00:00:02
Speaker 1: By revenue, the biggest healthcare company in the world is Johnson & Johnson. But Johnson & Johnson no longer sells Band-Aids. It sold off its consumer product division. Now it focuses on pharmaceuticals and medical devices. The man responsible for that transformation of Johnson & Johnson is Joaquin de Watteau. I had a chance recently to sit down with him to ask him why he made this transformation.
00:00:26
Speaker 2: When I was preparing for this, I did some research and I was disappointed to learn that the Band-Aids I've been using all these years are no longer owned by Johnson & Johnson. What happened to the Band-Aids? I mean, I thought Band-Aids were Johnson & Johnson.
00:00:41
Speaker 3: So it's not only you.
00:00:42
Speaker 4: I think many red IDs of the company are sending me mail regarding that same feeling. And many of them work in our consumer sector. Even today, when I tell people I'm the CEO of Johnson & Johnson, they tell me the baby shampoo company.
00:00:59
Speaker 3: All the time, all the time.
00:01:01
Speaker 2: You became the CEO, and then within a year or two of that, you spun out your entire consumer division, all the kind of products that I'm the one that I buy those things at the drugstore. And all those things you got rid of. Why did you do that?
00:01:13
Speaker 3: We wanted to be more focused on medical innovation.
00:01:17
Speaker 4: And the consumer business has departed from medical innovation. We were more on areas more connected with cosmetics or over-the-counter medication, and it didn't fit in the overall umbrella on trying to bring medical innovation to treat tough, difficult conditions like oncology, cardiovascular, or dementia.
00:01:38
Speaker 2: You're in pharmaceuticals, and you're in medical devices. Let's talk about pharmaceuticals. What is your biggest pharmaceutical product?
00:01:46
Speaker 4: Our biggest pharmaceutical product is a drug for multiple myeloma called Darzalex. Multiple myeloma is a blood cancer that has improved significantly in.
00:01:56
Speaker 3: The last decade.
00:01:57
Speaker 4: The life expectancy of a multiple myeloma patient was about single years. Now a multiple myeloma patient can expect to live more than 10 years. And in some ways, we're turning multiple myeloma into a chronic disease.
00:02:10
Speaker 2: Medical devices is another thing. Pharmaceutical is one thing, medical devices. What is your most important medical device that you have?
00:02:18
Speaker 4: Look, let me tell you why we have medical devices and pharmaceuticals. It's because I think it gives us a long-term competitive advantage because we can span the entire patient journey.
00:02:27
Speaker 3: Let's say cancer. Let's take lung cancer.
00:02:29
Speaker 4: We have systems to do bronchoscopy and do diagnosis there, robotic-assisted bronchoscopy.
00:02:35
Speaker 3: We have medicines to treat lung cancer.
00:02:38
Speaker 4: We also have the instruments that are used for the surgery in lung cancer.
00:02:43
Speaker 3: And we are working on.
00:02:44
Speaker 4: A radiotherapy enhancer, and radiotherapy is an important therapeutic modality for local control in lung cancer. So we can expand the entire patient journey. What I'm more excited about medical devices right now is that we can use technology to make our medical devices smarter. And the most important product that we are about to get approval from.
00:03:03
Speaker 3: The FDA is a robotic surgical system.
00:03:06
Speaker 4: So most of the surgery is going to have a robotic component that's going to help improve the level of surgery and have better outcomes.
00:03:13
Speaker 2: How many different products do you have in the pharmaceutical and how many do you have in the devices?
00:03:18
Speaker 3: We have dozens of products on both sides.
00:03:20
Speaker 2: So how do you keep up with all of them? And when somebody comes along and says we have a new product, do you actually... test the product yourself? Or how do you decide whether you're going to go ahead and use this product or not?
00:03:30
Speaker 4: We have a large, we have a $ 15 billion regional development budget and thousands of scientists working at Johnson & Johnson. I don't make those decisions. I trust the scientists working at Johnson & Johnson to help me in identifying and making the decision of what's gonna have a bigger impact on patients. And our standard is, what is going to have a bigger impact on patients? What is going to clearly improve the standard of care of that particular disease? That's what we try to do every day.
00:03:56
Speaker 2: Now you have the highest revenue of any healthcare company in the world, but there's one healthcare company that has a higher market capitalization than you, which is Eli Lilly, and that's about roughly a trillion dollars because they have a GLP-1 drug. How come you don't have a GLP-1 drug?
00:04:12
Speaker 3: We were focused on a different area.
00:04:13
Speaker 4: We were not focused on obesity or on diabetes like Eli Lilly was. And great for them that they were able to identify these transformational medicine GLP-1s. There's going to be more GLP-1s coming through the pipe. Multiple companies have GLP-1s. We have other things to pay attention to, like trying to cure cancer or address dementia, which are real social problems and real issues that we want to pursue.
00:04:34
Speaker 3: But no, we are not going to be in the GLP-1 area.
00:04:38
Speaker 2: How many employees does Johnson & Johnson have?
00:04:41
Speaker 3: We have 140,000 employees globally.
00:04:42
Speaker 2: How many in the United States?
00:04:44
Speaker 3: We have about 60,000 in the U.S., 80,000 globally.
00:04:48
Speaker 2: And what are the revenues of Johnson & Johnson now?
00:04:51
Speaker 4: Our guidance this year is going to be somewhere north of $ 100 billion.
00:04:56
Speaker 2: Now, some people say that the United States is very good at health care when you have a problem. We have all kinds of drugs for things when you have a problem. But what about prevention? We're not thought to be as good in preventing health care problems as solving them once you have them. What do you think about that argument or criticism?
00:05:13
Speaker 4: I think that we could do better as a country in prevention. And I think that everything we can do to improve our diet, our exercise, our lifestyle is going.
00:05:21
Speaker 3: To be good.
00:05:21
Speaker 4: And everything we can do to improve the primary care side of healthcare in the U.S.
00:05:26
Speaker 3: Will help in the prevention side.
00:05:27
Speaker 4: Primary care is the first defense in healthcare and improving primary care, it's an important element.
