UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
for the quarterly period ended April 1, 2007
or
( ) Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
for the transition period from to
Commission file number 1-3215
JOHNSON & JOHNSON
(Exact name of registrant as specified in
its charter)
NEW JERSEY 22-1024240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
(Address of principal executive offices)
Registrant's telephone number, including area code
(732) 524-0400
Indicate by check mark whether the
registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter
period that the registrant was required to
file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
(X) Yes ( )No
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See
definition of "accelerated filer and large
accelerated filer" in Rule 12b-2 of the
Exchange Act. Large accelerated filer (X)
Accelerated filer ( ) Non-accelerated filer
( )
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of
the Exchange Act). ( ) Yes (X) No
Indicate the number of shares outstanding
of each of the issuer's classes of common
stock, as of the latest practicable date.
On April 29, 2007 2,896,558,402 shares of
Common Stock, $1.00 par value, were outstanding.
JOHNSON & JOHNSON AND SUBSIDIARIES
TABLE OF CONTENTS
Part I - Financial Information Page No.
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets -
April 1, 2007 and December 31, 2006 3
Consolidated Statements of Earnings for the Fiscal
First Quarters Ended April 1, 2007 and
April 2, 2006 5
Consolidated Statements of Cash Flows for the Fiscal
First Quarters Ended April 1, 2007 and
April 2, 2006 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 24
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 35
Item 4. Controls and Procedures 35
Part II - Other Information
Item 1 - Legal Proceedings 35
Item 2 - Unregistered Sales of Equity Securities
and Use of Proceeds 36
Item 6 - Exhibits 36
Signatures 37
Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in Millions)
ASSETS
April 1, December 31,
2007 2006
Current Assets:
Cash & cash equivalents $5,175 $4,083
Marketable securities 16 1
Accounts receivable,
trade, less allowances
for doubtful accounts
$164 (2006,$160) 9,293 8,712
Inventories (note 4) 5,047 4,889
Deferred taxes on income 2,088 2,094
Prepaid expenses and
other receivables 3,054 3,196
Total current
assets 24,673 22,975
Marketable securities,
non-current 14 16
Property, plant and
equipment at cost 24,239 24,028
Less: accumulated
depreciation (11,059) (10,984)
Property, plant and
equipment, net 13,180 13,044
Intangible assets, net
(note 5) 15,568 15,348
Goodwill, net (note 5) 13,663 13,340
Deferred taxes on income 3,273 3,210
Other assets 2,695 2,623
Total Assets $73,066 $70,556
See Notes to Consolidated Financial Statements
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in Millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
April 1, December 31,
2007 2006
Current Liabilities:
Loans and notes
payable $4,682 $4,579
Accounts payable 5,643 5,691
Accrued liabilities 4,483 4,587
Accrued rebates,
returns and
promotions 2,352 2,189
Accrued salaries,
wages and commissions 1,125 1,391
Accrued taxes on
income 1,378 724
Total current
liabilities 19,663 19,161
Long-term debt 2,012 2,014
Deferred taxes on
income 1,375 1,319
Employee related
obligations 5,660 5,584
Other liabilities 3,428 3,160
Total liabilities 32,138 31,238
Shareholders' Equity:
Common stock - par
value $1.00 per share
(authorized 4,320,000,000
shares; issued 3,119,842,548
shares) 3,120 3,120
Accumulated other
comprehensive income
(note 8) (2,124) (2,118)
Retained earnings 50,850 49,290
Less: common stock
held in treasury, at
cost (225,826,000 and
226,612,000 shares) 10,918 10,974
Total shareholders'
equity 40,928 39,318
Total liabilities
and shareholders'
equity $73,066 $70,556
See Notes to Consolidated Financial Statements
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited; dollars & shares in millions
except per share amounts)
Fiscal Quarters Ended
April Percent April Percent
1, 2007 to 2, 2006 to
Sales Sales
Sales to customers $15,037 100.0% $12,992 100.0%
Cost of products
sold 4,385 29.1 3,612 27.8
Gross profit 10,652 70.9 9,380 72.2
Selling,
marketing and
administrative
expenses 4,802 31.9 4,095 31.5
Research expense 1,652 11.0 1,532 11.8
In-process research &
development 807 5.4 37 0.3
Interest Income (95) (0.6) (197) (1.5)
Interest Expense,
net of portion
capitalized 62 0.4 16 0.1
Other(income)expense,
net (228) (1.5) (718) (5.5)
Earnings before
provision for taxes
on income 3,652 24.3 4,615 35.5
Provision for taxes
on income (Note 3) 1,079 7.2 1,310 10.1
NET EARNINGS $2,573 17.1% $3,305 25.4%
NET EARNINGS PER SHARE
Basic $0.89 $1.11
Diluted $0.88 $1.10
CASH DIVIDENDS PER
SHARE $0.375 $0.33
AVG. SHARES OUTSTANDING
Basic 2,894.2 2,974.5
Diluted 2,924.3 2,992.7
See Notes to Consolidated Financial Statements
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in Millions)
Fiscal Quarters Ended
April 1, April 2,
2007 2006
CASH FLOW FROM
OPERATING ACTIVITIES
Net earnings $2,573 $3,305
Adjustment to
reconcile net
earnings to cash
flow:
Depreciation and
amortization of
property and
intangibles 622 521
Stock based
compensation 164 153
Purchased in-process
research and
development 807 37
Deferred tax provision (5) (153)
Accounts receivable
allowances 3 (4)
Changes in assets and
liabilities, net of
effects from acquisitions:
Increase in accounts
receivable (562) (568)
Increase in inventories (120) (219)
Decrease in accounts payable
and accrued liabilities (229) (633)
Increase in other current
and non-current assets (373) (207)
Increase in other current
and non-current liabilities 957 1,242
NET CASH FLOWS FROM
OPERATING ACTIVITIES 3,837 3,474
CASH FLOWS FROM
INVESTING ACTIVITIES
Additions to property,
plant and equipment (446) (446)
Proceeds from the
disposal of assets 214 1
Acquisitions, net of
cash acquired (1,368) (811)
Purchases of investments (52) (327)
Sales of investments 6 69
Other (primarily intangibles) (40) (63)
NET CASH USED BY
INVESTING ACTIVITIES (1,686) (1,577)
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividends to shareholders (1,085) (982)
Repurchase of common stock (295) (401)
Proceeds from short-term debt 8,117 357
Retirement of short-term debt (8,051) (267)
Proceeds from long-term debt - -
Retirement of long-term debt (5) (7)
Proceeds from the exercise
of stock 234 136
Options and related excess
tax benefits (1,085) (1,164)
NET CASH USED BY FINANCING
ACTIVITIES
Effect of exchange rate
changes on cash and cash
equivalents 26 34
Increase in cash and
cash equivalents 1,092 767
Cash and Cash equivalents,
beginning of period 4,083 16,055
CASH AND CASH EQUIVALENTS,
END OF PERIOD $5,175 $16,822
Acquisitions
Fair value of assets acquired $1,599 $850
Fair value of liabilities
assumed (231) (39)
Net cash paid for
acquisitions $1,368 $811
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - The accompanying unaudited interim
consolidated financial statements and related notes
should be read in conjunction with the audited
Consolidated Financial Statements of Johnson & Johnson
and its Subsidiaries (the "Company") and related notes
as contained in the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 2006. The
unaudited interim financial statements include all
adjustments (consisting only of normal recurring
adjustments) and accruals necessary in the judgment of
management for a fair statement of the results for the
periods presented.
During the fiscal first quarter of 2007, the Company
adopted FASB Interpretation 48 (FIN 48), "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB
Statement No 109". This interpretation prescribes a
recognition threshold and measurement attribute for the
financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax
return. The interpretation also provides guidance on
derecognition, classification and other matters. See
Note 3 for more details.
NOTE 2 - FINANCIAL INSTRUMENTS
The Company follows the provisions of Statement of
Financial Accounting Standards (SFAS) 133, SFAS 138 and
SFAS 149 requiring that all derivative instruments be
recorded on the balance sheet at fair value.
As of April 1, 2007, the balance of deferred net gains
on derivatives included in accumulated other
comprehensive income was $29 million after-tax. For
additional information, see Note 8. The Company expects
that substantially all of this amount will be
reclassified into earnings over the next 12 months as a
result of transactions that are expected to occur over
that period. The amount ultimately realized in earnings
will differ as foreign exchange rates change. Realized
gains and losses are ultimately determined by actual
exchange rates at maturity of the derivative.
Transactions with third parties will cause the amount
in accumulated other comprehensive income to affect net
earnings. The maximum length of time over which the
Company is hedging is 18 months. The Company also uses
currency swaps to manage currency risk primarily
related to borrowings, which may exceed 18 months.
For the fiscal first quarters ended April 1, 2007 and
April 2, 2006, the net impact of the hedges'
ineffectiveness, transactions not qualifying for hedge
accounting and discontinuance of hedges to the
Company's financial statements was insignificant. Refer
to Note 8 for disclosures of movements in Accumulated
Other Comprehensive Income.
