jnj earnings presentation 4q2015
DESCRIPTION
$JNJ Earnings 4Q 2015TRANSCRIPT
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4th Quarter 2015
Earnings Call Presentation
January 26, 2016
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Louise Mehrotra
Vice President
Investor Relations
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Note on Forward-Looking Statements These presentations contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, future operating and financial performance, product development, market position, business strategy and restructuring plans. The viewer is
cautioned not to rely on these forward-looking statements. These statements are based on current expectations of future events. If underlying
assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the expectations and
projections of Johnson & Johnson. Risks and uncertainties include, but are not limited to, economic factors, such as interest rate and currency exchange
rate fluctuations; competition, including technological advances, new products and patents attained by competitors; challenges and uncertainties inherent
in new product development, including uncertainty of clinical success and obtaining regulatory approvals; uncertainty of commercial success for new and
existing products; impact of business combinations and divestitures; challenges to patents; the impact of patent expirations; the ability of the company to
successfully execute strategic plans, including on-going restructuring plans; any required consultation procedures relating to restructuring workforce
actions, the potential that the expected benefits and opportunities related to the restructuring may not be realized or may take longer to realize than
expected; market conditions and the possibility that the share repurchase program may be suspended or discontinued; significant adverse litigation or
government action, including related to product liability claims; changes to applicable laws and regulations, including global health care reforms; trends
toward health care cost containment; changes in behavior and spending patterns or financial distress of purchasers of health care products and services;
financial instability of international economies and legal systems and sovereign risk; manufacturing difficulties or delays, internally or within the supply
chain; product efficacy or safety concerns resulting in product recalls or regulatory action; increased scrutiny of the health care industry by government
agencies; and the potential failure to meet obligations in compliance agreements with government bodies. A further list and description of these risks,
uncertainties and other factors can be found in Johnson & Johnsons Annual Report on Form 10-K for the fiscal year ended December 28, 2014, including Exhibit 99 thereto, and the companys subsequent filings with the Securities and Exchange Commission. Copies of these filings are available online at www.sec.gov, www.investor.jnj.com, or on request from Johnson & Johnson. Any forward-looking statement made in these presentations speaks only as
of the date of these presentations. Johnson & Johnson does not undertake to update any forward-looking statements as a result of new information or
future events or developments.
Note on Non-GAAP Financial Measures These presentations refer to certain non-GAAP financial measures. These non-GAAP financial measures should not be considered replacements for, and
should be read together with, the most comparable GAAP financial measures.
A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the accompanying
financial schedules of the earnings release and the Investor Relations section of the Companys website at www.investor.jnj.com.
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Strategic Partnerships, Collaborations and Licensing Arrangements During the course of this mornings presentations, we will discuss a number of products and compounds developed in collaboration with strategic partners or licensed from other companies. Following is an acknowledgement of those relationships.
Neuroscience: INVEGA SUSTENNA/XEPLION includes technology licensed from Alkermes, Inc.; RISPERDAL CONSTA developed in collaboration with Alkermes
Cardiovascular/Metabolism: XARELTO co-developed with Bayer HealthCare; INVOKANA/INVOKAMET licensed from Mitsubishi Tanabe Pharma Corporation
Immunology: REMICADE and SIMPONI marketing partners are Schering-Plough (Ireland) Company, a subsidiary of Merck & Co., Inc. and Mitsubishi Tanabe Pharma Corporation; sirukumab developed in collaboration with GlaxoSmithKline PLC
Infectious Diseases & Virology: OLYSIO in US, GALEXOS in Canada and SOVRIAD in Japan developed in collaboration with Medivir AB; PREZCOBIX / REZOLSTA fixed-dose combination and Rilpivirine +F/TAF FDC developed in collaboration with Gilead Sciences, Inc.
Oncology: VELCADE developed in collaboration with Millennium: The Takeda Oncology Company; IMBRUVICA developed in collaboration with Pharmacyclics, Inc.; DARZALEX licensed from Genmab A/S; ZYTIGA licensed from BTG International Ltd.; YONDELIS developed in collaboration with Pharma Mar S.A.
