eteulss
`
`UBS Investment Research
`
`Johnson & Johnson
`
`Zytiga label extended
`
`I FDA approves use in pre-chemo pts, as expected
`
`Zytiga was previously approved for chemo-experienced advanced prostate cancer
`pts and now gets nod for earlier stage pre—chemo. Pre—chemo market opportunity is
`>2x that of chemo-experienced. We model Zytiga ww sales improving from $1 .0B
`in 2012 to $l.4B in 2013 (US: +28%; ex-US: +53%), accounting for ~20% of our
`projected 3.5% total organic rev growth for JNJ in 2013.
`
`I Competition is the key question (Chart 1)
`Since Xtandi approval in Sep, Zytiga TRx’s are flattish (~l600/wk) and NRx’s have
`dipped (now ~550/wk; peak ~600/wk). Use in chemo-naive (but largely chemo-
`intolerant pts) has increased already ahead of the approval, and was estimated at 36%
`ofUS sales in 3Ql2 (31% in 2Q12 and 28% in 1Q12 per JNJ, based on third-party
`analytics). A recent check with a high vol medical oncologist indicated all his new
`Zytiga vol is now pre—chemo (not intolerants) and reimbursement is not an issue.
`
`I Co—r-xistence?
`
`We assume that an expanding chemo-naive market could sustain some Zytiga
`growth, although increasing Xtandi use in this setting may relegate Zytiga to
`downstream use. The PI for Zytiga indicates that the median OS of 35.3 mo’s for
`Zytiga vs. 30.1 mo’s for pbo did not meet statistical significance, which could put
`Zytiga at an overall disadvantage in this setting. Our view on Zytiga has always
`been that relatively long rlmway for chemo-naive pts would facilitate some utility
`for multiple agents.
`
`I Valuation — Maintain Buy rating and $76 price target (DCF—dr-rived)
`On our 2013E, JNJ trades at l3.0x PE and 8.3x EBITDA.
`
`Highlights (l_lS$m)
`Revenues
`EBIT (UB3)
`Net Income (use)
`EPS (U88. U88)
`Net DP3 gl_JBs, U3$2
`
`12/10
`61,507.00
`16,527.00
`13200.37
`4.76
`2.11
`
`12/11
`65,030.00
`16240.00
`13,867.00
`5.00
`2.25
`
`12/12E
`57,071.02
`17,55220
`14226.76
`5.00
`2.39
`
`12/135
`71,649.10
`19,365.03
`15,339.55
`5.43
`2.43
`
`12l14E
`74,704.91
`20,722.30
`16,424.07
`5.00
`2.00
`
`12/141:
`12/135
`12/121:
`12/11
`51: hist av.
`Profitability 0 Valuation
`27.7
`27.0
`262
`25.0
`25.0
`Blfmargin 15
`30.7
`292
`31.9
`36.0
`36.0
`Rolc(EBn)1s
`7.2
`0.1
`0.0
`0.4
`0.9
`Evlla3rrDA(core)x
`122
`13.0
`13.9
`12.7
`13.6
`PE (UB9) x
`3.7
`3.4
`3.4
`3.5
`3.1
`Netdividerld yield 96
`Sour: Carmmyarnulrk, Ihanraarflealss, lflsesint (l.BS)Iflfimare.sfl!rIkhEg7afiIIdtddnarpsalrIdlaafi:Iner5'br
`flmndanleaulmu.-‘'As7lsdIleaabsb'p@r7ul’
`Vatrdms beadmalaluayeahareplbfidwt. (H baedmadIaeprl'a9aIl.W705lm I004.-c20I2I5lIE$T
`
`Rajeev Jashnani, CFA
`Analyst
`
`+1-212-713 9127
`
`Kendra Kavanagh
`Associate Analyst
`|rendra.llavanagl@ubs.0om
`+1 212 713 1435
`
`Global Equity Research
`Americas
`
`Advanced Medical Devices
`
`12-month rating
`
`12m price target
`
`Price
`
`Rlc: JNJ.N BBG: JNJ Us
`
`
`
`Buy
`Unchanged
`US$76.00
`Unchanged
`
`US$70.54
`
`10 December 2012
`
`Trading data
`
`52—wlr range
`Market cap.
