Q3 2020 Johnson & Johnson Earnings Call

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Operator: If anyone has any objections, you may disconnect at this time. If you experience technical difficulties during the conference, you may press star zero to reach the operator. I would now like to turn the conference call over to Johnson & Johnson. You may begin. Good morning, this is Chris Dolorfus, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the third quarter of 2020. I hope everyone is healthy and continues to remain safe during these times. Joining me on today's call is Joe Walk, Executive Vice President, Chief Financial Officer. During the Q&A portion of the call, we will be joined by Jennifer Talbert, Executive Vice President and Worldwide Chairman, Pharmaceuticals; and Ashley McEvoy, Executive Vice President and Worldwide Chairman, Medical Devices. Thibaut Mangan, Executive Vice President and Worldwide Chairman, Consumer Health, and Mattai Mammon, Global Head of Janssen Research and Development. A few logistics before we get into the details.

If anyone has any objections you may disconnect at this time.

If you experienced technical difficulties during the conference you May press star zero to reach the operator.

I would now like to turn the conference call over to Johnson <unk> Johnson you may begin.

Good morning. This is Chris door, FES, Vice President of Investor Relations for Johnson and Johnson.

Welcome to our company's review of business results for the third quarter of 2020.

I hope everyone is healthy it continues to remain safe during these times.

Joining me on today's call is Joe Walk Executive Vice President Chief Financial Officer during the.

During the Q and a portion of the call we will be joining by Jennifer to Albert Executive Vice President and worldwide Chairman Pharmaceuticals.

Actually Mcevoy executive Vice President worldwide Chairman medical devices.

She built long gone.

Executive Vice President and worldwide Chairman consumer health.

Hi, Matt Smith Global head of Janssen research and development.

A few logistics before we got into the details.

Chris Schott: This review is being made available via webcast, accessible through the Investor Relations section of the Johnson & Johnson website, at www.investor.jnj.com, where you can also find additional materials, including today's presentation and associated schedules. 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 risks and factors that may cause the company's actual results to differ materially from those projected.

This review is being made available via webcast accessible through the Investor Relations section of the Johnson <unk> Johnson website.

At Investor Dot change <unk> Dot Com, where you can also find additional materials, including todays presentation and associated schedules.

Please note that today's presentation includes forward looking statements. We encourage you to review the cautionary statement included in todays presentation, which identifies certain risks and factors that may cause the company's actual results to differ materially from those projected.

Chris Schott: In particular, there is significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic. This means the 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. A further description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2019 Form 10-K and subsequent Form 10-Qs, along with the reconciliation of the non-GAAP financial measures utilized for today's discussion to the most comparable GAAP measures. Additionally, 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, I will cover consolidated and segment sales information along with some operational highlights from the P&L results for the corporation and the three business segments. My comments on the segments will be shared at a high level to allow more time for Q&A.

In particular, there are significant uncertainty about the duration and contemplated the impact of the cold at 19 pandemic.

This means that results could change at any time and the contemplated impact of cold 19 on the company's business results and outlook is a best estimate based on the information available as of today's date.

A further description of these risks uncertainties and other factors can be found in our SEC filings.

Putting our 2019 form 10-K, and subsequent form 10-Q's, along with a reconciliation of the non-GAAP financial measures utilized for todays discussion to the most comparable GAAP measures are also available at Investor Day JNJ Dotcom.

Several other 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 todays agenda, I will cover consolidated and segment sales information along with some operational highlights from the PML results for the corporation and the three business segments like.

My comments on the segments will be shared at a high level to allow more time for Q1 day, Joe will provide high level commentary about our enterprise performance, including James response to COVID-19, followed by insights into our capital allocation priorities as well as some key pipeline updates he will then.

Chris Schott: Joe will provide high-level commentary about our enterprise performance, including JNJ's response to COVID-19, followed by insights into our capital allocation priorities, as well as some key pipeline updates. He will then conclude with our 2020 guidance and qualitative expectations as we position for a strong start to 2021. The remaining time will be available for your questions. We anticipate the webcast will last about 75 minutes.

He will then conclude with our 2020 guidance and qualitative expectations as we position for a strong start to 2021.

The remaining time will be available for your questions. We anticipate the webcast will last about 75 minutes.

Chris Schott: Worldwide sales were $21.1 billion for the third quarter of 2020, reflecting a reported growth of 1.7% versus the third quarter of 2019. Operational sales growth, which excludes the effect of translational currency, also increased by 1.7%, as currency had no impact in the quarter. In the U.S., sales increased 2.7%, while in regions outside the U.S., a reported and operational increase was 0.6%; excluding the net impact of acquisitions and divestitures, adjusted operational sales increase was 2% worldwide, 2.8% in the U.S., and 1.1% outside the U.S. Results were negatively impacted by the COVID-19 pandemic, but we did see improvement throughout the quarter, with procedure volume recovering Turning now to Earnings. For the quarter, net earnings were $3.6 billion, and diluted earnings per share was $1.33 versus diluted earnings per share of $0.66 a year ago.

Worldwide sales were $21.1 billion for the third quarter of 2020, reflecting a reported growth of 1.7% versus the third quarter of 2019.

Operational sales growth, which excludes the effect of translational currency also increased 1.7% as currency had no impact in the quarter.

In the U.S. sales increased 2.7% while in regions outside the U.S. our reported an operational increase was 0.6%.

Excluding the net impact of acquisitions and divestitures adjusted operational sales increase was 2% worldwide.

2.8% in the U.S. and 1.1% outside the U.S.

Results were negatively impacted by the COVID-19 pandemic. However, we did see improvement throughout the quarter with <unk>.

Procedure volume recovering faster than expected as well as positive trends in scripts and physician office visits.

Turning now to earnings for the <unk>.

For the quarter net earnings were $3.6 billion and diluted earnings per share was $1.33 cents versus diluted earnings per share of 66 cents a year ago.

Chris Schott: Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.9 billion, and adjusted diluted earnings per share was $2.20, representing increases of 3.5% and 3.8%, respectively, compared to the third quarter of 2019. On an operational basis, adjusted diluted earnings per share increased 2.4%. Beginning with consumer health, I would now comment on business segment sales performance for the third 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 third quarter of 2019 and therefore exclude the impact of currency translation. Worldwide consumer health sales totaled $3.5 billion and grew 3%, with growth in the U.S. of 11.6% and a decline outside the U.S. of 2.7%.

Excluding after tax intangible asset amortization expense and special items for both periods adjusted net earnings for the quarter.

Were $5.9 billion and adjusted diluted earnings per share was $2.20.

Representing increases of 3.5% and 3.8% respectively compared to the third quarter of 2019.

On an operational basis adjusted diluted earnings per share increased 2.4%.

Beginning with consumer health I will now comment on business segment sales performance for the third 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 third quarter of 2019 and there.

And therefore exclude the impact of currency translation.

Worldwide consumer health sales totaled $3.5 billion and grew 3% with growth in the U.S. of 11.6% and a decline outside the U.S. of 2.7%.

Chris Schott: Consumer Health delivers strong performance in our U.S. OTC, oral care, and wound care businesses, partially offset by the negative impact of COVID-19 outside the U.S., primarily in our OTC and skin health beauty businesses. We are making good progress executing our SKU Rationalization Program, which, as expected, negatively impacted sales results in mostly OUS markets. However, this was mostly offset by some sales-related true-ups in Latin America. Additionally, e-commerce sales continue to drive growth across most brands. Over-the-counter medicines grew globally by 4% on strong U.S. sales of Tylenol in analgesics due to share growth and increased demand driven by COVID-19, Pepsid in digestive health due to a competitive withdrawal, and Zyrtec in allergy due to share gains, incremental distribution, and strong in-season marketing plans.

Super Health delivered strong performance in our U.S., So Tc oral care and wound care business is par.

Partially offset by the negative impact of COVID-19.

Outside the U.S., primarily in our Otcs and skin health beauty businesses.

We're making good progress executing our SKU rationalization program, which as expected negatively impacted sales results in mostly US markets. However, this was mostly offset by some sales related trups in Latin America.

Additionally, E commerce sales continue to drive growth across most brands.

Over the counter medicines grew globally by 4% on strong us sales of tylenol in analgesics due to share growth and increased demand driven by COVID-19, perhaps.

Hepcidin digestive health due to competitive withdrawal and zyrtec and allergy due to share gains incremental distribution and strong in the season marketing plans.

Chris Schott: Growth was also driven by increased retailer stocking across multiple brands in preparation for a potential upcoming cold and flu season. However, this strong performance was partially offset outside the U.S. by the impact of COVID-19 consumption declines in China for pain and in cough, cold, and digestive health in other regions. Our OTC business is growing above the market, gaining 0.7 points of share on a year-to-date basis. The skin health and beauty franchise returned a growth of 0.9% on the strong performance of OGX due to share gains coupled with increased retailer stocking across multiple brands and a reduction in sun care returns due to a rebound in category growth. This growth was partially offset by competitive pressures in the U.S. and the negative impact of COVID-19 in Asia Pacific and Latin America, although as consumers continue to focus on products related to personal health and hygiene. Worldcare grew by 10.8% on continued growth of Listerine mouthwash due to new product launches in Asia-Pacific and increased demand globally related to COVID-19. Wound care grew 13.5% primarily due to strong sales of Band-Aid brand adhesive bandages and Neosporin.

Growth was also driven by increased retailer stocking across multiple brands in preparation for a potential upcoming cold and flu season.

This strong performance was partially offset outside the us by the impact of COVID-19 consumption declines in China in pain.

And in cough, cold and digestive health and other regions.

ROTC business is growing above the market, gaining 0.7 points of share on a year to date basis.

Skin health and beauty franchise returned to growth of 0.9% on strong performance of our GXT due to share gains coupled with increased retailer stocking across multiple brands and a reduction in sun care returns due to a rebound in category growth.

This growth was partially offset by competitive pressures in the U.S. and the negative impact of COVID-19 in Asia Pacific and Latin America.

As consumers continue to focus on products related to personal health and hygiene.

All care grew by 10.8% one continued growth of LISTERINE mouthwash due to new product launches in Asia Pacific and increased demand globally related to COVID-19.

Care grew 13.5%, primarily due to strong sales of Bandaid brand adhesive bandages and he is foreign.

Chris Schott: Moving on to the pharmaceutical segment, worldwide pharmaceutical sales of $11.4 billion grew 4.6%, enabled by growth across all regions. The business realized double-digit growth in seven key products, with oncology as the main catalyst. Sales grew in the U.S. by 1.5% and outside the U.S. by 8.8%.

Moving onto the pharmaceutical segment.

Worldwide pharmaceutical sales of $11.4 billion grew 4.6% enabled by growth across all regions.

<unk> business is realized double digit growth in seven key products within college is the main catalyst.

Sales grew in the U.S. by 1.5% and outside the U.S. by 8.8% our growth.

Chris Schott: Our growth was negatively impacted by COVID-19, driven by continued delays in diagnosis and slower new patient starts. The products most impacted were Stelara, Tremfya, Invegas-Astena, and our pulmonary hypertension portfolio. The estimated impact of these products was worth roughly 200 basis points on worldwide pharmaceutical growth in the quarter, which was an improvement from Q2, as office visit and script trends continue to improve. Year-to-date global operational growth is strong at roughly 6%, which remains above expected market growth for 2020. Our Oncology portfolio delivered another strong quarter with worldwide growth of 12.4%. Darzalex continued to show momentum in all regions, growing 43.4%, led by share uptake in Lines 1 and 2, with U.S. Line 1 share up 2 points versus the prior year.

Our growth was negatively impacted by COVID-19, driven by continued delays in diagnosis and slower new patient starts.

The products most impacted were stelara from fire, Invega, sustenna and our pulmonary hypertension portfolio.

We estimate the impact of these products was worth roughly 200 basis points on worldwide pharmaceuticals growth in the quarter, which was an improvement from Q2 as office visit and script trends continue to improve.

Year to date global operational growth is strong at roughly 6%, which remains above expected market growth for 2020.

Our oncology portfolio delivered another strong quarter with worldwide growth of 12.4%.

Darzalex continues to show momentum in all regions growing 43.4%.

Led by share uptake in lines, one and two with U.S. lying one share up two points versus the prior year.

Chris Schott: Additionally, the U.S. and European markets exhibited increasing adoption of the subcutaneous formulation launched in the second quarter, as feedback continues to be very positive on the ease and reduced time to administer the new formulation, especially during this pandemic period. Also, we continue to advance the Darzalex innovation pipeline with the U.S. filing for amyloidosis. Imbruvica grew 11.2% globally, driven largely by increased penetration and share gains in

Additionally, the us and European markets exhibited increasing adoption of the subcutaneous formulation launched in the second quarter as feedback continues to be very positive on the east and reduce time to administer the new formulation.