NOTE 3 - INCOME TAXES
The worldwide effective income tax rates for the fiscal
first quarters of 2007 and 2006 were 29.5% and 28.4%,
respectively. In 2007 the increase in the effective tax
rate of 1.1% was primarily due to the in-process
research and development (IPR&D) charge of $807
million, which is not tax deductible. This was
partially offset by increases in taxable income in
lower tax jurisdictions relative to taxable income in
higher tax jurisdictions along with the benefit of the
Research and Development (R&D) tax credit in 2007 which
was not in effect in the fiscal first quarter of 2006.
The Company adopted FIN No 48, "Accounting for
Uncertainty in Income Taxes" effective January 1, 2007
which resulted in the recognition of an additional $19
million of previously unrecognized tax benefits, with
the corresponding adjustment to retained earnings. The
Company had $1.1 billion of unrecognized tax benefits
as of January 1, 2007 including the previous adjustment
mentioned above. The Company classifies interest
expense and penalties related to unrecognized tax
benefits as income tax expense. The total amount of
accrued interest on January 1, 2007 was $0.2 billion.
The Company conducts business and files tax returns in
numerous countries and currently has tax audits in
progress with a number of tax authorities. The U.S.
Internal Revenue Service (IRS)has completed their audit
for tax years through 1999; however, the years 1996
through 1999 remain open while a limited number of
issues are being considered at the IRS appeals level.
In other major jurisdictions where the Company conducts
business, the tax years remain open generally back to
the year 2000 with some jurisdictions remaining open
back to 1995.
NOTE 4 - INVENTORIES
(Dollars in Millions)
April 1, December 31,
2007 2006
Raw materials and
supplies $1,046 $980
Goods in process 1,627 1,253
Finished goods 2,374 2,656
Total $5,047 $4,889
NOTE 5 - INTANGIBLE ASSETS & GOODWILL
Intangible assets that have finite useful lives are
amortized over their estimated useful lives. Goodwill
and indefinite lived intangible assets are assessed
annually for impairment. The latest impairment
assessment of goodwill and indefinite lived intangible
assets was completed in the fiscal fourth quarter of
2006 and no impairment was determined. Future
impairment tests will be performed annually in the
fiscal fourth quarter, or sooner if conditions
warranted.
(Dollars in Millions)
April 1, December 31,
2007 2006
Trademarks (non-
amortizable) - gross $6,692 $6,609
Less accumulated
amortization 136 134
Trademarks (non-
amortizable) - net 6,556 6,475
Patents and trademarks -
gross 5,333 5,282
Less accumulated
amortization 1,774 1,695
Patents and trademarks -
net 3,559 3,587
Other intangibles - gross 7,177 6,923
Less accumulated
amortization 1,724 1,637
Other intangibles - net 5,453 5,286
Total intangible assets -
gross 19,202 18,814
Less accumulated
amortization 3,634 3,466
Total intangible assets -
net 15,568 15,348
Goodwill - gross 14,405 14,075
Less accumulated
amortization 742 735
Goodwill - net 13,663 13,340
Goodwill as of April 1, 2007 as allocated by segment of
business is as follows:
(Dollars in Millions)
Consumer Pharm Med Dev Total
& Diag
Goodwill, net of
accumulated
amortization at
December 31, 2006 $7,866 $902 $4,572 $13,340
Acquisitions - - 437 437
Translation &
Other (118) 2 2 (114)
Goodwill, net as of
April 1, 2007 $7,748 $904 $5,011 $13,663
The weighted average amortization periods for patents
and trademarks and other intangible assets are 15 years
and 27 years, respectively. The amortization expense
of amortizable intangible assets for the fiscal first
quarter ended April 1, 2007 was $175 million and the
estimated amortization expense for the five succeeding
years approximates $740 million before tax, per year.
NOTE 6 - SEGMENTS OF BUSINESS AND GEOGRAPHIC AREAS
SALES BY SEGMENT OF BUSINESS(1)
(Dollars in Millions)
Fiscal First Quarters
April 1, April 2, Percent
2007 2006 Change
Consumer
U.S. $1,629 $1,150 41.7%
International 1,867 1,205 54.9
3,496 2,355 48.5
Pharmaceutical
U.S. 4,034 3,701 9.0
International 2,187 1,925 13.6
6,221 5,626 10.6
Medical Devices &
Diagnostics
U.S. 2,584 2,520 2.5
International 2,736 2,491 9.8
5,320 5,011 6.2
U.S. 8,247 7,371 11.9
International 6,790 5,621 20.8
Worldwide $15,037 $12,992 15.7%
(1) Export and intersegment sales are not significant.
OPERATING PROFIT BY SEGMENT OF BUSINESS
(Dollars in Millions)
Fiscal First Quarters
April 1, April 2, Percent
2007 2006 Change
Consumer $760 $465 63.4%
Pharmaceutical 2,281 1,927 18.4
Medical Devices &
Diagnostics (1) 715 2,160 (66.9)
Segments total 3,756 4,552 (17.5)
Income/(expense)
not allocated to
segments (104) 63
Worldwide total $3,652 $4,615 (20.9)%
(1) Includes $807 million of IPR&D charges related to
the acquisition of Conor Medsystems, Inc. completed
in the fiscal first quarter of 2007. The fiscal first
quarter of 2006 included the Guidant acquisition
agreement termination fee, less associated expenses,
of $622 million.
SALES BY GEOGRAPHIC AREA
(Dollars in Millions)
Fiscal First Quarters
April 1, April 2, Percent
2007 2006 Change
U.S. $8,247 $7,371 11.9%
Europe 3,812 3,071 24.1
Western Hemisphere,
excluding U.S. 1,046 822 27.3
Asia-Pacific,
Africa 1,932 1,728 11.8
Total $15,037 $12,992 15.7%
NOTE 7 - EARNINGS PER SHARE
The following is a reconciliation of basic net
earnings per share to diluted net earnings per share
for the fiscal first quarters ended April 1, 2007 and
April 2, 2006.
(Shares in Millions) Fiscal Quarters
Ended
April 1, April 2,
2007 2006
Basic net earnings per share $.89 $1.11
Average shares outstanding -
basic 2,894.2 2,974.5
Potential shares exercisable
under stock option plans 209.4 233.2
Less: shares which could be
repurchased under treasury
stock method (183.2) (218.9)
Convertible debt shares 3.9 3.9
Adjusted average shares
outstanding - diluted 2,924.3 2,992.7
Diluted earnings per share $.88 $1.10
The diluted earnings per share calculation included the
dilutive effect of convertible debt that was offset by
the related reduction in interest expense of $1 million
for both the fiscal first quarters ended April 1, 2007
and April 2, 2006.
The diluted earnings per share calculation excluded 68
million and 47 million shares related to options for
the fiscal first quarters ended April 1, 2007 and April
2, 2006, respectively, as the exercise price per share
of these options was greater than the average market
value, which would have resulted in an anti-dilutive
effect on diluted earnings per share if included in the
calculation.
NOTE 8 - ACCUMULATED OTHER COMPREHENSIVE INCOME
The total comprehensive income for the fiscal first
quarter ended April 1, 2007 was $2.6 billion, compared
with $3.4 billion for the same period a year ago. Total
comprehensive income included net earnings, net
unrealized currency gains and losses on translation,
adjustments related to Employee Benefit Plans, net
unrealized gains and losses on securities available for
sale and net gains and losses on derivative instruments
qualifying and designated as cash flow hedges. The
following table sets forth the components of
accumulated other comprehensive income.
(Dollars in Millions)
Total
Unrld Gains/ Accum
For. Gains/ Pens (Losses) Other
Cur. (Losses) Liab on Deriv Comp
Trans. on Sec Adj. & Hedg Inc/
(Loss)
December 31, 2006 $ (158) 61 (2,030) 9 (2,118)
2007 Three Months
changes
Net change associated
with current period
hedging transactions (83)
Net amount reclassed
to net earnings 103*
Net three months
changes (96) 32 38 20 (6)
April 1, 2007 $(254) 93 (1,992) 29 (2,124)
Amounts in accumulated other comprehensive income are
presented net of the related tax impact. Foreign
currency translation adjustments are not currently
adjusted for income taxes, as they relate to permanent
investments in international subsidiaries.
*Primarily offset in net earnings by changes in value
of the underlying transactions.
NOTE 9 - MERGERS, ACQUISITIONS AND DIVESTITURES
During the fiscal first quarter of 2007, the Company
acquired Conor Medsystems, Inc. for a purchase price of
$1.4 billion in cash. Conor Medsystems, Inc., is a
cardiovascular device company, which currently markets
the CoStar Drug Eluting Stent.
In the fiscal first quarter of 2007 the Company
recorded an in-process research & development (IPR&D)
charge of $807 million before and after tax related to
the acquisition of Conor Medsystems, Inc.
The Company is in the process of finalizing the
allocation of the purchase price to the individual
assets acquired and liabilities assumed. The
preliminary allocation of the purchase price included
in the current period balance sheet is based on the
best estimates of management. The completion of the
purchase price allocation may result in adjustments to
the carrying value of the Conor Medsystems, Inc.
recorded assets and liabilities, revisions of the
useful lives of intangible assets and the determination
of any residual amount that will be allocated to
goodwill. The related depreciation and amortization
from the acquired assets is also subject to revision
based on the final allocation.