`Shares ols
`Free fled
`
`Avg. daily volume ('0tl0)
`Avg. daily value (In)
`
`Balance sheet data 12I12E
`
`3hu'eho|ders' equity
`PIBV (UB3)
`Net cash (debt)
`
`Forecast returns
`
`Forecast price appreciation
`
`Forecast dividend yield
`Forecast stock return
`
`Market return assumption
`Forecast excess return
`
`US$72.5251.78
`US$194bn
`2,745m (COM)
`100%
`
`2.755
`US$191.8
`
`US$63.5bn
`3.1x
`(US$2.08bn)
`
`+77%
`
`3.4%
`+11.1%
`
`52%
`+59%
`
`12/11
`Actual
`1.35
`1.28
`1.24
`1.13
`
`EPS QUBS, U33)
`
`12I12E
`
`01
`02
`03
`04E
`12l1I
`12l13E
`
`UB8
`1.33
`122
`1.47
`1.17
`5.08
`5.43
`
`Cons.
`1.37
`1.30
`1.25
`1.17
`509
`549
`
`Performmce gU3$l
`Sudfiitlfi)
`II)
`
`£8!-P3
`
`13
`
`3
`
`5 3 b 5
`2 9
`E 9
`W11
`W11 IWill
`W-er-snrusslrursl
`_lusu-slonlrsi
`Srurzl$
`
`www.lbs.colrlhnvestrnen1leswlr:h
`
`ARGENTUM EX1058
`ARGENTUM EX1058
`Page 1
`
`This report h been prepared by UBS Securities LLC
`ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 5.
`
`UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
`have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as onlv a sinole factor in makina
`their investment decision.
`
`Page 1
`
`

`
`Johnson & Johnson 10 December 2012
`
`Chart 1: Zytiga weekly TRx trends
`
`2000
`
`1800
`
`1600
`
`400
`
`200
`
`000
`
`800
`
`600
`
`Source: IMS
`
`—Q—Zyiga TRx
`
`Ema
`
`S385
`
`3%.
`
`Sea
`
`~:§
`
`«tag.
`
`Ema
`
`3%:
`
`mmmmmmmmm
`M..22:
`
`.m.+M
`
`V.NumMWzyw.:aa
`Wm_:&>.
`
`Source: IMS
`
`.0nm
`
`s«:2:
`
`~:aa
`
`«saw
`
`«:3:
`
`«:83
`
`~:a=.
`
`um:
`
`Page2
`
`Page 2
`
`

`
`Johnson & Johnson
`
`hcome statement
`Ruvunuu
`q1I'd'l1gllpu1su(Ix dupn)
`EBnnA(u1s)
`tnpnaiaion
`opuruiug imum(EnIr.ws)
`ouurinoonuaauooiahs
`N11‘-11-at
`Abmmu1i1uns(pn4ax)
`Pm1i1|u1on1u
`Tax
`Ptofildllthx
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`Iinovitialpunividum
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`uuuu:nmo(u1s)
`
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`B’8(|o1:d GMP)
`a=s(u1s)
`1111096
`G|!|EPS
`nws
`
`111
`
`Balance sheet
`Onlsllmdcqlivdulb
`ollumnntauts
`Total anultnssds
`Ndtnugialofixodassas
`Nutmngixlofiuduuts
`1nva1um1s1o11uuuu1:
`Touasuts
`True |1lyd1||9lo1ll'8Th'd1iti|9
`61111111:-111114111
`ToHul16ntIid1ilii69
`Longhmddll
`(X|16r|o11gh11I1Ii¢ifiu9
`Touliahililica
`Equ‘1y&uuiuori1yin1uu1:
`Toulidaililiuaquity
`
`CBIIHOW
`Nutinoom
`nap1ua'a1ion
`Nuleomgoin-orking capital
`oI1ur(opu1ing)
`uu1ea1111omopu-ulions
`oupiuupcnditun
`uu1(a1:quisi1ions)11ispou1s
`ounrdungainiuvatmnts
`oululuominvutingaetiviliu
`Inuuu1(aumu)ind-61
`s1uuissuuI(rqmrc1uau)
`[ividmdspid
`o111¢cas1u1mm1iu«a'ng
`°I9N?°I||1"|I|¢i||9 WW6
`
`cu1u11aud1goinuu10quivum1s
`Fxlnon cash nuns
`ausnut dlgoil casuquivuluuls
`
`12M?
`61.095111
`(43,105.00)
`17.99000
`(2.177.00)
`1521300
`144.00
`156.00
`(2230.00)
`13.26300
`(2,7o7.00)
`10.5500
`0.00
`0.00
`10.57600
`1211500
`
`20.30
`210
`
`12D7
`3.
