07.27.09
$23.1 Billion ($63.7B total)
KEY EXECUTIVES:
KEY EXECUTIVES:
William Weldon, Chairman and CEO
Dominic J. Caruso, VP, Finance and CFO
Donald M. Casey Jr., Worldwide Chairman, Comprehensive
Care Group
Alex Gorsky, Worldwide Chairman, Surgical Care Group
NO. OF EMPLOYEES: 118,700
GLOBAL HEADQUARTERS: New Brunswick, N.J.
NO. OF EMPLOYEES: 118,700
GLOBAL HEADQUARTERS: New Brunswick, N.J.
During the turbulent economic times of 2008, Johnson & Johnson (J&J) was the third best-performing stock on the Dow Jones Industrial Average. For the multinational healthcare company, which makes everything from bandages to the tiniest of cardiovascular stents, 2008 was yet another year of revenue growth—though a little more challenging.
Despite the challenge, the company remained the largest producer of medical device technology.
“The medical technology market offers significant growth opportunities in light of aging demographics, unmet medical needs and technological innovation,” said William Weldon, chairman and CEO. “In addition, we see low penetration rates in many of our key categories, along with geographic development opportunities. We are well positioned to capitalize on this market potential, with No. 1 or No. 2 positions in the majority of markets in which we compete.”
Weldon said the company’s device opportunities are “solid” in markets such as ophthalmology, cardiology and metabolic disease, where there is a strong need for patient-centric solutions to address chronic disease.
Overall company sales for the fiscal year (ended Dec. 31) were $63.7 billion, an increase of 4.3 percent compared with 2007. Net earnings were $12.9 billion, up 6.8 percent.
The company’s worldwide Medical Devices and Diagnostics (MD&D) segment achieved annual sales of $23.1 billion in 2008, representing an increase of 6.4 percent, with operational growth of 3.5 percent and positive currency impact of 2.9 percent. Domestic revenue inched up only slightly by 1 percent, while international sales increased by double digits—11.3 percent (5.8 percent from operations and 5.5 percent from currency).
“Given the competitive strengths of our MD&D businesses and opportunities for growth, we remain enthusiastic about the potential for sustained long-term growth in this segment,” Weldon added.
According to J&J, primary contributors to this year’s growth included Ethicon Endo-Surgery’s minimally invasive products; Vistakon’s disposable contact lenses; and DePuy’s orthopedic joint reconstruction and sports medicine businesses. The sector’s solid growth partially was offset by lower sales in the Cordis franchise, reflecting new competitive entries in the drug-eluting stent market, particularly from the new Xience V stent released by Abbott Laboratories during fiscal 2008.
The DePuy orthopedic franchise achieved sales of $5 billion in 2008, an 8.8 percent increase over the prior year. This growth primarily was due to DePuy’s joint reconstruction products, including hip and knee product lines. Additionally, new product launches in the Mitek sports medicine product line contributed to the growth.
The Ethicon Endo-Surgery franchise achieved sales of $4.3 billion in 2008, an 11.8 percent increase over the prior year. This growth was mainly driven by the Harmonic technology business due to the success of newly launched products and the underlying strength of the technology. Additional contributors to the growth were the Realize Gastric Band (for weight loss) in the United States and endoscopy products internationally.
The Ethicon franchise achieved sales of $3.8 billion, a 6.6 percent increase compared with 2007. According to company officials, this was a result of growth in the hemostasis, meshes and biosurgical product lines.
The company’s Cordis franchise continued to post losses. Sales were $3.1 billion, a decline of 8.5 percent compared to 2007. The decline reflects lower sales of the Cypher sirolimus-eluting coronary stent due to increased global competition, company officials claimed. The decline partially was offset by the performance of the Biosense Webster and neurovascular businesses within Cordis.
The Diabetes Care franchise achieved sales of $2.5 billion for the year, a 6.8 percent increase. This growth was driven by sales in the Animas insulin delivery pump business due to new product launches and sales growth in the Ultra test strip product lines outside the United States.
The Vision Care franchise achieved sales of $2.5 billion, a 13.2 percent increase. Sales of Acuvue contact lenses, Oasys, 1-Day Acuvue Moist and Acuvue Oasys for astigmatism drove sales increases.
Weldon said the company’s device opportunities are “solid” in markets such as ophthalmology, cardiology and metabolic disease, where there is a strong need for patient-centric solutions to address chronic disease.
Overall company sales for the fiscal year (ended Dec. 31) were $63.7 billion, an increase of 4.3 percent compared with 2007. Net earnings were $12.9 billion, up 6.8 percent.
