3rd quarter 2015...3rd quarter 2015 earnings call presentation october 13, 2015 2 louise mehrotra...
TRANSCRIPT
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3rd Quarter 2015
Earnings Call Presentation
October 13, 2015
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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 and business strategy. 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; the ability of the company to successfully execute strategic plans; impact of
business combinations and divestitures; challenges to patents; the impact of patent expirations; 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 & Johnson’s Annual Report on Form 10-K for the fiscal year ended December 28,
2014, including Exhibit 99 thereto, and the company’s 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 Company’s website at www.investor.jnj.com.
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3rd Quarter 2015 Sales by Geographic Area
% Change
TOTAL COMPANY 3Q 2015 3Q 2014 Reported Operational*
U.S. $8.8 $8.8 (0.6) (0.6)
Europe 3.8 4.4 (14.5) 2.7
Western Hemisphere
(ex U.S.) 1.5 1.8 (19.6) 2.7
Asia-Pacific, Africa 3.0 3.4 (9.3) 1.2
International 8.3 9.6 (13.7) 2.1
Worldwide (WW) $17.1 $18.5 (7.4) 0.8
* Excludes impact of translational currency
$ U.S. Billions
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3rd 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
3Q 2015 3Q 2014 % Change
Sales $17.1 $18.5 (7.4) Total
0.8 Ops*
GAAP Earnings 3.4 4.7 (29.3)
GAAP EPS 1.20 1.66 (27.7)
Adjusted Earnings** 4.2 4.6 (9.4)
Adjusted EPS** 1.49 1.61 (7.5) Total
1.2 Ops*
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Consumer Highlights – 3rd Quarter 2015
Key Drivers of Operational Performance*
• Skin Care
– Strong growth for AVEENO® &
NEUTROGENA® due share
gains and seasonal inventory
build
– OUS impacted by soft sales in
China
• Women's Health
– New products & successful
marketing campaigns OUS
• Wound Care/Other
– BENECOL® divestiture OUS
in November 2014
• Total Consumer
– Excl. net impact of Acq./Div.**,
WW growth +4.0%, U.S.
+8.9%, OUS +1.5%
• Baby Care
– New product launches partially
offset by soft sales in China
• Oral Care
– LISTERINE® new products
& successful marketing
campaigns
• OTC
– US analgesics up 29%; US
adult share ~12.5% & pediatric
share ~44.5%
– US Zyrtec® seasonal inventory
builds & initial stocking for re-
launched digestive health
– OUS results negatively
impacted by timing of seasonal
inventory build for upper
respiratory products
Sales: $3.3B Ops Change*: WW 3.1%, U.S. 8.9%, Int’l 0.4%
CONSUMER
SEGMENT
TOTAL WW
SALES $MM
REPORTED
% GROWTH
OPERATIONAL
% GROWTH*
Baby Care $506 (10.1%) 2.0%
Oral Care 378 (7.6) 3.5
OTC 963 (5.5) 6.3
Skin Care 863 (6.2) 2.5
Women’s
Health 310 (4.6) 13.3
Wound
Care/Other 294 (16.7) (11.9)
Total
Consumer $3,314 (7.7%) 3.1%
* Excludes impact of translational currency ** Non-GAAP measure; see reconciliation
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Pharmaceutical Highlights – 3rd Quarter 2015
Key Drivers of Operational Performance* • Oncology (cont.)
– ZYTIGA®
• U.S. - strong market growth
partially offset by share decline
• OUS - strong growth in Asia and
Latin America partially offset by
lower sales in Europe due to
increased competition
• Cardiovascular / Metabolism / Other** – INVOKANA®/INVOKAMET®
achieved 6.3% in defined U.S. T2D
market and ~13% share with
endocrinologists
– XARELTO® continued novel oral
anticoagulant U.S. market
leadership; 15.8% share of broader
oral anticoagulant market
• Total Pharmaceutical – Excl. net impact of Acq/Div and Hep
C sales***, WW growth +10.1%,
U.S. +11.5% and OUS +8.5%
• Immunology – Strong U.S. immunology market
growth and increased penetration
of SIMPONI ARIA®
– Two thirds of decline in
REMICADE® export attributed to
lower sales to our distributor in
Japan primarily due to an inventory
drawdown in preparation for label
expansion
• 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 +10% WW and +18%
U.S.
