Gsb 621 Return Driven Execution Presentation On Johnson & Johnson And Abbott Laboratories

February 23, 2008

Return D i
R t Driven E
Execution:
ti
Strategy and Execution Research Project
_______________

GSB 621 Matthew Jacobson
Return Driven Strategy Aman Manna
Parimal Mehta
February 2008
y
Jim Polson
Ji P l
Professor Mark L. Frigo
Shannon Resler
Professor Joel Litman
Ripal Shah
Kellstadt Graduate School of Business
Kurt Wunderlich
DePaul U e s ty
e au University

Do not copy or redistribute without express written consent of Dr. Mark L. Frigo
Do not copy or redistribute without express written consent of Dr. Mark L. Frigo Page 1

In 2005, U.S. Healthcare Spending
Was Two Trillion Dollars

This is approximately 16% of GDP

As
A we grow i age…so d
in does the
th
spending

…So Why Are These Men So Happy?

HOLT Slides for Johnson & Johnson and Abbott Laboratories
Johnson & Johnson Abbott Laboratories


Execution of Strategy
• J&J’s commitment to its Credo
Patients and customers, First
p y
Employees
Communities
Shareholders

• J&J’s main priorities
Winning in healthcare
Capitalizing on convergence
Accelerating growth in emerging markets
Developing leadership and talent

• Operational excellence
Decentralization
Manufacturing excellence
Organizational redesign

• Office of Strategy and Growth


Johnson & Johnson’s Growth Strategy

J&J wants to grow its business with
strategic acquisitions of other
pharmaceutical and medical devices
companies to expand their offerings and
establish themselves in growing markets
as well as maintaining/expanding their
current products.

BRIEF statement o t e initiative as it app es
state e t of the t at e t applies Spec c easu e/ et cs
Specific measure/metrics Actual ta get
ctua target
to that particular Tenet employed

Commitment Ethically Maximize Continue track record of growth – 75 consecutive 2007 Operational sales growth 11.5-12.5%
Tenant Wealth years of sales increases, 24 consecutive years of 2007 Adjusted EPS growth $3.88-$3.93
adjusted earnings increases
Goal T
G l Tenants Target Appropriate
T A i Continue to b ild strong competitive positions
C i build ii ii Capture #1 or #2 market
C k 70% of pharma
f h
Customer Groups across seven therapeutic areas positions sales from #1/ #2
(Pharmaceuticals) Growth in Emerging Markets products;
Low double digit
growth
Competency Innovate Offerings Develop wide variety of offerings; many new # of filings/approvals for new 1 approval, 4 filings
Tenants offerings will be best in class or first in class products in 2007; 7-10 new
filings by 2010
Supporting Balance Focus and Ensure future growth by investing in R&D and Investments in R&D 8% growth
Tenants Options product extensions and advancing the pipeline


Johnson & Johnson’s Productivity Strategy

Ethicon Products, a Johnson & Johnson
Medical Devices Company, strives to
constantly improve its brand image by
providing its customers a cheaper, more
reliable delivery option.

BRIEF statement of the initiative as it applies to Specific measure/metrics Actual target
that particular Tenet employed

Commitment Ethically Maximize Increase in customer profitability due to lowered Mark-up per product order 2-3%
Tenant Wealth distribution costs Cost to ship $7 flat fee
delivery
Goal Tenants Fulfill Otherwise Unmet Increase in Customer Satisfaction amongst those Customer Satisfaction Ratings 100%
Customer Needs who use Suture Express

Competency Deliver Offerings Implemented the “Smart Program”, which improved Percentage of On-time deliveries 100%
Tenants on-time deliveries

Supporting Partner Deliberately Added Suture Express to their Distribution Team Improve on-time delivery from 2-3 Next-day
Tenants days delivery


