Johnson & Johnson · NYSE:JNJ
Johnson & Johnson — Q2 2006 Earnings Presentation
46 slides from Johnson & Johnson's earnings presentation, July 2006
Slide 1: Slide 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement Some of the statements made during this presentation may be considered "forward looking statements”. The 10K for fiscal year 2005 identifies certain factors that could cause the Company’s actual results to differ materially from those projected in any forward looking statements
Slide 3: Content Overview
Content Overview • Strategic Principles • Historical Performance • Segment Overview • Second Quarter 2006 Results • Outlook
Slide 4: Strategic Principles
STRATEGIC PRINCIPLES
Slide 5: Strategic Principles
Strategic Principles • Broadly based in human health care • Decentralized management • Manage for the Long Term • Ethical Principles – Our Credo
Slide 6: World's Most Comprehensive and Broadly Based Health Care Company
World’s Most Comprehensive and Broadly Based Health Care Company • 2005 Sales of $50.5 Billion • Over 230 operating companies in 57 countries around the world • Leadership positions in ethical and OTC pharmaceuticals, medical/surgical products, diagnostics and a variety of consumer products • Except
Slide 7: Balanced Portfolio Segment Operating Profit
Balanced Portfolio Segment Operating Profit* 2000 Operating Profit: 2005 Operating Profit: $6.7 Billion* $13.6 Billion* $1.6B $5.3B 24% $.8B $1.6B 12% 39% 12% 64% 49% $4.3B $6.7B MD&D Consumer Pharmaceuticals *Excluding IPR&D The company has adopted SFAS No. 123(R) Shared Based Payment, applying app
Slide 8: Strategic Principles
Strategic Principles • Broadly based in human health care • Decentralized management • Manage for the Long Term • Ethical Principles – Our Credo
Slide 9: Decentralized Management
Decentralized Management • Most effective management structure for our broadly based business • Fosters engagement: – Sense of ownership – Entrepreneurship – Collaboration • Enables customer and patient focused decision making
Slide 10: Strategic Principles
Strategic Principles • Broadly based in human health care • Decentralized management • Manage for the Long Term • Ethical Principles – Our Credo
Slide 11: Leadership in Major Markets
Leadership in Major Markets Johnson & Johnson #1 or #2 Anti-Anemia Lo-Cal Sweeteners Sweeteners Antipsychotics Blood Glucose Monitoring Anti-TNF Blood Screening & Typing Hormonal Contraceptives Disposable Contact Lenses Quinolone Anti-Infective OTC Pharmaceuticals Coronary Stents Sanitary Protection
Slide 12: Long-Term Growth Strategy
Long-Term Growth Strategy • Strong internal R&D capability • Strategic alliances • Selected acquisitions
Slide 13: Total Research Expense
Total Research Expense $U.S. Billions $6.5 $3.2 $1.8 1995 2000 2005 9.7% Percent to Sales 12.8% The company has adopted SFAS No. 123(R) Shared Based Payment, applying applying the modified retrospective transition method. 1995- 1995-2005 reported financial statements have been restated accordingly.
Slide 14: Partner of Choice
Partner of Choice • Over 100 new third party relationships annually • In house venture capital (JJDC) – Over $400 million invested as of 2005 in a broad array of companies • Focus on early stage product development
Slide 15: Mergers & Acquisitions – Recent Examples
Mergers & Acquisitions – Recent Examples Strategic moves to enhance our growth rate and create long-term value for our shareholders Typically modest in size: over 60 in the last decade • Ensure Medical, Inc. (7/06). Acquisition of Ensure Medical, a privately held company will provide Cordis with a d
Slide 16: Mergers & Acquisitions – Recent Examples (Continued)
Mergers & Acquisitions – Recent Examples (Continued) Strategic moves to enhance our growth rate and create long-term value for our shareholders Typically modest in size: over 60 in the last decade •• Groupe Groupe Vendome Vendome SASA (5/06). (5/06). Johnson Johnson && Johnson Johnson Consumer Consu
