Annual Report: 2017
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ANNUAL REPORT 2017 MARCH 2018 TO OUR SHAREHOLDERS ALEX GORSKY Chairman and Chief Executive Officer It is my honor to be writing my sixth the very edge of imagination and possibility. EVERY YEAR annual letter to you as shareholders That’s exciting, of course, and just a little FOR THE PAST 132 and stakeholders of this great company. daunting at the same time. Getting to that YEARS, JOHNSON Sometimes it seems as if these six years future will require urgency, boldness and & JOHNSON HAS have flown by in six minutes, given the fast vision—characteristics most often attributed BEEN INVOLVED pace of the world in which we all live and to very successful startups. However, I IN DEFINING work. Change is the dominant theme of believe it is also a great description of this THE FUTURE OF business, politics and culture today. company today—a 132 year-old startup. HEALTHCARE. During this time of unparalleled change, We are moving in fast-forward, but our it is vital that we do not become fixated momentum comes from a base as solid as on this very moment; but rather take a the marble on which Our Credo is inscribed. longer-term view and look much further It is our rock, our foundation, our DNA. Our ahead. In fact, every year for the past Credo was written seventy-five years ago, it 132 years, Johnson & Johnson has been remains relevant today, and I’m certain it will involved in defining the future of healthcare. continue to sustain us for the next seventy- No matter how many billions of lives we five years and beyond. have touched over those decades, or will touch in the years to come, we always see DELIVERING SHAREHOLDER and feel this challenge in the context of that VALUE one person, that one individual who has put Johnson & Johnson’s total shareholder their trust in us today and will tomorrow. return for 2017 was more than 24%, exceeding our competitor composite, Ahead, we see a future that lies beyond as well as exceeding most major indices the intersection of science and technology. which, I am proud to say, Johnson & We are rocketing toward that future, toward Johnson has done over the last three-, $)"*3."/µ4-&55&3 * five-, ten- and twenty-year periods. Our underscore our commitment to lead the shareholder return for 2017 is indicative of next frontier of health. the strength of our business, as well as the long-term strategic focus and execution A culture of collaborative innovation has that our leaders and teams have delivered been the basis for every achievement, every over the past several years. step and leap forward since our inception as a company. That culture—singularly Our track record of strong shareholder focused on the best outcomes for patients returns is also the result of our approach to and consumers around the world— managing for the long-term, our relentless continues to motivate us today. That’s why drive for innovation, our disciplined portfolio we are convinced that technology will A CULTURE OF management, our capital allocation strategy, not replace, but rather will extend human COLLABORATIVE and our unwavering commitment to the caring, that human touch which has always INNOVATION HAS highest level of execution, all of which are distinguished our work, and always will. BEEN THE BASIS regularly discussed as part of our ongoing FOR EVERY strategic planning with our Board of As the healthcare landscape, science and ACHIEVEMENT, Directors. technology continue to evolve, all three of EVERY STEP AND our business segments are well positioned LEAP FORWARD Most importantly, our success for to meet the needs of our patients, SINCE OUR shareholders reflects our singular focus consumers, healthcare professionals, INCEPTION AS on serving our patients and consumers, employees, communities and shareholders. A COMPANY. the doctors and nurses, the mothers and As with any organization, we have areas fathers and all others who use our products where we are performing very well and and have benefitted from, as well as shared other areas where we are working to in, our triumphs over the past year. fulfill our full potential. We remain 100% committed to having all of our businesses DRIVING INNOVATIVE SOLUTIONS deliver the highest levels of innovation, Through the decades, Johnson & Johnson customer satisfaction, and overall has advanced with the evolution of performance. science and technology—whether it was through our pioneering development of PHARMACEUTICALS sterile surgery at the turn of the 20th Our Pharmaceutical business has delivered century—or today as we work to develop outstanding and sustained performance a differentiated robotic-assisted surgery for more than seven years, driven by the platform in orthopaedics, build novel successful launch and growth of many regimens to boost T cells and train blockbuster medicines. As we move them to recognize and attack cancer forward, we will drive the continued through our groundbreaking immuno- growth of our existing medicines, while oncology efforts, and focus to create the also delivering on our near-term pipeline. first vaccine for HIV/AIDS. These are And, we remain focused on driving just some of the many examples that robust innovation to address high unmet ** $)"*3."