Orthopaedics: MONOVISC/ORTHOVISC licensed from Anika Therapeutics, Inc.
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4th Quarter 2015 Sales by Geographic Area
% Change
TOTAL COMPANY 4Q 2015 4Q 2014 Reported Operational*
U.S. $9.3 $8.6 8.0 8.0
Europe 4.0 4.6 (12.2) 0.8
Western Hemisphere
(ex U.S.) 1.4 1.8 (19.1) 2.8
Asia-Pacific, Africa 3.1 3.3 (7.1) 0.9
International 8.5 9.7 (11.7) 1.2
Worldwide (WW) $17.8 $18.3 (2.4) 4.4
* Excludes impact of translational currency
$ U.S. Billions, except EPS
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4th Quarter 2015 Financial Highlights
* Excludes impact of translational currency
** Non-GAAP measure; excludes intangible amortization expense and special items; see reconciliation
$ U.S. Billions, except EPS
4Q 2015 4Q 2014 % Change
Sales $17.8 $18.3 (2.4) Total
4.4 Ops*
GAAP Earnings 3.2 2.5 27.5
GAAP EPS 1.15 0.89 29.2
Adjusted Earnings** 4.0 3.9 4.0
Adjusted EPS** 1.44 1.37 5.1 Total
12.4 Ops*
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2015 2014 % Change
Sales $70.1 $74.3 (5.7) Total
1.8 Ops*
GAAP Earnings 15.4 16.3 (5.6)
GAAP EPS 5.48 5.70 (3.9)
Adjusted Earnings** 17.4 18.3 (4.8)
Adjusted EPS** 6.20 6.39 (3.0) Total
5.8 Ops*
Free Cash Flow*** 15.9 14.8 7.4
Full Year 2015 Financial Highlights
* Excludes impact of translational currency
** Non-GAAP measure; excludes special items; see reconciliation
*** Non-GAAP measure; defined as operating cash flow less capital spending; estimated as of 1/26/16
$ US Billions, except EPS
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Consumer Highlights 4th Quarter 2015
Key Drivers of Operational Performance*
Skin Care
U.S. negatively impacted by timing of shipments and
inventory builds
OUS new products partially offset by soft sales in China
Women's Health
OUS new products & sales momentum
Wound Care/Other
Excluding divestitures +~6.5%
Total Consumer
Excl. net impact of Acq./Div.**, WW growth +4.7%, U.S.
+1.7%, OUS +6.3%
Additional shipping days contributed ~4% to J&J WW
growth
Baby Care
New product launches partially offset by soft sales in China
Oral Care
LISTERINE successful marketing campaigns &
geographic expansion
OTC
U.S. ZYRTEC strong consumption & re-launched
digestive health products
U.S. analgesics +3% share growth partially offset by slow
start to flu season U.S. adult $ share ~13.5%
U.S. pediatric $ share ~45.5%
OUS growth driven by upper respiratory including inventory
build & anti-smoking product
re-launches
Sales: $3.3B Ops Change*: WW 1.8%, U.S. (4.9%), Intl 5.5%
CONSUMER
SEGMENT
TOTAL WW
SALES $MM
REPORTED
% GROWTH
OPERATIONAL
% GROWTH*
Baby Care $484 (7.6%) 3.7%
Oral Care 408 (1.4) 8.2
OTC 1,045 (2.6) 8.2
Skin Care 871 (8.9) (1.1)
Womens Health
283 (8.1) 7.4
Wound
Care/Other 229 (30.8) (26.7)
Total
Consumer $3,320 (7.9%) 1.8%
* Excludes impact of translational currency ** Non-GAAP measure; see reconciliation
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Pharmaceutical Highlights 4th Quarter 2015
Key Drivers of Operational Performance*
Oncology (cont.)
