Johnson and Johnson 2008 Annual Report Download

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Table of contents

  • Page 1
    aNNual REPORT 2008

  • Page 2
    ... Heals Touches Empowers Transforms Inspires Endures CARING ON THE COVER Around the world, we're focused on making life-changing, long-term differences in the prevention and treatment of HIV/AIDS. Our HIV franchise continues to grow as we discover, develop and provide access to medicines like...

  • Page 3
    ... to work each day driven by a shared passion: caring. Our caring touches the lives of people around the world. It motivates us to identify unmet health care needs, reach increasing numbers of patients and consumers, and create broader solutions- not only for the most serious medical conditions but...

  • Page 4
    ... care requires a multipronged approach for long-term success. Accordingly, we continue Office of Strategy & Growth is charged with this mission. As an initial step in the creation of a Wellness & Prevention to invest in internal development and to pursue selective licenses business platform, Johnson...

  • Page 5
    ... & Johnson enterprise. Our broad base of businesses working together creates this distinctive competitive advantage. And our diverse capabilities, expertise, talent and financial strength enable us to develop innovative solutions that advance health care around the world and build long-term success...

  • Page 6
    ..., sales of baby care products. DABAOâ„¢, the changing health care Ortho-Clinical Diagnostics, Inc. has access leading moisturizer in China, also contriblandscape. Our blend of to new delivery channels in point-of-care uted to this growth. and near-patient settings outside the Our Consumer business...

  • Page 7
    ... an experienced management team in take ingenuity and caring to new levels. For all these reasons, place with the right skills to capitalize on market conditions and I remain confident that Johnson & Johnson will continue to grow build businesses for long-term growth. stronger in the years ahead...

  • Page 8
    ... at Geisinger Medical Center in Danville, Pa., began using two new surgical devices in 2008 that are the latest innovations in HARMONIC® energy from Ethicon Endo-Surgery, Inc. Says Dr. Hess: "It makes a difference in the care I can provide for my patients." JOHNSON & JOHNSON 2008 ANNUAL REPORT 6

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  • Page 11
    ... think of their shower at home. PERSONALIZED SKIN CARE Many Johnson & Johnson consumer brands are part of people's daily health and hygiene rituals around the world. LE PETIT MARSEILLAISâ„¢, a trusted family brand with a 100-year heritage, leads the French market for personal cleansing. It was part...

  • Page 12
    ... the best and most effective medical products to our customers in China to serving many more patients and improving the quality of health care." During the Olympic Games, Johnson & Johnson helped better the health and well-being of families and communities through education and information, and...

  • Page 13
    11

  • Page 14
    ... to enroll in the study. Ustekinumab is a new biologic medicine for which Johnson & Johnson has worldwide marketing rights under the trade name sTElARA™. With his participation in the trial, "Troy went from having a significant percentage of his body involved with psoriasis to having significant...

  • Page 15

  • Page 16
    ...(See a map of worldwide sustainability projects on www. jnj.com.) In 2005, when the BioCork facility was being built, there was a strong commitment to reduce the new site's carbon footprint by approximately 20 percent. "From the initial design, we looked at a JOHNSON & JOHNSON 2008 ANNUAL REPORT 14

  • Page 17
    ... with innovative ideas and ways to reduce our carbon footprint." Johnson & Johnson Worldwide Environment, Health and Safety, and Category Winner in Sustainability for the 2009 Facility of the Year Award, from ISPE, INTERPHEX and Pharmaceutical Processing magazine. Khadra, who worked on building the...

  • Page 18
    .... JOHNSON & JOHNSON 2008 ANNUAL REPORT Madi uses the ONETOUCH® PING™ glucose management system, the first full-feature insulin pump with a meter-remote. Launched in 2008, it's the first integrated product from two of the companies that comprise the Diabetes Care Franchise: Animas Corporation...

