Summary of the financial reports for Johnson & Johnson from

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1 Summary of the financial reports for Johnson & Johnson from By David Belk MD First, some definitions: -Sales/revenue: Some companies report total sales only, some total revenue only and some itemize total sales then add extra revenue. I use total revenue whenever it s an option. -Profit: Net income after taxes. Many companies will add or subtract money from taxes or other revenue/fees from discontinued items to that net income. In such cases I ll use net income attributable to that company for profit. -Research includes research and development and purchased in-process research. -Marketing is usually listed as marketing/sales/informational/advertising/administrative. I realize that some companies lump other things in that budget that wouldn t be strictly considered marketing (like ongoing litigation costs) but, it was the company s choice to lump those costs in their marketing budget so there s not much I can do about it. Anyway, much of what pharmaceutical companies call research is really just marketing so all figures should be taken with a grain of salt. -Revisions: When a figure is revised in a subsequent report I normally use the revised figure. This can be challenging when, for example, frequent revisions occur over multiple years (see Pfizer). In general, I did my best to use the numbers that I felt most accurately reflected the actual revenues, profits and expenditures of these companies. Johnson & Johnson is the largest pharmaceutical company in the US, but the majority of their business isn t in making pharmaceuticals. Only about 4% of Johnson & Johnson s total revenue comes from pharmaceutical sales, but pharmaceutical sales provide about 5% of their profit. The rest of their revenue is from the sale of medical devices and consumer products (like baby shampoo). Since the production and marketing of medical devices has a lot in common with the production and marketing of pharmaceuticals (high R&D costs, little to no transparency in pricing, similar profit margins, etc..) I chose to include J&J in my study. Consumer sales provided just over 2% of J&J s total revenue. The only major revision in the report is from a change in accounting methods in 26 that caused revisions in most of the figures.

2 Here are the composite numbers for Johnson & Johnson from : Total Revenue (Sales): Total Profit: Total Spent on Research: Total Spent on Marketing: Total Spent in Taxes: US Revenue: Revenue from All Other Countries: Revenue from US Pharmaceutical Sales: Revenue from International Pharmaceutical Sales: $719 Billion $136 Billion $9 Billion $232 Billion $39 Billion $362 Billion $358 Billion $17 Billion $122 Billion 24 Total Amounts Spent for the Entire Period Marketing Profits Research Taxes Figure 1: Total amount Johnson & Johnson earned in profit (net income after taxes) from compared to how much they spent on research, marketing and taxes. Figure 2 (below) shows the proportion of J&J s total revenue that was allocated toward research, marketing, taxes and profits.

3 Proportional Allocation of Revenue Other 31% Marketing 32% Taxes 5% Research 12% Profits 19% Figure 2 32 Annual Data for Johnson and Johnson Marketing Profits Research Taxes Figure 3: J&J s profit compared with amount spent on research, marketing and taxes each year from

4 Proportion of Total Revenue from US vs. All Other Countries All Others 5% USA 5% Figures 4 & 5: 5% of J & J s total revenue and 58% of their pharmaceutical revenue came from sales in the US since 23. Proportion of Pharma Revenue from US vs. All Other Countries ROW 42% USA 58%

5 Proportion of J&J s Revenue from Pharmaceutical Sales Pharmaceutical Sales 41% Non Pharma Sales 59% Figure 6: 59% of J&J s total revenue came from Non-pharmaceutical sales. 8 Total Annual Revenue for Johnson & Johnson Figure 7: Annual total revenue.

6 36 Total Annual Pharmaceutical Revenue for Johnson & Johnson Figure 8: Annual revenue from pharmaceutical sales. Total Executive pay for Johnson & Johnson was $66.72 million in 214 with $24.99 million going to their CEO Alex Gorsky.