Cash and Cash Equivalents

Johnson & Johnson ended 2Q10 with about $19 billion in cash and investments and $12 billion in debt. At the end of 2Q10, the company had $18 billion in cash and investments and $12 billion in debt.

Share Repurchase Program

The company’s strong finances support acquisitions, dividend increases, and share repurchases. With no large acquisition currently underway, and with support from strong cash flow, the company is conducting a $10 billion share repurchase program. Since the inception of the share repurchase program, Johnson & Johnson has repurchased $8.9 billion in stock with $4.5 billion repurchased in 2008 and another $800 million in 1H09. On the FY09 earnings call, management announced its intention to reinvest in the business in 2010 and to fund transactions, hence planning to slow down the share repurchase program, which only has $1.1 billion worth of shares remaining to be repurchased.
 

Acquisition

On July 12, 2010, Johnson & Johnson announced its plans to acquire medical device maker Micrus Endovascular Corp. (MEND), based in San Jose, California, for $480 million in cash or $23.40 per share for each of Micrus’ 20.5 million fully diluted shares outstanding. The transaction, which is anticipated to close in 2H10, is expected to be breakeven to slightly dilutive to the company’s 2010 EPS. The acquisition of Micrus Endovascular will expand Johnson & Johnson’s stroke treatment portfolio, as Micrus is a global developer and manufacturer of catheters and other minimally invasive devices, which are used to address stroke-related problems in the brain, like arterial thickening or aneurysms.

On June 1, 2010, Johnson & Johnson announced that its Centocor Ortho Biotech unit agreed to acquire privately-held RespiVert Ltd. Terms of the acquisition were not disclosed. London-based RespiVert manufactures treatments for asthma and other lung diseases.
 

Agreement

On June 22, 2010, Johnson & Johnson announced that it entered into an agreement with Diamyd Medical AB, a Swedish publicly traded company. The deal is focused on the development and commercialization of a drug to treat type I diabetes and associated conditions. This candidate is currently in phase III studies in newly diagnosed type I diabetes patients. As per the terms of the agreement, the company made an initial payment of $45 million to Diamyd and will share costs of the ongoing research and development activities.

Divestiture

On July 12, 2010, Ethicon Endo-Surgery Inc., a unit of Johnson & Johnson, announced completion of divestiture of its breast care business to Devicor Medical Products, Inc., a portfolio company of GTCR Golder Rauner.
 

Top product Procrit/Eprex faces increasing competition from Amgen’s Aranesp.
 

Pricing pressures in the EU pharmaceutical sector, driven by government regulations, is expected to affect the FY10 and FY11 revenues.
 

The OTC product recalls in 2Q10 were a major negative for JNJ. It even led to production suspension at the McNeil Consumer Healthcare facility.