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Johnson Johnson
Johnson Johnson
COMPANY PROFILE
TABLE OF CONTENTS
Company Overview
COMPANY OVERVIEW
Johnson & Johnson (J&J or 'the company') is one of the world's largest providers of diverse health care
products. The company is engaged in the research, development, manufacture and sale of consumer
health care products, pharmaceuticals, and medical devices. It provides pharmaceuticals in the areas of
immunology, cancer, neuroscience, infectious, cardiovascular and metabolic diseases areas. J&J has
business presence across the Americas, Europe, Asia-Pacific and Africa. J&J distributes its
pharmaceutical products, medical devices and consumer products to retailers, wholesalers, health care
professionals and hospitals and through a network of retail outlets and distributors. J&J is headquartered
in New Brunswick, New Jersey, the US.
The company reported revenues of (US Dollars) US$76,450 million for the fiscal year ended January
2017 (FY2017), an increase of 6.3% over FY2016. In FY2017, the company’s operating margin was
23.1%, compared to an operating margin of 27.5% in FY2016. In FY2017, the company recorded a net
margin of 1.7%, compared to a net margin of 23% in FY2016.
Key Facts
KEY FACTS
SWOT Analysis
SWOT ANALYSIS
Johnson & Johnson (J&J) is a provider of diverse healthcare products. Leadership position in diverse
healthcare segments, strong brand portfolio, and focus on R&D are the company's major strengths,
whereas product recalls and legal proceedings remain major areas of concern. In the future, healthcare
reforms in the US, patent expiry of Remicade, and intense competition could affect the company's
business operations. However, Product approvals, positive outlook for pharmaceuticals market in the US,
and acquisitions and collaborations are likely to provide new growth opportunities to the company.
Strength Weakness
Product approvals likely to help the company in Patent expiry for the key product: Remicade
catering to unmet medical needs Intense competition
Positive outlook for pharmaceuticals market in the US Healthcare reforms in the US could negatively impact
Acquisitions and collaborations to strengthen J&J J&J's profitability
offerings
Strength
J&J is one of the largest and diversified healthcare companies in the world. It also has strong presence in
the medical devices, pharmaceutical and consumer products markets worldwide. The company also holds
leadership positions across several categories, including antithrombotic agents, antipsychotic
(injectables), baby and kids care, biosurgicals, disposable contact lenses, electrophysiology diagnostics
and catheters, endo-mechanical, endoscopy, hormone antagonists, infection prevention, oral rinses,
orthopaedics (trauma/hips/shoulders), OTC, sodium glucose co�transporter 2 (SGLT2) inhibitors,
sutures, systemic antipsoriasis products, and wound care. J&J conducts its business through over 230
operating companies located in 60 countries, including the US, worldwide. Strong market leadership
enhances J&J's brand image and enables it to penetrate new markets as new product launches become
easier.
J&J developed a broad and strong portfolio of brands. For instance, Xarelto (rivaroxaban) is the number
one prescribed blood thinner in its class. Invokana (canagliflozin) is the most prescribed drug among the
SGLT2 inhibitors class of medications that significantly lower the levels of glycated hemoglobin (A1C) in
adults with type 2 diabetes. Stelara (ustekinumab) is the leading biologic in the dermatology market.
Furthermore, Imbruvica (ibrutinib) is the leading therapy in the US for 1st and 2nd line CLL, mantle cell
lymphoma (MCL) and WM. Also, other brands such as Complera (emtricitabine/rilpivirine/tenofovir
disoproxil fumarate) and Invega Trinza (paliperidone palmitate) also have leading presence in their
respective markets. Complera (emtricitabine/rilpivirine/tenofovir disoproxil fumarate) is the number one
non-nucleoside reverse transcriptase inhibitor (NNRTI) for the HIV treatment. Invega Trinza (paliperidone
palmitate) is the first and only schizophrenia treatment with a dosage frequency of four times a year,
providing the longest dosing interval available. Moreover, the company offers 12 mega consumer brands
such as Aveeno, Benadryl, Johnson’s baby, Listerine, Neutrogena, Zyrtec, Carefree, Tylenol, Motrin IB,
Clean & Clear, Band-Aid and Le petite Marseillais. Of these, Johnson’s baby, Neutrogena and Listerine
generate more than US$1 billion annual revenue. Most of these brands have an established market
presence. For instance, Tylenol is the leading OTC brand for pain relief used by hospitals worldwide;
Motrin IB is the most prescribed ibuprofen brand by pediatrics; and Listerine is the number one dentist
recommended mouth wash brand.
