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Valuation, Industry Outlook and Background of Johnson and Johnson

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  • It's well know consumer products are Baid-Aid Brand bandages,Coach, Sudafed, Nicorette, Tylenol, Neutrogena and Acuvuecontat lenses. The company first producted surgical bandages in 1885. Since the 1990s diversification has allowed for steady and successfull growth. They have over 230 sudsidiaries including Merck, Gynecare and BabyCenter, LLC. In July 2009,they acquired Cougar Biotechnology, Inc. with approximately 95.9% interest in Cougar Biotechnology's outstanding common stock. In September 2009, Elan Corporation, plc and Johnson & Johnson announced that they completed the acquisition of substantially all of the assets and rights of Elan related to its Alzheimer`s Immunotherapy Program (AIP). In March 2010, Hypermarcas SA acquired 99.99% of VersoixParticipacoes Ltda.
  • JNJ has their hand in many different industries. The profitability of individual companies depends on the ability to develop superior products. Large companies have economies of scale in manufacturing and R&D. Small companies can compete successfully by specializing in a particular market segment, or through technical innovation
  • We maintain a well-designed system of internal accounting controls.We encourage strong and effective corporate governance from our Board of Directors.We continuously review our business results and strategic choices.We focus on financial stewardship.
  • In September 2009, Elan Corporation, plc and Johnson & Johnson announced that they completed the acquisition of all of the assets and rights of Elan related to its Alzheimer`s Immunotherapy Program. In July 2009,they acquired Cougar Biotechnology, Inc. with approximately 95.9% interest in Cougar Biotechnology's outstanding common stock.
  • Corporate Finance

    1. 1. Background Financials Valuation Recommendations (JNJ) Brent Blonkvist Mary Coppedge Daniel Kurtz Amaka Okagbue Kelsey Schmidt
    2. 2. Background Financials Valuation Recommendations Johnson & Johnson•American pharmaceutical, medical devices and consumer packagedgood manufacturer•The company first produced surgical bandages in 1885.•Diversification has allowed for steady and successful growth•230 subsidiaries including Merck, Gynecare and BabyCenter, LLC..
    3. 3. Background Financials Valuation Recommendations Competition Comparison90,000,000,00080,000,000,00070,000,000,00060,000,000,000 PG50,000,000,000 JNJ40,000,000,00030,000,000,000 NVS20,000,000,00010,000,000,000 LLY AMGN 0 Top 5 Competitors and JNJ
    4. 4. Background Financials Valuation Recommendations Corporate Governance“The values embodied in Our Credo guide the actions of the people of the Johnson & Johnson Family of Companies at all levels and in all parts of the world. They have done so for more than 60 years. These Credo values extend to our accounting and financial reporting responsibilities. Our management is responsible for timely, accurate, reliable and objective financial statements and related information.”Key Ideas: • Internal accounting controls. • Corporate governance from our Board of Directors. • Review results and strategic choices. • Financial stewardship.
    5. 5. Background Financials Valuation Recommendations Managers• The Executive Committee of Johnson & Johnson is the principal management group.• Operations and allocation of the resources of the Company.• Oversees and coordinates the activities of each segment: Consumer, Pharmaceuticals and Medical Devices and Diagnostics. William C.Weldon Colleen Goggins Dominic J. Caruso Alex Gorsky Russell C. Deyo Sheri S. McCoy
    6. 6. Background Financials Valuation Recommendations Recent Acquisitions• Elan’s Alzheimer`s Immunotherapy Program.• Cougar Biotechnology
    7. 7. Background Financials Valuation Recommendations Industry Outlook• Expects consolidation among small and emerging biotechnology companies will continue in 2010• Biotechnology industry in 2010 measured with degree of uncertainty – Reflect extent of economic recovery – Reflect performance of broader capital markets• Overall, 2010 will be a productive year for the biotechnology industry – Companies just need to learn new financial environment
    8. 8. Background Financials Valuation Recommendations Industry Outlook• Overall benefit from healthcare reform – Short term • Imposed discounts, rebates and increased industry fees will lead to a market dip – Long term • Revenues will rise – Increase in total number of insured citizens – Increase in drug consumption
    9. 9. Background Financials Valuation Recommendations Financials• JNJ is a healthy firm • Great short-term/long-term outlook• Capital structure – Solid growth potential for investors – Stable • Enterprise value of $257.1 • Current Ratio: 1.82 billion • Solvency Ratio: 53.43% • Total revenue of $61.9 billion • Quick Ratio: 1.58 in year ending 2009 • D/E: 0.29 • J&J consistently outperforms some of its key • Long-term D/E: 0.16 competitors, including • Interest Coverage Ratio: 44.64 Novartis and Amgen.
    10. 10. Background Financials Valuation Recommendations Valuation Other
    11. 11. Background Financials Valuation Recommendations Recommendation Buy/Hold• Undervalued stock – JNJ stock is currently valued at $65.14 – Analysis shows that stock at $70.59 – Shift away from Pharma to MD&D/consumer• Strong and stable profit margins• Consistently outperforming competitors• Market is the best valuation of the price. – Our price is reasonable due to this factor
    12. 12. Sources• Citigroup Global Markets Research|27 January 2010|JNJ• Citigroup Global Markets Research|19 February 2010|JNJ• Standard&Poor’s Stock Report|April 3, 2010|JNJ• Yahoo Finance• Google Finance• Bloomberg• Osiris• http://www.jnj.com• Factiva.com• FactSet

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