During the fiscal first quarter of 2007, the Company
completed the divestiture of the KAOPECTATE(R), UNISOM(R),
CORTIZONE(R), BALMEX(R) and ACT(R) consumer products to
Chattem, Inc. for $410 million in cash.
The 2006 acquisitions included Animas Corporation, a
leading maker of insulin infusion pumps and related
products; Hand Innovations LLC, a privately held
manufacturer of fracture fixation products for the
upper extremities; Future Medical Systems S.A., a
company that primarily develops, manufactures and
markets arthroscopic fluid management systems; Vascular
Control Systems, Inc., a company focused on developing
medical devices to treat fibroids and to control
bleeding in obstetric and gynecologic applications;
Groupe Vendome S.A., a French marketer of adult and
baby skin care products; ColBar LifeScience Ltd., a
company specializing in reconstructive medicine and
tissue engineering; Ensure Medical, Inc., a company
that develops devices for post-catheterization closure
of the femoral artery; and the Consumer Healthcare
business of Pfizer Inc., which included brands such as
LISTERINE(R), NICORETTE(R), NEOSPORIN(R), SUDAFED(R),
BENADRYL(R) and VISINE(R).
The Company recorded the Guidant acquisition agreement
termination fee, less associated expenses, of $622
million before tax in other income during the fiscal
first quarter of 2006.
NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Components of Net Periodic Benefit Cost
Net periodic benefit cost for the Company's defined
benefit retirement plans and other benefit plans for
the fiscal first quarters of 2007 and 2006 included the
following components:
(Dollars in Millions)
Retirement Plans Other Benefit Plans
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
Service cost $ 135 126 $ 37 18
Interest cost 160 140 37 26
Expected return on
plan assets (197) (173) (1) (1)
Amortization of prior
service cost 2 3 (2) (2)
Recognized actuarial
losses 47 63 17 10
Net periodic benefit
cost $ 147 159 $ 88 51
*Includes other post employment benefits as per the
adoption of SFAS No. 158.
Company Contributions
The Company contributed $11 million during the fiscal
first quarter of 2007 to its U.S. and international
retirement plans. The Company does not expect a
minimum statutory funding requirement for its U.S.
retirement plans in 2007. International plans will be
funded in accordance with local regulations.
NOTE 11 - LEGAL PROCEEDINGS
PRODUCT LIABILITY
The Company is involved in numerous product liability
cases in the United States, many of which concern
adverse reactions to drugs and medical devices. The
damages claimed are substantial, and while the Company
is confident of the adequacy of the warnings and
instructions for use that accompany such products, it
is not feasible to predict the ultimate outcome of
litigation. However, the Company believes that if any
liability results from such cases, it will be
substantially covered by existing amounts accrued in
the Company's balance sheet and, where available, by
third-party product liability insurance.
Multiple products of Johnson & Johnson subsidiaries
are subject to numerous product liability claims and
lawsuits, including ORTHO EVRA(R), RISPERDAL(R), DURAGESIC(R)
and the CHARITE(TM) Artificial Disc. There are
approximately 1,800 claimants who have filed lawsuits
or made claims regarding injuries allegedly due to
ORTHO EVRA(R), 700 claimants with respect to RISPERDAL(R),
120 with respect to CHARITE(TM) and 100 with respect to
DURAGESIC(R). These claimants seek substantial
compensatory and, where available, punitive damages.
Numerous claims and lawsuits in the United States
relating to the drug PROPULSID(R), withdrawn from general
sale by the Company's Janssen Pharmaceutica Inc.
(Janssen) subsidiary in 2000, have been resolved or are
currently enrolled in settlement programs with an
aggregate cap below $100 million in payments by the
Company. Litigation concerning PROPULSID(R) is pending in
Canada, where a class action of persons alleging
adverse reactions to the drug was recently certified.
The Johnson & Johnson subsidiaries responsible for
marketing the above products are vigorously defending
against these claims except where settlement is deemed
appropriate.
AFFIRMATIVE STENT PATENT LITIGATION
In patent infringement actions tried in Delaware
Federal District Court in late 2000, Cordis Corporation
(Cordis), a subsidiary of Johnson & Johnson, obtained
verdicts of infringement and patent validity, and
damage awards against Boston Scientific Corporation
(Boston Scientific) and Medtronic AVE, Inc. (Medtronic)
based on a number of Cordis vascular stent patents. In
December 2000, the jury in the damage action against
Boston Scientific returned a verdict of $324 million
and the jury in the Medtronic action returned a verdict
of $271 million. Multiple post-trial proceedings and
appeals have ensued with respect to these verdicts,
with the ultimate outcome still subject to uncertainty.
Cordis also has an arbitration claim against Medtronic
accusing Medtronic of infringement by sale of stent
products introduced by Medtronic subsequent to its
products subject to the earlier action referenced
above. Those subsequent products were found to have
been licensed to Medtronic pursuant to a 1997 license
by an arbitration panel in March 2005. Further
arbitration proceedings will determine whether
royalties are owed for those products.
In January 2003, Cordis filed a patent infringement
action against Boston Scientific in Delaware Federal
District Court accusing its Express2(TM), Taxus(R) and
Liberte(R) stents of infringing the Palmaz patent that
expired in November 2005. The Liberter stent was also
accused of infringing Cordis' Gray patent that expires
in 2016. In June 2005, a jury found that the
Express2(TM), Taxus(R) and Liberte(R) stents infringed the
Palmaz patent and that the Liberte(R) stent also
infringed the Gray patent. Motions filed by Boston
Scientific seeking to vacate the verdict or obtain a
new trial were denied in June 2006. Cordis expects
Boston Scientific will appeal to the U.S. Court of
Appeals for the Federal Circuit.
PATENT LITIGATION AGAINST VARIOUS JOHNSON & JOHNSON
SUBSIDIARIES
The products of various Johnson & Johnson subsidiaries
are the subject of various patent lawsuits, the
outcomes of which could potentially adversely affect
the ability of those subsidiaries to sell those
products, or require the payment of past damages and
future royalties. With respect to all of these matters,
the Johnson & Johnson subsidiary involved is vigorously
defending against the claims of infringement and
disputing, where appropriate, the validity and
enforceability of the patent claims asserted against
it.
In July 2005, a jury in Federal District Court in
Delaware found that the Cordis CYPHER(R) stent infringed
Boston Scientific's Ding '536 patent and that the
Cordis CYPHER(R) and BX VELOCITY(R) stents also infringed
Boston Scientific's Jang '021 patent. The jury also
found both of those patents valid. Boston Scientific
seeks substantial damages and an injunction in that
action. In June 2006, the District Court denied motions
by Cordis to overturn the jury verdicts or grant a new
trial. Cordis has moved for re-consideration of those
decisions. If reconsideration is denied, Cordis will
appeal to the Court of Appeals for the Federal Circuit.
The District Court indicated it will consider damages,
willfulness and injunctive relief after the appeals
have been decided.
The Federal District Court in Delaware granted Cordis'
motion for summary judgement of non-infringement in
Boston Scientific's case asserting infringement by the
CYPHER(R) stent of Boston Scientific's Grainger patent.
Boston Scientific is expected to appeal that decision.
Boston Scientific has brought actions in Belgium and
the Netherlands under its Kastenhofer patent to enjoin
the manufacture and sale of allegedly infringing
catheters in those countries, and to recover damages.
The Belgian case is pending and no hearing date has
been set. A decision by the lower court in the
Netherlands in Boston Scientific's favor was reversed
on appeal in April 2007. Boston Scientific is expected
to appeal further.
In Germany, Boston Scientific has several actions based
on its Ding patents pending against the Cordis CYPHER(R)
stent. Cordis was successful in these actions at the
trial level, but Boston Scientific has appealed.
The following chart summarizes various patent lawsuits
concerning products of Johnson & Johnson subsidiaries
that have yet to proceed to trial:
J&J Plaintiff/
Product Company Patents Patent Holder Court Trial Date Filed
Two-layer Cordis Kasten- Boston Scientific N.D. Cal 10/07 02/02
Catheters hofer Corp. Belgium * 12/03
Forman
Stents Cordis Israel Medinol Multiple E.U. * 05/03
jurisdictions
Catheters and Cordis Fitzmaurice Medtronic AVE E.D. Tex 09/07 06/03
stent delivery
systems
Contact Lenses Vision Nicolson CIBA Vision M.D. Fla. * 09/03
Care
Drug Eluting Conor Jang Boston Scientific D. Del. 09/07 12/03
Stents Medsystems Corp.
Drug Eluting Cordis Ding Boston Scientific Germany * 04/04
Stents Corp. 11/04
Stents Cordis Ricci Medtronic and E.D. Tex * 03/07
Evysio
* Trial date to be established.
LITIGATION AGAINST FILERS OF ABBREVIATED NEW DRUG
APPLICATIONS (ANDAS)
The following chart indicates lawsuits pending against
generic firms that filed Abbreviated New Drug
Applications seeking to market generic forms of
products sold by various subsidiaries of the Company
prior to expiration of the applicable patents covering
those products. These ANDAs typically include
allegations of non-infringement, invalidity and
unenforceability of these patents. In the event the
subsidiary of the Company involved is not successful in
these actions, or the statutory 30-month stay expires
before a ruling from the district court is obtained,
the firms involved will have the ability, upon FDA
approval, to introduce generic versions of the product
at issue resulting in very substantial market share and
revenue losses for the product of the Company's
subsidiary.
