JNJ’s Likely Investment Johnson and Johnson Company (JNJ) is a global leader of consumer health products, medical devices, and pharmaceuticals. According to financial projections JNJ is likely to invest as a result of cost-savings in the medical devices segments due to restructuring of the segment in 2015. JNJ will also likely invest in the pharmaceutical segment. JNJ is scheduled to introduce 10 new pharmaceuticals and 40 extensions between 2015 and 2019, each with the potential to exceed $1 billion in revenue (JNJ, 2015). The medical device segment accounts for about 40 percent of JNJs earnings. Sales are behind in the medical device segment due to an increase in substitute product in the market and unfavorable exchange rates, which caused …show more content…
The money is scheduled to be used to promote innovation and launch new medical devices (Williams, 2016). Investing in innovation and advance technology is an important part of keeping profit margins high and keep similar product being introduced in the market. Another very important benefit of investing in medical devices are current changes to healthcare laws. The passage of the Affordable Care Act of 2010 improved access to healthcare for over 20 million Americans (HHS, 2016) which, also means that people will live longer and need high quality medical devices and additions prescription drugs. JNJ’s investment in medical device and pharmaceutical segments will prove very profitable in the future. According to Williams (2016), “there is a global increase of healthcare access, which means that more people may become elderly and need medical devices and advanced medical procedures such as knee and hip replacements. JNJ’s plan to invest in the pharmaceutical and medical device segment aligns with projected earnings per share (EPS) and projected earnings for the next four years. The below table portrays earning growth and EPS projections for the years 2016-2019. Earning growth is predicted to increases each year as well as earning per …show more content…
JNJ’s budget will not be affected if they gain the approval of the FDA for the new drugs and stick to the plan to invest in new drugs and medical devices. The introduction of new drug will substantially boost JNJ’s revenue for the next four years. JNJ is aligning products to meet the needs of patient now and in the future. For example, JNJ just released a new drug called Invega Trinza which, is an antipsychotic to be taken by patients diagnosed schizophrenia. The drug is unique because it is administered to patients four times a year and is reported effective in 93 percent of patients by preventing schizophrenia symptoms. There is a huge market for antipsychotic drugs to include the 2.4 million adults in the U.S. (Zacks,