  • Page 19
    ... with Diabetes (CWD) in October 2008. Diabetes Juvenil is one of the biggest online communities for Spanish-speaking families living with type 1 diabetes. Together, CWD and Diabetes Juvenil can help meet the needs of families affected by diabetes around the world. Diagnosed with type 1 diabetes at...

  • Page 20
    ... babies and living positive lives." THE POWER Of PaRTNERiNg m2m program leaders say that partnerships with business, government and other groups have allowed the program to grow and reach more women every day. Johnson & Johnson helped establish two m2m sites in 2005 and currently supports 15 sites...

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  • Page 22
    ... our growth strategies. This includes organic growth of iconic brands, new ventures and even emerging markets where the scientific and technical challenge is to develop and grow products that are effective, appealing and provide value to consumers across cultures and socioeconomic groups. Worldwide...

  • Page 23
    A SCIENCE-BASED APPROACh TO GROWTh CONNECTING CLINICALLY PROVEN EFFICACY WITh CONSUMER INSIGhTS MANY BRANDS RECOMMENDED BY hEALTh CARE PROFESSIONALS Oral Care Reaches New Markets Expanding Our Presence in China The Johnson & Johnson Healthcare Products Division of McNEIL-PPC, Inc. continues to be...

  • Page 24
    ... entities while pursuing innovative platforms and technologies for drug delivery. Here are highlights of significant regulatory milestones in 2008. i MMu N O lO gY • sTElARA ™ (ustekinumab) is a new biologic medicine for which Johnson & Johnson has worldwide marketing rights. It has been...

  • Page 25
    ... market the drug, which is licensed from and co-developed with Basilea Pharmaceutica Ltd., as ZEVTERA™ in Switzerland. CON Ti N uEd gROW TH Pharmaceutical Segment Sales Sales by Major Product (in billions of dollars)* $7.3 +1 1 % OThER ACIPhEX®/PARIET® $1.2 (15%) 2008 Sales: $24.6 billion...

  • Page 26
    ... both companies share a commitment to science, health and wellness. Mentor will become the cornerstone of a broader Johnson & Johnson leadership strategy for aesthetic medicine, serving both consumers and medical professionals. Ethicon Endo-Surgery, Inc. continued to drive business growth in 2008...

  • Page 27
    ... billions of dollars)* DIABETES CARE ETHICON ENDO-SURGERY® $4.3 +12% DEPUY® $5.0 +9% $2.5 2008 Sales: +7% $23.1 billion Growth Rate: 6.4% ORTHO-CLINICAL DIAGNOSTICS® $1.8 +8% ETHICON® $3.9 +7% VISION CARE $2.5 +13% * includes rounding CORDIS® $3.1 (9%) Johnson & Johnson Vision Care...

  • Page 28
    ... continuous innovation. LifeScan introduced the ONETOUCH® UlTRAlINK™ Blood Glucose Meter as the new, exclusive meter with wireless communications for use with Medtronic insulin pumps in the United States. It uses Medtronic-certified wireless technology to transmit glucose readings directly to...

  • Page 29
    ..., we acquired LGE Performance Systems, Inc., known as HUMAN PERFORMANCE INsTITUTE â„¢, which develops science-based training programs to improve employee engagement and YEAR IN REVIEW STaYi Ng HEalT HY Judy Herlich, an associate scientist at J&JPRD, uses many of her company's wellness programs to...

  • Page 30
    ... than 100 years. This legacy of philanthropy is guided by Our Credo responsibility to the communities in which we live and work, and to the world community as well. We work with hundreds of partners worldwide as we strive to make life-changing, long-term differences in human health. In India, Nepal...

  • Page 31
    ... in Spanish. Located at www.access2wellness.com, this Spanish-language service provides access to more than 1,000 free and discounted prescription medications for uninsured and underinsured people who qualify. ACCEss2 wEllNEss™ is divided into sections developed to address the specific needs...