00:05:36
Speaker 3: Now, I tell you, when it comes to specialized care, clearly the U.S. is the lead in the world.
00:05:41
Speaker 4: Everywhere I go, when somebody has a serious disease, they think about coming to the U.S.
00:05:45
Speaker 3: Because we have the best medicine in the world.
00:05:47
Speaker 2: A number of years ago, the Affordable Care Act was passed by Congress. and it was heavily criticized by some, but supported by others. Do you think the Affordable Care Act has been helpful to our US healthcare system? How does it help you? And how would you change it if you could change it?
00:06:02
Speaker 4: My principle, our principle as a company is the more people that has health coverage, the better for this country. So anything that improves health coverage and more people covered, the better for this country. It's important for a country as rich as the US that we have health care extended to as.
00:06:20
Speaker 3: Many people as possible. So in that regard, I think that's good.
00:06:22
Speaker 4: And that's going to help in the areas of prevention that you were mentioning.
00:06:26
Speaker 3: That's going to help in life expectancy. That's good for the country.
00:06:29
Speaker 2: People say that sometimes the drugs in Canada or England are cheaper. than they are in the United States for the same drug. Have you ever heard of that?
00:06:36
Speaker 3: It's true.
00:06:37
Speaker 4: We are working in order to have the right recognition there. But keep in mind that we are working with countries that have a national health care system that has a monopoly on that. And we have to obey for some of these regulations unless we don't want these patients to have that medicine.
00:06:54
Speaker 2: It may not be a surprise to you, but a lot of people in this country don't think that pharmaceutical companies are very good. They charge high prices and things like that. You're aware of this concern?
00:07:04
Speaker 3: I'm aware, yeah.
00:07:05
Speaker 2: So what are you trying to do in the pharmaceutical industry to make people like you more?
00:07:10
Speaker 4: Every time I talk to a patient that is using one of our medicines and has a serious condition, they like Johnson & Johnson. And they like the pharmaceutical industry. And they are grateful. And we do that a lot. I mean, we bring a lot of patients to our offices. We bring patients to our manufacturing sites. So our people working in the company can connect what they do every day with the impact those medicines have on patients or those medical devices. So yes, we have a reputation depending, but where we have a good reputation is in the patients that use our medicines and medical technology.
00:07:43
Speaker 2: Now, when you had a litigation issue years ago where I think some kind of baby talc was said to be carcinogenic. Maybe it was, I don't know. But then when you spun it off, your consumer division, you still kept the talc litigation. What's the status of that litigation?
00:08:01
Speaker 4: So let me say first, you know, studies, regulatory agencies have never found a causal relationship between talc and cancer. So we stand behind that, and that's why we defend our position there, and we litigate every single case that comes with talk. There's a combination of third-party litigation funders that invest in litigation, like if you were working in infrastructure or if you were investing in technology, and they fund these litigations, building pseudo-scientific arguments and try to play in companies like us. That's the business model that exists here. So we are litigating every single case. We are winning, and at the same time, we are also trying to introduce modifications in civil justice in order to make the system more fair.
00:08:50
Speaker 2: You must do consumer surveys. What is the most popular thing that people tell you about what they like about your company, what they don't like?
00:08:56
Speaker 4: What they like about our company is normally the trust that our medicines and medical technologies have on them. So when they think Johnson & Johnson, they think it's a trust market. What they don't like about our company are the.
00:09:08
Speaker 3: Prices, as usual.
00:09:09
Speaker 2: What are you going to do about the prices?
00:09:11
Speaker 4: Look, there's always going to be a tension between innovation and affordability. Because innovation is expensive, it's high risk, and we want to make that innovation gets to everybody in this country. So we are always trying to price our medicines in a way that is consistent with the benefit they bring. In this country, we can work in different areas in order to improve affordability. One area is trying to take some of the percentage that the middlemen get in pharmaceuticals, try to get back to the patient. We can also, we should be doing that, we can also have other countries that are developed countries paying the fair share for recent development. All these things will help in making medicines for Americans more affordable.
00:09:55
Speaker 2: Let's talk about your story. You're born in Spain, What city?
00:09:58
Speaker 4: I was born in Spain, in Valencia. I'm the son of an engineer and a nurse. So I had the medical side in my family and also the entrepreneurial side. And I grew up in a large family. In my family, my dad had nine brothers and sisters.
00:10:14
Speaker 3: So I have like 40 cousins. And I was in the middle.
00:10:17
Speaker 4: So I realized at the beginning that I needed to have a strong voice in order to be heard. Otherwise, nobody was paying attention to me in my family.
00:10:25
Speaker 2: Now, as I understand it, you went to college in Spain initially.
00:10:28
Speaker 3: Yeah.
00:10:29
Speaker 2: And then after you graduated from college, you applied for a job at Johnson & Johnson and got turned down.
00:10:35
Speaker 3: Yeah.
00:10:37
Speaker 4: I got an interview and I didn't make it to the second interview.
00:10:40
Speaker 2: So what happened to the person who turned you down? Is he still there?
00:10:43
Speaker 4: He worked in the consumer business and look what happened with consumer.
00:10:50
Speaker 3: Okay.
00:10:51
Speaker 2: All right. So now you worked your way up. Over how many years have you been at Johnson & Johnson?
00:10:57
Speaker 3: I've been at Johnson & Johnson. It goes fast. 37 years.
00:11:01
Speaker 2: Did you ever think you could rise up to be the CEO?
00:11:04
Speaker 3: Never. I never thought I was going to be the CEO.
00:11:07
Speaker 4: I tell you how I realized I could be the CEO, because I was getting different jobs, and every time I got that job, I thought, you know what, I can do the next one. And then next job, I could do the next one, I could do the next one, until I became Vacher, and I said, I think I can be CEO.
00:11:21
Speaker 2: When did they tell you, like three years in advance?
00:11:24
Speaker 4: They told me maybe a year and a half in advance. They told me, you are going to be a candidate to be CEO, and I have to go through a process in order to become the CEO.
00:11:32
Speaker 2: And did you tell them what was wrong with all the other candidates, or you didn't tell them that?