`4.15
`1.62
`5.16
`15.14
`
`12107
`9,315.00
`20,.00
`3.91500
`14,105.00
`20,763.00
`0,061.00
`01.95100
`17,314.00
`2.46300
`19.03700
`7,074.00
`10,724.00
`37.63500
`43,319.00
`01.95100
`
`12D'I
`10,576.00
`2,777.00
`1.47500
`421.00
`15.24900
`(2712.00)
`(1.300.00)
`(36000)
`(446600
`3,017.00
`(4,045.00)
`(4.610.00)
`0.00
`(5350-M
`
`5.133111
`140.00
`5,z1100
`
`12M!
`.1000
`(44,146.00)
`19.00101
`(2.03200)
`16.16901
`616.00
`(74.00)
`190.00
`16.92900
`(3900.00)
`12.91901
`0.00
`0.00
`12.91900
`1290101
`
`2351
`2.09
`
`12100
`4.57
`4.55
`1.00
`5.61
`15.32
`
`12MB
`12,009.00
`21 ,560.00
`31.37700
`14,365.00
`27,695.00
`0.47500
`01.912111
`17,120.00
`3.73200
`20.052111
`0,120.00
`13,429.00
`42.40100
`42,511.00
`01.91200
`
`12MB
`12949.00
`203200
`(1539.00)
`030.00
`14.91200
`(2201.00)
`(1214.00)
`(03.00)
`(3571101)
`2725.00
`(5,165.00)
`(5.024.00)
`0.00
`(7.454-W)
`
`3.931111
`(43600)
`3.40400
`
`12D9
`$1,051.11)
`(42,347.00)
`19.55000
`(2,774.00)
`16.17600
`140.00
`(361.00)
`0.00
`16.555111
`(4209.00)
`12.266111
`0.00
`0.00
`12.266111
`1291600
`
`25.91
`£04
`
`12D9
`4.40
`4.63
`1.93
`5.64
`10.36
`
`12519
`19,425.00
`20,116.00
`39.51100
`14,759.00
`31,105.00
`9.19700
`91.60201
`15,413.00
`6,310.00
`21.73101
`022300
`14,140.00
`4409100
`50,500.00
`91.60200
`
`12M9
`12266.00
`2,774.00
`1,339.00
`192.00
`16.51100
`(2365.00)
`(2316.00)
`(109.00)
`(4.19000)
`2,403.00
`(124000)
`(5,327.00)
`0.00
`(4.037-W)
`
`7.611900
`(107300)
`6.61600
`
`12110
`61.56700
`(42,121.00)
`19.4300
`(2939.00)
`16.52700
`651.00
`(340.00)
`0.00
`16.021100
`(3,496.00)
`13.33100
`0.00
`0.00
`13.33100
`1320137
`
`20.77
`2109
`
`12110
`4.70
`4.16
`211
`5.04
`2053
`
`12110
`27,650.00
`19,649.00
`47.30700
`14,553.00
`32,010.00
`9,030.00
`112.9001
`15,455.00
`7,617.00
`2307200
`9,156.00
`14,101.00
`46.32900
`56,519.00
`112.9301
`
`12110
`13,334.00
`2,939.00
`(050.00)
`970.00
`16.35111
`(2304.00)
`(745.00)
`(30.00)
`(:1,161.00)
`2,395.00
`(1,571.00)
`(5,004.00)
`0.00
`(4190111)
`
`0.m00
`(5.00)
`0.213111
`
`12111
`65.03000
`(4563200)
`19.351121
`(3,150.00)
`16.210111
`1,593.00
`(400.00)
`0.00
`11.35300
`(1,601.00)
`9.672111
`0.00
`0.00
`9.672111
`13.157111
`
`4425
`20.09
`
`12111
`3.49
`5.00
`225
`6.16
`20.71
`
`12111
`32261.00
`22,055.00
`51.31600
`14,739.00
`34,276.00
`10,313.00
`113.614.!!!
`16,153.00
`6,650.00
`22111100
`12,969.00
`20,704.00
`56.56100
`5,000.00
`113.6141»
`
`12111
`9.67200
`3,150.00
`1,003.00
`(215.00)
`umm
`(2093.00)
`(1,455.00)
`(770.00)
`(5,126!!!)