  • Page 32
    ...Institute of Technology Fourth Row, Left to Right l EO f. Mu l l iN Retired Chairman and Chief Executive Officer, Delta Air Lines, Inc. Wil l iaM d. PEREZ Retired President and Chief Executive Officer, Wm. Wrigley Jr. Company Fifth Row, Left to Right CHaRl ES P RiNCE Chairman, Sconset Group; Vice...

  • Page 33
    ... retirement, pension, long-term incentive, savings, health and welfare plans that cover the Company's employees. Arnold G. Langbo, Chairman Michael M. E. Johns, M.D. William D. Perez Charles Prince The Public Policy Advisory Committee reviews the Company's policies, programs and practices on public...

  • Page 34
    ... Counsel Executive Committee k aY E i. fOSTE R- C H E Ek Vice President, Human Resources Executive Committee CO l l E EN a . g O g g iN S Vice President, Office of Strategy & Growth Executive Committee Worldwide Chairman, Consumer Group Executive Committee COMPaNY gRO uP CHai R ME N JOaQu iN...

  • Page 35
    ... Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Management's Report on Internal Control over Financial Reporting 70 Summary of Operations and Statistical Data 1998-2008 71 Shareholder Return Performance...

  • Page 36
    ...700 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the health care field. The Company conducts business in virtually all countries of the world with the primary focus on products related to human health and well-being. The Company is...

  • Page 37
    ...JOHNSON'S® Adult product lines, as well as new products related to the acquisition of Beijing Dabao Cosmetics Co. Ltd. The Baby Care franchise sales grew by 11.7% to $2.2 billion in 2008. This growth was primarily in international markets across all product lines. The Women's Health franchise sales...

  • Page 38
    ... colitis and use in the treatment of rheumatoid arthritis, achieved sales of $3.7 billion in 2008, with growth of 12.7% over prior year. Growth was driven by increased demand due to the introduction of new clinical data and overall market growth. REMICADE® is competing in a market which is...

  • Page 39
    ...year. This growth was mainly driven by the HARMONIC® technology business due to the success of newly launched products and the underlying strength of Major Medical Devices and Diagnostics Franchise Sales*: (Dollars in Millions) Analysis of Consolidated Earnings Before Provision for Taxes on Income...

  • Page 40
    ... Control Systems, Inc., Ensure Medical, Inc., ColBar LifeScience Ltd., Hand Innovations LLC and Future Medical Systems S.A. The charge related to the Consumer Healthcare business acquired from Pfizer Inc. accounted for $320 million before tax of the IPR&D charges and was included in the operating...

  • Page 41
    ... the Consumer Healthcare business of Pfizer Inc. and the Common Stock repurchase program announced in 2007. Interest income in 2006 increased by $342 million due primarily to higher rates of interest, as well as a higher average cash balance, despite the $5.0 billion Common Stock repurchase program...

  • Page 42
    ... use related to changes in assets and liabilities net of effects from acquisitions of $0.8 billion. In 2008, the Company continued to have access to liquidity through the commercial paper market. For additional details on borrowings, see Note 6 to the Consolidated Financial Statements. The Company...

  • Page 43
    ... projected market conditions in the various markets served. The Company evaluates market conditions for products or groups of products primarily through the analysis of wholesaler and other third-party sell-through and market research data, as well as internally generated information. Sales returns...

  • Page 44
    ...the discount rate, expected return on plan assets, expected salary increases and health care cost trend rates. See Note 13 to the Consolidated Financial Statements for further details on these rates and the effect a rate change would have on the Company's results of operations. Stock Options: During...

  • Page 45
    ... the Consolidated Financial Statements for further information regarding legal proceedings. COMMON STOCK MARKET PRICES The Company's common stock is listed on the New York Stock Exchange under the symbol JNJ. The composite market price ranges for Johnson & Johnson common stock during 2008 and 2007...