00:11:36
Speaker 3: They didn't tell me anything. They just told me, you're going to be the next one.
00:11:39
Speaker 2: Do you have children who want to be in the healthcare world?
00:11:42
Speaker 4: I have a daughter who is in medical school, and I have a son who is a mechanical engineer. But yeah, I have a tradition in my family, as I told you, my My mom was a nurse. My grandmother was a pharmacist. My grandfather, a pediatrician. And I spent a lot of my childhood in Valencia, my hometown, in my grandmother's pharmacy. She had a retail pharmacy. And when my mom was doing errands in town, she would let me in the pharmacy waiting with my grandmother because she was manning the pharmacy herself. And she was talking to patients coming to refill prescriptions all the time. And I would always complain, grandma, why do you talk to people so much? where you spend so much time with the people. And she told me, I remember that, Joaquin, the important thing is not the medicine, it's the person. So I always retain that to myself. It's not the medicine, it's the person.
00:12:32
Speaker 2: So if you're the healthcare CEO of the biggest healthcare company in the world, you should be really fit. And you seem like you're fit, but what do you do to save? I mean, do you exercise every day? Do you have an instructor to teach you how to make sure you look fit and are fit?
00:12:45
Speaker 4: So I exercise a couple of days a week, and then I play tennis over the weekend. They say tennis is the best sport in order to be fit.
00:12:53
Speaker 3: Because you have to exercise your mind and your body.
00:12:56
Speaker 4: And there are many studies that show that tennis is the one that creates more longevity.
00:12:59
Speaker 2: So that's why I'm testing it. So do you play with Rafael Nadal? I wish.
00:13:03
Speaker 3: I wish.
00:13:04
Speaker 4: I play with a coach. And I plan that. I play twice a week. And I really love it.
00:13:09
Speaker 2: How much of your time do you spend on the road?
00:13:12
Speaker 3: I would say 75%. 75%? Yeah.
00:13:13
Speaker 2: So who's watching the store back in?
00:13:17
Speaker 4: Look, I mean, I have a lot of people back in the store, so that is watching for me.
00:13:23
Speaker 3: And it's important for me to be connected.
00:13:25
Speaker 4: I have to be connected to the physicians that use our medicines and medical technologies. I have to be connected with our employees here in the.
00:13:33
Speaker 3: US and elsewhere. I have to have a pulse of the company. I cannot have a pulse of the company if I am at New Brunswick.
00:13:40
Speaker 2: What is the hardest part about being CEO of Johnson & Johnson? What's the biggest challenge you face?
00:13:47
Speaker 4: The biggest challenge is to be able to continue to improve this company every day. I mean, these companies as big as Johnson & Johnson, we need to have attention to improvement, to reinvent ourselves. So the biggest challenge for a CEO is to break the inertia and to make the company every day more competitive.
00:14:05
Speaker 3: And that's what I'm trying every day.
00:14:07
Speaker 2: If you were to educate somebody to this audience and you say, here's something you should know about healthcare that you really don't know or you should know more about, what would that be?
00:14:15
Speaker 4: Yeah, so I would say first, in becoming CEO of Johnson & Johnson, I think this is a sign of the opportunities that exist in this country. I think the U.S. is a great country. It's a land of opportunity and Look, I was born in Spain, but I am more an American from a professional perspective. I love the sense of opportunity of this country. I love the opportunity to progress and make your dreams come true, like me becoming CEO of Johnson & Johnson.
00:14:38
Speaker 3: So as a U.S.
00:14:40
Speaker 4: Citizen that was not born in the U.S., I have to say this is a wonderful country. And sometimes you have to be from outside to appreciate what a great country this is. So I'm very grateful for this country and the opportunities they gave me. So as far as what I would say in healthcare, I would say trust your doctor. I think doctors and nurses and healthcare workers are really the frontline of our health, and I think that trusting your doctor, your nurse, is a very important thing for us. That's why, as Johnson & Johnson, our focus in terms of our philanthropic activities is in frontline healthcare workers, is in nurses. We think that's the frontline of healthcare, and my advice is trust them.
00:15:18
Speaker 2: Now, in the United States, there are only two companies that have a triple A credit rating. Does anybody else know what, one is Johnson & Johnson, anybody else know what the other one is? That is the only other company in the United States, publicly traded company, that has a triple A credit rating. Anybody? What? Microsoft is the company.
00:15:38
Speaker 3: Microsoft, yeah, Microsoft and Johnson & Johnson. We're proud. to have a AAA credit rating.
00:15:43
Speaker 4: I think it's a better credit rating than the US government. It's a sign of our financial discipline and our trajectory over a long period of time. And many investors ask me, why having a AAA credit rating? You could be more leveraged. I say, look, it's a sign of our financial discipline. We are not married to the AAA credit rating. If a good opportunity would come along, we would be happy not to have a... a triple-A credit rating, but it's a sign of our financial discipline, and our investors like it.
00:16:15
Speaker 2: For 15 years in a row, you've had an annual dividend that has increased, is that right?
00:16:21
Speaker 3: More than 50 years.
00:16:23
Speaker 2: More than 50 years.
00:16:23
Speaker 3: More than 50 years we have increased our dividend, yeah, yeah.
00:16:26
Speaker 2: So that's pretty good. Do you try very hard to make sure you do that every year?
00:16:29
Speaker 4: That's sacrosanct. You know, when investors ask me, what about the dividend? I say, that's always going to be there, that you can bet that you will have a dividend growth if you are investing in Johnson & Johnson.
00:16:40
Speaker 2: The most commonly asked question of CEOs today is how is your company being affected by AI and what are you doing to take advantage of AI? So how are you being affected by AI and how are you taking advantage of AI?
00:16:51
Speaker 4: On the positive, you know, AI for us is a force multiplier because AI, it's going to help life science companies like Johnson & Johnson to be able to develop better medicines and medical technology. So we have to embrace AI. AI is going to accelerate discovery of new medicines. AI is going to make medical devices smarter, be able to navigate the body better. So I think AI is something that a company like Johnson & Johnson has to embrace. Now, we have to help all our employees to amplify what they do with AI. And we are training all our employees in AI because we want to bring everybody in the journey. AI is not going to take your job, but somebody with AI skills may take your job.