Strong launch of DARZALEX
ZYTIGA strong U.S. market growth
partially offset by share decline
OUS - strong sales in Asia
Pac/Africa; Canada and LA partially
offset by lower sales in Europe due to
increased competition
Cardiovascular / Metabolism /
Other**
INVOKANA/INVOKAMET achieved
6.5% TRx share in defined U.S. T2D
market and ~13%TRx share with
endocrinologists
XARELTO continued novel oral
anticoagulant U.S. market leadership;
16.1% TRx share of broader oral
anticoagulant market
Total Pharmaceutical
Excl. net impact of Acq/Div and Hep C
sales***, WW growth +11.1%, U.S.
+21.0% and OUS -0.2%
Additional shipping days contributed
~4% to J&J WW growth
Immunology
Strong U.S. immunology market
growth and increased penetration
of SIMPONI ARIA
OUS - Strong results for STELARA
due to increased penetration of PsA
indication partially offset by lower
sales to distribution partner for
REMICADE and SIMPONI
Infectious Diseases
Lower sales of hepatitis C products
due to competitive launches
Increased sales of HIV products with
introduction of PREZCOBIX
Neuroscience
Long-acting injectable products
growth of +13% WW ;+30% U.S.;
uptake of INVEGA TRINZA
CONCERTA positive impact of
reclassification of generic competitor
products in U.S.
Oncology
Sales of IMBRUVICA due to
strong patient uptake, additional
country launches; US share leader
2nd line CLL & MCL
Sales: $8.1B Ops Change*: WW 6.5%, U.S. 12.7%, Intl (0.9%)
PHARMACEUTICAL
SEGMENT
TOTAL WW
SALES $MM
REPORTED
% GROWTH
OPERATIONAL
% GROWTH*
Immunology $2,771 7.5% 11.7%
Infectious Diseases 801 (25.6) (20.4)
Neuroscience 1,601 (3.0) 3.9
Oncology 1,273 5.0 14.8
Cardiovascular/
Metabolism/ Other ** 1,618 9.2 13.0
Total Pharma $8,064 0.8% 6.5%
* Excludes impact of translational currency
** Previously referred to as Other *** Non-GAAP measure; see reconciliation
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Medical Devices Highlights 4th Quarter 2015
Key Drivers of Operational Performance*
Orthopaedics (cont.)
Results OUS were negatively impacted by softer demand and a reduction in
inventory levels primarily in China
Pricing pressure across major categories partially offset by mix for Trauma & Spine
Surgery
Advanced endocutters +15%, biosurgicals +9%, energy +5%
General Lower sales of womens health & urology partially offset by growth in
sutures & topical adhesives
Specialty growth driven by ASP & Mentor products
Vision Care
Strong growth in U.S. due to new product introductions & trade inventory build
Total Medical Devices
Excl. net impact of Acq./Div.**, WW growth +5.8%, U.S. +8.0%, OUS +3.9%
Additional shipping days contributed ~4% to J&J WW growth
Cardiovascular
WW electrophysiology +19%; driven by strong growth of THERMOCOOL
SMARTTOUCH Contact Force
Sensing Catheter
Impacted by divestiture of Cordis business in 4Q 2015
Diabetes
ANIMAS VIBE strong double digit growth & SMBG volume growth
partially offset by lower price
Diagnostics
Divestiture of Ortho-Clinical Diagnostics in June 2014
Orthopaedics
Hips - driven by primary stem platform
Knees - strong sales of ATTUNE Knee System
Trauma global launch of TFNA nail
Spine & Other - ORTHOVISC
/MONOVISC strong contributor to
growth; WW Spine (2%), U.S. +3%,
OUS (9%),
Sales: $6.4B Ops Change*: WW 3.4%, U.S. 6.7%, Intl 0.6%
MEDICAL DEVICES
SEGMENT
TOTAL WW
SALES $MM
REPORTED
% GROWTH
OPERATIONAL
% GROWTH*
Cardiovascular $439 (21.3%) (16.4%)
Diabetes 480 (6.6) 2.2
Diagnostics 24 71.4 N/M
Orthopaedics 2,423 (0.7) 4.5
Hips 354 1.1 6.4
Knees 405 1.0 5.5
Trauma 644 0.8 6.3
Spine & Other 1,020 (2.9) 2.4
Surgery 2,413 (2.5) 4.7
Advanced 870 2.5 9.7
General 1,147 (8.5) (1.0)
Specialty 396 5.9 12.4
Vision Care 648 0.3 8.4
Total Med Dev $6,427 (3.3%) 3.4%
* Excludes impact of translational currency ** Non-GAAP measure; see reconciliation