Especially during this pandemic period also.

Also we continue to advance the Darzalex innovation pipeline with the U.S. filing for amyloidosis.

Imbruvica grew 11.2% globally, driven largely by increased penetration and share gains in Europe.

Chris Schott: The U.S. saw strong underlying double-digit growth and continued leadership and shared growth in CLL Line 1, up 1.9 points. However, U.S. growth was negatively impacted by two comparisons to the prior year, a one-time returns reserve adjustment, and higher inventory levels in 2019. On a global basis, these adjustments were worth over 500 basis points.

U.S. saw strong underlying double digit growth and continued leadership and share growth in CLL wind was up 1.9 points.

US growth was negatively impacted by two comparisons to the prior year, a onetime returns reserve adjustment and higher inventory levels in 2019.

Chris Schott: Erleada continued its strong growth momentum, contributing just over $200 million in the quarter, with sales more than doubling versus the prior year, with strong share growth, especially in the metastatic indication. Slightly offsetting these results were declines in Zytiga and Velcade, primarily due to generic competition. Moving now to immunology.

On a global basis. These adjustments were worth over 500 basis points.

Our lead a continued its strong growth momentum contributing just over $200 million in the quarter with sales more than doubling versus prior year with strong share growth, especially in the metastatic indication.

Slightly offsetting these results were declines in sight, tega and Velcade, primarily due to generic competition.

Chris Schott: Globally, sales grew 1.9% in the third quarter, driven by double-digit growth in Stelara and Tremfya, partially offset by continued erosion in Remicade due to biosimilar competition. Internationally, sales grew at 8.4%, offsetting a slight decline in the U.S. of under 1%. Third quarter growth for our immunology portfolio, as well as the overall market, was impacted by COVID-19-related delayed diagnosis. Year-to-date immunology growth is 5.7%. Stelara growth of 14% was driven by continued global uptake and share gains in Crohn's disease, with about a 5-point share increase in the U.S., and growth from the recently approved ulcerative colitis indication despite the negative impacts to the immunology market created by COVID-19. On a year-to-date basis, Stelara growth remains strong at about 18% globally. Tremfya, the first-in-class, market-leading IL-23 inhibitor, grew 12.2% in the quarter, driven by growth of roughly 50% outside the U.S. due to continued strength of new launches in Europe and Asia. However, U.S. sales were flat in the quarter.

Moving now to immunology globally sales grew 1.9% in the third quarter driven by double digit growth in Stelara interim fire, partially offset by continued erosion and remicade biosimilar competition interns.

Internationally sales grew at 8.4% offsetting a slight decline in the U.S. of under 1%.

Third quarter growth for our immunology portfolio as well as the overall market was impacted by COVID-19 related delayed diagnosis.

To date immunology growth is 5.7%.

Store growth of 14% was driven by continued global uptake and share gains in crohns disease with about a five point share increase in the us and growth from the recently approved ulcerative colitis indication despite the negative impacts to the immunology market created by COVID-19.

On a year to date basis still our growth remained strong at about 18% globally.

Term via the first in class market, leading IL 23 inhibitor grew 12.2% in the quarter driven by growth of roughly 50% outside the us due to continued strength of new launches in Europe and Asia.

Chris Schott: The U.S. delivered strong share gains, up nearly three points. However, growth was negatively impacted by COVID-19, along with an unfavorable prior period pricing adjustment, and further investments and rebates offered to enhance access. On a year-to-date basis, global growth for Tremfya remains strong at 30.3%. Our total pulmonary hypertension portfolio posted double-digit growth of 13.9%, driven by strong growth of Upsummit and Uptravi of 12.3% and 23.2%, respectively, driven by increased market penetration and share growth. I'll now turn your attention to the medical devices segment. Worldwide medical device sales were $6.2 billion, declining 3.9%, excluding the net impact of acquisitions and divestitures. Primarily, the divestiture of ASP's adjusted operational sales decline was 3.3% worldwide.

US sales were flat in the quarter.

U.S. delivered strong share gains up nearly three points. However growth was negatively impacted by COVID-19, along with an unfavorable prior period pricing adjustment and further investments in rebates offered to enhance access.

On a year to date basis global growth for term fire remained strong at 30.3%.

For total pulmonary hypertension portfolio posted double digit growth of 13.9% driven by strong growth of up summit, and uptravi of 12.3% and 23.2%, respectively, driven by increased market penetration and share growth.

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

Worldwide medical devices sales were $6.2 billion declining 3.9%, excluding the net impact of acquisitions and divestitures, primarily the divestiture of ASP adjusted operational sales decline was 3.3% worldwide.

Chris Schott: The medical device market continued to be impacted by the COVID-19 pandemic in Q3, but procedures began to resume more widely across the globe, and we are reporting significant improvement in sales versus the 32.5% adjusted operational decline in Q2 and 20.1% decline in June. There was some variability by platform and across markets, but overall, we saw more stable results in total across each month this quarter, with September declining in line with the total quarter decline of 3.3%. The sequential improvement compared to Q2 occurred across all segments of our business, with the recovery occurring the quickest in the U.S. and China, two of our largest geographies. The U.S. returned to growth in the quarter. China grew almost 17%, adjusting for the ASP divestiture, despite the negative impact from the sell-through of product stocking that occurred in the first quarter to ensure that there was product available to support the expected market recovery in subsequent quarters.

Medical device market continued to be impacted by the COVID-19 pandemic in Q3 for procedures began to resume more widely across the globe and we are reporting significant improvement in sales versus the 32.5% adjusted operational decline in Q2 and 20.1% decline in June.

There were some variability by platform and across markets, but overall, we saw a more stable results in total across each month this quarter with September declining in line with the total quarter decline of 3.3%.

The sequential improvement compared to Q2 occurred across all segments of our business with the recovery occurring the quickest in the us and China two of our largest geographies.

The U.S. returned to growth in the quarter.

China grew almost 17% adjusting for the ASP divestiture, despite the negative impact from the sell through of products stocking that occurred in the first quarter to ensure there was product available to support the expected market recovery in subsequent quarters.

Chris Schott: We expect most of this product stocking to be depleted in Q4. Most other OUS markets experienced significant improvements compared to Q2. However, the state of procedure recovery has varied by market due to factors such as the structure of different healthcare systems and localized decisions regarding COVID-19 restrictions. Consistent with what we shared in the prior quarter, the impact on results related to selling days was immaterial for this quarter.

We expect most of this product stocking to be depleted in Q4.

Most other all us markets experienced significant improvements compared to Q2. However, the state of procedure recovery has varied by market due to factors such as the structure of different healthcare systems and localized decisions regarding COVID-19 restrictions.

Consistent with what we shared in the prior quarter the impact to results related to selling days was immaterial for this quarter.

Chris Schott: As a reminder, we will have extra selling days in the fourth quarter as a result of the 53rd week. Interventional solutions returned to double-digit growth this quarter across both the U.S. and O.U.S. regions, delivering 12.4 percent growth globally. The U.S. and China were the primary drivers, with newer product offerings in both electrophysiology and serenovus positively contributing to both market and share growth for the quarter. Additionally, we received approval from the U.S. FDA for a ThermoCool SmartTouch SF ablation catheter for the treatment of persistent atrial fibrillation, making it the only radiofrequency catheter on the U.S. market with this indication.

As a reminder, we will have extra selling days in the fourth quarter as a result of the 50 Threerd week.

Interventional solutions returned to double digit growth this quarter across both the us and us regions delivering 12.4% growth globally. The us in China were the primary drivers with newer product offerings in both electrophysiology and server novus positively contributing to both market and share growth for the quarter.

Additionally, we received approval from the Usfour for.

For our thermal coal smartwatch assaf ablation catheter for the treatment of persistent ATRIO fibrillation, making it the only radiofrequency catheter on the us market with this indication.

Chris Schott: Worldwide orthopedics declined 3.1% versus the prior year, with the U.S. returning to growth for the quarter. HIPPS grew 1.9% globally, led by strong U.S. growth of 8.7%. This reflects both market recovery as well as strength from our leadership position in the U.S. in the anterior approach and related demand for products like the Actis Total Hip System and enabling technologies. However, sales outside the U.S. declined by 8.4% due to COVID-19, as well as product stocking reductions in China worth over 250 basis points.

Worldwide Orthopedics declined 3.1% versus prior year with the us returning to growth for the quarter fixed.

EPS grew 1.9% globally led by strong us growth of 8.7%.

This reflects both market recovery as well as strength from our leadership position in the us in the anterior approach and related demand for products like the act as total hip system and enabling technologies.

Sales outside the U.S. declined by 8.4% due to COVID-19, as well as product stocking reductions in China worth over 250 basis points.

Chris Schott: Worldwide trauma returned to growth in Q3, delivering 0.7% growth globally. U.S. growth of 4.2% for the quarter reflects COVID-19-related procedural recovery, as well as continued strength of our newer products, such as the femoral neck systems and cannulated compression screws. OUS declines reflect slower procedure volumes due to COVID-19. However, we continue to see stabilization of our spine business with recent launches of Symfony, Conduit, and Fibrograft. Global results for this platform were flat versus the prior year.

Worldwide trauma returned to growth in Q3, delivering 0.7% growth globally use.

US growth of 4.2% for the quarter reflects COVID-19 related procedural recovery as well as continued strength of our newer products such as the femoral neck systems and Cannulated compression screws.

Oh, you less declines reflect slower procedure volumes due to cover at 19.

We continue to see stabilization of our spine business with recent launches of symphony conduit in fiber graft.

Chris Schott: The knee market accelerated versus Q2 performance, but it is recovering slower than the other segments of orthopedics. The U.S. recovery was better than other markets, declining about 2%, primarily driven by COVID-19. The performance was aided by the continued success of products like Attune Revision and Cementless. While improving from a Q2 decline of 55.3%, the Q3 OUS sales decline of 26.4% reflects slower market recovery, especially in revision procedures where we have higher penetration than primary. Performance was also negatively impacted by a comparison to strong double-digit adjusted growth in the third quarter of 2019. However, pricing continues to be a factor in orthopedics. For the quarter, U.S. prices returned to more historic levels, down low single digits.

Mobile results for this platform were flat versus prior year.

The knee market accelerated versus Q2 performance, but as recovering slower than the other segments of orthopedics. The U.S. recovery was better than other markets declining about 2%, primarily driven by COVID-19 before.

Performance was aided by the continued success of products like a tune revision and some Atlas.

While improving from a Q2 decline of 55.3% Q3 O US sales decline of 26.4% reflects slower market recovery, especially in revision procedures, where we have higher penetration than primary.

Performance was also negatively impacted by a comparison to strong double digit adjusted growth in the third quarter of 2019.

Pricing continues to be a factor in orthopedics for the quarter us price returned to more historic levels down low single digits.

Chris Schott: Moving to the results for the surgery business, advanced surgery showed significant improvement versus Q2, but still declined by 1.2% due to the impact of COVID-19. Worldwide energy and endocutters declined about 7% and 3%, respectively.

Moving to the results for the surgery business advance.

Advanced surgery showed significant improvement versus Q2, but still declined by 1.2% due to the impact of COVID-19.

Chris Schott: We continue to experience competitive pressures in the U.S. However, relative to the market, both platforms performed well outside the U.S., especially in China, due to the strength of new products. Global biosurgery growth was over 5%, reflecting share gains from new products and the return of Surgiflo plus thrombin to the U.S. market after the supply disruption in the prior year. Last year's supply disruption impacted global biosurgery growth by about 400 basis points in the quarter. Global wound closure declined less than 5% in line with the market recovery, with continued competitive growth in both the U.S. and China. The vision business declined 9.5% globally.

Worldwide energy and Endocutters declined about 7% and 3% respectively. We.

We continue to experience competitive pressures in the us however relative to the market both platforms performed well outside the us, especially in China due to the strength of new products.

Global Biosurgery increased over 5%, reflecting share gains from new products and the return of surge of flow plus thrombin to the us market after the supply disruption in the prior year.

Last year supply disruption impacted biosurgery growth by about 400 basis points in the quarter.

Global wound closure declined less than 5% inline with the market recovery with continued competitive growth in both the us and China.

Chris Schott: U.S. contact lens growth of about 13% was largely driven by product stocking worth about 11 points, which is expected to return to more normalized levels in Q4. OUS contact lens growth versus the prior quarter. The decline of 18% was negatively impacted by a prior year pre-buy in advance of a consumption tax increase in Japan worth about 5 points.

