3 rd Quarter 2015 Earnings Call Presentation. October 13, 2015

Transcription

1 3 rd Quarter 2015 Earnings Call Presentation October 13,

2 Louise Mehrotra Vice President Investor Relations 2

3 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 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 3

4 3 rd Quarter 2015 Sales by Geographic Area $ U.S. Billions % Change TOTAL COMPANY 3Q Q 2014 Reported Operational* U.S. $8.8 $8.8 (0.6) (0.6) Europe (14.5) 2.7 Western Hemisphere (ex U.S.) (19.6) 2.7 Asia-Pacific, Africa (9.3) 1.2 International (13.7) 2.1 Worldwide (WW) $17.1 $18.5 (7.4) 0.8 * Excludes impact of translational currency 4

5 3 rd Quarter 2015 Financial Highlights $ U.S. Billions, except EPS 3Q Q 2014 % Change Sales $17.1 $18.5 (7.4) Total 0.8 Ops* GAAP Earnings (29.3) GAAP EPS (27.7) Adjusted Earnings** (9.4) Adjusted EPS** (7.5) Total 1.2 Ops* * Excludes impact of translational currency ** Non-GAAP measure; excludes intangible amortization expense and special items; see reconciliation 5

6 Consumer Highlights 3 rd Quarter 2015 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 Wound Care/Other Total Consumer 310 (4.6) (16.7) (11.9) $3,314 (7.7%) 3.1% Key Drivers of Operational Performance* 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 relaunched digestive health OUS results negatively impacted by timing of seasonal inventory build for upper respiratory products 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% * Excludes impact of translational currency ** Non-GAAP measure; see reconciliation 6

7 Pharmaceutical Highlights 3 rd Quarter 2015 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, Cardiovascular/ Metabolism / Other ** 1, Total Pharma $7,694 (7.4%) (0.3%) * Excludes impact of translational currency ** Previously referred to as Other *** Non-GAAP measure; see reconciliation Key Drivers of Operational Performance* 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 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 % and OUS +8.5% 7

8 Medical Devices Highlights 3 rd Quarter 2015 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% Key Drivers of Operational Performance* Cardiovascular WW electrophysiology +9%; driven by strong growth of THERMOCOOL SMARTTOUCH Contact Force Sensing Catheter Diabetes Lower price partially offset by ANIMAS VIBE TM 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 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 FLEX TM 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% * Excludes impact of translational currency ** Non-GAAP measure; see reconciliation 8

9 Gary Pruden Worldwide Chairman SURGERY ORTHOPAEDICS CARDIOVASCULAR & SPECIALTY

10 An Attractive, Evolving Market GROWING (+4% 5-yr. CAGR) $325B GLOBAL MARKET AGING DEMOGRAPHICS, RISE OF CHRONIC DISEASES EXPANDING ACCESS TO CARE CONSOLIDATION 10

11 Our Advantage BREADTH, DEPTH, SCALE AND FINANCIAL STRENGTH BUSINESS SCALE IN EMERGING MARKETS # 1 # 2 LEADERSHIP IN 17 KEY CATEGORIES 11

12 Performance Year to Date SOLID PERFORMANCE IN KEY PLATFORMS CHALLENGES Global economy Pricing pressure OPPORTUNITIES Aggressive reallocation to high-growth segments Strategic customer partnerships Disciplined approach to divestiture/acquisition GROWTH FROM KEY EMERGING MARKETS Slowing but continued growth 12

13 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 13

14 Our Strategy to Win SURGERY ORTHOPAEDICS CARDIOVASCULAR INNOVATION FOCUS: 5 KEY UNMET NEEDS ACCELERATE GROWTH IN PRIORITY PLATFORMS Surgical Oncology Obesity Select Cardiovascular Disease Areas SUSTAIN GROWTH IN CORE PLATFORMS Osteoarthritis Osteoporosis DRIVE ABOVE MARKET GROWTH IN 9 KEY GEOGRAPHIES US BRAZIL UK GERMANY ITALY RUSSIA JAPAN CHINA ANZ ADVANCE INNOVATION CADENCE Products filed since May 2014 New product launches planned in next mos. LEVERAGING OUR BREADTH AND SCALE Novel Commercial Models 14

15 Innovative Commercial Models INTEGRATED PROCEDURAL SELLING CROSS-PLATFORM PROCEDURAL INNOVATION STRATEGIC CUSTOMER PARTNERSHIPS EU Orthopaedics hospital 6 year agreement US Academic medical center agreement Multinational hospital network risk sharing agreement GLOBAL AND EMERGING MARKET SCALE INNOVATION IN GROWTH PLATFORMS ADDRESSING SIGNIFICANT UNMET NEEDS 15