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Important Developments in 4th Quarter 2015 Pharmaceutical:
U.S. Food and Drug Administration (FDA) approval of DARZALEX (daratumumab) for the treatment of double refractory multiple myeloma
U.S. FDA approval of YONDELIS (trabectedin) for the treatment of patients with unresectable or metastatic liposarcoma or leiomyosarcoma
European Commission approval of EDURANT (rilpiravine) in combination with other anti-retroviral agents, for treatment-nave adolescent patients aged 12 to 18 years with human immunodeficiency virus-1 (HIV-1) infection
U.S. FDA New Drug Application (NDA) submitted for INVOKAMET XR, a once-daily therapy combining fixed doses of canagliflozin and metformin hydrochloride extended release for the treatment of adults with type 2 diabetes
U.S. FDA and European Medicines Agency (EMA) submissions for STELARA (ustekinumab) for the treatment of adult patients with moderately to severely active Crohn's disease
U.S. FDA and EMA submissions for IMBRUVICA (ibrutinib) for patients with relapsed or refractory chronic lymphocytic leukemia (CLL) or small lymphocytic lymphoma in combination with bendamustine and rituximab; EMA submission for patients with relapsed/refractory mantle cell lymphoma
European Extension Marketing Authorization Application submitted for IMBRUVICA (ibrutinib) for treatment-nave chronic lymphocytic leukemia
Completion of the acquisition of Novira Therapeutics, Inc.
Medical Devices:
U.S. FDA approved the pediatric indication for the Animas Vibe insulin pump
Completion of the acquisition of Coherex Medical, Inc.
The company announced the restructuring of certain Medical Devices businesses
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Alex Gorsky
Chairman of the Board
&
Chief Executive Officer
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Our Responsibility to Help Lead
the Way to A Better Future
Growing Global Challenge:
Aging population
Rising costs in health care
Growing middle classes in emerging economies
Access to quality health care
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BROAD GLOBAL
FOOTPRINT
PARTNER OF
CHOICE
ENTERPRISE
CAPABILITIES &
EFFICIENCIES
BREAKTHROUGH
INNOVATION
STRONG
FINANCIAL
PERFORMANCE
Our Broad-Base Advantage
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Creating Value Through Global Reach
& Local Focus
New operating models
Strong relationships with local governments/health systems;
medical communities
Robust investments in market appropriate portfolios
and R&D centers
Strategic acquisitions and partnerships with local players
to further accelerate growth
to reach more consumers and patients
Building on a strong position
2015 Sales: $70.1B
80% Developed
20% Emerging
51% US
49% OUS
BROAD GLOBAL
FOOTPRINT
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Johnson & Johnson as the Partner of Choice
Johnson & Johnson
Differentiators:
Scale and depth
Financial flexibility
Breadth of business and health care expertise
Hospital Systems
Early-Stage Innovators
Information Technology Companies
CUSTOMER
SOLUTIONS
Public Health
Organizations
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Insulin Glucagon
Somatostatin DAPI
Cell Therapy
for Diabetes
Developing a
combination biologic-
device product with
insulin producing cells
encapsulated in an
immune-isolation device
Obesity / Diabetes
Leveraging innovative
device, pharma and
consumer capabilities
to treat and / or
prevent obesity and
diabetes
Eye Health
Bringing together novel
pharma / surgical / cell
based therapies and
vision care insights
and technologies for
a comprehensive
approach
Cell Therapy for AMD
Bringing together
novel pharma / vision
technologies for an
innovative therapy
treatment for age-
related macular
degeneration
Driving Innovation with Cross-Segment Collaborations
