Johnson & Johnson (JNJ) at Morgan Stanley Notes

JNJ’s 24 billion dollar brands–and its diverse portfolio in general–gives it insight and connections with large customers that are increasingly consolidating.

“You take we’ve got 24 brands that are billion dollar platforms at Johnson & Johnson, the first and best in many different areas. And we think that that provides a certain financial stability as we think about the long-term future and really investing for the long-term. We think that that diversified portfolio, however, provides us a number of other benefits. It provides us certain insights… We think it gives us breadth and depth with large customers that are increasingly consolidating, whether it’s large independent healthcare systems, whether it’s governments outside of the United States, particularly in emerging markets where the diversified and even consumer branded Johnson & Johnson is very important. It’s a philosophy and it’s a strategy that’s also grounded in competitiveness.” Alex Gorsky – Chief Executive Officer

 

Growth is split about 50-50 between organic and inorganic.

“In about slightly over 50% of the time, depending on the timeframe, it can range from 55% to 60% of the time, we tend to benefit from organic growth opportunities, things that we develop within our labs. About 40% to 45% of the time it’s been through inorganic growth.” Alex Gorsky – Chief Executive Officer

 

Over the next 30 years, 350 million people worldwide are aging past 65. This will create opportunity for the healthcare industry, but will also create pricing pressure.

“I think absolutely we should be expecting ongoing pricing pressures in the industry. It’s just the fact that if you look at the macroeconomic issues around the world, given aging populations, the fact that each of us are getting there faster by the minute. But about 12% of the population is over the age of 65, that number is probably going to go to 25% certainly here in the United States. If you’re in Japan, you’re already at 25%, but if you’re in Germany and places like that, you’re rapidly approaching that same number. When you consider the fact that once you turn 65 you tend to consume about 5 to 7 times the amount of healthcare you consumed before you were 65. And then if we go to emerging markets, China, Brazil, India, Russia, other areas, you’ve got two dynamics. One, you have an aging population in many of those places. I think there’s about 150 million people over the age of 65 in China. That number will go to 350 million over the next 30 years.

So imagine a population the size of the United States. And then you combine that with an increasing middle class and once people get shelter, food, what’s the third thing they want to consumer more of as they move up the economic ladder? Healthcare. So we think all of those are going to being a lot of pressure on payers and healthcare systems and therein lies the opportunity I think for us. But I think clearly that will result in pricing pressure” Alex Gorsky – Chief Executive Officer

 

Large acquisitions focus on synergy, smaller acquisitions focus on innovation

“Large acquisitions by definition are more complex, they’re messier. Rather than focusing on innovation, they frequently focus on synergies. And so that’s what we would prefer.” Alex Gorsky – Chief Executive Officer

 

As the hospital and pharmaceutical ecosystems evolve, they prefer to deal on a broader basis.

“We see that as systems get larger in the United States that there’s a preference to talk across category. Now it’s fair to say that hospital systems are still evolving in this area. There’s some of them that still need to mature, that need to build their systems to deal on that kind of basis. But we’re seeing a greater and greater appetite for that as we speak. We certainly see it outside the United States in dealing with places like the UK, Germany and in emerging markets where they want to deal on a broader basis.” Alex Gorsky – Chief Executive Officer

 

The JNJ brand is associated with the smell of baby shampoo.

“We believe the consumer business at J&J is an absolute integral part of our company. And it starts with what you just said. I mean wherever I go around the world, if you say what do you think of with Johnson & Johnson, I mean people smell baby shampoo. And it brings an affinity to the brand of Johnson & Johnson, it makes us different.” Alex Gorsky – Chief Executive Officer

Abbott Laboratories’ (ABT) Management Presents at Wells Fargo Securities Healthcare Broker Conference Notes

China is attractive in the long-term, currently it is difficult to penetrate and adapt to

“What I would classify China, it’s a market in transition, still very attractive long term but there is a lot of also channel dynamics that happen very fast and consumer trends and behaviors that change really fast and that’s what companies right now including ourselves are adapting to making the adjustments around.” Brian Yoor – Senior Vice President and Chief Financial Officer

 

Debt ratios have increased considerably as a result of acquisitions, and ABT will not have any more significant M&A activity until de-leveraging goals are met