00:17:30
Speaker 2: Are you spending a lot of money now on AI?
00:17:32
Speaker 4: We are investing in AI, too, in programs that are going to improve the operations of the company in areas like drug discovery, where I think AI is going to have a big impact, in areas like making our medical devices smarter, our robotic systems.
00:17:47
Speaker 3: So we are investing in AI.
00:17:49
Speaker 2: Like in my age, I'm focused on drugs that are Alzheimer's related. Is that something you're focused on?
00:17:55
Speaker 3: Yeah.
00:17:56
Speaker 2: Because that's going to be a big....
00:17:59
Speaker 4: I think the biggest challenge for the healthcare industry and for the pharmaceutical and medical device industry is to address the issue of neurodegeneration and dementia.
00:18:09
Speaker 3: I mean, it's a real.
00:18:10
Speaker 4: Social problem that your chances of having some type of cognitive impairment.
00:18:15
Speaker 3: Increase as you age.
00:18:17
Speaker 4: And as we are increasing our age, the likelihood of having more people with dementia is higher. So I think this is the most important problem, in my view, that the industry can address. And we are working on that, as Johnson & Johnson, in trying to identify that.
00:18:31
Speaker 3: We're trying, we fail, and we come back again.
00:18:34
Speaker 2: What about cancer?
00:18:36
Speaker 4: Cancer, we aim to be the number one company in cancer. Our goal is to be number one by 2030. Perhaps it's the best sign of where the company is heading. What is the new Johnson & Johnson about is trying to eliminate cancer. The basic areas that we're working, I mentioned multiple myeloma, we're also working in lung cancer, bladder cancer, prostate cancer, colorectal cancer, head and neck cancer. So we have multiple medicines to address a number of cancers that have common oncogenic drivers. Cancer is an area in which progress is occurring at an accelerated pace. On one hand, we understand better the biology of the disease, and on the other hand, we have better technologies to kill cancer cells.
00:19:20
Speaker 2: So when you want to get a new product, let's say in Alzheimer's or cancer, you can develop it yourself in terms of your own lab, and that might take 15 years or so, or you can go buy it from somebody else. What percentage of your products that you now sell in pharmaceutical and in medical devices did you actually develop yourself, and what percentage did you actually buy from somebody else?
00:19:44
Speaker 4: So we always aim to have a happy mix of 50-50, internal and external, Uh, It's not realistic for a company to think that all the best things are going to occur in your labs. You have to be aware that some of the best science is not going to be occurring in the walls of Johnson & Johnson. So we have a very sophisticated system of scientific scouts identifying external innovation. Most of the times, we identify things that are quite early on that will still take many years to get into the market. For example, we just bought a company that has a system to kill cancer cells. I think the first medicine coming from that company may come mid-30s.
00:20:24
Speaker 3: So is that internal or external?
00:20:26
Speaker 4: Because for us to get that medicine into the market, we have to do some adjustments in the chemical structure. We have to be able to develop and do all the clinical development and develop all the manufacturing process and bring it to market. So we have a happy 50-50 external and internal innovation for a company that is focused on medical breakthroughs. Having a good system of external innovation is fundamental.
00:20:50
Speaker 2: Now, some people say that in China, they take American healthcare products that are patented and then they kind of copy them, counterfeit them, and sell them. Is there any evidence of that?
00:21:02
Speaker 4: China is making a lot of strides in healthcare and everything is incremental. At the beginning, you start copying, but gradually you start improving and you start discovering new things yourself too. So I think clearly we have competition from China when it comes to innovation. I don't think China is at the level of breakthrough innovation that the U.S.
00:21:21
Speaker 3: Is.
00:21:22
Speaker 4: China didn't discovered the GLP-1s or didn't discover the CAR T cell therapy or the immunotherapy in cancer, but they are good in being fast followers and that only has to stimulate the US that has the best ecosystem in order to be able to invest more in healthcare. We have to invest more in research, we have to continue to protect the intellectual property, we have to attract the best talent, we have to have a good market, and if we do that, we're gonna continue being the number one country in life science innovation, which is good economically, and it's also good for the patients here.
00:21:53
Speaker 2: If I wanted to buy a stock in a healthcare company, would Johnson & Johnson be a good stock to buy?
00:21:59
Speaker 3: David, you're a smart man. It would be the best stock to buy, Johnson & Johnson. No question. I'm going to give you some reasons why. We are just at the beginning.
00:22:08
Speaker 4: This is just the initial innings of a cycle of growth for Johnson & Johnson. We were saying that we have line of sight to double-digit growth by the end of the decade, and that's remarkable. for a company which is more than $ 100 billion. And you know why? We are not a one-trick pony company. We have a whole stable of medicines and medical devices. We have 28 platforms of more than a billion dollars. So we don't depend on a single platform. And that creates much more optionality to be able to bring breakthroughs and at the same time to create more revenue.
00:22:39
Speaker 2: Since you've been in the healthcare world, what do you think is the single greatest healthcare invention or creation? It's this discovery of certain kind of drugs. What do you think has changed the world of healthcare more than anything else in the years that you've been in the healthcare world?
00:22:53
Speaker 3: I mean, I have seen a lot of progress.
00:22:55
Speaker 4: I mean, I've seen how life expectancy increase in the 20th century more than 30 years. I have seen how HIV got to be a curable disease. I have seen how we develop vaccines that have been extremely positive preventive tools. I have seen how we have improved cardiovascular mortality and morbidity through multiple prevention in hypertension, in statins. So I have seen many, many positive things. Perhaps the most positive things that I'm seeing now is how we are improving our treatment of cancer.
00:23:27
Speaker 3: The cancer death rates are coming down.
00:23:29
Speaker 4: We are much better as a country than any other country in the world, and we have the ambition to eliminate cancer.
00:23:36
Speaker 2: Thanks for listening. To hear more of my interviews, you can subscribe and download my podcast on Spotify, Apple, or wherever you listen.