– CONCERTA® positive impact of
reclassification of generic competitor
products in U.S.
• Oncology − Sales of IMBRUVICA® due to
new indications and strong
patient uptake
Sales: $7.7B Ops Change*: WW (0.3%), U.S. (4.5%), Int’l 5.5%
PHARMACEUTICAL
SEGMENT
TOTAL WW
SALES $MM
REPORTED
% GROWTH
OPERATIONAL
% GROWTH*
Immunology $2,614 (1.0%) 4.4%
Infectious Diseases 848 (45.7) (39.9)
Neuroscience 1,476 (6.0) 3.4
Oncology 1,170 5.2 18.4
Cardiovascular/
Metabolism / Other ** 1,586 11.5 16.1
Total Pharma $7,694 (7.4%) (0.3%)
* Excludes impact of translational currency
** Previously referred to as Other *** Non-GAAP measure; see reconciliation
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Medical Devices Highlights – 3rd 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
• Specialty Surgery/Other
– WW Biosurgery +9%, OUS Energy +6%,
WW Mentor +13% due to market growth,
market share gains in certain segments
and new products
• Surgical Care
– Endo growth with ECHELON FLEXTM
family partially offset by pricing pressure
• Vision Care
– New product introductions drove strong
growth in all major regions
• Total Medical Devices
– Excl. net impact of Acq./Div.**, WW
growth +1.3%, U.S. +2.0%, OUS +0.8%
• Cardiovascular
– WW electrophysiology +9%; driven by
strong growth of THERMOCOOL
SMARTTOUCH® Contact Force
Sensing Catheter
• Diabetes
– Lower price partially offset by
ANIMAS® VIBETM strong double digit
growth and SMBG volume growth
• Diagnostics
– Divestiture of Ortho-Clinical
Diagnostics in June 2014
• Orthopaedics
– WW Knees flat; US +2%, strong sales
of ATTUNE® Knee System
– WW Hips +2%, US +3% driven by
primary stem platform
– WW Trauma flat, US +5%, new product
introduction - TFNA
– WW Spine (6%), US flat, competitive
challenges
– ORTHOVISC® /MONOVISC® strong
contributor to growth
Sales: $6.1B Ops Change*: WW 0.9%, U.S. 2.0%, Int’l 0.1%
MEDICAL DEVICES
SEGMENT
TOTAL WW
SALES $MM
REPORTED
% GROWTH
OPERATIONAL
% GROWTH*
Cardiovascular $524 (3.3%) 5.2%
Diabetes 470 (15.8) (6.4)
Diagnostics 16 (63.6) (39.8)
Orthopaedics 2,181 (7.0) (0.7)
Specialty
Surgery/Other 821 (4.3) 3.5
Surgical Care 1,399 (8.0) 0.9
Vision Care 683 (3.0) 8.1
Total Med Dev $6,094 (7.3%) 0.9%
* Excludes impact of translational currency ** Non-GAAP measure; see reconciliation
Gary Pruden Worldwide Chairman
SURGERY ORTHOPAEDICS CARDIOVASCULAR & SPECIALTY
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An Attractive, Evolving Market
GROWING (+4% 5-yr. CAGR) $325B
GLOBAL MARKET
AGING DEMOGRAPHICS,
RISE OF CHRONIC DISEASES
EXPANDING ACCESS TO CARE
CONSOLIDATION
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Our Advantage
BREADTH, DEPTH, SCALE AND FINANCIAL
STRENGTH
LEADERSHIP IN 17 KEY CATEGORIES 1 2 # #
BUSINESS SCALE IN EMERGING MARKETS
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Performance Year to Date
GROWTH FROM KEY EMERGING MARKETS – Slowing but continued growth
CHALLENGES – Global economy
– Pricing pressure
SOLID PERFORMANCE IN KEY PLATFORMS
OPPORTUNITIES – Aggressive reallocation to high-growth segments
– Strategic customer partnerships
– Disciplined approach to divestiture/acquisition
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Reaching more patients
Restoring more lives
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
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CARDIOVASCULAR SURGERY ORTHOPAEDICS
SUSTAIN GROWTH
IN CORE PLATFORMS
ANZ
GERMANY
BRAZIL
JAPAN CHINA
RUSSIA
US ITALY
UK
ACCELERATE
GROWTH IN PRIORITY
PLATFORMS
Our Strategy to Win
INNOVATION FOCUS:
5 KEY UNMET NEEDS
Surgical Oncology
Obesity
Select Cardiovascular
Disease Areas
Osteoarthritis
Osteoporosis
DRIVE ABOVE
MARKET GROWTH
IN 9 KEY
GEOGRAPHIES
ADVANCE INNOVATION
CADENCE
Products filed since
May 2014
LEVERAGING
OUR BREADTH AND SCALE
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14+ New product launches
planned in next 18-24 mos.