- Execution of Strategy

• Abbott’s Competitive Advantage: Broad Portfolio of Businesses
• Abbott’s Strategic Focus
• Innovation
•Targeting High Growth Markets
•Deep Late Stage Product Pipeline
Deep
•Strong Internal R&D

• Profitable Growth
•Strategic Acquisitions
•Consistent, Strong Cash Flows
•Accelerated Earnings Growth
Accelerated
•Sales Momentum in Key Products


Abbott Laboratories’ Growth Strategy

ABT leverages its broad product offering to
generate the financial strength to continue
investing i new products and t h l
i ti in d t d technology ffor
customers and patients while deploying
substantial amounts of cash back to its
shareholders

BRIEF statement of the initiative as it applies to Specific measure/metrics Actual
that particular Tenet employed target

Commitment Ethically Maximize Effectively return cash to shareholders •Increase Dividend •10%
Tenant Wealth •Share repurchases •> $1 billion

Goal T
G l Tenants
t Fulfill Oth
F lfill Otherwise Unmet
i U t Increased i
I d investments in bi l i f iliti and R&D
t t i biologics facilities d Invested and b ilt state of the art
I t d d built t t f th t Capital
C it l
Customer Needs – total market opportunity in 2016 of $20B biologics facility in Puerto Rico investment-
- $450M
Competency Innovate Offerings Submitted 6 major products for regulatory approval Exceeded timeline for every late 100%
Tenants stage product submission for
approval
Supporting Partner Strategically Completion of the integration of KOS Incurred integration expenses and Accretive to
Tenants Pharmaceuticals – strengthened ABT’s position in increased R&D – total paid for deal EPS in 2009
Lipid management of $3.7 billion


Abbott Laboratories’ Productivity Strategy

ABT desired to refine and refocus its product
pipeline across all business segments

Given the increasingly competitive
environment, ABT had to increase R&D
efficiency and quality while targeting the most
attractive and highly profitable markets

BRIEF statement of the initiative as it applies to Specific measure/metrics Actual
that particular Tenet employed target

Commitment Ethically Maximize Leverage financial strength to invest more in R&D Increase funds invested in >10% of
Tenant Wealth and commercial operations – ensure steady pipeline combined R&D and product revenue
and support of new product launches
d t f d tl h launches
l h
Goal Tenants Fulfill Otherwise Expand application of Humira to treat Crohn’s Gain market share > 30%
Unmet Customer disease
Needs
Competency Deliver Offerings Productivity improvements in the R&D program - New molecular compounds > 75%
Tenants quicker move from discovery to development advanced to the next stage of
discovery or development in 2007
Supporting Partner Strategically TAP joint venture: increase product offerings for Increase in operating income $350 - $400
Tenants gastrointestinal disorders million


Comparison of Abbott Laboratories and Johnson & Johnson
with respect to execution of Return Driven Strategy

Tenet Strengths/Weaknesses: Strengths/Weaknesses:
1 Commitment S – CAGR of 10%, buyback shares $1.0 B S – Strong established brand name and relationships
Tenet W – Relatively low operating margins W – Growth decrease in core pharmaceutical products/
Opportunities/Threats: Opportunities/Threats:
O – Growing blood glucose testing market O – Growing population in developing nations
T – Pending lawsuits (21) , fierce competition T – Fierce Competition / Lawsuits
2–3 S – Strong R&D capability – test for AIDS, Arthritis S – Aging demographic in developed markets
Goal Tenets W – Approvals of key drugs from FDA W – Lack of unique products in the pipeline
Opportunities/Threats: Opportunities/Threats:
O – Increasing therapeutic coverage of Humira O –New offerings (Generic Drugs / Health Services)
T – Third world countries overriding patents to import /create T – Patent Expiration on Key Products
generics of AIDS drugs