Speaker 1: By revenue, the biggest healthcare company in the world is Johnson & Johnson. But Johnson & Johnson no longer sells Band-Aids. It sold off its consumer product division. Now it focuses on pharmaceuticals and medical devices. The man responsible for that transformation of Johnson & Johnson is Joaquin de Watteau. I had a chance recently to sit down with him to ask him why he made this transformation.
00:00:26
Speaker 2: When I was preparing for this, I did some research and I was disappointed to learn that the Band-Aids I've been using all these years are no longer owned by Johnson & Johnson. What happened to the Band-Aids? I mean, I thought Band-Aids were Johnson & Johnson.
00:00:41
Speaker 3: So it's not only you.
00:00:42
Speaker 4: I think many red IDs of the company are sending me mail regarding that same feeling. And many of them work in our consumer sector. Even today, when I tell people I'm the CEO of Johnson & Johnson, they tell me the baby shampoo company.
00:00:59
Speaker 3: All the time, all the time.
00:01:01
Speaker 2: You became the CEO, and then within a year or two of that, you spun out your entire consumer division, all the kind of products that I'm the one that I buy those things at the drugstore. And all those things you got rid of. Why did you do that?
00:01:13
Speaker 3: We wanted to be more focused on medical innovation.
00:01:17
Speaker 4: And the consumer business has departed from medical innovation. We were more on areas more connected with cosmetics or over-the-counter medication, and it didn't fit in the overall umbrella on trying to bring medical innovation to treat tough, difficult conditions like oncology, cardiovascular, or dementia.
00:01:38
Speaker 2: You're in pharmaceuticals, and you're in medical devices. Let's talk about pharmaceuticals. What is your biggest pharmaceutical product?
00:01:46
Speaker 4: Our biggest pharmaceutical product is a drug for multiple myeloma called Darzalex. Multiple myeloma is a blood cancer that has improved significantly in.
00:01:56
Speaker 3: The last decade.
00:01:57
Speaker 4: The life expectancy of a multiple myeloma patient was about single years. Now a multiple myeloma patient can expect to live more than 10 years. And in some ways, we're turning multiple myeloma into a chronic disease.
00:02:10
Speaker 2: Medical devices is another thing. Pharmaceutical is one thing, medical devices. What is your most important medical device that you have?
00:02:18
Speaker 4: Look, let me tell you why we have medical devices and pharmaceuticals. It's because I think it gives us a long-term competitive advantage because we can span the entire patient journey.
00:02:27
Speaker 3: Let's say cancer. Let's take lung cancer.
00:02:29
Speaker 4: We have systems to do bronchoscopy and do diagnosis there, robotic-assisted bronchoscopy.
00:02:35
Speaker 3: We have medicines to treat lung cancer.
00:02:38
Speaker 4: We also have the instruments that are used for the surgery in lung cancer.
00:02:43
Speaker 3: And we are working on.
00:02:44
Speaker 4: A radiotherapy enhancer, and radiotherapy is an important therapeutic modality for local control in lung cancer. So we can expand the entire patient journey. What I'm more excited about medical devices right now is that we can use technology to make our medical devices smarter. And the most important product that we are about to get approval from.
00:03:03
Speaker 3: The FDA is a robotic surgical system.
00:03:06
Speaker 4: So most of the surgery is going to have a robotic component that's going to help improve the level of surgery and have better outcomes.
00:03:13
Speaker 2: How many different products do you have in the pharmaceutical and how many do you have in the devices?
00:03:18
Speaker 3: We have dozens of products on both sides.
00:03:20
Speaker 2: So how do you keep up with all of them? And when somebody comes along and says we have a new product, do you actually... test the product yourself? Or how do you decide whether you're going to go ahead and use this product or not?
00:03:30
Speaker 4: We have a large, we have a $ 15 billion regional development budget and thousands of scientists working at Johnson & Johnson. I don't make those decisions. I trust the scientists working at Johnson & Johnson to help me in identifying and making the decision of what's gonna have a bigger impact on patients. And our standard is, what is going to have a bigger impact on patients? What is going to clearly improve the standard of care of that particular disease? That's what we try to do every day.
00:03:56
Speaker 2: Now you have the highest revenue of any healthcare company in the world, but there's one healthcare company that has a higher market capitalization than you, which is Eli Lilly, and that's about roughly a trillion dollars because they have a GLP-1 drug. How come you don't have a GLP-1 drug?
00:04:12
Speaker 3: We were focused on a different area.
00:04:13
Speaker 4: We were not focused on obesity or on diabetes like Eli Lilly was. And great for them that they were able to identify these transformational medicine GLP-1s. There's going to be more GLP-1s coming through the pipe. Multiple companies have GLP-1s. We have other things to pay attention to, like trying to cure cancer or address dementia, which are real social problems and real issues that we want to pursue.
00:04:34
Speaker 3: But no, we are not going to be in the GLP-1 area.
00:04:38
Speaker 2: How many employees does Johnson & Johnson have?
00:04:41
Speaker 3: We have 140,000 employees globally.
00:04:42
Speaker 2: How many in the United States?
00:04:44
Speaker 3: We have about 60,000 in the U.S., 80,000 globally.
00:04:48
Speaker 2: And what are the revenues of Johnson & Johnson now?
00:04:51
Speaker 4: Our guidance this year is going to be somewhere north of $ 100 billion.
00:04:56
Speaker 2: Now, some people say that the United States is very good at health care when you have a problem. We have all kinds of drugs for things when you have a problem. But what about prevention? We're not thought to be as good in preventing health care problems as solving them once you have them. What do you think about that argument or criticism?
00:05:13
Speaker 4: I think that we could do better as a country in prevention. And I think that everything we can do to improve our diet, our exercise, our lifestyle is going.
00:05:21
Speaker 3: To be good.
00:05:21
Speaker 4: And everything we can do to improve the primary care side of healthcare in the U.S.
00:05:26
Speaker 3: Will help in the prevention side.
00:05:27
Speaker 4: Primary care is the first defense in healthcare and improving primary care, it's an important element.