PHARMACEUTICAL MEDICAL DEVICES CONSUMER
China Lung
Cancer Center
Developing a holistic
approach to treat lung
cancer in China
BREAKTHROUGH
INNOVATION
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Enterprise Capabilities to Enable
Our Business ENTERPRISE
CAPABILITIES &
EFFICIENCIES
Our Strategy
Enable business growth through supply chain
innovation
Make quality a competitive advantage, focused on
prevention
Set new benchmarks for medical safety
Leverage Enterprise Standards
and Productivity to drive
business growth
Our Actions and Results
One Johnson & Johnson Supply Chain
Implemented the Johnson & Johnson Quality Policy and
quality standards across our
Family of Companies
Clinical research transparency: Johnson & Johnson / Yale Open
Data Access agreement
Achieving operational savings to support our growth: Targeting $1B
by 2018
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A Strong, Consistent, Sustainable Business STRONG FINANCIAL
PERFORMANCE
* Non-GAAP measure; excludes intangible amortization expense, special items and the impact of translational currency
** Inclusive of the April 2015 dividend declaration
*** Non-GAAP measure; defined as operating cash flow less capital spending; estimated as of 1/22/16
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Performance Driven Strategy
GROW SALES
FASTER
THAN THE
MARKET
GROW EARNINGS
FASTER THAN
SALES
CREATE VALUE
THROUGH
STRATEGIC
ACQUISITIONS &
PARTNERSHIPS
COMPELLING
LONG-TERM
TOTAL
SHAREHOLDER
RETURNS
GENERATE
STRONG
DIVIDEND YIELD
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Our Near-Term Priorities
ENTERPRISE Delivering on our financial and quality commitments
PHARMACEUTICAL Continuing to build on our launch excellence
and robust pipeline
MEDICAL DEVICES Accelerating growth through innovation and transforming
our go-to-market models
CONSUMER Expanding market leadership in key segments within OTCs,
Oral Care, Baby and Beauty
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A Market Leader Across All Segments
Market Leadership
One of the largest and fastest growing Pharmaceutical companies in
the world
Most comprehensive Medical Devices business in the world
Market-leading Consumer Health Care company, with trusted brands
endorsed by professionals globally
2015 Sales: $70.1B*
Pharma
Medical
Devices
$28.5B
$28.1B
$14.7B
Consumer
$25.1B
$31.4B
$13.5B
* The sum of the segments do not equal the total due to rounding
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Our Strategy
Focus innovation on
five therapeutic areas
Deliver continued growth with
our current core billion-dollar-
plus products
Maximize our existing
in-market portfolio, which
includes seven products
launched since 2009 that have
multi-billion dollar potential
Invest in our future with 10
new products we plan to file by
2019, each with billion-dollar-
plus potential
Our Actions and Results
16 new product launches
since 2009, driving cumulative
sales of ~$41B
6 new products1 achieved
>$1B in sales in last 12 months
U.S. approval for DARZALEX,
the first human monoclonal
antibody, 4 months ahead
of schedule
More than 70 novel compounds
in early development and
approximately 150 ongoing
discovery projects
Pharmaceutical
Industry-Leading Pipeline and Commercial Excellence
1 Products launched since 2009
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Pharmaceutical
Key Pipeline Events for 2016 Potential Approvals*
DARZALEXTM Double Refractory Multiple Myeloma (EU)
IMBRUVICA CLL Frontline (US/ EU)
MCL Relapsed (EU)
CLL 2nd Line No prior Bendamustine (US/ EU)
INVOKAMET Initial Therapy Fixed Dose with Metformin (US)
INVOKAMET XR Fixed Dose Combo with Metformin XR (US)
3-Month Paliperidone
Palmitate Schizophrenia (EU)
STELARA Crohns Disease (US)
EDURANT STR Single tablet regimen for HIV (US/ EU) (Rilpivirine + F/TAF FDC)