4–6 S – Offering innovation, branding at product level for target S – Presence in Growing Oncology Market
Competency customers and effective delivery W – R&D costs of products in pipeline
Tenets W – Less exposure to internet advertising Opportunities/Threats:
Opportunities/Threats: O – Increased Market Share in Oncology
O – Targeting nutrition products in emerging markets as T – Growing generic pharmaceutical products
personal income improves
T – AIDS group lawsuit could attract negative publicity
Tenet 7-11 Strengths/Weaknesses: Strengths/Weaknesses:
Supporting S – Agreement with Takeda to leverage sales distribution S – Established Channels of Distribution
Tenets network, providing drugs to consumers efficiently W – Overdependence/focus on key pharmaceuticals
and W – Expiring patent & Lack of patent protection to save Opportunities/Threats:
Genuine g
genuine assets O – Strategic Acquisitions
g
Assets Opportunities/Threats: T – Industry Consolidation
O – More M&A activity to gain market share and improve
margins
T – Need to be vigilant to environmental pollution problems
threatening financial performance

…Why Are These Men So Happy?
2005 – 2015
• Healthcare Spending: Projected to grow from $2
p g j g
Trillion to $5 Trillion in the U.S. (16% to 20% of GDP)

CEO Miles White
CEO Bill Weldon

• Wouldn’t you be smiling too?


February 23, 2008

Return D i
R t Driven E
Execution:
ti
Strategy and Execution Research Project

Appendix
GSB 621 Matthew Jacobson
Return Driven Strategy Aman Manna
February 2008 Parimal Mehta
Professor Mark L. Frigo Jim Polson
Professor Joel Litman Shannon Resler
Ripal Shah
Kellstadt Graduate School of Business
Kurt Wunderlich
DePaul University

Do not copy or redistribute without express written consent of Dr. Mark L. Frigo

Appendix: ABT Financial Strength

Uses of Cash Initiatives

Share repurchase program
Approved a $2.5 Billion share repurchase program in xxx, 2006
2007 Goal – purchase over $1 billion in stock

Dividend Policy
Dividends have increased for each of the last 35 years
2007 Goal – dividend increase of 10%

Source - Tom Freyman, CFO, 3rd Quarter Earnings Conference Call, October 17, 2007

“The second highlight from last year was the effective return of cash to shareholders. We paid
approximately $2 billion in dividends the 35th consecutive year of increasing dividends and we repurchased
dividends, dividends,
more than $1 billion worth of Abbott stock.” – Miles White, CEO, 4th Quarter Earnings Conference Call, Jan
23, 2008 (see sources slide #19)


Appendix: ABT Assets

Unique, Well Balanced Product Portfolio

Broad Based Healthcare Company
Consistent and Balanced Performance

Diversified Growth Opportunities
Focused on Innovation

Strong Momentum entering 2008
Accelerating EPS Growth
g
“Our confidence in the future is based on the strength and the balance of our broad mix of leading
businesses from medical products to pharmaceuticals, to nutritionals and diagnostics. Together these
businesses provide a diverse mix of cash flows and multiple sources of earnings growth that should help us
achieve consistent leading performance in the coming years. Going forward, we're targeting higher growth
markets, including emerging markets where we can distinguish Abbott from the competition with leading
technology and innovative new products that meet the needs of patients and customers.”
Source – Miles White, CEO, 4th Quarter Earnings Conference Call, Jan. 23, 2008


Appendix: ABT Assets

Unique, Well Balanced Product Portfolio

Our businesses are focused on two things: innovation and profitable growth. We are targeting markets where
we can distinguish ourselves from the competition with leading technology and products. As we enter
2008, we are pleased with the momentum in our key products, our late stage pipeline and across our
businesses in general. As a result, we continue to expect to deliver an accelerating rate of earnings
general result

growth in 2008 as compared to 2007

Through a series of strategic acquisitions, as well as internally developed R&D, we positioned Abbott with multiple
sources of earnings power.

