Key questions and answers from the fourth quarter earnings call conducted by Johnson and Johnson (JNJ: chart) on 20 January, 2009.

Larry Biegelsen (Wachovia): Could you articulate J&J’s strategy in the Pharmaceutical business?

Bill Weldon:We have historically been very focused on the specialty markets so when you look at the impacts we have much less of the impact but like everyone else really assessed our sales force, different ways of going to market but we have identified the specific therapeutic areas where we continue to focus on continue to develop our products where we think there is high potential whether its here in the United States or around the world.

We modified our strategy but haven’t really changed it other than some of the ways we go to market with sales organization and new ways of looking at promoting our products that we think make us more efficient. As far as the specialty area it’s been an area that we’ve historically been focused on and will continue to be focused on. We think it gives us a lot of leverage and a lot of strength.

Larry Biegelsen (Wachovia): Any additional colour on acquisitions?

Bill Weldon: We took last year really and tried to look across the landscape, we looked at health information technology for example. We zeroed in on prevention and wellness and the two acquisitions we have coupled with the experiences we’ve had over the last two decades at Johnson & Johnson.

We think there’s a very strong business model looking at that in that today we pay about $400 less per employee for our healthcare costs than the normal company would pay. The reason for that is for two decades now we have 4% tobacco users at J&J where a normal population is about 20%.

We have a focus on obesity and weight loss; we have a focus on cholesterol, hypertension and the areas that really many of the co-morbidities associated with obesity and keeping people healthy and well. We think that will also drive to engagement, absenteeism. We know, we’ve documented it in our own programs.

By looking at the behavior modification technology that HealthMedia has coupled with the Human Performance Institute which looks at nutrition, exercise, recovery and the critical pieces. Putting it together with the facts we have we think we have a very strong model to go to governments and other businesses with to improve the health of their employees.

I wouldn’t expect you’d see us going into large acquisitions trying to move things forward but build from the base that we have in wellness and prevention as we continue to assess other opportunities.

Catherine Arnold (Credit Suisse): With a lot of your competitors talking about going down the path of bio-similars or bio-betters, do have a similar interest given your capabilities and expertise in that area?

Bill Weldon: We continue to assess whether its generics, bio-similar or anything else we’ll continue to assess it. We don’t see it as a real opportunity at the moment and part of that is because with bio-similars you’re probably going to still have to show because of the size of the molecule and everything else the way it forms, the way it shapes, the way it fits into the receptor there is going to have to be clinical trials so its going to require a significant investment.

Our belief is we need to keep focused on creating new opportunities in the marketplace, driving them forward through the products that we can. As far as getting into the bio-similar area we don’t see any opportunity for us at this point in time.

Mike Weinstein (JP Morgan): Do you have the plan in place to achieve operating margin expansion in 2009 and the face of the fundamental pressures you’ll have?

Dominic Caruso: Yes, the plans are in place for 2009 operating performance that would improve pre-tax operating margins over 2008. As a reminder, we started on this path back in 2007 where we conducted the restructuring of the pharmaceutical business and the Cordis business. Again, 2009 was not a surprise for us, we knew about this for some time.
To put the plans in place now, we are executing on a number of those plans we are very happy we’re able to achieve the higher end of our cost improvement guidance that we provided earlier. We have of course the higher level of the PCH integration synergies happening in 2009 so those plans are in place, we feel comfortable with that.

Bill Weldon: We are always looking for the right opportunities and we think that the pressures in the economy right now are going to create very unique opportunities for us. We have our list of candidates that we think would be good opportunities and other ones are going to be popping up and coming to us as the year progresses.

We are very focused on the unique opportunities that will be presented to us based on the market conditions that we see today.

David Roman (Morgan Stanley): Can you talk a little bit about the avenues you might use to enter disease management a little more whether its IT services or diagnostics?

Bill Weldon: The way we are trying to look at it is basically looking at a patient and saying how do we deal with that patient in taking the resources that J&J has and putting them against it.

When we look at the management of the patient we’re talking about the area of diabetes for example and metabolic disease. Part of it goes to what we were talking about before this wellness and prevention.