Novel
Commercial
Models
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Innovative Commercial Models
GLOBAL AND EMERGING MARKET SCALE
INNOVATION IN GROWTH PLATFORMS
ADDRESSING SIGNIFICANT UNMET NEEDS
– EU Orthopaedics hospital 6 year agreement
– US Academic medical center agreement
– Multinational hospital network risk sharing agreement
STRATEGIC CUSTOMER PARTNERSHIPS
INTEGRATED PROCEDURAL SELLING
CROSS-PLATFORM PROCEDURAL
INNOVATION
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Transforming the Future of
Surgery-enabling Robotics
• Advanced data analytics in the OR
• Flexible OR workflow dynamic
• Reduced cost to serve
+
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Robotics Opportunities: Today and Future
Robotics is shifting the
basis of competition
• Innovation at the system
level
• Connection between OR
and broader environment
• Potential bridge to the OR
for imaging & diagnostic
companies
Data
Integration
Cost
Reduction
Improved
Decision Making
Imaging
Integration
Reduced
OR Footprint
Today
Surgeon
Comfort
Marketability
Precision
Wristed
Movement 3D
Visualization
Access to deep
& angled spaces
Cutting &
Coagulation
Tissue
Removal
Anastomosis
Access
Manipulation
Transection
Closure
Future
Surgical
Environment
Emerging
Unmet Needs
New Robotic
Benefits
Traditional
MIP Benefits
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Leveraging Our Advantage
FOCUSING ON THE CATEGORIES
WHERE WE LEAD
LEVERAGING THE BROAD SCALE
OF JOHNSON & JOHNSON
ADVANCING STANDARDS OF CARE
FOR PATIENTS
POSITIONING TO DRIVE ABOVE MARKET
GROWTH AND DELIVER STRONG RETURNS
TO SHAREHOLDERS
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Dominic Caruso
Vice President, Finance
&
Chief Financial Officer
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Important Developments in 3rd Quarter 2015 Pharmaceutical:
• IMBRUVICA® (ibrutinib) Supplemental New Drug Application for treatment-naïve chronic lymphocytic leukemia submitted to the U.S. FDA
• Daratumumab Marketing Authorization Application submitted to the European Medicines Agency for relapsed and refractory multiple myeloma and is accepted for accelerated CHMP assessment
• U.S. FDA grants Priority Review for daratumumab as a treatment for double refractory multiple myeloma
• U.S. FDA approves update of SIMPONI ARIA® (golimumab for infusion) label to include improvement in both physical and emotional measures of health when treating moderately to severely active rheumatoid arthritis
• European Extension Marketing Authorization Application submitted for paliperidone palmitate once-every-three-months formulation for the treatment of schizophrenia
• U.S. FDA approved EDURANT® (rilpirivine), in combination with other anti-retroviral agents, for treatment-naïve adolescent patients aged 12 to 18 years with human immunodeficiency virus-1 (HIV-1) infection
• Supplemental New Drug Application submitted to U.S. FDA for all-oral, once-daily OLYSIO® (simeprevir) in combination with sofosbuvir
Medical Devices:
• Completion of Cordis divestiture to Cardinal Health*
Consumer:
• Completion of the divestiture of SPLENDA® brand to Heartland Food Products Group
Other:
• Board of Directors approval of the repurchase of up to $10 billion of the company's common stock*
* Q4 2015 event
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3rd Quarter 2015 Condensed Consolidated Statement of Earnings (Unaudited; Dollars and Shares in Millions Except Per Share Figures)
(Unaudited; in Millions Except Per Share Figures) THIRD QUARTER
2015 2014 Percent
Percent Percent Increase
Amount to Sales Amount to Sales (Decrease)
Sales to customers 17,102$ 100.0 18,467$ 100.0 (7.4)
Cost of products sold 5,224 30.5 5,399 29.2 (3.2)
Selling, marketing and administrative expenses 5,081 29.7 5,468 29.6 (7.1)
Research and development expense 2,154 12.6 2,023 11.0 6.5
In-process research and development 10 0.1 - -
Interest (income) expense, net 91 0.5 112 0.6
Other (income) expense, net 420 2.5 (1,345) (7.3)
Earnings before provision for taxes on income 4,122 24.1 6,810 36.9 (39.5)
Provision for taxes on income 764 4.5 2,061 11.2 (62.9)
Net earnings 3,358$ 19.6 4,749$ 25.7 (29.3)
Net earnings per share (Diluted) 1.20$ 1.66$ (27.7)
Average shares outstanding (Diluted) 2,807.2 2,864.3
Effective tax rate 18.5 % 30.3 %
Adjusted earnings before provision for taxes and net earnings (1)
Earnings before provision for taxes on income 5,212$ 30.5 6,077$ 32.9 (14.2)
Net earnings 4,172$ 24.4 4,605$ 24.9 (9.4)
Net earnings per share (Diluted) 1.49$ 1.61$ (7.5)
Effective tax rate 20.0 % 24.2 %
(1) See Reconciliation of Non-GAAP Financial Measures.