`2,903.00
`(1279.00)
`(6.156.00)
`0.00
`(4.45?-W1
`
`4.121101
`(117.00)
`4.611301
`
`1211E
`67.07102
`(45.740.03)
`213120
`(3,m.99)
`11,552.20
`1,050.00
`(525.00)
`0.00
`10.07711
`(3.050.44)
`14.22676
`000
`0.00
`14.2676
`14.22616
`
`21.x
`21.30
`
`12112E
`5.00
`500
`239
`645
`22
`
`12112E
`21206.60
`22,991.54
`50.1962
`20,516.36
`40,161.96
`10,313.00
`129.1095
`15,009.16
`6.65000
`2,267.76
`22,.00
`20,704.00
`65,601.76
`,507.a0
`129.1u5
`
`12112E
`14,226.76
`3,m99
`(1,479.70)
`(2,320.07)
`14.19610
`(241456)
`(21,.17)
`0.00
`(2244132)
`9,661.00
`1.13092
`(6009.01)
`0.00
`4.19391
`
`(55132)
`(.00)
`(5.05432)
`
`$011
`31
`0.2
`10.0
`19.5
`0.1
`34.1
`94
`-
`4.2
`-49.9
`47.1
`-
`-
`47.1
`25
`
`51.9
`50
`
`$011
`457
`1.5
`5.2
`47
`9.2
`
`$011
`-157
`42
`-75
`392
`40.5
`0.0
`13.7
`34
`0.0
`-2.4
`74.5
`0.0
`15.1
`11.3
`13.7
`
`$011
`47.1
`19.5
`-
`903.2
`0.7
`-15.5
`13451
`-
`357.3
`-
`-
`735
`-
`~
`
`-
`-
`-
`
`12113E
`71,619.10
`(40,109.90)
`23,539.11
`(4,113.29)
`19,365.03
`700.00
`(525.00)
`0.00
`19.51003
`(4201.20)
`15.33955
`0.00
`0.00
`15331155
`15,339.55
`
`21.50
`21.50
`
`12113E
`5.43
`5.43
`2.43
`6.93
`26.31
`
`12113E
`35,900.06
`23,902.14
`59.u220
`20,357.95
`40,662.01
`10,313.00
`13921596
`15226.39
`6,650.00
`21.01439
`22,121.00
`20,704.00
`61.10939
`74,426.57
`139,215.96
`
`12113E
`15,339.55
`4.17329
`(1293.96)
`(317.20)
`11.51159
`(2,507.72)
`(2,o00.00)
`0.00
`(4,515n)
`(509.00)
`2,602.64
`(6,706.14)
`0.00
`(4.517-50)
`
`0.m;I1
`0.00
`0.m;n
`
`% ch
`5.14
`52
`10.4
`105
`103
`333
`0.0
`-
`0.1
`91
`70
`-
`-
`7.0
`70
`
`09
`09
`
`5611
`7.0
`7.0
`1.7
`75
`153
`
`5 ch
`322
`4.0
`193
`0.0
`1.0
`0.0
`70
`-25
`00
`-1.7
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`0.0
`-1.4
`172
`7.11
`
`$011
`70
`105
`-125
`475.4
`25.1
`39
`-905
`-
`00.7
`-
`-
`250
`-
`~
`
`-
`-
`-
`
`12114E
`74,161.91
`(49,650.16)
`25,131.15
`(4.41237)
`211,721
`700.00
`(500.00)
`0.00
`20.9n.:11
`(4,490.31)
`16.42101
`0.00
`0.00
`16.42101
`16.42101
`
`21.50
`21.50
`
`1211415
`5.00
`5.00
`260
`7.39
`3020
`
`12114E
`45,560.34
`24.94025
`10,516.59
`20,034.61
`49212.35
`10,313.00
`150.0163
`15,144.56
`6,650.00
`2,412.56
`22,112.00
`20,704.00
`6525156
`04,777.90
`150,076.51
`
`12114E
`16.42407
`4.41231
`(527.94)
`(300.05)
`20,001.46
`(2542.00)
`(2095.00)
`0.00
`(4,1:111.57)
`(9.00)
`1.55293
`(7311.54)
`0.00
`(517151)
`
`9.511120
`0.00
`9.53211
`
`06165011114
`Ilintunnuupitulupu-ditun
`11-wmuuonuuwlingupiu
`
`17,990.00
`(2.712.00)
`0.00
`
`19,001.00
`(2201.00)
`0.00
`
`19,550.00
`(2365.00)
`0.00
`
`19,406.00
`(2304.00)
`0.00
`
`19,390.00
`(2.093.00)
`0.00
`
`21.33020
`(241456)
`0.00
`
`10.0
`-15.5
`-
`
`23,539.11
`(2507.72)
`0.00
`
`10.4
`39
`-
`
`25,134.75
`(2542.60)
`0.00
`
`95011
`4.4
`32
`5.0
`5.7
`20
`0.0
`4.9
`-
`71
`71
`71
`-
`-
`71
`71
`
`0.0
`0.0
`
`95011
`59
`59
`70
`5.5
`140
`
`5011
`25.5
`4.4
`17.0
`-1.5
`1.1
`0.0
`70
`3.4
`0.0
`24
`0.0
`0.0
`0.11
`139
`70
`
`$011
`71
`57
`592
`-29
`11.7
`1.4
`4.4
`-
`27
`-
`-
`7.03
`-
`35?