The vision business declined 9.5% globally us contact lens growth of about 13% was largely driven by product stocking worth about 11 points, which is expected to return to more normalized levels in Q4.

Oh us contact lens improved versus the prior quarter.

The decline of 18% was negatively impacted by a prior year pre buy in advance of consumption tax increase in Japan worth about five points.

Chris Schott: We continue to advance our contact lens pipeline with the world's first and only drug-releasing contact lens for patients with allergic eye itch having received approval from Health Canada for Acuvue Theravision. However, surgical vision declined 16.4% globally due to the continued impact of COVID-19 on procedures and competitive pressures in the U.S. I will now provide some commentary on our earnings for the quarter. Regarding our consolidated statement of earnings for the third quarter of 2020, please direct your attention to the box section at the bottom of the schedule. You will see that we have provided our earnings adjusted to exclude intangible amortization expense and special items.

We continue to advance our contact lens pipeline with the worlds first and only drug releasing contact lens for patients with allergic edge, having received approval from health, Canada for accurate view third revision.

Surgical vision declined 16.4% globally due to the continued impact of COVID-19 on procedures and competitive pressures in the U.S.

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

Regarding our consolidated statement of earnings for the third quarter of 2020. Please direct your attention to the box section at the bottom of the schedule.

Chris Schott: As reported this morning, our adjusted EPS of $2.20 reflects a reported increase of 3.8% and an operational increase of 2.4%. 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 remained flat versus 2019 as a percent of sales as COVID-19 related fixed cost deleveraging in the medical devices business was offset by favorable mix in the pharmaceutical and consumer businesses. Selling, marketing, and administrative margins for the quarter improved as a result of favorable segment mix and expense leveraging in the pharmaceuticals business partially offset by the negative COVID-19 impact on medical devices sales and increased brand marketing expense investments in the consumer business. We continue to invest in research and development at competitive levels, investing 13.5% of sales this quarter.

You will see that we have provided our earnings adjusted to exclude intangible amortization expense and special items.

As reported this morning, our adjusted EPS of $2.20 reflects a reported increase of 3.8% and an operational increase of 2.4%.

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 product sold remained flat versus 2019 as a percent to sales as COVID-19 related fixed cost deleveraging in the medical devices business was offset by favorable mix in the pharmaceutical and consumer businesses.

Selling marketing and administrative margins for the quarter improved as a result of favorable segment mix and expense leveraging in the pharmaceuticals business, partially offset by the negative COVID-19 impact on medical devices sales and increased brand marketing expense investments in the consumer business.

Chris Schott: This was higher than the third quarter of 2019 by 100 basis points, driven by portfolio progression, including the COVID-19 vaccine in the pharmaceutical business, increased investment in robotics and digital platforms, and the negative COVID-19 impact on medical devices sales. The other income and expense line showed a net expense of $1.2 billion in the third quarter of 2020 compared to net expense of $4.2 billion last year.

We continue to invest in research and development at competitive levels investing 13.5% of sales this quarter. This was.

This was higher than the third quarter of 2019 by 100 basis points driven by portfolio progression, including the COVID-19 vaccine in the pharmaceutical business increased investment in robotics, and digital platforms and the negative COVID-19 impact on medical devices sales.

The other income and expense line showed net expense of $1.2 billion in the third quarter of 2020 compared.

Chris Schott: 2019 includes $4 billion related to the initial agreement in principle to settle opioid litigation, and we've recorded an additional $1 billion in the third quarter of 2020 based on continued negotiations of an all-in settlement amount for the state, local, and tribal governments' opioid litigation claims for a cumulative total of $5 billion. Regarding taxes in the quarter, our effective tax rate increased from a 6.4% benefit in the third quarter of 2019 to 19.2% in the third quarter of 2020. As a reminder, the third quarter 2019 tax rate was significantly affected by the aforementioned $4 billion agreement in principle. I encourage you to review our 10-Q for further details on specific tax matters. Excluding special items, the effective tax rate was 19% vs. 20.3% in the same period last year.

Compared to net expense of $4.2 billion last year.

2019 includes $4 billion related to the initial agreement in principle to settle opioid litigation and we have recorded an additional $1 billion in the third quarter of 2020 based on continued negotiations of an all in settlement amount for the state local and tribal governments opioid litigate.

Recent claims for a cumulative total of $5 billion.

Regarding taxes in the quarter, our effective tax rate increased from a 6.4% benefit in the third quarter of 2019% to 19.2% in the third quarter of 2020.

As a reminder, the third quarter 2019 tax rate was significantly affected by the aforementioned 4 billion dollar agreement in principle.

I encourage you to review our 10-Q for further details on specific tax matters.

Chris Schott: Let's now look at Adjusted Income Before Tax by Segment. In the third quarter of 2020, adjusted income before tax for the enterprise increased by 0.1% versus the third quarter of 2019 to 34.4%. Looking at the adjusted pre-tax income by segment.

Excluding special items, the effective tax rate was 19% versus 20.3% in the same period last year.

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

In the third quarter of 2020 adjusted income before tax for the enterprise increased by 0.1% versus the third quarter of 2019% to 34.4%.

Chris Schott: Pharmaceutical margins improved by 340 basis points to 46.4%, primarily driven by favorable product mix and selling and marketing expense leveraging. Medical devices declined to 21.6%, driven by COVID-19 impacts on the business, including sales declines and fixed cost deleveraging. Consumer health margins improved by 280 basis points to 24.4 percent, driven by favorable product mix inclusive of progressing our SKU rationalization program. That concludes the sales and P&L highlights for Johnson & Johnson's third quarter, 2020. I'm now pleased to turn the call over to Joe. Thank you, Chris.

Looking at the adjusted pre tax income by segment for Us.

Pharmaceutical margins improved by 340 basis points to 46.4%, primarily driven by favorable product mix and selling and marketing expense leveraging.

Medical devices declined to 21.6% driven by COVID-19 impacts on the business, including sales declines and fixed cost deleveraging.

Consumer health margins improved by 280 basis points to 24.4% driven by favorable product mix inclusive of progressing our SKU rationalization program.

Joseph J. Wolk: Good morning, everyone, and thanks to all of you for joining us today. 2020 has proven to be an eventful year, with uncertainty sparking rapid change across many industries, particularly in health care. I'm honored to represent Johnson & Johnson Management to acknowledge the tremendous resilience and the willingness of our colleagues across the globe to tackle the many challenges being encountered. Like in prior quarters, and for that matter, prior years, their strength, character, and perseverance are the driving force behind our solid performance this quarter, while solidifying the foundation for long-term success across Johnson & Johnson's businesses. Our team continues to be hard at work pursuing a vaccine candidate to help combat the COVID-19 pandemic, and we are proud of the progress that has been made thus far.

That concludes the sales and PML highlights for Johnson <unk> Johnson's third quarter 2020, Im now pleased to turn the call over to Joe.

Thank you Chris Good morning, everyone and thanks to all of you for joining US today 2020 has proven to be an eventful year with uncertainty sparking rapid change across many industries, particularly in healthcare I am honored to represent Johnson and Johnson management to acknowledge the tremendous resilience and the willingness of our colleagues across the globe.

Tackle the many challenges being encountered liking.

Like in prior quarters and for that matter prior years their strength of character and perseverance is the driving force behind our solid performance this quarter, while solidifying the foundation for long term success across Johnson <unk> Johnson's businesses.

Our team continues to be hard at work pursuing a vaccine candidate to help combat. The COVID-19 pandemic and we are proud of the progress that has been made thus far on sept.

Joseph J. Wolk: On September 23rd, we announced that the first participants were dosed in our pivotal multi-country phase 3 trial, Ensembl, which will evaluate a single dose of our COVID-19 vaccine candidate in up to 60,000 people worldwide, including representation from high-risk populations and underrepresented communities. This follows positive interim results from our Phase 1, 2A study, which showed the safety profile and immunogenicity after a single vaccination with our candidates supported for development. These findings demonstrated that a single dose resulted in immunogenicity in all age groups with similar responses, including older adults.

On September 20, Threerd, we announced that the first participants were dosed in our pivotal multi country phase three trial, and samba, which will evaluate a single dose of our COVID-19 vaccine candidate in up to 60000 people worldwide, including representation from high risk populations and underrepresented communities.

This follows positive interim results from our phase one two a study which showed the safety profile and Immunogenicity. After a single vaccination with our candidate supported further development. These.

These findings demonstrate it that a single dose resulted in immunogenicity in all age groups with similar responses, including older adults.

Joseph J. Wolk: A single dose of a safe and effective vaccine could offer a significant advantage during a global pandemic. However, we also appreciate that a two-dose regimen may have the potential for enhanced durability in some participants. Therefore, we plan to run a Phase III clinical trial with a two-dose regimen beginning later this year. Simultaneously, we have scaled up manufacturing capacity and are on track to meet our goal of providing over 1 billion doses of the vaccine per year. We have committed to the public to provide the vaccine, once approved, on a not-for-profit basis for emergency pandemic use. As we continue to progress our vaccine clinical program, we are committed to the highest ethical standards, sound scientific principles, the pursuit of diversity and inclusion, and transparent communication of our processes and results. Let me be unequivocal here.

Single dose of a safe and effective vaccine could offer a significant advantage during a global pandemic.

We also appreciate that a key dose regimen may have the potential for enhanced durability in some participants therefore, we plan to run a phase three clinical trial with a two dose regiment beginning later this year.

Simultaneously, we have scaled up manufacturing capacity and are on track to meet our goal of providing over 1 billion doses of a vaccine per year.

We have committed to the public to provide the vaccine once approved on a not for profit basis for emergency pandemic use.

As we continue to progress our vaccine clinical program. We are committed to the highest ethical standards sound scientific principles pursuit of diversity and inclusion and transparent communication of our processes and results.

Joseph J. Wolk: We have not encountered any undue pressure, and we will maintain the rigorous requirements of research, development, and manufacturing to bring a safe and effective COVID-19 vaccine to the public, as we do for all our products. Mattai Mammon will provide a few words on the COVID-19 vaccine candidate at the conclusion of my remarks. Now, let's take a deeper look into our results in Outlook. Each of our business segments performed well in the third quarter despite COVID-19-related headwinds. We believe our pharmaceutical segment once again outperformed the market, and recovery in our medical device business was faster than anticipated. And in consumer, our strategy focused on science-based products led to solid growth. While COVID dynamics continue to make the outlook fluid and perhaps not linear, we are encouraged by this progress and believe that we will continue to see improvement through the end of the year.

Let me be unequivocal here, we have not encountered any undue pressure and we will maintain the rigorous requirements of research development and manufacturing to bring a safe and effective COVID-19 vaccine to the public as we do for all our products.

My time and will provide a few words on the COVID-19 vaccine candidate at the conclusion of my remarks.

Now, let's take a deeper look into our results and outlook.

Each of our business segments performed well in the third quarter. Despite cove at 19 related headwinds.

We believe our pharmaceutical segment once again outperformed the market recovery in our medical device business was faster than anticipated and in consumer our strategy focused on science based products led to solid growth.

While Kobe dynamics continue to make the outlook fluid and perhaps not linear we are encouraged by this progress and believe that we will continue to see improvement through the end of the year.

As Chris mentioned in his remarks with respect to the additional accrual for opioid litigation the amount crude this quarter is intended to bring a comprehensive resolution to the overall opioid litigation with states cities counties and tribal governments for a final amount and provide certainty for involve parties and critical.

Joseph J. Wolk: As Chris mentioned in his remarks with respect to the additional accrual for opioid litigation, the amount accrued this quarter is intended to bring a comprehensive resolution to the overall opioid litigation with states, cities, counties, and tribal governments for a final amount and provide certainty for involved parties and critical assistance for families and communities in need. Regarding our cash position, we ended the third quarter with approximately $7 billion of net debt, consisting of approximately $31 billion of cash and marketable securities and approximately $38 billion of debt.

Assistance for families and communities in need.

Regarding our cash position, we ended the third quarter with approximately $7 billion of net debt consisting of approximately $31 billion of cash and marketable securities and approximately $38 billion of debt our balance sheet remains strong we.

We estimate free cash flow through the first three quarters to be more than $13 billion.

In August the company completed a $7.5 billion debt offering we were able to secure historically low rates benefiting from the current low interest rate environment and our strong credit rating.