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2015 Guidance
OCTOBER 2015
JULY 2015
* Non-GAAP measure; excludes intangible amortization expense and special items
$450 - $550 million
$2.2 - $2.3 billion
21% - 22%
Net Interest
Expense
Net Other
Income*
Effective Tax
Rate*
$450 - $500 million
$2.3 - $2.4 billion
21% - 22%
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OCTOBER 2015 ESTIMATED
OPERATIONAL*
ESTIMATED
CURRENCY
ESTIMATED
REPORTED**
2015 Guidance – Sales
JULY 2015 ESTIMATED
OPERATIONAL*
ESTIMATED
CURRENCY
ESTIMATED
REPORTED**
** Euro Average Rate: October 2015 = 1.12; July 2015 = 1.10
$75.0B - $76.0B
1.0% - 2.0%
($5.0B)
(7.0%)
$70.0B - $71.0B
(6.0%) – (5.0%)
4.5%
5.5% - 6.5%
Sales % Change vs. PY
Sales ex. Acq./Div. & Hep C % Change vs. PY
Net Impact: Acq./Div. and Hep C
Sales % Change vs. PY
Net Impact: Acq./Div. and Hep C
Sales ex. Acq./Div. & Hep C % Change vs. PY
$75.0B - $76.0B
1.0% - 2.0%
4.5%
($5.0B)
(7.0%)
$70.0B - $71.0B
(6.0%) – (5.0%)
5.5% - 6.5%
* Excludes the impact of translational currency
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OCTOBER 2015 ESTIMATED
OPERATIONAL**
ESTIMATED
CURRENCY
ESTIMATED
REPORTED***
*** Euro Average Rate: October 2015 = 1.12 ; July 2015 = 1.10
JULY 2015 ESTIMATED
OPERATIONAL**
ESTIMATED
CURRENCY
ESTIMATED
REPORTED***
($0.60)
(9.4%)
$6.70 - $6.80
4.8% - 6.4%
$6.10 - $6.20
(4.6%) - (3.0%) Adjusted EPS* % Change vs. PY
Adjusted EPS* % Change vs. PY
* Non-GAAP measure; excludes intangible amortization expense and special items
** Excludes the impact of translational currency
$6.75 - $6.80
5.6% - 6.4%
($0.60)
(9.4%)
$6.15 - $6.20
(3.8%) - (3.0%)
2015 Guidance – EPS
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OCTOBER 2015 ESTIMATED
OPERATIONAL**
ESTIMATED
CURRENCY
ESTIMATED
REPORTED***
Sales % Change vs. PY
Adjusted EPS* % Change vs. PY
* Non-GAAP measure; excludes intangible amortization expense and special items
** Excludes the impact of translational currency
*** Euro Average Rate: October = 1.12
2015 Guidance – Sales and EPS Summary
$75.0B - $76.0B
1.0% - 2.0%
($5.0B)
(7.0%)
$70.0B - $71.0B
(6.0%) – (5.0%)
$6.75 - $6.80
5.6% - 6.4%
($0.60)
(9.4%)
$6.15 - $6.20
(3.8%) - (3.0%)