00:05:36
Speaker 3: Now, I tell you, when it comes to specialized care, clearly the U.S. is the lead in the world.
00:05:41
Speaker 4: Everywhere I go, when somebody has a serious disease, they think about coming to the U.S.
00:05:45
Speaker 3: Because we have the best medicine in the world.
00:05:47
Speaker 2: A number of years ago, the Affordable Care Act was passed by Congress. and it was heavily criticized by some, but supported by others. Do you think the Affordable Care Act has been helpful to our US healthcare system? How does it help you? And how would you change it if you could change it?
00:06:02
Speaker 4: My principle, our principle as a company is the more people that has health coverage, the better for this country. So anything that improves health coverage and more people covered, the better for this country. It's important for a country as rich as the US that we have health care extended to as.
00:06:20
Speaker 3: Many people as possible. So in that regard, I think that's good.
00:06:22
Speaker 4: And that's going to help in the areas of prevention that you were mentioning.
00:06:26
Speaker 3: That's going to help in life expectancy. That's good for the country.
00:06:29
Speaker 2: People say that sometimes the drugs in Canada or England are cheaper. than they are in the United States for the same drug. Have you ever heard of that?
00:06:36
Speaker 3: It's true.
00:06:37
Speaker 4: We are working in order to have the right recognition there. But keep in mind that we are working with countries that have a national health care system that has a monopoly on that. And we have to obey for some of these regulations unless we don't want these patients to have that medicine.
00:06:54
Speaker 2: It may not be a surprise to you, but a lot of people in this country don't think that pharmaceutical companies are very good. They charge high prices and things like that. You're aware of this concern?
00:07:04
Speaker 3: I'm aware, yeah.
00:07:05
Speaker 2: So what are you trying to do in the pharmaceutical industry to make people like you more?
00:07:10
Speaker 4: Every time I talk to a patient that is using one of our medicines and has a serious condition, they like Johnson & Johnson. And they like the pharmaceutical industry. And they are grateful. And we do that a lot. I mean, we bring a lot of patients to our offices. We bring patients to our manufacturing sites. So our people working in the company can connect what they do every day with the impact those medicines have on patients or those medical devices. So yes, we have a reputation depending, but where we have a good reputation is in the patients that use our medicines and medical technology.
00:07:43
Speaker 2: Now, when you had a litigation issue years ago where I think some kind of baby talc was said to be carcinogenic. Maybe it was, I don't know. But then when you spun it off, your consumer division, you still kept the talc litigation. What's the status of that litigation?
00:08:01
Speaker 4: So let me say first, you know, studies, regulatory agencies have never found a causal relationship between talc and cancer. So we stand behind that, and that's why we defend our position there, and we litigate every single case that comes with talk. There's a combination of third-party litigation funders that invest in litigation, like if you were working in infrastructure or if you were investing in technology, and they fund these litigations, building pseudo-scientific arguments and try to play in companies like us. That's the business model that exists here. So we are litigating every single case. We are winning, and at the same time, we are also trying to introduce modifications in civil justice in order to make the system more fair.
00:08:50
Speaker 2: You must do consumer surveys. What is the most popular thing that people tell you about what they like about your company, what they don't like?
00:08:56
Speaker 4: What they like about our company is normally the trust that our medicines and medical technologies have on them. So when they think Johnson & Johnson, they think it's a trust market. What they don't like about our company are the.
00:09:08
Speaker 3: Prices, as usual.
00:09:09
Speaker 2: What are you going to do about the prices?
00:09:11
Speaker 4: Look, there's always going to be a tension between innovation and affordability. Because innovation is expensive, it's high risk, and we want to make that innovation gets to everybody in this country. So we are always trying to price our medicines in a way that is consistent with the benefit they bring. In this country, we can work in different areas in order to improve affordability. One area is trying to take some of the percentage that the middlemen get in pharmaceuticals, try to get back to the patient. We can also, we should be doing that, we can also have other countries that are developed countries paying the fair share for recent development. All these things will help in making medicines for Americans more affordable.
00:09:55
Speaker 2: Let's talk about your story. You're born in Spain, What city?
00:09:58
Speaker 4: I was born in Spain, in Valencia. I'm the son of an engineer and a nurse. So I had the medical side in my family and also the entrepreneurial side. And I grew up in a large family. In my family, my dad had nine brothers and sisters.
00:10:14
Speaker 3: So I have like 40 cousins. And I was in the middle.
00:10:17
Speaker 4: So I realized at the beginning that I needed to have a strong voice in order to be heard. Otherwise, nobody was paying attention to me in my family.
00:10:25
Speaker 2: Now, as I understand it, you went to college in Spain initially.
00:10:28
Speaker 3: Yeah.
00:10:29
Speaker 2: And then after you graduated from college, you applied for a job at Johnson & Johnson and got turned down.
00:10:35
Speaker 3: Yeah.
00:10:37
Speaker 4: I got an interview and I didn't make it to the second interview.
00:10:40
Speaker 2: So what happened to the person who turned you down? Is he still there?
00:10:43
Speaker 4: He worked in the consumer business and look what happened with consumer.
00:10:50
Speaker 3: Okay.
00:10:51
Speaker 2: All right. So now you worked your way up. Over how many years have you been at Johnson & Johnson?
00:10:57
Speaker 3: I've been at Johnson & Johnson. It goes fast. 37 years.
00:11:01
Speaker 2: Did you ever think you could rise up to be the CEO?
00:11:04
Speaker 3: Never. I never thought I was going to be the CEO.
00:11:07
Speaker 4: I tell you how I realized I could be the CEO, because I was getting different jobs, and every time I got that job, I thought, you know what, I can do the next one. And then next job, I could do the next one, I could do the next one, until I became Vacher, and I said, I think I can be CEO.
00:11:21
Speaker 2: When did they tell you, like three years in advance?
00:11:24
Speaker 4: They told me maybe a year and a half in advance. They told me, you are going to be a candidate to be CEO, and I have to go through a process in order to become the CEO.
00:11:32
Speaker 2: And did you tell them what was wrong with all the other candidates, or you didn't tell them that?