  • Page 46
    Consolidated Balance Sheets At December 28, 2008 and December 30, 2007 (Dollars in Millions Except Share and Per Share Data) (Note 1) Johnson & Johnson and Subsidiaries 2008 2007 Assets Current assets Cash and cash equivalents (Notes 1 and 14) Marketable securities (Notes 1 and 14) Accounts ...

  • Page 47
    ...76 3.73 Sales to customers Cost of products sold Gross profit Selling, marketing and administrative expenses Research expense Purchased in-process research and development (Note 17) Restructuring (Note 22) Interest income Interest expense, net of portion capitalized (Note 3) Other (income) expense...

  • Page 48
    ... on securities Employee benefit plans Losses on derivatives & hedges Reclassification adjustment Total comprehensive income Balance, December 30, 2007 Net earnings Cash dividends paid Employee compensation and stock option plans Conversion of subordinated debentures Repurchase of common stock Other...

  • Page 49
    ... 2008 2007 2006 Cash flows from operating activities Net earnings Adjustments to reconcile net earnings to cash flows from operating activities: Depreciation and amortization of property and intangibles Stock based compensation Purchased in-process research and development Intangible asset...

  • Page 50
    ... 118,700 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the health care field. The Company conducts business in virtually all countries of the world and its primary focus is on products related to human health and well-being. The...

  • Page 51
    ... projected market conditions in the various markets served. The Company evaluates market conditions for products or groups of products primarily through the analysis of wholesaler and other third-party sell-through and market research data, as well as internally generated information. Sales returns...

  • Page 52
    ... on the Company's financial performance; (2) protect the Company's cash flow from adverse movements in foreign exchange rates; (3) ensure the appropriateness of financial instruments; and (4) manage the enterprise risk associated with financial institutions. PRODUCT LIABILITY INCOME TAXES The...

  • Page 53
    ... related obligations of $136 million and $481 million for 2008 and 2007, respectively, are included in other assets on the consolidated balance sheet. The Company has access to substantial sources of funds at numerous banks worldwide. In September 2008, the Company secured a new 364-day and 5-year...

  • Page 54
    ...) 13,719 U.S. International Earnings before taxes on income: Tax rates: U.S. statutory rate Puerto Rico and Ireland operations Research and orphan drug tax credits U.S. state and local International subsidiaries excluding Ireland U.S. manufacturing deduction In process research and development (IPR...

  • Page 55
    .... In consolidating international subsidiaries, balance sheet currency effects are recorded as a component of accumulated other comprehensive income. This equity account includes the results of translating all balance sheet assets and liabilities at current exchange rates, except for those located in...

  • Page 56
    ... Johnson & Johnson options with a life of 2 years. Historical data is used to determine the expected life of the option. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. The average fair value of options granted was $7.66, $11.67 and $12.22 in 2008, 2007...

  • Page 57
    ... 861 2,045 132 2,177 (Dollars in Millions) Sales to Customers(2) _____ 2008 2007 2006 Long-Lived Assets(8) _____ 2008 2007 2006 United States Europe Western Hemisphere excluding U.S. Asia-Pacific, Africa Segments total General corporate Other non long-lived assets Worldwide total (1) $32,309 16...

  • Page 58
    ... health care benefits in advance and has the right to modify these plans in the future. The Company uses the date of its consolidated financial statements (December 28, 2008 and December 30, 2007, respectively) as the measurement date for all U.S. and international retirement and other benefit plans...

  • Page 59
    ... year. Retirement Plans _____ 2008 2007 2006 Other Benefit Plans _____ 2008 2007 2006 (Dollars in Millions) U.S. Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in compensation levels International Benefit Plans Discount rate Expected long-term rate...

  • Page 60
    ... plan assets Effect of exchange rates Plan assets at fair value - end of year Funded status at - end of year* Amounts Recognized in the Company's Balance Sheet consist of the following: Non-current assets Current liabilities Non-current liabilities Total recognized in the consolidated balance sheet...