As noted in the following chart, 30-month stays expired
during 2006 and will expire in 2007 or 2008 with
respect to ANDA challenges regarding various products:
Brand Name Patent/NDA Generic Trial Date 30-Month
Product Holder Challenger Court Date Filed Stay Expires
ACIPHEX(R) 20 Eisai Teva S.D.N.Y. 03/07 11/03 02/07
mg delay
release (for Janssen) Dr.Reddy's S.D.N.Y. 03/07 11/03 02/07
tablet Mylan S.D.N.Y. 03/07 01/04 02/07
AXERT(R) 6.25 Almirall Teva S.D.N.Y. * 03/06 11/08
and 12.5 mg Ortho-McNeil
Neurologics
CONCERTA(R) McNeil-PPC Andrx D.Del. * 09/05 None
18,27,36 and
54 mg ALZA
controlled
release tablet
ORTHO TRI
CYCLEN(R) LO Ortho-McNeil Barr D.N.J. * 10/03 02/06
0.18 mg/0.025 mg
0.215 mg/0.025 mg
and 0.25 mg/0.025 mg
PEPCID(R)
Complete McNeil-PPC Perrigo S.D.N.Y. 02/07 02/05 06/07
RAZADYNE(TM) Janssen Teva D. Del 05/07 07/05 01/08
Mylan D. Del 05/07 07/05 01/08
Dr. Reddy's D. Del 05/07 07/05 01/08
Purepac D. Del 05/07 07/05 01/08
Barr D. Del 05/07 07/05 01/08
Par D. Del 05/07 07/05 01/08
AlphaPharm D. Del 05/07 07/05 01/08
RAZADYNE(TM)
ER Janssen Barr D.N.J. * 06/06 11/08
RISPERDAL(R)
Tablets Janssen Mylan D.N.J. 06/06 12/03 05/06
..25, 0.5, 1, 2, 3, 4 Dr. Reddy's D.N.J. 06/06 12/03 06/06
mg tablets Apotex D.N.J. * 06/06 11/08
RISPERDAL(R)
M-Tab Janssen Dr. Reddy's D.N.J. 06/06 02/05 07/07
0.5,1,2,3, 4 mg
RISPERDAL(R)
Oral Janssen Apotex D.N.J. * 03/06 08/08
Solution, 1 mg/ml
TOPAMAX(R) Ortho-McNeil Mylan D.N.J. * 04/04 09/06
25,50,100, 200 mg tablet Cobalt D.N.J. * 10/05 03/08
TOPAMAX(R)
SPRINKLE Ortho-McNeil Cobalt D.N.J. * 12/05 05/08
15, 25 mg capsule Mylan D.N.J. * 10/06 03/09
* Trial date to be established
Trial in the action against Teva, Dr. Reddy's and Mylan
with respect to their ANDA challenges to the patent on
Aciphex of Esai Pharmaceutical, Inc., Ortho McNeil
Pharmaceutical's marketing partner, proceeded before
the district court in New York in April. The court
indicated it would issue its decision in the case on or
before May 15, 2007.
In the action against Mylan and Dr. Reddy's
Laboratories regarding RISPERDAL(R) (risperidone) tablets
and M-Tabs, the District Court in New Jersey ruled, on
October 13, 2006, that the RISPERDAL(R) patent was valid,
enforceable, and infringed by the generic products at
issue, and entered an injunction prohibiting Mylan and
Dr. Reddy's from marketing their generic risperidone
products until a date no earlier than patent expiration
in December 2007. Mylan has appealed that ruling and
argument is scheduled at the Court of Appeals for May
10, 2007. Dr. Reddy's withdrew its appeal.
In the action against Mylan with respect to the patent
on TOPAMAX(R), the District Court in New Jersey, on
October 24, 2006, granted the Company's subsidiary
Ortho-McNeil Pharmaceutical, Inc.'s (Ortho-McNeil)
motion for a preliminary injunction barring launch by
Mylan of its generic version of TOPAMAX(R). On
February 2, 2007, the district court granted Ortho-
McNeil's motion for summary judgment dismissing Mylan's
claim the patent was obvious, the only remaining issue
in the case. The Court entered judgment in the case for
Ortho-McNeil, and entered an injunction prohibiting
Mylan from marketing its generic topiramate products
until a date no earlier than patent expiration in
September 2008. Mylan has appealed and requested a
stay of the trial court's order.
In the weeks following the adverse ruling in the
DITROPAN XL(R) ANDA litigation against Mylan in September
2005, Johnson & Johnson and ALZA received seven
antitrust class action complaints filed by purchasers
of the product. They allege that Johnson & Johnson and
ALZA violated federal and state antitrust laws by
knowingly pursuing baseless patent litigation, and
thereby delaying entry into the market by Mylan and
Impax.
With respect to all of the above matters, the Johnson &
Johnson subsidiary involved is vigorously defending the
validity and enforceability and asserting the
infringement of its own or its licensor's patents.
AVERAGE WHOLESALE PRICE (AWP) LITIGATION
Johnson & Johnson and several of its pharmaceutical
subsidiaries, along with numerous other pharmaceutical
companies, are defendants in a series of lawsuits in
state and federal courts involving allegations that the
pricing and marketing of certain pharmaceutical
products amounted to fraudulent and otherwise
actionable conduct because, among other things, the
companies allegedly reported an inflated Average
Wholesale Price (AWP) for the drugs at issue. Most of
these cases, both federal actions and state actions
removed to federal court, have been consolidated for
pre-trial purposes in a Multi-District Litigation (MDL)
in Federal District Court in Boston, Massachusetts. The
plaintiffs in these cases include classes of private
persons or entities that paid for any portion of the
purchase of the drugs at issue based on AWP, and state
government entities that made Medicaid payments for the
drugs at issue based on AWP. In the MDL proceeding in
Boston, plaintiffs moved for class certification of all
or some portion of their claims. On August 16, 2005,
the trial judge certified Massachusetts-only classes of
private insurers providing "Medi-gap" insurance
coverage and private payers for physician-administered
drugs where payments were based on AWP. The judge also
allowed plaintiffs to file a new complaint seeking to
name proper parties to represent a national class of
individuals who made co-payments for physician-
administered drugs covered by Medicare. The Court of
Appeals declined to allow an appeal of those issues and
in January 2006, the court certified the national class
as noted above. A trial of the two Massachusetts-only
class actions concluded before the Massachusetts
District Court in December 2006. A decision is expected
in the third or fourth quarter of 2007. The trial judge
has scheduled jury trials to begin in June 2007 in the
national class action on behalf of individuals who paid
co-payments for Medicare Part B drugs. Trial in the
action brought by the Attorney General of the State of
Alabama making allegations related to AWP is set for
November 2007. Additional AWP cases brought by various
Attorney Generals are expected to be set for trial in
2008.
OTHER
In July 2003, Centocor Corporation received a request
that it voluntarily provide documents and information
to the criminal division of the U.S. Attorney's Office,
District of New Jersey, in connection with its
investigation into various Centocor marketing
practices. Subsequent requests for documents have been
received from the U.S. Attorney's Office. Both the
Company and Centocor responded, or are in the process
of responding, to these requests for documents and
information.
In December 2003, Ortho-McNeil received a subpoena from
the U.S. Attorney's Office in Boston, Massachusetts
seeking documents relating to the marketing, including
alleged off-label marketing, of the drug TOPAMAX(R)
(topiramate). Additional subpoenas for documents have
been received. Ortho-McNeil is cooperating in
responding to the subpoenas. In October 2004, the U.S.
Attorney's Office in Boston asked attorneys for Ortho-
McNeil to cooperate in facilitating the subpoenaed
testimony of several present and former Ortho-McNeil
employees before a federal grand jury in Boston.
Cooperation in securing the testimony of additional
witnesses before the grand jury has been requested and
is being provided.
In January 2004, Janssen received a subpoena from the
Office of the Inspector General of the U.S. Office of
Personnel Management seeking documents concerning sales
and marketing of, any and all payments to physicians in
connection with sales and marketing of, and clinical
trials for, RISPERDAL(R) (risperidone) from 1997 to 2002.
Documents subsequent to 2002 have also been requested.
An additional subpoena seeking information about
marketing of and adverse reactions to RISPERDAL(R) was
received from the U.S. Attorney's Office for the
Eastern District of Pennsylvania in November 2005.
Janssen is cooperating in responding to these
subpoenas.
In August 2004, Johnson & Johnson Health Care Systems,
Inc. (HCS), a Johnson & Johnson subsidiary, received a
subpoena from the Dallas, Texas U.S. Attorney's Office
seeking documents relating to the relationships between
the group purchasing organization, Novation, and HCS
and other Johnson & Johnson subsidiaries. The Company's
subsidiaries involved have responded to the subpoena.
In September 2004, Ortho Biotech Inc. (Ortho Biotech),
received a subpoena from the U.S. Office of Inspector
General's Denver, Colorado field office seeking
documents directed to sales and marketing of PROCRIT(R)
(Epoetin alfa) from 1997 to the present, as well as to
dealings with U.S. Oncology Inc., a healthcare services
network for oncologists. Ortho Biotech has responded to
the subpoena.