Joseph J. Wolk: Our balance sheet remains strong, and we estimate free cash flow through the first three quarters to be more than $13 billion. In August, the company completed a $7.5 billion debt offering. We were able to secure historically low rates, benefiting from the current low interest rate environment and our strong credit rating. Subsequent to the quarter, approximately $6.5 billion was used to fund our recently closed acquisition of Momenta Pharmaceuticals. Our capital allocation strategy remains intact, committed to managing our entire business and portfolio with a long-term mindset. While all aspects of our COVID-19 vaccine program are a top priority, we continue to invest in innovation in key areas of our pipeline across all parts of our business. With respect to M&A, we continue to evaluate potential strategic opportunities that complement the robust R&D portfolio across our broad-based business while driving long-term value for our stakeholders.

Subsequent to the quarter approximately $6.5 billion was used to fund our recently closed acquisition of Momenta Pharmaceuticals.

Our capital allocation strategy remains intact committed to managing our entire business and portfolio with a long term mindset.

While all aspects of our COVID-19 vaccine program are a top priority we continue to invest in innovation in key areas of our pipeline across all parts of our business.

With respect to M&A, we continue to evaluate potential strategic opportunities that complement the robust R&D portfolio across our broad base business, while driving long term value for our stakeholders.

As I just noted earlier this month, we closed the Momenta pharmaceuticals transaction bolstering our pipeline with novel Therapeutics being developed for immune mediated diseases.

We are particularly excited by the lead asset nipple Cal Nab, a potentially best in class anti Fcr and antibody. This.

Joseph J. Wolk: As I noted earlier this month, we closed the Momenta Pharmaceuticals transaction, bolstering our pipeline with novel therapeutics being developed for immune-mediated diseases. We are particularly excited by the lead asset, Nipocalimab, a potentially best-in-class anti-FCRN antibody. The science behind Nipocalimab is advancing research in rare auto-antibody-driven diseases with significant unmet need, with current Phase II and Phase III studies in warm autoimmune hemolytic anemia, Hemolytic Diseases of the Fetus and Newborn, and Myasthenia Gravis.

The science behind that the column that is advancing research in rare auto antibody driven diseases with significant unmet need with current phase two and phase three studies in warm auto immune hemolytic anemia Hema.

Hemolytic diseases of the fetus and newborn and Meyers senior gratis.

We plan to build on this foundation with additional indications planned in serious dermatological, rheumatic neurologic and hematologic diseases.

Joseph J. Wolk: We plan to build on this foundation with additional indications planned in serious dermatological, rheumatic, neurologic, and hematologic diseases. Many of these auto-antibody diseases have no adequate standard of care today. Finally, on capital allocation, our dividend remains a top priority, and during the quarter, we distributed $2.7 billion to shareholders, in line with the 6.3% increase we announced in April. We continue to make progress advancing key pipeline assets that are expected to deliver long-term growth. Beyond what Chris mentioned in his remarks, there are a few other pipeline items worth highlighting. In our pharmaceutical segment, we continue to advance our innovative pipeline. During the third quarter, we received FDA approval for a second indication of Spravato in major depressive disorder with acute suicidal ideation or behavior.

Many of these auto antibody diseases have no adequate standard of care today.

Finally on capital allocation, our dividend remains a top priority and during the quarter, we distributed $2.7 billion to shareholders in line with the 6.3% increase we announced in April.

We continued to make progress advancing key pipeline assets that are expected to deliver long term growth.

On what Chris mentioned in his remarks, there are a few other pipeline items worth highlighting.

In our pharmaceutical segment, we continued to advance our innovative pipeline during the third quarter. We received FDA approval for a second indication of provide out in major depressive disorder with acute suicidal ideation or behavior, we did.

We did make a strategic decision to discontinue development of from that of the year and investigational treatment for influenza and based on recent results from pre planned interim analysis that sound familiar in combination with the standard of care did not demonstrate added benefit in hospitalized patients as we head into the fourth quarter.

Joseph J. Wolk: We did make a strategic decision to discontinue development of Pimidavir, an investigational treatment for influenza A, based on recent results from preplanned interim analyses that found Pimidavir, in combination with the standard of care, did not demonstrate added benefit in hospitalized patients. As we head into the fourth quarter, we look forward to additional plan submissions, most notably our U.S. filing for our BCMA CAR-T in multiple myeloma, as well as the U.S. filing for amivantamab in non-small cell lung cancer. Regarding digital robotic surgery in our medical device business, we made a significant step for our orthopedic solution, submitting a $510K pre-market notification to the U.S. FDA in September for our Velys robotic-assisted solutions for total knee arthroplasty. This is another important milestone in our digital surgery program, complementing the commercial success we have seen with Monarch.

We look forward to additional plan submissions, most notably our us filing of our DCM a car T and multiple myeloma.

As well as the us filing for Amazon to Nab in non small cell lung cancer.

Regarding digital robotic surgery in our medical device business, we made a significant step for our orthopedic solution submitting a five 10-K premarket notification to the us FDA in September for our Dallas robotic assisted solutions for total knee arthroplasty.

This is another important milestone in our digital surgery program complementing the commercial success, we have seen with monarch.

As you May recall, we plan to a full medical device business review back in May and had hoped we could provide that in person event sometime this year.

However, given the ongoing limitations for in person events, we decided to provide a shorter limited scope virtual update on our medical device business, featuring all of our digital surgery solutions.

Joseph J. Wolk: As you may recall, we planned a full medical device business review back in May and had hoped we could provide that in-person event sometime this year. However, given the ongoing limitations for in-person events, we decided to provide a shorter, limited-scope virtual update on our medical device business featuring all of our digital surgery solutions. We've scheduled this for Thursday, November 19th, and we'll provide additional event details in the coming weeks.

We scheduled this for Thursday November 19th and will provide additional event details in the coming weeks.

So, let's now turn to our full year 2020 guidance and key updates.

As I noted based on our third quarter results across the enterprise and the continued progress we saw in procedure volumes, we are confident to increase our guidance.

Joseph J. Wolk: So let's now turn to our full year 2020 guidance and key updates. As I noted, based on our third quarter results across the enterprise and the continued progress we saw in procedure volumes, we are confident to increase our guidance. To provide you with a little more insight regarding our medical devices business, as you can see from our results, we exceeded our expectations as the market recovery was even stronger than anticipated, as hospitals and surgeons continued to work through the pent-up demand resulting from restrictions on procedures earlier in the year. Moving to the fourth quarter, we are expecting continued procedure stabilization slightly ahead of our assumptions communicated last quarter. We are updating our range to be flat to down 10% versus flat to down 15% provided last quarter.

To provide you a little more insights regarding our medical devices business as you can see from our results we exceeded our expectations as the market recovery was even stronger than anticipated as hospitals and surgeons continue to work through the pent up demand, resulting from restrictions on procedures earlier in the year move.

Moving to the fourth quarter, we are expecting continued procedure stabilization slightly ahead of our assumptions communicated last quarter, we are up.

We are updating our range to be flat to down 10% versus flat to down 15% provided last quarter.

As a reminder, this range as compared with our original estimates to start the year. When we were expecting to continue our positive sales momentum prior to the pandemic. This updated range reflects continued improvement with fourth quarter sales expectations around 2019 levels.

This forecast reflects our latest thinking based on what we know today and is consistent with our efforts throughout the year to provide transparency around our assumptions.

Joseph J. Wolk: As a reminder, this range is compared with our original estimates to start the year when we were expecting to continue our positive sales momentum prior to the pandemic. This updated range reflects continued improvement with fourth quarter sales expectations around 2019 levels. This forecast reflects our latest thinking based on what we know today and is consistent with our efforts throughout the year to provide transparency around our assumptions. Taking the qualitative factors related to each of our segments into account, and based on recent developments, we are making the following adjustments to our 2020 guidance. Adjusted operational sales growth of between 0.5% and 1.5%.

Taking the qualitative factors related to each of our segments into account and based on recent developments, we are making the following adjustments to our 2020 guidance.

Adjusted operational sales growth of 0.5% to 1.5%.

Moving on to operational sales, our guidance is $82 billion to $82.8 billion or flat to growth of 1% versus 2019.

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 1.17. There is an estimated negative impact of foreign currency translation of approximately 100 basis points versus the negative 130 basis points provided in our.

Joseph J. Wolk: Moving on to operational sales, our guidance is $82 billion to $82.8 billion, or flat to growth of 1% versus 2019. 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 1.17, there is an estimated negative impact of foreign currency translation of approximately 100 basis points versus the negative 130 basis points provided in our July guidance, or an improvement of 30 basis points, resulting in an estimated reported sales change between minus 1% to flat compared to 2019, or $81.2 billion to $82 billion We are tightening our other income guidance to $800 million to $900 million versus our previous guidance of $800 million to $1 billion. We are tightening the range of net interest expense, now expected to be net interest expense of $100 to $150 million.

July guidance or an improvement of 30 basis points, resulting in an estimated reported sales change between minus 1% to flat compared to 2019 or $81.2 billion to $82 billion.

We are expecting our operating margins to be in line with our previous guidance of approximately a 100 basis points decline with planned investments across all of our business segments in the fourth quarter.

We are tightening our other income guidance to $800 million to $900 million versus our previous guidance of $800 million to $1 billion.

We are tightening the range of net interest expense now expected to be net interest expense of $100 million to $150 million.

We're also tightening the range of our effective tax rate guidance for 2020 estimated at 17.0% to 17.5%.

Given those updates we are comfortable with adjusted earnings per share guidance, ranging from $7.95 to $8.05 on a constant currency basis.

While not predicting currency movements, but to provide some insights on the potential impact on EPS. Our reported adjusted EPS will be positively impacted by approximately 10 cents per share versus our July guidance and now reflects no translational currency impact for the full year.

Joseph J. Wolk: We are also tightening the range of our effective tax rate guidance for 2020, estimated at 17.0% to 17.5%. Given those updates, we are comfortable with adjusted earnings per share guidance ranging from $7.95 to $8.05 on a constant currency basis. While not predicting currency movements, but to provide some insights on the potential impact on EPS, our reported adjusted EPS would be positively impacted by approximately $0.10 per share versus our July guidance and now reflects no translational currency impact for the full year. Accounting for that, we would be comfortable with your models reflecting reported adjusted EPS ranging from $7.95 to $8.05, or a range of minus 8.4% to minus 7.3%. In case you're now doing a double-take, yes, that is the same range I just provided for constant currency. So, essentially, on income, we are estimating no year-on-year impact from currency.

Accounting for that we would be comfortable with your models, reflecting reported adjusted EPS ranging from $7.95 to $8.05 or a range of minus 8.4% to minus 7.3% in.

In case, you are now doing a double take yes that is the same range I just provided for constant currency. So essentially on income we are estimating no year on year impact from currency.

While not providing guidance related to 2021 at this time I'd like to provide some early perspectives on how we are thinking about next year for consideration in your financial modeling.

We anticipate our pharmaceutical segment to remain strong continuing to reach more patients with best in class products in areas of high unmet need as such we expect to continue delivering solid volume driven above market growth in 2021.

In consumer health, we expect to grow competitively with the market driven by priority areas and enhance strength in ecommerce we expect that can.

Joseph J. Wolk: While not providing guidance related to 2021 at this time, I'd like to provide some early perspectives on how we are thinking about next year for consideration in your financial modeling. We anticipate our pharmaceutical segment to remain strong, continuing to reach more patients with best-in-class products in areas of high unmet need. As such, we expect to continue delivering solid, volume-driven, above-market growth in 2021. In consumer health, we expect to grow competitively with the market, driven by priority areas and enhanced strength in e-commerce. We expect that continued skew rationalization and 2020 COVID-related sales comparisons, primarily in OTC, can be a headwinds in the first half of 2021. With respect to margins, we have demonstrated a steady cadence of margin improvement. The improvement will not be as significant as we've experienced in the last two years.

We expect that continued SKU rationalization and Twentytwenty cobot related sales comparisons primarily in LTC can be a headwind in the first half of 2021 with.

With respect to margins, we have demonstrated a steady cadence of margin improvement. Our previously announced SKU rationalization will result in margin improvement, but given the tremendous progress. The team has made in recent years to reach benchmark levels. The.

The improvement will not be as significant as we've experienced the last two years.

Our medical devices segment, we anticipate a continued increase in procedures associate it with pandemic recovery. We continue to believe in the strong underlying fundamentals in the medical device market, such as aging demographics and unmet need coupled with hospital systems that has successfully navigated the pandemic.

