drug Therapies
Anti-infectiveAntipsychoticCardiovascularContraceptiveDermatologyGastrointestinalImmunologyNeurologyPain managementVirology
RisperdalInvegaProcitFloxinConcertaOrtho Evra
Johnson+JohnsonMedical Devices and Diagnostics
Circulatory disease managementOrthopedic joint reconstruction and spinal care
Wound care Women’s health
Minimally invasive surgicalBlood glucose monitoring and insulin delivery
Diagnostic productsDisposable contact lenses
Johnson+JohnsonWorld Health Care Spending
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• World spending: $4 Trillion• JNJ Revenues: $53.3 Billion
• Piece of the action: 1.338 % Strategy = GROWTH!
Johnson+JohnsonAreas of Growth
• Sales in emerging markets expected to grow at 15% per year
• 250 operating companies• Consumer: McNeil• Medical: Ethicon• Pharma: Virco Lab
• Just acquired HealthMedia to move into wellness and health services
Johnson+JohnsonAreas of Growth: Consumer
• Who said a mature company can’t grow?
• Sales: $14.5b
• Growth rate: 48.3%
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Johnson+JohnsonAreas of Growth: Pharmaceuticals
• Who said a mature company can’t grow?
• Sales: $24.9b
• Growth rate: 6.9%QuickTime™ and a
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Johnson+JohnsonAreas of Growth: Medical
• Who said a mature company can’t grow?
• Sales: $21.7b
• Growth rate: 7.2%QuickTime™ and a
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Johnson+Johnson
• The United States accounts for 53% of revenue• 2007 domestic revenue: $32.4 Billion
2007 Revenue Breakdown
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Johnson+JohnsonGrowth Strategy
• Five-year compound annual growth:
• Worldwide - 11%• U.S. - 7.6%• International - 15.7%
• Issuing rebates to doctors
• Defend or renew patents
• Similar margins in all segments
Johnson+JohnsonThe Market - Qualitative Assessment
• The population is aging• Anti-aging cosmetics• Medical needs
• More countries can afford care
• The field is advancing rapidly
• Obama Administration
Johnson+Johnson
2001 Recession Performance
Johnson+Johnson
Current Market Position
Johnson+Johnson
Current Market Position: PharmaceuticalsCompetitors: Merck, Eli-Lilly, Bristol-Meyer, Schering - Plough
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Johnson+Johnson
Current Market PositionPharmaceutical Index
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Johnson+Johnson
Johnson+Johnson
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Summary
• Largest Market Cap in Health Care • Invaluable Goodwill and Intangible Assets • Ability to weather bad times and capitalize in good times • Buy Johnson & Johnson