Annual Report
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ANNUAL REPORT 2019 MARCH 2020 To Our Shareholders Alex Gorsky Chairman and Chief Executive Officer By just about every measure, Johnson & These are some of the many financial and Johnson’s 133rd year was extraordinary. strategic achievements that were made possible by the commitment of our more than • We delivered strong operational revenue and 132,000 Johnson & Johnson colleagues, who adjusted operational earnings growth* that passionately lead the way in improving the health exceeded the financial performance goals we and well-being of people around the world. set for the Company at the start of 2019. • We again made record investments in research and development (R&D)—more than $11 billion across our Pharmaceutical, Medical Devices Propelled by our people, products, and and Consumer businesses—as we maintained a purpose, we look forward to the future relentless pursuit of innovation to develop vital with great confidence and optimism scientific breakthroughs. as we remain committed to leading • We proudly launched new transformational across the spectrum of healthcare. medicines for untreated and treatment-resistant diseases, while gaining approvals for new uses of many of our medicines already in the market. Through proactive leadership across our enterprise, we navigated a constant surge • We deployed approximately $7 billion, of unique and complex challenges, spanning primarily in transactions that fortify our dynamic global issues, shifting political commitment to digital surgery for a more climates, industry and competitive headwinds, personalized and elevated standard of and an ongoing litigious environment. healthcare, and that enhance our position in consumer skin health. As we have experienced for 133 years, we • And our teams around the world continued can be sure that 2020 will present a new set of working to address pressing public health opportunities and challenges. However, propelled crises, including HIV, Ebola, and most recently by our people, products, and purpose, we look Coronavirus—known as COVID-19. forward to the future with great confidence CHAIRMAN’S LETTER • I and optimism as we remain committed to Performance & Purpose leading across the spectrum of healthcare. Over the many decades, we have successfully remained focused on investing in our business Our Credo, Company & Culture to drive growth that generates long-term value, You’ve heard me talk about Our Credo in while also returning value to shareholders almost every communication that I’ve ever and all other stakeholders. In fact, I’m delivered—and this letter is no different. proud to highlight that 2019 marked: Our Credo is the moral compass that we use to guide our business decisions, and it’s the • 36 consecutive years of adjusted blueprint that outlines how we operate and operational earnings growth,* care for the world. Our Credo is the “red • 57 consecutive years of increased thread” that connects our rich heritage, thriving dividends, and workplace culture, and the corporate DNA that • Our continued ranking among Top 10 continues to shape our present and future. Market Cap companies. This “red thread” was quite prominent last Employing our proven capital allocation September. In recognition of the words in strategy enables us to balance our short-term Our Credo standing the test of time, we goals with our long-term aspirations, while celebrated the 75th anniversary of our Initial ensuring we have the resources to invest in Public Offering (IPO) by ringing the historic long-term growth and meet the needs of our Opening Bell at the New York Stock Exchange stakeholders. This is how we live into Our Credo (NYSE). Although we had been in business for values and apply equal focus and commitment almost 60 years, General Robert Wood Johnson II to both our performance and purpose. Our drafted Our Credo shortly before he took four key capital allocation priorities include: the Company public in 1944, creating an opportunity for people to invest in our vision • Investing in growth opportunities for our of healthcare and to also understand how business that deliver health solutions to the we would fulfill that vision. This bold move world, via the research and development of forward sharpened the focus of Johnson new ideas and new approaches. Our substantial & Johnson and helped us forever open our investment in innovation spanned multiple aperture and create a global approach for opportunities, including our continued work defining the future of healthcare every day. with CAR-T (chimeric antigen receptor T-cell therapy) to treat multiple myeloma and bring new hope to patients fighting this devastating disease. We are also investing in novel ways to Our Credo is the “red thread” that connects eliminate disease at its earliest stage through our rich heritage, thriving workplace the World Without Disease Accelerator culture, and the corporate DNA that (WWDA) efforts. The WWDA is currently exploring several innovative approaches that continues to shape our present and future. focus on using digital twins to monitor, maintain and personalize an individual’s health. Today I’m proud to see that we have shareholders • Delivering a competitive dividend to our from every walk of life, small retail investors to shareholders, which increased for the 57th large institutions, as well as current employees consecutive year, paying out nearly $10 billion to retirees. Diverse as they are, the one thing to shareholders in 2019. our shareholders hold in common is the belief in our Company, our values, our people, our • Pursuing mergers, acquisitions and licensing performance and our purpose. Their trust agreements that we believe will add significant and confidence inspire us to continue the long-term value for our shareholders and all pursuit of exceeding their expectations and other stakeholders. Mergers and acquisitions creating long-term shareholder returns. have accounted for approximately 40% of our II • CHAIRMAN’S LETTER operational growth over the past five years. In competition and generic erosion, as well as new total, throughout 2019 we completed 13 major competitive entrants and price reductions. acquisitions and noteworthy licenses, and 100 innovation deals. We also made 19 new Our robust growth can again be attributed equity investments from Johnson & Johnson to volume and is a reflection of the increased Innovation - JJDC, Inc. number of patients we are reaching with our • Considering other prudent ways to return transformational medicines for unmet needs. value to shareholders, such as through share repurchase programs. We initiated a $5 billion share repurchase in December Leading across the Pharmaceutical, of 2018, which was completed in the third Medical Devices and Consumer sectors quarter of 2019. provides us with a unique and powerful Today, there is an increased emphasis on perspective that enables us to see more, corporate purpose. However, across Johnson touch more, learn more and do more & Johnson, we have always operated under the belief that there is a tightly linked connection across the full spectrum of health, as between our Company’s purpose—to advance well as throughout every stage of our health for humanity, and our performance— patients’ and consumers’ lives. to create and deliver shareholder value. Delivering life-saving and life-changing Leading Across the Spectrum of Healthcare medicines to people around the globe We are the most broadly-based global company in translated into Johnson & Johnson having the the healthcare industry. We consider this scope a third-largest Pharmaceuticals business in the strategic business advantage, and we also assume world, retaining our #1 leadership position in the responsibility that comes with it. Leading the United States, and being ranked #1 in the across the Pharmaceutical, Medical Devices and Pharmaceuticals category on Fortune’s annual Consumer sectors provides us with a unique and “World’s Most Admired Companies” list. powerful perspective that enables us to see more, touch more, learn more and do more across the Our Pharmaceutical investments in research full spectrum of health, as well as throughout and development continued to fuel exceptional every stage of our patients’ and consumers’ lives. growth as well. We achieved double-digit growth for 10 key products and delivered We have established a sustainable business strong performance across all regions, in model that is built for the long-term and both developed and emerging markets. provides us with increased confidence about We’re very proud and excited that: our strategic direction and the future of the healthcare industry. We remain focused on • We gained approval and launched two new driving the next generation of innovation across transformational medicines: SPRAVATO for our entire portfolio—in new markets, in existing treatment-resistant depression and BALVERSA markets where we have greater opportunity to for metastatic urothelial cancer. compete, and in the markets where we lead, • We also continued to maximize the value of which include our 26 platforms that each deliver our in-market brands for patients, submitting a billion dollars or more in sales annually. numerous filings and receiving approvals for new line extensions for key brands, including Pharmaceuticals STELARA, DARZALEX, IMBRUVICA, TREMFYA In Pharmaceuticals, our strong track record and ERLEADA, many with peak sales potential of success continued again in 2019, as our that is greater than $500 million. Pharmaceutical segment outpaced the market, growing