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Johnson & Johnson

Johnson & Johnson

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Johnson & Johnson

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  1. Johnson & Johnson Justin Quaglia Analyst, Non-Cyclical Sector Madison Investment Fund

  2. Objective • A stable and strong company that meets all the needs of a stock an investor should have going into a recession • DIVERSIFICATION-not only produces medication, but also medical equipment, and human staple goods • Unlike many other pharmaceutical companies, they are not in big trouble with patents • Proven successful during the recent recessions

  3. Pharmaceutical Plague • 2007-2010: Disappointing, dissipating, and decaying time for many pharmaceutical companies around the world • Key drugs that provide profit and revenue will be losing their patent protection • Allows these medications to go generic which will provide the consumer with the same medication at a cheaper and more reasonable price

  4. Pharmaceutical Plague • Many companies are not showing any positive signs in R&D • Blockbuster drugs are lacking • Even if they do break through, they are being shut down by the FDA for undesired and dangerous side effects

  5. Company Overview • The world's largest healthcare group • R&D, manufacture, and sale of a range of products in the healthcare field • Operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics • Not only produce pharmaceuticals but human staple goods as well • They have more than 250 operating companies • Sell products in 57 countries throughout the world

  6. Key Stats Price: 62.15 Market Cap: 177.86B 52 Week High: 68.85 52 Week Low: 59.72 Average Volume: 13.63M P/E: 17.12 F P/F: 14.94 Beta: 0.12 EPS: 3.63 Dividend: 0.41 Yield: 2.67% Shares: 2.86B

  7. Product Categories Allergies Baby Care Dental Care Diabetes Care Feminine Hygiene Gastrointestinal Nutritional Orthopedics Prescription Drugs Vision Care Wound Care Colds and Flu Cardiology Denture Care Family Planning First Aid Medial Devices/Diagnostics Oncology Pain Reliever Skin and Hair Care Women’s Health

  8. New Release • Intelence- HIV drug for patients with resistance to other therapies (NNRTIs) • Patients need new options because HIV can mutate to resist existing treatments • Tens of thousands of patients worldwide have resistance to NNRTIs and could be candidates for Intelence • FDA approved Intelence for use with other AIDS drugs • Close to 40 million people are infected with HIV

  9. Medications(Top Sellers) • RISPERDAL CONSTA (June) and INVEGA, both antipsychotic medications • TOPAMAX, an antiepileptic and a treatment for the prevention of migraine headaches (March 2009) • REMICADE, for the treatment of a number of immune mediated inflammatory diseases • VELCADE, a treatment for multiple myeloma • CONCERTA, a treatment for attention deficit hyperactivity disorder • LEVAQUIN, an anti-infective

  10. Newly Acquired • Introduced 600 products and line extensions under its consumer business just this year • Rolaids, Rogaine, Sudafed, Visine, Neosporin, Listermint, Listerine, Bengay, and Benadril just to name a few • Always evaluating licensing and acquisitions • Highly respected for making business deals/buying/selling operating companies

  11. In the Pipeline • 8 drugs in early FDA approval stages • 20 drugs in Phase III of FDA approval • Could be as soon as 12 months before release • 4 drugs have received FDA approval for releases in 2008

  12. Competitors Source: Yahoo Finance

  13. 1 Year Chart C A B

  14. JNJ vs. S&P 500 Over 2007

  15. Performance in 2001 Recession Had a 2:1 stock split during the recession

  16. Management • Weldon Williams- (1971) CEO • Joined the Company in 1971 • Served in several sales, marketing and international management positions • Dominic Caruso - (1999) CFO & Vice President of Finance • Previously VP of the Finance for the Medical Devices and Diagnostics • KPMG • Joined in October of 1999 through the acquisition of Centocor (has been with that company since 1985) • Christine Poon - (2000) Vice Chairman of the Board • Served in various management positions at Bristol-Myers Squibb Company for 15 years, most recently as President of International Medicines before coming to JNJ Strong sense of seniority

  17. Track Record of Performance • Exceptionally consistent performance • 75 consecutive years of sales increases • 24 consecutive years of earnings increases • 45 consecutive years of dividend increases • Few, if any companies, can claim this

  18. Q4 and Fiscal 2007 Earnings • Announced record sales of $16.0 billion for Q42007, an increase of 16.6% YoY • Operational growth was up 11.9% • Domestic sales were up 9.1%, while international sales increased 25.8% in 2007 • Worldwide sales for the year 2007 were $61.1 billion, an increase of 14.6% over 2006 • Pharmaceutical sales- $25 billion, and increase of 7% • MD&D sales- $21.7 billion, increase of 7.2% • Consumer segment- $14.5 billion, increase of 48%

  19. Q4 and Fiscal 2007 Earnings • Net earnings and diluted earnings for Q4 2007 were $2.4 billion and $.82 respectively, representing increases of 9.5% and 10.8% • Sales results reflect the strong performance of LISTERINE and the launch of whitening products; Baby and Kids Care products; the skin care lines of AVEENO, CLEAN & CLEAR, and NEUTROGENA; SPLENDA sweetener; ROGAINE hair regrowth treatment; and IMODIUM A-D • Significant progress in their pipeline • Successful integration of Pfizer Consumer Healthcare • Increased profits 48%

  20. Financial Highlights

  21. Accelerating Growth in 2008 • “Back Up Products” • Patients getting used to certain drugs, especially antipsychotic • RISPERDAL CONSTA and TOPAMAX • Prevents generics from taking over • Make their own generics • Will continue to pull in a strong profit from loss of patent protection

  22. 2008 Forecast • Expects earnings per share for 2008 to total $4.39 to $4.44 • Analysts have been looking for earnings of $4.42 a share for 2008 • Benefit from the relatively weak US dollar • Expects at least 60% of its predicted 4-5% sales growth this year to come from foreign exchange gains

  23. Investment Rationale • Diversity • Stability (low Beta) • Profiting acquisition • Determination for consistent improvement • Strong pipeline

  24. “Safe Haven” • “A safe haven away from volatility” • Goldman Sachs • ``JNJ certainly could be a haven in a bear market because of its diversity'' • Raymond James & Associates • Recommendation: BUY