Q1 2020 Earnings Call

Sure Paul Stoffels, Vice Chairman of the Executive Committee and Chief Scientific Officer.

And Joe Walk Executive Vice President Chief Financial Officer.

But you want a portion of the call Joaquin Duato Vice Chairman of the Executive Committee will also join Alex pool, Joe and myself.

A few logistics before we get into the details. This review is being made available via webcast accessible through the Investor Relations section of the Johnson and Johnson website at Investor Day, JNJ Dot Com, where you could also find additional materials, including todays presentation and associated schedules.

We would like to draw your attention to the fact that there are a slight changes to the sales reporting the medical devices and pharmaceutical businesses, which I will comment too as I review the segment commentary. Additionally, those changes are noted and reconciliations are available on the website.

We appreciate you joining us on the call today.

In order for us to provide insights related to the cobot 19 pandemic and to allow for ample time for Q1 day, the coalesced around 90 minutes.

Please note today's presentation includes forward looking statements. We encourage you to review the cautionary statement included in todays presentation, which identifies certain factors that may cause the company's actual results to differ materially from those projected in particular, there are significant uncertainty about the duration and contemplated impact.

Correct. The cold at 19 pandemic. This means that results could change at any time and the contemplated impact of cobot 19 on the company's business results and outlook is the best estimate based on the information available as of today's date or FCC filings, including our 2019 form 10-K.

Along with reconciliations of the non-GAAP financial measures utilized for today's discussion then to the most comparable GAAP measures are also available at Investor Dot change I dotcom.

Several of the Sun compounds discussed today are being developed in collaboration with strategic partners were licensed from other companies. This slide acknowledges those relationships.

Moving to todays agenda, Alex will start with his perspective, it's related to the cobot 19 pandemic and Jane Jays response.

Paul will then update you on our efforts to develop a vaccine for the cobot 19 virus along with change Ace therapeutic development efforts next I will cover consolidated and segment sales information along with some operational highlights from the PML with you estimated cobot 19 impact framed where applicable.

Joe will conclude by providing insights on the status of our operations, including actions, we're taking to maintain business continuity.

How we think about our capital allocation. During this time and will provide an update on our full year guidance.

Remaining time will be available for your questions.

Now please to turn the call over to Alex Gorsky.

Thank you, Chris and thanks to all of you for joining US today I also want to think Joaquin Duato Dr., Paul Stoffels for joining our first quarter webcast.

The bites chairs, the Johnson and Johnson and given the leadership role they are playing as we mobilized wrappers resources across the company to address Cup in 19.

I thought it would be helpful to have both of them available to answer potential questions and can banking information.

I'll also share more detailed perspective in his prepared commentary, which will follow my remarks.

Clearly kobin 19 at the forefront of everyone's mine, which is why we plan to spend a fair amount of time during the earnings webcast discussing this unprecedented global pet.

The profound impact, it's having a global public health.

And our unwavering commitment to create and deliver value to all of our stakeholders.

Johnson and Johnson was built for times like this and our strong first quarter results are just one reflection of our sustainable business model.

Our Johnson and Johnson colleagues remain focused on delivering on the commitments of responsibilities for patients doctors nurses employees parents children communities and shareholders as defined in our credo.

As we announced this morning, we increased our quarterly dividend by 6.3% to one dollar and one side, which is another reflection of our stability and further underscores our commitment to delivering value to our shareholders.

This marks the 58 consecutive year of dividend increases for Johnson and Johnson.

And we believe the taking this action is the right thing to do for our shareholders. At this time and importantly, a strong example of the competence, we haven't our business now and in the future.

Given christen, Joe will discuss our first quarter performance and outlook in greater detail I'd like to take just a few minutes to highlight four pillars. The strike the reinforce white Johnson and Johnson is built for times like this.

These pillars surface the foundation of our resiliency in response to the current company 19 crisis and provide the dynamic foundation for Johnson and Johnson, they continue to build a stronger healthier and successful future for all of our stakeholders.

We recognized the challenges the individuals companies in the world are facing right now, but as we look for we are confident it together we will win this fight against the coated 19, and Devin and we are maintaining a long term view of optimism.

The first pillar is our long standing believed and driving both performance and purpose what people can happen.

Across Johnson and Johnson, we operate but the believe there's a tightly linked connection between our company's purpose, which is really dance health for humanity, and our financial performance, which has helped us deliver lifesaving medicines and life saving products as well as investments support communities around the world.

We recognized the challenges that families in their loved ones are pacing and these volatile and unpredictable times and this is exactly why across our enterprise. We've been working so hard to help that was a need and to accelerate our collective efforts towards the ending this pandemic.

Some examples of note include we're applying all of our capabilities to support nurses doctors midwives and community health workers.

Recently, it was announced the Johnson and Johnson family of companies and the Johnson and Johnson Foundation for increasing our previous 250 million dollar commitment over 10 years by an additional $50 million for immediate cobot 19 response.

This contribution will primarily focused on supporting frontline health workers were truly modern day euros in a backbone of the health care system.

We're also working diligently to convert manufacturing lines in several facilities around the world for products most in need during the pandemic. So we can continue to provide important medicines and products the patients.

The second pillar I want to highlight is our strategic advantage of being the most broadly based healthcare company in the industry.

Leading across the pharmaceutical consumer and medical devices segments provides us with the unique and powerful perspective that enables us to see more reach more learn more and do more across the full spectrum upheld as well as throughout every agent stage of our patience and consumers' lives.

In fact in apartment cynical business, we're thrilled to have identified a lead candidate for potential vaccine.

In consumer Tylenol is one of my most iconic and trusted brands by consumers in health care professionals for reducing fever, and we have increased production running our tylenol manufacturing plant 24, seven to maximize supply.

We've also refocused our manufacturing lines to make our easiest to produce pills, which are the white tylenol cap whats. So we can increase production and throughput.

In medical devices, we are experiencing in near term negative impact and expect this to continue while elective procedures are deferred and hospital resources are redeployed to address patients impacted by this pandemic.

That said medical devices has historically been a strong market and we believe the underlying fundamentals of the market remain intact. We continue to see tremendous potential over the long term to serve our patience and customers.

And at this time in this time that need we are utilizing our supply chain delivery in threed printing expertise in collaboration with Prisma help to manufacture and distribute the desper ventilator expansion splitter device, which addresses the acute ventilator shortage during the cold in 19 pandemic and <unk>.

No cost to health care providers.

Additionally, we continue to support ensure product availability to healthcare workers hospital systems and surgeons in critical need areas, such as trauma stroke, another life saving surgeries that cannot be deferred.

Third pillar is our unparalleled scientific expertise.

Innovation is integral to our ability to deliver breakthrough healthcare solutions and the remarkable that ambitious work than we have underway to eradicate coded 19 as a true Testament to this back.

Based on 134 years of experience, we know that the power or science the scale of our business and the dedication of our employees is critical and driving innovative solutions that can change People's lives that are unchanged the pace of health care.

In collaboration with scientist from various external institutions, we've been able to identify and lead called the 19 vaccine candidate, we will leverage the scientific expertise of our internal teams with a decade of work spend developing vaccines for HIV Zika in a bolus to apply the groundbreaking science and scalable manufacturing platform.

So we already have in place.

This is monumental and as much needed.

We are accelerating timelines and plan to begin production at risk evidently and we're committed to bringing it up affordable vaccine to the public on a not for profit basis for emergency pandemic use.

The fourth and last pillar as the world class talent capabilities and dedication of our 132000 colleagues worldwide.

We always take actions and employ tactics that support our Johnson and Johnson colleagues, but professionally and personally to ensure they are safe and well equipped.

And today is no different we're ensuring employees are able to play their part in helping to fight the company 19 outbreak and how they don't work.

Some examples include.

We've implemented significantly enhanced sanitizing procedures and appropriate distancing to ensure we maintained safe clean and well functioning facilities across our manufacturing distribution centers and research and development sites.

We're rolling out a onetime award of $1000 per essential employ with cost of living adjustments globally. This presence is required on site to recognize the extraordinary work. These employees are doing to advance our science and ensure supply of our most essential products and medicines.

We're providing 100% of base salary and benefits through April Thirtyth, two employees, who are primary care givers and are unable to work remotely due to cobot related family care responsibilities underlying health issues connectivity issues or other unique circumstances.

And were granting up to 14 weeks of pay lead to employees around the world with medical training, who volunteer or who are called to serve their communities and diagnosing treating in providing helps support related to cover 19.

In underpinning each of these four pillars as our credo.

Our freedom has been a source of both inspiration and confidence for me and my Johnson and Johnson colleagues, especially in times like these for more than 75 years. Our credo is that the moral compass. The guides our business decisions and that's the blueprint that outlines how we operate in care for the world.

Got it by our credo, yielding sense of purpose, we have created a powerful legacy of improving the health and wellbeing of people worldwide, while delivering sustainable long term value to all of our stakeholders.

We have a century plus history of leading in times of rain challenge, we've done it before and we can do it again. This is what the world expects of US and this is what we are all committed to prepare to do.

Now as the World continues to face the significant an urgent public health prices I want to emphasize across Johnson and Johnson, we're leveraging our broad base size and scale to think lead and operate with the same level of incredible urgency relying on the same courage conviction in core strains that set us up.

Apart and empower us to make a positive impact on society in health care.

I am proud and amazed at the level of dedication that I've witnessed from every Johnson and Johnson business function team and person over the last several weeks.

Now, we certainly don't have all the answers today, we will find the ones needed to ensure our success for tomorrow.

We won't take shortcuts, the compromise our standards or our values as we move with speed and determination.

As I said earlier Johnson and Johnson is built for times like this we take a long term strategic view, which means we're in this for the long haul delivering value to all of our stakeholders.

I look forward to addressing your questions during the upcoming today I'll now turn it over to Paul will provide an update on the progress, we're making with Adobe 19 vaccine development.

Thank you Paul Thank you Alex I'm pleased to provide an update on a multi pronged approach to addressing go read 19, including developing a vaccine and screening of compound libraries to identify potential new treatments to address this pandemic.

In addition, we are exploring immunomodulators to predict against acute respiratory distress syndrome are rds in corporate 19.

While we focus today on finding potential new treatments ultimately a vaccine is key to eradicating the ongoing threat of dependent make.

Since 2011, Johnson and Johnson has invested heavily to build state of the art vaccine capabilities, which we used to develop and manufacture or bola Zika modus fee and HIV vaccine candidates.

We are bringing to bear those same capabilities to rapidly accelerate our efforts towards the potential corporate 19 vaccine.

We're pleased to see that there are many approaches to vaccines for corporate 19, which showed the importance of ongoing research in industry over the past several decades.

Our corporate 19 vaccine program Leverages, Johnson, Edina, Victor and versus six technologies that provides the ability to rapidly develop new vaccine candidates and upscale production of the optimal vaccine candidate.

Based on the W. true criteria for key attributes reprioritizing vaccine platforms feet on the rides the attributes of our platform with us in a leadership position.

First a Dino 26 final Victor platform induces potent than long lasting humeral and cellular immune responses in humans.

Further does approach has very low to no risk on respiratory disease enhancement based on the immune responses observed across our programs.

This is in line with your observation that targets preclinical models used in context of the artist fee vaccine development have shown that this platform is not the associated with enhanced respiratory disease.

But platform has a proven safety profile more than 50000 people have been vaccinated and we have demonstrated that it's well tolerated.

Our first this excel line offers a high yielding vaccine manufacturing platform and is scalable and fully industrialized providing us the ability to make hundreds of millions of vaccines per year.

Capacity Leiden based vaccines lounge facility is as high as 300 million doses per year.

Finally, we have to do it sells just stability data on their vaccine, making it compatible with standard vaccine distribution channels, and therefore multi required new infrastructure to get it to the people who need.

We have begun working on the vaccine candidate in early January as soon as the Corona Vars Sequins became first available.

As you can see into infographic on the right to make vaccine candidates, we insert a piece of the spike protein into the genome over non replicating and therefore, not infective adenovirus, but type of common gold fires.

Unknown Executive: Waffles, Vice Chairman of the Executive Committee and Chief Scientific Officer, and Joe Wolk, Executive Vice President, Chief Financial Officer. During the Q&A portion of the call, Joaquin Duato, Vice Chairman of the Executive Committee, will also join Alex, Paul, Joe, and myself. A few logistics before we get into the details.

Unknown Executive: This review is being made available via webcast, accessible through the Investor Relations section of the Johnson & Johnson website at investor.jnj.com, where you can also find additional materials, including today's presentation and associated schedules. I would like to draw your attention to the fact that there are slight changes to the sales reporting for the medical devices and pharmaceutical businesses, which I will comment on as I review the segment commentary. Additionally, those changes are noted, and reconciliations are available on the website. We appreciate you joining us on the call today.

The research teams at the Anson in collaboration with the Idmc at Harvard Medical School constructed and tested multiple vaccine candidates.

The vaccine constructs with tested then to identify those would most promise in producing an immune response in preclinical testing.

Based on this work Johnson and Johnson announced in March Thirtyth that we have identified to lead covert 19 vaccine candidate along with two backups in.

In order for any vaccine to be manufacturer to GMP in large quantities. It is necessary to first produce amongst the seed bank, which is then progenitor of all future large Gil vaccination batches.

Unknown Executive: In order for us to provide insights related to the COVID-19 pandemic and to allow for ample time for Q&A, the call will last around 90 minutes. Please note that today's presentation includes forward-looking statements. We encourage you to review the cautionary statement included in today's presentation, which identifies certain factors that may cause the company's actual results to differ materially from those projected. In particular, there is significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic. This means that results could change at any time, and the contemplated impact of COVID-19 on the company's business results and outlook is a best estimate based on the information available as of today. Our SEC filings, including our 2019 Form 10-K, along with reconciliations of the non-GAAP financial measures utilized for today's discussion to the most comparable GAAP measures, are also available at investor.jnj.com.

All three candidates are now entering pretty Moscow seed production.

Final selection of stock of most of seed production is expected in June twentytwenty.

As we have already unknowns, we are expanding our global manufacturing capacity and bartolo, including the establishment of a new us vaccine manufacturing capability.

We're also in discussions with other potential partners to expand manufacturing capacity in Europe, and Asia and look forward to making those announcements in the coming weeks.

We plan to begin production at risk imminently and our goal is to enable the supply of more than 1 billion doses of the vaccine globally.

We are on track to start phase one clinical trials in early September into use in Europe with clinical data on safety and Immunogenicity expected to be available by the end of the year.

This could allow vaccine availability for emergency use authorization as early as early Twentytwenty one.

Unknown Executive: Several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, Alex will start with his perspectives related to the COVID-19 pandemic and JNJ's response. Paul will then update you on our efforts to develop a vaccine for the COVID-19 virus along with JNJ's therapeutic development efforts. Next, I will cover consolidated and segment sales information along with some operational highlights from the P&L with the estimated COVID-19 impact highlighted where applicable. Joe will conclude by providing insights on the status of our operations, including actions we are taking to maintain business continuity, how we think about our capital allocation during this time, and we'll provide an update on our full year guidance. The remaining time will be available for your questions. I am now pleased to turn the call over to Alec Skorsky.

We are confident in this vaccine candidate because we have now seen good data in animal models.

Well, we are moving with extreme speed, we're absolutely committed to making sure. Another vaccine photos all guidelines with regard to good manufacturing practices and quality controls.

We are not cutting any corners when it comes to safety.

We are able to achieve the speed because we are doing several processes in buffalo, many interest rather than in sequence.

In addition to work on vaccines wheel screening compound libraries, including compounds from Jaeson, an older pharmaceutical companies to identify potential treatments against covert 19, and exploring immuno motor leads us to protect against a rds.

The empty vital screening efforts are being conducted in partnership with the Institute at the University of Leuven, Belgium.

Alec Skorsky: Thank you, Chris, and thanks to all of you for joining us today. I also want to thank Joaquin DeWatto and Dr. Paul Stoffels for joining our first-quarter webcast. As the vice-chairs of Johnson & Johnson, and given the leadership role they are playing as we mobilize our efforts and resources across the company to address COVID-19, I thought it would be helpful to have both of them available to answer potential questions and convey key information. Paul will also share a more detailed perspective in his prepared commentary, which will follow my remarks.

As I mentioned, we have been able to reach this boring as a result of multiple collaborations.

As you also saw into March stood at announcement as part of our new partnership with BARDA. We have together committed more than 1 billion of investment to go fund vaccine research and development clinical testing and accelerate the manufacturing.

If a vaccine is approved we will work with that elephant healthcare opportunities to ensure that the products are accessible wherever it needed.

Alec Skorsky: Clearly, COVID-19 is at the forefront of everyone's mind, which is why we plan to spend a fair amount of time during the earnings webcast discussing this unprecedented global pandemic, the profound impact this is having on global public health, and our unwavering commitment to create and deliver value to all of our stakeholders. Johnson & Johnson was built for times like this, and our strong first quarter results are just one reflection of our sustainable business model. Our Johnson & Johnson colleagues remain focused on delivering on the commitments and responsibilities to our patients, doctors, nurses, employees, parents, children, communities, and shareholders as defined in our CRADA. As we announced this morning, we increased our quarterly dividend by 6.3% to $1.01, which is another reflection of our stability and further underscores our commitment to delivering value to our shareholders. This marks the 58th consecutive year of dividend increases for Johnson & Johnson.