/µ4-&55&3 medical needs and leveraging our strong how we continue to strengthen the commercial capabilities across each of our foundation and simplify operations six therapeutic areas. in Medical Devices. For 2018, we expect our key catalysts for Our near-term priority is to accelerate growth will include: growth though innovation and improved 4FDVSJOH OFX JOEJDBUJPOT UP SFBDINPSF execution with our customers on a global patients and increase market penetration basis. We have also instituted a rigorous for life-changing products such as portfolio management process to better DARZALEX®, IMBRUVICA®, STELARA® focus our efforts. We are launching and XARELLTO®. new commercial models and customer EACH ONE OF Driving best-in-class uptake of experiences in response to healthcare OUR MEDICINES TREMFYAA®, which was approved last consolidation and the development of AND PRODUCTS July in the U.S. and last November in alternative sources for healthcare. We OFFERS A the EU. are also seeing an increasing impact of technology and data on the products LIFESAVING OR 5IF HSPXUI PG"DUFMJPO QSPEVDUT and services we are delivering to LIFE-CHANGING 5IF TVDDFTTGVM MBVODI PG &3-&"%" improve outcomes in a cost-effective SOLUTION THAT in the U.S. manner. Additionally, we will complete GIVES NEW HOPE 4VCNJUUJOH SFHVMBUPSZ BQQMJDBUJPOT GPS our restructuring initiative and achieve TO PATIENTS new molecular entities (NMEs), which the majority of our targeted pre-tax cost AROUND THE include esketamine, erdafitinib, and six savings of $800 million to $1 billion by WORLD. significant line extensions. the end of 2018 to better position us for the evolving marketplace. Some of these names may be new or unfamiliar to you, however each one of Our goal is to build on the topline our medicines and products offers a acceleration we saw in the second half of lifesaving or life-changing solution that 2017. We plan to drive growth in 2018 by: gives new hope to patients around the -BVODIJOH TFWFSBM OFX QSPEVDUT world. We expect to file for the approval across our orthopaedics, surgery and of up to eight compounds by 2021— interventional portfolios. each with more than $1 billion peak 1SPHSFTTJOH UIF EFWFMPQNFOU PG PVS revenue potential—as well as multiple line digital surgery solutions. extensions, many with revenue potential .BYJNJ[JOH OFX NBSLFU HSPXUI exceeding $500 million annually. opportunities in platforms such as stroke and in care delivery locations MEDICAL DEVICES beyond the hospital. We’ve improved quality, execution %FMJWFSJOH B TUFBEZ TUSFBN PG JOOPWBUJWF and competitiveness; filled many critical next generation products to meet a broad portfolio gaps; and built new platforms, set of eye health needs, while using services and digital solutions. This is new channels to effectively connect $)"*3."/µ4-&55&3 *** with customers; and building a premium beloved brands—NEUTROGENA®, surgical channel with superior intraocular AVEENO®, LISTERINE®, TYLENOL®, lenses (IOL technology). MOTRIN® and ZYRTEC®—to more 'VSUIFS FOIBODJOH PVS XPSMEDMBTT consumers around the world, ensuring commercial capabilities, with a relentless our products are available wherever and focus on execution. whenever consumers want to buy them. $POUJOVJOH UP CVJME PVS TUSPOH CSBOE Considering the progress we’ve made in our portfolio through innovation that matters Medical Devices business, we are pleased, to consumers, delivering superior science but never satisfied. We know there is still and differentiated products that are a great deal of work ahead of us to ensure professionally endorsed. we are ideally positioned to consistently WITHOUT deliver innovative solutions and value in I am confident that our Consumer business ANY DOUBT, 2018 and beyond. strategies will position us for success. INCREASING At the same time, we will remain agile in INVESTMENT CONSUMER adapting to and addressing the needs of IN INNOVATION Despite the global category slowdowns a rapidly changing market, continuously IS THE MOST experienced in 2017, we were largely evolving our capabilities and delivering IMPORTANT able to retain our share gains from 2016. relevant solutions. ASPECT OF In the latter half of 2017, we launched OUR STRATEGY. several new products that will position VALUE-CREATING us well in 2018 and we will continue to COLLABORATIONS innovate throughout the year. As consumers Without any doubt, increasing investment change their shopping habits, our business in innovation is the most important aspect has evolved to ensure our products are of our strategy. In 2017, we achieved well-positioned in both traditional and record levels of investment: $10.6 billion emerging channels. We are using our global in R&D and $35.2 billion in M&A.