Pfizer Inc. (PFE), Abbott Laboratories (ABT): Can Johnson & Johnson (JNJ) Turn Around This Lagging Business?

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When it comes to health care companies, there’s no bigger name than the largest firm in the business: Pfizer Inc. (NYSE:JNJ) .

Pfizer Inc. (NYSE:PFE)

What doesn’t J&J produce? From pharmaceuticals to consumer care goods to medical devices, this major medical player has it all. That can make it tough on investors trying to understand this highly diversified company, however: With so many parts, what do you need to keep an eye on? To get a grip on this colossus of the health care sector, let’s take a look at Johnson & Johnson’s consumer products business and how the company can turn around this lagging division.

Sales falling across the board
J&J made its biggest splash in the consumer health field back in 2006, when it purchased Pfizer Inc. (NYSE:PFE)‘s consumer care segment for a whopping $16.6 billion, or more than four times the division’s sales in 2005. Pfizer Inc. (NYSE:PFE) made out nicely in that deal, but the acquisition isn’t looking as brilliant for J&J despite some of the big brand names – such as Listerine, Rolaids, Rogaine, and more – it acquired.

The division’s sales fell nearly 3% year-over-year in 2012, and consumer health’s share of J&J’s total revenue has also declined — from a nearly 23% share in 2011 to less than 21.5% in 2012, while pharmaceuticals and medical devices have taken priority in the company’s growth plans.

J&J’s massive over-the-counter children’s medicines recall in 2010, courtesy of its McNeil Consumer Healthcare subsidiary, hasn’t helped matters. After the company voluntarily pulled 43 medicines from shelves due to problems at manufacturing facilities, the FDA stepped in and signed a consent decree with McNeil.

The agency has governed several manufacturing plants ever since, and Johnson & Johnson reported in its most recent annual filing that production continues to lag at FDA-controlled plants due to approval and review processes. With the company expecting that trend to continue this year, growth in the over-the-counter business won’t likely impress investors in 2013.

Not like the other consumer care segments have grown recently, either: J&J’s oral care business posted the top sales “growth” in 2012 by managing not to lose revenue year-over-year, mainly due to Listerine’s stronger sales. Meanwhile, women’s health products saw sales fall 9.3%, while skin care — a segment that makes all sorts of common brands from Bebe to Aveeno to Neutrogena — baby care, and other products also experienced single-digit percentage declines.


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