Valuation, Industry Outlook and Background of Johnson and Johnson

1. Background Financials Valuation Recommendations
(JNJ)
Brent Blonkvist
Mary Coppedge
Daniel Kurtz
Amaka Okagbue
Kelsey Schmidt

2. Background Financials Valuation Recommendations
Johnson & Johnson
•American pharmaceutical, medical devices and consumer packaged
good manufacturer
•The company first produced surgical bandages in 1885.
•Diversification has allowed for steady and successful growth
•230 subsidiaries including Merck, Gynecare and BabyCenter, LLC..

3. Background Financials Valuation Recommendations
Competition Comparison
90,000,000,000
80,000,000,000
70,000,000,000
60,000,000,000 PG
50,000,000,000
JNJ
40,000,000,000
30,000,000,000
NVS
20,000,000,000
10,000,000,000
LLY AMGN
0
Top 5 Competitors and JNJ

4. Background Financials Valuation Recommendations
Corporate Governance
“The values embodied in Our Credo guide the actions of the people of the
Johnson & Johnson Family of Companies at all levels and in all parts of
the world. They have done so for more than 60 years. These Credo
values extend to our accounting and financial reporting
responsibilities. Our management is responsible for
timely, accurate, reliable and objective financial statements and
related information.”
Key Ideas:
• Internal accounting controls.
• Corporate governance from our Board of Directors.
• Review results and strategic choices.
• Financial stewardship.

5. Background Financials Valuation Recommendations
Managers
• The Executive Committee of Johnson & Johnson is the principal
management group.
• Operations and allocation of the resources of the Company.
• Oversees and coordinates the activities of each segment:
Consumer, Pharmaceuticals and Medical Devices and Diagnostics.
William C.Weldon Colleen Goggins
Dominic J. Caruso Alex Gorsky
Russell C. Deyo Sheri S. McCoy

6. Background Financials Valuation Recommendations
Recent Acquisitions
• Elan’s Alzheimer`s Immunotherapy Program.
• Cougar Biotechnology

7. Background Financials Valuation Recommendations
Industry Outlook
• Expects consolidation among small and emerging biotechnology companies will
continue in 2010
• Biotechnology industry in 2010 measured with degree of uncertainty
– Reflect extent of economic recovery
– Reflect performance of broader capital markets
• Overall, 2010 will be a productive year for the biotechnology industry
– Companies just need to learn new financial environment

8. Background Financials Valuation Recommendations
Industry Outlook
• Overall benefit from healthcare reform
– Short term
• Imposed discounts, rebates and increased industry fees
will lead to a market dip
– Long term
• Revenues will rise
– Increase in total number of insured citizens
– Increase in drug consumption

9. Background Financials Valuation Recommendations
Financials
• JNJ is a healthy firm • Great short-term/long-term outlook
• Capital structure – Solid growth potential for investors
– Stable • Enterprise value of $257.1
• Current Ratio: 1.82 billion
• Solvency Ratio: 53.43% • Total revenue of $61.9 billion
• Quick Ratio: 1.58 in year ending 2009
• D/E: 0.29 • J&J consistently outperforms
some of its key
• Long-term D/E: 0.16 competitors, including
• Interest Coverage Ratio: 44.64 Novartis and Amgen.

10. Background Financials Valuation Recommendations
Valuation Other

11. Background Financials Valuation Recommendations
Recommendation
 Buy/Hold
• Undervalued stock
– JNJ stock is currently valued at $65.14
– Analysis shows that stock at $70.59
– Shift away from Pharma to MD&D/consumer
• Strong and stable profit margins
• Consistently outperforming competitors
• Market is the best valuation of the price.
– Our price is reasonable due to this factor

12. Sources
• Citigroup Global Markets Research|27 January 2010|JNJ
• Citigroup Global Markets Research|19 February 2010|JNJ
• Standard&Poor’s Stock Report|April 3, 2010|JNJ
• Yahoo Finance
• Google Finance
• Bloomberg
• Osiris
• http://www.jnj.com
• Factiva.com
• FactSet