Source – Miles White, CEO, 4th Quarter Earnings Conference Call, Jan. 23, 2008


Appendix: ABT Growth Drivers

Pharmaceutical Products

Humira
Best in class anti TNF therapy
Sales goals for 2007 of ~ $3 billion
Crohn’s disease use gaining market share: >30% since launch
Significant Psoriasis opportunity: Potential for market leadership
g pp y p

In 2007, we expect Humira to become our first $3 billion global product. In fact, Humira
achieved $1 billion sales in Europe alone last year, the first time we have had a product reach
that level in a single region outside the U.S. That growth has been fueled largely by the
continued momentum in rheumatoid arthritis as well as the addition of new indications”

Source - TF, JP Morgan conference, 3-07 earnings call




Expanding opportunity for biologics
$30 Billion market opportunity by 2012
pp y y
“We completed construction of our new state-of-the-art biologics
manufacturing facility in Puerto Rico to support our long-term growth
outlook for HUMIRA and other innovative biologics that are in development.”
g p
“With our strong R&D capabilities, state-of-the-art biologics manufacturing
and biologics pipeline, we are extremely well-positioned to benefit from this
significant market opportunity over the longer term.”

Source - Miles White, CEO, 4th Quarter Earnings call, January 23, 2008
“Abbott's new biotech plant on the 'Bio Island' good to go”, inpharma technologist.com, April 11, 2007, Anna
Lewcock




Lipid Franchise
Building a broad lipid franchise
Niaspan
2007 sales expectations of $650 million
TriCor – best at lowering Triglycerides
Strong growth continues

“The fifth major achievement I'd mentioned from last year was the completion of
the integration of our Kos Pharmaceuticals acquisition which strengthened
g g
our position in lipid management.”
Sources – MW, 4th quarter earnings call; TF, JP Morgan conference




Strong pipeline – many key drugs in development to drive future
growth
Late stage lipid pipeline
Neuroscience & Pain
Oncology
Respiratory disease
Immunology

Source – TF, JP Morgan conference




Strong pipeline – many key drugs in development to drive future
growth
First, we met or exceeded every time line for regulatory submission or approval across our
broad-based late stage development pipeline. In pharmaceuticals, we received global
regulatory approval and launched the Crohn's indication for HUMIRA. We also filed for
approval of psoriasis, which we received in both the U.S. and Europe within the last few
weeks. In addition, we submitted for the approval of two new products that hold promise
for expanding our lipid franchise, Simcor, our combination therapy of Niaspan and generic
Simvastatin, and ABT-335, our next generation Fenofibrate. Our fourth product
submission was Vicodin CR, our extended release version of the well-known branded pain
medication
“And finally, our TAP joint venture filed TAK-390MR, it's next-generation proton pump inhibitor
for treatment of gastrointestinal disorders. The execution of these filings means that over
disorders
the next 12 months our commercial teams are poised to launch four new Abbott
pharmaceutical brands in the U.S.”
Source – MW, 4Q earnings call



Nutritional Products

Strong operating margins
Strong returns on invested capital
Generates tremendous cash flows
International presence
I t ti l
Rapid growth in emerging markets
Strong double digit growth expected in the longer-term

“ In addition, we continued construction at our new manufacturing facility in Singapore to support our long-
term growth projections for global nutritionals, where consumer demand is driving rapid growth in the
fastest growing emerging economies of Asia and Latin America.”

“Another of our diversified growth drivers is our leading nutritionals business, which generates strong
operating margins and return on capital as well as tremendous cash flow. With population growth and
flow
improving economies around the world, there is a growing demand for high quality nutritional products
in the emerging markets. We've seen particularly strong growth in Asia and Latin America. We expect
double-digit growth for our international nutritionals business to continue into 2008.”

Sources – TF JP Morgan 3Q earnings call Citigroup Sellside report
TF, Morgan, call,



Medical Products

Abbott Diabetes Care
Emerging markets opportunities
Abbott Molecular
Sales growing double digits
Global diagnostics

“In
“I our medical products businesses, diabetes care returned to double-digit growth in the second half of last
di l d t b i di b t t d t d bl di it th i th d h lf f l t
year, and we expect this momentum to continue into 2008.”