In March 2005, DePuy Orthopaedics, Inc. (DePuy), a
Johnson & Johnson subsidiary, received a subpoena from
the U.S. Attorney's Office, District of New Jersey,
seeking records concerning contractual relationships
between DePuy Orthopaedics and surgeons or surgeons-in-
training involved in hip and knee replacement and
reconstructive surgery. Other leading orthopaedic
companies are known to have received a similar
subpoena. DePuy Orthopaedics is responding to the
subpoena as well as several follow-on subpoenas for
documents. A number of employees of DePuy have been
subpoenaed to testify before a grand jury in connection
with this investigation.
In June 2005, the U.S. Senate Committee on Finance
requested the Company to produce information regarding
use by several of its pharmaceutical subsidiaries of
educational grants. A similar request was sent to other
major pharmaceutical companies. In July 2005, the
Committee specifically requested information about
educational grants in connection with the drug
PROPULSID(R). A follow up request was received from the
Committee for additional information in January 2006.
In July 2005, Scios Inc. (Scios), a Johnson & Johnson
subsidiary, received a subpoena from the U.S.
Attorney's Office, District of Massachusetts, seeking
documents related to the sales and marketing of
NATRECOR(R). Scios is responding to the subpoena. In
early August 2005, Scios was advised that the
investigation would be handled by the U.S. Attorney's
Office for the Northern District of California in
San Francisco.
In September 2005, Johnson & Johnson received a
subpoena from the U.S. Attorney's Office, District of
Massachusetts, seeking documents related to sales and
marketing of eight drugs to Omnicare, Inc., a manager
of pharmaceutical benefits for long-term care
facilities. The Johnson & Johnson subsidiaries involved
are responding to the subpoena. Several employees of
the Company's pharmaceutical subsidiaries have been
subpoenaed to testify before a grand jury in connection
with this investigation.
In January 2006, Janssen received a civil investigative
demand from the Texas Attorney General seeking broad
categories of documents related to the sales and
marketing of RISPERDAL(R). Janssen is responding to the
request. In October 2006, the Texas Attorney General
joined a qui tam action filed against Janssen in Texas
state court alleging off label marketing of RISPERDAL(R)
and seeking compensation for alleged adverse reactions
due to RISPERDAL(R).
In February 2006, Johnson & Johnson received a subpoena
from the U.S. Securities & Exchange Commission (SEC)
requesting documents relating to the participation by
several Johnson & Johnson subsidiaries in the United
Nations Iraq Oil For Food Program. The subsidiaries are
cooperating with the SEC in producing responsive
documents.
In June 2006, DePuy received a subpoena from the U.S.
Department of Justice, Antitrust Division, requesting
documents related to the manufacture, marketing and
sale of orthopaedic devices, and had search warrants
executed in connection with the investigation. DePuy is
responding to the request for documents. In the wake of
publicity about the subpoena, DePuy was served with
five civil antitrust class actions.
In September 2006, Janssen received a subpoena from the
Attorney General of the State of California seeking
documents regarding sales and marketing and side-
effects of RISPERDAL(R), as well as interactions with
State officials regarding the State's formulary for
Medicaid-reimbursed drugs. Janssen is in the process of
responding to the subpoena.
On November 27, 2006, Centocor received a subpoena
seeking documents in connection with an investigation
being conducted by the Office of the United States
Attorney for the Central District of California
regarding Centocor's Average Selling Price (ASP)
calculations for REMICADE(R) under the company's Contract
Purchase Program. Centocor is producing material
responsive to the subpoena and cooperating with the
investigation.
On February 12, 2007, Johnson & Johnson voluntarily
disclosed to the U.S. Department of Justice (DOJ) and
the U.S. Securities and Exchange Commission (SEC) that
subsidiaries outside the United States are believed to
have made improper payments in connection with the sale
of medical devices in two small-market countries, which
payments may fall within the jurisdiction of the
Foreign Corrupt Practices Act. The Company has provided
and will continue to provide additional information to
DOJ and SEC, and will cooperate with the agencies'
reviews of these matters.
On March 5, 2007, Cordis Corporation received a letter
request for documents from the Committee on Oversight
and Government Reform of the U.S. House of
Representatives regarding marketing and safety of drug-
eluting stents. Cordis is cooperating in responding to
the request.
On March 12, 2007, the Company announced that it had
received separate subpoenas from the U.S. Attorney's
Office in Philadelphia, the U.S. Attorney's Office in
Boston and the U.S. Attorney's Office in San Francisco.
The subpoenas relate to investigations by these three
offices referenced above concerning, respectively,
sales and marketing of RISPERDAL(R) by Janssen, TOPAMAX(R)
by Ortho-McNeil and NATRECOR(R) by Scios. The subpoenas
request information regarding the Company's corporate
supervision and oversight of these three subsidiaries,
including their sales and marketing of these drugs.
The Company is cooperating in responding to these
requests.
On March 21, 2007, the Company received a letter from
the Committee on Energy and Commerce of the U.S. House
of Representatives seeking answers to several questions
regarding marketing and safety of PROCRIT(R), the
erythropoietin product sold by the Company's Ortho-
Biotech subsidiary. The Company is responding to
these questions.
In September 2004, plaintiffs in an employment
discrimination litigation initiated against the Company
in 2001 in Federal District Court in New Jersey moved
to certify a class of all African American and Hispanic
salaried employees of the Company and its affiliates in
the U.S., who were employed at any time from November
1997 to the present. Plaintiffs seek monetary damages
for the period 1997 through the present (including
punitive damages) and equitable relief. The Court
denied plaintiffs' class certification motion in
December 2006 and their motion for reconsideration in
April 2007. Plaintiffs have indicated that they will
appeal these decisions. The Company disputes the
allegations in the lawsuit and is vigorously defending
against them.
In late December of 2005 and early 2006, three
purported class actions were filed on behalf of
purchasers of endo-mechanical instruments against the
Company and its wholly-owned subsidiaries, Ethicon,
Inc., Ethicon Endo-Surgery, Inc., and Johnson & Johnson
Health Care Systems, Inc. These challenge suture and
endo-mechanical contracts with Group Purchasing
Organizations and hospitals,in which discounts are
predicated on a hospital achieving specified market
share targets for both categories of products. These
actions have been filed in the Federal District Court
for the Central District of California.
In November 2005, Amgen filed suit against Hoffmann-
LaRoche, Inc. in the U.S. District Court for the
District of Massachusetts seeking a declaration that
the Roche product CERA, which Roche has indicated it
will seek to introduce into the United States,
infringes a number of Amgen patents concerning EPO.
Amgen licenses EPO for sale in the United States to
the Company's Ortho Biotech Inc. subsidiary for non-
dialysis indications. The suit is in its preliminary
stages.
In October 2006, Wyeth, Inc. initiated litigation in
Delaware against Cordis Corporation alleging that
Cordis breached the license and supply agreement
pursuant to which Wyeth supplies Cordis the drug
Rapamycin which is used in connection with Cordis'
CYPHER(R) Sirolimus-eluting Stent. Cordis has commenced
its own action in Delaware seeking a declaration that
no breach has occurred.
The Company is also involved in a number of other
patent, trademark and other lawsuits incidental to its
business. The ultimate legal and financial liability of
the Company in respect to all claims, lawsuits and
proceedings referred to above cannot be estimated with
any certainty. However, in the Company's opinion, based
on its examination of these matters, its experience to
date and discussions with counsel, the ultimate outcome
of legal proceedings, net of liabilities accrued in the
Company's balance sheet, is not expected to have a
material adverse effect on the Company's financial
position, although the resolution in any reporting
period of one or more of these matters could have a
significant impact on the Company's results of
operations and cash flows for that period.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Analysis of Consolidated Sales
For the fiscal first quarter of 2007, worldwide sales
were $15.0 billion, with a total increase of 15.7% and
an operational increase of 13.3% over 2006 fiscal first
quarter sales of $13.0 billion. Currency had a
positive 2.4% impact on total reported fiscal first
quarter 2007 sales. The acquisition of Pfizer Inc.'s
Consumer Healthcare business net of related
divestitures increased both total sales growth and
operational growth by 7.0%.
Sales by U.S. companies were $8.2 billion in the fiscal
first quarter of 2007, which represented a total
increase of 11.9% over the same period last year. Sales
by international companies were $6.8 billion, which
represented a total increase of 20.8%, an operational
increase of 15.4%, and a positive impact from currency
of 5.4% over 2006 fiscal first quarter sales.
Sales by companies in the Western Hemisphere, excluding
the U.S., achieved growth of 27.3%, operational growth
of 26.9% and a positive impact from currency of 0.4%.
Sales by companies in Europe experienced an increase of
24.1%, with operational growth of 15.0% and a positive
impact from currency of 9.1%. Sales by companies in
the Asia-Pacific, Africa region posted sales growth of
11.8%, with operational growth of 10.4% and a positive
impact from currency of 1.4%.
Analysis of Sales by Business Segments
Consumer
Consumer segment sales in the fiscal first quarter of
2007 were $3.5 billion, an increase of 48.5% over the
same period a year ago, with 45.7% of operational
growth and a positive impact from currency of 2.8%.
