Managing for Sustainable Growth (cont.)

CONSUMER

Our Consumer business segment is improving operating efficiency by refining management structures and responsibilities in its businesses. To smooth decision-making, clearer, more consistent lines of responsibility were established for regional vice presidents, impacting their operational relationships with managing directors and franchise general managers; this took effect Jan. 1, 2010.

“We are confident we have the right structure, and the right people, to continue to keep our commitments to the millions of people around the world who count on our Johnson & Johnson consumer products for themselves and their families,” says Colleen Goggins, Worldwide Chairman, Consumer Group.

MEDICAL DEVICES AND DIAGNOSTICS

The Medical Devices and Diagnostics business segment took steps to integrate businesses into one group and made some additional structural changes to ensure that our businesses in this segment remain focused on their core strategies and highest-priority growth platforms and opportunities.

One example: In January 2010, the Cordis, DePuy, Ethicon and Ethicon Endo-Surgery businesses in the Europe, Middle East and Africa (EMEA) region began operating as a fully integrated company, organized by franchise.

“The EMEA region represents one-third of the global device market and is expected to grow significantly in the coming years,” says Alex Gorsky, Worldwide Chairman, Medical Devices and Diagnostics. “Not only are we aligning our businesses to deliver against needs in these markets, we’re helping to improve care by providing advanced surgical training through our professional training centers.”

PHARMACEUTICALS

The Pharmaceuticals business segment is increasing its focus in several areas: reprioritizing activities to support core products; redeploying significant resources to maximize opportunities with new products and solutions; investing in prioritized internal and external development opportunities to ensure a robust pipeline; and exploring new business models while continuing investments in emerging markets with growth potential.

“Another critical priority that is even more important in times of change is our focus on training, developing and engaging our people,” says Sheri McCoy, Worldwide Chairman, Pharmaceuticals. “We’re working to ensure that we provide our leaders with meaningful opportunities and infuse diversity of thought throughout the organization.”

FINANCIAL IMPACTS OF RESTRUCTURING

We expect our restructuring plans to increase operational efficiency and generate annualized pretax cost savings of $1.4 billion to $1.7 billion when fully implemented in 2011; we expect savings of $800 million to $900 million in 2010. These savings will provide additional resources to invest in new growth platforms, ensure the successful launch of many new products and the continued growth of core businesses, and enable more flexibility in adjusting to the changed and evolving global environment. (Please see Analysis of Consolidated Earnings Before Provision for Taxes on Income and Note 22 to the Consolidated Financial Statements in our 2009 Annual Report for related information.)

“A more streamlined, focused Johnson & Johnson will better serve the unmet needs of our patients and customers and allow us to increase investment in the most promising areas for growth,” says William C. Weldon, Chairman, Board of Directors, and Chief Executive Officer, Johnson & Johnson. “The products and services we create improve the health and well-being of people around the world, and that remains our most crucial mission.”