  • Page 61
    ...nature of the liabilities and considering the demographic composition of the plan participants (average age, years of service and active versus retiree status). The Company's plans are considered non-mature plans and the long-term strategic asset allocations are consistent with these types of plans...

  • Page 62
    ... developer of in vitro diagnostic technologies for use in point-of-care and near-patient settings; Beijing Dabao Cosmetics Co., Ltd., a company that sells personal care brands in China; SurgRx, Inc., a privately held developer of the advanced bipolar tissue sealing system used in the ENSEAL® family...

  • Page 63
    ... fluid management systems; Vascular Control Systems, Inc., a privately held company focused on developing medical devices to treat fibroids and to control bleeding in obstetric and gynecologic applications; Groupe Vendôme S.A., a privately held French marketer of adult and baby skin care products...

  • Page 64
    ... was calculated using cash flow projections discounted for the risk inherent in such projects. A probability of success factor of 75% was used to reflect inherent clinical and regulatory risk and the discount rate applied was 22%. With the exception of the Consumer Healthcare business of Pfizer Inc...

  • Page 65
    ... AGAINST FILERS OF ABBREVIATED NEW DRUG APPLICATIONS (ANDAs) The following chart indicates lawsuits pending against generic firms that filed Abbreviated New Drug Applications (ANDAs) seeking to market generic forms of products sold by various subsidiaries of the Company prior to expiration of...

  • Page 66
    ... TRI-CYCLEN® LO, on January 22, 2008, the Company's subsidiary Ortho Women's Health & Urology, a Division of Ortho-McNeil-Janssen Pharmaceuticals, Inc., and Barr agreed to a non-binding term sheet to settle the litigation, which settlement discussions are still underway. The trial court postponed...

  • Page 67
    ...Attorney's Office, District of Massachusetts, seeking documents related to sales and marketing of eight drugs to Omnicare, Inc., a manager of pharmaceutical benefits for long-term care facilities. The Johnson & Johnson subsidiaries involved responded to the subpoena. Several employees of the Company...

  • Page 68
    ... to several employees of Johnson & Johnson. In May 2007, the New York State Attorney General issued a subpoena seeking information relating to the marketing and safety of PROCRIT®. The Company is responding to these requests. In April 2007, the Company received two subpoenas from the Office of the...

  • Page 69
    ... underlying stock options for 2008, 2007 and 2006, respectively, as the exercise price of these options was greater than their average market value, which would result in an anti-dilutive effect on diluted earnings per share. Balance at January 1, 2006 Employee compensation and stock option plans...

  • Page 70
    ... its enterprise-wide functions such as human resources, finance and information technology to support growth across the business, while also leveraging its scale more effectively in areas such as procurement to benefit its operating companies. Additionally, as part of this program the Company plans...

  • Page 71
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was...

  • Page 72
    ... expense(3) Supplementary balance sheet data: Property, plant and equipment, net Additions to property, plant and equipment Total assets Long-term debt Operating cash flow Common stock information Dividends paid per share Shareholders' equity per share Market price per share (year-end close) Average...

  • Page 73
    ...each of the Company's Common Stock, the Standard & Poor's 500 Stock Index, the Standard & Poor's Pharmaceutical Index and the Standard & Poor's Health Care Equipment Index and that all dividends were reinvested. 5-Year Cumulative Total Shareholder Return (2003-2008) $160 Johnson & Johnson S&P 500...

  • Page 74
    ...Dollars in Millions Except Per Share Data) 2008 2007 2006 '08 vs. '07 % Change '07 vs. '06 % Change Earnings before provision for taxes on income - as reported Purchased in-process research & development (IPR&D) Net gain on fourth quarter litigation Restructuring charges NATRECOR® intangible asset...

  • Page 75
    ... for employees and Code of Business Conduct & Ethics for Members of the Board of Directors and Executive Officers. Copies of these documents are available to shareholders without charge upon written request to the Secretary at the Company's principal address. Listed on New York Stock Exchange Stock...

  • Page 76
    ... and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products...