We are committed to bringing an affordable vaccine to the public on a not for profit basis for emergency pandemic use.

In conclusion.

I want to note that covert 19 is one of the most severe global held challenges we have seen in or lifetimes, but at the same time, we have unprecedented science and technology available today to help us Mount a false and effective response.

Johnson and Johnson is committed to harnessing the leads us to shedding Nolan resources and fueling global collaborations to help the world when the flight against covert 19.

And be even better prepared for possible future funding mix.

No I will turn it over to Chris to discuss our results for the quarter. Thank you.

Thank you Paul now we will provide our Q1 results worldwide sales were $20.7 billion for the first quarter of 2020, an increase of 3.3% versus the first quarter of 2019.

Operational sales growth, which excludes the effective translational currency increased 4.8% as currency had a negative impact of 1.5 points.

Alec Skorsky: And we believe that taking this action is the right thing to do for our shareholders at this time and, importantly, a strong example of the confidence we have in our business now and in the future. Given Chris and Joe will discuss our first quarter performance and outlook in greater detail, I'd like to take just a few minutes to highlight four pillars of strength that reinforce why Johnson & Johnson is built for times like this. These pillars serve as the foundation of our resiliency and response to the current COVID-19 crisis and provide the dynamic foundation for Johnson & Johnson to continue to build a stronger, healthier, and successful future for all of our stakeholders. Now, we recognize the challenges that individuals, companies, and the world are facing right now. But as we look forward, we are confident that together, we will win this fight against the COVID-19 pandemic. And we are maintaining a long-term view of optimism.

In the U.S. sales increased 5.6% in regions outside the US our reported growth was 1% however, operational sales growth outside the us was 4% with currency negatively impacting our reported U.S. results by three points.

Excluding the net impact of acquisitions and divestitures adjusted operational sales growth was 5.6% worldwide, 6.7% into us and 4.5% outside the U.S.

These global sales results include an estimated net impact of covert 19, which negatively impacted worldwide sales by about 80 basis points. This includes a negative impact to our medical device business segment across all regions with Asia Pacific and the U.S. regions seeing the most prominent impact.

Alec Skorsky: The first pillar is our long-standing belief in driving both performance and purpose with equal commitment. Across Johnson & Johnson, we operate with the belief that there is a tightly linked connection between our company's purpose, which is to advance health for humanity, and our financial performance, which has helped us deliver life-saving medicines and life-saving products, as well as invest in and support communities around the world. We recognize the challenges that families and their loved ones are facing in these volatile and unpredictable times, and this is exactly why, across our enterprise, we've been working so hard to help those in need and to accelerate our collective efforts towards ending this pandemic. Some examples of note include: we are applying all of our capabilities to support nurses, doctors, midwives, and community health workers.

Partially offsetting this was a net positive sales lift in our consumer health and pharmaceutical business segments as communities prepare to ensure they have the necessary access to healthcare products and medicines.

Turning now to earn.

For the quarter net earnings were $5.8 billion and diluted earnings per share was $2.17 versus diluted earnings per share of $1.39 cents a year ago, excluding after tax intangible asset amortization expense and special items for both periods adjusted net earnings for the quarter risk.

$6.2 billion and adjusted diluted earnings per share was $2.30, representing increases of 8.7% and 9.5% respectively compared to the first quarter of 2019 on an operational basis adjusted diluted earnings per share grew 10.5 per se.

Alec Skorsky: Recently, it was announced that Johnson & Johnson, its family of companies, and the Johnson & Johnson Foundation are increasing our previous $250 million commitment over 10 years by an additional $50 million for immediate COVID-19 response. This contribution will primarily focus on supporting frontline health workers who are truly modern-day heroes and the backbone of the healthcare system. We are also working diligently to convert manufacturing lines in several facilities around the world for products most in need during the pandemic so we can continue to provide important medicines and products to patients. The second pillar I want to highlight is our strategic advantage of being the most broadly based healthcare company in the industry. Leading across the pharmaceutical, consumer, and medical devices segments provides us with a unique and powerful perspective that enables us to see more, reach more, learn more, and do more across the full spectrum of health, as well as throughout every age and stage of our patients' and consumers' lives.

Yes.

Beginning with consumer health I will now comment on business segment sales performance for the first quarter highlighting items that build upon the slides you have in front of you unless otherwise stated percentages quoted represent the operational sales change in comparison to the first quarter of 2019, and therefore exclude the impact of currency translation Adcs.

Additionally, I will be providing additional insights using our best estimates on the contribution of cobot 19 to our performance in the areas, where this had the largest impact.

Worldwide consumer health sales totaled $3.6 billion growing 11.3% with operational growth in the U.S. of 21% and growth outside the us of 3.9%.

Excluding the net impact of acquisitions and divestitures adjusted operational sales growth was 11%.

Our consumer health segment realized a net positive impact of nearly 700 basis points associated with consumers, ensuring they have access to products during the cobot 19 pandemic.

Alec Skorsky: In fact, in our pharmaceutical business, we are thrilled to have identified a lead candidate for a potential vaccine. In consumer, Tylenol is one of our most iconic and trusted brands by consumers and healthcare professionals for reducing fever, and we have increased production, running our Tylenol manufacturing plant 24-7 to maximize supply. We've also refocused our manufacturing lines to make our easiest-to-produce pills, which are the white Tylenol Caplets, so we can increase production and throughput.

We do expect some of this benefit to reverse over the subsequent quarters this year.

This benefit was mostly realized in our over the counter medicines franchise.

The benefit was also most prominent in the us with a small benefit outside the US primarily in Europe offset by declines in Asia Pacific and mostly the skin health beauty and baby franchises.

Excluding some onetime items and the net benefit of Cobot 19, our consumer health segment delivered solid performance, but continued strong performance in the U.S. and priority areas within our OTI C and skin health beauty franchises.

Alec Skorsky: In medical devices, we are experiencing a near-term negative impact and expect this to continue while elective procedures are deferred and hospital resources are redeployed to address patients impacted by this pandemic. That said, medical devices have historically been a strong market, and we believe the underlying fundamentals of the market remain intact. We continue to see tremendous potential over the long term to serve our patients and customers. At this time, and in this time of need, we are utilizing our supply chain delivery and 3D printing expertise in collaboration with Prisma Health to manufacture and distribute the VESPR Ventilator Expansion Splitter Device, which addresses the acute ventilator shortage during the COVID-19 pandemic at no cost to healthcare providers.

Over the counter medicines grew globally, almost 26% operationally with about 36% growth in the us and 17% outside the U.S Cobot 19 contributed about 17 points to the global growth in the U.S.. We estimated covert 19 contributed about 24 points to growth and excluding that.

Impact our growth was strong enabled by share increases in multiple products such as adults well Pepcid Zyrtec ends Arby's US performance was also aided by a stronger allergy season. Additionally, there were some favorable onetime benefits, resulting from competitive dynamics.

Cobot 19 contributed about 10 points to growth outside the U.S, excluding that growth was strong driven by an elevated cough and cold season in key markets like Russia.

Alec Skorsky: Additionally, we continue to support and ensure product availability to healthcare workers, hospital systems, and surgeons in critical need areas such as trauma, stroke, and other life-saving surgeries that cannot be deferred. The third pillar is our unparalleled scientific expertise. Innovation is integral to our ability to deliver breakthrough healthcare solutions, and the remarkable and ambitious work that we have underway to eradicate COVID-19 is a true testament to this fact. Based on 134 years of experience, we know that the power of our science, the scale of our business, and the dedication of our employees are critical in driving innovative solutions that can change people's lives for the better and change the face of healthcare. In collaboration with scientists from various external institutions, we have been able to identify a lead COVID-19 vaccine candidate.

The skin health beauty franchise grew 3.5% or just under 2% when adjusted to exclude the impact of acquisitions and divestitures driven primarily by the acquisition of Dr. Seuss Lebow.

This franchise experienced a net negative impact due to covert 19 by slightly over 100 basis points with the largest negative impact in Asia Pacific, especially in China, partially offset by a favorable benefit in the us.

The U.S. operational growth of just over 12% benefited by about 450 basis points from covert 19.

Additionally, our core business in the U.S. remains competitive with strong performance in neutrogena facial care.

Alec Skorsky: We will leverage the scientific expertise of our internal teams with a decade of work spent developing vaccines for HIV, Zika, and Ebola to apply the groundbreaking science and scalable manufacturing platform that we already have in place. This is monumental and is much needed. We are accelerating timelines and plan to begin production at risk imminently. We are committed to bringing an affordable vaccine to the public on a not-for-profit basis for emergency pandemic use. The fourth and last pillar is the world-class talent, capabilities, and dedication of our 132,000 colleagues worldwide. We always take actions and employee tactics that support our Johnson & Johnson colleagues, both professionally and personally, to ensure they are safe and well-equipped. And today is no different. We are ensuring employees are able to play their part in helping to fight the COVID-19 outbreak at home and at work.

Yes also benefited from some timing of promotional orders.

And in our remaining consumer health franchises oral care women's health and wound care. Other franchises all reported strong growth, primarily driven by cobot 19, and excluding the favorable impact of cobot 19, each of these franchises delivered solid performance.

Baby care declined 4.9% globally or negative 2.7% when adjusted to exclude the impact of the Baby Center divestiture.

The majority of this decline was primarily due to the execution of SKU rationalization actions, primarily in AMEA and a smaller net negative coded 19 impact partially offset by solid growth in a vino baby globally.

Alec Skorsky: Some examples include... We've implemented significantly enhanced sanitizing procedures and appropriate distancing to ensure we maintain safe, clean, and well-functioning facilities across our manufacturing, distribution centers, and research and development sites. We're rolling out a one-time award of $1,000 per essential employee with cost-of-living adjustments globally, whose presence is required on-site to recognize the extraordinary work these employees are doing to advance our science and ensure the supply of We're providing 100% of base salary and benefits through April 30th to employees who are primary caregivers and are unable to work remotely due to COVID-related family care responsibilities, underlying health issues, connectivity issues, or other unique circumstances.

Moving onto the pharmaceutical segment.

Worldwide pharmaceutical sales of $11.1 billion grew 10.1% enabled by double digit growth in non key products sales grew in the U.S. by 8.6% an increased outside the us by 12% global growth was aided by over 200 basis points of onetime items, including about 100.

Basis points of impact from favorable prior period pricing adjustments in the us with remicade being the largest product impacted and about 100 basis points of net favorable estimated impact from coated 19, resulting from healthcare providers and wholesalers and shoring theres access to essential medicines.

This benefit occurred across our portfolio with favorable benefits in the us in Europe offsetting downside in the Asia Pacific region, and mostly China.

Incremental cobot 19 demand, primarily impacted imbruvica xarelto stelara, the pulmonary hypertension portfolio and HIV products.

Alec Skorsky: And we're granting up to 14 weeks of paid leave to employees around the world with medical training, who volunteer, or who are called to serve their communities in diagnosing, treating, and providing health support related to COVID-19. And underpinning each of these four pillars is our Credo, which has been a source of both inspiration and confidence for me and my Johnson & Johnson colleagues, especially in times like these. For more than 75 years, our credo has been the moral compass that guides our business decisions and is the blueprint that outlines how we operate and care for the world. Guided by our credo and a strong sense of purpose, we have created a powerful legacy of improving the health and well-being of people worldwide while delivering sustainable long-term value to all of our stakeholders. We have a century-plus history of leading in times of great challenge. We've done it before, and we can do it again.

Our strong portfolio of products and commercial capabilities has enabled us to continue to deliver global growth at above market levels.

Our oncology portfolio delivered another strong quarter with worldwide growth of almost 22%.

Darzalex continued its strong performance growing over 51% globally. The us grew almost 32% with strong growth across all lines of therapy, driven by the new frontline indications for multiple myeloma.

The continued strong growth outside the us is driven by increased penetration and share gains.

Imbruvica grew over 34% globally, driven largely by market share gains and strong market growth primarily in the chronic lymphocytic leukemia indication in the us along with strong uptake outside the us in the U.S. based on fourth quarter data Imbruvica gained almost eight points of market share in CLL line once.

Terrific.

We continue to be pleased with the launch progress of our leader.

Alec Skorsky: This is what the world expects of us, and this is what we are all committed to and prepared to do. Now, as the world continues to face a significant and urgent public health crisis, I want to emphasize that across Johnson & Johnson, we are leveraging our broad base, size, and scale to think, lead, and operate with the same level of incredible urgency, relying on the same courage, conviction, and core strengths that set us apart and empower us to make a positive impact on society and healthcare. I am both proud and amazed at the level of dedication that I have witnessed from every Johnson & Johnson business, function, team, and person over the last several weeks. Now, we certainly don't have all the answers today, but we'll find the ones needed to ensure our success for tomorrow, and we won't take shortcuts to compromise our standards or our values as we move with speed and determination.

As part of the sales reporting changes I mentioned earlier, we are now disclosing our lead a sale separately, which were $143 million globally and more than doubled versus last year driven by continued share growth in the us and continued launch progress in EMEA with availability in 18 countries.

Our immunology therapeutic area delivered double digit global sales growth of 13.1% driven by strong double digit performance of Stelara and term fire.

Sales growth was partially offset by continued erosion of remicade due to increased discounts and modest share loss in the U.S.

Still our growth of over 30% was primarily driven by the crohns disease indication where market share increased by over seven points in the us versus the first quarter of 2019.

From fire grew over 37% and achieved a 9% share of the psoriasis market in the US which is up 2.5 points from the first quarter of 2019.

Alec Skorsky: As I said earlier, Johnson & Johnson is built for times like this. We take a long-term strategic view, which means we're in this for the long haul, delivering value to all of our stakeholders. I look forward to addressing your questions during the upcoming Q&A, but I'll now turn it over to Paul, who will provide an update on the progress we're making with the COVID-19 vaccine development. Thank you.

The newer science, our problem long acting portfolio performed well growing almost 13% with higher market share driven by increased new patient starts and strong persistency.

In addition, we continue to progress the launches for Avado, where the unmet need remains high patient demand continues to build with new patient starts steadily increasing with over 5000 patients treated to date.

Paul: Thank you, Alec. I am pleased to provide an update on a multi-pronged approach to addressing COVID-19, including developing a vaccine and screening compound libraries to identify potential new treatments to address this pandemic. In addition, we are exploring immunomodulators to protect against acute respiratory distress syndrome, or ARDS, in COVID-19. While we focus today on finding potential new treatments, ultimately, a vaccine is key to eradicating the ongoing threat of the pandemic. Since 2011, Johnson & Johnson has invested heavily to build state-of-the-art vaccine capabilities which we used to develop and manufacture our Ebola, Zika, RSV, and HIV vaccine candidates. We are bringing those same capabilities to bear to rapidly accelerate our efforts toward the potential COVID-19 vaccine. We are pleased to see that there are many approaches to vaccines for COVID-19, which shows the importance of ongoing research in the industry over the past several decades.

In infectious diseases, our portfolio grew 11% led by strong growth of some tusa and Toluca for HIV, partially offset by cannibalization and increased generic competition and other products.

In our cardiovascular metabolism and other product portfolio, we did experience declining sales of 13.1% primarily driven by declines in Invokana and Biosimilar competition for appropriate. So we're also also declined by 2.7% with volume increases offset by increased rebates, including channel mix dynamics in.

Our total pulmonary hypertension portfolio sales increased 14.7% driven by strong growth of up summit, and uptravi of about 29% and 27%, respectively, driven by increased market penetration and share growth.

This portfolio growth was net of declining sales into clear as a result of continued generic competition note as part of the sales reporting changes I referenced to clear is now included under other pulmonary hypertension.

Paul: Our COVID-19 vaccine program leverages Janssen, Adenovector, and PERSIS-6 technologies that provide the ability to rapidly develop new vaccine candidates and scale up production of the optimal vaccine candidate. Based on the WHO criteria for key attributes for prioritizing vaccine platforms, here on the right, the attributes of our platform put us in a leadership position. First, our Adeno-26 viral vector platform induces potent and long-lasting humoral and stellar immune responses in humans. Further, this approach has very low to no risk for respiratory disease enhancement based on the immune responses observed across our program. This is in line with the observation that targeted preclinical models used in the context of the RSV vaccine development have shown that this platform is not associated with enhanced respiratory disease. Furthermore, our platform has a proven safety profile.

I'll now turn your attention to the medical devices segment.

Worldwide medical devices sales were $5.9 billion declining by 6.9%.

Excluding the net impact of acquisitions and divestitures, primarily the divestiture of ASP adjusted operational sales declined by 4.8% worldwide.

Our global medical device portfolio realized a significant impact on sales.

Automated to be worth 750 to 800 basis points as a result of procedures being deferred due to the covert 19 pandemic, which were partially offset by stocking primarily in Asia Pacific in anticipation of procedures ramping back up.

Approximately 50% of the net impact occurred in Asia Pacific about 30% was in the us and the remaining balance was primarily in Europe I.

I will provide further cut that shortly about how this impact that each platform.

Additionally, onetime items negatively impacted growth this quarter by about 90 basis points, primarily related to their being fewer selling days in this period.

