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2019 Vault Rankings

At a Glance

Uppers

The world's largest and most diverse medical device and diagnostics company

Great brand cachet for future résumés

Nationally recognized as a great place to work

Downers

Profits and revenues have suffered in recent years

Lay-offs are a fact of life at J&J

Large-scale recalls for consumer products in recent years

The Bottom Line

Johnson & Johnson is leading provider of consumer health, pharmaceutical and device products. It's also a leading employer, with a reputation for treating employees well.

About Johnson & Johnson

It's difficult to get well without Johnson & Johnson (J&J). The diversified health care giant operates in three segments through more than 260 operating companies located in more than 60 countries. Its Medical Devices division offers surgical equipment, monitoring devices, orthopedic products, and contact lenses, among other items. J&J's Pharmaceuticals division makes drugs for an array of ailments, such as neurological conditions, blood disorders, autoimmune diseases, and pain. Top sellers are psoriasis and arthritis drugs Remicade and Stelara. Finally, J&J's Consumer business makes over-the-counter (OTC) drugs and products for baby, skin, and oral care, as well as first-aid and nutritional uses. The company operates worldwide but makes more than half of its revenues in the US.

Operations

J&J prides itself on its decentralized operating structure, with the management teams of its myriad and far-flung operating units having wide latitude to make decisions. Each company belongs to one of J&J's three broad divisions: The Pharmaceuticals and Medical Devices segments account for about 45% and 35% of sales, respectively, while the Consumer division contributes about 20% of annual revenues. J&J's diversified business model also allows for some insulation against troubles in any one market.

The Pharmaceuticals segment operates in six primary therapeutic areas: immunology, infectious diseases, oncology, neuroscience, pulmonary hypertension, and cardiovascular and metabolic diseases. The segment's operating companies include Janssen Biotech and Janssen Pharmaceuticals. Remicade is the company's top earner, bringing in about $6.3 billion in annual sales or some 10% of total revenue; in addition to psoriasis, the drug treats Crohn's disease, rheumatoid arthritis, and ulcerative colitis. Other key drugs earning over $1 billion annually include schizophrenia medication Invega Sustenna, rheumatoid arthritis drug Simponi, cancer treatment Velcade, AIDS therapy Prezista, and plaque psoriasis drug Stelara.

The Medical Devices segment focuses on orthopedic, surgery, cardiovascular, diabetes care, and vision care products. Its many operating companies -- including surgical supplies companies Ethicon and Ethicon Endo-Surgery, orthopedics device maker DePuy, and vision care subsidiary Vision Care-- have experienced strong sales growth. The division also included the LifeScan diabetes care unit, but J&J sold those operations in 2018.

The Consumer segment sells products including J&J's baby products, the Listerine brand of oral care products, and skin care brands including Aveeno, Clean & Clear, and Neutrogena. Its portfolio also includes OTC pharmaceuticals, women's health, and wound care products. 

Geographic Reach

J&J has more than 260 operating companies in 60 countries selling products around the world. It has research facilities in more than a dozen countries and operates about 125 manufacturing facilities in North America, Asia, Europe, and the Middle East.

While the US and Europe represent the company's largest markets (accounting for more than 50% and about 25% of sales, respectively), the firm has been working to expand its presence in markets in Asia (especially China) and other regions that are emerging as high-growth opportunities. The Asia/Pacific region and Africa together account for more than 15% of revenue, while the non-US Western Hemisphere accounts for about 10%.

Sales and Marketing

J&J distributes its pharmaceutical products to retailers, wholesalers, and health care providers including hospitals.

Medical devices are marketed to the orthopedic, surgery, cardiovascular, diabetes care, and vision care industries. They are distributed to wholesalers, hospitals, retailers, and health care professionals.

J&J's two largest customers are wholesalers that distribute products across all three segments; they represent some 14% and 10% of total sales, respectively.

The company spent $2.5 billion on advertising campaigns (including television, radio, print, and online ads) in fiscal 2017, as compared to $2.4 billion spent in each of the prior two years.

Financial Performance

J&J had seen steady revenue growth over the past few years, and in fiscal 2017 revenue jumped 6% to $76.5 billion. This gain was due to higher sales in all three segments (Pharmaceuticals, Medical Devices, and Consumer); furthermore, sales grew across the board in both the US and abroad. The company's acquisition and divestiture activities alone boosted sales by nearly 4% that year. Pharmaceuticals that are seeing the highest growth include cancer treatment Imbruvica, HIV drug Edurant, and plaque psoriasis treatment Stelara. Medical Device sales increases were driven by vision care products acquired from Abbott Medical Optics in early 2017. In the Consumer segment, strong performers included the Neutrogena line of products and OTC analgesic medications. 

