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Contacts: Doretta Gasorek doretta.gasorek@ratingresearch.com (908) 432-0800 Ashley Burleson ashley.burleson@ratingresearch.com (813) 837-6166 |
Johnson & Johnson Retains Industry’s Sole AAA Reputation Rating
Johnson & Johnson Retains Industry’s Sole AAA Reputation
RatingBEDMINSTER, N.J., May 8, 2005 — Amid the recent turmoil in
the pharmaceutical industry, the corporate reputation status of five leading
pharmaceutical firms have suffered significantly, while reputations of
three firms focused in the fast-moving biotech sector have improved markedly.
That assessment comes from Rating Research LLC (RRC), the nation’s leading
provider of corporate reputation ratings and research. Accordingly, RRC today
announced the following Reputation Rating actions:
Pfizer — DOWNGRADED to AA from AAA
Merck — DOWNGRADED to AA from AAA
GlaxoSmithKline — DOWNGRADED to A from AA
Bayer — DOWNGRADED to BBB from A
Schering-Plough — DOWNGRADED to BB from BBB
Genentech — UPGRADED to AA from A
Novartis — UPGRADED to AA from A
Roche — UPGRADED to A from BBB
RRC rates the corporate reputation strength of companies using a AAA-through-C
scale similar to that used to rate financial securities, with AAA indicating
the highest quality and the smallest degree of reputation default risk, C indicating
the poorest quality.
Dory Gasorek, RRC Principal and Rating Committee Chairperson, notes that the
Pfizer and Merck downgrades come on the heels of the issues both companies
have had with Cox-2 inhibitor risk. In addition, she says that industry executives
and analysts expressed significantly weaker evaluations of both firms—primarily
in the areas of financial security, ethics, and third-party relationships.
With regard to the downgrades of GlaxoSmithKline, Bayer, and Schering-Plough,
Ms. Gasorek comments that “the Cox-2 inhibitor problems that emerged
late last year may have had some indirect effect on the reputations of these
firms, but the main factors we considered related to other company-specific
issues ranging from increased skepticism over their ethical behavior to questions
relating to their financial transparency and how they treat their employees.”
Commenting on the three firms upgraded, she notes that they have little exposure
to Cox-2 issues and were ranked very highly by survey respondents in three
areas that are critical drivers of corporate reputation strength in the current
pharmaceutical industry environment: Ethical Behavior, Workforce Quality, and
CEO Leadership.
Ms. Gasorek adds that survey respondents also gave Johnson & Johnson very
high marks in these and other key drivers of reputation, particularly in the
area of communication with the financial community.
Further, respondents expressed a very strong willingness to “personally
invest” in J&J and to “support the company in times of controversy.” That,
she says, enabled J&J to retain its AAA rating status, the only pharmaceutical
firm currently in that rating category.
PHARMA INDUSTRY REPUTATION HOLDS STABLE
Although downgrades led upgrades in RRC’s most recent rating announcements,
RRC reports that the industry’s overall reputation strength has remained
largely intact despite recent challenges.
RRC says that the average rating for the pharma industry remains at the A level,
which is about even with last year but slightly above the industry’s
average reputation strength in 2002. By way of comparison, the industry’ reputation
strength is well above that of two other key industries studied recently by
RRC — banking (average RRC rating 2003: BBB) and electric power (average
RRC rating 2004: BBB).
At the same time, the industry held stable on a key statistical measure of
reputation strength: the degree to which industry execs say they “would
be personally willing to invest in” each company. On average in our latest
survey, 49% of pharma execs said they would be so willing, a level 3 percentage
points more optimistic than the opinions of executives surveyed in both 2003
and 2002.
RRC RATING METHODOLOGY
As in previous years, RRC’s ratings are based in part on a telephone
survey of a broad and statistically valid sampling of high-level executives
in the industry and analysts who follow industry. In our latest study, we interviewed
214 executives and 62 analysts during October through December of 2004.
Responses to the 37 component questions asked were then analyzed using RRC’s
proprietary reputation research model. This year the responses factored out
statistically into ten main drivers, or “dimensions” of reputation
strength. These are: ethical behavior, workforce quality, financial stability,
CEO leadership, third-party relations, marketing effectiveness, community outreach,
strategy, global capabilities, and charitable support.
Final ratings are the product of consideration by RRC’s Rating Committee
of the statistical survey results in the context of a fundamental analysis
of each company.
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