“In molecular diagnostics, our competitive technologies have helped us grow sales three times as fast as the
total molecular market. In May, we received U.S. regulatory approval of our M-2000 system, which was
launched in Europe in 2006. In our core laboratory diagnostics business, Abbott remains the global
leader. W h
l d We have nearly 70,000 institutional customers i more th 100 countries. Our international
l 70 000 i tit ti l t in than ti O i t ti l
business comprises 80% of our total sales, and drove much of the strong growth we saw last year.
Emerging markets continue to represent a compelling opportunity for future growth in this business.”

Sources – MW 4Q earnings call, Lehman Bros Sellside report
MW, call report.



Medical Products

Vascular
Strong pipeline
Xience progress
Significant market opportunities
“In our vascular business, we filed for U.S. regulatory approval of XIENCE V last June, then received a
positive recommendation for approval from an FDA advisory panel in late November. In our diabetes care
business we launched FreeStyle Lite, our new no calibration blood glucose monitoring device, FreeStyle
Freedom Lite, our second new no-cal meter was launched in Europe and submitted for U.S. approval. In our
global nutritions business we launched new formulations of our leading infant formula brand, Similac, and
continues to expand the market for adult nutritionals through the introduction of new Ensure formulations in
ti t d th k tf d lt t iti l th h th i t d ti f E f l ti i
select markets.”

Sources – MW 4Q earnings call, Morgan Stanley report
S i ll M St l t


Appendix: ABT Near Term Growth Drivers

Generating momentum in the business

Major pharma launches
Xience U.S. launch
Accelerating EPS growth
A l ti th

“As we look ahead to 2008, our strategic position is strong. Our focus now is on operational is
execution as we prepared for four major Abbott drug launches, including Humira for p
p p j g , g psoriasis,
,
Simcor, ABT-335 and controlled release Vicodin. Each of these represents an extraordinary
opportunity for commercial success. In addition, we have tremendous opportunities in our
medical products and nutritionals businesses, in particular, our Xience drug-eluting stent. In
summary, we are very pleased with the state of our company. We are well-positioned with an
unprecedented number of major new products across all of our broad-based businesses, driving
broad based businesses
accelerating and double-digit earnings growth as we move into 2008.”

MW, 4Q earnings call


Appendix: ABT Outlook

“For the full year 2008, we expect high single to low double-digit sales growth, and we're providing earnings per
share guidance of $3.20 to $3 25 excluding specified items, forecasting steady improvement in the gross margin ratio
$3 20 $3.25, items
over 2007, with a ratio between 58% and 59% for the full year 2008, reflecting improved product mix and efficiency
initiative, forecasting continuing investment in programs to drive future growth with R&D as a percentage of sales
between 9% and 10%. SG&A as a percentage of sales for the full-year 2007 was close to 27%. And we're forecasting
a similar level for 2008. SG&A in 2008 reflects both the synergies of the Kos acquisition and an appropriate level of
investment to properly execute the five major product launches that are planned for the year. Regarding other aspects
of our 2008 outlook, we're forecasting income from the TAP joint venture of $350 million to $400 million, a net interest
expense of roughly $400 million. We're projecting a modest reduction in the tax rate for 2008, based on continued
changes in the mix of income across the various tax jurisdictions. The tax rate for 2008 is expected to be somewhat
above 19%. As a result, when you look at the overall P&L for the year, we're forecasting an improvement in our
, y y , g p
operating margin and net margin ratio in 2008.”

