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1、Johnson & Johnson ML00007-072 Published 01/2013 MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 1 MarketLine Case Study Johnson & Johnson: Product recalls in the OTC pharmaceuticals business Reference Code: ML00007-072 Publication Date: January 2013 WWW.MARKETLINE.C
2、OM MARKETLINE. THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Johnson & Johnson ML00007-072 Published 01/2013 MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 2 OVERVIEW Catalyst Johnson & Johnson is the largest manufacturer of over-the-counter (OTC)
3、 healthcare products in the US. However, this position has been threatened in recent years by a number of manufacturing issues that have led to a series of product recalls. This case study will examine the rise of the companys OTC healthcare division, threats to this position, and how the company ma
4、y overcome these issues in the future. Summary Johnson & Johnson began as a manufacturer of surgical dressings in 1886. Through a range of acquisitions and research over the years, the company embarked on a steady process of diversification with the business now operating as three divisions: Pharmac
5、eutical, Consumer, and Medical Devices and Diagnostics. This huge growth from a small manufacturer of surgical dressings to a large multinational holding company was achieved through expansion on a global scale, innovative products, significant investment in research and development (R&D), and above
6、 all significant merger and acquisition activity. A number of targeted acquisitions over the years have helped the company to diversify its business and to become a key player in the health care field. With regards to OTC pharmaceuticals, there have been a number of key purchases that have been sign
7、ificant for the company. These include the acquisition of McNeil Laboratories in the US in 1959 and Pfizer Consumer Healthcare in 2006. The steady expansion and diversification of Johnson & Johnson has led to success for the company in the US market. In particular, the acquisition of Pfizer Consumer
8、 Healthcare in 2006 led to significant growth for the company, with sales in from the OTC Pharmaceuticals & Nutritionals division growing by 87.5% in 2007. Johnson & Johnson has been the leading brand in the OTC pharmaceuticals market in the US for many years. The acquisition of Pfizer Consumer Heal
9、thcare in 2006 led to the companys market share growing from 9% to 14% of the market. In recent years the companys OTC Pharmaceuticals & Nutritionals division has faced a series of problems regarding product quality. These problems have mainly surrounded the McNeil Healthcare business, which manufac
10、tures OTC medicines. As a result the company has had to recall a range of products starting with Motrin tablets in July 2009. The product recalls have hurt the company in terms of reputation, sales, and market share. It was reported in mid-2012 that the product recalls and subsequent loss of market
11、share had lost the company around $1.5bn. The company has also been negatively impacted in terms of its reputation and has been made the subject of federal investigations at the McNeil manufacturing facilities. The issues with quality have led to negative press for the company and raised questions o
12、ver the companys credibility. Johnson & Johnson ML00007-072 Published 01/2013 MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 3 TABLE OF CONTENTS Overview 2 Catalyst 2 Summary . 2 Johnson & johnson has grown to become a large diversified business 5 The company began
13、 as a manufacturer of surgical dressings . 5 The company is now split into three divisions 5 Acquisition has been a key driver of growth for the company 5 Johnson & Johnson acquired McNeil Laboratories in 1959 . 5 In 2006 Johnson & Johnson acquired Pfizer Consumer Healthcare 6 In 2011 Johnson & John
14、son bought Merck & Co. out of the companies joint venture . 6 Johnson & Johnson OTC pharmaceuticals grew rapidly in the US . 7 Johnson & Johnson is the leading brand in the US OTC pharmaceuticals market 7 Johnson & Johnson have had to recall a number of products . 9 In 1982 Tylenol was laced with cy
15、anide . 9 The company acted quickly to save its reputation 9 There have been numerous product recalls since 2009 9 The opening of the Fort Washington manufacturing facility was delayed until the end of 2013 . 10 Product recalls have had an impact on the companys reputation and sales 11 Sales in the
16、OTC Pharmaceuticals & Nutritionals division have been significantly impacted 11 Product recalls have affected the companys share of the US pharmaceuticals market 12 Conclusions . 13 Johnson & Johnson continues to face threats to its market share position going forward . 13 Appendix . 14 Sources . 14
17、 Further Reading . 14 Ask the analyst 15 About MarketLine 15 Disclaimer 15 Johnson & Johnson ML00007-072 Published 01/2013 MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 4 TABLE OF FIGURES Figure 1: Johnson & Johnson consumer sales in OTC Pharmaceuticals & Nutritio
