Johnson and Johnson 2015 Annual Report Download - page 89

In April 2015, Adimmune Corporation Ltd (Adimmune) commenced an arbitration in the International Court of Arbitration—
International Chamber of Commerce against Crucell Switzerland AG (now Janssen Vaccines AG) and Crucell Holland BV
(collectively, Crucell). Adimmune claims that Crucell breached certain agreements relating to the supply of flu antigen
when Crucell ceased purchasing flu antigen from Adimmune. In December 2015, Adimmune filed its Statement of Claim
seeking monetary damages.
In August 2015, two third-party payors filed a purported class action in the United States District Court for the Eastern
District of Louisiana against Janssen Research & Development, LLC, Janssen Ortho LLC, Janssen Pharmaceuticals, Inc.,
Ortho-McNeil-Janssen Pharmaceuticals, and Johnson & Johnson (as well as certain Bayer entities), alleging that the
defendants improperly marketed and promoted XARELTO®as safer and more effective than less expensive alternative
medications while failing to fully disclose its risks. The complaint seeks damages in an unspecified amount.
Johnson & Johnson or its subsidiaries are also parties to a number of proceedings brought under the Comprehensive
Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state, local or
foreign laws in which the primary relief sought is the cost of past and/or future remediation.
22. Restructuring
The Company announced restructuring actions in its Medical Devices segment to better serve the needs of patients and
customers in today’s evolving healthcare marketplace. The Company is undertaking actions to strengthen its go-to-market
model, accelerate the pace of innovation, further prioritize key platforms and geographies, and streamline operations while
maintaining high quality standards.
The Company estimates that, in connection with its plans, it will record pre-tax restructuring charges of approximately $2.0
billion to $2.4 billion, most of which are expected to be incurred by 2017. In the fiscal fourth quarter of 2015, the
Company recorded a pre-tax charge of $590 million, of which $81 million is included in cost of products sold. The $590
million restructuring charge consists of severance costs of $484 million, asset write-offs of $86 million and $20 million in
other costs, primarily related to supply contracts.
Additionally, as part of the plan, the Company expects that the restructuring actions will result in position eliminations of
approximately 4 to 6 percent of the Medical Devices segment’s global workforce over the next two years, subject to any
consultation procedures in countries, where required.
The Company estimates that approximately one half of the cumulative pre-tax costs will result in cash outlays, including
approximately $500 million of employee severance. Approximately one half of the cumulative pre-tax costs are non-cash,
relating primarily to facility rationalization, inventory write-offs and intangible asset write-offs.
The following table summarizes the severance charges and the associated spending for the fiscal year ended 2015:
(Dollars in Millions) Severance Asset Write-offs Other Total
2015 restructuring charge $484 86 20 590
Current year activity – 86 3 89
Reserve balance, January 3, 2016* $484 – 17 501
* Cash outlays for severance are expected to be substantially paid out over the next 24 months in accordance with the Company’s plans
and local laws.
Johnson & Johnson 2015 Annual Report •77