Paul: More than 50,000 people have been vaccinated, and we have demonstrated that it's well-tolerated. Our Persis XL line offers a high-yielding vaccine manufacturing platform and is scalable and fully industrialized, giving us the ability to make hundreds of millions of vaccines per year. Capacity in Erleada-based vaccine launch facilities is as high as 300 million doses per year. Finally, we have 2-8 Celsius stability data on our vaccine, making it compatible with standard vaccine distribution channels and therefore will not require new infrastructure to get it to the people who need it. We began working on the vaccine candidate in early January, as soon as the coronavirus sequence became first available. As you can see in the infographic on the right, to make vaccine candidates, we insert a piece of the spike protein into the genome of a non-replicating and therefore non-infective adenovirus, a type of common cold virus. The research teams at Janssen, in collaboration with BIDMC at Harvard Medical School, constructed and tested multiple vaccine candidates. The vaccine constructs were then tested to identify those with the most promise in producing an immune response in preclinical testing.

Adjusting for these onetime impacts and the estimated impact of Cobot 19, our adjusted operational sales growth reflects continued strong underlying fundamentals consistent with our full year 2019 adjusted results.

Interventional solutions grew 0.4% globally with us growth of 6.6% offset by declining sales outside the us a 5.1%.

Cobot 19 had a net negative impact to our global growth rate by about an estimated 14.5 points, reducing us growth by over eight points and allow us growth by about 20 points growth.

Paul: Based on this work, Johnson & Johnson announced on March 30th that they have identified a lead COVID-19 vaccine candidate along with two backups. In order for any vaccine to be manufactured to GMP in large quantities, it is necessary to first produce a master seed bank, which is then progenitive of all future large-scale vaccination batches. All three candidates are now entering pre-master seed production, and final selection for start of master seed production is expected in June 2020.

Putting the impact of Cobot 19 was led by continued strength in our electrophysiology business driven by our newer offerings in ablation and advanced catheters contributing to atrial fibrillation procedural market growth.

Vision declined by 4.5% the estimated net impact of cobot 19 to growth is around 550 basis points. Additionally results in the quarter were negatively impacted by both the final bleed down of the Japan consumption tax forward by that occurred in Q3 2019, along with an unfavorable prior year comps.

Harrison due to an inventory forward by related to Brexit uncertainty, which were worth over 200 basis points in total.

While contact lenses realized a slight decline when you adjust for the for mentioned items the business delivered another quarter of competitive growth globally versus the market led by continued strong performance of daily disposables and the Accu view Oasis family.

In surgical vision sales declined 15.9% with the primary driver the decline driven by Cobot 19, which impacted results by an estimated 12 points.

Paul: As we have already announced, we are expanding our global manufacturing capacity in parallel, including the establishment of a new U.S. vaccine manufacturing capability. We are also in discussions with other potential partners to expand manufacturing capacity in Europe and Asia and look forward to making those announcements in the coming weeks. We plan to begin production at risk imminently, and our goal is to enable the supply of more than 1 billion doses of the vaccine globally. We are on track to start phase 1 clinical trials in early September in the US and Europe, with clinical data on safety and immunogenicity expected to be available by the end of the year. This could allow vaccine availability for emergency use authorization as early as early 2021.

The business excluding covered 19 saw continued strong us growth in the cataract business due to strong performance in Asia Pacific, which was more than offset by decline in the us primarily due to competitive pressures.

Orthopedics declined by 6.5% in the quarter. The cobot 19 pandemic impacted growth in this franchise by about an estimated 750 basis points with us market. Realizing the largest dollar impact at just over 40% of the total and the balance of the negative impact split relatively evenly.

Between Asia Pacific in Europe.

Total orthopedics growth adjusting for this impact was relatively consistent with our prior quarter performance, reflecting the continued execution of our innovation and commercial strategies aimed to improve performance.

Paul: We are confident in this vaccine candidate because we have now seen good data in animal models. While we are moving at extreme speed, we are absolutely committed to making sure that our vaccine follows all guidelines with regard to good manufacturing practices and quality controls. We are not cutting any corners when it comes to safety. We are able to achieve this speed because we are doing several processes in parallel, many at risk, rather than in sequence.

Hips declined by 5.6%, we estimated coded 19 negatively impacted growth by about 9.5 points. Excluding this impact EPS continue to deliver competitive performance driven by our leadership position in the anterior approach continued strong demand for our primary stem actress and enabling technologies such as the concise.

Surgical automated system and the Ventless hip navigation system that came from the chilling point acquisition.

Paul: In addition to our work on vaccines, we are screening compound libraries, including compounds from Janssen and other pharmaceutical companies, to identify potential treatments against COVID-19 and exploring immunomodulators to protect against ARDS. The antiviral screening efforts are being conducted in partnership with the Rega Institute at the University of Leuven in Belgium. As I mentioned, we have been able to reach this point as a result of multiple collaborations. As you also saw in the March 30th announcement, as part of our new partnership with BARDA, we have together committed more than $1 billion of investment to co-fund vaccine research, development, clinical testing, and accelerated manufacturing. If a vaccine is approved, we will work with relevant healthcare authorities to ensure that our products are accessible wherever needed.

These declined by 6.1% adjusting for the estimated covert 19 impact of about 11 points needs underlying fundamentals continue to improve and delivered solid performance in both of US I know us driven by new innovation, such as a tuned revision attune ask plus and the tune cementless rotating platform, which.

Launched later in 2019.

Trauma declined by 3.5% covered 19 negatively impacted results by an estimated 400 basis points. Additionally performance was impacted by overall market softness as a result of a mild winter season, leading to lower procedures as well as competitive pressures.

Spine declined 10.6%, however, adjusting for covert nineteens estimated impact of over 750 basis points spines underlying performance remained consistent with recent results. While we lost share in the quarter. We continue to see positive uptake of newer products, such as conduit and Viper Prime.

Paul: We are committed to bringing an affordable vaccine to the public on a not-for-profit basis for emergency pandemic use. In conclusion, I want to note that COVID-19 is one of the most severe global health challenges we have seen in our lifetimes. But at the same time, we have unprecedented science and technology available today to help us mount a fast and effective response. Johnson & Johnson is committed to harnessing the latest tools, sharing knowledge and resources, and fueling global collaborations to help the world win the fight against COVID-19 and be even better prepared for possible future pandemics. Now, I will turn it over to Chris to discuss our results for the quarter. Thank you.

We're also pleased with the rollout of our newly launched Symphony surgical system for use in posterior cervical spine procedures.

Pricing pressure continued in orthopedics us pure price in spine hips, and knees eroded versus Q4, 2019 declining about 5%, 2% and 1% respectively pricing improved compared to Q4 and was essentially flat.

Moving to the results for the surgery business as I noted earlier, we made some minor adjustments to how we report our medical devices sales and you will see that we moved the platforms previously under specialty surgery to general surgery now that we've closed the divestiture of the ASP business, which was the majority of the specialty surgery sales.

Chris: Thank you, Paul. Now we'll provide our Q1 results. Worldwide sales were $20.7 billion for the first quarter of 2020, an increase of 3.3% versus the first quarter of 2019. Operational sales growth, which excludes the effect of translational currency, increased 4.8% as currency had a negative impact of 1.5 points. In the US, sales increased 5.6%. In regions outside the US, our reported growth was 1%.

Advance surgery declined by 1.4%, but was significantly impacted by totaled 19, which we estimate was almost an 800 basis points impact.

Cobot 19, primarily impacted us results, particularly in Endocutters and energy with an estimated negative impact to global growth of about 900 basis points to each platform.

Chris: However, operational sales growth outside the US was 4%, with currency negatively impacting our reported OUS results by 3 points. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.6% worldwide, 6.7% in the U.S., and 4.5% outside the U.S. These global sales results include an estimated net impact of COVID-19, which negatively impacted worldwide sales by about 80 basis points. This includes a negative impact on our medical device business segment across all regions, with Asia Pacific and the U.S. regions seeing the most prominent impact. Partially offsetting this was a net positive sales lift in our consumer health and pharmaceutical business segments as communities prepare to ensure they have the necessary access to healthcare products and medicine. Turning now to earnings, for the quarter, net earnings were $5.8 billion, and diluted earnings per share was $2.17 versus diluted earnings per share of $1.39 a year ago.

Excluding this negative impact performance was strong led by energy.

Both energy and Endocutters performed well outside the U.S driven by share gains and new products, primarily in Asia and were partially offset by competitive pressure in the U.S.

Biosurgery had an estimated negative impact of over 550 basis points driven by Cobot 19, However, underlying fundamentals. Excluding this negative impact remained strong with growth balanced between the us endo use.

US performance and Biosurgery was driven by continued uptake of surgery flow after last year's stop shipment, coupled with new products such as this to seal.

Oh U.S. performance continues to be led by market and share performance in the Asia Pacific region.

We also continue to see great uptake of our monarch system for the diagnosis of lung cancer Q1 procedures grew 150% compared to the prior year and almost 2700 procedures have been performed since launch.

Wound closure declined over 7% in the quarter with cobot 19 negatively impacting results by an estimated 800 basis points growth. Excluding covered 19 was driven by continued strong market growth.

Chris: Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.2 billion, and adjusted diluted earnings per share was $2.30, representing increases of 8.7% and 9.5%, respectively, compared to the first quarter of 2019. On an operational basis, adjusted diluted earnings per share grew 10.5%. Beginning with consumer health, I will now comment on business segment sales performance for the first quarter, highlighting items that build upon the slides you have in front of you. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the first quarter of 2019, and therefore exclude the impact of currency translation. Additionally, I will be providing additional insights using our best estimates on the contribution. Worldwide consumer health sales totaled $3.6 billion, growing 11.3%, with operational growth in the U.S. of 21% and growth outside the U.S. of 3.9%. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 11%. Our consumer health segment realized a net positive impact of nearly 700 basis points associated with consumers ensuring they had access to products during the COVID-19 pandemic. However, we do expect some of this benefit to reverse over the subsequent quarters this year.

As well as share gains in conventional and barb sutures in China.

I will now provide some commentary on our earnings for the quarter.

Regarding our consolidated statement of earnings for the first quarter of 2020. Please direct your attention to the box section at the bottom of the schedule you will see we've provided our earnings adjusted to exclude intangible amortization expense and special items.

Chris: This benefit was mostly realized in our over-the-counter medicines franchise. The benefit was also most prominent in the U.S., with a small benefit outside the U.S., primarily in Europe, offset by declines in Asia-Pacific, mainly in skin health, beauty, and baby franchises. Excluding some one-time items and the net benefit of COVID-19, our consumer health segment delivered solid performance with continued strong performance in the U.S. and priority areas within our OTC and Skin Health Beauty franchises. Over-the-counter medicines grew globally almost 26% operationally with about 36% growth in the U.S. and 17% outside the U.S. COVID-19 contributed about 17 points to this global growth. In the U.S., we estimated COVID-19 contributed about 24 points to growth. And excluding that impact, our growth was strong, enabled by share increases in multiple products, such as Adultanol, Pepsid, Zyrtec, and Zarbi. U.S. performance was also aided by a stronger allergy season. Additionally, there were some favorable one-time benefits resulting from competitive dynamics.

As reported this morning, our adjusted EPS of to do some 30 cents reflects reported growth of 9.5% and operational growth of 10.5%.

Chris: COVID-19 contributed about 10 points to growth outside the U.S. Excluding that, growth is strong, driven by an elevated cough and cold season in key markets like Russia. The Skin Health Beauty franchise grew 3.5% or just under 2% when adjusted to exclude the impact of acquisitions and divestitures driven primarily by the acquisition of Dr. Szilabo. This franchise experienced a net negative impact due to COVID-19 by slightly over 100 basis points with the largest negative impact in Asia Pacific, especially in China, partially offset by a favorable benefit in the U.S. The U.S. operational growth of just over 12% benefited by about 450 basis points from COVID-19. Additionally, our core business in the U.S. remains competitive with strong performance in Neutrogena facial care.

Chris: The U.S. also benefited from some timing of promotional orders. And in our remaining consumer health franchises, our oral care, women's health, and wound care other franchises all reported strong growth, primarily driven by COVID-19. And excluding the favorable impact of COVID-19, each of these franchises delivered solid performance. Baby care declined 4.9% globally, or negative 2.7% when adjusted to exclude the impact of the baby-centered divestiture. The majority of this decline was primarily due to the execution of skew rationalization actions primarily in AMEA and a smaller net negative COVID-19 impact partially offset by solid growth in Aveeno Baby globally. Moving on to the pharmaceutical segment.

I'd like to now highlight a few noteworthy items that have changed on the statement of earnings compared to the same quarter last year.

Cost of products sold deleverage, primarily as a result of product mix and the establishment of inventory reserves associated with the cobot 19 impact in the medical devices business.

Selling marketing and administrative margins for the quarter improved driven by leveraging in the pharmaceutical and consumer health businesses and favorable segment mix, partially offset by deleveraging in the medical devices business, resulting from the cobot 19 impact on sales.

We continue to invest in research and development and competitive levels investing 12.5% of sales this quarter.

This was lower than the first quarter 2019 by 180 basis points, driven by timing of pharmaceutical milestone payments, partially offset by increased investment in robotics and digital solutions in the medical devices business.

The other income and expense line show net income of 679 million in the first quarter of 2020 compared to net income of 22 million last year. This was primarily driven by a contingent consideration reversal of approximately $1 billion related to the timing of certain developmental mile stones aside.

We ended with the Rs health acquisition, partially offset by higher for unrealized losses on securities.

Regarding taxes in the quarter, our effective tax rate declined from 15.2% in the first quarter of 2019% to 11% in the first quarter of 2020 as a result of additional favorable impacts from Swiss tax reform and the reversal of the ours contingent liability we.

Encourage you to reference our 10-Q for further details on this and other specific tax matters.

Excluding special items, the effective tax rate was 15% versus 17.6% in the same period last year driven by certain tax costs incurred in the first quarter of 2019, there were not repeated in 2020.

Let's now look at adjusted income before tax by segment.

In the first quarter of 2020 adjusted income before tax for the enterprise improved 70 basis points versus the first quarter of 2019% to 35%.

Looking at the adjusted pre tax income by segment pharmaceutical margins improved by 360 basis points to 45.3%, primarily driven by timing of R&D milestone payments.

Medical devices declined by 540 basis points to 24.2% due to covert 19 impacts on the business, including incremental inventory reserves and deleveraging in selling and marketing. In addition to continued increased investment in robotics and digital solutions.

Consumer margins declined slightly by 50 basis points to 24.5% driven by a onetime gain in 2019 related to the Companys previously held equity investment in doctors to lebow, which was partially offset by leveraging selling marketing and administrative margins in the current quarter.

That concludes the sales NPL highlights for Johnson <unk> Johnson's first quarter 2020 for your reference this slide summarizes notable developments occurring in the first quarter of note, we submitted new drug applications to the FDA and M&A for Panera, some odd for the treatment of adult patients with relapsed.

Multiple sclerosis.

Im now pleased to turn the call over to Joe walk.

Thank you, Chris and good morning, everyone. We appreciate that you decided to join the call today. Unlike others on this call who spoke before me I Hope you and those close to you are safe and healthy.

Chris: Worldwide pharmaceutical sales of $11.1 billion grew 10.1%, enabled by double-digit growth in nine key products. Sales grew in the U.S. by 8.6 percent and increased outside the U.S. by 12 percent. Global growth was aided by over 200 basis points of one-time items, including about 100 basis points of impact from favorable prior-period pricing adjustments in the U.S., with Remicade being the largest product impact, and about 100 basis points of net favorable estimated impact from COVID-19 resulting from healthcare providers and wholesalers ensuring there is access to essential medicine. This benefit occurred across our portfolio, with favorable benefits in the U.S. and Incremental COVID-19 demand primarily impacted Imbruvica, Xarelto, Stelara, the pulmonary hypertension portfolio, and HIV products. Our strong portfolio of products and commercial capabilities has enabled us to continue to deliver global growth at above market levels. Our oncology portfolio delivered another strong quarter with worldwide growth of almost 22%. Darzalex continued its strong performance, growing over 51% globally.

Let me state right upfront the fundamentals of Johnson and Johnson business are strong and our expectations of where the businesses heading have not changed combating the current crisis is anything but usual. However, many aspects of Johnson and Johnson continued to operate with a business as usual focus.

Such as advancing breakthrough innovation, fostering consumer and patient access and being financially disciplined.

We are motivated by never stopping when it comes to taking care of you our stakeholders and we can have a profound positive impact because we are built to lead built to last and quite frankly built for times like this.

By Central focus in today's prepared remarks is twofold first I will share with you our ongoing business continuity plans. It is important particularly in times of challenge that you understand the steps we have put in place recently and over a number of years to ensure reliable supply of the important products we provide.

Second I will outline how we are thinking about the impact of the cobot 19 crisis.

And what that will have on our near term financial performance in the context of changes from the guidance we issued in January.

Chris: The U.S. grew almost 32% with strong growth across all lines of therapy, driven by the new frontline indications for multiple myeloma. The continued strong growth outside the U.S. is driven by increased penetration and share gain. Imbruvica grew over 34% globally, driven largely by market share gains and strong market growth, primarily in the chronic lymphocytic leukemia indication in the U.S., along with strong uptake outside the U.S. In the U.S., based on fourth-quarter data, Imbruvica gained almost 8 points of market share in CLL Line 1 therapy. We continue to be pleased with the progress of Erleada.

I Trust at the end of my remarks, and at the end of this call. The obvious conclusion is that Johnson and Johnson is strong enough financial position to meet its obligation to all stakeholders and poised for many years and success.

