This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Johnson and Johnson Inc. (JNJ) on 20 January, 2009.
Management:
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Chairman and Chief Executive Officer: Bill Weldon
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Vice President, Finance and Chief Financial Officer: Dominic Caruso
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Vice President, Investor Relations: Louise Mehrotra
Key Investors Issues
- Sales of $15.2 billion were down 4.9% from $16 billion in 2007.
- Net earnings were $2.7 billion or 97 cents a share, up 14% from $2.4 billion or 82 cents in the same period in 2007.
Full Year Highlights:
- Consolidated sales to customers were $63.7 billion an increase of 4.3% as compared to 2007.
- Net earnings were $12.9 billion or $4.55 per share up 6.8% and 9.6% respectively as compared to the same period in 2007.
- During the year, the firm purchased approximately $8.1 billion of stock.
Fourth Quarter Highlights
Worldwide sales to customers were $15.2 billion, down 4.9% from $16 billion in 2007 as on an operational basis sales were down 1% and currency had a negative impact of 3.9%.
- Net earnings on a reported basis were $2.7 billion or 97 cents a share, up 14% from $2.4 billion or 82 cents in the same period in 2007 as cost of goods sold at 28.8% of sales was 90 basis points less than the same period in 2007.
- Selling, marking and administrative expenses at 37.3% of sales were up 150 basis points versus last year due to a combination of investment spending and the change in the mix of business driven by growth in consumer business and lower sales in pharmaceutical.
- Investment in research and development as a percent to sales was 13.9%, 70 basis points less than 2007 due to a combination of a change of mix of businesses and lower spending in pharmaceutical business.
- Interest expense of $17 million compares to $35 million of net interest income in 2007, with the change a result of lower interest income resulting from lower rates on invested cash and higher interest expense due to a higher average debt position.
Segment Performance:
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Consumer segment: sales of $3.9 billion increased 1.2% as compared to the same period last year.
- Operational growth was 6.9% while the impact of currency was -5.7 points and US sales were up 1.8% while international sales grew 10.6% on an operational basis.
- Sales for the over the counter pharmaceutical and nutritionals increased 8.5% on an operational basis compared to the same period in 2007.
- Sales in the US were up 4.7% due to the successful US launch of Zyrtec, partially offset by lower sales of cough and cold products due to the slower start to the season versus last year. - Sales outside the US were up 12.6% operationally driven by strong growth of adult Tylenol, Nicorette, upper respiratory products and nutritionals.
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Skin care achieved operational sales growth of 11.5% with sales in the US growing at 6.2% and sales outside the US up 15.3% on an operational basis.
- Strong growth was driven by the newly acquired products from Dabao, the leading moisturizer in China. Johnson’s Adult, Aveeno, Neutrogena also made significant contributions to the growth in the quarter.
- Baby care products achieved operational growth of 3.2% and sales in the US were down 6% primarily due to the lower sales for BabyCenter.com.
- Solid growth across most product lines resulted in an operational increase from sales outside the US of 5.7%.
Women’s health achieved operational growth of 1.1% and sales in the US were flat, while sales outside the US were up on an operational basis by 1.6% as solid growth in external sanitary protection was partially offset by sales declines in other products.
- Operational sales growth in the oral care franchise was 10.5% with US sales up 1.6%.
- In the US strong growth in Rembrandt products has been partially offset by slower sales in floss and mouth fresheners.
- Sales outside the US increased 19.3% operationally driven by very strong growth for Listerine across the major regions.
- Sales in the wound care other category were down 6.1% on an operational basis with the US down 17.2% and the business outside the US up 7% with the lower sales in the US due to increased competition and a reduction to the trade inventory levels.
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Pharmaceutical net sales of $5.7 billion were down 11.1% versus the same period last year.
- Sales in the US decreased 13% while sales outside the US increased on an operational basis by 0.5% and results continue to be impacted by generic competition on some of the products namely Duragesic, Razadyne, and Risperdal Oral.
- The patent for Risperdal expired in the US at the end of June, 2008, and there are generic competitors for Risperdal in most markets.
- AcipHex operational basis sales were down 15.6% with similar results both in and outside the US and in the US script share has been negatively impacted by additional generic launches in the PPI category.
Sales have also been impacted by the market entry in Canada of generic Rabeprazole, the active ingredient in Pariet.
- Concerta, a product for attention deficit hyperactivity disorder grew 3.1% operationally with sales in the US down 6.3% and in the US market growth has been offset by lower market share.
- Sales of Levaquin, the anti infective were down 4.2% on an operational basis when compared to the same period a year ago due to lower prescription share and share was negatively impacted by generics in the category.
- New competition and a softening of the market have contributed to the lower sales results for Eprex.
- Sales of Remicade, a biologic approved for the treatment of a number of immune mediated inflammatory diseases were down 2.4% as sales were impacted by lower customer inventory levels as well as a lower market share due to increased competition.
Sales to customers for markets outside the US were down 15% due to the timing of shipments related to production scheduling due to maintenance.
- Risperdal Consta, the long acting injectable formulation achieved sales growth of 16.3% on an operational basis with US sales growth was 8.3% while sales outside the US were up 20.9% operationally with continued positive momentum in share.
- Sales of Topamax which is approved for the treatment of epilepsy and migraine prophylaxis increased operationally by 6.4%.
- Velcade, a treatment for the relapse multiple myeloma is being co-developed with Millennium Pharmaceuticals and the firm has commercialization rights in Europe and the rest of the world outside the US.
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Medical devices and diagnostic segment sales of $5.6 billion grew 1.6% operationally as compared to the same period in 2007.
- Sales in the US were down 3% while sales outside the US increased on an operational basis by 5.6%.
- Results have been impacted by lower sales of drug eluting stents.
- Cordis sales were down 15.5% operationally with the US down 35.8% and sales outside the US up 1.3%, impacted by lower sales of Cypher, the Sirolimus-eluting stent, and endovascular products partially offset by the solid growth in the Biosense Webster business.
- Cypher sales were approximately $270 million down 34% on an operational basis versus the prior year.
The DePuy franchise had operational sales growth of 8.3% when compared to the same period in 2007 with the US growing 10% and the business outside the US growing by 6.2% operationally.