U.S. consumer segment sales increased 41.7%, while
international sales increased 54.9%, including
operational growth of 49.4% and a positive currency
impact of 5.5%.
Major Consumer Franchise Sales
(Dollars in Millions)
Fiscal Quarters Ended
April 1, April 2, Total Operations Currency
2007 2006 Change Change Change
OTC Pharm & Nutr $1,257 $653 92.5% 90.4% 2.1%
Skin Care 764 659 16.0 12.8 3.2
Baby & Kids Care 447 406 9.9 6.4 3.5
Women's Health 421 399 5.6 2.5 3.1
Oral Care Products 359 93 * * 1.7
Other 248 145 71.4 69.3 2.1
Total $3,496 $2,355 48.5% 45.7% 2.8%
*Percentages greater than 100%
The acquisition of Pfizer Inc.'s Consumer Healthcare
business net of the related divestitures increased
total sales growth for the total Consumer Segment by
39.1%. The corresponding impact by franchise is; OTC
Pharm & Nutr 77.5%, Skin Care 6.3%, Baby & Kids Care
2.2%, Women's Health 5.3%, Oral Care Products greater
than 100% and Other 62.0%.
Consumer segment sales growth was attributable to solid
sales performance, and the impact of new products from
acquisitions net of divestitures in the major
franchises in this segment, including OTC
Pharmaceutical & Nutritionals, Oral Care Products, Skin
Care and Baby & Kids Care.
The OTC Pharmaceuticals and Nutritionals franchise
achieved operational growth of 90.4%. This was
attributable to new products from acquisitions, strong
growth in the upper respiratory product lines
reformulated with phenylephrine instead of
pseudoephedrine, as well as growth in IMODIUM(R) and
SPLENDA(R) products. The impact on OTC Pharmaceuticals and
Nutritionals total sales growth due to newly acquired
brands from Pfizer Inc. is 77.5%.
The Skin Care franchise operational growth of 12.8% was
driven by strong performances from the AVEENO(R), CLEAN &
CLEAR(R), and Suncare product lines. Solid operational
growth related to new products launched and new brands
acquired as well as strong promotional activity. These
gains were partially offset by softer sales of RoC(R)
products. The impact on Skin Care sales growth due to
newly acquired brands from Pfizer Inc. is 6.3%.
The Baby & Kids Care franchise operational growth of
6.4% was the result of the strong performances by
cleanser, lotion and cream product lines. The impact on
Baby & Kids Care sales growth due to newly acquired
brands from Pfizer Inc. and divestitures related to the
acquisition is 2.2%.
The Women's Health franchise achieved operational
growth of 2.5%, which was attributable to new products
related to acquisitions. The impact on Women's Health
sales growth due to newly acquired brands from Pfizer
Inc. is 5.3%.
The Oral Care franchise strong results were driven by
LISTERINE(R) products and the relaunch of REMBRANDT(R)
Whitening Products. The impact on Oral Care sales
growth due to newly acquired brands from Pfizer Inc. and
divestitures related to the acquisition is greater than
100%.
Pharmaceutical
Pharmaceutical segment sales in the fiscal first
quarter of 2007 were $6.2 billion, an increase of 10.6%
over the same period a year ago with 8.6% of
operational growth and a positive impact from currency
of 2.0%. U.S. Pharmaceutical sales increased by 9.0%,
while international Pharmaceutical sales increased by
13.6%, including operational growth of 7.7% and a
positive impact from currency of 5.9%.
Major Pharmaceutical Product Revenues
(Dollars in Millions)
Fiscal Quarters Ended
April 1, April 2, Total Operations Currency
2007 2006 Change Change Change
Anti-psychotics $1,178 $1,018 15.7% 13.2% 2.5%
PROCRIT(R)/EPREX(R) 817 786 3.9 1.5 2.4
REMICADE(R) 731 681 7.4 7.4 -
TOPAMAX(R) 610 471 29.7 28.4 1.3
LEVAQUIN(R)/FLOXIN(R) 479 401 19.4 19.5 (0.1)
ACIPHEX(R)/PARIET(R) 336 306 9.8 6.8 3.0
DURAGESIC(R)/
Fentanyl Transdermal 303 325 (6.8) (10.2) 3.4
CONCERTA(R) 252 235 7.3 6.0 1.3
Hormonal Contraceptives 237 254 (6.5) (7.6) 1.1
Other 1,278 1,149 11.2 8.1 3.1
Total $6,221 $5,626 10.6% 8.6% 2.0%
Sales growth within the segment was led by strong
performances from RISPERDAL(R) CONSTA(R) (risperidone),
the launch of INVEGA(TM) (Paliperdone), REMICADE(R)
(infliximab), TOPAMAX(R) (topiramate) and LEVAQUIN(R)
(levofloxacin). Generic competition related to
DURAGESIC(R) (fentanyl transdermal system), oral
contraceptives and DITROPAN XL(R) continued to
negatively impact sales during the fiscal first
quarter of 2007.
The anti-psychotic franchise which includes
RISPERDAL(R) oral (risperidone), a medication that treats
the symptoms of schizophrenia and bipolar mania,
RISPERDAL(R) CONSTA(R) (risperidone) a long acting
injectable and INVEGA(TM) (paliperdone) Extended-Release
tablets for the treatment of schizophrenia, achieved
operational growth of 13.2% in the fiscal first quarter
of 2007. Sales growth was positively impacted by the
U.S. launch of INVEGA(TM) and the global success of
RISPERDAL(R) CONSTA(R). In March, the U.S. Food and Drug
Administration (FDA) granted pediatric exclusivity for
RISPERDAL(R), which extends the marketing exclusivity in
the U.S. for RISPERDAL(R) oral to the end of June 2008
and RISPERDAL(R) CONSTA(R) to May 2014.
PROCRIT(R) (Epoetin alfa) and EPREX(R) (Epoetin alfa)
combined had operational sales growth of 1.5%.
PROCRIT(R)'s increase was due to market growth coupled
with market share gains in the hospital and retail
markets offset by softer demand in the oncology
clinics. Contributors to the EPREX(R) results were the
indication for once weekly dosing and the restoration
to the label of subcutaneous administration. In the
U.S., Epoetin alfa products are now subject to a label
change, which may negatively impact future sales. The
label for Epoetin alfa products is also under review in
jurisdictions outside the U.S.
REMICADE(R) (infliximab), a biologic approved for the
treatment of Crohn's disease, ankylosing spondylitis,
psoriasis, psoriatic arthritis, ulcerative colitis and
use in the treatment of rheumatoid arthritis, achieved
operational growth of 7.4% over prior year fiscal first
quarter. This continued growth was driven by expanded
indications and overall market growth. REMICADE(R)
is experiencing increased competition which may negatively
impact the future rate of sales growth.
TOPAMAX(R) (topiramate), which has been approved for
adjunctive and monotherapy use in epilepsy, as well as
for the prophylactic treatment of migraines, achieved
strong operational growth of 28.4%. The primary driver
of increased demand was in the focus area of migraine
prescriptions written by primary care physicians.
LEVAQUIN(R) (levofloxacin)/FLOXIN(R) achieved strong
operational growth of 19.5% over prior year. This was
primarily due to strong seasonal market growth in the
U.S. In March the FDA granted pediatric exclusivity in
the U.S. for LEVAQUIN(R), which will extend the marketing
exclusivity by six months to June 2011.
ACIPHEX(R)/PARIET(R) a proton pump inhibitor, achieved
operational growth of 6.8% primarily due to strong
market growth in the U.S. Depending on an imminent
court decision related to the ACIPHEX(R) patent of Eisai
Pharmaceutical, Inc., the Company's marketing partner,
future sales may be negatively impacted due to earlier
than anticipated generic competition.
DURAGESIC(R)/Fentanyl Transdermal (fentanyl transdermal
system) experienced an operational sales decline of
10.2%. Although U.S. sales grew, operational sales
outside the U.S. declined due to the continued impact
of generic competition in certain international
markets.
CONCERTA(R) (methylphenidate HCl), a product for the
treatment of attention deficit hyperactivity disorder,
achieved operational sales growth of 6.0% over the
fiscal first quarter of 2006. Although the original
CONCERTA(R) patent expired in 2004, the FDA has not
approved any generic version that is substitutable for
CONCERTA(R). Two parties have filed Abbreviated New
Drug Applications (ANDAs) for generic versions of
CONCERTA(R) which are pending and may be approved at
any time.
The hormonal contraceptive franchise experienced an
operational sales decline of 7.6% primarily resulting
from generic competition in oral contraceptives. ORTHO
EVRA(R) (norelgestromin/ethinyl estradiol), the first
contraceptive patch approved by the FDA, experienced a
significant decline in sales as a result of labeling
changes and negative media coverage concerning product
safety. This was partially offset by growth in ORTHO TRI-
CYCLEN(R) LO (norgestimate/ethinyl estradiol), a low
dose oral contraceptive.
NATRECOR(R) (nesiritide), a product for the treatment of
patients with acutely decompensated congestive heart
failure who have dyspnea at rest or with minimal
activity, experienced a decline in demand due to
negative media coverage regarding a meta analysis of
selected historical clinical trials. The Company
believes that the data does not support the conclusions
of these medical and consumer publications.