The fundamentals of our business are intact.

As Alex mentioned earlier as the most broadly based global company in the healthcare industry, we have established a sustainable and resilient business model with flexibility designed into our research manufacturing and commercial capabilities. We have robust active business continuity plans across our network, which have been instrumental.

Chris: As part of the sales reporting changes I mentioned earlier, we are now disclosing Erleada sales separately, which were $143 million globally and more than doubled versus last year, driven by continued share growth in the U.S. and continued launch progress in EMEA with availability in 18 countries. The immunology therapeutic area delivered double-digit global sales growth of 13.1%, driven by strong double-digit performance of Stelara and Tremfya. Sales growth was partially offset by continued erosion of Remicade due to increased discounts and modest share loss in the U.S. Stelara growth of over 30% was primarily driven by the Crohn's disease indication, where market share increased by over 7 points in the U.S. versus the first quarter of 2019. Tremfya grew over 37% and achieved a 9% share of the psoriasis market in the U.S. In Neuroscience, our palipratin-1 long-acting portfolio performed well, growing almost 13%, with higher market share driven by increased new patient starts and strong persistency. In addition, we continue to progress the launch of Spravato where the unmet need remains high.

In preparing us for events like Cobot 19.

Some steps we have taken recently include leveraging our global manufacturing footprint and dual source capabilities, while closely monitoring and maintaining critical inventory at major distribution centers to address high risk areas and ensure adequate and affected distribution.

Working closely with suppliers distributors local governments and regulators to gain better insights to address their concerns.

Through our commercial organizations supporting health care providers in the safest way possible by moving to virtual connections to serve as a resource for physicians where needed we directly engaged to support them in areas like trauma surgeries, ensuring we follow all health protocols to keep everyone safe.

Within clinical operations, our first priority is always to protect the health and wellbeing of participants currently enrolled in our clinical trials.

Our next priority is to complete these trials in a manner to fully satisfy regulatory requirements.

This pandemic does not change these priorities.

As a result of these efforts we are able to meet the majority of patient and consumer needs.

Given the unprecedented nature of current events I'd like to provide insights on a few topics that we typically don't detail, but are likely top of mind. These days for most.

Chris: Patient demand continues to build, with new patient starts steadily increasing, with over 5,000 patients treated to date. In infectious diseases, our portfolio grew 11%, led by strong growth of Symtuza and Jaluka for HIV, partially offset by cannibalization and increased generic competition in other products. In our cardiovascular metabolism and other product portfolio, we did experience declining sales of 13.1%, primarily driven by declines in Invokana and biosimilar competition for Procrep. Xarelto also declined by 2.7%, with volume increases offset by increased rebates, including channel mix dynamics.

From a liquidity standpoint, we're very well positioned we ended the first quarter with cash and marketable securities of $18 billion generating approximately $3 billion of free cash flow in the quarter consistent with first quarters of the previous two years.

Coupled with our AAA credit rating, we are able to access the capital markets if needed and would anticipate securing the most competitive credit spreads available.

A strong balance sheet has been a hallmark of Johnson and Johnson and his most valued in times of macro economic distress. We are able to use this strength to benefit many constituents. Some recent examples include partnering with BARDA to jointly invest approximately $1 billion not only develop and deliver a vaccine for the novel Corona.

Chris: In our total pulmonary hypertension portfolio, sales increased 14.7%, driven by strong growth of Upsummit and Uptravi of about 29% and 27%, respectively, driven by increased market penetration and share growth. This portfolio growth was net of declining sales of Triclir as a result of continued generic competition. Note, as part of the sales reporting changes I referenced, Triclir is now included under Other Pulmonary Hypertension. I'll now turn your attention to the medical devices segment.

The virus, but potentially in record time.

We are complementing the efforts of communities and health care heroes through numerous donations and other activities, which Alex highlighted.

We are supporting small and diverse suppliers and customers offering financial flexibility at a time when they need it most.

And we responsibly increased our dividend to shareholders.

Chris: Worldwide medical devices sales were $5.9 billion, declining by 6.9%. Excluding the net impact of acquisitions and divestitures, primarily the divestiture of ASP, adjusted operational sales declined by 4.8% worldwide. Our global medical device portfolio realized a significant impact on sales estimated to be worth 750 to 800 basis points as a result of procedures being deferred due to the COVID-19 pandemic, which were partially offset by stocking primarily in Asia Pacific in anticipation of procedures ramping back up. Approximately 50% of the net impact occurred in Asia-Pacific, about 30% was in the US, and the remaining balance was primarily in Europe. I will provide further context shortly about how this impacted each platform.

Our capital allocation priorities are clear and remain unchanged, we continue to invest in our business with a bias towards innovation that delivers meaningful products and services to address unmet needs, while commercial capabilities that generate greater access to healthy living for more people.

It is investing in innovation, particularly in times of uncertainty that will not just bridge. The next few months, but the next several years.

After investing at or above competitive levels in our business, we look to allocate capital to our shareholders in the form of dividends, we know that many of our shareholders prioritize that aspect when investing in Johnson and Johnson.

Alex announced earlier in the call that with a 58 straight year, we are increasing our dividend.

I'll certainly notable from a historical standpoint. This announcement is important in that it underscores our confidence and optimism for the future.

Chris: Additionally, one-time items negatively impacted growth this quarter by about 90 basis points, primarily related to there being fewer selling days in this period. However, adjusting for these one-time impacts and the estimated impact of COVID-19, our adjusted operational sales growth reflects continued strong underlying fundamentals consistent with our full year 2019 adjusted results. Interventional solutions grew 0.4% globally, with U.S. growth of 6.6%, offset by declining sales outside the U.S. of 5.1%. COVID-19 had a net negative impact on our global growth rate by about an estimated 14.5 points, reducing U.S. growth by over 8 points and O.U.S. by about 20 points. Growth excluding the impact of COVID-19 was led by continued strength in our electrophysiology business driven by our newer product offerings in ablation and advanced catheters contributing to atrial fibrillation procedural market growth. Vision declined by 4.5%.

We intend to continue generating strong cash flows and be financially well positioned.

Our next priority is to invest our capital in value, creating M&A pursuing transactions that bolster our portfolio or enhance our pipeline while targeting returns that compensate shareholders for the risk we are bearing on their behalf.

The current crisis does not reduce our desire to do these transactions in fact, given our financial strength, we may be in a better position to fund opportunities that will augment sustainable long term growth.

While our second quarter event a good example of this in practice is our recently signed preclinical research collaboration with fate therapeutics to develop and commercialize off the shelf allogeneic cell therapies for up to four tumor associated antigens, which we believe has the potential to significantly change the.

Current cell therapy paradigm in the treatment of several distinct cancer types.

Chris: The estimated net impact of COVID-19 on growth is around 550 basis points. Additionally, results in the quarter were negatively impacted by both the final bleed-down of the Japan consumption tax forward buy that occurred in Q3 2019, along with an unfavorable prior year comparison due to an inventory forward buy related to Brexit uncertainty, which was worth over 200 basis points in total. While contact lenses realized a slight decline when you adjusted for the aforementioned items, the business delivered another quarter of competitive growth globally versus the market, led by a continued strong performance of daily disposables in the Acuvue Oasys family. In surgical vision, sales declined 15.9%, with the primary driver of the decline driven by COVID-19, which impacted results by an estimated 12 points. The business excluding COVID-19 saw continued strong OUS growth in the cataract business due to strong performance in Asia-Pacific, which was more than offset by a decline in the U.S., primarily due to competitive pressures. Orthopedics declined by 6.5% in the quarter.

Finally within our capital allocation paradigm as you saw the past few years, we also simultaneously allocate capital to share repurchase programs.

We do not have an active program at this time and have no plans to announced a new program as we feel other capital allocation priorities take precedence at this time.

Given that is often a question let me offer a few remarks related to ongoing litigation.

With respect to opioids as announced last October we reached an agreement in principle to settle the litigations. The state attorneys generals are engaged and there continues to be cooperation working towards broad participation by the states cities and counties involved in this litigation.

Regarding talc as we have previously stated multiple sources of independent Science and third party testing supports the safety of our products. We await the dalbert hearing outcomes from judge Wolfson in the Federal District Court of New Jersey.

Okay, let's move to our guidance for 2020, we know some companies in our peers that have pulled their guidance. We also know that some sell side models have not been updated.

Chris: The COVID-19 pandemic impacted growth in this franchise by about 750 basis points, with the U.S. market realizing the largest dollar impact at just over 40% of the total, and the balance of the negative impacts split relatively evenly between Asia-Pacific and Europe. However, total orthopedics growth adjusting for this impact was relatively consistent with our prior quarter performance, reflecting the continued execution of our innovation and commercial strategies aimed to improve performance. HIPs declined by 5.6%, and we estimated COVID-19 negatively impacted growth by about 9.5 points.

We understand that may have been an option for us as well.

But in uncertain times, we look forward to offering you as much transparency and credible insight into our view of our business.

We have decided to provide updated guidance given what we know today with the objective of finding that right balance between bolstering your confidence and Johnson and Johnson, while not providing false assurances.

Things will change in the coming days weeks and months, but at least you'll have the benefit of our perspective to consider among the numerous sources you rely upon to make financial sense of the near term outlook.

Chris: Excluding this impact, HIPs continue to deliver competitive performance driven by our leadership position in the anterior approach, continued strong demand for our primary stem actus, and enabling technologies such as the concise surgical automated system and the Velys HIP navigation system that came from the Joint Point acquisition. Knees declined by 6.1%. Adjusting for the estimated COVID-19 impact of about 11 points, knees' underlying fundamentals continued to improve and delivered solid performance in both the U.S. and the O.U.S., driven by new innovation such as Attune Revision, Attune S+, and the Attune Cementless Rotating Platform, which launched later in 2019. Trauma declined by 3.5%; COVID-19 negatively impacted results by an estimated 400 basis Additionally, performance was impacted by overall market softness as a result of a mild winter season leading to lower procedures as well as competitive pressure.

During the next few minutes I will touch upon each part of our business with greater emphasis on medical devices.

That segment is currently projected to experienced the most significant impact.

Let me start however by sharing a few assumptions that apply across our entire business.

Our guidance or tends to account for the macro economic impact of coven 19, and the potential impact it will have on the overall health care system, capturing the potential negative impact on the number of insured individuals and how people may prioritize disposable income in the near term.

Second utilizing the experiencing earlier affected markets as a reference our estimates of the covert 19 impact assume the relative shape of the cobot 19 curve as being more of an acute shorter term impact rather than a prolonged impact.

For our largest market. The us this assumption is consistent with the estimate at mid April peak assumed by the institute of health metrics and evaluation or ice age and knee.

Chris: Spine declined 10.6%, however, adjusting for COVID-19's estimated impact of over 750 basis points, Spine's underlying performance remained consistent with recent results. While we lost share in the quarter, we continue to see positive uptake of newer products such as Conduit and Viper Prime. We are also pleased with the rollout of our newly launched Symfony surgical system for use in posterior cervical spine procedures.

The IDH any also predicts mid to late April peaks for several European countries.

Third taking into account recent statements by Dr. Fallaci and other scientifically accomplished sources, our estimates do not assume the virus returns in the fall with the same intensity currently experienced.

What do I mean by that as the experts have noted in various forms if the virus does return the world should be much better prepared to test identify an isolated.

Chris: Pricing pressure continued in orthopedics. U.S. pure price for spine, hips, and knees eroded versus Q4 2019, declining about 5%, 2%, and 1%, respectively. Price in training improved compared to Q4 and was essentially flat. Moving to the results for the surgery business, as I noted earlier, we made some minor adjustments to how we report our medical devices sales, and you will see that we moved the platforms previously under specialty surgery to general surgery now that we've closed the divestiture of the ASP business, which was the majority of the specialty surgery sales. Advanced surgery declined by 1.4% but was significantly impacted by COVID-19, which we estimate was almost an 800 basis points impact. COVID-19 primarily impacted OUS results, particularly in endocutters and energy, with an estimated negative impact on global growth of about 900 basis points to each platform. Excluding this negative impact, performance was strong, led by energy.

There may also be therapeutic options available. So our premise is that elective procedures and doctor visits will largely be permissible in the second half of this year.

Finally, we assume a recovery for procedures that begins in the third quarter and improves further in the fourth quarter, we do anticipate some disruption to the economy and have considered it on a smaller scale coming out of the second quarter, we assume an improving global economy with lower unemployment better insurance.

Coverage and higher procedure capacity than what has been or will be experienced at peak.

Let's delve into the segments. The story for Pharmaceuticals is fairly straightforward our results in the first quarter confirm the strength of our pharmaceutical business and we expected to be resilient, we provide valuable solutions in critical disease states with high unmet need and we largely expect patients will continue to receive and seek treatment.

Chris: Both energy and endocutters perform well outside the U.S., driven by share gains and new products, primarily in Asia, and were partially offset by competitive pressure in the U.S. However, biosurgery had an estimated negative impact of over 550 basis points driven by COVID-19. However, underlying fundamentals excluding this negative impact remain strong with growth balance between the U.S. and O.U.S. U.S. performance in biosurgery was driven by continued uptake of Surgiflow after last year's stopped shipment, coupled with new products such as Vistaseal. However, OUS performance continues to be led by market and share performance in the Asia-Pacific region. We also continue to see great uptake of our Monarch system for the diagnosis of lung cancer.

Quite frankly, it is important that they do sell to avoid unintended health consequences related to covert 19 beyond the pandemic itself with that said based on what we have seen to date, we do expect a small level of disruption associated with delayed diagnosis and new patient starts.

This is driven by two factors first data from a QVC suggest that office visits have recently declined by 30% and that interaction is not being entirely offset by the escalating use of tele health services.

We also know that benefit inquiries have declined suggesting new patient activity has slowed.

The second factor is related to physician administered drugs. For example, some infusion centers are being re purpose as cobot 19 treatment centers and there are staggered infusion times with fewer chairs to comply with social distancing practices.

Chris: Q1 procedures grew 150% compared to the prior year, and almost 2,700 procedures have been performed since launch. Wound closure declined over 7% in the quarter, with COVID-19 negatively impacting results by an estimated 800 basis points. Growth excluding COVID-19 was driven by continued strong market growth, as well as Sharegames and conventional and barbed sutures in China. I will now provide some commentary on our earnings for the quarter. Regarding our consolidated statement of earnings for the first quarter of 2020, please direct your attention to the box section at the bottom of the schedule. You will see we have provided our earnings adjusted to exclude intangible amortization expense and special items. As reported this morning, our adjusted EPS of $2.30 reflects reported growth of 9.5% and operational growth of 10.5%.

The extent in duration of those two factors comprise the largest variable in our pharmaceuticals outlook.

However, the net of it all is that we remain confident in delivering the pharmaceutical expectation we had in our guidance at the start of the year and anticipate the business to grow above the market again.

Chris: I'd like to now highlight a few noteworthy items that have changed on the Statement of Earnings compared to the same quarter last year. Cost of products sold decreased primarily as a result of product mix and the establishment of inventory reserves associated with the COVID-19 impact in the medical devices business. Selling, marketing, and administrative margins for the quarter improved, driven by leveraging in the pharmaceutical and consumer health businesses and favorable segment mix, partially offset by deleveraging in the medical devices business, resulting from the COVID-19 impact on sales. We continue to invest in research and development at competitive levels, investing 12.5% of sales this quarter.

Looking slightly ahead to next year. We also remain confident in the progression of our pipeline, which should fuel growth beyond 2020.

Chris: This was lower than the first quarter of 2019, by 180 basis points, driven by the timing of pharmaceutical milestone payments partially offset by increased investment in robotics and digital solutions in the medical devices business. The other income and expense line showed net income of $679 million in the first quarter of 2020 compared to net income of $22 million last year. This was primarily driven by a contingent consideration reversal of approximately $1 billion related to the timing of certain developmental milestones associated with the ORIS Health acquisition, partially offset by higher unrealized losses on security. Regarding taxes, our effective tax rate declined from 15.2% in the first quarter of 2019 to 11% in the first quarter of 2020 as a result of additional favorable impacts from Swiss tax reform and the reversal of the ORS contingent liability.

We're partnering with health authorities on the status of our 2020 project that regulatory filings and approvals and have not received notification from regulatory authorities regarding any delays for our major submissions. We continue to progress our plans prepare to work through any implications related to cope with 19 at this time our major five.

Filings and approvals planned in 2020 are on track.

Lets transition to consumer health as you heard the first quarter was very strong for this segment as our essential products are in high demand across the globe. We operate in key categories such as over the counter medicines that should continue to perform well as consumers look to self managed conditions, such as fever and pain.

However, the first quarter surge was partially due to pantry loading that will not continue for the full year.

Access to necessary consumer products across most of our portfolio will continue but perhaps differently there will be some impact in certain categories. As a result of reduced store traffic and social distancing behaviors that are not likely to be fully offset by higher E. Commerce activity. So we expect some category softness and franchises such as such.

In health, most notably Sun care products.

With that said, we think the upside opportunities at least offset the downside risks and are therefore projecting that here to our full year assumption in January remains intact for the segment. We continue to expect growth above the market in the us while executing the SKU rationalization program, mostly focused outside the U.S.

So let's move on to medical devices, which is at the core of our guidance change and remains the most uncertain.