“we publicly stated that out of the gates we would be at a 4.5 times ratio of debt to EBITDA that we would implement a de-leveraging plan to bring that down to at least 3.5 by 2018… I think, I could set the expectation, we can set the expectation that there won’t be any significant M&A until we get down to a level that we are comfortable with over the longer term” Brian Yoor – Senior Vice President and Chief Financial Officer

 

In current economic environment, ABT believes its 6% growth is very respectable

When you look at 6% growth to your point of where we have been growing, we are very pleased with that type of growth especially when you look across the world and think about where GDP is at, we are in a low growth environment globally speaking, kind of a low inflationary environment, so I think 6% type of growth is very respectable. We have been in that range, so as a starting point we are very positive without that. Brian Yoor – Senior Vice President and Chief Financial Officer

 

Emerging markets are tailwinds for ABT and will continue to be so

“So we are optimistic that on a tailwind perspective that trend of healthcare and healthcare penetration that is still very below the developed markets is going to continue…  So the emerging markets will continue to be a nice tailwind for us given our presence and scale that we have across all of our businesses in emerging markets.” Brian Yoor – Senior Vice President and Chief Financial Officer

 

ABT’s diverse portfolio has allowed it to navigate international turmoil

“the point is there is always going to be some ebbs and flows in Abbott’s portfolio the way we constructed but that’s constructed with intent because I think what’s good about… there is always an incident but the incidence we have been able to navigate because of our diversity and shots on goal that we have in these growth markets but our portfolio has been pretty resilient when you think about the situations that have been going on in the world whether it’s political turmoil, or unrest in some counties, impeachments or Brexits” Brian Yoor – Senior Vice President and Chief Financial Officer

Medtronic (MDT) 1Q17 Earnings Call Notes

Product pipeline remains strong in all business segments

“Across all four of our groups, CVG, MITG, RTG and Diabetes, our new product pipeline is robust and we’re confident we can drive sustainable growth of our new therapies growth vector within our 200 to 350 basis point goal.” Omar Ishrak – Chairman & CEO

 

Emerging markets are a the biggest long-term opportunity for med tech

“Overall however, the consistency of our emerging market performance benefits strongly from increased geographic diversification reducing dependence on any single market. We continue to believe strongly that the penetration of existing therapies into emerging markets represents the single largest opportunity in med tech over the long term.” Omar Ishrak – Chairman & CEO

 

Heartware acquisition offers a better return on investment than R&D

“we had a number investments internally going on in R&D programs directed specifically at heart failure… we basically are reallocating resources and people to support the activities within HeartWare and backing off on some of those because we actually think HeartWare return on investment will be even better.” Mike Coyle – President, Cardiac and Vascular Group

 

Diversity of MDT portfolio allows for even organic growth despite geographic or categorical weaknesses

“one of our main strength is the diversity of not only our portfolio but our geographic presence as well as the nature of the sources of revenue that we have from emerging markets from services solutions and new therapies. And that by definition means that there will be areas which are strong one quarter and week in others but overall we’re pretty confident, very confident that we can maintain even just organically the mid-single-digit range within the full range of mid single-digits. We expect acquisition to supplement that” Kevin Miller

 

MDT takes advantage of interest rate environment to fund acquisitions and R&D, while staying committed to dividend and share repurchase policy

“obviously one of the key things that we had been doing in an ultra-low rate environment was focused on efficiency and driving strong bottom-line. And so that’s exactly what we’ll be doing here. In terms of capital deployment, I think the highest and best use of our capital is to grow the intrinsic value of the company through reinvestment first and foremost, but beyond that I think it’s very important to have a dividend that is strong and… pay back to our shareholders through share repurchase and that’s exactly what we’re doing with our commitment to deliver a minimum of 50% of our free cash flow to our shareholders” Karen Parkhill – CFO

 

CEO Omar Ishrak is very optimistic on healthcare and med-tech industry

“If you look at it both from a medical innovation perspectives, the number of problems that have to be solved that patients will value, that create a real difference in people’s lives driving equity in healthcare around the world. The opportunities there are again limitless and we’re just scratching the surface and then on top of that you know like we’ve talked about the challenge of addressing wastage in healthcare where we’re literally wasting across the world hundreds of billions of dollars in total healthcare spend… not one that should ever be a down market if we as players and stakeholders in the healthcare market can get our heads around this”. Omar Ishrak – Chairman & CEO