Medical Devices and Diagnostics
Medical Devices and Diagnostics segment sales in the
fiscal first quarter of 2007 were $5.3 billion, an
increase of 6.2% over the same period a year ago with
3.7% of this change due to operational growth and a
positive impact from currency of 2.5%. The U.S.
Medical Devices and Diagnostics sales increase was
2.5%, while the growth in international Medical Devices
and Diagnostics sales was 9.8%, including operational
growth of 4.7% and an increase of 5.1% related to the
positive impact of currency.
Major Medical Devices and Diagnostics Franchise Sales
(Dollars in Millions)
Fiscal Quarters Ended
April 1, April 2, Total Operations Currency
2007 2006 Change Change Change
DEPUY(R) $1,157 $1,039 11.3% 8.4% 2.9%
CORDIS(R) 928 1,075 (13.6) (15.3) 1.7
ETHICON ENDO-SURGERY(R) 891 794 12.3 9.4 2.9
ETHICON(R) 870 774 12.4 8.8 3.6
LIFESCAN(R) 549 504 8.9 6.0 2.9
Vision Care 513 441 16.4 15.2 1.2
ORTHO-CLINICAL
DIAGNOSTICS(R) 393 370 6.2 4.1 2.1
Other 19 14 38.6 37.8 0.8
Total $5,320 $5,011 6.2% 3.7% 2.5%
The DePuy franchise's operational growth of 8.4% was
primarily due to DePuy's orthopaedic joint
reconstruction products including the hip and knee
product lines. Strong performance was also reported in
Mitek sports medicine products.
The Cordis franchise experienced an operational sales
decline of 15.3% as compared to the prior year. These
results were impacted by lower sales of CYPHER(R)
Sirolimus-eluting Coronary Stent primarily due to a
global contraction of the drug-eluting stent market
following reports of a potential risk of late stent
thrombosis associated with the use of drug-eluting
stents. These results were partially offset by very
strong sales growth achieved by the Biosense Webster
and Cordis Endovascular businesses which were driven by
the sales of AcuNav Ultrasound Catheters, newly
launched carotid systems and the continued growth of
the chronic total occlusion devices.
In April and July of 2004, the Cordis Cardiology
Division of Cordis Corporation received Warning Letters
from the FDA regarding Good Manufacturing Practice
regulations and Good Clinical Practice regulations. In
response to the Warning Letters, Cordis has made
improvements to its quality systems and has provided
periodic updates to the FDA. The Clinical Warning
Letter issues have been resolved to the FDA's
satisfaction. With respect to the Quality System
Warning Letter, in addition to the improvement updates,
the Cordis Juarez, Mexico and stent supplier locations
were inspected with acceptable results. The FDA
inspected the Miami site and the Global Quality system,
including Design Control System, in August 2006, with
acceptable results; Cordis received no observations
from the FDA during this inspection. The FDA
inspections were completed in Cordis LLC in San German,
Puerto Rico and Cordis laboratory operations in Warren,
New Jersey in January 2007, thereby completing all
scheduled follow up inspections. Cordis has met with
the FDA to review the results of the inspections and
the FDA is in the final review of the inspection report
from the Puerto Rico District Office. Cordis
anticipates that the FDA final review will be completed
in the second quarter.
The Ethicon Endo-Surgery franchise achieved operational
growth of 9.4% over prior year. This growth was mainly
driven by endocutter sales that include products used in
performing bariatric procedures for the treatment of
obesity, an important focus area for the franchise.
Additionally, strong results were achieved with the
continued success of the HARMONIC ACE(R), an ultrasonic
cutting and coagulating surgical device.
Ethicon worldwide sales grew operationally by 8.8% from
the same period in the prior year. Sales of
VICRYL(R)PLUS sutures, DERMABOND(R), Meshes and women's
health products had strong results in the first quarter
of 2007 as compared to the same period in the prior year.
The LifeScan franchise achieved operational growth of
6.0% with the ONETOUCH(R) ULTRA(R) product line being the
major contributor to growth outside the U.S. Sales
related to the acquisition of Animas Corporation,
acquired in the middle of fiscal first quarter 2006
also contributed to this growth.
The Vision Care franchise operational sales growth of
15.2% was led by the continued success of ACUVUE(R)
OASYS(TM), 1-DAY ACUVUE(R) moist, and ACUVUE(R)
ADVANCE(TM) for Astigmatism.
The Ortho-Clinical Diagnostics franchise achieved
operational growth of 4.1% with the Immunodiagnostics
product line being a major contributor. Included in
first quarter sales was the launch of the Chagas
screening assay.
Cost of Products Sold and Selling, Marketing and
Administrative Expenses
Consolidated costs of goods sold increased to 29.1%
from 27.8% of sales over the same period a year ago.
The increase is due to the impact of newly acquired
consumer brands as well as unfavorable product mix in
the pharmaceutical and medical devices and diagnostic
segments.
Consolidated selling, marketing and administrative
expenses increased 17.3% over the same period a year
ago. Selling, marketing and administrative expenses as
a percent to sales were 31.9% versus 31.5% in the
fiscal first quarter of 2006. The increase is
attributable to the addition of the newly acquired
consumer brands to our mix of businesses partially
offset by continued cost containment efforts primarily
in our pharmaceutical business.
Research & Development
Research activities represent a significant part of the
Company's business. These expenditures relate to the
development of new products, improvement of existing
products, technical support of products and compliance
with governmental regulations for the protection of
consumers and patients. Worldwide costs of research
activities for the fiscal first quarter of 2007 were
$1.7 billion, an increase of 7.8% over the same period
a year ago. This increase reflects both the significant
number of pharmaceutical projects in late stage
development and higher levels of investment in research
projects in our Medical Devices and Diagnostics
segment. As a percent to sales, the level of research
and development spending decreased to 11.0% in the
fiscal first quarter of 2007, from 11.8% during the
same period a year ago. This decrease as a percent to
sales in research and development is primarily due to
the change in the mix of businesses with the inclusion
of the newly acquired consumer products.
In-Process Research & Development
In the fiscal first quarter of 2007 the Company
recorded an in-process research & development (IPR&D)
charge of $807 million before and after tax related to
the acquisition of Conor Medsystems Inc. The fiscal
first quarter of 2006 IPR&D charge of $37 million
before tax, and $29 million after tax related to the
acquisitions of Hand Innovations LLC and Future Medical
Systems S.A.
Other (Income) Expense, Net
Other (income) expense included gains and losses
related to the sale and write-down of certain equity
securities of the Johnson & Johnson Development
Corporation, losses on the disposal of fixed
assets, currency gains & losses, minority interests,
litigation settlement expense, as well as, royalty income.
The change in other (income) expense was the result of
the net gain of $175 million before tax related to the
divestiture of certain brands partially offset by the
integration costs of newly acquired businesses recorded
in the fiscal first quarter of 2007, as compared to the
same period a year ago, which included a gain of $622
million recorded for the Guidant acquisition
termination fee, less associated expenses.
OPERATING PROFIT BY SEGMENT
Consumer Segment
Operating profit for the Consumer segment as a percent
to sales in the fiscal first quarter of 2007 was 21.7%
versus 19.7% over the same period a year ago. This
increase was primarily due to the gain from the
divestitures offset by integration costs and other
operating expenses related to newly acquired products.
Pharmaceutical Segment
Operating profit for the Pharmaceutical segment as a
percent to sales in the fiscal first quarter of 2007
was 36.7% versus 34.3% over the same period a year ago.
Operating profit was positively impacted by cost
containment efforts in selling, marketing and
administrative expenses.
Medical Devices and Diagnostics Segment
Operating profit for the Medical Devices and
Diagnostics segment as a percent of sales in the fiscal
first quarter of 2007 was 13.4% versus 43.1% over the
same period a year ago. Operating profit was negatively
impacted by IPR&D charges of $807 million, associated
with the Conor Medsystems acquisition in the fiscal
first quarter of 2007. The fiscal first quarter 2006
included the Guidant acquisition termination fee, less
associated expenses, of $622 million before tax.
Interest (Income) Expense
Interest income in the fiscal first quarter of 2007
decreased by $102 million over the fiscal first quarter
of 2006, due to a lower cash balance. The cash balance,
which included marketable securities, was $5.2 billion
at the end of the fiscal first quarter of 2007. This
is a decrease of $12.0 billion from the same period a
year ago. This is primarily due to acquisition activity
and the stock repurchase program during the fiscal year
2006.
Interest expense in the fiscal first quarter of 2007
increased by $46 million over the fiscal first quarter
of 2006 due to a higher debt position of $3.9 billion.
This was due to acquisition activity and the stock
repurchase program during the fiscal year 2006.