Joseph J. Wolk: In our medical devices segment, we anticipate a continued increase in procedures associated with pandemic recovery. We continue to believe in the strong underlying fundamentals of the medical device market, such as aging demographics and unmet need, coupled with hospital systems that have successfully navigated the recent pandemic. As I said on our second-quarter earnings call, hospitals are much better prepared for any potential COVID resurgence and have become even more efficient in the allocation of resources to meet the needs of all patients. While we certainly continue to watch closely as the rest of 2020 plays out, we remain optimistic heading into 2021 and, as you might expect, expect to deliver robust double-digit sales growth. Moving on to a few comments related to the 2021 P&L. Consistent with sales, we also anticipate strong comparative year-over-year earnings per share.

As I said on our second quarter earnings call hospitals are much better prepared for any potential cobot resurgence and have become even more efficient in the allocation of resources to meet the needs of all patients.

While we certainly continue to watch closely as the rest of 2020 plays out we remain optimistic heading into 2021 and as you might expect anticipate to deliver robust double digit sales growth.

Moving onto a few comments related to the 2021 PNM consistent with sales. We also anticipate strong comparative year over year earnings per share.

This impart due to the Twentytwenty dynamics, but also in part due to the strength of our businesses. At this time, we anticipate that operating margin will be more in the range of where we ended 2019.

Joseph J. Wolk: This is in part due to the 2020 dynamics, but also in part due to the strength of our businesses. At this time, we anticipate that operating margin will be more in the range of where we ended 2019. For R&D, we will continue to invest for the long term and anticipate that level of spend to be in the same range of approximately 14% of sales, consistent with prior years.

For R&D, we will continue to invest for the long term and anticipate that level of spend to be in the same range of approximately 14% of sales consistent with prior years.

Lastly, it's important to note that we are committed to the incremental investment necessary to advance our pipeline inclusive of the negative impact to EPS related to the Momenta acquisition and.

Joseph J. Wolk: Lastly, it's important to note that we are committed to the incremental investment necessary to advance our pipeline, inclusive of the negative impact to EPS related to the Momenta acquisition, and that in 2021, the impact to EPS is approximately dilution of $0.10 to $0.15, as we disclosed at the deal signing. We remain confident in our strength heading into 2021 and optimistic about our long-term outlook. I want to thank the business leaders joining our call today, Jennifer, Ashley, Thibault, and Mattai, for engaging in the Q&A session. In fact, I'm going to take the liberty of kicking off this portion of the webcast with a topic that we are often asked, that being the impact of COVID-19, not only this year, but what we anticipate for 2021, by requesting each of these leaders to provide a few Jennifer, let's start with you. Well, thank you, Joe. And good morning, everyone.

And that in 2021, the impact to EPS is approximately dilution of 10 cents to 15 cents as we disclosed at the deal signing.

We remain confident in our strength heading into 2021 and optimistic in our long term outlook I want to.

I want to thank the business leaders, joining our call today, Jennifer actually tivo and the tie to engage in the Q and a session in fact I'm going to take the Liberty of kicking off this portion of the webcast with the topics that we are often asked that being the impact of COVID-19, not only this year, but what we anticipate for 2021 by request.

In each of these leaders to provide a few brief comments on their respective businesses.

And then we'll have much high address the state of our vaccine candidate development Jeff.

Jennifer let's start with you.

Well, Thank you Joe and good morning, everyone. It's really nice to have the opportunity to speak with you today I'd like to start by acknowledging all those who have been and continue to be impacted by COVID-19, I sincerely hope that yield and those closest to remain healthy and safe.

I'm really proud of the Pharmaceuticals group performance in the third quarter.

We know that illnesses don't hit pause just because there is a global pandemic, so whether battling cancer facing mental health challenges or living with an auto immune disease patients rely on our transformational medicines every single day.

Jennifer Taubert: It's really nice to have the opportunity to speak with you today. I'd like to start by acknowledging all those who have been and continue to be impacted by COVID-19. I sincerely hope that you and those closest to you remain healthy and safe. I'm really proud of the Pharmaceuticals Group's performance in the third quarter. You know, we know that illnesses don't hit pause just because there's a global pandemic.

As you heard from Chris Our Pharmaceuticals business grew 4.6% operationally in the third quarter, and we delivered our 10th consecutive quarter with sales that exceeded $10 billion and our second quarter with sales exceeding 11 billion.

Seven of our key brands grew at double digit rates, including our oncology brands, our leader Darzalex Imbruvica.

Jennifer Taubert: So whether battling cancer, facing mental health challenges, or living with an autoimmune disease, patients rely on our transformational medicines every single day. As you heard from Chris, our pharmaceuticals business grew 4.6% operationally in the third quarter, and we delivered our 10th consecutive quarter with sales that exceeded $10 billion. And this was our second consecutive quarter with sales exceeding $11 billion. Seven of our key brands grew at double-digit rates, including our oncology brands Erleada, Darzalex, and Imbruvica, our immunology brands Stelara and Tremfya, and our pulmonary hypertension brands Upsummit and Uptravi. And despite the pressures that COVID-19 has placed on our business, our growth year-to-date is roughly 6%, definitely above market growth. During the third quarter, we kept a relentless focus on innovation and on delivering for our patients and customers around the world.

Our immunology brands Stelara interim Fiat and our pulmonary hypertension brands up some and Uptravi and just.

And despite the pressures at Covent 19th placed on our business our growth year to date is roughly 6% definitely above market growth.

During the third quarter, we kept a relentless focus on innovation and on delivering for our patients and customers around the world. So.

So we worked really hard to maximize the value of our industry, leading portfolio of marketed medicine, we delivered on our pipeline of transformational medicine, and we advanced our next wave of innovation.

In Q3, we continued the very successful launch of Darzalex bass Pro which is our subcutaneous formulation of darzalex to treat multiple myeloma and.

And we received approvals first provider in major depressive disorder, with acute suicidal ideation or behavior, and we filed uptravi Ivy for pulmonary arterial hypertension and darzalex for light chain amyloidosis.

Jennifer Taubert: So we worked really hard to maximize the value of our industry-leading portfolio of marketed medicines, we delivered on our pipeline of transformational medicines, and we advanced our next wave of innovation. In Q3, we continued the very successful launch of Darzalex Faspro, which is our subcutaneous formulation of Darzalex to treat multiple myeloma. And we received approvals for Spravato in major depressive disorder with acute suicidal ideation or behavior.

And on October Onest, we closed our acquisition at Momenta Pharmaceuticals, which provides a significant opportunity to drive long term growth through expansion into and leadership and auto antibody driven diseases twice.

Jennifer Taubert: We filed Uptravi IV for pulmonary arterial hypertension and Darzalex for light chain amyloidosis. Additionally, on October 1st, we closed our acquisition of Momentum Pharmaceuticals, which provides a significant opportunity to drive long-term growth through expansion into and leadership in autoantibody-driven diseases. 2020 has been an unprecedented year, and we've adapted our business to meet the new challenges that have been posed by the COVID-19 pandemic. We quickly transitioned to scaling omni-channel capabilities to engage with healthcare providers. We enabled patients to both start and stay on therapy using virtual tools, and we deployed a number of technologies to help keep our clinical trials on track. And despite some negative impact related to COVID-19 in the quarter, we also saw encouraging signs of recovery in our market performance across multiple metrics.

2020 has been an unprecedented year and we've adapted our business to meet the new challenges that have imposed by the Coca 19 pandemic, we quickly transition to scaling omnichannel capabilities to engage with health care providers.

We enable patients to both start and stay on therapy, using virtual tools and we deployed a number of technologies to help keep our clinical trials on track.

And despite some negative impact related to COVID-19 in the quarter. We also saw encouraging signs of recovery and our market performance across multiple night metrics.

The fundamentals of our business remains strong and we feel confident in our ability to grow above the market on a full year basis in 2020, and also our expectations of where our business is heading remain unchanged and we continue to plan for another strong year of above market growth in 2021. So.

Again, it's a pleasure to have this opportunity to connect with you today and I look forward to any question, but first let me go ahead and turn it over to Ashley Mcevoy Ashley Thank you Jennifer well clearly.

Jennifer Taubert: The fundamentals of our business remain strong, and we feel confident in our ability to grow above the market on a full-year basis in 2020. Additionally, our expectations of where our business is heading remain unchanged, and we continue to plan for another strong year of above-market growth in 2021. So again, it's a pleasure to have this opportunity to connect with you today, and I look forward to any questions. But first, let me go ahead and turn it over to Ashley McEvoy. Ashley?

Ted market has been disrupted by this once in a generation of that and I would like to start by acknowledging that this recovery would not be possible without the heroic efforts as healthcare workers around the world their selfless dedication to patient care has just been amazing.

And I cannot give a shout out to our day to day.

One in we'll have been partnering with our customers covering cases, managing both COVID-19 patients as well as helping to stand back up other important medical for key here.

So as Jennifer mentioned co has really been any salary for shifts within the med tech industry really creating a lot of new creative solution related to digital patient engagement virtual surgeon training a shift in patient care and continued evolution in our business model we have.

Ashley A. McEvoy: Thank you, Jennifer. Well, listen, clearly the MedTED market has been disrupted by this once-in-a-generation event, and I, too, would like to start by acknowledging that this recovery would not be possible without the heroic efforts of healthcare workers around the world. Their selfless dedication to patient care has just been amazing. And I must give a shout out to our J&Jers who, since day one in Wuhan, have been partnering with our customers, covering cases, managing both COVID-19 patients, as well as helping to stand back up other important medical procedures. So, as Jennifer mentioned, COVID has really been an accelerant for shifts within the medtech industry, really creating a lot of new creative solutions related to digital patient engagement, virtual surgeon training, a shift in sites of care, and continued evolution in our business model.

We have reason to this challenge and rethinking how we engage with our customer to name a couple examples we partnered with an education partner advances in surgery, where we virtually trained over 1 million surgeon.

Okay, 50 different country, Uncoated 19 protocol as well as ways to safely stand back up medical procedure.

We cooperated remote clinical cases for real estate.

Customers around the world.

And most recently in September we launched resources to education about the importance of routine medical visit and the implication of differing treatment within my health can't wait campaign.

During that has definitely overly advanced our innovation agenda, we continue to increase the overall value of our new product pipeline and are shifting a kilowatt substantial and transformational innovation.

In quarter, three we received FDA approval for the indication to treat persistent atrial fibrillation in our Biosense Webster business we.

Ashley A. McEvoy: We've risen to this challenge by rethinking how we engage with our customers. To name a couple examples, we partnered with an education partner, Advances in Surgery, where we virtually trained over 1 million surgeons in 150 different countries on COVID-19 protocols, as well as ways to safely stamp out medical procedures. We've incorporated remote clinical case support to assist and connect customers around the world. And most recently, in September, we launched resources to educate patients about the importance of routine medical visits and the implications of deferring treatment with the My Health Can't Wait campaign.

We were granted approval from health, Canada for a first of its kind of drop the leading contact lens for allergy suffer.

We submitted our.

Finally for our upcoming valent robotic assisted knee replacement program.

We received FDA clearance for our goal ability high growth segment.

We began a rollout of an entire revamp of our ethicon and higher echelon platform from empowered secular state black to approve stately mechanisms all three gateway and improve Alco.

So as we've been talking about med tech really need and on the three year improvement journey, and we are demonstrating progress with growth year over year from 1.5% in 2017% to 3.9% in 2019.

Colby temporarily interrupted this progression our results this quarter demonstrate that in addition to the overall market recovery.

Ashley A. McEvoy: During the pandemic, we've meaningfully advanced our innovation agenda; we continue to increase the overall value of our new product pipeline and are shifting to more substantial and transformational innovation. In Quarter 3, we received FDA approval for the indication to treat persistent atrial fibrillation in our Bison's Webster business. Additionally, we were granted approval from Health Canada for a first-of-its-kind drug-eluting contact lens for allergy sufferers.

This strategic choices, we've made to strengthen our competitiveness and our relentless focus on customer education are working.

Good to see our largest market the United States.

Go positive up 1% growth.

Our second largest market in China will deliver 17% growth.

Well I was like Biosense Webster and Sarah Nobody does.

Well digit.

Trauma.

Harrogate, both the all posted low to mid single digit growth.

Ashley A. McEvoy: We submitted our FDA filing for our upcoming Velys robotic-assisted knee replacement program. Additionally, we received FDA clearance for our dual-mobility HIP, a high-growth segment. And lastly, we've begun a rollout of an entire revamp of our Ethicon Endocutter Echelon Platform, from buttresses to powered circular staplers to improved stapling mechanisms, all to reduce leaks and improve outcomes. So as we've been talking about MedTech, really, we have been on this three-year improvement journey. And we are demonstrating progress with growth year-over-year from 1.5% in 2017 to 3.9% in 2019. While COVID temporarily interrupted this progression, our results this quarter demonstrate that, in addition to the overall market recovery, the strategic choices we've made to strengthen our competitiveness and our relentless focus on customers and patients are working. It's good to see our largest market, the United States, go positive, up 1% growth. Our second largest market, China, will deliver 17% growth.

