Successes and Challenges

A look back at the Successes and Challenges of Johnson & Johnson.

2011 Successes

Advancing Human Health and Well-Being
• Continued development of new and existing treatments for HIV and TB and enhancing access to these treatments for patients around the world; expanded the scope of our Janssen Global Access and Partnership Program and licensed generic partners to speed access to rilpivirine, an important new first-line medicine to treat HIV.

• Continued our commitment to research and development by investing more than $7.5 billion. More patents were awarded in 2011 than in any other year in our Company's history. More than 625 new products were launched in 2011 across the enterprise.

• Sales in emerging markets were up 13 percent operationally in the BRIC markets (Brazil, Russia, India and China). In addition, we launched six new pharmaceutical products in Japan, the world's second-largest pharmaceutical market.

• Our Pharmaceuticals group launched four products and a dozen major regional brands and entered a new strategic category, vaccines. We advanced our pipeline in all five key therapeutic areas, with an unprecedented and industry-leading regulatory approval of three New Molecular Entities—ZYTIGA® (abiraterone acetate) in oncology, XARELTO® (rivaroxaban) in cardiovascular disease and EDURANT® (rilpivirine) in HIV—as well as a number of line extensions.

• Janssen Pharmaceutical Companies of Johnson & Johnson launched Healthy Minds, a significant new commitment in funding, R&D and education to help reduce stigma and improve public understanding of mental health conditions, and to encourage collaboration to accelerate the discovery of new therapeutic solutions for brain disease.

• Announced a new collaboration between Johnson & Johnson, the World Health Organization, the Bill & Melinda Gates Foundation, the U.S. and U.K. governments, officials from endemic countries, the World Bank and 12 other pharmaceutical companies for a coordinated effort to combat 10 neglected tropical diseases. As part of the effort, we'll work with other partners on pre-clinical research and clinical development of flubendazole, an effective treatment for intestinal parasites originally discovered and developed by renowned researcher Dr. Paul Janssen, founder of Johnson & Johnson's Janssen Pharmaceutica. Dr. Paul Stoffels, Worldwide Chairman, Pharmaceuticals, played an important role in establishing the collaboration.

• Became the first company to support the United Nations' Health 4+, the joint action platform that aims to coordinate the UN Secretary General's Global Strategy on Women and Children's Health at the country level. Johnson & Johnson will support pilot training for health care workers in Tanzania and Ethiopia in order to provide critical prenatal and obstetric care for mothers and newborns.

• Provided a one-year update of strong progress made on our five-year comprehensive pledge to the United Nations' Millennium Development Goals. Our efforts are focused on maternal and child health initiatives, as well as innovations in treatment for HIV/AIDS and TB. In addition, we:

• In conjunction with other partners, launched the Mobile Alliance for Maternal Action, which uses mobile phones to deliver prenatal and post-birth health information to new and expectant mothers in the developing world. Over the next three years, the program will reach mothers in Bangladesh, India and South Africa.

• Announced our collaboration with the Mayo Clinic as a leading partner in the Clinton Global Initiative's Global Smoke- Free Worksite Challenge, which aims to expand the number of employees who work in a smoke-free environment. Johnson & Johnson will share what we've practiced and learned as a 100 percent smoke-free work environment since 1997.

• Announced our involvement in a partnership led by the U.S. Department of Health & Human Services that's committed to expanding the QuitNowTXT interactive text-based intervention for adult smokers beyond the United States.

• Achieved a 6 percent increase over 2010 in employees completing a health risk profile.

• Achieved a 15 percent improvement in contractor safety resulting from targeted efforts around large-capital construction projects.

• Developed a human rights training program that is being deployed in our Procurement organization.


Safeguarding the Planet
• Granted EARTHWARDS® recognition for 15 products; EARTHWARDS® is the Johnson & Johnson process that improves the sustainability of our products

• Launched the top-selling NEUTROGENA® Naturals skin care line, which incorporates sustainable design elements to reduce the environmental impacts of the products and packaging. NEUTROGENA® also established a partnership with The Nature Conservancy to support protection of natural sources of clean water.