`
`-
`-
`-
`
`5.9
`1.4
`
`- S
`
`am: Cmpmymmut, [$550133 fl1B)vfl4fimms&dbé19y¢l-mbHdflysaddHafimmth&umdafl:mm&bmdkmdy$'fi&7ul Na Fwm1ne1:u1ni1$, hedilalmesasaramatialloefil
`anpmyaauaps
`
`UBS3
`
`Page 3
`
`Page 3
`
`

`
`Global Equity Research
`
`Americas
`
`Advanced Medl Devices
`
`12—monlhra1ing
`
`12m price target
`
`Buy
`
`US$76.00
`
`Company profile
`research and development
`in
`Johnson 8 Johnson engages
`manufacturing, and sale of products in heallhcare Irrougr operations
`in Iuee segmenls: Pharmaaeutical (e.g., an1i-fungal, anti-‘nfedive,
`cardiovascular,
`contraceptive,
`gastroirteslirral,
`hematology,
`immunology, oncology, pail
`rmnagement,
`psychotropic, aid
`v'I0|00Yl; Medcal Devices and Diagnostics (e.g., ciculabry disease
`management, orlhopedts, would re, surgical, blood ghcose
`insuin delivery, and vision (are); and Consumer (baby
`re, skin re, oral care, women's hedlh, nulritionals, and OTC
`pharmaceuticals).
`
`Value (EV/0pFCF & PIE)
`
`IIID
`
`12lI11fcF‘l-'6) E FE‘-5)
`
`I21!
`
`IZIE
`
`Profitability
`
`um
`
`mag)
`mzfi
`um
`1 Elfllllilll-H5) - - MEN'S!
`
`Izufi
`
`ROE v Price to book value
`
`um
`rzno
`Z IKEQJQ
`
`mac)
`uzrzfi
`— - Iilhlflfiulfllfi
`
`1214(2)
`
`Growth (UBS EPS)
`
`Valuation x
`PIE (loud GAAP)
`PIE (ms)
`PK}B’8
`Ni tividuul yield ($)
`PIBV
`EVIrovmu¢ (can)
`EvIEBnDA(ooro)
`EVIEBIT ()
`EVIOpFOF (core)
`EVbp. invasu capital
`
`Johnson & Johnson
`
`5Yr Av
`152
`13.6
`11.0
`3.1
`3.5
`27
`8.9
`10.5
`103
`3.9
`
`12/10
`13.0
`13.1
`10.7
`3.4
`3.0
`2.7
`8.4
`9.9
`9.6
`3.6
`
`12/11
`18 2
`127
`10 3
`3.5
`3.1
`25
`8.4
`10.1
`9.9
`3.6
`
`12l12E
`13 9
`13 9
`10 9
`3.4
`3.1
`28
`as
`10.7
`10.0
`3.4
`
`12l13E
`13.0
`13.0
`102
`3.4
`27
`27
`8.1
`9.9
`9.1
`29
`
`12I14E
`122
`122
`9.5
`3.7
`2.3
`2.4
`7.2
`8.8
`8.0
`2.7
`
`12I14E
`12l13E
`12l12E
`12/11
`12/10
`Enlegprise value (US$m)
`193,637.8
`193,637.8
`193,637.8
`175,130.7
`171 ,284.3
`Ava-up mu-kd cg
`0.00
`0.00
`0.00
`o.oo
`o.oo
`+ nirovily ‘ml-Ids
`(11,999.70
`(2559.87)
`(5276 34)
`(11,759.50
`(7.884.50)
`+ amigo nd ddrt (call)
`o.oo
`o.oo
`0.00
`0.00
`0.00
`+punsion ouigalionsmdorlur
`0.00
`0.00
`0.11)
`0.00
`0.1!)