Provision For Taxes on Income
The worldwide effective income tax rates for the fiscal
first quarters of 2007 and 2006 were 29.5% and 28.4%,
respectively. The increase in the effective tax rate
of 1.1% was primarily due to the IPR&D charge of $807
million recorded in the fiscal first quarter of
2007,which was non-deductible for tax purposes. This
was partially offset by increases in taxable income in
lower tax jurisdictions relative to taxable income in
higher tax jurisdictions along with the Research and
development tax credit, which was not in effect in the
fiscal first quarter of 2006.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash generated from operations provided the major
sources of funds for the growth of the business,
including working capital, capital expenditures and
acquisitions. Other uses of cash included share
repurchases, dividend payments and debt repayments. In
the fiscal first quarter of 2007, cash flow from
operations was $3.8 billion, an increase of $0.4
billion over the same period a year ago. This increase
was primarily due to a $0.4 billion increase in
accounts payable. Net cash used by investing activities
increased by $0.1 billion due to an increase of $0.6
billion in acquisition activity offset by $0.2 billion
in proceeds from the disposal of assets and a decrease
of $0.2 in the purchase of investments. Net cash used
by financing activities decreased by $0.1 billion due
to a $0.1 billion decrease in the repurchase of common
stock and an increase of $0.1 billion in proceeds from
the exercise of stock options offset by a $0.1 billion
increase in dividends paid to shareholders. Cash and
current marketable securities were $5.2 billion at the
end of the fiscal first quarter of 2007 as compared
with $17.2 billion at the end of fiscal first quarter
2006, a decrease of $12.0 billion, which was due to
acquisition activity and the 2006 stock repurchase
program.
Dividends
On January 2, 2007, the Board of Directors declared a
regular cash dividend of $0.375 per share, paid on
March 13, 2007 to shareholders of record as of February
27, 2007. This represented an increase of 13.6% from
the fiscal first quarter of 2006 dividend.
On April 26, 2007, the Board of Directors declared a
regular cash dividend of $0.415 per share, payable on
June 12, 2007 to shareholders of record as of May 29,
2007. This represented an increase of 10.7% in the
quarterly dividend rate and was the 45th consecutive
year of cash dividend increases. The Company expects
to continue the practice of paying regular cash
dividends.
OTHER INFORMATION
New Accounting Standards
In September 2006, the FASB issued Statement of
Financial Accounting Standards No 157, "Fair Value
Measurements". This statement defines fair value,
establishes a framework for measuring fair value under
generally accepted accounting principles, and expands
disclosures about fair value measurements. The
statement is effective in the fiscal first quarter of
2008 and the Company will adopt the statement at that
time. The Company believes that the adoption of SFAS
No 157 will not have a material effect on its results
of operations, cash flows or financial position.
In June 2006, the FASB issued FASB Interpretation 48
(FIN 48), "Accounting for Uncertainty in Income Taxes -
an interpretation of FASB Statement No 109". This
interpretation prescribes a recognition threshold and
measurement attribute for the financial statement
recognition and measurement of a tax position taken or
expected to be taken in a tax return. The
interpretation also provides guidance on derecognition,
classification and other matters. The statement was
effective for the fiscal year 2007 and the Company
adopted the Interpretation at that time. See Note 3 to
the Unaudited Consolidated Financial Statements for
more details.
In February 2007, the FASB issued Statement No. 159,
"Fair Value Option for Financial Assets and Financial
Liabilities", which permits an entity to measure certain
financial assets and financial liabilities at fair
value. Statement 159 is effective for fiscal year 2008
but early adoption is permitted. The Company is
currently in the process of evaluating this
pronouncement and the impact of the adoption of FASB
159 would have on its results of operations, cash flows
and financial position.
Economic and Market Factors
Johnson & Johnson is aware that its products are used
in an environment where, for more than a decade,
policymakers, consumers and businesses have expressed
concern about the rising cost of health care. Johnson
& Johnson has a long-standing policy of pricing
products responsibly. For the period 1996 through 2006
in the United States, the weighted average compound
annual growth rate of Johnson & Johnson price increases
for health care products (prescription and over-the-
counter drugs, hospital and professional products) was
below the U.S. Consumer Price Index (CPI).
Inflation rates, even though moderate in many parts of
the world during 2006, continue to have an effect on
worldwide economies and, consequently, on the way
companies operate. In the face of increasing costs, the
Company strives to maintain its profit margins through
cost reduction programs, productivity improvements and
periodic price increases. The Company faces various
worldwide health care changes that may result in
pricing pressures that include health care cost
containment and government legislation relating to
sales, promotions and reimbursement.
The Company also operates in an environment
increasingly hostile to intellectual property rights.
Generic drug firms have filed Abbreviated New Drug
Applications seeking to market generic forms of most of
the Company's key pharmaceutical products, prior to
expiration of the applicable patents covering those
products. In the event the Company is not successful in
defending a lawsuit resulting from an Abbreviated New
Drug Application filing, the generic firms will then
introduce generic versions of the product at issue,
resulting in very substantial market share and revenue
losses. For further information see the discussion on
"Litigation Against Filers of Abbreviated New Drug
Applications" in Note 11 to the Unaudited Consolidated
Financial Statements.
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains forward-looking statements.
Forward- looking statements do not relate strictly to
historical or current facts and anticipate results
based on management's plans that are subject to
uncertainty. Forward-looking statements may be
identified by the use of words like "plans," "expects,"
"will," "anticipates," "estimates" and other words of
similar meaning in conjunction with, among other
things, discussions of future operations, financial
performance, the Company's strategy for growth, product
development, regulatory approval, market position and
expenditures.
Forward-looking statements are based on current
expectations of future events. The Company cannot
guarantee that any forward- looking statement will be
accurate, although the Company believes that it has
been reasonable in its expectations and assumptions.
Investors should realize that if underlying assumptions
prove inaccurate or that unknown risks or uncertainties
materialize, actual results could vary materially from
the Company's expectations and projections. Investors
are therefore cautioned not to place undue reliance on
any forward-looking statements. The Company does not
undertake to update any forward-looking statements as a
result of new information or future events or
developments.
Risks and uncertainties include general industry
conditions and competition; economic conditions, such
as interest rate and currency exchange rate
fluctuations; technological advances, new products and
patents attained by competitors; challenges inherent in
new product development, including obtaining regulatory
approvals; challenges to patents; U.S. and foreign
health care reforms and governmental laws and
regulations; trends toward health care cost
containment; increased scrutiny of the health care
industry by government agencies; product efficacy or
safety concerns resulting in product recalls or
regulatory action.
The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2006 contains, as an Exhibit, a
discussion of additional factors that could cause
actual results to differ from expectations. The Company
notes these factors as permitted by the Private
Securities Litigation Reform Act of 1995.
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
There has been no material change in the Company's
assessment of its sensitivity to market risk since
its presentation set forth in Item 7A, "Quantitative
and Qualitative Disclosures About Market Risk," in
its Annual Report on Form 10-K for the fiscal year
ended December 31, 2006.
Item 4 - CONTROLS AND PROCEDURES
Disclosure controls and procedures. At the end of the
period covered by this report, the Company evaluated
the effectiveness of the design and operation of its
disclosure controls and procedures. The Company's
disclosure controls and procedures are designed to
ensure that information required to be disclosed by the
Company in the reports that it files or submits under
the Securities Exchange Act is recorded, processed,
summarized and reported, within the time periods
specified in the SEC's rules and forms. Disclosure
controls and procedures include, without limitation,
controls and procedures designed to ensure that
information required to be disclosed by the Company in
the reports that it files or submits under the
Securities Exchange Act is accumulated and communicated
to the Company's management, including its principal
executive and principal financial officers, or persons
performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.
William C. Weldon, Chairman and Chief Executive
Officer, and Dominic J. Caruso, Vice President, Finance
and Chief Financial Officer, reviewed and participated
in this evaluation. Based on this evaluation, Messrs.
Weldon and Caruso concluded that, as of the end of the
period covered by this report, the Company's disclosure
controls and procedures were effective.
Internal control. During the period covered by this
report, there were no changes in the Company's internal
control over financial reporting that have materially
affected, or are reasonably likely to materially
affect, the Company's internal control over financial
reporting.
Part II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
The information called for by this item is incorporated
herein by reference to Note 12 included in Part I, Item
1. Financial Statements unaudited)-Notes to
Consolidated Financial Statements.
Item 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS
(c) Purchases of Equity Securities by the Issuer and
Affiliated Purchasers.
The following table provides information with respect
to Common Stock purchases by the Company during the
fiscal first quarter of 2007. Common Stock purchases
on the open market are made as part of a systematic
plan to meet the Company's compensation programs.
Total Number of Average Price
Fiscal Month Shares Purchased Paid per Share
January 1, 2007 through
January 28, 2007 1,303,500 $66.18
January 29, 2007 through
February 25, 2007 1,153,800 $65.61
February 26, 2007 through
April 1, 2007 2,139,500 $62.25
Total 4,596,800 $64.21
Item 6 - EXHIBITS
Exhibit 31.1 Certifications under Rule 13a-14(a)
of the Securities Exchange Act pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 - Filed with
this document.
Exhibit 32.1 Certifications pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 - Furnished with
this document.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly
caused this report to be signed on
its behalf by the undersigned thereunto duly
authorized.
JOHNSON & JOHNSON
(Registrant)
Date: May 10, 2007 By /s/ D.J. CARUSO
D.J. CARUSO
Vice President, Finance;
Chief Financial Officer
(Principal Financial Officer)
Date: May 10, 2007 By /s/ S.J. COSGROVE
S. J. COSGROVE
Controller
(Principal Accounting Officer)