When I referenced at the outset of this section that some companies have withdrawn guidance. It has been primarily in the medical device segment. So that is a good indication of where the uncertainty exists.

Consistent with what we experienced in the first quarter, we expect our medical device business to be negatively impacted as many procedures continue to be deferred and hospital resources are diverted to address the pandemic.

We are assuming the most significant negative impact occurs in the second quarter, a lingering impact but signs of stabilization in the third quarter and then some recovery in the fourth quarter.

Chris: We encourage you to refer to our 10-Q for further details on this and other specific tax matters. Excluding special items, the effective tax rate was 15% versus 17.6% in the same period last year, driven by certain tax costs incurred in the first quarter of 2019 that were not repeated in 2020. Let's now look at adjusted income before tax by segment. In the first quarter of 2020, adjusted income before tax for the enterprise improved 70 basis points versus the first quarter of 2019, to 35%. Looking at the adjusted pre-tax income by segment, pharmaceutical margins improved by 360 basis points to 45.3%, primarily driven by the timing of R&D milestones. Medical devices declined by 540 basis points to 24.2% due to COVID-19 impacts on the business, including incremental inventory reserves and deleveraging in selling and marketing, in addition to continued increased investment in robotics and digital solutions.

To determine the impact we started by reviewing external data, including surveys expert panels epidemiology data and capacity constraints.

We then reviewed our own internal data at the procedural level and weekly sales results at the country level compared to reported cases of Corona virus.

Given China was the first country impacted by this pandemic and is believed to be further along in the cobot 19 curve than the rest of the world. We modeled this first.

Then given the success that Japan, and Korea appeared to have had thus far containing the virus, we decided to bucket all three of these Asia Pacific markets, together, which represents approximately 20% of our medical devices revenue.

We then looked at the remaining seven countries in our top 10 markets.

United States, Italy, France, Germany, the United Kingdom, Spain, and Russia, which collectively make up approximately 60% of our medical devices revenue.

Chris: Consumer margins declined slightly by 50 basis points to 24.5%, driven by a one-time gain in 2019 related to the company's previously-held equity investment in Dr. Salabo, which was partially offset by leveraging of selling, marketing, and administrative margins in the current quarter. That concludes the sales and P&L highlights for Johnson & Johnson's first quarter 2020. For your reference, this slide summarizes notable developments occurring in the first quarter. Of note, we submitted new drug applications to the FDA and EMA for penicillin for the treatment of adult patients with relapsing multiple sclerosis. I'm now pleased to turn the call over to Joe Walker.

The remaining rest of the world markets outside of our top 10 countries. Therefore account for 20% of our medical devices revenue.

As you know we have a broad portfolio in medical devices. As this slide depicts approximately one third of our medical device business supports urgent procedures that arent candidates for deferral in other words non elective such as events that address trauma stroke and critical surgeries associated with cancer.

Based on this procedural classification data and the geographic split I outlined we developed a range of scenarios to inform the low end and the high end of our estimates in those key Asia Pacific markets, we assume that elective procedures will decline, 20% to 60% during the second quarter based on two.

Joseph J. Wolk: Thank you, Chris, and good morning, everyone. We appreciate that you decided to join the call today, and like others on this call who spoke before me, I hope you and those close to you are safe and healthy. Let me state right up front that the fundamentals of Johnson & Johnson's business are strong, and our expectations of where the business is heading have not changed. Combating the current crisis is anything but usual.

Joseph J. Wolk: However, many aspects of Johnson & Johnson continue to operate with a business-as-usual focus, such as advancing breakthrough innovation, fostering consumer and patient access, and being financially disciplined. We are motivated by never stopping when it comes to taking care of you, our stakeholders, and we can have a profound, positive impact because we are built to lead, built to last, and, quite frankly, built for times like this. My central focus in today's prepared remarks is twofold.

Trends, we are currently observing in those countries.

Elective procedures could be down less than this if recovery occurs earlier and ramps back up quickly, but given how much is still unknown. We felt this was an appropriate view at this time.

We do see stabilization occurring earlier in these countries compared to the rest of the world and expect to start seeing deferred procedures being made up primarily throughout the second half of this year.

Using similar methodologies for the other remaining major markets, we assumed deferred procedures declined 65% to 85% in the second quarter and declined 20% to 60% in the third quarter versus our prior guidance, we see stabilization in the fourth quarter with these country.

Starting to recover deferred procedures the rest of the world assumptions are consistent with the seven countries.

Joseph J. Wolk: First, I will share with you our ongoing business continuity plans. It is important, particularly in times of challenge, that you understand the steps we have put in place recently and over a number of years to ensure a reliable supply of the important products we provide. Second, I will outline how we are thinking about the impact of the COVID-19 crisis and what that will have on our near-term financial performance in the context of changes from the guidance we issued in January. I trust that at the end of my remarks and at the end of this call, the obvious conclusion is that Johnson & Johnson is strong, in a financial position to meet its obligation to all stakeholders, and poised for many years of success. The fundamentals of our business are intact.

You can also see that we are assuming declines in urgent procedures as well individuals are spending less time outdoors engage in physical activity, which we expect to impact procedures, even urgent ones, particularly in a market like trauma.

In terms of recovery if hospitals everywhere, we're doing procedures 24 hours a day, including weekends. They could only increased capacity by about 30%. So we looked at that as the highest possible increase in capacity, which we view as unlikely.

We believe hospital systems will have capacity to make up deferred procedures from earlier in the year, but we suspect it could take time for patients to get comfortable scheduling an elective procedure hospitals and surgeons may still be recovering from peak cobot 19 impacts and there will be economic challenges, we discussed earlier, namely a potential impact to the.

Joseph J. Wolk: As Alex mentioned earlier, as the most broadly based global company in the healthcare industry, we have established a sustainable and resilient business model with flexibility designed into our research, manufacturing, and commercial capabilities. We have robust, active business continuity plans across our network, which have been instrumental in preparing us for events like COVID-19. Some steps we have taken recently include leveraging our global manufacturing footprint and dual-source capabilities while closely monitoring and maintaining critical inventory at major distribution centers to address high-risk areas and ensure adequate and effective distribution; working closely with suppliers, distributors, local governments, and regulators to gain better insights to address their concerns; and, through our commercial organizations, supporting healthcare providers in the safest way possible by moving to virtual connections to serve as a resource for physicians. Where needed, we directly engage to support them in areas like trauma surgeries, ensuring we follow all health protocols to keep everyone safe.

Number of insured patients and a changing prioritization of income in the near term.

Those factors lead us to assume a recovery in a range of zero percent to 15%.

These assumptions are our best estimates at this time and again, we're not assuming a recurrence or significant mutation of coping 19.

Similarly, we're not assuming potential aggressive recovery measures that may be implemented sooner by hospitals, who are experiencing or will experience a minimal kogan 19 impact you are faced with managing unexpected financial challenges, resulting from being under utilized.

As a result of all these factors, we estimate a negative operational sales impact of approximately $4 billion to approximately $7 billion to the medical devices forecast below our prior guidance. While there are many moving parts the impact in medical device is the sole change to our prior operational sales guide.

For the enterprise.

Joseph J. Wolk: Within clinical operations, our first priority is always to protect the health and well-being of participants currently enrolled in our clinical trials. Our next priority is to complete these trials in a manner that fully satisfies regulatory requirements. This pandemic does not change these priorities. As a result of these efforts, we are able to meet the majority of patient and consumer needs. Given the unprecedented nature of current events, I'd like to provide insights on a few topics that we typically don't detail but are likely top of mind these days for most. From a liquidity standpoint, we are very well positioned. We ended the first quarter with cash and marketable securities of $18 billion, generating approximately $3 billion of free cash flow in the quarter, consistent with the first quarters of the previous two years.

So let's summarize this for you given all the factors I have described we would be comfortable with your models, reflecting the following.

Adjusted operational sales of minus 3% to plus 0.5% incorporating the range of the medical device operational sales negative impact of approximately $4 billion to approximately $7 billion.

Moving to operational sales, our guidance is $79.2 billion to $82.2 billion or minus 3.5% to zero percent.

As you know, we do not predict the impact of currency movements, but utilizing the euro spot rate relative to the US dollar as of last week. At 1.09. There is an estimated negative impact of foreign currency translation of approximately 200 basis points versus the negative 50 basis points provided in our January guide.

Joseph J. Wolk: With our AAA credit rating, we are able to access the capital markets if needed and would anticipate securing the most competitive credit spreads available. A strong balance sheet has been a hallmark of Johnson & Johnson and is most valued in times of macroeconomic distress. We are able to use this strength to benefit many constituencies. Some recent examples include partnering with BARDA to jointly invest approximately $1 billion to not only develop and deliver a vaccine for the novel coronavirus, but potentially in record time. We are complementing the efforts of communities and healthcare heroes through numerous donations and other activities, which Alec highlighted. We are supporting small and diverse suppliers and customers, offering financial flexibility at a time when they need it most, and we have responsibly increased our dividend to shareholders. Our capital allocation priorities are clear and will remain unchanged.

Since resulting in an estimated reported sales growth between minus 5.5% to minus 2.0% compared to 2019 or $77.5 billion to $80.5 billion.

Moving to items impacting earnings regarding adjusted pre tax operating margin. We now expect adjusted pre tax operating margin for the year to decline about 100 basis points due to higher manufacturing costs related to covert 19 sales impact, which is partially offset by spending reductions of.

Approximately $2 billion.

Net interest expense is now expected to be in the range of $50 million to $150 million of expense due to lower rates on interest income earned.

Joseph J. Wolk: We continue to invest in our business with a bias toward innovation that delivers meaningful products and services to address unmet needs, or commercial capabilities that generate greater access to healthy living for more people. It is investing in innovation, particularly in times of uncertainty, that will not just bridge the next few months but the next several years. After investing at or above competitive levels in our business, we look to allocate capital to our shareholders in the form of dividends. We know that many of our shareholders prioritize that aspect when investing in Johnson & Johnson. Alex announced earlier in the call that for the 58th straight year, we are increasing our dividend.

We are lowering our expectations for net other income.

As mentioned earlier, our financial strength may present, us with near term opportunities to execute transactions that enhance our current or future portfolio. There is another element to that strength, we're not dependent on selling assets to achieve our long term objectives, given the current market conditions and to ensure we create appropriate.

Returns we are assuming previously planned divestitures will be deferred until such time, we can secure commensurate value for these very solid businesses.

This decision results in us reducing our previously guided other income by $700 million to a range of $800 million to $1 billion.

Joseph J. Wolk: While certainly notable from a historical standpoint, this announcement is important in that it underscores our confidence and optimism for the future. We intend to continue generating strong cash flows and be financially well-positioned. Our next priority is to invest our capital in value-creating M&A, pursuing transactions that bolster our portfolio or enhance our pipeline while targeting returns that compensate shareholders for the risk we are bearing on their behalf. The current crisis does not reduce our desire to do these transactions. In fact, given our financial strength, we may be in a better position to fund opportunities that will augment sustainable long-term growth. While a second quarter event, a good example of this in practice is our recently signed preclinical research collaboration with Fate Therapeutics to develop and commercialize off-the-shelf allogeneic cell therapies for up to four tumor-associated antigens, which we believe has the potential to significantly change the current cell therapy paradigm in the treatment of several distinct cancer types.

Our effective tax rate guidance for 2020 is now estimated to be approximately 16.5% to 18.0% wider than the previous range given the variability associated with the sequence and pace of economic recovery across the major regions.

Given those updates we are now comfortable with adjusted EPS guidance in the range of $7.65 to $8.05 on a constant currency basis. This reflects an operational or constant currency decline of 11.9% to 7.3%.

Again, while not predicting currency movements, but to provide some insight on the potential impact on EPS using exchange rates from last week, our reported adjusted EPS would be negatively impacted by approximately 15 cents per share versus our prior guidance impact of negative five cents accounting for that.

That we would be comfortable with your models, reflecting reported adjusted EPS ranging from $7 in 50 cents to $7.90 a range of minus 13.6% to minus 9.0% based on what we know today.

Joseph J. Wolk: Finally, within our capital allocation paradigm, as you have seen in the past few years, we also simultaneously allocate capital to share repurchase programs. We do not have an active program at this time and have no plans to announce a new program as we feel other capital allocation priorities take precedence at this time. Given it is often a question, let me offer a few remarks related to ongoing litigation. With respect to opioids, as announced last October, we reached an agreement in principle to settle the litigation. The state attorneys general are engaged, and there continues to be cooperation working towards broad participation by the states, cities, and counties involved in this litigation. Regarding talc, as we have previously stated, multiple sources of independent science and third-party testing support the safety of our product.

A quick illustration of our EPS guidance change from January is presented here. The biggest impacts are obviously from the estimated decline in medical device sales and what we believe as a prudent decision to delay some previously planned divestitures.

We also have some earnings impact associated with Johnson and Johnson is multifaceted leadership to come back Cobot 19 from vaccine development employee wellbeing and addressing healthcare worker needs totaling close to a quarter of $1 billion.

To help partially offset these items, we are reducing spend by approximately $2.3 billion on a pre tax basis, but let me be clear. This is largely a reduction aligned to expenses that we believe will naturally be lower we're not reducing important programs initiatives a practices.

Joseph J. Wolk: We await the Daubert hearing outcomes from Judge Wolfson in the Federal District Court of New Jersey. Okay, let's move to our guidance for 2020. We know some companies in our peer set have pulled their guidance. We also know that some cell site models have not been updated.

That best serve all stakeholders for the long term our investors conveyed to us that they want us to continue managing for results to five and 10 years into the future.

Joseph J. Wolk: We understand that may have been an option for us as well. But in uncertain times, we look forward to offering you as much transparency and credible insight into our view of our business. We have decided to provide updated guidance given what we know today with the objective of finding that right balance between bolstering your confidence in Johnson & Johnson while not providing false assurances. Things will change in the coming days, weeks, and months, but at least you'll have the benefit of our perspective to consider among the numerous sources you rely upon to make financial sense of the near-term outlook. During the next few minutes, I will touch upon each part of our business, with a greater emphasis on medical devices. That segment is currently projected to experience the most significant impact. Let me start, however, by sharing a few assumptions that apply across our entire business. Our guidance attempts to account for the macroeconomic impact of COVID-19 and the potential impact it will have on the overall healthcare system, capturing the potential negative impact on the number of insured individuals and how people may prioritize disposable income in the near term.

We do not provide quarterly guidance, but there are two items worth noting for you to consider as you update your models for key too.

The first is likely apparent we expect the greatest cobot 19 impact on sales to occur in the second quarter.

Second for comparative purposes recall that in the second quarter of 2019, we recorded a significant divestiture gain as other income today's revised guidance is a clear indication that a gain of that size will not occur in the second quarter of 2020.

Before I hand, the call back to Chris to begin the Q in AG, Let me. Thank many on the phone listening today. We appreciate the insight you have shared to enhance our thought process and while a 100% precision is not the order of the day. We hope you found the explanation of our guidance updates useful.

Joseph J. Wolk: Utilizing the experience in earlier affected markets as a reference, our estimates of the COVID-19 impact assume the relative shape of the COVID-19 curve as being more of an acute, shorter-term impact rather than a prolonged impact. For our largest market, the U.S., this assumption is consistent with the estimated mid-April peak assumed by the Institute of Health Metrics and Evaluation, or IHME. The IHME also predicts mid-to-late April peaks for several European countries. Third, taking into account recent statements by Dr. Fauci and other scientifically credible sources, our estimates do not assume the virus returns in the fall at the same intensity currently experienced. What do I mean by that?

I also want to thank our Johnson and Johnson associates around the world for the extra ordinary effort and dedication they have displayed these past few months I.

Im humbled by the magnificent leadership stories, you on a daily basis, they serve as an inspiration.

Our performance of the first quarter highlights the resiliency of our business during challenging times and showcases the commitment of our employees to advanced solutions that enhance the lives of patients and consumers seeking better health.

Chris back to you to begin the Q and a portion.

Thank you Joe we will now move to the Cuban a portion of the webcast.

Operator can you please provide instructions for those in the line wishing to ask a question.

Yes, Thank you, ladies and gentlemen, if you'd like to ask a question at this time. Please press Star then one on your telephone keypad.

If you like to withdraw your question Press Star then too.

Please limit your questions to one question and one follow up.

Your first question comes from David Lewis Morgan Stanley.

Good morning, and thanks for all the significant work you're doing on behalf of patients in the system as well as the very significant guidance that Joe just provided just a couple quick questions for me.

The first for Paul just you talked extensively about the vaccine program and I know your goals to produce a billion doses and you're ramping reduction throughout the year. So just first question is by the first quarter of 21, where do you think production capacity will be and how could that scale through twentytwenty, one relative to that billion doses at a quick follow up for Joe.

Joseph J. Wolk: As experts have noted in various forums, if the virus does return, the world should be much better prepared to test, identify, and isolate it. There may also be therapeutic options available, so our premise is that elective procedures and doctor visits will largely be permissible in the second half of this year. Finally, we assume a recovery for procedures that begins in the third quarter and improves further in the fourth quarter. We do anticipate some disruption to the economy, but we have considered it on a smaller scale. Coming out of the second quarter, we assume an improving global economy with lower unemployment, better insurance coverage, and higher procedure capacity than what has been or will be experienced at this time. Now, let's delve into the segments.

No.

Yes production capacity would be ready to go app.