16 Transforming the Future of Surgery-enabling Robotics + Advanced data analytics in the OR Flexible OR workflow dynamic Reduced cost to serve 16

17 Robotics Opportunities: Today and Future Surgical Environment Emerging Unmet Needs New Robotic Benefits Traditional MIP Benefits Marketability Access Data Integration Manipulation Wristed Movement Transection Tissue Removal Imaging Integration 3D Visualization Cutting & Coagulation Closure Precision Reduced OR Footprint Surgeon Comfort Cost Reduction Access to deep & angled spaces Improved Decision Making 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 Anastomosis Today Future 17

18 Leveraging Our Advantage FOCUSING ON THE CATEGORIES WHERE WE LEAD ADVANCING STANDARDS OF CARE FOR PATIENTS LEVERAGING THE BROAD SCALE OF JOHNSON & JOHNSON POSITIONING TO DRIVE ABOVE MARKET GROWTH AND DELIVER STRONG RETURNS TO SHAREHOLDERS 18

19 Dominic Caruso Vice President, Finance & Chief Financial Officer 19

20 Important Developments in 3 rd 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* * Q event 20

21 3 rd 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 Percent Percent Percent Increase Am ount to Sales Am ount to Sales (Decrease) Sales to custom ers $ 17, $ 18, (7.4) Cost of products sold 5, , (3.2) Selling, m arketing and adm inistrative expenses 5, , (7.1) Research and developm ent expense 2, , In-process research and developm ent Interest (incom e) expense, net Other (incom e) expense, net (1,345) (7.3) Earnings before provision for taxes on incom e 4, , (39.5) Provision for taxes on incom e , (62.9) Net earnings $ 3, $ 4, (29.3) Net earnings per share (Diluted) $ 1.20 $ 1.66 (27.7) Average shares outstanding (Diluted) 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 incom e $ 5, $ 6, (14.2) Net earnings $ 4, $ 4, (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. 21

22 2015 Guidance OCTOBER 2015 JULY 2015 Net Interest Expense $450 - $500 million $450 - $550 million Net Other Income* $2.3 - $2.4 billion $2.2 - $2.3 billion Effective Tax Rate* 21% - 22% 21% - 22% * Non-GAAP measure; excludes intangible amortization expense and special items 22

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24 2015 Guidance Sales OCTOBER 2015 OPERATIONAL* CURRENCY REPORTED** Sales % Change vs. PY $75.0B - $76.0B 1.0% - 2.0% ($5.0B) (7.0%) $70.0B - $71.0B (6.0%) (5.0%) Net Impact: Acq./Div. and Hep C 4.5% Sales ex. Acq./Div. & Hep C % Change vs. PY 5.5% - 6.5% JULY 2015 OPERATIONAL* CURRENCY REPORTED** Sales % Change vs. PY $75.0B - $76.0B 1.0% - 2.0% ($5.0B) (7.0%) $70.0B - $71.0B (6.0%) (5.0%) Net Impact: Acq./Div. and Hep C 4.5% Sales ex. Acq./Div. & Hep C % Change vs. PY 5.5% - 6.5% * Excludes the impact of translational currency ** Euro Average Rate: October 2015 = 1.12; July 2015 =

25 2015 Guidance EPS OCTOBER 2015 OPERATIONAL** CURRENCY REPORTED*** Adjusted EPS* % Change vs. PY $ $ % - 6.4% ($0.60) (9.4%) $ $6.20 (3.8%) - (3.0%) JULY 2015 OPERATIONAL** CURRENCY REPORTED*** Adjusted EPS* % Change vs. PY $ $ % - 6.4% ($0.60) (9.4%) $ $6.20 (4.6%) - (3.0%) * Non-GAAP measure; excludes intangible amortization expense and special items ** Excludes the impact of translational currency *** Euro Average Rate: October 2015 = 1.12 ; July 2015 =

26 2015 Guidance Sales and EPS Summary OCTOBER 2015 OPERATIONAL** CURRENCY REPORTED*** Sales % Change vs. PY $75.0B - $76.0B 1.0% - 2.0% ($5.0B) (7.0%) $70.0B - $71.0B (6.0%) (5.0%) Adjusted EPS* % Change vs. PY $ $ % - 6.4% ($0.60) (9.4%) $ $6.20 (3.8%) - (3.0%) * Non-GAAP measure; excludes intangible amortization expense and special items ** Excludes the impact of translational currency *** Euro Average Rate: October =

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