`—non-coroasdvduo
`'
`163,399.8
`1,371.2
`188,31 5
`191,077 9
`181 ,.1
`
`Growth '16
`5Yr Av
`12I10
`12I11
`12l12E
`12l13E
`12I14E
`Revenue
`16
`0.5
`5.6
`3.1
`6.8
`4.4
`a3rrDA(u3s)
`1.9
`0.4
`413
`10.0
`10.4
`6.8
`BIT (I88)
`16
`-1.5
`-1.7
`8.1
`10.3
`7.0
`EPs(u3s)
`4.6
`2.9
`4.9
`1.6
`1.0
`6.9
`Och His
`4.5
`3.4
`5.5
`4.7
`7.5
`6.6
`PH DPS
`8.6
`9.3
`6.6
`6 2
`1.7
`7.0
`BVP8
`82
`11.8
`0.9
`9 2
`16.3
`14.8
`
`Margins (96)
`BITDA IIIIIII
`Blflrovuuuo
`Nut profit (ws)Imunuu
`
`Rain on capital (as)
`BlI’R0lc(lB8)
`RGO post llx
`DH NE
`
`coverage rafics (x)
`BIT! nd illlul
`Dividend covr (I88 98)
`Div.pqoutra1io($,IBsEPs)
`lflddtlflllm
`
`Eficienoy rdios (x)
`nunnuolopjnvululupilnl
`Rovonuolfixd and:
`RIVIIIII I nd wlting fifild
`
`hveslmen1rdios(x)
`Q)R3FlEBll'
`Open lrumuo ($)
`Oqnxldcprocidion
`
`5Yr Agg
`31.5
`25.8
`20.8
`
`5Yr Avg
`(5.8
`-
`272
`
`5Yr Avg
`—
`24
`41.6
`M4
`
`5Yr Avg
`1.4
`1.4
`14.4
`
`5YrAvg
`1.0
`4.0
`0.9
`
`12I10
`31.6
`26.8
`21.6
`
`12110
`362
`28.5
`24.8
`
`12I10
`III
`2.3
`442
`M4
`
`12I10
`1.3
`1.3
`13.8
`
`12110
`1.0
`3.9
`0.8
`
`12I11
`29.8
`25.0
`213
`
`12l12E
`31.8
`262
`21 2
`
`12l13E
`329
`27.0
`21.4
`
`12I14E
`33.6
`27.7
`22.0
`
`12111
`36.0
`28.8
`24.4
`
`12I11
`M!
`22
`449
`M4
`
`12I11
`1.4
`1.4
`12 9
`
`12111
`1.0
`4.4
`0.9
`
`12l12E
`319
`25.1
`23.6
`
`12l12E
`III
`21
`469
`0.1
`
`12l12E
`12
`1.1
`10.1
`
`12l12E
`1.1
`3.6
`0.6
`
`12l13E
`292
`229
`222
`
`12l13E
`NM
`22
`44.6
`NM
`
`12l13E
`1.1
`1.0
`8.9
`
`12l13E
`1.1
`3.5
`0.6
`
`12I14E
`30.7
`24.1
`20.6
`
`12I14E
`NM
`2.2
`44.6
`NM
`
`12I14E
`1.1
`1.1
`8.4
`
`12I14E
`1.1
`3.4
`0.6
`
`12I14E
`12l13E
`12l12E
`12I11
`12I10
`5Yr Avg
`Cqfld slrudne (%)
`(19.8)
`(9.7)
`33
`(221)
`(19.2)
`(10.6)
`lflddl Ihid quily
`(24.7)
`(10.7)
`32
`(28.4)
`(23.8)
`(132)
`NutduuI(nddub1+quily)
`(6.6)
`(1.3)
`(28)
`(7 2)
`(4.8)
`-2 53
`Nd dd (con) IEV
`Sauna Canparyamzurc, wsmfirds (lB$ raialir:aesaI:dbe£uepabi1%drayuaddraa§rstruthdrurndardearunt
`'arnsdIne.rabst'/ikrral
`Vflfim bxedmataruagedareprielalyar, (B basdmasharepIixdl&705laIr 1017x2012 I5lYESTlhI'dr3(BmayiId&
`heawdraetaeabrqfiais
`
`Ian
`mm
`- KENS)
`
`man
`1212(2)
`— — l$%GIllIfl6)
`
`man
`
`Rajeev Jashnani, CFA
`Analyst
`rajeev.jashnani@Ibs.corn
`+1—212—713 9127
`
`Kendra Kavanagh
`Associate Analyst
`kendra.lravana(jI@ubs.oom
`+1 212 713 1435
`
`UBS4
`
`Page 4
`
`Page 4
`
`

`
`Johnson & Johnson 10 December 2012
`
`(cid:81) Johnson & Johnson
`
`Johnson & Johnson engages in research and development, manufacturing, and
`sale of products
`in healthcare
`through operations
`in
`three segments:
`Pharmaceutical (e.g., anti-fungal, anti-infective, cardiovascular, contraceptive,
`gastrointestinal, hematology,
`immunology, oncology, pain management,
`psychotropic, and virology); Medical Devices and Diagnostics (e.g., circulatory
`disease management, orthopedics, wound care, surgical, blood glucose
`monitoring, insulin delivery, and vision care); and Consumer (baby care, skin
`care, oral care, women’s health, nutritionals, and OTC pharmaceuticals).