Within the medical devices segment, J&J offers leading brands such as Acuve Oasys (leading reusable
contact lenses brand); and 1-Day Acuve Moist (number one daily disposable brand) for vision care; and
OneTouch, the number one doctor prescribed brand in the US for diabetes care. The company’s major
brands in beauty include the Aveeno; Clean & Clear; Dabao; Johnson’s Adult; Le Petite Marseillais;
Neutrogena; RoC and OGX product lines. Over-the-counter medicines include the broad family of Tylenol
acetaminophen products; Sudafed cold, flu and allergy products; Benadryl and Zyrtec allergy products;
Motrin IB ibuprofen products; and the Pepcid line of acid reflux products. Major brands in women’s health
outside of North America include Stayfree and Carefree sanitary pads and o.b. tampon brands. Wound
care brands include the Band-Aid Brand Adhesive Bandages and Neosporin First Aid product lines.
Further, the company expects to file 10 new products each with at least US$1 billion in potential sales, as
well as filing an additional 40 line extensions with over US$500 million in potential sales by the end of
2019. Strong portfolio of market leading brands offers a significant source of revenue for the company,
thereby providing competitive advantage over its peers.
J&J’s research and development (R&D) initiatives focus on developing new products in the areas of
immunology, infectious, cardiovascular, metabolism, neuroscience and cancer therapy. The company
operates R&D facilities in the US, Brazil, Belgium, China, Canada, Germany, Switzerland Singapore, the
UK, France, Israel, India, Japan, and the Netherlands. In FY2017, the company invested US$10,554
million on R&D initiatives as compared to US$9,095 million in FY2016. It operates research facilities in
the US, Belgium, Brazil, Canada, China, France, Germany, Israel, Japan, the Netherlands, Switzerland
and the UK with additional R&D support in more than 30 other countries worldwide. The company's
continued investments in R&D yielded many new pharmaceutical products in the past, including
Olysio/Sovriad (simeprevir), for combination treatment of chronic hepatitis C in adult patients; Xarelto
(rivaroxaban), an oral anticoagulant; Zytiga (abiraterone acetate), an oral, once-daily medication used in
combination with 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 and WM. Its
other significant recent approvals in the pharmaceuticals segment include Darzalex (daratumumab) in
combination with lenalidomide and dexamethasone, or bortezomib and dexamethasone, for the treatment
of patients with MM who have received at least one prior therapy in the US; Stelara (ustekinumab) for the
treatment of adult patients with moderately to severely active Crohn’s disease in the US as well as
Europe; Invokamet XR (canagliflozin and metformin hydrochloride extended-release), a once-daily, fixed-
dose therapy for first-line use as an adjunct to diet and exercise in the US; and Imbruvica (ibrutinib) as an
oral, once-daily, single-agent targeted therapy for previously untreated patients with active CLL in
Canada. J&J's emphasis on R&D has also led to innovations in its medical devices and consumer
platforms. For instance, In August 2017, FDA approved Imbruvica (ibrutinib), an inhibitor jointly developed
and commercialized by Janssen Biotech, Inc. and Pharmacyclics LLC, an AbbVie Company. The first and
only FDA approved Imbruvica (ibrutinib) for the treatment of adult patients with chronic graft-versus-host-
disease (Cgvhd) after failure of one or more lines of systemic therapy. In July 2017, Janseen Biotech Inc.,
a J&J company announced the FDA approval of Tremfya (guselkumab) for the treatment of adults living
with moderate to severe plaque psoriasis. Hence, the company's commitment to technological innovation
as reflected in its R&D investments and a focus on new product development not only strengthens its
market position but also helps it to maintain a robust product pipeline.
Weakness
Legal proceedings
J&J and certain of its subsidiaries are involved in various claims and lawsuits regarding product liability,
intellectual property, commercial and other matters; governmental investigations; and other legal
proceedings. The most significant of the product liability claims of the company involve products such as
DePuy ASR XL Acetabular System, DePuy ASR Hip Resurfacing System, Pinnacle Acetabular Cup
System, pelvic meshes, Risperdal and Xarelto. As of December 31, 2017, in the US there were about
2,000 plaintiffs with direct claims in pending lawsuits regarding injuries allegedly due to the DePuy ASR
XL Acetabular System and DePuy ASR Hip Resurfacing System, 10,000 with respect to the Pinnacle
Acetabular Cup System, 53,600 with respect to pelvic meshes, 13,700 with respect to Risperdal, 22,900
with respect to XarelTO, 6,610 with respect to body powders containing talc; and 1,100 with respect to
Invokana. Involvement in legal proceedings results in huge financial expenses for the company in the
form of fees and penalties. It could also hamper J&J’s reputation in the market if proven guilty.