So looking forward, there's still going to be factors like patient willingness and affordability of medical care, which will continue to drive the level of uncertainty in the near term.

However, when I look at the state market overall, and Medtech I continue to be optimistic as arie fill an unmet clinical need.

You know, what we know today with the impact of Covance and what it had on 2020 I expect that we're going to deliver robust double digit operational growth in 2021.

Looking forward to the question.

And now I'm going to turn it over to Steve.

Thank you Ashley and good morning to all of you on the call.

As you heard from from create this quarter again, we have seen that our consumer Brown has been very resilient. During these unprecedented time.

Consumer has picked up growth, 33% operationally in the quarter, delivering a 3.4% operational growth on a year to date basis.

While continuing to expand our margin.

And it is a testament to the strength of our strategy of offering differentiated science based brand focus.

Focused on federal health and endorsed by professionals.

Today's environment consumer the glow.

Consumer globally have a heightened interest in digital health and hygiene.

Ashley A. McEvoy: And platforms like Biosense Webster and Serenovus grew double digits, and HITS, Trauma, and Biosurgery all posted low to mid-single digit growth. So looking forward, there's still going to be factors like patient willingness and affordability of medical care, which will continue to drive some level of uncertainty in the near term. However, when I look at the end-of-state markets overall in medtech, I continue to be optimistic, as there is still oodles of unmet clinical need to be met. So, knowing what we know today with the impact of COVID and what it's had on 2020, I expect that we're going to deliver robust double-digit operational growth in 2021. Thanks for your time. I'm looking forward to the questions. And now I'm going to turn it over to Thibaut.

Any driving high demand for education trusted solution backed by science like sold offset by Johnson and Johnson and an example of our preference would be to the tremendous growth we have seen in our over the counter medicine business.

Driven by brands like diving or via TEG, Betsy and lobby.

In oral care franchise with at least three miles Walsh.

In other parts of our business has done very well.

The results have been more new them, we have seen a negative impact of COVID-19 in categories like skin care and makeup remover.

Seeing increased demand full body wash body lotions call premium of healthcare.

So for 2021.

We expect both headwinds and Tailwinds.

As we saw this year, but.

We strongly believe that our strategy of capabilities and our focus on execution.

Thibaut Mangan: Thank you, Ashley, and good morning to all of you on the call. As you heard from Chris, this quarter, again, we have seen that our consumer brands have been very resilient during this unprecedented time. Our consumer health sector grew a solid 3% operationally in the quarter, delivering a 3.4% operational growth on a year-to-date basis while continuing to expand our margin.

Position us very well for continued to from where we are prepared to see ongoing creation consumer demand related to the firm they make.

Potential pantry loading behavior of or lower incidence of conditions like cores and true. However.

However, even if we did that with these uncertainties in mine.

We expect to see continued strong growth in E Commerce and continued demand for our leading brown, which if you could see is backed by science.

The other thing in a consumer has business to continue to grow competitively with the market in 2021.

And with this let me over to my time and.

Thibaut Mangan: And this is a testament to the strength of our strategy of offering differentiated science-based brands focused on personal health and endorsed by professionals. In today's environment, consumers globally have a heightened interest in personal health and hygiene, and it's driving high demand for efficacious, trusted solutions backed by science like those offered by Johnson & Johnson. And an example of that preference would be the tremendous growth we have seen in our other countermedicine business, driven by brands like Tylenol, Zyrtec, Pepsit, and Larbiz or in our oral care franchise with Listerine Mouthwash.

Thank you CFO.

Let me now give you a brief update on our COVID-19 vaccine.

First a reminder of a bit of background.

On the heels of something really promising phase one into a data we initiated a single dose phase three study called ensemble a few weeks ago on September 21 in the United States.

And where the process of opening numerous sites globally.

Our vaccine as a reminder is based on 20 <unk> is as a human identifier.

Thanks contains a variant of the Sars Koby twos site protein.

Thibaut Mangan: In other parts of our business, like skin health and beauty... Results have been more nuanced. We have seen a negative impact of COVID-19 in categories like sun care and makeup removers, while seeing increased demand for body wash, body lotions, or premium hair care. So for 2021, we expect both headwinds and tailwinds, as we saw this year.

Our vaccine was shown to elicit a robust immune responses in humans as demonstrated by the presence of neutralizing antibody details I would like to.

I would like to now elaborate on the stage that we posted on our website yesterday regarding a temporary pause in further dosing in our Kodak in clinical trial.

Thibaut Mangan: But we strongly believe that our strategy, our capabilities, and our focus on execution position us very well for continued performance. We are prepared to see ongoing fluctuations in consumer demand related to the pandemic, potential pantry-loading behaviors, or lower incidence of conditions like cold and flu. However, even with these uncertainties in mind, we expect to see continuous strong growth in e-commerce and continued demand for our leading brands, whose efficacy is backed by science, resulting in our consumer health business to continue to grow competitively with the market in 2021. And with that, I will hand over to Mattai Maman.

First some contract.

Not at all unusual or unexpected illnesses that occur in large studies over their duration.

In some cases, they're called serious adverse events or asset Eve and may have something or nothing to do with the drive their vaccine being investigated.

However, as a company that always put safety one we take each and every case seriously and so.

In certain cases, when we need more information, we'd causes study enrollment and dosing of additional cartus spend as we take the time to gather more information we have it.

We have a very high and well thought through process that JJ that hall as high standards of scientific medical and ethical cockpit, and we followed all of that to the latter.

Matthew Miksic: Thank you, Thibault. Let me now give you a brief update on our COVID-19 vaccine. First, a reminder of a bit of background. On the heels of some really promising Phase I and IIa data, we initiated a single-dose Phase III study called Ensembl a few weeks ago on September 21st in the United States, and we're in the process of opening numerous sites globally. Our vaccine, as a reminder, is based on ATS-26, which is a human adenovirus and contains a variant of the SARS-CoV-2 spike protein.

First preliminary information that's to an independent data safety monitoring board or DSMB be the Smbs. As you know are very commonly car trials in the pharmaceutical industry.

Sure. It is comprised of outside experts, who evaluate the information and then make a recommendation to us and our.

In our case here, we were in Florida that expected LS on Sunday October 11.

And we followed our process exactly and quickly and posted a statement on our web site. The following day on Monday October 12, pausing enrollment.

Matthew Miksic: Our vaccine was shown to elicit a robust immune response in humans, as demonstrated by the presence of neutralizing antibodies in T-cells. Now, I'd like to elaborate on the statement we posted on our website yesterday regarding a temporary pause in further dosing in our COVID vaccine clinical trial. First, some context. It's not at all unusual for unexpected illnesses to occur in large studies over their duration. In some cases, these are called serious adverse events or FADs and may have something or nothing to do with the drug or vaccine being investigated.

That the SMB with inquiries immediately on Sunday and they've requested additional information.

We are now awaiting further medical information and evaluation, which we will then forward to the DSV for their independent recommendations.

We're absolutely committed to providing transparent update throughout our vaccine development program and we will update you will learn more.

Matthew Miksic: However, as a company that always puts safety first, we take each and every case seriously. In certain cases, when we need more information, we pause study enrollment and dosing of additional participants as we take the time to gather more information. We have a very defined and well-thought-through process at JNJ that follows high standards of scientific, medical, and ethical practice. And we followed all of that to the letter here. First, preliminary information is sent to an independent Data and Safety Monitoring Board, or DSMB. DSMBs, as you know, are very commonly part of trials in the pharmaceutical industry. This board is comprised of outside experts who evaluate the information and then make a recommendation to us.

And finally as I would be remiss, if I didnt expect great enthusiasm for the R&D portfolio Chantal.

I am very excited about all the really tremendous progress we've made against the programs in our portfolio in spite of Covance team continue.

Continuing to make deacon vastness and terrific progress on currently marketed products that extend them further add against new molecular SP highlights for already mentioned that include Darzalex Castro for Alamo doses progress as we continue to build on higher after that to map, our cdthree redirect or Frank.

Hi, BC card.

RPG, our gene therapy, and many others, so happy to effect any of that.

Matthew Miksic: In our case here, we were informed of an unexpected illness on Sunday evening, October 11th, and we followed our process exactly and quickly and posted a statement on our website the following day, Monday, October 12th, pausing enrollment. The DSMB was informed immediately on Sunday, and they've requested additional information. We're now awaiting further medical information and evaluations, which we will then forward to the DSMB for their independent recommendation. We are absolutely committed to providing transparent updates throughout our vaccine development program, and we will update you when we learn more. And finally, I would be remiss if I didn't express great enthusiasm for the R&D portfolio at Janssen. I'm very excited about all the really tremendous progress we've made on the programs in our portfolio in spite of COVID-19.

Okay.

Without back to Chris Miller.

Right.

Terrific. Thank you Ms. sign thank you, Jennifer Ashley and Tivo Rob.

Let's now move to questions from the investment community can you. Please provide instructions for those on the line wishing to ask a question.

Sure.

Ladies and gentlemen, if youd like to ask a question at this time. Please press Star then one on your telephone keypad, if youd like to withdraw your question Press Star then two please limit your questions to one question and one follow up.

Your first question comes from Steve.

David Lewis with Morgan Stanley.

Good morning, Thanks for taking the question time, maybe I'll start with you just as we finished with you is there.

Is there a realistic timeframe for us to learn if the adverse events in the treatment or placebo arm any sense right now.

Matthew Miksic: We continue to make deep investments and terrific progress on currently marketed products to extend them further and against new molecular entities. Highlights have already mentioned that include Darzalex-Tospro for ALM-Lodosis progress as we continue to build on Tremfya, Amivantamab, our CD3 Redirector franchise, BCMA CAR-T, RPGR gene therapy, and many others. I'll be so happy to address any of that in the Q&A. Now, I'll hand it back to Chris.

Ms neurological and nature.

So we know very little information right now we've given our patients that we do know too that the SMB faster number specific question, we don't know whether they have an informed us they are there.

They have the right on line, we are still blinded so we don't know.

Armed vaccine.

Chris Schott: Terrific. Thank you, Mattai, and thank you, Jennifer, Ashley, and Thibaut. Rob, now we move to questions from the investment community. Can you please provide instructions for those on the line wishing to ask a question?

We know very little of that plant and it'll be a few days at minimum for the right set of information that we gathered added evaluated.

Okay very helpful and I'll just ask my two questions right up front, maybe one for Ashley and one for Joe you actually just thinking with the MDD commentary for September we suggested improvement, but some of resting in improvement in the month of September as I think about the guidance range at the top end you guys get to do the top end of your range for the fourth quarter to show improvement in the fourth quarter.

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

Operator: Please limit your questions to one question and one follow-up. And your first question comes from David Lewis with Morgan Stanley. Good morning, thanks for taking the question. Mattai, maybe I'll start with you just because we finished with you.

So what is your confidence in delivering the top end of the range and in what are some of the factors in the fourth quarter.

It could impact the ability to show sequential improvement and then for Joe just quickly on pharma, thanks to the outlook for 21.

Pharma has accelerated the entire year on both a reported underlying basis.

Obviously above market next year can farm accelerate in 21, thanks, so much.

Matthew Miksic: Is there a realistic time frame for us to learn if the adverse event was in the treatment or placebo arm in any sense right now if the AE was neurological in nature? So we know very little right now. We've given our information set that we do know to the DSMB, and they've asked a number of specific questions. We don't know whether they haven't informed us. They have the right to be unblinded. However, we are still blinded. So we don't know the treatment arm, or the vaccine arm. We know very little at this point. And it'll be a few days at minimum for the right set. Okay, very helpful.

So again thanks.

Thanks for the question, David maybe I'll start with.

Really obviously, we ended Q3 down 3% and.

As Joe mentioned, our expectation for quarter four it they're really in line with the range communicated in July we give it to make it from.

Hello Hello.

For down 10% and just as a reminder, this is.

A guide versus what we originally communicated here in January of our plan.

Hey look at this it means that our range for quarter four can be consistent with the results we delivered in quarter, three and kind of one book again.

And then delivering a modest growth versus 2019 last year.

And things that were considering I think that we're confident in how hospitals are managing through the surgeon, we are paying close attention to patient sentiment and affordability and Ajay Ajay I believe Chris mentioned, we did and we are building some inventory that we.

