MBA 699-All Included

5

Milestone Three:

Alternative Buyer Research Report

Deyanira Diaz

Southern New Hampshire University

MBA 699: Strategic Opportunity Management

Professor Steven Farina

December 11, 2022

Milestone 3: Alternative Buyer Research Report

Johnson & Johnson (J&J) would be the likely buyer for the life sciences company. J&J specializes in pharmaceutical products, consumer health products, and medical devices. It is known for manufacturing various products, including Neutrogena skincare products, Tylenol pain reliever, Acuvue lenses, and Band-Aid. Johnson & Johnson operates in sixty countries, with its products sold in over 170 nations. The company is headquartered in New Jersey, United States.

Current Market

J&J manufactures healthcare products and offers related services for medical devices, pharmaceuticals, and consumer health markets. The company operates in the following sectors: pharmaceutical, medical devices, and consumer health. The pharmaceutical sector deals with medical areas, including neuroscience, pulmonary hypertension, oncology, neuroscience, and immunology. The medical device segment deals with products designed for the surgical, orthopedic, eye health, diabetes care, and cardiovascular fields (Forbes, 2022).On the contrary, the consumer health segment comprises baby care products, beauty products, pharmaceuticals, women’s health products, and oral care items.

Johnson & Johnson manufactures different products. Common products in the pharmaceutical segment include Invega, Edurant, Remicade, Concerta, Xarelto, Invokana, and Balversa. Common medical devices include Catalys, Carto 3 System, Actis Stem, Acuvue, Band-Aid, and TearScience. On the other hand, consumer health products include Neutrogena skincare products, Carefree, Stayfree, Johnson’s Baby, and Tylenol. Its geographic areas include Europe, the United States, Asia, and Africa.

Johnson & Johnson serve different customers globally. The company targets households for personal care products, home care products, and healthcare products. J&J also targets healthcare facilities and organizations for the purchase of medical devices and pharmaceuticals. Generally, Johnson & Johnson operates in the pharmaceutical industry. It also operates in the consumer goods and medical device industries. Its key competitors include Merck, Procter & Gamble, Unilever, and Bristol Myers Squibb.

Financial Situation

Johnson & Johnson has steadily reported remarkable financial performance. In 2019, Johnson & Johnson’s revenue amounted to $82.06 million (Mikulic, 2022). In 2020, the company generated $82.58 million in revenue. In 2021, Johnson & Johnson’s revenue increased to $93.77 million. Revenue growth signifies an increase in sales volumes and business success.

Despite generating huge revenues, the company’s expenses have increased, especially in Research and Development (R&D). In 2019, Johnson & Johnson’s R&D expenses amounted to $11.36 million. The figure escalated to $12.6 million in 2020. In 2021, R&D expenses escalated further to $14.71 million. Johnson & Johnson’s operating expenses have also increased yearly. In 2019, the company’s operating expenses amounted to $64.73 billion. The figure increased to $66.08 billion in 2020, a 2.1% increase from the previous year's estimate. In 2021, operating expenses escalated to $70.99 billion, a 7.4% increase from the previous year's estimate.

Nevertheless, J&J is a profitable company. In 2019, the company reported a total of $15.12 million in net profits. The amount dropped to $14.71 million in 2020. However, in 2021, the company recorded a total of $20.88 million in net profits. That was a significant improvement from the previous year's estimate.

Recent Developments

In early 2021, President Biden declared a collaboration between Merck and Johnson & Johnson to produce the COVID-19 vaccine. Merck is very proficient in vaccine manufacturing. Therefore, this partnership would improve J&J manufacturing capacity. Since 2020, the company has worked directly with health authorities, governments, and other entities to help eliminate the pandemic. Merck was the ninth company to join J&J's global manufacturing network (Johnson & Johnson, 2021). That collaboration enabled J&J to deliver the COVID-19 vaccine globally. It also reflects the organization’s mission: “Bringing science and sense of sight to life through world-class innovation and customer experience.”

J&J has been instrumental in fighting epidemics and pandemics for years. In 1918, for instance, the company played a significant role in fighting the Spanish flu – the most severe pandemic of the 20th century. Reports show that Johnson & Johnson started mass producing vaccines to fight the epidemic. Such notable events can be attributed to the company’s innovativeness – the skill and ability to produce new things.

Buyer Rationale

J&J is the most appropriate choice for life sciences organizations. The company has constantly recorded remarkable financial performance over the years. In 2021, it was ranked 36 on the Fortune 500 list of the leading United States firms by total revenue. Besides that, J&J is the most valuable pharmaceutical corporation globally, with a market value of 10.9 billion U.S. dollars (Rees, 2020). Furthermore, J&J has a AAA credit rating, reflecting the organization’s huge market presence, high-profit margins, and high capacity to meet if financial obligations.

J&J stands out from the crowd. Its financial performance demonstrates stable and persistent growth in revenues and net profits. The company invests more in research and development, explaining its increasing R&D expenses. Investing in R&D facilitates the production of new products/services, allowing the company to stand out in competitive markets. R&D also offers powerful insights and knowledge and helps to improve existing processes, especially where costs can be reduced, and efficiency increased.

Acquisition Road Map

The life sciences organization has already performed various steps to complete the acquisition process. These entail 1) acquisition planning, 2) determining the criteria for selecting potential buyers, 3) identifying key players in the market, 4) performing competitor research, and 5) choosing the prospective buyer (refer to figure 1).

The life sciences organization would also need to perform other tasks over the next one year to complete the acquisition. The first step is planning the transaction. The company’s CFO (Chief Financial Officer) would be responsible for the task. It may take around two months to complete everything. The second step is performing company analysis to acquire more information. A business analyst will perform the second task. It may take around one month to complete the process. The third step is signing the LOI (letter of intent). The CEO (Chief Executive Officer) will sign the document. That might take only two months. The fourth step entails performing due diligence, which a business advisor will perform. It might take at least three months to complete everything. The next step is drafting the contract. The company’s legal department would be responsible for this task, which may take thirty days to complete. The other step is financing the acquisition. The CFO will be in charge of the financing process. The task might take at least thirty days. The last step is joining the two companies. The company’s executives will be in charge of the task, which might take three months.

Figure 1: Gantt chart

References

Forbes. (2022). Johnson & Johnson (JNJ). Retrieved from: https://www.forbes.com/companies/johnson-johnson/?sh=6d113b54f91d

Johnson & Johnson. (2021). Johnson & Johnson Statement on Collaboration with Merck. Retrieved from: https://www.jnj.com/johnson-johnson-statement-on-collaboration-with-merck

Mikulic, M. (2022). Johnson & Johnson's total sales 2005-2021. Statista. Retrieved from: https://www.statista.com/statistics/266403/total-revenue-of-johnson-und-johnson-since-2004/

Rees, V. (2020). Johnson & Johnson “most valuable” pharma brand, says report. European Pharmaceutical Review. Retrieved from: https://www.europeanpharmaceuticalreview.com/news/112494/johnson-johnson-most-valuable-pharma-brand-says-report/