The company has recalled several of its products in the recent past. For instance, in January 2018, the
US Food and Drug Administration (FDA) issued a recall of about 110 Agilis Steerable Introducer Sheath
devices manufactured by the company’s unit over a faulty valve. Earlier, December 2017, Johnson &
Johnson Consumer Inc. recalled several first aid products over presence of an unspecified allergen. In
May 2017, J&J’s subsidiary, DePuy Mitek, Inc. initiated recalled 153 units of Latarjet Experience Top Hat
Tap, as Combo Screw Driver tip has increased potential to break intra-operatively while used at an angle
off-axis to screw. In May 2016, J&J’s subsidiary, Ethicon initiated a worldwide recall of Physiomesh
flexible composite mesh, as the studies showed higher revision rates after a type of minimally invasive
hernia repair using the product. Ethicon recalled 228 units of Evarrest in April 2016, due to labelling error.
Ethicon mentioned that the characters ‘0-bad’ were printed in the expiration date field on the foil pouch
labels of the product instead of the valid expiration date (2016-12-28). Such product recalls may dent
J&J's brand image besides having a negative impact on its revenue growth.
Opportunity
Product approvals likely to help the company in catering to unmet medical needs
The company advanced its pipeline with several regulatory submissions and approvals for new drugs and
additional indications for existing drugs in FY2017. For instance, in October 2017, the company’s Janssen
Biotech received the FDA approval for expanded indication of Stelara, which is used for the treatment of
adolescents with moderate to severe plaque psoriasis for phototherapy or systemic therapy. In
September 2017, Actelion Pharmaceuticals US, Inc. (Actelion), a Janssen Pharmaceutical Companies of
Johnson & Johnson received FDA approval of Tracleer. It received approval for new 32 mg tablet for oral
suspension for Tracleer, it is used in pediatric patients aged three years and older with pulmonary arterial
hypertension (PAH) to improve pulmonary vascular resistance (PVR). In February 2017, DARZALEX
(daratumumab) received positive CHMP opinion for the treatment of multiple myeloma in patients who
have received at least one prior therapy. The ECHELON FLEX GST System received clearance from the
FDA to offer both 45mm and 60mm endocutters with exclusive reloads in January 2017. These product
approvals are expected to help J&J in catering to unmet medical needs and thereby generate huge
revenues.
The pharmaceuticals market in the US is expected to maintain a consistent growth in the next few years.
According to MarketLine, the US pharmaceuticals market was valued at US$383.8 billion in 2015,
accounting for 40.3% of the global pharmaceuticals market value. The market grew at a compound
annual growth rate (CAGR) of approximately 2% during 2011–15. By 2020, the pharmaceuticals market
in the US is forecast to reach a value of US$422.9 billion, an increase of 10.2% since 2015. J&J offers
pharmaceutical products in five therapeutic areas, including immunology, infectious diseases and
vaccines, neuroscience, oncology, and cardiovascular and metabolic diseases. The pharmaceutical
products are distributed to retailers, wholesalers, hospitals and health care professionals for prescription
use. These products are marketed under Remicade, Simponi, Stelara, Edurant, Invega and Zytiga,
among others. As of December 31, 2017, the pharmaceutical segment reported revenues of US$36,256
million, which accounted for 47.4% of the company’s total revenue. Thus, J&J's focused approach to
cater to the requirements of this market can make it a prominent player in the market.
J&J made various strategic acquisitions and collaborations in the recent past, which are expected to
enhance its operational capabilities. For instance, in February 2018, Johnson & Johnson Medical Devices
Companies, through its French affiliate Apsis SAS, acquired Orthotaxy, a developer of software-enabled
surgery technologies, to develop next-generation robotic-assisted surgery platform in orthopaedics area.
In June 2017, the company’s subsidiary, Janssen Holding GmbH completed the acquisition of Actelion
Ltd, a Swiss drug discovery and development services firm, for US$30 billion. The acquisition will add
Actelion’s specialty in-market medicines and late-stage products J&J portfolio. It will also support J&J
efforts to enhance its presence in therapeutic areas and serious illnesses. In February 2017, J&J
acquired Abbott Medical Optics (AMO), a wholly owned subsidiary of Abbott. The acquisition would
enable the company to reach more patients globally through expansion into cataract surgery. In January
2017, J&J’s Ethicon acquired Megadyne Medical Products, a medical device company that develops,
manufactures and markets electrosurgical tools used in operating rooms worldwide. The acquisition
complements and enhances Ethicon’s energy portfolio with wide range of innovative electrosurgical tools.
Ethicon entered into a definitive agreement to acquire Torax Medical, a medical device company that
manufactures and markets the LINX Reflux Management System (a device for the surgical treatment of
GERD) in February 2017. The acquisition will enable Ethicon to provide patients a safe and effective
alternative to the anatomy-altering laparoscopic Nissen fundoplication surgical procedure. During the
same period, the company acquired AMO, a wholly-owned subsidiary of Abbott Laboratories. The
transaction included ophthalmic products in three business segments: cataract surgery, laser refractive
surgery and consumer eye health. The acquisition of AMO complements J&J’s Acuvue contact lens
business.
