Question

Discuss whether Johnson & Johnson has been successful in all of their acquisitions.

Answer 1

Johnson & Johnson (JNJ) is a massive, one of a kind, highly diversified healthcare company with three key segments: Consumer, Pharmaceuticals, and Medical Devices.

Two major acquisitions changed the dynamics for Johnson & Johnson in 2017. The first was J&J's purchase of Abbott Medical Optics from Abbott Labs for $4.3 billion. This deal was completed in February, and brought a lineup of cataract surgery, laser refractive surgery and consumer eye health products into J&J's fold to join the company's successful Acuvue contact lens business. Largely as a result of this acquisition, J&J's medical device segment posted solid sales growth in 2017.

The bigger deal, however, was Johnson & Johnson's buyout of Actelion for $30 billion, which closed in June. Some observers thought that J&J overpaid for the Swiss drugmaker (including me). However, Actelion was expected to give a shot in the arm to J&J's pharmaceutical segment -- and it did.

Thanks to the Actelion buyout, Johnson & Johnson now has a solid pulmonary hypertension franchise. Three pulmonary hypertension drugs picked up from Actelion should generate additional revenue of more than $1.5 billion for J&J in 2017 and even more next year with a full 12 months of sales included.

Consumer Products segment was responsible for $1.15 billion in pretax income in the first six months of 2019, or around 9.7% of the company's total. It generated $6.7 billion in sales for the first six months of 2019. Most of this segment's sales came from outside the U.S., with international sales that made up 57% of total segment sales.

The business offers a broad range of products used in baby care, oral care, beauty products, women's health, wound care and over-the-counter (OTC) medicines. Beauty and OTC products accounted for the largest amount of sales for the consumer products segment. Johnson & Johnson has taken steps to improve the business' profitability over the past couple of years. This included a new management team, which led to getting OTC products back on the shelves in the U.S. and implementing new manufacturing quality standards.

Management has been undertaking acquisitions across all segments. Last year the company acquired Orthotax, which develops software-enabled surgery technologies, supplement company Zarbee’s Naturals and Japanese cosmetics company Ci:z Holdings. In Feb. 2019, Johnson & Johnson purchased Aris Health, which develops robotics technology for medical applications.

The medical devices segment generated pretax income of $4.7 billion in the first six months of 2019 or 39.6% of total earnings for the period. The business generated $13 billion in sales, with roughly half being international sales.