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J&J and Merck Receive Highest Ratings on Industry Reputation Survey

Bedminster, N.J. (26 June 2002) - Johnson & Johnson (J&J) and Merck receive the highest possible rating, a triple AAA, on corporate reputation within the pharmaceutical industry, according to a recently published survey conducted by Rating Research LLC (RRC), a joint venture between The Ratrix Group and Opinion Research Corporation. Pfizer, another industry powerhouse, was given the next highest rating, which it shares with Bayer, GlaxoSmithKline and Eli Lilly.

The findings indicate that industry executives clearly view J&J and Merck as the reputation leaders. Analysts share this positive outlook of J&J, but are somewhat less supportive of Merck short-term noting patent expirations that could limit its earnings.

Both J&J and Merck receive solid scores from industry executives across-the-board on overall "excellence" and Competitiveness, of which "offering innovative products and services", is a critical component. Genentech and Pfizer also score high here.

"We examine the critical intangible assets that are generally not apparent in a financial statement, but that can impact future performance, " said Dory Gasorek, Principal and Chair of RRC's Rating Committee. "At the same time, we don't ignore the financials - we recognize that financial flexibility provides the opportunity for companies to make necessary changes and adjustments."

The RRC survey explores a series of reputation dimensions such as Market Effectiveness, Competitiveness, Ethics and Financial Stability, among others. Its reputation rating is based on both qualitative and quantitative input emerging from in-depth interviews with senior executives in the pharmaceutical industry, and financial analysts who specialize in the industry. Additionally, the RRC Rating Committee reviews and incorporates findings from existing customer studies into its rating methodology and conducts its own primary research on consumers as deemed necessary.

Pfizer Performs Strongly but Enjoys Less Executive Support

Pfizer, a close runner-up to J&J and Merck, performs well on most dimensions, but receives a low score from industry executives on "personally willing to support in times of controversy".

"There is a suggestion here that Pfizer may be viewed as somewhat arrogant by industry executives, " explained Ms. Gasorek. "The importance of this for Pfizer is that its reputation is more at risk if it should suffer a setback - it won't get the support other companies might."

Schering-Plough, Roche and Wyeth Lag Behind

Schering-Plough, Roche and Wyeth, which receive generally low scores on key dimensions, receive a rating of BBB, at the low end of the industry but significantly above the lowest-possible reputation rating of "C". Pharmacia and Abbott Laboratories join them at this rating level.

Schering-Plough continues to face the patent expiration of its blockbuster Claritin® and manufacturing quality control issues, while Roche, a Swiss-based company, is less well known by U.S. executives. Despite its name change, Wyeth, formerly named American Home Products, continues to face some of same reputational challenges.

Genentech, Novartis, Others: Worth Watching

A handful of companies scoop up mid-rated positions reflecting future leadership potential if specific reputation deficiencies are addressed. For example, industry executives rank Genentech highly on "personally willing to invest in", but improvement is needed on its Financial Stability dimension in order to leapfrog into a top-rated position. This circumstance is also reflected in its placement in the "Next Generation" quadrant of RRC's Outlook Matrix, a composite of a company's total Reputation Strength score and its familiarity within the industry.

GlaxoSmithKline is on the border between "Next Generation" and "Leaders" in the Outlook Matrix. Clearly, as the second largest pharmaceutical company in the world, it is a formidable player with strong research and development, global capabilities and market leadership. However, a few issues appear to hamper its reputation leadership, including concerns about its ability to enter into strategic alliances and attract new customers. Novartis, on the cusp of the "Traditional" and "Leaders" quadrants, is perceived as a future star given its wealth of new product introductions, among other factors. AstraZeneca has a healthy product pipeline, but receives a low score on Ethics, the third most important reputation-driver in the pharma industry. "

"It is not clear why AstraZeneca scores low on Ethics. It could be the result of legal actions the company has taken that industry executives may view as an off-handed strategy to extend Prilosec®'s patent protection." noted Ms. Gasorek.

Industry Reflects Reputational Volatility

The survey reinforces the strength of the pharmaceutical industry, but suggests that it may be less invincible to volatility swings in reputation, particularly given a host of marketplace changes such as continued merger activity, patent expirations and generic competition, plus an increasingly cautious Food and Drug Administration.

"Given the volatility we've seen in the pharmaceutical business over the past six months and the continued changes that are anticipated, we believe it's good practice for companies - particularly in the current marketplace environment - to address reputational issues head-on, enabling them to better weather potential storms," notes Ms. Gasorek.

RRC is a publisher of research and opinion focused on the intangible dimensions of corporate reputation. RRC assigns corporate reputation ratings to the leading companies in each industry surveyed and publishes these ratings for use by interested third parties.

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For more information on the Pharmaceutical Reputation Survey, part of Rating Research LLC Reputation Series, call 908-470-1260 or visit www.ratingresearch.com.