Johnson and Johnson 2009 Annual Report Download - page 31

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S O F R E S U L T S O F O P E R A T I O N S A N D F I N A N C I A L C O N D I T I O N 29
The Company also received approvals expanding the indica-
tions for several key products, including INVEGA® (paliperidone)
extended-release tablets in the U.S. for the acute treatment of
schizoaffective disorder; RISPERDAL® CONSTA® (risperidone)
Long-Acting Treatment in the U.S. as both monotherapy and adjunc-
tive therapy to lithium or valproate in the maintenance treatment of
Bipolar I Disorder, as well as for the treatment of schizophrenia in
Japan; PREZISTA® (darunavir) in the EU with low-dose ritonavir as
part of combination therapy in treatment-naïve adults, as well as for
treatment-experienced pediatric patients with HIV.
The Company submitted a New Drug Application (NDA) to the
FDA for tapentadol extended release (ER) tablets, an investigational
oral analgesic for the management of moderate to severe chronic
pain in patients 18 years of age or older. In addition, the Company
also invested in a number of new platforms for growth in Oncology,
Alzheimer’s disease and vaccines for the treatment and prevention
of influenza and other infectious and non-infectious diseases.
Pharmaceutical segment sales in 2008 were $24.6 billion, a
decrease of 1.2% from 2007, with an operational decline of 3.1% and
1.9% increase due to the positive impact of currency fluctuations.
U.S. Pharmaceutical segment sales were $14.9 billion, a decrease of
4.9%. International Pharmaceutical segment sales were $9.7 billion,
an increase of 5.1%, which included 0.1% of operational growth and
5.0% related to the positive impact of currency fluctuations.
MEDICAL DEVICES AND DIAGNOSTICS SEGMENT
The Medical Devices and Diagnostics segment achieved sales of
$23.6 billion in 2009, representing an increase of 1.9% over the prior
year, with operational growth of 4.2% and a negative currency
impact of 2.3%. U.S. sales were $11.0 billion, an increase of 4.5%
over the prior year. International sales were $12.6 billion, a decrease
of 0.2%, with growth of 4.0% from operations and a decrease of
4.2% resulting from the negative impact of currency fluctuations.
The DePuy franchise achieved sales of $5.4 billion in 2009, a
4.6% increase over the prior year. This was primarily due to growth
in the spine, 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 $4.5 bil-
lion in 2009, a 4.8% increase over the prior year. This was attributable
to growth in the endoscopy, HARMONIC®, ENSEAL® and Advanced
Sterilization product lines.
The Ethicon franchise achieved sales of $4.1 billion in 2009, a
7.3% increase over the prior year. This was attributable to growth in
the sutures, biosurgical and mesh product lines in addition to sales
of newly acquired products from the acquisitions of Omrix Biophar-
maceuticals, Inc. and Mentor Corporation. The growth was partially
offset by the divestiture of the Professional Wound Care business of
Ethicon, Inc. in the fiscal fourth quarter of 2008.
Sales in the Cordis franchise were $2.7 billion, a decline of
10.3% versus the prior year. The decline reflects lower sales of the
CYPHER® Sirolimus-eluting Coronary Stent due to increased global
competition. The decline was partially offset by growth of the
Biosense Webster business.
The Vision Care franchise achieved sales of $2.5 billion in
2009, a 0.2% increase over prior year primarily related to growth
in the Astigmatic contact lens product line offset by the negative
impact of currency.
Sales in the Diabetes Care franchise were $2.4 billion in 2009,
a decline of 3.7% versus the prior year. Declines in the LifeScan
product line were partially offset by growth of the Animas insulin
delivery business resulting from new product launches and
continued development in international markets.
The Ortho-Clinical Diagnostics franchise achieved sales of
$2.0 billion in 2009, a 6.6% increase over the prior year primarily attrib-
utable to the recent launch of the VITROS® 3600 and 5600 analyzers.
The Medical Devices and Diagnostics segment achieved sales
of $23.1 billion in 2008, representing an increase of 6.4% over the
prior year, with operational growth of 3.5% and 2.9% due to a posi-
tive impact from currency fluctuations. U.S. sales were $10.5 billion,
an increase of 1.0%. International sales were $12.6 billion, an
increase of 11.3%, with 5.8% from operations and a positive
currency impact of 5.5%.
Analysis of Consolidated Earnings
Before Provision for Taxes on Income
Consolidated earnings before provision for taxes on income
decreased by $1.1 billion to $15.8 billion in 2009 as compared to the
$16.9 billion earned in 2008, a decrease of 6.9%. The decrease was
primarily related to lower sales, the negative impact of product
mix, lower interest income due to lower rates of interest earned and
restructuring charges of $1.2 billion. This was partially offset by
lower selling, marketing and administrative expenses due to cost
containment efforts across all the businesses. 2008 included pur-
chased in-process research and development (IPR&D) charges of
$0.2 billion and increased investment spending in selling, marketing
and administrative expenses utilized from the proceeds associated
with the divestiture of the Professional Wound Care business of
Ethicon, Inc. The increase in 2008 of 27.4% over the $13.3 billion
in 2007 was primarily due to lower IPR&D charges of $0.6 bil-
lion, gains from divestitures of $0.5 billion and higher litigation
gains of $0.5 billion versus restructuring charges of $0.7 billion
and the write-down of the NATRECOR® intangible asset of
$0.7 billion recorded in 2007. As a percent to sales, consolidated
earnings before provision for taxes on income in 2009 was 25.4%
versus 26.5% in 2008.
Major Medical Devices and Diagnostics Franchise Sales*:
% Change
_____________________
(Dollars in Millions) 2009 2008 2007 ’09 vs. ’08 ’08 vs. ’07
DEPUY® $ 5,372 5,136 4,698 4.6% 9.3
ETHICON ENDO-SURGERY® 4,492 4,286 3,834 4.8 11.8
ETHICON® 4,122 3,840 3,603 7.3 6.6
CORDIS® 2,679 2,988 3,314 (10.3) (9.8)
Vision Care 2,506 2,500 2,209 0.2 13.2
Diabetes Care 2,440 2,535 2,373 (3.7) 6.8
ORTHO-CLINICAL DIAGNOSTICS® 1,963 1,841 1,705 6.6 8.0
Total $23,574 23,126 21,736 1.9% 6.4
* Prior year amounts have been reclassified to conform to current presentation.