Johnson and Johnson 2010 Annual Report Download - page 35

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 33
PREZISTA® (darunavir), INTELENCE® (etravirine), NUCYNTA®
(tapentadol) and INVEGA SUSTENNA®(paliperidone palmitate).
This growth was partially offset by lower sales of DURAGESIC®/
Fentanyl Transdermal (fentanyl transdermal system) and
RISPERDAL®/risperidone oral due to continued generic competition.
During 2010, several new compounds were filed for regulatory
approval. These included abiraterone acetate, an investigational
agent for the treatment of metastatic, advanced prostate cancer
which was granted priority review in the U.S. and accepted for accel-
erated assessment in Europe, and telaprevir, developed in collabora-
tion with Vertex Pharmaceuticals Incorporated, for hepatitis C
which was filed and accepted for accelerated assessment in Europe.
TMC 278 (rilpivirine) for HIV in treatment-naïve patients was
filed in both the U.S. and Europe. Rivaroxaban, an anti-coagulant
co-developed with Bayer HealthCare, has been filed in the U.S. for the
prevention of stroke in patients with atrial fibrulation. The Company
also responded to the FDA complete response letter for its review of
the rivaroxaban filing for preventing deep vein thrombosis and pul-
monary embolism following total knee and hip replacement surgery.
Pharmaceutical segment sales in 2009 were $22.5 billion, a
decrease of 8.3% from 2008, with an operational decline of 6.1%
and the remaining 2.2% due to the negative impact of currency fluc-
tuations. U.S. sales were $13.0 billion, a decrease of 12.1%. Interna-
tional sales were $9.5 billion, a decrease of 2.6%, which included
3.0% operational growth and a decrease of 5.6% resulting from the
negative impact of currency fluctuations.
MEDICAL DEVICES AND DIAGNOSTICS SEGMENT
The Medical Devices and Diagnostics segment achieved sales of
$24.6 billion in 2010, representing an increase of 4.4% over the
prior year, with operational growth of 3.4% and a positive currency
impact of 1.0%. U.S. sales were $11.4 billion, an increase of 3.6%
over the prior year. International sales were $13.2 billion, an increase
of 5.0% over the prior year, with growth of 3.0% from operations
and a positive currency impact of 2.0%.
The DePuy franchise achieved sales of $5.6 billion in 2010, a
4.0% increase over the prior year. This growth was primarily due
to an increase in the knee and Mitek sports medicine product lines,
and outside the U.S., growth of the hip product line. Pressure on
pricing continued as a result of economic trends, however new
product launches and incremental sales of newly acquired products
from Micrus Endovascular Corporation have mitigated some of
the impact. In August 2010, DePuy Orthopaedics, Inc. (DePuy)
announced a worldwide voluntary recall of its ASR™XL Acetabular
System and DePuy ASR™Hip Resurfacing System used in hip
replacement surgery, principally sold between 2003 and 2009.
The Ethicon Endo-Surgery franchise achieved sales of $4.8 bil-
lion in 2010, a 5.9% increase over the prior year. This was attributable
to growth in the endoscopy, Advanced Sterilization, HARMONIC®,
SurgRx and ENSEAL®product lines. The growth was partially offset
by the divestiture of the Breast Care business in the third quarter
of 2010.
The Ethicon franchise achieved sales of $4.5 billion in 2010, a
9.2% increase over the prior year. The growth was attributable to
sales of newly acquired products from Acclarent, Inc. in addition to
growth in the sutures, Mentor, biosurgical, Women’s Health and
Urology, and mesh product lines.
The Vision Care franchise achieved sales of $2.7 billion in
2010,a 6.9% increase over prior year primarily driven by 1-DAY
ACUVUE®TruEye™, ACUVUE®OASYS™for Astigmatism, and
1-DAY ACUVUE®MOIST®, partially offset by lower sales of
reusable lenses. During 2010, the Company and Novartis AG, CIBA
VISION Corporation and CIBA VISION AG agreed to resolve all
pending patent litigation on a worldwide basis enabling the
Company to reenter the markets in France and the Netherlands.
Sales in the Cordis franchise were $2.6 billion, a decline of
4.7% 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 strong growth
of the Biosense Webster business.
Sales in the Diabetes Care franchise were $2.5 billion in 2010, a
1.2% increase over the prior year. This was primarily attributable to
growth in the U.S. and Asia Pacific region partially offset by a sales
decline in Europe.
The Ortho-Clinical Diagnostics franchise achieved sales of
$2.1billion in 2010, a 4.6% increase over the prior year. Growth was
primarily attributable to sales of the VITROS®5600 and 3600
analyzers partially offset by lower sales in donor screening primarily
due to more selective screening for Chagas testing in the U.S.
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.
Analysis of Consolidated Earnings
Before Provision for Taxes on Income
Consolidated earnings before provision for taxes on income
increased by $1.1 billion to $16.9 billion in 2010 as compared to the
$15.8 billion earned in 2009, an increase of 7.6%. The increase was
primarily related to lower selling, marketing and administrative
expenses due to cost containment actions resulting from the
restructuring plan initiated and implemented in 2009, income from
litigation settlements and the gain on the divestiture of the Breast
Care business of Ethicon Endo-Surgery, Inc. This was partially offset
by costs associated with product liability expense and the impact of
the OTC and DePuy ASR™Hip recalls. Additional offsets were lower
Major Medical Devices and Diagnostics Franchise Sales:
% Change
_____________________
(Dollars in Millions) 2010 2009 2008 ’10 vs. ’09 ’09 vs. ’08
DEPUY®$5,585 5,372 5,136 4.0% 4.6
ETHICON ENDO-SURGERY®4,758 4,492 4,286 5.9 4.8
ETHICON®4,503 4,122 3,840 9.2 7.3
Vision Care2,680 2,506 2,500 6.9 0.2
CORDIS®2,552 2,679 2,988 (4.7) (10.3)
Diabetes Care2,470 2,440 2,535 1.2 (3.7)
ORTHO-CLINICAL DIAGNOSTICS®2,053 1,963 1,841 4.6 6.6
Total $24,601 23,574 23,126 4.4% 1.9