• Debuted a sugarcane-based plastic container for SUNDOWN® brand sun care products in Brazil—the only brand in Brazil's sun care segment to use this greener technology.

• Mapped the location of our manufacturing facilities against known areas of water stress (quality or availability) to target our water conservation efforts.

• Increased the amount of clean-technology energy capacity that is installed or under construction by 33 percent over 2010 to 38 megawatts.

• Transformed and expanded our supplier standards to reach beyond our external manufacturers and go further regarding sustainability. The new Standards for Responsible Suppliers applies to our entire supplier base.

• Confirmed that 109, or 36 percent, of our 306 strategic suppliers establish and publicly report on two or more sustainability goals.

• Enlisted 97 suppliers, representing more than $2 billion in spend, to participate in the Carbon Disclosure Project's Supply Chain program.

• Began sharing sustainability information for 30 percent of our targeted 23 major brands.


Conducting Business Responsibly
• Held stakeholder dialogues on executive compensation and then redesigned our long-term incentive program for named executive officers with the aim of drawing a more visible link between pay and performance. The new criteria were applied to 2011 executive performance.

• Delivered solid financial results, with 5.6 percent sales growth and our 28th consecutive year of adjusted earnings increases.

• Maintained our AAA credit rating, one of only four industrial companies with this rating.

• Delivered a total shareholder return of nearly 10 percent for 2011, exceeding the S&P 500 and the Dow Jones Index.

• Delivered 49 years of consecutive dividend increases—one of only eight companies in the S&P 100 to achieve that record.

• Returned employee satisfaction to the highest levels measured in three years.

• Became the first health care company to join the prestigious Billion Dollar Roundtable upon achieving global spending of at least $1 billion with diverse suppliers. Increased our spend to $1.3 billion in 2011, representing 10.4 percent of our total supplier spend.

• Initiated voluntary disclosure of payments to physicians by our U.S. Medical Devices and Diagnostics companies. (Disclosure of these payments by our U.S. Pharmaceutical companies began in 2010.)

• Delivered good first-year progress on our five-year Healthy Future 2015 sustainability goals (see results summary, inside back pocket).

• Continued to embed sustainability into the fabric of our business. All three business segments now have business-specific sustainability strategies and goals. Internally, our segments are furthering the engagement and alignment of their associates via interactive websites, videos, online communities of interest, volunteering and personal sustainability plans. Externally, they are engaging and collaborating with customers to deliver sustainable products and services.

2011 Challenges

• Tightening integration of our quality systems across the enterprise. In 2011, McNeil Consumer Healthcare signed a consent decree with the U.S. Food and Drug Administration, which governs certain manufacturing operations. We incurred costs for the recall of DePuy Orthopaedics, Inc.'s ASR™ XL Acetabular System and ASR™ Hip Resurfacing System.

• Reinforcing our culture of compliance. Stemming from subsidiaries outside the U.S. that were believed to have made improper payments in connection with the sale of medical devices, we entered into a three-year Deferred Prosecution Agreement with the U.S. Department of Justice and related agreements with the U.S. Securities & Exchange Commission and the U.K. Serious Fraud Office.

• Reducing complexity and redundancies throughout our global supply chain so our companies can consistently produce high-quality products, maintain reliable supply and increase customer satisfaction. Manufacturing problems at a supplier created a shortage of Janssen Products, LP's cancer drug DOXIL® (doxorubicin HCl liposome injection) in 2011.

• Managing pricing pressures. Our Medical Devices and Diagnostics segment is facing more pressure on product prices because hospital customers are looking for cost relief. The global economy has also affected sales of medical devices, with people postponing non-acute care.

• Reversing a 7 percent increase in crashes among our fleet of vehicles. While well below our baseline year of 1995, our crashes per million miles driven increased in 2011 to 5.94 from 5.53 in 2010.

• Continuing to reduce our water consumption. While we achieved a 1.2 percent absolute reduction in water in 2011, more than 15 years of implementing water-saving projects and the low cost of water make further water reduction projects less financially feasible.