Source - TF, 4Q earnings call


Appendix: ABT Sales Growth

Sales Growth
(dollars in billions)

$19.70
$19 70
$17.50
$15.60
$13.70
$12.10
$10.90
$8.80
$8 80

2000 2001 2002 2003 2004 2005 2006

Sales Growth Year Over Year

1.60% 24.30% 11.00% 13.60% 13.70% 11.80% 12.60%


Appendix: ABT Operating Cash Flow

Operating Cash Flow
(dollars i billi
(d ll in billions)
)
$5.30
$5.00
$4.30

2004 2005 2006


Appendix: ABT Research & Development

Research & Development
(dollars in billions) $2.30
$1.80
$1.70

2004 2005 2006


Appendix: ABT Cash Dividend

Cash Dividend Per Share
(in dollars per share) $1.18
$1.10
$1 10
$1.04

2004 2005 2006


Appendix: ABT Income Statements

Income Statement

Period Ending Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2006

Total Revenue 19,680,016.00 22,337,808.00 22,476,322.00
Cost or Revenue 8,884,157.00 10,641,111.00 9,815,147.00
Gross Profit 10,795,859.00 11,696,697.00 12,661,175.00

Operating Expense
Research & Developmen 1,696,753.00 1,821,175.00 2,255,271.00
Selling: General & Admin 4,921,780.00 5,496,123.00 6,349,685.00
Non Recurring 279,006.00 17,131.00 2,014,000.00
Others - - -

Operating Income or Loss 3,898,320.00
3 898 320 00 4,362,268.00
4 362 268 00 2,042,219.00
2 042 219 00

Income from Continued Ops
Total Other Income Expe 376,367.00 499,007.00 174,512.00
Earning Before Interest a 4,274,687.00 4,861,275.00 2,692,542.00
Interest Expense 149,087.00 241,355.00 416,172.00

Net Income from Continu 3,175,836.00 3,372,065.00 1,716,755.00

Non-recurring Events
Discontinued Operations 60,015.00 - -

Net Income 3,235,851.00 3,372,065.00 1,716,755.00

Preferred Stock and Other Adjustments
P f d St k d Oth Adj t t
Net Income Applicable to Common 3,235,851.00 3,372,065.00 1,716,755.00


Appendix: ABT Acquisitions

Acquisitions and Spin-off

Year Company Activity Goal
1999 Perclose acquisition entering vascular care
2001 Knoll Pharmaceuticals acquisition adding biologics expertise and Humira
2004 TheraSense acquisition diabetic care leadership
2004 Hospira spin-off new hospital leader
2006 Abbot Nutrition International targeting emerging markets
2006 Guidant Vascular acquisition forefront of vascular care
2006 Kos Pharmaceuticals acquisition pipeline in lipid management
2007 Core Lab Diagnostics divestiture innovation-driven business


Appendix: Current Stock Prices

Feb. 15,
F b 15 2008
Abbott's Stock Price per Share $55.55
Johnson and Johnson Price Per Share $62.90

Stock Price in Similar Industries
AstraZeneca $38.76
Novartis AG $50.23
Bristol Myers $23.30


Appendix: JNJ General Facts

• Founded in 1886
• William Weldon, Chairman of the Board and Chief Executive Officer
• More than 250 operating companies in 57 countries
• More than 120,500 employees worldwide, 50,000 in the U.S.
• 47% of 2007 revenues from outside the U.S.
• 75 consecutive years of sales increases, 24 consecutive years of
adjusted earnings increases, 45 consecutive years of dividends
increases
• In December 2006, J&J completed its acquisition of Pfizer
Consumer Healthcare for $16.6B increasing its consumer segment
from 18% to 25% of total sales


Appendix: JNJ Financial Strength

Uses of Cash Initiatives

Share repurchase program
In 2007, launched a $10B share buyback program; Completed $3,6B in 2007 and continuing
through 2008

Dividend Policy
Dividends have increased for each of the last 45 years

Generated Free Cash Flow of $12.2B in 2007, a 5.2% increase

Launched a $1.3-$1.6B cost savings initiative in Pharmaceutical and Cordis business in 7/07