18、nals division 2003-08 ($m) 7 Figure 2: Branded share of the US OTC pharmaceuticals market in 2005 8 Figure 3: Branded share of the US OTC pharmaceuticals market in 2010 8 Figure 4: Johnson & Johnson consumer sales in OTC Pharmaceuticals & Nutritionals division 2008-11 ($m) 11 Figure 5: Johnson & Joh
19、nson consumer sales in OTC Pharmaceuticals & Nutritionals division Q1-3 2011 and 2012 ($m) 12 Johnson & Johnson ML00007-072 Published 01/2013 MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 5 JOHNSON & JOHNSON HAS GROWN TO BECOME A LARGE DIVERSIFIED BUSINESS The com
20、pany began as a manufacturer of surgical dressings A speech by Joseph Lister, an antiseptic advocate, inspired Robert Wood Johnson to begin designing a range of ready to use surgical dressings in 1885. Robert Wood Johnson, joined by his brothers James Wood Johnson and Edward Mead Johnson, aimed to i
21、mprove surgical procedures through the creation of a range of antiseptic surgical products. The company began to produce its early products in 1886 and became incorporated in 1887. Through a range of acquisitions and research over the years, the company embarked on a steady process of diversificatio
22、n with the business now including medical devices, pharmaceuticals, and consumer packaged goods. Johnson & Johnson now owns more than 250 companies located in 57 countries around the globe. This huge growth from a small manufacturer of surgical dressings to a large multinational holding company was
23、achieved through expansion on a global scale, innovative products, significant investment in research and development (R&D), and above all significant merger and acquisition activity. The company is now split into three divisions Johnson & Johnson now operates as three divisions: Pharmaceutical, Con
24、sumer, and Medical Devices and Diagnostics. The company entered into the pharmaceuticals market in 1959 with the purchase of McNeil Laboratories in the US and Cilag Chemie AG in Europe. The pharmaceuticals segment has a wide range of products across various therapeutic areas including immunology, in
25、fectious diseases and vaccines, cardiovascular and metabolism, and oncology. The company added consumer products to its range in 1920. The consumer division now includes a large range of products in the skin care, oral care, baby care, wound care, and womens health care markets. This division also m
26、anufactures nutritional and over-the-counter (OTC) pharmaceutical products. The medical devices and diagnostics segment of the company is involved in the production of a range of products for use by professionals operating in health care. This includes those operating in the fields of vision care, s
27、urgery, orthopedics, cardiovascular disease, and sports medicine among others. Acquisition has been a key driver of growth for the company A number of targeted acquisitions over the years have helped the company to diversify its business and to become a key player in the health care field. With rega
28、rds to OTC pharmaceuticals, there have been a number of key purchases that have been significant for the company. Johnson & Johnson acquired McNeil Laboratories in 1959 The acquisition of McNeil Laboratories in the US in 1959 marked the companys entry into the pharmaceuticals market. At the time the
29、 pharmaceutical medicines field was growing, and the acquisition of McNeil Laboratories gave the company a significant presence within the market. At the time of purchase McNeils net sales were $11.4m. An important product produced by McNeil was Tylenol Elixir for children, which was the first pain
30、reliever not containing aspirin to hit the market. This product was introduced in 1955 and was available only on prescription. In the year following the sale of McNeil to Johnson & Johnson, Tylenol Elixir was approved for retail without prescription in the US. Johnson & Johnson has gone on to expand
31、 the Tylenol line of OTC pain relieving products to include Adult Tylenol and Tylenol Extra Strength. In 1976, the Tylenol range of products became the number 1 branded OTC pain killer in the US market. Furthermore, in 1979 the brand became the number 1 in the health and beauty aid market, taking ov
32、er Crest toothpaste which had been the number 1 for 18 years prior to this. In 1978, Johnson & Johnson divided McNeil into two separate entities, namely McNeil Pharmaceutical to focus on prescription only drugs, and McNeil Consumer Products Company, which would manufacture all OTC products. The Tyle
33、nol range of products has continued to expand to include cold products, arthritis pain relief products, and a night time pain killer product. Johnson & Johnson ML00007-072 Published 01/2013 MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 6 In 1997, McNeil acquired t