The company’s worldwide Medical Devices and Diagnostics (MD&D) segment achieved annual sales of $23.1 billion in 2008, representing an increase of 6.4 percent, with operational growth of 3.5 percent and positive currency impact of 2.9 percent. Domestic revenue inched up only slightly by 1 percent, while international sales increased by double digits—11.3 percent (5.8 percent from operations and 5.5 percent from currency).
“Given the competitive strengths of our MD&D businesses and opportunities for growth, we remain enthusiastic about the potential for sustained long-term growth in this segment,” Weldon added.
According to J&J, primary contributors to this year’s growth included Ethicon Endo-Surgery’s minimally invasive products; Vistakon’s disposable contact lenses; and DePuy’s orthopedic joint reconstruction and sports medicine businesses. The sector’s solid growth partially was offset by lower sales in the Cordis franchise, reflecting new competitive entries in the drug-eluting stent market, particularly from the new Xience V stent released by Abbott Laboratories during fiscal 2008.
The DePuy orthopedic franchise achieved sales of $5 billion in 2008, an 8.8 percent increase over the prior year. This growth primarily was due to DePuy’s joint reconstruction products, including hip and knee product lines. Additionally, new product launches in the Mitek sports medicine product line contributed to the growth.
The Ethicon Endo-Surgery franchise achieved sales of $4.3 billion in 2008, an 11.8 percent increase over the prior year. This growth was mainly driven by the Harmonic technology business due to the success of newly launched products and the underlying strength of the technology. Additional contributors to the growth were the Realize Gastric Band (for weight loss) in the United States and endoscopy products internationally.
The Ethicon franchise achieved sales of $3.8 billion, a 6.6 percent increase compared with 2007. According to company officials, this was a result of growth in the hemostasis, meshes and biosurgical product lines.
The company’s Cordis franchise continued to post losses. Sales were $3.1 billion, a decline of 8.5 percent compared to 2007. The decline reflects lower sales of the Cypher sirolimus-eluting coronary stent due to increased global competition, company officials claimed. The decline partially was offset by the performance of the Biosense Webster and neurovascular businesses within Cordis.
The Diabetes Care franchise achieved sales of $2.5 billion for the year, a 6.8 percent increase. This growth was driven by sales in the Animas insulin delivery pump business due to new product launches and sales growth in the Ultra test strip product lines outside the United States.
The Vision Care franchise achieved sales of $2.5 billion, a 13.2 percent increase. Sales of Acuvue contact lenses, Oasys, 1-Day Acuvue Moist and Acuvue Oasys for astigmatism drove sales increases.
J&J’s Ortho-Clinical Diagnostics franchise achieved sales of $1.8 billion in 2008, an 8 percent increase resulting from growth in both immunohematology and immunodiagnostics products.
Operating profit for the Medical Devices and Diagnostics business increased 49.1 percent from 2007, reaching $7.2 billion. As a percentage of sales, 2008 operating profit increased to 31.2 percent. The improved operating profit was the result of the $429 million gain from net litigation settlements, favorable product mix, manufacturing efficiencies and lower in-process research and development charges of $174 million in 2008 vs. $807 million in 2007, company officials noted. In 2007, the operating profit in the Medical Devices and Diagnostics segment decreased 20.9 percent from 2006.
Operating profit for the Medical Devices and Diagnostics business increased 49.1 percent from 2007, reaching $7.2 billion. As a percentage of sales, 2008 operating profit increased to 31.2 percent. The improved operating profit was the result of the $429 million gain from net litigation settlements, favorable product mix, manufacturing efficiencies and lower in-process research and development charges of $174 million in 2008 vs. $807 million in 2007, company officials noted. In 2007, the operating profit in the Medical Devices and Diagnostics segment decreased 20.9 percent from 2006.
As in years past, J&J remained acquisitive. There were several purchases in fiscal 2008 worth noting.
In December 2008, Johnson & Johnson made a billion-dollar deal adding to its device holdings. The company purchased breast-implant maker Mentor Corp. for $1.07 billion. In November, J&J announced plans to buy Omrix Biopharmaceuticals Inc., in Somerville, N.J., a maker of surgical equipment to stanch bleeding, for $438 million.
Mentor, based in Santa Barbara, Calif., is the world’s leading seller of breast implants and also sells equipment used in liposuction and facelifts, all offerings new to New Brunswick, N.J.-based Johnson & Johnson. The acquisition is an important step in J&J’s efforts to enter the $4.6 billion market for cosmetic medical products, said Gary Pruden, president of Ethicon, the unit that will oversee Mentor.