Appendix: JNJ Income Statement

Source: Bear Stearns, “JNJ 4Q07: A Strong Finish as Search for Next Growth Platform Intensifies”, January 23, 2008

Appendix: JNJ Balance Sheet

Source: Stanford Group Company, “JNJ: Upgrade to Buy – We Believe JNJ Can Navigate the Turbulence Ahead”, January 23, 2008

Appendix: JNJ 2007 Sales by Segment

Consumer
24%

Pharmaceutical
40%

MD&D
36%


Appendix: JNJ 2007 Operating Profit by Segment

Consumer
14%

Pharmaceutical
48%

MD&D
38%


Appendix: JNJ R&D

8

7
6
5 $6.5 $7.1 $7.7
$5.3
4
3
2
1
0
2004 2005 2006 2007


Appendix: JNJ Products by Segment

Pharmaceutical (2007 Sales of $24.9B) MD&D (2007 Sales of $21.7B) Consumer (2007 Sales of $14.5B)
•Remicade ($3.3B) •Cordis circulatory disease • Tylenol
•Procrit/Eprex ($2.9B) management products • Motrin
•Topamax ($2 5B)
($2.5B) •Depuy orthopaedic joint • Imodium
•Aciphex/Pariet ($1.4B) reconstruction and spinal care • Benadryl
•Duragesic ($1.2B) products • Rolaids
•Concerta ($1.0B) •Ethicon wound care and • Pepcid AC
•Velcade ($0.5B) women’s health products • Listerine
•Anti-psychotics,
•Anti psychotics including Risperdal •Ethicon Endo-Surgery
Ethicon Endo S rger • Nicorette
($4.7B) minimally invasive surgical • Aveeno
•Levaquin products • Neutrogena
•Ortho Evra/Tricyclen Lo •Lifescan blood glucose • Clean & Clear
•Elmiron monitoring and insulin delivery • Rogaine
•Doxil products
d t • Vi i
Visine
•Leustatin •Ortho-Clinical Diagnostics • Splenda
•Orthoclone OKT3 •Vision Care disposable contact • Band-Aids
•Razadyne ER lenses (including Acuvue) • Johnson’s Baby Powder, Lotions,
•Retin A Bath Products
•Prezista
Prezista •B G
BenGay
•Virco Type HIV-1

70% of sales from #1 or #2 market 80% of sales from #1 or #2 market
positions
iti positions


Sources
Johnson & Johnson Web Site. April 17, 2007. Johnson & Johnson, Inc. February 10, 2008. <http://www.jnj.com>

Mehrotra, Louise. Keynote Address. Q4 2007 Johnson & Johnson Earnings Conference Call. January 22, 2008 8:30AM EST.

White, Miles.
White Miles Keynote Address CEO ABT – Q4 2007 Abbott Earnings Conference Call January 23 2008 9:00AM EST
Address, CEO. Call. 23, EST.

Morales, Soniya. Personal Interview. February 10, 2008.

Willick, Mike. Personal Interview. February 6, 2008

Peete, Adam. Personal Interview. February 9, 2008.

Johnson, Brandon. Personal Interview. February 12, 2008.

Yahoo Finance. February 12, 2008. Yahoo. February 12, 2008. <http://finance.yahoo.com/q?s=JNJ>

Hernia Solutions. February 14, 2008. Ethicon a Johnson & Johnson Company. February 14, 2008.
<www.herniasolutions.com>

MyPreceptor. 2002. MrPreceptor.com Sponsored by Ethicon. February 17, 2008. <www.dermabondtraining.com>

“JNJ 4Q2007: A Strong Finish as Search for Next Growth Platform Intensifies.” Bear Stearns. January 23, 2008. February 15,
2008. <http://www.bearstearns.com>

“ABT 4Q07: A solid 2007 Sets the Stage for EPS Growth.” Bear Stearns. January 24, 2008. February 5, 2008.
p
<http://www.bearstearns.com>

“JNJ: Upgrade to Buy – We Believe JNJ Can Navigate the Turbulence Ahead.” Stanford Group Company. January 23, 2008.
February 13, 2008.