The company also entered into various research collaborations with leading pharmaceutical companies.
For instance, in January 2017, DePuy Synthes Products, part of J&J, entered into an asset purchase and
development agreement with Interventional Spine, a manufacturer of expandable cage and MIS
technologies for spinal fusion. Through the acquisition of Interventional Spine’s technology, DePuy
Synthes Products can enhance its portfolio of open and minimally invasive spine surgery solutions.
Further during the same period, Janssen Biotech, in partnership with BMS, announced plans to evaluate
daratumumab (DARZALEX), first CD38-directed cytolytic antibody, in combination with nivolumab
(opdivo), a checkpoint inhibitor. Also in January 2017, DePuy Synthes Sales announced exclusive co-
promotional agreement with Pacira Pharmaceuticals to co-promote EXPAREL, a long-lasting, non-opioid,
local analgesic administered at the orthopaedic surgical site. Strategic acquisitions and collaborations
such as these help the company build its portfolio of offerings and thereby cater to an expanded customer
base.
Threat
J&J experienced significant challenges to patents covering its largest product, Remicade (infliximab),
which accounted for about 8.3% of its total sales in FY2017. In the US, a biosimilar version of Remicade
was introduced in 2016, and additional competitors continue to enter the market. Further, sales of
infliximab biosimilars in the US market could result in a continued reduction of Remicade sales. J&J’s
patents related to Remicade (infliximab) will expire in 2018. The 471 patent, related to Remicade
(infliximab), expires in September 2018 and is co-owned by JBI and NYU, with NYU having granted JBI
an exclusive license to NYU’s rights under the patent. Hence, the patents related to this product are
extremely significant for J&J. There are two sets of patents related to Remicade (infliximab). The first set
of patents is co-owned by Janssen Biotech and NYU Langone Medical Center (NYU). Janssen Biotech
has exclusive licensing rights to NYU's interests in Remicade (infliximab) patents. These patents have
expired in all countries outside the US. In the US, the latest of these patents is set to expire in September
2018. The second set of patents specifically related to Remicade (infliximab) was granted to The
Kennedy Institute of Rheumatology in Europe, Canada, Australia and the US. Janssen Biotech owns
licenses (exclusive for human anti-TNF antibodies and semi-exclusive for non-human anti-TNF
antibodies) to these patents, which are due for expiry in 2017 outside the US and in 2018 in the US. J&J
does not expect any additional extensions for the above mentioned patents related to Remicade
(infliximab). Also, many claims have been lodged by the company’s competitors worldwide, challenging
the validity of these patents. In case, any of the Remicade (infliximab) related patents are proved invalid,
the company cannot rely on such patents to prevent the introduction of biosimilars into the market.
Introduction of biosimilars could further intensify the competition for J&J and could result in reduction of
market share for its products.
Intense competition
J&J operates in a highly competitive pharmaceutical, medical devices and healthcare industries. The
competitive environment in pharmaceutical and consumer healthcare industries could affect the
company’s business operations. The company faces competition from biotechnology firms, major drug
discovery and development firms, apart from medical devices manufacturers. J&J competes with Abbott
Laboratories, Beiersdorf AG, Boston Scientific Corporation, Bristol-Myers Squibb Company, Eli Lilly and
Company, Merck & Co., Inc., Novartis AG, Pfizer Inc, The Procter & Gamble Co, and Unilever in the
areas of central nervous system, cardiovascular, gastrointestinal and metabolic disorders, immunology,
oncology, hematological disorders, infectious diseases, medical devices and consumer products. Major
factors influencing competition include changing incentive programs and new product launches in the
market. Intense competition could affect the company’s business operations.
The recently enacted US Healthcare Reform could affect J&J's margins. In addition, business practices in
the health care industry, particularly in the US, have come under increased scrutiny, by government
agencies and state attorneys general, and resulting investigations and prosecutions carry the risk of
significant civil and criminal penalties. In 2010, the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation Act (together, the US Healthcare Legislation,
and also known as the Affordable Care Act or ACA), was enacted in the US. Certain provisions of the US
Healthcare Legislation became effective in 2010 or in 2011, while other provisions will become effective
on various dates. Among other things, the principal provisions affecting the biopharmaceutical industry
include an increase in the minimum rebate on branded prescription drugs sold to Medicaid beneficiaries
from 15.1% to 23.1% effective January 1, 2010. The new law also increased the types of entities eligible
for 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 D coverage gap
(also called as 'donut hole'). Increased rebates on prescription pharmaceuticals could affect J&J's
profitability. Further, in the EU, Japan, and several countries, governments have pervasive involvement in
funding healthcare, which could directly or indirectly impose price controls, limit access to, or
reimbursement for the company’s products, or reduce the value of its intellectual property protection.