Net income plummeted 92% to $1.3 billion in 2017, though. Higher spending contributed to that plummet, but the company was especially hit by sweeping US tax reform, including a $13.6 billion charge for years of accumulated foreign earnings.

Despite the drop in net earnings, operating cash flow increased 12% to $21.1 billion in 2017. That was due to positive adjustments to reconcile net earnings to operating cash flows such as asset write-downs and deferred tax provisions, as well as positive changes to assets and liabilities. 

Strategy

J&J's core strategies for growth are to create value through innovation, to expand its international reach, and to operate purposefully at the highest level of excellence. It has worked toward these goals through such efforts as embracing health care technology, acquiring new businesses (such as Abbott Medical Optics), and strategically divesting certain units.

In the pharmaceuticals business, J&J is focused on innovating in therapeutic areas where the medical needs are largely unmet. It spent $10.6 billion on R&D in 2017, seeking new treatments as well as new indications for existing products. These include Darzalex, Imbruvica, and Stelara -- drugs that J&J hopes to bring to new markets and to increase sales in current markets. The company hopes to launch eight blockbusters, or products that will top $1 billion in annual sales, by 2021. (It gained US and Europe approval for psoriasis drug Tremfya in 2017 and US approval for prostate cancer drug Erleada in early 2018, for example.) It also fights to keep its drugs competitive by protecting its patents against the releases of biosimilars. Further, the company is banking on growth for the products acquired through the purchase of rare disease biotech Actelion in 2017.

Additionally, J&J is working to launch innovative products through its Medical Device segment. It has expanded the segment through recent acquisitions, and it is improving margins by utilizing supply chain and operational efficiencies. The company is investing billions of dollars in the development and acquisition of digital surgery products. 

In the Consumer segment, J&J's top sellers include Tylenol and Motrin. It is also counting on its Neutrogena, Listerine, and Johnson's Baby brands to deliver growth for the segment going forward. The company is reformulating its Johnson's brand products. This overhaul is likely tied to a 2017 verdict in which J&J was ordered to pay $4.69 billion to 22 women who claimed the company's talc products caused them to develop ovarian cancer.

Mergers and Acquisitions

While it continues to streamline its businesses for optimal performance, J&J is also keeping pace with its acquisition strategy by pursuing purchases both large and small.

In 2019, the company acquired start-up Auris Health for $3.4 billion. That deal furthered J&J's presence in surgical robotics -- a field it is targeting for future growth. Similarly, in 2018, it acquired Orthotaxy, a French developer of software-enabled surgery technologies (such as robotics) for use in knee replacement surgery.

Also in 2018, J&J agreed to buy the 80% of Japanese skincare firm Ci:z that it doesn't already own for $2.05 billion.

In early 2017 the company acquired Abbott Medical Optics from Abbott Laboratories for $4.3 billion. That purchase, which included operations in cataract surgery, laser vision surgery, and consumer products such as eye drops, underscored J&J's growing focus on vision. Furthering that mission, the company acquired medical device maker TearScience in 2017. TearScience manufactures devices designed to treat Meibomian Gland Dysfunction, the leading cause of dry eye disease. J&J also acquired Sightbox, an online subscription service for contact lens wearers.

Also in 2017, J&J bought Swiss biotech Actelion, which focuses on rare diseases, for $30 billion. That deal -- the largest to-date for the company -- added Actelion's treatments for pulmonary arterial hypertension to its portfolio. As part of the transaction, J&J spun off Actelion's drug discovery and early-stage R&D operations into a new public Swiss company.

The company additionally secured the rights to Protagonist Therapeutics' PTG-200, a pre-clinical oral therapy for Crohn's disease, for up to $990 million.

Johnson & Johnson

1 JOHNSON & JOHNSON PLZ
New Brunswick, NJ 08933-0002
Phone: 1 (732) 524-0400

Stats

Employer Type: Publicly Owned
Stock Symbol: JNJ
Stock Exchange: , NYSE
EVP and CFO: Dominic J. Caruso
Chairman and CEO: Alex Gorsky
EVP and Group Worldwide Chairman: Sandra E. Peterson
Employees (This Location): 1,000
Employees (All Locations): 135,100

Major Office Locations

New Brunswick, NJ

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