Sources (continued)
“Abbott Laboratories Company Profile.” Datamonitor. March 28, 2007. February 6, 2008.

“Johnson & Johnson Company Profile.” Datamonitor. August 10, 2007. February 6, 2008.

“Abbott Laboratories Stock Report.” St d d & P ’ F b
“Abb tt L b t i St k R t ” Standard Poor’s. February 2 2008 F b
2, 2008. February 5 2008
5, 2008.
<http://www2.standardandpoors.com/portal/site/sp/en/us/page.home>

“Johnson & Johnson Stock Report.” Standard & Poor’s. February 2, 2008. February 5, 2008.
<http://www2.standardandpoors.com/portal/site/sp/en/us/page.home>

“Johnson & Johnson”. ValueLine. February 5, 2008. <http://www.valueline.com/vlquotes/quote.aspx?symbol=JNJ>

“Abbott Laboratories.” ValueLine. February 5, 2008. <http://www.valueline.com/vlquotes/quote.aspx?symbol=ABT>

Freyman, Tom. Keynote Address, CFO. ABT 3rd Quarter 2007 Earnings Conference Call. October 17, 2008.

White, Miles. Keynote Address, CEO. ABT 4th Quarter 2007 Earnings Conference Call. January 23, 2008.

Freyman, Tom. Keynote Address, CFO. ABT Presentation, JP Morgan Healthcare Conference. January 7, 2008.

Lewock, Anna. Abbott's
Lewock Anna “Abbott's new biotech plant on the 'Bio Island' good to go ” Inpharmatechnologis com April 11 2007
go. Inpharmatechnologis.com. 11, 2007.
<http://www.in-pharmatechnologist.com/news/ng.asp?id=75648>

Wise, Rick. “A Solid 2007 Sets the Stage for EPS Growth Acceleration.” Bear Stearns. January 24, 2008.

Reicin, Glenn. “4Q 2007: Good Quarter; We Remain Buyers.” Morgan Stanley. January 23, 2008.
4Q Buyers.


Sources (continued)

Butler, Anthony. “Abbott Laboratories: Change of Earnings Forecast.” Lehman Brothers Equity Research. January 24, 2008.

“Abbott Laboratories: Q4 More Of The Same.” Citigroup Global Markets Equity Research. January 23, 2008.
g p q y y

Butler, Anthony. “Abbott Shows Strong Mix.” Lehman Brothers. January 24, 2008.

Dodds, Matthew. “More of the Same.” Citigroup. January 23, 2008.

Scodari, Joseph C K
S d i J h C. Keynote Add
t Address, W ld id Ch i
Worldwide Chairman Ph
Pharmaceuticals. J h
ti l Johnson and J h
d Johnson Ph
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Strategy, Execution, Performance, Valuation

Valuation
Σ =
FCF
1 + Discount Rate
Forecasted
Free Cash Flows

Cash Flow ROI Capital investment growth

Margins X Turns Turns X Sales Δ
Performance
Sales Less Costs Sales
Sales Δ
Sales Capital Investment
EBITDA% CAPX, NWC, R&D
COGS% SGA% Other LT Assets
O Sales Δ

# new stores, same new store development
# customers, PoPs store sales, process,
Market dominance % sold new products R&D/ sales,
sales
Execution
E ti Price Δ X Volume Δ Capacity: people/AUM employee turnover,
% repeat purchases Six sigma flaws target training hours per yr

Are management s wealth-creation goals aligned with investors?
management’s wealth creation
Can the firm fulfill customers’ unmet needs - and continue to?
Strategy Do targeted market size and growth rates support valuations?
Does the firm create and deploy Genuine Assets to resist fade?

Gsb 621 Return Driven Execution Presentation On Johnson & Johnson And Abbott Laboratories

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