`
`(cid:81) Statement of Risk
`
`Risks for the medical device and pharmaceutical industries include, but are not
`limited to, changes in reimbursement, delays in product approvals, litigation
`outcomes, patent expirations, increased competition, clinical trial outcomes and
`product failures or recalls. In addition, there are company specific downside and
`upside risks for Johnson & Johnson. On the downside, the company may not
`achieve the synergies expected from the integration of the Pfizer Consumer
`Healthcare acquisition or may not do so as rapidly as expected; the company’s
`restructuring efforts may not be adequate to prevent declining margins due to
`decreased sales in key pharmaceutical and medical device products; the ESA
`market may decline more rapidly or to a greater extent than we have forecast;
`and the company may utilize free cash flow to engage in non-value creating
`acquisitions. On the upside, Johnson & Johnson’s pharmaceutical products
`including Remicade, Risperdal and Topamax may be more resilient to own or
`competitive patent expiration than expected or operating margins may improve
`by more than anticipated.
`
`(cid:81) Analyst Certification
`
`Each research analyst primarily responsible for the content of this research
`report, in whole or in part, certifies that with respect to each security or issuer
`that the analyst covered in this report: (1) all of the views expressed accurately
`reflect his or her personal views about those securities or issuers and were
`prepared in an independent manner, including with respect to UBS, and (2) no
`part of his or her compensation was, is, or will be, directly or indirectly, related
`to the specific recommendations or views expressed by that research analyst in
`the research report.
`
`UBS 5
`
`Page 5
`
`

`
`
`Johnson & Johnson 10 December 2012
`
`Required Disclosures
`
`This report has been prepared by UBS Securities LLC, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and
`affiliates are referred to herein as UBS.
`
`IB Services2
`31%
`31%
`20%
`IB Services4
`33%
`0%
`
`For information on the ways in which UBS manages conflicts and maintains independence of its research product;
`historical performance information; and certain additional disclosures concerning UBS research recommendations,
`please visit www.ubs.com/disclosures. The figures contained in performance charts refer to the past; past performance is
`not a reliable indicator of future results. Additional information will be made available upon request. UBS Securities Co.
`Limited is licensed to conduct securities investment consultancy businesses by the China Securities Regulatory
`Commission.
`UBS Investment Research: Global Equity Rating Allocations
`Coverage1
`UBS 12-Month Rating
`Rating Category
`Buy
`Buy
`50%
`Neutral
`Hold/Neutral
`41%
`Sell
`Sell
`9%
`Coverage3
`UBS Short-Term Rating
`Rating Category
`Buy
`Buy
`less than 1%
`Sell
`Sell
`less than 1%
`1:Percentage of companies under coverage globally within the 12-month rating category.
`2:Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within
`the past 12 months.
`3:Percentage of companies under coverage globally within the Short-Term rating category.
`4:Percentage of companies within the Short-Term rating category for which investment banking (IB) services were provided
`within the past 12 months.
`
`Source: UBS. Rating allocations are as of 30 September 2012.
`
`UBS Investment Research: Global Equity Rating Definitions
`UBS 12-Month Rating
`Definition
`Buy
`FSR is > 6% above the MRA.
`Neutral
`FSR is between -6% and 6% of the MRA.
`Sell
`FSR is > 6% below the MRA.
`UBS Short-Term Rating
`Definition
`Buy: Stock price expected to rise within three months from the time the rating was assigned
`Buy
`because of a specific catalyst or event.
`Sell: Stock price expected to fall within three months from the time the rating was assigned
`because of a specific catalyst or event.