00:11:36
Speaker 3: They didn't tell me anything. They just told me, you're going to be the next one.
00:11:39
Speaker 2: Do you have children who want to be in the healthcare world?
00:11:42
Speaker 4: I have a daughter who is in medical school, and I have a son who is a mechanical engineer. But yeah, I have a tradition in my family, as I told you, my My mom was a nurse. My grandmother was a pharmacist. My grandfather, a pediatrician. And I spent a lot of my childhood in Valencia, my hometown, in my grandmother's pharmacy. She had a retail pharmacy. And when my mom was doing errands in town, she would let me in the pharmacy waiting with my grandmother because she was manning the pharmacy herself. And she was talking to patients coming to refill prescriptions all the time. And I would always complain, grandma, why do you talk to people so much? where you spend so much time with the people. And she told me, I remember that, Joaquin, the important thing is not the medicine, it's the person. So I always retain that to myself. It's not the medicine, it's the person.
00:12:32
Speaker 2: So if you're the healthcare CEO of the biggest healthcare company in the world, you should be really fit. And you seem like you're fit, but what do you do to save? I mean, do you exercise every day? Do you have an instructor to teach you how to make sure you look fit and are fit?
00:12:45
Speaker 4: So I exercise a couple of days a week, and then I play tennis over the weekend. They say tennis is the best sport in order to be fit.
00:12:53
Speaker 3: Because you have to exercise your mind and your body.
00:12:56
Speaker 4: And there are many studies that show that tennis is the one that creates more longevity.
00:12:59
Speaker 2: So that's why I'm testing it. So do you play with Rafael Nadal? I wish.
00:13:03
Speaker 3: I wish.
00:13:04
Speaker 4: I play with a coach. And I plan that. I play twice a week. And I really love it.
00:13:09
Speaker 2: How much of your time do you spend on the road?
00:13:12
Speaker 3: I would say 75%. 75%? Yeah.
00:13:13
Speaker 2: So who's watching the store back in?
00:13:17
Speaker 4: Look, I mean, I have a lot of people back in the store, so that is watching for me.
00:13:23
Speaker 3: And it's important for me to be connected.
00:13:25
Speaker 4: I have to be connected to the physicians that use our medicines and medical technologies. I have to be connected with our employees here in the.
00:13:33
Speaker 3: US and elsewhere. I have to have a pulse of the company. I cannot have a pulse of the company if I am at New Brunswick.
00:13:40
Speaker 2: What is the hardest part about being CEO of Johnson & Johnson? What's the biggest challenge you face?
00:13:47
Speaker 4: The biggest challenge is to be able to continue to improve this company every day. I mean, these companies as big as Johnson & Johnson, we need to have attention to improvement, to reinvent ourselves. So the biggest challenge for a CEO is to break the inertia and to make the company every day more competitive.
00:14:05
Speaker 3: And that's what I'm trying every day.
00:14:07
Speaker 2: If you were to educate somebody to this audience and you say, here's something you should know about healthcare that you really don't know or you should know more about, what would that be?
00:14:15
Speaker 4: Yeah, so I would say first, in becoming CEO of Johnson & Johnson, I think this is a sign of the opportunities that exist in this country. I think the U.S. is a great country. It's a land of opportunity and Look, I was born in Spain, but I am more an American from a professional perspective. I love the sense of opportunity of this country. I love the opportunity to progress and make your dreams come true, like me becoming CEO of Johnson & Johnson.
00:14:38
Speaker 3: So as a U.S.
00:14:40
Speaker 4: Citizen that was not born in the U.S., I have to say this is a wonderful country. And sometimes you have to be from outside to appreciate what a great country this is. So I'm very grateful for this country and the opportunities they gave me. So as far as what I would say in healthcare, I would say trust your doctor. I think doctors and nurses and healthcare workers are really the frontline of our health, and I think that trusting your doctor, your nurse, is a very important thing for us. That's why, as Johnson & Johnson, our focus in terms of our philanthropic activities is in frontline healthcare workers, is in nurses. We think that's the frontline of healthcare, and my advice is trust them.
00:15:18
Speaker 2: Now, in the United States, there are only two companies that have a triple A credit rating. Does anybody else know what, one is Johnson & Johnson, anybody else know what the other one is? That is the only other company in the United States, publicly traded company, that has a triple A credit rating. Anybody? What? Microsoft is the company.
00:15:38
Speaker 3: Microsoft, yeah, Microsoft and Johnson & Johnson. We're proud. to have a AAA credit rating.
00:15:43
Speaker 4: I think it's a better credit rating than the US government. It's a sign of our financial discipline and our trajectory over a long period of time. And many investors ask me, why having a AAA credit rating? You could be more leveraged. I say, look, it's a sign of our financial discipline. We are not married to the AAA credit rating. If a good opportunity would come along, we would be happy not to have a... a triple-A credit rating, but it's a sign of our financial discipline, and our investors like it.
00:16:15
Speaker 2: For 15 years in a row, you've had an annual dividend that has increased, is that right?
00:16:21
Speaker 3: More than 50 years.
00:16:23
Speaker 2: More than 50 years.
00:16:23
Speaker 3: More than 50 years we have increased our dividend, yeah, yeah.
00:16:26
Speaker 2: So that's pretty good. Do you try very hard to make sure you do that every year?
00:16:29
Speaker 4: That's sacrosanct. You know, when investors ask me, what about the dividend? I say, that's always going to be there, that you can bet that you will have a dividend growth if you are investing in Johnson & Johnson.
00:16:40
Speaker 2: The most commonly asked question of CEOs today is how is your company being affected by AI and what are you doing to take advantage of AI? So how are you being affected by AI and how are you taking advantage of AI?
00:16:51
Speaker 4: On the positive, you know, AI for us is a force multiplier because AI, it's going to help life science companies like Johnson & Johnson to be able to develop better medicines and medical technology. So we have to embrace AI. AI is going to accelerate discovery of new medicines. AI is going to make medical devices smarter, be able to navigate the body better. So I think AI is something that a company like Johnson & Johnson has to embrace. Now, we have to help all our employees to amplify what they do with AI. And we are training all our employees in AI because we want to bring everybody in the journey. AI is not going to take your job, but somebody with AI skills may take your job.