Planned Submissions
Sirukumab Rheumatoid Arthritis (US/ EU)
Guselkumab Psoriasis (US/ EU)
DARZALEXTM Relapsed/Refractory Multiple
Myeloma (US/EU)
Potential Clinical Data Presentations
Phase 3
DARZALEXTM Relapsed/Refractory Multiple Myeloma
Guselkumab Psoriasis
SIMPONI /
SIMPONI ARIA AS, PsA and UC
Sirukumab Rheumatoid Arthritis
STELARA Crohns Disease
INVEGA TRINZA Schizophrenia
ZYTIGA Prostate cancer
Phase 2
3DAA FDC (AL-335 + odalasvir + simeprevir) Hepatitis C
IMBRUVICA Refractory Follicular Lymphoma
* Based on submissions in 2015
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Our Strategy
Focus on key consumer need states
and 12 megabrands
Leverage new marketing models and brand-building
competitive advantage
Develop insight-led innovation grounded in
science, endorsed by
professionals
Improve margins by reducing costs and
complexity
Our Actions and Results
Delivered double-digit growth in key emerging
markets like Russia, India and
Brazil*
Exceeded market share in Oral Care, Feminine Care
and US OTC
Nearly all OTC products returned to shelves with
additional sizes and flavors
to be introduced during 2016
FDA notification that all of our US OTC manufacturing
facilities are in conformity
Consumer
Iconic Brands and Unparalleled Consumer Insights
* Operational growth vs. full year 2014
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Our Strategy
Drive growth in priority platforms through innovation
and launch excellence
Sustain our leadership in foundation platforms
Leverage our breadth and scale through novel
commercial models
Invest in areas of significant unmet need
Our Actions and Results
Strong sales performance in endocutters, biosurgicals and
electrophysiology*
Shifting more resources to priority platforms and key markets
Ethicon and DePuy Synthes Joint Reconstruction and Spine, now
co-selling in over 1200 accounts
Acquisition of Coherex Medical in the area of atrial fibrillation and
surgical robotics collaboration
with Verily
Medical Devices
Comprehensive Portfolio and Accelerated Growth Strategy
* Operational growth vs. full year 2014
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Key Takeaways
Focusing on near-term priorities
Delivering on our financial and quality commitments
Building on pharmaceutical launch excellence
& robust pipeline
Accelerating our growth in Medical Devices
through innovation and by transforming our
go-to-market models
Expanding our market leadership in key consumer
segments: OTC, Oral Care, Baby and Beauty
Positioned well for the future
Broad base in health care a competitive advantage
Optimistic about opportunities in
health care
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Dominic Caruso
Vice President, Finance
&
Chief Financial Officer
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Full Year 2015 Condensed Consolidated Statement of Earnings (Unaudited; Dollars and Shares in Millions Except Per Share Figures)
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4th Quarter 2015 Condensed Consolidated Statement of Earnings (Unaudited; Dollars and Shares in Millions Except Per Share Figures)
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2015** 2014
Adjusted Income Before Tax by Segment*
* Non-GAAP measure; excludes amortization expense and special items; see reconciliation at www.investor.jnj.com
** Estimated as of 1/26/16.
$22.0B $22.8B
Pharmaceutical
Medical Devices
Consumer
Expenses Not Allocated
to Segments
2015 2014
Pharmaceutical 39.1% 39.6%
Medical Devices 35.6% 32.0%
Consumer 14.3% 15.4%
Total 31.4% 30.7%
% to Sales
$12.8
$8.8
$2.2 $1.9
$8.9
$12.3
($1.1) ($1.0)
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Save the Date
Consumer and Medical Device Business Review
Wednesday, May 18, 2016
Hyatt Regency, New Brunswick