`
`Sell
`
`
`
`
`
`
`UBS 6
`
`Page 6
`
`

`
`Johnson & Johnson 10 December 2012
`
`KEY DEFINITIONS
` Forecast Stock Return (FSR) is defined as expected percentage price appreciation plus gross dividend yield over the next 12
`months.
` Market Return Assumption (MRA) is defined as the one-year local market interest rate plus 5% (a proxy for, and not a
`forecast of, the equity risk premium).
` Under Review (UR) Stocks may be flagged as UR by the analyst, indicating that the stock's price target and/or rating are
`subject to possible change in the near term, usually in response to an event that may affect the investment case or valuation.
` Short-Term Ratings reflect the expected near-term (up to three months) performance of the stock and do not reflect any
`change in the fundamental view or investment case.
`Equity Price Targets have an investment horizon of 12 months.
`
`EXCEPTIONS AND SPECIAL CASES
`UK and European Investment Fund ratings and definitions are: Buy: Positive on factors such as structure, management,
`performance record, discount; Neutral: Neutral on factors such as structure, management, performance record, discount; Sell:
`Negative on factors such as structure, management, performance record, discount.
`Core Banding Exceptions (CBE): Exceptions to the standard +/-6% bands may be granted by the Investment Review
`Committee (IRC). Factors considered by the IRC include the stock's volatility and the credit spread of the respective company's
`debt. As a result, stocks deemed to be very high or low risk may be subject to higher or lower bands as they relate to the rating.
`When such exceptions apply, they will be identified in the Company Disclosures table in the relevant research piece.
`
`Research analysts contributing to this report who are employed by any non-US affiliate of UBS Securities LLC are not
`registered/qualified as research analysts with the NASD and NYSE and therefore are not subject to the restrictions contained in
`the NASD and NYSE rules on communications with a subject company, public appearances, and trading securities held by a
`research analyst account. The name of each affiliate and analyst employed by that affiliate contributing to this report, if any,
`follows.
`UBS Securities LLC: Rajeev Jashnani, CFA; Kendra Kavanagh.
`
`
`Company Disclosures
`Reuters
`Company Name
`Johnson & Johnson6, 7, 16, 18
`JNJ.N
`Source: UBS. All prices as of local market close.
`Ratings in this table are the most current published ratings prior to this report. They may be more recent than the stock pricing
`date
`
`12-mo rating Short-term rating
`Buy
`N/A
`
`Price
`US$70.45
`
`Price date
`07 Dec 2012
`
`6.
`
`7.
`
`16.
`18.
`
`This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment
`banking securities-related services are being, or have been, provided.
`Within the past 12 months, UBS Securities LLC has received compensation for products and services other than
`investment banking services from this company/entity.
`UBS Securities LLC makes a market in the securities and/or ADRs of this company.
`The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position
`in Johnson & Johnson.
`
`Unless otherwise indicated, please refer to the Valuation and Risk sections within the body of this report.
`
`UBS 7
`
`Page 7
`
`

`
`
`Johnson & Johnson 10 December 2012
`
`Johnson & Johnson (US$)
`
`Price Target (US$)
`
`Stock Price (US$)
`
`01-Oct-12
`
`01-Jul-12
`
`01-Apr-12
`
`01-Jan-12
`
`01-Oct-11
`
`01-Jul-11
`
`01-Apr-11
`
`01-Jan-11
`
`01-Oct-10
`
`01-Jul-10
`
`01-Apr-10
`
`01-Jan-10
`
`01-Oct-09
`
`01-Jul-09
`
`01-Apr-09
`
`01-Jan-09
`
`01-Oct-08
`
`01-Jul-08
`
`01-Apr-08
`
`01-Jan-08
`
`01-Oct-07
`
`100
`
`80
`
`60
`
`40
`
`20
`
`0
`
`Buy
`Neutral
`No Rating
`
`Source: UBS; as of 07 Dec 2012
`
`
`
`
`
`
`UBS 8
`
`Page 8
`
`

`
`
`Johnson & Johnson 10 December 2012
`
`Global Disclaimer
`
`This document has been prepared by UBS Securities LLC, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and affiliates are referred to herein as UBS.
`
`This document is for distribution only as may be permitted by law. It is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or
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`or o her enquiries, clients should contact their local sales representative.
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`is based on numerous assumptions. Different assumptions could result in materially different results. The analyst(s) responsible for the preparation of this document
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`
`
`
`
`UBS 9
`
`Page 9
`
`

`
`Johnson & Johnson 10 December 2012
`
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