Operator: And I'll just ask my other two questions right up front, maybe one for Ashley and one for Joe. Ashley, just thinking about the MVD commentary for September, which suggested improvement but some arresting improvement in the month of September. As I think about the guidance range, at the top end, you basically have to hit the top end of your range for the fourth quarter to show improvement. So how confident are you in delivering the top end of the range? And what are some of the factors in the fourth quarter that could impact the ability to show sequential improvement?

Procured shrewdly in beginning of the year for China, and we will be all sound like you are seeing from.

As Chris mentioned coming off of last year that Japan consumption taxes into two things to consider when from this year went from here.

And David with respect to Pharmaceuticals, I do think that we could see acceleration. So the in line portfolio continues to perform extremely well as we've seen we're getting nice uptake in some of our larger products.

Ashley A. McEvoy: And then for Joe, just quickly on pharma, thanks for the outlook for 21. Pharma has accelerated the entire year on both a reported underlying basis, obviously above market next year. Can pharma accelerate in 21? Thanks so much.

Notably Stelara and you see which was recently an approval we acquired.

Trump fire for PPSA I would.

I would also.

Point to some of the filings that we anticipate here in the near term with respect to the car T. Bcm may as well as of anthem AD for non small cell lung cancer potentially on the horizon and part of the mix in Twentytwenty. One I will also point out that while this quarter was strong we still have some impact.

Joseph J. Wolk: So, thanks for the question, David. Maybe I'll start with, you know, really, obviously, we ended Q3 down 3%. As Joe mentioned, our expectations for Quarter 4 are really in line with the range communicated in July, although we've tightened it a bit to make it from flat to down 10%.

Ashley A. McEvoy: And just as a reminder, this is a guide versus what we originally communicated at the beginning of the year in January of our plan. So, if you look at this, it means that our range for Quarter 4 could be consistent with the results we delivered in Quarter 3, the kind of one bookend to then delivering some modest growth versus last year. And things that we're considering. I do think that we're confident in how hospitals are managing through the surges. We are paying close attention to, you know, patient sentiment and affordability. And at JNJ, as Chris mentioned, we are bleeding through some inventory that we procured shrewdly in the beginning of the year for China. And we will also be adjusting from, as Chris mentioned, coming off of last year's Japanese consumption tax. So, those are two things to consider, one from this year and one from last year.

Correct.

In all three segments related to COVID-19 dynamics. So there's probably two to three points of growth that hampered.

The third quarter reported results as you can imagine there's still a segment of the population that a little bit cautious about going out in public having their normal office visits so.

So I would anticipate that should come back as therapeutics as vaccines.

As people know more about the virus itself so.

So it wouldn't be beyond our expectation to think that Jennifer and her team could do even better and in Twentytwenty one.

Thanks, Dave appreciate the question Rob next question. Please your next question comes from Chris Schott with Jpmorgan.

Jennifer Taubert: And David, with respect to pharmaceuticals, you know, I do think that we could see acceleration. So the in-line portfolio continues to perform extremely well, as we've seen. We're getting nice uptake in some of our larger products, notably Stelara in UC, which was recently an approval we acquired, Tremfya for PSA. I would also point to some of the filings that we anticipate here in the near term with respect to CAR-T, BCMA, as well as Avantimab for non-small cell lung cancer, potentially, on the horizon and part of the mix in 2021. I will also point out that while this quarter was strong, we still have some impact in all three segments related to COVID-19 dynamics. So there are probably two to three points of growth that hampered the third quarter reported results.

Great. Thanks, so much for the questions. The first one was just a bit of a clarification on the 2021 operating margin dynamics I just want to make sure I understood what levels, you're referring to with results in line with 2019 margins I guess, specifically is that including or excluding the ASP gain last year and as I think about 21 margin.

Would you characterize those as normalized margins for Jay Jay or are they still have margins that going to be depressed as we're facing some covert disruptions.

My second question was just on pharma pricing and how you're thinking about that for 21, I guess, specifically as we think about the higher unemployment rates and adverse payer mix is there any expectation we should be thinking about pricing adult different in 21 versus what we're seeing in 2020. Thanks, so much Chris.

Joseph J. Wolk: As you can imagine, there's still a segment of the population that's a little bit cautious about going out in public, having their normal office visits. So I would anticipate that should come back as therapeutics, as vaccines, as people know more about the virus itself. So it wouldn't be beyond our expectation to think that Jennifer and her team could do even better in 2021. Thanks, David. I appreciate the question. Rob, next question, please.

Chris Thanks for the questions I'll take the first question around margins and then I'll turn it over to Jennifer to give some thoughts with with respect to.

An outlook to the extent, we can provide in our pharmaceutical pricing so.

So with margins and my commentary I reference we should be around 2019 operating margin levels that would exclude other income. So it excludes the ASP divestiture gain that you've referenced our operating margin for 2019 was 31.3, we expect to get back to that level, we're going to continue to invest in our pipeline recall too.

Operator: Your next question comes from Chris Schott with J.P. Morgan. Great, thanks so much for the questions. The first one was just a bit of clarification on the 2021 operating margin dynamics. I just wanted to make sure I understood what levels you're referring to with results in line with 2019 margins. Specifically, is that including or excluding the ASP gain last year? And as I think about 21 margins, would you characterize those as normalized margins for JNJ?

To that end, our projections for 2021, where.

We're looking at the Momenta transaction, which was dilutive by as much as 15 cents. So thats part of the mix, but I would say, Chris that probably best labeled if I was to label them as normal operating margins, we expect to grow our bottom line slightly faster than our top line.

Joseph J. Wolk: Or are these still margins that are going to be depressed as we're facing some COVID disruption? My second question was just on pharma pricing and how you're thinking about that for 2021. Specifically, as we think about higher unemployment rates and an adverse payer mix, is there any expectation we should be thinking about pricing at all differently in 2021 versus what we're seeing in 2020? Thanks so much.

In most years and so I think we will continue to look to do that with respect to the portfolio.

Our investment capacity, but not compromising the long term at any point in time.

Joseph J. Wolk: Chris, thanks for the questions. I'll take the first question around margins and then I'll turn it over to Jennifer to give some thoughts with respect to an outlook, to the extent we can provide it on pharmaceutical pricing. So, on margins, in my commentary, I referenced that we should be around 2019 operating margin levels. That would exclude other income, so it would exclude the ASP divestiture gain that you've referenced.

And I cried for Jennifer I can jump in on the pricing one so.

Whether it.

Based on unemployment trends or whether it's based on health care reform, we do see that there is going to be continued pressure on pricing.

Across the farm industry I think an important reminder, is that for US our growth is all based on volume not price. So we think relative to our competitive set that we are very well positioned.

Joseph J. Wolk: Our operating margin for 2019 was $31.3, and we expect to get back to that level. We're going to continue to invest in our pipeline. Recall, too, that in our projections for 2021, we're looking at the Momenta transaction, which was dilutive by as much as $0.15. So, that's part of the mix. But I would say, Chris, they're probably best labeled, if I were to label them, as normal operating margins.

For the future environment, we work very very hard to develop robust value propositions and to be able to.

Get appropriate value for our products in the market and we will continue to do so but whether it's through health care reform efforts on which actually we think could ultimately have a positive it can help lower patient out of pocket cost or through other channel mix dynamics. We do think that there will be continued pressure there.

Jennifer Taubert: We expect to grow our bottom line slightly faster than our top line in most years. And so, I think we will continue to look to do that with respect to the portfolio and our investment capacity but not compromise the long term at any point in time. And Hi, Chris. It's Jennifer. I can jump in on the pricing one.

Great. Thank you Chris I appreciate the questions. Rob next question. Please. Your next question comes from Larry Biegelsen with Wells Fargo.

Jennifer Taubert: So whether it's, you know, based on unemployment trends or whether it's based on healthcare reform, we do see that there is going to be continued pressure on pricing across the farm industry. I think an important reminder is that, for us, our growth is all based on volume, not price. So, relative to our competitive set, we think that we are very well positioned for this future environment. We work very, very hard to develop robust value propositions and to be able to, you know, get appropriate value for our products in the market, and we'll continue to do so. But whether it's through healthcare reform efforts, which actually could ultimately have a positive effect if it can help lower patient out-of-pocket costs, or through other channel mix and dynamics, we do think that there will be continued pressure there. Thank you, Chris. I appreciate the questions. Rob, next question, please. Your next question comes from Larry Beagelson with Wells Fargo. Good morning. Thanks for taking the time to answer the question. One for Ashley and one for Jennifer.

Hi, good morning, Thanks for taking the question one for Ashley one for Jennifer.

So actually I I appreciate the commentary about 2021, you expect.

Double digit.

Growth Mike.

My question is can you grow.

In 2021 over 2020 2019 levels in the device business and for Jennifer.

You have the the substance bench trial, starting this week.

Can you offer any thoughts on that do you still believe it will be very difficult for a generic company to manufacture generic version of substance that even if you lose.

Litigation, Thanks for taking the questions guys.

Thank you Larry.

And for 2021, we do anticipate as I mentioned double digit growth versus versus 2020, and we do anticipate growth in 2021 relative to where we exited 2019.

Operator: So Ashley, I appreciate the commentary about 2021. You expect double-digit growth. My question is, can you grow in 2021 over 2019 levels in the device business? And for Jennifer, you have the Sustina bench trial starting this week. You know, can you offer any thoughts on that?

The today.

Okay about Invega Sustenna we.

We are very confident in our IP positions around our long acting injectable portfolio on whether we're talking about invega sustenna, whether we're talking about Invega trinza.

Ashley A. McEvoy: Do you still believe it'll be very difficult for a generic company to manufacture a generic version of Sustina, even if you lose that litigation? Thanks for taking the questions, guys. Thank you, Larry. So listen, for 2021, we do anticipate, as I mentioned, double-digit growth versus 2020. And we do anticipate growth in 2021 relative to where we exited in 2019. And then, if we talk about Invega Sistena, we are very confident in our IP positions around our long-acting injectable portfolio. Whether we're talking about Invega Sistena or whether we're talking about Invega Trinza, those products bring significant benefits to patients with schizophrenia.

Those products bring significant benefit to patients with schizophrenia, and so Larry as you noted we do have that the bench trial that that's starting but we feel good in our position there and that those assets are going to continue to be able to deliver not only for patients with schizophrenia, but also for Janssen and for Johnson and Johnson.

Thanks, Larry I appreciate the questions. Rob next question. Please ask your next question comes from Josh Jennings with Cowen and company.

Jennifer Taubert: And so Larry, as you noted, we do have the bench trial that's starting, but we feel good in our position there and that those assets are going to continue to be able to deliver not only for patients with schizophrenia but also for Janssen and for Johnson & Johnson. Thanks, Larry. Appreciate the questions. Rob, next question, please. Yes, your next question comes from Josh Jennings with Cowan & Company. Hi, good morning.

Hi, good morning, Thanks for taking the questions first question for Ashley I was hoping just thanks for the 2021 element of medical devices franchise, but I was hoping you could help us think through the roof.

The risk of the Affordable care Act being repealed.

The administration and then secondarily, if unemployment levels stay where they are what type of headwinds you expect in 2021 and whether those have been baked into that 2021 outlook and then I was also hoping for Jennifer to ask about the immunology franchise, just by revenues the largest business in pharma.

Jennifer Taubert: Thanks for taking the questions. First question for Ashley, I was hoping, I just, thanks for the 2021 outlook on the medical devices franchise, but I was hoping you could help us think through the risk of the Affordable Care Act being repealed by the Trump administration, and then secondarily, if unemployment levels stay where they are, what type of headwinds you expect in 2021, and whether those have been baked into that 2021 outlook. And then I was also hoping for Jennifer to ask about the immunology franchise, just by revenue, it's the largest business in pharma. Usually, you're bolstering it through the momentum acquisition, but wanted to ask about any updates you can provide on the outlook for Remicade declines, with the premise being just if that anchor can get lighter, declines can be tempered, that would be a positive for that immunology franchise in 2021 Thanks for taking the questions. Thank you, Josh. I think your question was about the ACA, and in our business for J&J MedDevice, about 60% of our payer mix is public. Clearly, a big chunk of that is Medicare, and then a smaller amount is Medicaid, and about 40% is private.

So you are bolstering its through the movements acquisition.

I wanted to ask about any update you can provide on the outlook for remic see declines with the premise being just if that anchor can get lighter declines can be tempered that would be.

A positive for that immunology franchise, and 2021 and beyond but anything any help you can give them.

Outlook for Remicade from here, thanks for taking the questions.

Thank you Josh I think your question was about the Ian.

In our business for changing the device, we have about 60% of our payer mix is public.

