New Brunswick, N.J.-based Johnson & Johnson (NYSE:JNJ) is probably most famous as the parent company of multiple household products that double as household names. Listing them all would require more space than is practical, but they include Band-Aid, Listerine, Splenda, Stayfree, Lubriderm, Visine, Purell, Mylanta, Bengay, and dozens upon dozens of others. If you’ve ever bandaged a wound, rinsed your mouth, applied lotion, moisturized your eyes, sanitized your hands, done battle with a headache, substituted for sugar or treated heartburn, chances are excellent that you did so courtesy of Johnson & Johnson’s research and development.

Johnson & Johnson’s array of consumer goods isn’t merely wide, but dominant. To quote company Chairman and CEO Alex Gorsky, “approximately 70% of our sales come from products with the number one or number two global market share position.” Johnson & Johnson boasts no fewer than 275 subsidiary companies, up from 250 three years ago. These include LifeScan, which makes blood glucose monitoring systems; McNeil Nutritionals, maker of artificial sweeteners; and Ethicon, a provider to the laparoscopic surgery industry.

Not Just Tylenol

But as omnipresent in the collective consciousness as Johnson & Johnson’s consumer goods are, the company is first and foremost a medical supplier. Two-fifths of Johnson & Johnson’s revenue derives from its medical devices, another two-fifths via pharmaceuticals. Johnson & Johnson’s preeminence in medical devices is particularly pronounced: the 70% sales figure for market-leading and market-runner-up products jumps to 85% when restricted to the company’s orthopedic instruments and surgical care items.

As for its global pharmaceutical business, Johnson & Johnson develops and sells some of the best-known over-the-counter drugs on the market. However, the true profit centers are the company’s higher-margin specialty pharmaceuticals. These include Remicade, Simponi, and Stelara, drugs that suppress autoimmune ailments (arthritis, Crohn’s disease) and that can cost more than $20,000 per year per patient; Zytiga, which fights particularly resilient forms of prostate cancer and which sells for $40 a pill; and Complera and Edurant, HIV drugs that can retail for over $70 per dose. These drugs might not be as ubiquitous as their fever-reducing brethren, but their contribution to Johnson & Johnson revenue is unmistakable. Given the slow pace of drug approval in both the United States and Europe, the profits realized by Johnson & Johnson today are the result of years and billions of dollars’ worth of research already undertaken. The company acknowledges that it files for approval for new drugs and line extensions of existing drugs up to 4 years in advance, and lag doesn’t even include how long it takes said drugs to then appear on pharmacy shelves.

Medical devices and diagnostics account for $29 billion of Johnson & Johnson’s global sales, putting that division just slightly ahead of the pharmaceutical one and making Johnson & Johnson the largest medical devices company on Earth. One doesn’t typically think of knee implants and catheters as carrying corporate brand names in the same way that shampoos or antihistamines do, but the former are every bit as much Johnson & Johnson products as the latter are. The only difference is the per-unit profitability. A Johnson & Johnson Attune knee replacement package can sell for around $10,000, not counting the price of professional surgical insertion, of course. With over 23,000 such packages now joining various thighs to lower legs around the world, it’s easy to see how just one specialty product can contribute to annual Johnson & Johnson revenues of over $71 billion.

Growth By Acquisition

Not all of the company’s revenue derives organically. In those instances where Johnson & Johnson doesn’t innovate in its crucial fields of interest, it instead uses its substantial financial muscle to acquire. In 2012 Johnson & Johnson finalized its $22 billion purchase of Synthes, which had been a publicly-traded Swiss manufacturer of implements that treat traumatic injuries. That was Johnson & Johnson’s largest purchase since it bought Pfizer’s (NYSE:PFE) consumer healthcare unit in 2006, which instantly positioned Johnson & Johnson as a certifiable consumer products titan.

But pharmaceutical and medical devices together account for only four-fifths of Johnson & Johnson revenue. The remainder derives from the aforementioned consumer products, and the lion’s share of that in the categories of over-the-counter medications and skin care. The company singles out anti-inflammatory drug Motrin and fever medication Tylenol for particular contributions to the bottom line. Worldwide sales of Tylenol exceeded $1.6 billion last year, making the painkiller the best-selling product of its kind.

The Bottom Line

Johnson & Johnson provides some of the most vital products in all of commerce; reducing the impact of AIDS, combating diabetes, even helping the deaf to hear and the lame to walk. Now well into its second century, Johnson & Johnson remains one of the most robust components of the Dow Jones Industrial Average, and one of the most influential and profitable companies in existence.

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