10-KPeriod: FY2014

JOHNSON & JOHNSON Annual Report, Year Ended Dec 28, 2014

Filed February 24, 2015For Securities:JNJ

Summary

Johnson & Johnson's (JNJ) 2015 10-K filing for the fiscal year ending December 27, 2014, highlights a diversified healthcare company operating across three key segments: Consumer, Pharmaceutical, and Medical Devices. The company emphasizes its global reach with over 265 operating companies in 60 countries, managed under a decentralized structure. A significant point of discussion is the patent status of its major product, REMICADE®, with key patents set to expire between 2015 and 2018, raising concerns about the potential introduction of biosimilar versions and the impact on future revenues. Despite the patent challenges, JNJ demonstrates a commitment to innovation through substantial Research and Development (R&D) investments, totaling $8.5 billion in 2014. The company also addresses ongoing regulatory matters, including a consent decree related to certain manufacturing operations. Furthermore, JNJ actively managed its capital structure by repurchasing approximately $3.5 billion in common stock during the fourth quarter of 2014 under a new $5.0 billion authorization, signaling confidence in its financial health and commitment to shareholder returns.

Financial Highlights

54 data points
Beta

Revenue

$74.33B

69.4% Gross Margin

Net Income

$16.32B

22.0% Net Margin

EPS (Diluted)

$5.70

Total Assets

$130.36B

Cash & Equivalents

$14.52B

Free Cash Flow

$15.00B

Financial Statements
Beta
Revenue$74.33B
Cost of Revenue$22.75B
Gross Profit$51.59B
SG&A Expenses$21.95B
Operating Income$21.59B
Interest Expense$533.00M
Net Income$16.32B
EPS (Basic)$5.80
EPS (Diluted)$5.70
Shares Outstanding (Basic)2.82B
Shares Outstanding (Diluted)2.86B

Key Highlights

  • 1Johnson & Johnson operates a diversified business across Consumer, Pharmaceutical, and Medical Devices segments, with a significant global presence in 60 countries.
  • 2The company is facing patent expirations for its major product REMICADE® between 2015 and 2018, with potential for biosimilar competition, impacting future revenue streams.
  • 3Significant investment in Research and Development (R&D) continues, with $8.5 billion spent in fiscal year 2014, underscoring a commitment to innovation and new product pipelines.
  • 4Regulatory oversight continues, with specific mention of a consent decree impacting certain Consumer segment manufacturing operations, though remediation efforts were progressing.
  • 5The company initiated a $5.0 billion share repurchase program in July 2014 and repurchased approximately $3.5 billion in the fourth quarter, indicating capital return to shareholders.
  • 6The divestiture of the Ortho-Clinical Diagnostics business was completed in June 2014, streamlining the Medical Devices segment.

Frequently Asked Questions

Johnson & Johnson's business is organized into three primary segments: Consumer, Pharmaceutical, and Medical Devices. The Consumer segment includes products in baby care, oral care, skin care, over-the-counter medicines, women's health, and wound care. The Pharmaceutical segment focuses on therapeutic areas such as immunology, infectious diseases, neuroscience, oncology, and cardiovascular/metabolic diseases. The Medical Devices segment offers products for orthopaedics, surgery, cardiovascular care, diagnostics, diabetes care, and vision care.

A significant risk identified is the upcoming expiration of patents for REMICADE® (infliximab), a key product. Patents are set to expire between 2015 and 2018 in various major markets. This loss of exclusivity is expected to lead to a reduction in sales as biosimilar versions are introduced. The company is also involved in legal proceedings and reexamination proceedings related to these patents, adding to the uncertainty.

Johnson & Johnson is actively investing in Research and Development (R&D), with $8.5 billion spent in fiscal year 2014. This investment aims to develop new products and improve existing ones, including next-generation immunology products like STELARA®, SIMPONI®, and SIMPONI ARIA® which have remaining patent lives of up to nine years, to offset potential declines from products like REMICADE® facing patent cliffs.

The company operates a substantial number of manufacturing facilities globally. It addresses regulatory matters, such as the consent decree with the FDA concerning certain Consumer segment manufacturing operations, through remediation efforts. While progress was being made towards certification of facilities, ongoing oversight and potential FDA inspections are part of the process. The company also highlights its commitment to environmental compliance.