J&J: Our Duality Is a Benefit, Not a Hindrance

Marketer Says Consumer, Drug Sides Will Team Up on Product Development

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BATAVIA (AdAge.com) -- Johnson & Johnson's very name suggests a duality. It's a company with a big but increasingly troubled drug division coupled with a smaller, more stable consumer business. Now it's out to prove the pieces can work together.
J&J Vice Chairman Christine Poon told investors research-and-development projects spanning multiple business units are under way, including semi-permanent cosmetics.
J&J Vice Chairman Christine Poon told investors research-and-development projects spanning multiple business units are under way, including semi-permanent cosmetics.

Reassuring investors
In a recent analysts meeting, J&J tried to reassure investors its consumer business won't be hamstrung by its $16.6 billion merger with Pfizer and that its beleaguered prescription-drug and medical-device business can drive growth. But J&J's main message is that substantial cross-pollination opportunities between its businesses exist: Think sunscreen that won't rub off or semi-permanent cosmetics, products that meld the core competencies of both the drug and consumer-products units.

J&J's pharmaceutical sales were up 10.6% for the first quarter, to $6.2 billion, and up 6.6% organically, excluding the impact of acquisitions and currency. Medical-device sales rose 6.2%, to $5.3 billion, but were up only 1.2% organically. Consumer-product sales rose a whopping 45.7%, to $3.5 billion, but only 3.9% excluding the impact of the Pfizer acquisition and currency.

Though it makes up less than a quarter of Johnson & Johnson's sales, the consumer business -- from Johnson's baby lotion to Neutrogena, K-Y, Tylenol and Splenda -- spends more than 80% of the company's $1.2 billion media budget. J&J started making a much bigger bet on its consumer business with the addition of such Pfizer brands as Listerine, Rogaine, Lubriderm and Visine last year. But its 4% organic sales growth lagged behind most of J&J's major competitors, including Procter & Gamble Co., Unilever and Colgate-Palmolive Co.

Bitter pill
While drugs and medical devices are growing faster, J&J's marketing of four top prescription drugs and its drug-coated stents for coronary patients is under investigation. Possibly worse news for J&J is that its blockbuster, the $4 billion antipsychotic Risperdal, will lose patent protection next year. Hoping for a solution, J&J is seeking marketing approval for five new prescription drugs this year, the sexiest of which -- Dapoxetine -- treats premature ejaculation.

The FDA last year indicated the drug was non-approvable in the U.S. for reasons J&J hasn't disclosed. But the company has since done research showing Dapoxetine increased the staying power of affected men from less than one minute to about three minutes -- about twice the average impact of a placebo. It plans to seek approval this year to sell Dapoxetine in Canada and several countries in Western Europe as it develops a new strategy to gain approval in the U.S., said Paul Stoffels, J&J's group chairman-pharmaceutical research and development.

That the same staid New Jersey company sells K-Y warming massage oil, a drug to fight premature ejaculation and a new experimental class of HIV drugs may seem logical, but J&J executives are out to prove the linkages go well beyond that.

Innovation
Vice Chairman Christine Poon told investors research-and-development projects spanning multiple business units are under way to create smart consumer products that stick sunscreen exactly where it's needed, anti-aging products that stay in place longer and even semi-permanent cosmetics.

"Few, if any, competitors are in a position to match us when it comes to scientific advancements," said Pericles Stamatiades, group chairman-beauty care. He said the skin-care business, including acquired Pfizer brands such as Lubriderm, grew 8.5% last year and at a 10.8% compound annual rate, nearly double the 5.5% growth rate of the global industry.

J&J sees acne, anti-aging and even hair removal as key growth areas in skin care. And it's even testing expansion of its Carefree panty-liner brand into a broad range of women's products, including depilatories, said Marc Robinson, group chairman of J&J's consumer-health-care, over-the-counter-drug and nutritionals group.

Colleen Goggins, worldwide chairman-consumer group, said integration of Pfizer brands and management is on track. "There have been no disruptions to our business," she said. "We think we had a darn good quarter given all the things we had going on."
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