Johnson and Johnson 2006 Annual Report Download - page 7

C H A I R M A N ’ S L E T T E R
transformational—outcomes. The long
view also gives us the courage to walk away
from the negotiating table when we believe
the price tag on an acquisition will not
deliver a strong long-term return on the
shareholder’s investment.
Managing for the long term also
entails careful evaluation of the long-term
prospects for each of our businesses.
We regularly evaluate our business and
product portfolios; we make tough decisions
to curtail projects and sometimes divest
entire businesses.
Finally, managing for the long term—
along with our shared value system—has
helped earn us a reputation as a company
that is worthy of trust. Being trusted opens
doors to opportunities and growth. It opens
doors to prospective business partners with
new product ideas and new technologies . . .
doors to research institutions working
on the health advances of tomorrow.
It opens doors to policy makers and
advocacy groups who want to hear our
perspective on improving the health care
system in their countries (see stories on
pages 10 and 22).
Managing our business for the long term
allows us to focus on shaping our future
rather than simply reacting to change.
CONSUMER HEALTH CARE HIGHLIGHTS 2006 was
a momentous year for our consumer health
care businesses. The completion of the
acquisition of Pfi zer Consumer Healthcare
(PCH) in December solidifi ed our position
as the world’s premier consumer health care
company, extending our leadership from 13
to 22 consumer health categories. We have
the world’s most diverse consumer health
portfolio of large and sustainable platforms
for growth.
With approximately half of PCH sales
outside the U.S., the acquisition also expands our reach into
attractive high-growth markets. It brings us growing and
enduring brand names that complement our own portfolio
of strong and iconic brands. It broadens our oral health care
business into a signifi cant franchise with more than $1 billion
in sales. Further, it transforms our over-the-counter (OTC)
business, nearly doubling its size and solidifying our position
as the worldwide leader in non-prescription medicines.
The acquisition substantially diversifi es our OTC portfolio
and provides entry into high-potential categories such as
smoking cessation.
Strategically, this acquisition is vitally important, as the
market for consumer health care products becomes
increasingly attractive. Several demographic and social
shifts favor increased demand for consumer health products.
Consumers are taking greater interest in and responsibility
for their own health and well-being. Throughout the world,
they are turning to OTC medicines and other non-prescription
solutions to meet their health needs. Higher levels of dispos-
able income in developing nations are creating increased
demand for consumer health products in regions with
large populations.
Over and above the PCH acquisition, it was another good
year for our consumer health care businesses, which reached
nearly $10 billion in sales. In total, our consumer health
businesses introduced more than 400 new products and
signifi cant line extensions, helping to drive total sales growth
of 7.5 percent (see 2006 Year in Review: Consumer Health Care
on pages 24–25).
We believe the PCH acquisition, along with our access to
scientifi c knowledge and technologies fl owing from our
pharmaceuticals and medical devices and diagnostics
5
Founded on Shared Values The foundation of our strategic principles is a
deeply held, common set of values embodied in a 64-year-old document
called Our Credo. (See page 3.)
Broadly Based in Human Health Being broadly based in three diverse
segments of health care has helped us sustain a consistent superior
performance for Johnson & Johnson shareholders through the years.
Even more important, our breadth offers four key advantages that enable
us to elevate our performance. (See page 3.)
Decentralized Approach The decentralized manner in which we operate
our businesses marries the best qualities of smaller companies with the
resources, know-how and investment capital of a Fortune 50 company.
(See page 4.)
Managed for the Long Term Managing our business for the long term
keeps us focused on the underlying performance of our business. While
conscious of ongoing performance in all time frames, we focus on keeping
our businesses healthy for the long term. (See page 4.)
OUR FOUR STRATEGIC PRINCIPLES
Broadly Based
in
Human Health
Managed
for the
Long Term
Founded on Shared Values
Decentralized
Approach