34、he marketing rights to Motrin, an OTC ibuprofen brand. This helped to strengthen the companys position as number 1 in the pain relief market. In 2006 Johnson & Johnson acquired Pfizer Consumer Healthcare Johnson & Johnson expanded its consumer division in 2006 with the $16.6bn acquisition of Pfizer
35、Consumer Healthcare. This acquisition provided a huge boost for the company within the health care market, and in particular OTC pharmaceutical products. In 2005, prior to the sale, Pfizer Consumer Healthcare recorded sales of $3.9bn from OTC and personal care products. The purchase of Pfizer Consum
36、er Healthcare gave the company ownership of leading brands including Benadryl, Nicorette, Listerine, and Neosporin. The addition of such brands to Johnson & Johnsons already formidable portfolio, gave the company a highly advantageous position within the market. In 2011 Johnson & Johnson bought Merc
37、k & Co. out of the companies joint venture In 1989, Johnson & Johnson and Merck entered into a joint venture to manufacture and market a range of OTC products in the US and Canada. Such brands included Mylicon, Mylanta, and Pepcid. In 2011, Johnson & Johnson bought Mercks 50% interest for $175m. Thi
38、s gave Johnson & Johnson all of the rights for the OTC products included in the venture in the US and Canada. Following the sale, Johnson & Johnson renamed the business McNeil Consumer Pharmaceuticals, enabling the McNeil division to grow its digestive health business. Johnson & Johnson ML00007-072
39、Published 01/2013 MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 7 JOHNSON & JOHNSON OTC PHARMACEUTICALS GREW RAPIDLY IN THE US The steady expansion and diversification of Johnson & Johnson has led to success for the company in the US market. This success has been
40、spurred on by the launch of innovative products, significant investment in R&D, and significant merger and acquisition activity. In particular, the acquisition of Pfizer Consumer Healthcare in 2006 led to significant growth for the company, with sales in from the OTC Pharmaceuticals & Nutritionals d
41、ivision growing by 87.5% in 2007. Figure 1: Johnson & Johnson consumer sales in OTC Pharmaceuticals & Nutritionals division 2003-08 ($m) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 1000 2000 3000 4000 5000 6000 7000 200320042005200620072008 $m OTC Pharmaceuticals & NutritionalsGrowth SOURCE: JOHNS
42、ON & JOHNSON ANNUAL REPORTS M A R K E T L I N E Johnson & Johnson is the leading brand in the US OTC pharmaceuticals market Johnson & Johnson has been the leading brand in the OTC pharmaceuticals market in the US for many years. The acquisition of Pfizer Consumer Healthcare in 2006 led to the compan
43、ys market share growing from 9% to 14% of the market. Johnson & Johnson ML00007-072 Published 01/2013 MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 8 Figure 2: Branded share of the US OTC pharmaceuticals market in 2005 9% 6% 4% 3% Johnson & JohnsonPfizer Inc.Bayer
44、 AGGlaxoSmithKline Plc SOURCE: MARKETLINE M A R K E T L I N E Figure 3: Branded share of the US OTC pharmaceuticals market in 2010 14% 7% 4% 3% Johnson & JohnsonPfizer Inc.Bayer AGGlaxoSmithKline Plc SOURCE: MARKETLINE M A R K E T L I N E Johnson & Johnson ML00007-072 Published 01/2013 MARKETLINE TH
45、IS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 9 JOHNSON & JOHNSON HAVE HAD TO RECALL A NUMBER OF PRODUCTS In 1982 Tylenol was laced with cyanide In 1982, it was estimated that Tylenol held approximately 35% of the US OTC pain relief market. However, in September of the same ye
46、ar a “Tylenol scare” began following the deaths of seven people in Chicago after taking Extra Strength Tylenol. It was found that the drug had been purposely laced with cyanide and led to one of the first major drug recalls in the US. Despite the fact that the bottles which had been tampered with ca
47、me from different production facilities with the onus being that the bottles had been tampered with in supermarkets and drug stores, it quickly became known that Tylenol was associated with the deaths and the market value of the company fell by $1bn as a result. The company acted quickly to save its
48、 reputation The company acted quickly following the deaths, demanding the recall of Tylenol from every outlet, not just from the state where the drug had been tampered with. Within a week, 31 million bottles had been pulled back from retailers. Furthermore, Johnson & Johnson made the decision that T
49、ylenol would not be re-introduced to the market until better product protection had been put in place to prevent similar incidents from occurring in the future. This led to the company developing tamperproof packaging which would make it obvious to the consumer if a bottle had been interfered with. The cost to the company following the Tylenol murders was considerable, and included a drop in share price when the crisis hit, and the cost of lost production and destroyed goods as a result of the product recall. However, the companys fast actio