Johnson and Johnson 2006 Annual Report Download - page 4

J O H N S O N & J O H N S O N 2 0 0 6 A N N U A L R E P O R T
most broadly based medical
devices and diagnostics
company, where we hold the
No. 1 or No. 2 position in most
of our major franchises.
In pharmaceuticals, we
strengthened our virology
business with the U.S. launch
of PREZISTA™ (darunavir)
for patients diagnosed with
treatment-resistant HIV and
continue to build a pipeline of
products targeting some of the
world’s most difficult-to-treat
diseases. We also signed several
important licensing agreements
that position us for growth
in therapeutic areas—such
as oncology, diabetes and
hepatitis C—where serious
unmet needs exist and where
the science is rapidly evolving.
Thanks to the dedication
of our people in advancing human health and well-being,
Johnson & Johnson delivered solid 2006 financial results
while taking aggressive steps to position the corporation
for future growth. Worldwide sales grew to a record
$53.3 billion, a growth rate of 5.6 percent with operational
growth of 5.3 percent.
Net earnings as adjusted of $11.1 billion grew by
9.2(1) percent, once again outpacing sales growth. We achieved
solid earnings growth in a year of slower sales growth by
continued focus on productivity and cost management.
Adjusted earnings per share of $3.76 grew by 10.9(1) percent,
a higher rate than earnings due to completion of our $5 billion
share repurchase program announced in March 2006.
STRONG GROWTH OPPORTUNITIES There has never been a more
exciting time to be the world’s most comprehensive and
broadly based health care company. Our products and services
bring high value; they are in increasing demand; and the
progress of science is opening new horizons for improving
human health and well-being.
Demographic and geographic trends will drive even
stronger demand for all categories of health care products in
the years ahead. Much of the developed world’s population
is aging, with an expectation of maintaining a full and active
life. Furthermore, the rapid growth in demand for health
products and services in developing nations is creating a global
expansion opportunity, especially for companies like ours
that have the capacity to execute in many markets. Our
products are sold in over 175 countries, making us ideally
suited to capitalize on this trend.
Equally important, the science of health and well-being
is evolving rapidly, thanks in part to the wealth of information
flowing from sequencing of the human genome. Moreover,
scientific breakthroughs outside of biology—in materials
science, electronics, computer science and other technologies
that underpin science-based health care solutions—are
also advancing at an unprec-
edented pace. This means
that opportunity for scientific
innovation—including
innovation through technology
convergence—has never been
more promising, especially
for broadly based companies
with the capacity to adopt
and commercialize new
technologies quickly.
Of course, systemic
increases in demand create
countervailing social forces,
including pressure on health
care budgets, political pressure
for access to and affordability
of health care services and
products, demand for low-cost
alternatives, increasing
competition and challenges
to intellectual property.
These forces impact virtually
all participants in the health care marketplace.
Our approach to addressing these underlying challenges is
to find the right path with all of our stakeholders to sustainable
long-term growth. At Johnson & Johnson, for over 60 years Our
Credo has focused our people on our responsibilities to a wide
range of stakeholders: customers, patients, family members,
employees, communities and shareholders. We have been long
acquainted with the need to find win-win propositions with
stakeholders all around the world. We also understand that
solid financial returns will come from doing this well.
A WINNING FORMULA FOR GROWTH Johnson & Johnson is a unique
company. And in a world in which change is the only constant,
Johnson & Johnson is an enduring company.
Our uniqueness goes well beyond the exceptional
long-term financial results we have delivered for many
decades. It derives from management philosophies that
define our unique business model and have guided us through
extraordinary changes in the science and economics of human
health over much of the past century. We are:
· Founded on shared values embodied in Our Credo.
· Broadly based in human health care.
· Decentralized in the way we operate the business.
· Managed for the long term.
Followed over time, these strategic principles are the
source of our enduring strength and our ability to adapt and
flourish in a dynamic, ever-evolving industry. They encourage
successful operation of our businesses for both the near
and the long term.
The chart on the next page shows the exceptionally
consistent sales growth we have attained over the longer term.
In 2006, we logged our 74th consecutive year of sales increases,
our 23rd consecutive year of earnings increases adjusted for
special charges and our 44th consecutive year of dividend
increases. This is a record matched by very few, if any,
companies in history.
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Opportunity for
scientific innovation
—including innovation
through technology
convergence—has never
been more promising,
especially for broadly
based companies with
the capacity to adopt
and commercialize new
technologies quickly.