Six to 900 million into first quarter growing up to a billion into cores multi year north over billion by the end of year, So and Thats on annual basis.

Overlap for manufacturing side, but going on one by one bringing the whole capacity up to 1 billion in due course multi year.

Okay very helpful. Paul and Joe just of your detailed guidance for medical devices very much appreciated on consumer in pharma, obviously, we saw in the first quarter subs.

Joseph J. Wolk: The story for pharmaceuticals is fairly straightforward. Our results in the first quarter confirm the strength of our pharmaceutical business, and we expect it to be resilient. We provide valuable solutions in critical disease states with high unmet need, and we largely expect patients will continue to receive and seek treatment. Quite frankly, it is important that they do so to avoid unintended health consequences related to COVID-19 beyond the pandemic itself. With that said, based on what we have seen to date, we do expect a small level of disruption associated with delayed diagnosis and new patient starts. This is driven by two factors. First, data from IQVIA suggests that office visits have recently declined by 30% and that interaction is not being entirely offset by the escalating use of telehealth services. We also know that benefit inquiries have declined, suggesting new patient activity has slowed. The second factor is related to physician-administered drugs.

Joseph J. Wolk: For example, some infusion centers are being repurposed as COVID-19 treatment centers, and there are staggered infusion times with fewer chairs to comply with social distancing practices. The extent and duration of those two factors comprise the largest variable in our pharmaceutical outline. However, the net of it all is that we remain confident in delivering the pharmaceutical expectations we had in our guidance at the start of the year and anticipate the business to grow above the market again. Looking slightly ahead to next year, we also remain confident in the progression of our pipeline, which should fuel growth beyond 2020. We are partnering with health authorities on the status of our 2020 projected regulatory filings and approvals and have not received notification from regulatory authorities regarding any delays for our major submissions. We continue to progress our plans, prepared to work through any implications related to COVID-19. At this time, our major filings and approvals planned for 2020 are on track. Now, let's transition to consumer health.

Hoarding benefiting consumer annuity see franchises and probably some stocking benefit in pharmacists businesses for the year I. Appreciate your stable can you give us any help first to second quarter, how we should be thinking about the relative trended as businesses should we expect to be below trend in second quarter versus first and pop back up in the third quarter, just based on a stocking and hoarding benefits.

Thanks, so much.

Great sure David Thanks for the questions I would say you could probably expect that in our consumer unit you saw significant stocking across the globe.

Probably as Chris referenced.

Was about seven points of additional growth for the consumer franchise, we were off to a good start but then you saw the the benefit of pantry loading I would say in farm remains to be seen as you know we don't give quarterly guidance. It was only worth about one point of growth in the quarter.

As some pbms moved from 30 day refill cycles to 90 days I would imagine that activity will still continue but we'd have to see how that plays out a little bit further into the second quarter here. When you have stay at home protocols.

Okay. Thanks, so much thanks, David appreciate the question.

Rob next question please.

Next question is from Chris Schott with JP Morgan.

Great. Thanks, very much and again appreciate all the color on the cover dynamics very helpful. Given all the uncertainty out there. So just my two questions. Here was one can you elaborate on the sensitivity of your business to elevated unemployment levels as we look past some of the near term shutdowns I guess for an environment, where we have double digit unemployment the near term.

And maybe slow rates there elevated as we look out to 2021, what does that due to the business as we think about things starting to normalize. My second question was was a question about China and just you to share a little bit about what you're seeing with the business as the economy begins to reopen there and are there any learnings weve found from China that could be helpful as well.

Think about recoveries elsewhere in the world from what you've seen today. Thanks, so much.

So Chris let me take the first question with respect to how we factored unemployment into.

Joseph J. Wolk: As you heard, the first quarter was very strong for this segment, as our essential products are in high demand across the globe. We operate in key categories, such as over-the-counter medicines that should continue to perform well, as consumers look to self-manage conditions such as fever and pain. However, the first quarter surge was partially due to pantry loading that will not continue for the full year.

Our modeling specifically around the medical device business, and maybe I'll turn it over to Alex to provide some commentary around what our team is telling us with respect to getting back to things in China.

With respect to unemployment, we look back at the financial crisis of 2008, 2009 tried to draw inferences from GDP growth and what that meant relative to elective procedures and procedures in general So we'll have to see how that kind of plays out.

Joseph J. Wolk: Access to necessary consumer products across most of our portfolio will continue, but perhaps differently. There will be some impact in certain categories as a result of reduced store traffic and social distancing behaviors that are not likely to be fully offset by higher e-commerce activity, so we expect some category softness in franchises such as Skin Health, most notably SunCare products. With that said, we think the upside opportunities at least offset the downside risks and are therefore projecting that, here too, our full-year assumption in January remains intact for the segment. We continue to expect growth above the market in the U.S. while executing the SKU rationalization program mostly focused outside the U.S. So let's move on to medical devices, which is at the core of our guidance change and remains the most uncertain. When I mentioned at the outset of this section that some companies have withdrawn guidance, it was primarily in the medical device segment. So that is a good indication of where the uncertainty exists.

Relative to the 2008 2009 financial crisis. The team has done a nice job relying on many of the reports and surveys that you in the sell side have conducted.

To make some assessments, but will really have to see how it plays out and that's why we've widened our range much more than we have traditionally I think at the outset at a year, we had about an $800 million range on our overall enterprise sales guidance here you can see it's about $3 billion of a range and its exclusively tied to medical devices. So more to come on that.

Front, but we believe we've got at least a a fairly sizable element of that already baked them.

Alex can I turn it over to you for some thoughts on China.

Sure Chris. Thank you very much message and and look maybe before I answer that I just want to make a couple of comments first of all once again acknowledging the tremendous impact that this is having yarn.

Systems around the world lung patients and consumers.

This is likely one of the most significant events that any of us have ever experience in a very personal way and I think making sure that throughout this particularly as the world's largest healthcare products company that we remain.

Joseph J. Wolk: Consistent with what we experienced in the first quarter, we expect our medical device business to be negatively impacted as many procedures continue to be deferred and hospital resources are diverted to address the pandemic. We are assuming the most significant negative impact occurs in the second quarter, a lingering impact with signs of stabilization in the third quarter, and then some recovery in the fourth quarter. To determine the impact, we started by reviewing external data, including surveys, expert panels, epidemiology data, and capacity constraints.

And just incredibly focused on serving them.

Is that is our number one priority I think secondly, truly acknowledging healthcare workers.

Privileged to have a number of family members frankly to we're out there on the frontline, making a difference everyday and when you see what they're doing.

And literally going into battle and.

Joseph J. Wolk: We then reviewed our own internal data at the procedural level and weekly sales results at the country level compared to reported cases of coronavirus. Given China was the first country impacted by this pandemic and is believed to be further along in the COVID-19 curve than the rest of the world, we modeled this first. Then, given the success that Japan and Korea appear to have had thus far containing the virus, we decided to bucket all three of these Asia-Pacific markets together, which represents approximately 20% of our medical devices revenue. We then looked at the remaining seven countries in our top ten markets, the United States, Italy, France, Germany, the United Kingdom, Spain, and Russia, which collectively make up approximately 60% of our medical devices revenue.

Preparing for the worst hoping for the vast.

Working 24 seven.

Without them.

I couldn't imagine the situation, we would be under then last but not least is out of the work of our employees I.

Im incredibly inspired.

Heard earlier, the great progress the strong progress that we've made on our vaccine program.

And while Paul review that perhaps and 10 minute swept through I think really important to keep in the perspective is that the work that he's talking about accomplishing literally and six to 12 months.

Usually take between five and seven years and to do that in a way where there is a relentless focus on safety and efficacy on affordability, but.

But also while accelerating those timelines to do everything we can to be touching as you heard those numbers up to a 1 billion people with vaccines.

Joseph J. Wolk: The remaining rest of the world markets outside of our top 10 countries therefore account for 20% of our medical devices revenue. As you know, we have a broad portfolio of medical devices. As this slide depicts, approximately one-third of our medical device business supports urgent procedures that aren't candidates for deferral, in other words, non-elective, such as events that address trauma, stroke, and critical surgeries associated with cancer. Based on this procedural classification data and the geographic split I outlined, we developed a range of scenarios to inform the low-end and the high-end of our estimates. In those key Asia-Pacific markets, we assume that elective procedures will decline 20-60% during the second quarter based on trends we are currently observing in those countries. Elective procedures could be down less than this if recovery occurs earlier and ramps back up quickly, but given how much is still unknown, we felt this was an appropriate view at this time.

In the course of 2021 is it's a huge undertaking and.

We've got people working 24 seven.

Everyday of the weak right now to really make that possible.

As it relates to China, Chris I think that their Q, it's important to acknowledge the work of our team member when we first saw this starting to break in late December early January we immediately at several of the team.

And they began taking actions very quickly obviously to ensure the safety of our employees, but also to ensure the integrity of our supply chain and being able to support the healthcare infrastructure within China and.

What we have seen over the past several weeks I would say at the gradual.

Return of the business, it's important to remember that in our case. In addition to the economic statistics that I think many other people can share given the number of associates that we have on the ground that are literally visiting hospitals, even in some more of the remote areas.

Joseph J. Wolk: We do see stabilization occurring earlier in these countries compared to the rest of the world and expect to start seeing deferred procedures being made up primarily throughout the second half of this year. Using similar methodologies for the other remaining major markets, we assume deferred procedures declined 65 to 85 percent in the second quarter and declined 20 to 60 percent in the third quarter versus our prior guidance. We see stabilization in the fourth quarter with these countries starting to recover deferred procedures. The rest of the world's assumptions are consistent with these seven countries.

We're confident that we're starting to see what I would call a re entry into procedures.

Depending on where you are that could range from 50% to is high the 60 or 70% as of today.

And.

And there are still are areas.

Our at the low end of that spectrum. We've also heard some comments recently about some concern about a follow up way, our resurgence and and they're responding accordingly.

Joseph J. Wolk: You can also see that we are assuming declines in urgent procedures as well. Individuals are spending less time outdoors engaged in physical activity, which we expect to impact procedures, even urgent ones, particularly in a market like trauma. In terms of recovery, if hospitals everywhere were doing procedures 24 hours a day, including weekends, they could only increase capacity by about 30%. So we looked at that as the highest possible increase in capacity, which we view as unlikely. We believe hospital systems will have capacity to make up deferred procedures from earlier in the year, but we suspect it could take time for patients to get comfortable scheduling an elective procedure. Hospitals and surgeons may still be recovering from peak COVID-19 impacts, and there will be economic challenges we discussed earlier, namely a potential impact on the number of insured patients and a changing prioritization of income in the near term. Those factors lead us to assume a recovery in a range of 0% to 15%. These assumptions are our best estimates at this time, and again, we are not assuming a recurrence or significant mutation of COVID-19.

But I think overall, we are starting to see.

A return to a more normal rate of surgical procedures.

And frankly, just the provision of health care services, either the our pharmaceutical business.

And in our consumer business as well.

We have.

More than 50% of our employees back to work following.

In a very specific protocols and directives to ensure their safety.

But we are confident that as we proceed and in the coming months that we'll see.

Mark returned to normal continuing thank you.

Thanks, Chris appreciate the question Rob next question. Please.

Your next question is from Larry Biegelsen with Wells Fargo.

Good morning, Thanks for taking the question. Thanks for all the very helpful color.

One question on medical devices in the recovery, there and one on the vaccine a first on on devices.

Joe can you share with that's your preliminary thoughts on believe it or not 2021, just the postpone procedures.

I heard your comments about the capacity and little catch up assume for for Q4, just direct qualitatively should we think about a lower base in 2020 and normalized growth in 2021, or how should we think about those postpone procedures potentially coming back next year and one follow up.

Joseph J. Wolk: Similarly, we are not assuming potential aggressive recovery measures that may be implemented sooner by hospitals who are experiencing or will experience minimal COVID-19 impact yet are faced with managing unexpected financial challenges resulting from being underutilized. As a result of all these factors, we estimate a negative operational sales impact of approximately $4 billion to approximately $7 billion to the medical devices forecast below our prior guidance. While there are many moving parts, the impact in medical devices is the sole change to our prior operational sales guidance for the enterprise. So let's summarize this for you.

Sure Larry Thanks for the question as you might imagine.

While we hope to 2021 looks a lot like we thought it was going to look like.

Maybe three months ago, we really have to let that play out we did see and put into our modeling anywhere from normal level of procedures in the fourth quarter. Two recoupment. If you will have plus 15%, but it's really going to depend on the pandemic itself, what's the health priorities.

Joseph J. Wolk: Given all the factors I have described, we would be comfortable with your models reflecting the following adjusted operational sales of minus 3% to plus 0.5% incorporating the range of the medical device operational sales negative impact of approximately $4 billion to approximately $7 billion. Moving to operating income, our guidance is $79.2 billion to $82.2 billion, or minus 3.5% to 0%. As you know, we do not predict the impact of currency movements, but utilizing the euro spot rate relative to the U.S. dollar as of last week at 1.09, there is an estimated negative impact of foreign currency translation of approximately 200 basis points versus the negative 50 basis points provided in our January guidance, resulting in an estimated reported sales growth between minus 5.5 percent to minus 2.0 percent compared to 2019, or 77.5 billion dollars to 80.5 billion dollars.

Hi, how are patients and consumers feeling about going to the hospital for these procedures. So I believe from what we've heard from hospital Ceos that they would like to get back in the business of elective surgeries.

Many of you have saw recent announcements male clinic, most recently with respect to just only 25% utilization in their elected suites.

That is putting financial strain on major hospital systems, and we want to make sure that when we return to normal that there's good quality healthcare still in place. So I'll defer I think it'd be a little bit irresponsible for me at this point in time to comment on 2021.

The hope and the optimism is for whenever the pandemic updates will be at or above expectations that we will all once had.

Thanks.

Larry Larry Yes, Yes, Alex Larry just just just one other comment on that but I think might be some important perspective as Joe said.

Im showing you can appreciate over the past several weeks we have.

Done are back to be and very close touch with hospital Ceos with physician, who are working interest comes around the country and.

Joseph J. Wolk: Moving to items impacting earnings, Regarding adjusted pre-tax operating margin, we now expect adjusted pre-tax operating margin for the year to decline about 100 basis points due to higher manufacturing costs related to COVID-19 sales, which is partially offset by spending reductions of approximately $2 billion. Net interest expense is now expected to be in the range of $50 million to $150 million due to lower rates on interest income earned.

And we are currently saying I think gave a.

This is consistent with what you've seen in from recent press articles, where look there are clearly areas.

Where it has been just a relentless hey, the patient care and areas like New York areas like Northern New Jersey, other hotspot, such as New Orleans Detroit.

And American there are also other areas in the Midwest, where you might say there are hot.

Joseph J. Wolk: We are lowering our expectations for net other income. As mentioned earlier, our financial strength may present us with near-term opportunities to execute transactions that enhance our current or future portfolio. But there is another element to that strength.

Outside of that however.

And very consistent with Joe's comments.

You see in many cases, our hospitals that are well under 50% of their capacity.

Joseph J. Wolk: We are not dependent on selling assets to achieve our long-term objectives. Given the current market conditions and to ensure we create appropriate returns, we are assuming previously planned divestitures will be deferred until such a time as we can secure commensurate value for these very solid businesses. This decision results in us reducing our previously guided other income by $700 million to a range of $800 million to $1 billion. Our effective tax rate guidance for 2020 is now estimated to be approximately 16.5% to 18.0%, wider than the previous range given the variability associated with the sequence and pace of economic recovery across the major regions. Given those updates, we are now comfortable with adjusted EPS guidance in the range of $7.65 to $8.05 on a constant currency basis. This reflects an operational or constant currency decline of 11.9% to 7.3%.

That have.

Also increased some of their investments chewed up threefold from tons more.

And appropriately fell preparing for the absolute worst case and the pandemic.

And at the same time, they've lost a very significant portion of their income seeing a cost increase putting.

Potential financial stress on them.

And I end and sell and we're also hearing a consistent theme of making sure that as they think about returning ensuring that we can get consumer and patient confidence back up through the right kind of testing and the right kind of protocols and the hospital.

In place to make sure that we can get healthcare professional that its physicians nurses.

Kind of assurance that they're going to need to get back to a more normal state of working as well as in some case given the amount of work they've been doing make sure that they've got this kind of backup resources in place.

To be able to do that is going to be very very important as those to healthcare systems work with governors.

Joseph J. Wolk: Again, while not predicting currency movements, but to provide some insight on the potential impact on EPS, using exchange rates from last week, our reported adjusted EPS would be negatively impacted by approximately $0.15 per share versus our prior guidance impact of $0.05. Accounting for that, we would be comfortable with your models reflecting reported adjusted EPS ranging from $7.50 to $7.90, a range of minus 13.6% to minus 9.0% based on what we know today. A quick illustration of our EPS guidance change from January is presented here. The biggest impacts are obviously from the estimated decline in medical device sales and what we believe is a prudent decision to delay some previously planned divestitures.

And frankly, even were Khan with Congress, making sure that cares three and cares for our accounting for this significant strain on hospitals around the country. So I hope that's helpful.

We are helpful. Chris if I could just get one in on on the vaccine for Paul.

My understanding is moderna.

It is targeting four times a base immunity.

Paul What's your understanding of the base immunity and effective covert 19 patients.

What level do you think you need.

For an effective vaccine what what are you targeting thank you for taking the questions.

