Johnson & Johnson: Moving Forward With Acquisitions

May 1, 2006
J&J rebounds from its failed buyout attempt of Guidant Corp. with smaller purchases that the company hopes will spur long-term growth.

Don't expect any blockbuster buyouts from health-care products giant Johnson & Johnson in the near future. Just months after its failed bid to acquire heart-device maker Guidant Corp., the New Brunswick, N.J.-based manufacturer plans to focus on smaller deals that will key long-term growth, according to the Associated Press.

J&J -- one of IndustryWeek's IW Best 50 Manufacturers for 2005 -- has already acted on those plans with several recent acquisitions.

In March, Johnson & Johnson Consumer France SAS, a subsidiary of J&J, purchased Groupe Vendome, a privately held French marketer of adult and baby skin-care products. Groupe Vendome's products include a line of shower gels, soaps, bath and hair-care products, moisturizers and body cleansers and a baby toiletries brand. The move will expand J&J's skin-care offerings in France, says Claudio Cavicchioli, president of Johnson & Johnson Consumer France.

"The acquisition of Groupe Vendome will allow us to enhance our adult and baby skin-care business," Cavicchioli said in a March 23 statement. "We are looking forward to building on the outstanding equity that the Groupe Vendome brands enjoy in the consumer marketplace. In particular, Le Petit Marseillais is a trusted family brand with more than 100 years of heritage behind it."

Johnson & Johnson
At A Glance

Johnson & Johnson
New Brunswick, N.J.
Primary Industry: Pharmaceuticals
Number of employees: 115,600
2004 In Review
Revenue: $47.3 billion
Profit Margin: 18%
Sales Turnover: 0.9
Inventory Turnover: 3.7
Revenue Growth: 13.1%
Return On Assets: 17.6%
Return On Equity: 31.7%
In February, J&J completed its acquisition of Animas Corp., a maker of insulin infusion pumps. Animas is expected to operate as a stand-alone entity reporting through LifeScan Inc., a J&J subsidiary that sells blood glucose monitoring systems. The value of the cash-for-stock transaction is estimated at $518 million.

"The combination of Animas' insulin delivery systems and LifeScan's glucose monitoring systems will allow us to offer more comprehensive disease management solutions for our patients," said Eric Milledge, J&J Group chairman responsible for the LifeScan business, in a Dec. 16, 2005, statement. "We have worked in partnership with Animas Corporation since 2003 and know they share our commitment and passion for advancing the standards of care for people with diabetes."

While J&J moved forward with these smaller acquisitions, the company reported modest gains for first-quarter 2006. Profits rose 17% over the year-ago period, but that figure was skewed by a $662 million termination fee paid by Guidant for accepting Boston Scientific Corp.'s buyout offer. Otherwise, profits increased 4.5% to $3 billion, or 99 cents per share.

The company cited growth in its medical devices and diagnostics division and Cordis, the company's vascular disease management subsidiary, as key contributors to first-quarter increases. Worldwide medical devices and diagnostics sales increased 4.5% over 2006. Cordis Cypher stent is used in more than 2 million patients with coronary artery disease. However, worldwide pharmaceutical sales were down 2.2% from 2005. The company attributes slower sales to competition from generic brands. Sales were still strong for its Risperdal, Remicade, Topamax and Concerta brand medications.

"Our first-quarter results were as anticipated, and we look forward to improving performance throughout the balance of the year," said William C. Weldon, chairman and CEO, in an April 18 statement. "We are continuing to make significant investments in research and development in order to bring important new products to market, positioning us well for long-term growth."

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