Johnson & Johnson (US)
Best-known for babycare and Band-Aids, Johnson & Johnson has long been one of the world's biggest healthcare manufacturers, and got even bigger in 2006 with the purchase of the consumer health division of Pfizer. In fact, consumer products had until then been the group's smallest segment. The largest chunk of group revenues still comes from pharmaceuticals, including blockbusters such as Remicade, Procrit and Risperdal, and medical devices. The group flavours a highly decentralised structure with a broad portfolio of almost 200 separately branded subsidiary businesses, operating as McNeil, Janssen, Depuy and Ethicon among many others. Key brands under the group's umbrella include Tylenol, Neutrogena, Aveeno and Ortho contraceptives, as well as medical devices, surgical products and Acuevue contact lenses. Despite its size, Johnson & Johnson has endured tough trading in recent years, especially in the US, as a result of a series of manufacturing problems and product recalls that have tainted the reputations of several of its best-known consumer brands.
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Johnson & Johnson was formed in the early years of modern medicine, initially to combat high rates of infection among operative patients. In the late 19th century, surgical dressings were generally made from dirty cotton, swept from the floors of textile mills. But medical practice was gradually being revolutionized by Sir Joseph Lister's discovery of bacteria, and the realization that they could spread infection within the largely unhygienic theatres in which operations were performed. In 1886, brothers James and Edward Mead Johnson established a company to manufacture surgical dressings which would protect wounds from these bacteria, then a completely novel concept. However the driving force behind the business was the third brother Robert, who joined the firm in 1887, and suggested coating the inside of the dressings with an antiseptic compound to aid recovery. Despite the presence of three brothers, the business kept its original name of Johnson & Johnson. Ten years later, Edward Mead Johnson left the firm and set up his own business making nutritional products for babies. That company, Mead Johnson, is now a division of Bristol Myers-Squibb.
Johnson & Johnson's antiseptic plasters were followed by absorbent gauze dressings, and in 1888 the company published the textbook Modern Methods of Antiseptic Wound Treatment, which for many years remained a standard text on antiseptic practices. In 1890, in answer to a complaint from a doctor that their plasters had caused skin irritation in one of his patients, the company began packaging Italian talcum powder with their dressings. It was soon apparent that the same powder was also invaluable for preventing skin irritation in babies, and the scented talc began to be sold separately under the name of Johnson's Baby Powder in 1892. The same year the company developed the first dressing which was not only antiseptic but also pre-sterilised, followed by zinc oxide plasters in 1899. Continued experimentation finally led to the creation of one of the company's most successful products, the Band-Aid plaster, first launched in 1921. The product is credited to Johnson Kenyon, manager of the company's textiles mill. According to company legend, his accident-prone wife had a habit of cutting her finger while preparing dinner. To save her time when bandaging the wounds, Kenyon laid out a long strip of the company's surgical tape on the table sticky side up, and placed small pads of gauze along the strip. Then he attached a separate strip of non-stick crinoline on top and rolled up the whole device, so she could just cut off a piece of the bandage each time she needed a piece.
The company expanded rapidly to market its new discoveries. Robert Johnson had died in 1910, succeeded as president by his brother James. But his sons came to play an important part in the business. International expansion began in 1919, with a Canadian affiliate, followed by the establishment of a UK division in 1924. Robert Wood Johnson Jr became president in 1932, and set in place a process of a rapid growth. As the company grew, its different divisions were established as independent operating units. In 1941, the group's suture business was separated from the rest of the group, and renamed Ethicon in 1949. Johnson & Johnson also introduced a range of birth control products under the Ortho brand. In 1959, the group acquired pharmaceutical laboratory McNeil Laboratories. The following year, McNeil launched pain reliever acetaminophen under the Tylenol brandname. The same year, the group acquired Swiss drug company Cilag-Chemie and Janssen Pharmaceutica of Belgium. The two were merged to form Janssen-Cilag. Other acquisitions included Dr Carl Hahn Company in Germany, the manufacturer of sanitary protection products for women (1974); and the Penaten Group, Germany's leading baby toiletries company (1986).
A series of other acquisitions followed during the 1980s and 1990s. Frontier Contact Lens was acquired in 1981 and became Vistakon, the leading contact lens company in the US. The business introduced Acuevue contact lenses in 1983. In 1986, Johnson & Johnson acquired LifeScan, which makes home blood glucose monitoring systems for people with diabetes. J&J claims to prefer forging partnerships with smaller, entrepreneurial businesses whose innovative products can benefit from J&J's marketing muscle. However, it also operates joint ventures with bigger partners in the industry. A joint venture was formed in 1989 with Merck to develop and market a range of non-prescription products acquired from ICI. The group was also one the first into China - Janssen Pharmaceutica entered the market in 1985, followed by Johnson & Johnson's Band-Aid business in 1990.
In 1993 and 1994, the group acquired French skincare business RoC as well as Neutrogena in the US. Other purchases included Mitek Surgical Products (1995), circulatory remedy business Cordis (1996), orthopaedic products maker DePuy (from Roche in 1998) and FemRX (1999). Also that year, Johnson acquired SC Johnson & Son's skincare business, based around the Aveeno brand, and agreed a partnership with Shiseido. Johnson launched the latter's Super Mild shampoo in Asia-Pacific outside Japan, while Shiseido marketed Neutrogena in Japan. In 1998, the company secured North American rights to Benecol, an innovative Finnish margarine product made from wood pulp which reduces cholesterol levels. The product launched in 1999 in the US.
In 1999 Johnson agreed the purchase of biotechnology group Centocor for $4.9bn, after more than six months of negotiations. The following year the group announced it would stop marketing its heartburn drug Propulsid in the US after reports of serious cardiovascular side effects. Also in 2000, the group acquired Innovasive Devices, specialising in surgical devices for sports injuries. Group subsidiary Cordis acquired Atrionix, a company manufacturing catheter-based systems for the treatment of heart conditions. In 2001 the group acquired online business BabyCenter Inc from failed dotcom retailer eToys. A few months later it announced a new partnership with Danone to produce a new range of nine skincare products under the Evian Affinity brand. The group launched another major acquisition in early 2001, agreeing to buy Alza Corporation for around $12.3bn, then its biggest ever purchase.
The group's most significant purchase in recent years was the deal to acquire Pfizer's mammoth OTC portfolio. That deal was agreed in June 2006, with a price tag of $16.6bn, and completed at the end of the year. In early 2007, J&J disclosed that it had uncovered evidence that two of its international subsidiaries in the medical devices division had made improper payments relating to sales of products. No further details were released, but the improper payments were thought to constitute bribes. Although he did not appear to have been personally involved in the matter, Michael Dormer, chairman of the group's medical devices division, accepted responsibility for the actions and resigned.
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