Johnson & Johnson, together with its subsidiaries, researches and develops, manufactures, and sells various products in the health care field worldwide. It operates through three segments: Consumer, Pharmaceutical, and Medical Devices. The Consumer segment offers baby care products under the JOHNSON'S brand; oral care products under the LISTERINE brand; beauty products under the AVEENO, CLEAN & CLEAR, DABAO, JOHNSON'S Adult, LE PETITE MARSEILLAIS, NEUTROGENA, RoC, and OGX brands; over-the-counter medicines, including acetaminophen products under the TYLENOL brand; cold, flu, and allergy products under the SUDAFED brand; allergy products under the BENADRYL and ZYRTEC brands; ibuprofen products under the MOTRIN IB brand; and acid reflux products under the PEPCID brand. This segment also provides women's health products, such as sanitary pads under the STAYFREE and CAREFREE brands, and tampons under the o.b. brand; wound care products comprising brand adhesive bandages under the BAND-AID brand and first aid products under the NEOSPORIN brand. The Pharmaceutical segment offers various products in the areas of immunology, infectious diseases and vaccines, neuroscience, oncology, and cardiovascular and metabolic diseases. The Medical Devices segment provides orthopaedic products; general surgery, biosurgical, endomechanical, and energy products; electrophysiology products to treat cardiovascular disease; sterilization and disinfection products to reduce surgical infection; diabetes care products that include blood glucose monitoring and insulin delivery products; and disposable contact lenses. The company markets its products to general public, retail outlets and distributors, wholesalers, hospitals, and health care professionals for prescription use, as well as for use in the professional fields by physicians, nurses, hospitals, eye care professionals, and clinics. Johnson & Johnson was founded in 1885 and is based in New Brunswick, New Jersey.
Business Analysis of J&J
The Life Sciences Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how J&J compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by J&J to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of J&J with an interactive chart.
- Revenue Growth: J&J reported a revenue growth of 2.6% year-on-year during 2016. Pharmaceuticals Industry grew at 7.7% in the same period
- COGS share of Revenues: As a percentage of revenue, J&J spent 30.2% of its total revenues on COGS. Pharmaceuticals industry average (COGS share of revenue) in the same period was 31.7%
- R&D share of Revenues: As a percentage of revenue, J&J spent 12.7% of its total revenues on R&D. Pharmaceuticals industry average R&D spending in the same period was 15.6%
- SG&A share of Revenues: As a percentage of revenue, J&J spent 27.7% of its total revenues on Sales, Marketing, and General Administration (SG&A). Pharmaceuticals industry average SG&A spending in the same period was 27.9%
- Inventory share of Revenues: As a percentage of revenue, J&J spent 11.3% of its total revenues on Inventories. Pharmaceuticals industry average Inventory spending in the same period was 13.1%
- Accounts Payable share of Revenues: As a percentage of revenue, J&J invested 9.6% of its total revenues on Accounts Payable (A/P) Pharmaceuticals industry average Accounts Payable investment in the same period was 12.4%
- Accounts Receivable share of Revenues: As a percentage of revenue, J&J invested 16.3% of its total revenues on Accounts Receivable (A/R). Pharmaceuticals industry average Accounts Receivable investment in the same period was 19.0%
- PP&E share of Revenues: As a percentage of revenue, J&J invested 22.1% of its total revenues on Property, Plants, and Equipments (PP&E). Pharmaceuticals industry average PPE investment in the same period was 26.2%
- Intangibles share of Revenues: As a percentage of revenue, J&J invested 69.1% of its total revenues on Intangibles. Pharmaceuticals industry average Intangibles investment in the same period was 161.8%
- Net Margins: J&J Net Margins in the year 2016 were 23.0%. Pharmaceuticals industry average Net Margins in the same period were 15.8%
Sector and Industry Association of J&J
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries. For high-level analysis purposes, related/similar sectors are grouped into sector groups.
J&J is associated with Healthcare Sector Group, Life Sciences Sector, and Pharmaceuticals Industry.
Life Sciences sector is comprised of the following industries: Pharmaceuticals; Medical Devices; Biotechnology; Diagnostics & Scientific Instruments. The definitions for each of the industries is as follows:
- Pharmaceuticals industry includes companies that discover, develop, manufacture, and market medicines licensed for use as medications. In general these companies offer pharmaceutical products that can be described as prescription or over-the-counter medicines. Many Pharmaceutical companies also offer a diverse portfolio of animal health products, services and solutions. Many diversified pharmaceutical companies operate in more than two operating segments like consumer health products, medical devices and pharmaceutical.
- Medical Devices industry includes manufacturers and distributors of medical equipments and medical supplies. Medical equipments include large scale capital equipmets such as X-Ray machines and MRI scanners and other nondisposable medical devices like stents and pacemakers. Medical supplies include makers of contact lenses, eyeglass lenses, bandages and other disposable products.
- Biotechnology industry includes Biotechnology product companies, subscription companies, and service companies. Biotechnology product companies offer pharmaceutical drug products that are manufactured in, extracted from, or semi synthesized from biological sources. Subscription-based companies develop genome databases, which can be used to develop medicinal drugs. Service companies offer solutions based on a common technology or generic tool of other large pharmaceutical or biopharmaceutical companies.
- Diagnostics & Scientific Instruments industry includes companies that provide testing products, diagnostic reagents, instruments and diagnostic services to aid in the detection and treatment of a wide range of diseases. It also includes molecular diagnostic and genetic testing companies that develop, manufacture, market and provide diagnostic tests, diagnostic systems and related products and services. Also included are companies that manufacture and market analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics.
Industry Ranking of J&J
With $71.9 billion revenues, J&J ranked number 1 of all the companies in the US Pharmaceuticals industry. There were a total of 49 public companies in the US Pharmaceuticals industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Pharmaceuticals industry by revenues during 2016 were:
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.