00:17:30
Speaker 2: Are you spending a lot of money now on AI?
00:17:32
Speaker 4: We are investing in AI, too, in programs that are going to improve the operations of the company in areas like drug discovery, where I think AI is going to have a big impact, in areas like making our medical devices smarter, our robotic systems.
00:17:47
Speaker 3: So we are investing in AI.
00:17:49
Speaker 2: Like in my age, I'm focused on drugs that are Alzheimer's related. Is that something you're focused on?
00:17:55
Speaker 3: Yeah.
00:17:56
Speaker 2: Because that's going to be a big....
00:17:59
Speaker 4: I think the biggest challenge for the healthcare industry and for the pharmaceutical and medical device industry is to address the issue of neurodegeneration and dementia.
00:18:09
Speaker 3: I mean, it's a real.
00:18:10
Speaker 4: Social problem that your chances of having some type of cognitive impairment.
00:18:15
Speaker 3: Increase as you age.
00:18:17
Speaker 4: And as we are increasing our age, the likelihood of having more people with dementia is higher. So I think this is the most important problem, in my view, that the industry can address. And we are working on that, as Johnson & Johnson, in trying to identify that.
00:18:31
Speaker 3: We're trying, we fail, and we come back again.
00:18:34
Speaker 2: What about cancer?
00:18:36
Speaker 4: Cancer, we aim to be the number one company in cancer. Our goal is to be number one by 2030. Perhaps it's the best sign of where the company is heading. What is the new Johnson & Johnson about is trying to eliminate cancer. The basic areas that we're working, I mentioned multiple myeloma, we're also working in lung cancer, bladder cancer, prostate cancer, colorectal cancer, head and neck cancer. So we have multiple medicines to address a number of cancers that have common oncogenic drivers. Cancer is an area in which progress is occurring at an accelerated pace. On one hand, we understand better the biology of the disease, and on the other hand, we have better technologies to kill cancer cells.
00:19:20
Speaker 2: So when you want to get a new product, let's say in Alzheimer's or cancer, you can develop it yourself in terms of your own lab, and that might take 15 years or so, or you can go buy it from somebody else. What percentage of your products that you now sell in pharmaceutical and in medical devices did you actually develop yourself, and what percentage did you actually buy from somebody else?
00:19:44
Speaker 4: So we always aim to have a happy mix of 50-50, internal and external, Uh, It's not realistic for a company to think that all the best things are going to occur in your labs. You have to be aware that some of the best science is not going to be occurring in the walls of Johnson & Johnson. So we have a very sophisticated system of scientific scouts identifying external innovation. Most of the times, we identify things that are quite early on that will still take many years to get into the market. For example, we just bought a company that has a system to kill cancer cells. I think the first medicine coming from that company may come mid-30s.
00:20:24
Speaker 3: So is that internal or external?
00:20:26
Speaker 4: Because for us to get that medicine into the market, we have to do some adjustments in the chemical structure. We have to be able to develop and do all the clinical development and develop all the manufacturing process and bring it to market. So we have a happy 50-50 external and internal innovation for a company that is focused on medical breakthroughs. Having a good system of external innovation is fundamental.
00:20:50
Speaker 2: Now, some people say that in China, they take American healthcare products that are patented and then they kind of copy them, counterfeit them, and sell them. Is there any evidence of that?
00:21:02
Speaker 4: China is making a lot of strides in healthcare and everything is incremental. At the beginning, you start copying, but gradually you start improving and you start discovering new things yourself too. So I think clearly we have competition from China when it comes to innovation. I don't think China is at the level of breakthrough innovation that the U.S.
00:21:21
Speaker 3: Is.
00:21:22
Speaker 4: China didn't discovered the GLP-1s or didn't discover the CAR T cell therapy or the immunotherapy in cancer, but they are good in being fast followers and that only has to stimulate the US that has the best ecosystem in order to be able to invest more in healthcare. We have to invest more in research, we have to continue to protect the intellectual property, we have to attract the best talent, we have to have a good market, and if we do that, we're gonna continue being the number one country in life science innovation, which is good economically, and it's also good for the patients here.
00:21:53
Speaker 2: If I wanted to buy a stock in a healthcare company, would Johnson & Johnson be a good stock to buy?
00:21:59
Speaker 3: David, you're a smart man. It would be the best stock to buy, Johnson & Johnson. No question. I'm going to give you some reasons why. We are just at the beginning.
00:22:08
Speaker 4: This is just the initial innings of a cycle of growth for Johnson & Johnson. We were saying that we have line of sight to double-digit growth by the end of the decade, and that's remarkable. for a company which is more than $ 100 billion. And you know why? We are not a one-trick pony company. We have a whole stable of medicines and medical devices. We have 28 platforms of more than a billion dollars. So we don't depend on a single platform. And that creates much more optionality to be able to bring breakthroughs and at the same time to create more revenue.
00:22:39
Speaker 2: Since you've been in the healthcare world, what do you think is the single greatest healthcare invention or creation? It's this discovery of certain kind of drugs. What do you think has changed the world of healthcare more than anything else in the years that you've been in the healthcare world?
00:22:53
Speaker 3: I mean, I have seen a lot of progress.
00:22:55
Speaker 4: I mean, I've seen how life expectancy increase in the 20th century more than 30 years. I have seen how HIV got to be a curable disease. I have seen how we develop vaccines that have been extremely positive preventive tools. I have seen how we have improved cardiovascular mortality and morbidity through multiple prevention in hypertension, in statins. So I have seen many, many positive things. Perhaps the most positive things that I'm seeing now is how we are improving our treatment of cancer.
00:23:27
Speaker 3: The cancer death rates are coming down.
00:23:29
Speaker 4: We are much better as a country than any other country in the world, and we have the ambition to eliminate cancer.
00:23:36
Speaker 2: Thanks for listening. To hear more of my interviews, you can subscribe and download my podcast on Spotify, Apple, or wherever you listen.