Mentor, based in Santa Barbara, Calif., is the world’s leading seller of breast implants and also sells equipment used in liposuction and facelifts, all offerings new to New Brunswick, N.J.-based Johnson & Johnson. The acquisition is an important step in J&J’s efforts to enter the $4.6 billion market for cosmetic medical products, said Gary Pruden, president of Ethicon, the unit that will oversee Mentor.
In addition to Mentor Corporation and Omrix Biopharmaceuticals, the strategic acquisitions of several other companies strengthened the company’s product pipelines. Ethicon Endo-Surgery Inc. acquired SurgRx Inc., a manufacturer of advanced bipolar tissue sealing systems based in Redwood City, Calif. Terms of the deal were not disclosed. Through the acquisition of Åmic AB, a privately held Swedish developer of in vitro diagnostics, J&J’s Ortho-Clinical Diagnostics division has access to new delivery channels in point-of-care and near-patient settings outside the clinical laboratory.
In 2008, Johnson & Johnson businesses introduced several new products.
DePuy Orthopaedics Inc. introduced Tri-Lock, a bone-preserving hip stem with proprietary Gription technology for stability. DuPuy claims a leading position in hip replacement in the U.S. market. DePuy released more than 20 new products in 2008. New product rollouts included enhancement to the company’s Sigma Knee System, including Sigma High Performance instruments to enhance procedure efficiency, surgical precision and flexibility, and the Sigma PS Femur, for active, high-demand patients. Entering the growing aging-spine market, DePuy Spine introduced the Confidence spinal cement system for vertebral compression fractures.
In Europe, LifeScan Inc. launched the new One Touch Vita blood glucose meter for people with Type 2 diabetes. For 2008, J&J said its One Touch Ultra Mini blood glucose meter became the best-selling blood glucose meter in the United States.
In early 2009, Cordis’ Biosense Webster unit received approval from the U.S. Food and Drug Administration for the Navistar Thermocool catheter for treatment of atrial fibrillation, an abnormal heart rhythm that affects 10 million people worldwide. During cardiac ablation, energy is delivered through the catheter to those areas of the heart muscle causing the abnormal heart rhythm. The energy “disconnects” the pathway of the abnormal rhythm. This is the first ablation catheter approved in the United States for the treatment of atrial fibrillation.
For the second quarter of fiscal 2009, J&J beat analysts estimates but predicted more challenges ahead.
A cost-saving agreement that the hospital industry negotiated with the Obama administration and the Senate Finance Committee may hurt future revenue, said Dominic Caruso, J&J’s chief financial officer, on a conference call with investors. The agreement, announced July 8, calls for $155 billion in savings over 10 years.
“The medical device industry will feel some impact from the current deal,” Caruso said during the call.“We would expect that the medical device manufacturers may feel an impact from that through the pressures that hospitals may face.”
In 2008, Johnson & Johnson businesses introduced several new products.
DePuy Orthopaedics Inc. introduced Tri-Lock, a bone-preserving hip stem with proprietary Gription technology for stability. DuPuy claims a leading position in hip replacement in the U.S. market. DePuy released more than 20 new products in 2008. New product rollouts included enhancement to the company’s Sigma Knee System, including Sigma High Performance instruments to enhance procedure efficiency, surgical precision and flexibility, and the Sigma PS Femur, for active, high-demand patients. Entering the growing aging-spine market, DePuy Spine introduced the Confidence spinal cement system for vertebral compression fractures.
In Europe, LifeScan Inc. launched the new One Touch Vita blood glucose meter for people with Type 2 diabetes. For 2008, J&J said its One Touch Ultra Mini blood glucose meter became the best-selling blood glucose meter in the United States.
In early 2009, Cordis’ Biosense Webster unit received approval from the U.S. Food and Drug Administration for the Navistar Thermocool catheter for treatment of atrial fibrillation, an abnormal heart rhythm that affects 10 million people worldwide. During cardiac ablation, energy is delivered through the catheter to those areas of the heart muscle causing the abnormal heart rhythm. The energy “disconnects” the pathway of the abnormal rhythm. This is the first ablation catheter approved in the United States for the treatment of atrial fibrillation.
For the second quarter of fiscal 2009, J&J beat analysts estimates but predicted more challenges ahead.
A cost-saving agreement that the hospital industry negotiated with the Obama administration and the Senate Finance Committee may hurt future revenue, said Dominic Caruso, J&J’s chief financial officer, on a conference call with investors. The agreement, announced July 8, calls for $155 billion in savings over 10 years.
“The medical device industry will feel some impact from the current deal,” Caruso said during the call.“We would expect that the medical device manufacturers may feel an impact from that through the pressures that hospitals may face.”