Slide 17: Mergers & Acquisitions
Mergers & Acquisitions Occasionally Substantial • Scios Inc. (4/03 - $2.4B) – A biopharmaceutical company with a marketed product (NATRECOR®) for cardiovascular disease and research projects focused on auto-immune diseases. • ALZA Corporation (6/01- $12.3B) - Research-based pharmaceutical company wi
Slide 18: Strategic Principles
Strategic Principles • Broadly based in human health care • Decentralized management • Manage for the Long Term • Ethical Principles – Our Credo
Slide 19: Foundation of Ethical Principles
Foundation of Ethical Principles The Four Tenets • Customers • Employees • Community • Stockholders
Slide 20: Historical Performance
HISTORICAL PERFORMANCE
Slide 21: Worldwide Net Trade Sales
Worldwide Net Trade Sales By Geographic Area 2005 56% 24% 6% 14% $50.5 Billion U.S. W. Hem (ex. US) Asia Pacific & Africa Europe
Slide 22: 2005 Sales by Segment
2005 Sales by Segment MD&D Consumer $19.1 Billion $9.1 Billion 38% 18% 44% Pharmaceutical $22.3 Billion
Slide 23: Historical Performance
Historical Performance • 73 Consecutive years of Sales increases • 21 Consecutive years of double digit Earnings increases(1) (1) • 44 Consecutive years of Dividend increases Reported Operational Operational Adjusted Net Year Sales Growth Sales Sales Growth Growth Earnings Growth(1) (1) 100 +10.5 +1
Slide 24: Cash Flow - 2005
Cash Flow - 2005 Operating Cash Flow $11.8B Free Cash Flow* $9.2B Net Cash Position $13.5B One of Only Six Industrial Companies With Triple A Credit Rating *Non- *Non-GAAP financial measure: defined as operating cash flow less capital capital spending The company has adopted SFAS No. 123(R) Shared B
Slide 25: Shareholder Return Thru 12/31/05
Shareholder Return Thru 12/31/05 Years 1 5 10 % % % S&P 500 Index 4.9 0.5 9.1 S&P Pharmaceutical Index (3.3) (7.8) 8.7 S&P Healthcare Equip Index 0.1 4.3 13.0 Johnson & Johnson (3.3) 4.4 12.6 Note: Note: Data Data Source Source -- Bloomberg Bloomberg
Slide 26: 1995-2005 Gross Profit Margin
1995-2005 Gross Profit Margin % Percent 74% 72.3% 72% 70% 69.2% 68% 65.7% 66% 64% 62% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 The company has adopted SFAS No. 123(R) Shared Based Payment, applying applying the modified retrospective transition method. 1995- 1995-2005 reported financia
Slide 27: Selling General & Administrative
Selling General & Administrative 1995-2005 45.0% % to Sales 40.0% 37.5% 36.8% 37.2% 36.5% 36.1% 36.6% 35.6% 34.5% 34.5% 34.2% 34.1% 35.0% 30.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 The company has adopted SFAS No. 123(R) Shared Based Payment, applying applying the modified retrospe
Slide 28: Segment Overview
SEGMENT OVERVIEW
Slide 29: Consumer Segment Overview
Consumer Segment Overview • Worldwide annual sales in 2005 of $9.1 billion • Principal products in: – Over-the-Counter Pharmaceuticals and Nutritionals – Skin Care – Baby & Kids Care – Wound Care – Women’s Health
Slide 30: Major Franchise Sales & Operational Growth Rates
Major Franchise Sales & Operational Growth Rates 2005 Sales - $9.1 Billion 2005 Ops Growth Rate – 7.8% $ U.S. Billions McNeil OTC & Nutritionals $2.7 Skin Care +11% $0.8 $2.4 Other +2% +11% $1.6 +5% $1.6 Women's Health +6% Baby & Kids
Slide 31: Medical Devices & Diagnostics Segment Overview
Medical Devices & Diagnostics Segment Overview • Worldwide annual sales in 2005 of $19.1 billion • Largest medical device company in the world • Global presence in medical, surgical and diagnostic categories • 7 large franchises
Slide 32: Major Franchise Sales & Operational Growth Rates
Major Franchise Sales & Operational Growth Rates 2005 Sales - $19.1 Billion 2005 Ops Growth Rate - 12.5% $ U.S. Billions Vision Care OCD LifeScan $1.7 $1.4 $1.9 +11% +12% +10% Cordis EES $3.1 $4.0 +8% +24% $3.1 +8% $3.9 +12% Ethicon DePuy