Well like on difficult Eva scientific answer that because I don't think thats tested yet, but what we learned in from Zika from Ebola and promote other vaccines. These dr. together strong.

Euro, but also a solar immunity with one injection, especially in Zika, we sold out. So we think that we can get to very high levels of protection with the with the one single vaccine and double give us an ability to them perfect for longer terms will eventually boosting one year later, we think would be sufficient but we're going to studies up in large fuel.

Joseph J. Wolk: We also have some earnings impact associated with Johnson & Johnson's multifaceted leadership to combat COVID-19, from vaccine development to employee well-being to addressing healthcare worker needs totaling close to a quarter of a billion dollars. To help partially offset these items, we are reducing spend by approximately $2.3 billion on a pre-tax basis. But let me be clear, this is largely a reduction aligned to expenses that we believe will naturally be We are not reducing important programs, initiatives, or practices that best serve all stakeholders for the long term. Our investors convey to us that they want us to continue managing for results 2, 5, and 10 years into the future. We do not provide quarterly guidance, but there are two items worth noting for you to consider as you update your models for Q2. The first is likely obvious.

Studies in phase, one and that will start early September.

Thanks, Larry appreciate the questions. Bob next question. Please.

Your next question is from Joanne Lynch with Citi.

Good morning, and then thank you for all the work that you're doing during this time and for all the information from modeling it's really appreciated.

Two questions. The first one has to do it as we think about procedures coming back in medical devices in your conversations with hospitals and physician and also experienced during other economic downturns, which takes a procedures generally come back first.

Joseph J. Wolk: We expect the greatest COVID-19 impact on sales to occur in the second quarter. Second, for comparative purposes, recall that in the second quarter of 2019, we recorded a significant divestiture gain as other income. Today's revised guidance is a clear indication that a gain of that size will not occur in the second quarter of 2020.

And recognizing this is a different layers the land that all side, let just want to think about ortho versus vision care versus surgical or or anything that you can add there and I will say my second question now which is in your conversation with the FDA what are you seeing or expecting to see in terms of clinical trial enrollment.

And FDA product approvals. Thank you.

Okay, Hey, Joanne valid. Thank you for the first one.

Joseph J. Wolk: Before I hand the call back to Chris to begin the Q&A, let me thank everyone on the phone listening today. We appreciate the insights you have shared to enhance our thought process. And while 100% precision is not the order of the day, we hope you found the explanation of our guidance updates useful. I also want to thank our Johnson & Johnson associates around the world for the extraordinary effort and dedication they have displayed these past few months. I am humbled by the magnificent leadership stories I hear on a daily basis. They serve as an inspiration. Our performance in the first quarter highlights the resiliency of our business during challenging times and showcases the commitment of our employees to advanced solutions that enhance the lives of patients and consumers seeking better health. Chris, back to you to begin the Q&A portion.

Look what we're staying.

In the first case again, referring to my earlier comment because I think today.

There's a keen sound some volume hospital executives and positions have been need to try to return to a more normal state of surgery as we as we see.

Our system vehicle work their way through this curve.

And the virus.

And that's being driven by the way for also a broad recognition that many of the procedures that are currently being delayed will have and health care impact on these patients.

And.

We also now for example that.

The the more of a significant headwinds the economy takes will likely lead to greater rates of uninsured or underinsured answered. Most studies, we've demonstrated in our economy healthcare outcomes are poor. So these are not only economic issues, but these are actually healthcare issues driving their design.

Chris: Thank you, Joe. We will now move to the Q&A portion of the webcast. Operator, can you please provide instructions for those on the line wishing to ask a question?

Operator: Ladies and gentlemen, if you would like to ask a question at this time, please press star then 1 on your telephone keypad. If you would like to withdraw your question, press star then 2.

To get back to were also similar to Joe's point.

I think every system is trying to decide what does that pace look like as they have to return we're operating squeaks, even some of their ambulatory surgery centers back to more elective procedures, that's not going to happen overnight, that's going to take some time for them.

David Risinger: Please limit your questions to one and one follow-up. Your first question comes from David Lewis with Morgan Stanley. Good morning, and thanks for all the significant work you're doing on behalf of patients in the system, as well as for the very significant guidance that Joe just provided. Just a couple of quick questions for me. The first for Paul, just that you talked extensively about the vaccine program, and I know your goal is to produce a billion doses in your ramping reduction throughout the year. So this first question is, by the first quarter of 21, where do you think we're going to be?

To reestablish that that the system I think there's quite a recognition of that.

And then regarding that specific procedures look we would expect obvious areas.

Such an oncology and general surgery to come back sooner, we would expect there to be also certain areas in orthopedics, while elective that can have a significant impact on mobility.

Paul: How could that scale through 2021 relative to that billion doses?

And overall.

[music].

Standard of living.

Paul: Yeah, production capacity would be ready to go at six to nine hundred million in the first quarter, going up to a billion in the course of the year, north of a billion by the end of the year, and that's on an annual basis. So we'll have four manufacturing sites going on one by one, bringing the whole capacity up to one billion in the course of the year.

To come back end next.

And and then look we think the the longer term procedures, perhaps cataract surgery in areas of like that could be what I'd call a third tier.

I also believe that the EPA electrophysiologist business would be one that we would also see at faster return to I mean, there is some.

Concerning data actually regarding the cardiovascular effects of cobot 19, and how that could manifests itself in some of these conditions.

Paul: That was very helpful, Paul.

Joseph J. Wolk: Your detailed guidance and medical devices are very much appreciated in consumer and pharma, as we saw in the first quarter.

But at a high level I think thats the way, we're thinking about it today.

Joseph J. Wolk: CD3, TAR-210, TAR-210, TAR-210, TAR-210,

Joseph J. Wolk: [inaudible]

Okay. All are up Joaquin did you want to.

Discussed the impact on clinical pipeline.

Yes, Thank you Alan.

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It will.

Why don't you.

Joseph J. Wolk: And pop back up in the third quarter just based on the stocking and hoarding benefits. Thanks so much.

Yes.

Yes on first on on the regulatory there are not at the moment.

Joseph J. Wolk: Great. Sure, David.

We have multiple any information for regulatory authorities that the current views on.

Joseph J. Wolk: Thanks for the questions. I would say you could probably expect that in our consumer unit. You saw significant stocking across the globe. Probably, as Chris referenced, it was about seven points of additional growth for the consumer franchise. We were off to a good start, but then you saw the benefit of pantry loading. I would say in the farm remains to be seen. As you know, we don't give quarterly guidance. However, it was only worth about one point of growth in the quarter as some PBMs moved from 30-day refill cycles to 90 days. I would imagine that activity will still continue, but we'll have to see how that plays out a little bit further into the second quarter here when we have stay-at-home protocols.

Timelines on current submissions have changed so those that's going like bond for anticipated filings in 2020, we progress as us as planned and at the moment for the submissions Vettel fully recruited to our target Bill stay on on Omar.

Say unchanged and then maybe for the submissions that are completing to recruit patients will evaluate in the next few weeks clinical trials, we do our best up most best through or to keep going with.

With minimal delays as we are changing sides and two less impacted areas as well as our different ways of featuring patients and working with investigators Alex.

Joseph J. Wolk: Thanks so much. Thanks David. I appreciate the question. Rob, next question, please.

Chris Schott: Our next question is from Chris Schott with J.P. Morgan. Okay.

Add in Joanne and others, just one comment that I would like to make marble global level here too is to acknowledge the great work that the FDA and frankly European authorities and others are making.

Joseph J. Wolk: Thanks very much. And again, I appreciate all the color on the COVID dynamics. Very helpful, given all the uncertainty out there. So just my two questions here were, one, can you elaborate on the sensitivity of your business to elevated unemployment levels as we look past some of the near-term shutdowns? I guess for an environment where we have double-digit unemployment in the near term and maybe rates are elevated as we look out into 2021, what does that do for business as we think about things starting to normalize? My second question was about China, and just share a little bit about what you're seeing with business as the economy begins to reopen there, and are there any learnings we've found from China that could be helpful as we think about recoveries elsewhere Thanks so much.

In partnering and appropriate way for this pandemic.

Our senses that they have.

And extremely collaborative and helping to.

Ensure that our ongoing clinical trials that patient care is not interrupt bed of working with us on how can we make again appropriate adjustments along the way.

And so we've we've been really pleased.

By the the partnering of we've been able to have with them and I. Just think it's really important to acknowledge given all the other dynamics that are taking place right now that you're making that a priority walking.

Alec Skorsky: So, Chris, let me take the first question with respect to how we factored unemployment into our modeling, specifically around the medical device business, and maybe I'll turn it over to Alex to provide some commentary around what our team is telling us with respect to getting back to things in China. With respect to unemployment, we looked back at the financial crisis of 2008 and 2009, and tried to draw inferences from GDP growth and what that meant relative to elective procedures in general. So we'll have to see how that kind of plays out relative to the 2008-2009 financial crisis.

Yes, I will those slide that these is going up yet, but equally strong year one of the pharmaceutical group in them. So approvals on submissions in terms of approval.

In the civil leveled the yet we're expecting for key line extension up good wells.

One being.

Hopefully Q that we expect the second quarter Baiding port for Aslam bedding. Both on died before that Alex. We also expect theme that inphi gains for the at the got that idea, it's going to give us.

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We are expecting it's built in a major depressive disorder with two side that I intend and finally, we had exposure to expecting imbruvica in frontline CLM income what would be taxi map. So for May yield line extension of who was in the second half the year. Additionally, these going up yet based on.

Alec Skorsky: The team has done a nice job relying on many of the reports and surveys that you and the sell side have conducted to make some assessments, but we'll really have to see how it plays out. That's why we've widened our range much more than we have traditionally. I think at the outset of the year, we had about an $800 million range on our overall enterprise sales guidance. Here you can see it's about $3 billion in that range, and it's exclusively tied to medical devices. So more to come on that front, but we believe we've got at least a fairly sizable element of that already baked in. Alex, can I turn it over to you for some thoughts on China?

Year, or Johnson and Johnson into missions, we should be the first work that will nisi mall and new any need for multiple sclerosis on we plan to have the addition of submissions also during the second half of the year one.

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Alec Skorsky: Sure, Chris. Thank you very much for the message. And look, maybe before I answer that, I just want to make a couple of comments. First of all, once again, acknowledging the tremendous impact that this is having on citizens around the world, but also on patients and consumers. This is likely one of the most significant events that any of us have ever experienced in a very personal way, and I think making sure that throughout this, particularly as the world's largest healthcare products company, that we remain just incredibly focused on serving them is our number one priority. I think secondly, it's really acknowledging healthcare workers. You know, I'm privileged to have a number of family members who are out there on the front line making a difference every day.

Hi Fi made enormous most in lung cancer, but will be eligible to meet that at the end of this year that also has breakthrough designation. So beatty strong year from a fighting on ARPU was perspective for the pharmaceuticals.

Great. Thanks, Joanne I appreciate the question operator, we have time for two more questions I would ask folks to keep their question to just one.

Thank you. Our next question is from Terence Flynn with Goldman Sachs.

Alec Skorsky: And when you see what they're doing and literally going into battle and, you know, preparing for the worst, hoping for the best, working 24-7, without them, I couldn't imagine the situation we would be in. And then, last but not least, is the work of our employees. I'm incredibly inspired.

Hi, good morning, Thanks for taking the question and thanks for all the work the companies doing.

On the Kogut front.

Would you be able to share any high level perspective on what a framework for reopening the country looks like and maybe what are the leading indicators that you're watching here to understand if you'll need to potentially adjust your guidance again. Thank you.

Yeah, Karen Thank you very much and.

Look I'd also like to acknowledge.

Alec Skorsky: You know, you heard earlier about the great progress, the strong progress that we've made on our vaccine program. And while, you know, Paul reviewed that perhaps in 10 minutes, I think it's really important to keep in perspective that the work that he's talking about accomplishing literally in 6-12 months would usually take between 5 and 7 years. And to do that in a way where there's a relentless focus on safety, on efficacy, on affordability, but also while accelerating those timelines to do everything we can to reach, as you heard in those numbers, up to a billion people with vaccines in the course of 2021 is just a huge undertaking. And we've got people working 24-7 every day of the week right now to really make that possible. As it relates to China, Chris, I think that there, too, it's important to acknowledge the work of our team members.

The great work that I think our teams have done and trying to provide you with a very thoughtful balance in fact based projection on what we're seeing in each of our markets.

And again, it's been extremely rigorous using a number of quantitative as well as qualitative sources.

To help with the kind of transparency that you're you're hearing and you're staying on this call is indicative of.

The way we're trying to proceed to ensure that you've got as much information as possible.

To help understand what we're dealing with.

It's difficult to predict overall, but I would tell you that there are many efforts.

Here in the United States, certainly with organizations like the business round table there are others.

Taking place on a global basis.

And obviously I think everyone believes efficient start with the science and the data on what we're seeing in terms that disease progression, particularly in some of the hot spots and what youre seeing in Italy, and Spain, let alone watching the ongoing issue in China with an emphasis on.

Alec Skorsky: When we first saw this starting to break in late December or early January, we immediately assembled a team, and they began taking action very quickly, obviously to ensure the safety of our employees, but also to ensure the integrity of our supply chain and to be able to support the healthcare infrastructure within China. And what we have seen over the past several weeks, I would say, is a gradual return of the business. It's important to remember that in our case, in addition to the economic statistics that I think many other people can share, given the number of associates that we have on the ground that are literally visiting hospitals, even in some more remote areas, we're confident that we're starting to see what I would call a reentry into procedures. Depending on where you are, that can range from 50 percent to as high as 60 or 70 percent as of today. And there are still areas that are at the low end of that spectrum.

What can happen in a round to around three as well as what we're seeing here in the United States be it in New York City, Northern New Jersey, but also relative to other places frankly, we're seeing some quite encouraging signs such as California.

And other areas.

So understanding the data in terms of what is the rate of new patient infections versus.

The rate at for example of discharges or doubts that are taking place.

We think is an important factor as next it's also the availability of some of the testing kits that are available both at the front end.

With antigen vaccine, but at the backend with antibody testing, we're really encouraged by some of the work that we're staying in the diagnostics area and the way that companies have stepped up to try to accelerate availability clearly there were some challenges early on and that will likely continue to be some challenges.

But the more that we can ensure the kind of capacity that's necessary with kids with reagents with swaps and and the in these new testing procedures, we think and again thats going to give citizens.

Alec Skorsky: We've also heard some comments recently about some concern about a follow-up wave or resurgence, and they're responding accordingly. But I think overall, we are starting to see a return to a more normal rate of surgical procedures and, frankly, just the provision of healthcare services vis-à-vis our pharmaceutical business and our consumer business as well. We have more than 50 percent of our employees back to work following very specific protocols and directives to ensure their safety, but we are confident that as we proceed in the coming months, we'll see more of a return to normal. Thank you.

And others that a lot more confidence I think third is going to be will likely to be in a state where it will be a combination of testing and protocols for some time.

Even as we returned to work our understanding that the workplace.

And our lives will be a bit different.

But.

Understanding that we can we can use that data and sometimes maybe even by new tracking devices in conjunction with the test kits along with these protocols to form what I'd call out progressive or more gradual reentry.

Again, ensuring that we that we continue to build confidence we continue to watch the data and and we do that by the way, while we're developing hopefully a therapeutic.

Joseph J. Wolk: Great, thanks Chris. I appreciate the question. Rob, next question, please.

Operator: Your next question is from Larry Beakleson with Wells Fargo. Good morning. Thanks for taking the question. Thanks for all the very helpful color.

I would give us an opportunity to intervene in this disease and the coming but since you know the biopharmaceutical industry has invested billions of dollars over the past decade several decades.

Larry Biegelsen: One question on medical devices and the recovery there, and one on the vaccine. First, on devices, Joe, can you share with us your preliminary thoughts on, believe it or not, 2021, just the postponed procedures? You know, I heard your comments about capacity and little catch-up assumed for Q4. Just qualitatively, should we think about a lower base in 2020 and normalized growth in 2021? Or, you know, how should we think about those postponed procedures potentially coming back next year? And I had one follow-up.

It's not only Johnson and Johnson other companies are doing tremendous work working with regulators.

To see what can be done to accelerate that and then.

And we can have one or several dozen combination perhaps.

Later in the summer certainly as we head into the fall.

And then if we can get success with the vaccine.

And again, we're certainly proud of the work that we're doing the Paul mentioned, but also by the other companies. This would give us a very comprehensive approach as good as we head into the back ended 2020 in early 2021.

Joseph J. Wolk: Sure, Larry. Thanks for the question. As you might imagine, while we hope 2021 looks a lot like we thought it was going to look like maybe three months ago, we really have to let that play out. We did see and put into our modeling anywhere from a normal level of procedures in the fourth quarter to a recoupment, if you will, of plus 15%. But it's really going to depend on the pandemic itself, what the health priorities are, and how patients and consumers feel about going to the hospital for these procedures. So I believe from what we've heard from hospital CEOs that they would like to get back in the business of elective surgeries. Many of you have seen recent announcements, Mayo Clinic most recently, with respect to just only 25% utilization in their elective suites.

As this is a disease that can be manage.

And.

One that will have a much better understanding.

And and hopefully be able to put behind us at the right point in time.

Showed as you want to comment on leading indicators related to guidance.

