Johnson & Johnson (JNJ) derives its profitability from three segments: pharmaceuticals, medical devices, and consumer products. What follows is a breakdown of the profit contribution, measured by each segment's pretax income, in the first six months of 2019.
- Johnson & Johnson, a multi-billion market cap public company, is a giant in the health care space.
- The company has three key segments—pharmaceuticals, medical devices, and consumer products.
- The pharmaceuticals business makes up roughly half of Johnson & Johnson’s pretax income. Medical devices make up 40% and consumer products 10%.
The pharmaceuticals segment generates the majority of the company's profits. It produced $6 billion of Johnson & Johnson's pretax income, or about 50.7% of the total, in the first six months of 2019. Profits are adjusted at the segment and company level for certain one-time items such as gains from the sale of a brand and litigation expenses.
Although profitability is not broken down by region, the company does disclose sales totals for the U.S. and internationally. Johnson & Johnson conducts business in more than 60 countries throughout the world. Pharmaceuticals' domestic sales were $11.4 billion, while international sales reached $9.4 billion. The pharmaceutical business is focused on the therapeutic areas of immunology, infectious diseases, neuroscience, oncology, and cardiovascular and metabolic diseases.
Immunology is the biggest component of the segment's sales at $9.8 billion, which is about 32% of pharmaceuticals' sales. Three drugs are the primary drivers: Remicade, which is used to treat a variety of immune-mediated inflammatory diseases; Simponi or Simponi Aria, which are treatments for adults with moderate to severe rheumatoid arthritis, plaque psoriasis and active psoriatic arthritis; and Stelara, a treatment for adults with moderate to severe plaque psoriasis and active psoriatic arthritis. Remicade used to account for the most sales, however, increased competition following the expiration of patents has hurt sales and profitability in recent years. Now, Stelara is its leading immunology drug.
The medical devices segment generated pretax income of $4.7 billion in the first six months of 2019 or 39.6% of total earnings for the period. The business generated $13 billion in sales, with roughly half being international sales.
The medical devices segment sells a broad range of products in areas such as orthopaedics, surgical care, specialty surgery, cardiovascular care, diagnostics, diabetes care and vision care, which are distributed to wholesalers, hospitals and retailers. The orthopaedic segment generates the largest amount of sales for the medical devices segment.
This segment was responsible for $1.15 billion in pretax income in the first six months of 2019, or around 9.7% of the company's total. It generated $6.7 billion in sales for the first six months of 2019. Most of this segment's sales came from outside the U.S., with international sales that made up 57% of total segment sales.
The business offers a broad range of products used in baby care, oral care, beauty products, women's health, wound care and over-the-counter (OTC) medicines. Beauty and OTC products accounted for the largest amount of sales for the consumer products segment. Johnson & Johnson has taken steps to improve the business' profitability over the past couple of years. This included a new management team, which led to getting OTC products back on the shelves in the U.S. and implementing new manufacturing quality standards.
Management has been undertaking acquisitions across all segments. Last year the company acquired Orthotax, which develops software-enabled surgery technologies, supplement company Zarbee’s Naturals and Japanese cosmetics company Ci:z Holdings. In Feb. 2019, Johnson & Johnson purchased Aris Health, which develops robotics technology for medical applications.