Slide 33: Pharmaceutical Segment Overview
Pharmaceutical Segment Overview • Worldwide annual sales in 2005 of $22.3 billion • Contributes 49% of operating profit • Over 100 drugs marketed in approximately 125 countries • Eight of our medicines have revenues of $1 billion dollars or more. • Eight more products have sales greater than $200 mi
Slide 34: Pharmaceuticals
Pharmaceuticals Building leadership in: • Novel targets & mechanisms • Biomedicines • Formulation & delivery technology • Combination therapies • Health outcomes research • Global market development
Slide 35: Recent Pharmaceutical Approvals
Recent Pharmaceutical Approvals •• PREZISTA™ PREZISTA™ (darunavir) (darunavir) –– FDA FDA granted granted accelerated accelerated approval approval for for treatment- treatment- experienced experienced patients patients with with HIV, HIV, (co-administered (co-administered with with 100 100 mg mg ri
Slide 36: 2Q 2006 Results
Johnson sonia ZQ 2006 Results
Slide 37: 2Q 2006 Highlights
2Q 2006 Highlights Growth % Total Operations Currency • Sales – Worldwide 4.7% 4.8% -0.1% – U.S. 4.4% – Int’l 5.1% 5.2% -0.1% • Net Earnings 9.0% • EPS 10.5% • Adjusted Net Earnings(1) (1) 7.0% • Adjusted EPS(1) (1) 8.9% (1) Non GAAP. Excludes IPR&D in both 2005 and 2006 and tax gain due to the reve
Slide 38: 2Q 2006 Sales Growth by Segment
2Q 2006 Sales Growth by Segment Total Operations Currency Consumer 5.3% 4.5% 0.8% Med Device & Diagnostics 6.2% 6.7% -0.5% Pharmaceutical 3.2% 3.2% 0.0% Total Company 4.7% 4.8% -0.1%
Slide 39: 2Q 2006 Consumer Sales (+4.5%)
2Q 2006 Consumer Sales (+4.5%) Growth Drivers: • Skin Care (+8%) – US, AVEENO® and JOHNSON’s® Adult brands – OUS, Newly acquired Group Vendome product line • Baby & Kids Care (+6%) – US, Babycenter® – OUS, Cleansers, lotions and creams All growth %’s noted are operational growth
Slide 40: 2Q 2006 Medical Devices & Diagnostics Sales (+6.7%)
2Q 2006 Medical Devices & Diagnostics Sales (+6.7%) Growth Drivers • Vision Care (+13%) – Globally, ACUVUE® OASYS™ with HYDRACLEAR™ PLUS; ACUVUE® ADVANCE™ for ASTIGMATISM – OUS, 1-DAY ACUVUE® Moist ™ and 1-DAY ACUVUE® DEFINE™ • Ethicon Endo-Surgery, Inc. (+10%) – Endocutter; HARMONIC SCALPEL®; and A
Slide 41: 2Q 2006 Medical Devices & Diagnostics Sales (+6.7%)
2Q 2006 Medical Devices & Diagnostics Sales (+6.7%) Growth Drivers (Continued) • Cordis Corporation (+6%) – CYPHER®; Biosense Webster navigational catheters and Cordis Endovascular • DePuy, Inc. (+6%) – Mitek’s sports medicine products and Trauma business (Hand Innovation acquisition and base busine
Slide 42: 2Q 2006 Pharmaceutical Sales (+3.2%)
2Q 2006 Pharmaceutical Sales (+3.2%) Key Products % Change • REMICADE®® +21% • RISPERDAL®®/RISPERDAL®® CONSTA®® +17% • TOPAMAX®® +15% • ACIPHEX®®/PARIET®® +9% • CONCERTA®® +9% • FLOXIN®®/LEVAQUIN®® +7% • EPREX®®/PROCRIT®® -5% • DURAGESIC®® -12% • HORMONAL CONTRACEPTIVES -17% All All growth growth %’
Slide 43: Outlook
johnson senda OUTLOOK
Slide 44: Well Positioned To Capitalize On Growing Demand
Well Positioned To Capitalize On Growing Demand • Consumer – Heritage Brands – Steady stream of new and innovative products • Medical Devices & Diagnostics (MD&D day in 2006) – Significant Franchises with steady stream of new products – New Business Opportunities • Pharmaceuticals – More NMEs at all
Slide 45: Appendix A – Reconciliation of Non-GAAP Measures: Q2'06 vs. Q2'05
Appendix A – Reconciliation of Non-GAAP Measures: Q2’06 vs. Q2’05 Second Quarter % Incr. / (Dollars in Millions Except Per Share Data) 2006 2005 (Decr.) Net Earnings - as reported $ 2,820 2,588 9.0% In-process research & development (IPR&D) 87 353 Tax gain associated with a technical correction to A
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