Yes, I would think it really dovetail so what Alex outlined there in terms of returning to work opening up the economy, we're going to look for those same telltale signs how safe is the environment at large with respect to People's.

Comfort level to going back being and social settings going to hospitals to get procedures that they will might otherwise deferred during a time like this so we'll continue to watch those.

On each weekly basis, and the volume that comes through through our major markets.

Joseph J. Wolk: That is putting a financial strain on major hospital systems. And we want to make sure that when we return to normal, that there's good quality healthcare still in place. So I'll defer. It would be a little bit irresponsible for me at this point in time to comment on 2021. The hope and the optimism is that whenever the pandemic abates, we'll be at or above expectations that we've all once had.

Great. Thanks turns appreciate the question Rob last question. Please.

Last question is from Louise Chen with Cantor.

Hi, Thanks for taking my questions here. So first question I have for you. It could you provide more color on your variable cost structure and what's in that 2.3 billion decline in spend for this year and then secondly, how should we think about cash flow for 2020 in 2021 in light of your new guidance. Thank you.

Thanks for the questions Louise so with respect to what's in the $2.3 billion that I referenced in my prepared remarks. Those are expenses that we expect to naturally fall out as a result of the social distancing or stay at home measures. The work from home measures that have been instituted across the globe.

Alec Skorsky: Larry?

Paul: Yes, Alec. Larry, just one other comment on that that I think might be some important perspective. You know, as Joe said, And as I'm sure you can appreciate, over the past several weeks, we have done our best to be in very close touch with hospital CEOs, with physicians who are working in systems around the country, and what we're currently seeing, I think, is a, and this is consistent with what you've seen in some recent press articles, where there are clearly areas where it has been just a relentless pace of patient care in areas like New York, areas like northern New Jersey, other hotspots such as New Orleans, Detroit, and there are also other areas in the Midwest where you might say there are hot zones.

Paul: Outside of that, however, and very consistent with Joe's comments, what you see in many cases are hospitals that are well under 50% of their capacity and have also increased some of their investments two to threefold, sometimes more, and appropriately so, preparing for the absolute worst case in the pandemic. But at the same time, they've lost a very significant portion of their income, seen their costs increase, putting potential financial stress on them.

So think of those in categories, such as travel company meetings, there will be some project delays naturally when people aren't on site to execute them.

I want to be very clear, though we are not rushing to judgment and cutting valuable scientific programs valuable initiatives within our.

Commercial capabilities or programs that benefit our employees.

To to manage RPL in the short term as you heard me say, we think we're very well positioned for the long term you heard from Paul Alex and Joachim that our clinical trials for our major submissions. This year continued to be on track, we're not looking to disrupt this so we talk to investors regularly.

They want us managing for two 510 years out with a long term perspective, and so thats what were living into and we think thats appropriate given with the guidance. We provided today and should the need to rise we will look to of course correct as appropriate.

With respect to our cash flow clearly, we'll have a little bit of a hit to our original projections, but as a reminder, we are a strong generator of cash flow last year. We had an all time high of about $20 billion in cash flow, we were still up very well into the teams this year in with our projections.

Alec Skorsky: And we're also hearing a consistent theme of making sure that as they think about returning, ensuring that we can get consumer and patient confidence back up through the right kind of testing programs, the right kind of protocols in the hospital in place, to make sure that we can get healthcare professionals, that is physicians, nurses, the kind of assurance that they're going to need to get back to a more normal state of working, as well as in some cases, given the amount of work they've been doing, make sure that they've got the kind of backup resources in place to be able to do that is going to be very, very important as those healthcare systems work with governors, and frankly, even with Congress making sure that CARES 3 and CARES 4 are counting for this significant strain on hospitals around the country. So I hope that's helpful. Super helpful. Chris, if I could just get one in on the vaccine for Paul. My understanding is, you know, Moderna, you know, is targeting four times the base immunity.

We'll see how it plays out relative to this guidance, but was very well positioned with $18 billion, a cash and access to credit markets should we need them on a short term basis, but we feel very comfortable with the physician not just for getting through Twentytwenty, but then being very strong into 2021.

Great. Thanks. Thanks, we appreciate the question.

Thanks to everyone for your questions and your continued interest in our company apologies I know, we were unable to get to a lot of you, but certainly.

The Investor Relations team is happy to engage with you in more detailed discussions and we appreciate your time on the call today, We hope you find this information valuable.

And I'll now turn the call over to Alex just for some final comments.

Hey, Thank you once again everybody for your time.

And and the work that you're doing and I have one two and while we started by once again acknowledging the significant impact with is having on civil things on patients on consumers around the world.

Paul: Paul, what's your understanding of the base immunity and affected COVID-19?

We also believe that this demonstrates the importance of health care and everyone's lives.

Paul: COVID-19 patients. What level do you think you need, you know, for an effective vaccine? What are you targeting? Thank you for taking the questions.

Impacted it has and a very personal way on people on families. But also the impact and it has on countries on economies.

Paul: Well, I can't give a scientific answer to that easily because I don't think that's been tested yet. But what we learned from Zika, from Ebola, and from other vaccines is that we get strong humoral but also cellular immunity with one injection. Especially in Zika, we saw that. So we think that we can get to very high levels of protection with one single vaccine, and that will give us an ability to then protect for longer terms, eventually boosting one year later, we think would be sufficient. But we are going to study that in large-scale studies in Phase 1, and that will start early September.

On on almost every aspect of our lives and what I can absolutely committed to you is that when we say that at Johnson and Johnson were built for time like the it's out of humility, knowing the important role that we play and ensuring.

Healthcare is available and accessible and away where we can truly make a difference for billions of people around the world. So thank you very much and.

We'll look forward to our upcoming discussions and an update in the coming weeks and months by everybody stateside and stay healthy.

Paul: Thanks Larry, I appreciate the questions. Rob, next question, please.

Thank you. This concludes today's Johnson <unk> Johnson's first quarter 2020 earnings Conference call you may now disconnect.

Operator: This question is from Joanne Lynch with Citi. Good morning, and thank you for all the work that you're doing during this time and for all the information on modeling. It's really appreciated. I have two questions. The first one has to do with as we think about procedures coming back in medical devices.

Unknown Attendee: [inaudible]

Alec Skorsky: CD3, and TAR-210.

Alec Skorsky: Which types of procedures generally come back first? And, recognizing this as a different lay of the land, but also, I just wanna think about ortho versus vision care versus surgical or anything that you can add there. And I'll say my second question now, which is, in your conversation with the FDA, what are you seeing or expecting to see in terms of clinical trial enrollment and FDA product approvals? Thank you. Okay, Joanne, this is Alec. Thank you for the first one.

Alec Skorsky: Look, what we're seeing in the first case, and again, referring to my earlier comments, is that I think there's a keen sense among hospital executives and physicians of the need to try to return to a more normal state of surgery as we see our systems be able to work their way through this curve and the virus. And that's being driven, by the way, by a broad recognition that many of the procedures that are currently being delayed will have a healthcare impact on these patients. And we also know, for example, that the more of a significant hit that the economy takes will likely lead to greater rates of under-insurance, and those studies would demonstrate that in a poor economy, healthcare outcomes are poor.

Alec Skorsky: So these are not only economic issues, but these are actually healthcare issues driving their desire to get back to work. Also, similar to Joe's point, I think every system is trying to decide what that pace looks like as they have to return their operating suites, even some of their ambulatory surgery centers back to more elective procedures. That's not going to happen overnight. It's going to take some time for them to reestablish that system. I think there's clear recognition of that.

Alec Skorsky: And then regarding the specific procedures, look, we would expect obvious areas such as oncology and general surgery to come back sooner. We would also expect there to be certain areas in orthopedics, while elective, that can have a significant impact on mobility and overall, you know, standard of living to come back next. And then, look, we think the longer-term procedures, perhaps cataract surgery, and areas like that could be what I'd call a third tier. We also believe that the EP, the electrophysiology business, would be one that we would also see a faster return on. I mean, there is some concerning data actually regarding the cardiovascular effects of COVID-19 and how that could manifest itself in some of these conditions. But at a high level, I think that's the way we're thinking about it today. Apollo or Joaquin, did you want to discuss the impact on clinical timelines? Thank you, Alec.

Paul: (inaudible) Why don't you go?

Paul: Yeah, first on the regulatory front, we have not, at the moment, got any information from regulatory authorities that the current reviews on, review timelines on our current submissions have changed, so that's going like planned. For anticipated filings in 2020, we progress as planned, and at the moment, for the submissions that are fully recruited, our target deals stay unchanged, and then maybe for the submissions that are continuing to recruit patients, we'll evaluate them in the next few weeks. In clinical trials, we do our best, utmost best, to keep going with minimal delays as we are changing sites and to less impacted areas, as well as different ways of reaching patients and working with investigators.

Alec Skorsky: Alex? Hey. Joanne and others, just one comment that I would like to make at more of a global level here too is to acknowledge the great work that the FDA and, frankly, European authorities, and others are making in partnering in an appropriate way for this pandemic. You know, our sense is that they have been extremely collaborative in helping to ensure that our ongoing clinical trials, that patient care is not interrupted, working with us on how we can make, again, appropriate adjustments along the So we've been really pleased by the partnership that we've been able to have with them. And I just think it's really important to acknowledge, given all the other dynamics that are taking place right now, that they're making that a priority.

Joaquin Duato: Yeah, I would also add that this is going to be a particularly strong year for the pharmaceutical group in terms of approvals and submissions. In terms of approvals, in the second half of the year, we're expecting four key line extension approvals, one being Darzalex Sub-Q that we expect in the second quarter, very important for us and a very important driver for Darzalex. We also are expecting Trenfaya in psoriatic arthritis. It's going to give us the opportunity to be the only IL-23 company with both psoriasis and psoriatic arthritis. We are expecting Espravato in major depressive disorder with suicidal intent. And finally, we are also expecting Imbruvica in frontline CLL in combination with Rituximab. So, four major line extension approvals in the second half of the year. Additionally, this is going to be a very strong year for Johnson & Johnson in terms of submissions. We submitted in the first quarter Ponecimod, a new NME for multiple sclerosis.

Joaquin Duato: and we plan to have three additional submissions also during the summer.

Joaquin Duato: in the second half of the year. One is our BCMA CAR-T in relapsed refractory multiple myeloma that has breakthrough resignation. The other one is Miraparib in metastatic castor-resistant prostate cancer that also has breakthrough resignation. And finally, our latest one is our biospecific EGFR-CMED in non-small cell lung cancer that will also be submitted at the end of this year. It also has breakthrough resignation. So, a very strong year from a filing and approvals perspective for the pharmaceutical group.

Joaquin Duato: Great. Thanks, Joanne. I appreciate the question. Operator, we have time for two more questions. I would ask folks to keep their questions to just one.

Operator: Thank you. Our next question is from Terrence Flynn with Goldman Sachs.

Terence Flynn: Hi, good morning. Thanks for taking the question. And thanks for all the work the company's doing on the COVID front.

Alec Skorsky: Would you be able to share any high-level information?

Joseph J. Wolk: And finally, what are the leading indicators that you're watching here to understand if you'll need to potentially adjust your guidance again? Thank you.

Alec Skorsky: Yeah, Terence, thank you very much. And look, I'd also like to acknowledge the great work that I think our teams have done in trying to provide you with a very thoughtful, balanced, and fact-based projection on what we're seeing in each of our markets. And again, it's been extremely rigorous, using a number of quantitative as well as qualitative sources to, and hopefully the kind of transparency that you're hearing and you're seeing on this call is indicative of, you know, the way we're trying to proceed to ensure that you've got as much information as possible, you know, to help understand what we're dealing with. It's difficult to predict overall, but I would tell you that there are many efforts here in the United States, certainly with organizations like the Business Roundtable, there are others taking place on a global basis, and obviously I think everyone believes that they should start with the science and the data on what we're seeing in terms of disease progression, particularly in some of the hot spots and what you're seeing in Italy and Spain, watching the ongoing issue in China with an emphasis on, you know, what could happen in a round two or round three, as well as what we're seeing here in the United States, be it in New York City, northern New Jersey, but also relative to other places, frankly, we're seeing some quite encouraging signs, such as California and other areas.

Alec Skorsky: So understanding the data in terms of what is the rate of new patient infections versus, you know, the rate, for example, of discharges or deaths that are taking place is, we think, an important factor. Next, is the availability of some of the testing kits that are available, both at the front end with antigen testing and at the back end with antibody testing. We're really encouraged by some of the work that we're seeing in the diagnostics area and the way that companies have stepped up to try to accelerate availability. Clearly, there were some challenges early on, and there will likely continue to be some challenges, but the more that we can ensure the kind of capacity that's necessary with kits, reagents, swabs, and these new testing procedures, we think that, again, that's going to give citizens and others a lot more confidence.

Alec Skorsky: I think third is going to be, we're likely to be in a state where it will be a combination of testing and protocols for some time, even as we return to work, understanding that the workplace, that our lives will be a bit different, but understanding that we can use that data, and sometimes maybe even by new tracking devices in conjunction with the test kits, along with these protocols to form what I'd call a progressive or a more gradual reentry, again, ensuring that we continue to build confidence, we continue to watch the data, and we do that, by the way, while we're developing hopefully a therapeutic that would give us an opportunity to intervene in this disease in the coming months. As you know, the biopharmaceutical industry has invested billions of dollars over the past several decades, and not only Johnson & Johnson, other companies are doing tremendous work working with regulators to see what can be done to accelerate that, and then if we can have one or several of those in combination, perhaps, later in the summer, or certainly as we head into the fall, and then if we can get success with the vaccine, and again, we're certainly proud of the work that we're doing that Paul mentioned, but also by the other companies, this would give us a very comprehensive approach so that as we head into the back end of 2020 and early 2021, that this is a disease that can be managed, and, you know, one that will have a much better understanding of, and hopefully be able to put behind us at the right point in time.

Joseph J. Wolk: Joe, would you like to comment on leading indicators related to guidance?

Operator: Yeah, I would think it really dovetails to what Alec's outlined there in terms of returning to work, opening up the economy. We're going to look for those same telltale signs, how safe is the environment at large with respect to people's comfort level with going back, being in social settings, going to hospitals to get procedures that they might otherwise defer during a time like this. So we'll continue to watch those on a weekly basis and the volume that comes through our major markets.

Louise Chen: That's great. Thanks, Terrence. I appreciate the question. Rob, last question, please.

Joseph J. Wolk: And the last question is from Louise Chen with Cantor.

Louise Chen: Hi, thanks for taking my questions here.

Joseph J. Wolk: The first question I have for you is, could you provide more color on your variable cost structure and what's in that $2.3 billion decline in spend for this year? And then, secondly, how should we think about cash flow for 2020 and 2021 in light of your new guidance?

Joseph J. Wolk: Thank you.

Joseph J. Wolk: Thanks for the questions, Louise. So with respect to what's in the $2.3 billion that I referenced in my prepared remarks, those are expenses that we expect to naturally fall out as a result of the social distancing or stay-at-home measures, the work-from-home measures that have been instituted across the globe. So think of those in categories such as travel and company meetings. There will be some project delays naturally when people aren't on site to execute them. I want to be very clear, though: we are not rushing to judgment and cutting valuable scientific programs, valuable initiatives within our commercial capabilities, or programs that benefit our employees to manage our P&L in the short term. As you heard me say, we think we're very well positioned for the long term.

Joseph J. Wolk: You heard from Paul, Alex, and Joaquin that our clinical trials for our major submissions this year continue to be on track. We are not looking to disrupt this, so we talk to investors regularly. They want us managing for 2, 5, 10 years out with a long term perspective, and so that's what we're living into. We think that's appropriate given with the guidance we provided today, and should the need arise, we will look to course correct as appropriate, with respect to our cash flow clearly we'll have a little bit of a hit to our original projections but as a reminder we are a strong generator of cash flow last year we had an all-time high of about 20 billion dollars in cash flow we were still up very well into the teens this year in our projections we'll see how it plays out relative to this guidance but we're very well positioned with 18 billion dollars of cash and access to credit markets should we need them on a short-term basis but we feel very comfortable with the position not just for getting through 2020 but then being very strong into 2021

Alec Skorsky: Great. Thanks, Louise. I appreciate the question. Thanks to everyone for your questions and your continued interest in our company. Apologies, I know we weren't able to get to a lot of you, but certainly, the Investor Relations team is happy to engage with you in more detailed discussions, and we appreciate your time on the call today. We hope you find this information valuable, and I'll now turn the call over to Alec for some final comments.

Hey, thank you once again, everybody, for your time and the work that you're doing. And I want to end where we started by, you know, once again, acknowledging the significant impact that this is having on citizens, on patients, on consumers around the world. We also believe that this demonstrates the importance of healthcare in everyone's lives, the impact that it has in a very personal way on people, on families, but also the impact that it has on countries, on economies, on almost every aspect of our lives.

And what I can absolutely commit to you is that when we say that at Johnson & Johnson we're built for times like these, it's out of humility, knowing the important role that we play in ensuring that healthcare is available and accessible in a way where we can truly make a difference for billions of people around the world. So thank you very much, and we'll look forward to our upcoming discussions and updates in the coming weeks and months. Bye everybody. Stay safe and stay healthy. Thank you. This concludes today's Johnson & Johnson First Quarter 2020 Earnings Conference Call. You may now disconnect.