Finally, as a chunk of that is Medicare then the smaller amount of Medicaid and about 40% private so we do anticipate Medicaid increases late amount than we do anticipate getting.

In in employment and some of the economic challenges that that private amount may may decrease, but we factored those into our considerations. When you look at 2021.

And then I think your second question was really around.

Hi, Matt and I will tell you that that fast evolving data that we look at weekly and monthly and.

We are always looking to adelene, we potash that that funnel and.

And we factored those considerations into our assumptions into 2021.

And then it Jennifer I'll jump in on the immunology front. So on immunology as you know is our largest business for the Janssen franchise and continues to deliver a very very strong growth and both stelara and trend Fiat delivered very solid quarters still.

Ashley A. McEvoy: So we do anticipate Medicaid increasing its late amount, and we do anticipate, given employment and some of the economic challenges, that that private amount might decrease a bit. But we factored those into our considerations when you look at 2021. And then I think your second question was really around, you know, patient sentiment. And I would tell you that that's fast evolving data that we look at weekly and monthly. And, you know, we are always looking to replenish that funnel, and we've factored those considerations into our assumptions for 2021.

Stelara is showing very significant gains globally in both crohns disease and in the ulcerative colitis launch and very importantly, just this week, we have five year long term remission data in Crohns disease that is actually being presented publicly which we think is another great catalyst and.

Strange given the significant benefits that's still our offers to patients.

In the Gi space from that trend fire perspective, we've got very strong growth and competitiveness as we continue to launch into not only psoriasis, but now also sorry, attic arthritis, which we think is going to be a great catalyst not only for sorry, attic arthritis, but also for the psoriasis business and.

Jennifer Taubert: And then, Jennifer, I'll jump in on the immunology front. So, immunology, as you know, is our largest business for the Janssen franchise and continues to deliver very, very strong growth. And both Stelara and Tremfya delivered very solid quarters.

Right now it transpires, where the only IL 23 that has it that sorry, attic arthritis indication and hopefully as you know we're also studying it for G. III applications and our Kronos phase two data was actually presented this week as well as United European Gastroenterology week, so using.

Jennifer Taubert: Stelara is showing very significant gains globally in both Crohn's disease and in the ulcerative colitis launch. And very importantly, just this week, we have five-year long-term remission data in Crohn's disease that is actually being presented publicly, which we think is another great catalyst and demonstration of the significant benefits that Stelara offers to patients in the GI space. From a Tremfya perspective, we've got very strong growth and competitiveness as we continue to launch into not only psoriasis but now also psoriatic arthritis, which we think is going to be a great catalyst, not only for psoriatic arthritis but also for the psoriasis business.

Our eyes IL 23 pathway strategy, we're not only developing trend Fiat for psoriasis and Psoriatic arthritis, but also taking it into the Gi space, where we believe that we are going to be able to benefit even more patients because there's still so much unmet medical need there now you referenced momenta and we were really excited Cuba.

Both announced that deal and to close that deal in a very short timeframe and that acquisition is going to give us the opportunity to enter into the auto antibody space, where we believe forget the column App. We've got as many as 10 are more indications that we're going to be able to go into to really track.

Jennifer Taubert: And right now, with Tremfya, we're the only IL-23 that has that psoriatic arthritis indication. And hopefully, as you know, we're also studying it for GI applications. And our Crohn's Phase II data was actually presented this week as well at the United European Gastroenterology Week. So, using our IL-23 pathway strategy, we're not only developing Tremfya for psoriasis and psoriatic arthritis but also taking it into the GI space, where we believe that we're going to be able to benefit even more patients because there's still so much unmet medical need there.

Farm autoantibody related diseases and now.

Just about all of these are very underserved in many cases, we'll be able to be first in class and we believe best in class and we think this is going to be a really significant catalyst for us. We've also got a number of other assets in the immunology portfolio on the why we brought in from ACA NAV from ex biotech.

Jennifer Taubert: Now, you referenced Momenta, and we were really excited to both announce that deal and to close that deal in a very short timeframe. And that acquisition is going to give us the opportunity to enter the autoantibody space, where we believe for nipocalumab, we've got as many as 10 or more indications that we're going to be able to go into to really transform autoantibody-related diseases. And just about all of these are very underserved.

That other novel mechanisms that are being developed in G.I. application and we'll look forward to really unveiling the true breadth of our immunology pipeline. When we have our analyst day in 2021, but so let me come back to your question on Remicade Remicade I think we can anticipated.

Anticipate continued relatively similar.

Declines going forward as that product is very very late in its lifecycle, but please now across the breadth of our immunology portfolio. We have got a ton of strength there and are really planning on continuing having that be one of our leading franchises for the Janssen business globally.

Jennifer Taubert: In many cases, we'll be able to be first in class, and we believe it will be best in class, and we think this is going to be a really significant catalyst for us. We've also got a number of other assets in the immunology portfolio. The one we brought in is Bramecumab, from Bramex Biotech.

Jennifer Taubert: We've got other novel mechanisms that are being developed in GI applications, and we'll look forward to really unveiling the true breadth of our immunology pipeline when we have our Analyst Day in 2021. But so, let me come back to your question on Remicade. With Remicade, I think we can anticipate continued relatively similar declines going forward, as that product is very, very late in its life cycle.

Great. Thank you Josh appreciate it Rob next next question. Please. Please next question is from Danielle Antalffy with SVB Leerink.

Hey, good morning, guys. Thank you so much for taking the question actually this is a question for you and I guess I'm curious you gave a lot of color I appreciate that I, just want to get a little bit deeper and Im wondering if you guys could characterize and what you're seeing from a backlog work down versus new patients.

Jennifer Taubert: But please know, across the breadth of our immunology portfolio, we have got a ton of strength there and are really planning on continuing to have that be one of our leading franchises for the Janssen business globally. Thank you, Josh. I appreciate it. Rob, next question, please. Yes, the next question is from Danielle Antalfi with SVB Larynx. Hey, good morning, guys. Thank you so much for taking the time to answer the question. Ashley, this is a question for you, and I guess I'm curious. You gave me a lot of color. I appreciate that. But I just want to get a little bit deeper.

Entering the system, if theres, a way to sort of even qualitatively characterize that and then the second part of the question for you Ashleigh basket now on how do we think about the referral channel retail within devices and maybe this is even an appropriate question for firemen diagnoses, where do you see the areas that are most susceptible should we see some hiccup and the referral.

All right. Thank you so much.

So thank you Danielle you now when we look at again I have to give a huge acknowledgement to our customer and quite frankly around the world than how they really figured out how to manage people with covance as well as manage patients who don't have covance and.

Ashley A. McEvoy: And I'm wondering if you guys could characterize what you're seeing from a backlog workdown versus new patients entering the system, if there's a way to sort of even qualitatively characterize that. And then the second part of the question for you, Ashley, I'll just ask it now. As we think about the referral funnel refill within devices, and maybe this is even an appropriate question for pharma and diagnoses, where do you see the areas that are most susceptible should we see some hiccups in the referral funnel refilling process? Thank you so much.

When we look at our top 10 markets, we see about a 95% recovery today in the past four week.

It really obviously with China, leading the way, but we also saw positives in areas like Germany.

Like Russia, India, United States, It is around 95% and which which is remarkable hick about it that were in October.

And then we look at the top 10, IDN, which are really many of those are proud anymore hotter spots recorded there around 92% recovery and.

And clearly some hospitals are well above 100, and some are a little softer than that and so I think it really demonstrates to us that they have really learned how to manage both patient population quite well.

Ashley A. McEvoy: So thank you, Danielle. You know, when we look at, again, I have to give a huge acknowledgement to our customers, quite frankly, around the world for how they've really figured out how to manage people with COVID, as well as manage patients who don't have COVID. And when we look at our top 10 markets, we see about a 95% recovery to date in the past four weeks. And really, obviously, with China leading the way, but we also saw positives in areas like Germany. And in areas like Russia.

And when we when we go forward, we did he in quarter three as significant kind of clearing out of the patient backlog. We think when we go into quarter four there's a little bit more to go what were paying attention to is really the diagnosis Danny I'll say, let me give you an example, colorectal surgery and.

Colorectal surgeries in the United States are down about 10% to 12% from a procedure point of view versus pre part of it.

But the diagnosis the common off the fee is down about 20% to 30% now that's improving because any down 50%.

So we're looking at right through our joint and spine surgery on and when we start to see that number improve I think it shows that the new patient funnel is starting to replenish entity.

Ashley A. McEvoy: In the United States, it is around 95%, which is remarkable if you think about it, that we're in October. And then we look at, you know, the top 10 IDNs, which are really, many of those are present in more hotter spots for COVID. They're around 92% recovered. So we're looking at, you know, MRIs for joint and spine surgeries. And when we start to see that number improve, I think it shows that the new patient funnel is starting to replenish at a pace we hope to have. Jennifer, you're on mute.

Hi.

Jennifer you're on mute.

No.

Let me now Chris Yep perfect. Thank you. So when we look on the on the pharma side. So we continue to see improving new to brand trends for.

For some of the assets Theyre still on a little bit below pre called at levels.

Jennifer Taubert: Now, can you hear me now, Chris? So when we look on the pharma side, we continue to see improving new-to-brand trends. For some of the assets, they're still a little bit below pre-COVID levels as patients are just getting back in for the diagnosis and the workups and everything to ultimately get diagnosed and then treated. But as we take a look at total demand, most of our brands, and as we're looking across the market, are really back to and above pre-COVID levels. And we're definitely seeing stability and some growth in that area. I think while new-to-brand has still been a bit depressed, what we're seeing is higher rates of refills, higher rates of persistency, and lower rates of switch. And so they sort of compensate for each other.

As patients are just getting back in for the diagnosis and and the work ups and everything on to ultimately get diagnosed and treated but as we take a look at total demand.

Most of our brands and as we're looking across the market are really back to and above pre coated levels and we are definitely seeing stability and some growth in that area I think while new to brand has still been a bit depressed. What we're seeing is a higher rates of refills higher rates of persistency and lower rates of switch and so they sort of.

Compensate for each other and so we've been really pleased with the recovery that we've seen.

We think that our customers as well or are really adapting and figuring out how to use a combination of both tele health as well as in person visits depending upon the actual.

Jennifer Taubert: And so we've been really pleased with the recovery that we've seen. We think that our customers, as well, are really adapting and figuring out how to use a combination of both telehealth as well as in-person visits, depending upon the actual patient and potential diagnosis. And we see very positive trends going forward. And should there be any type of second wave, we think that they're gonna be much better able to handle that in a second wave than what we saw originally.

Patient and potential diagnosis, and we see very positive trends going forward and should there be any type of second wave, we think that they're going to be much better able to handle that in in the second way than what we saw originally.

Great. Thanks, Denny I appreciate it.

Operator: Great. Thanks, Danielle. I appreciate it. Rob, next question, please?

Rob next question. Please I guess next question is from Terence Flynn with Goldman Sachs.

Matthew Miksic: Yes. The next question is from Terrence Flynn with Goldman Sachs. Hi, thanks for taking the questions. I was just wondering about the COVID vaccine, if you could remind us of what you're hoping to show on the efficacy profile? And then the second part of that question is, what steps both you and the industry can take to encourage broad utilization of a vaccine if successful? And then my second question relates to your EGFR-Met antibody. There were some pretty compelling phase one data at ESMO this year. You mentioned this asset a couple of times in your remarks, but maybe you could just expand on the development program here for lung cancer and also other tumors, such as head and neck and colorectal, and remind us of how you're thinking about both the near-term opportunity as well as the longer-term opportunity.

Hi, Thanks for taking the questions.

I was just wondering on the cobot vaccine. If you can remind us of what you're hoping to show on the efficacy profile.

Then the second part of that question is what steps both you and the industry can take to encourage broad utilization of a vaccine if successful.

My second question relates to your.

Yeah, Jeff are met antibody, some pretty compelling phase one data at ESMO. This year you mentioned this asset a couple times in your remarks, but maybe you could just expand on the development program here for lung cancer and also other tumors, such as head and neck, and colorectal and remind us of how you're thinking about both the near term opportunity as well as the longer term opportunity. Thank you.

Todd you want to address the vaccine question and start with the pipeline.

Sure so.

In terms of the vaccine overall like as soon as we have.

Jennifer Taubert: Thank you. Edmitai, do you want to address the vaccine question and start with the pipeline? Uh, sure. So, um, uh...

Overcome the temporary pause our plateaued.

Continue to 50000 person study that were were en route.

Matthew Miksic: In terms of the vaccine overall, like, as soon as we overcome this temporary pause, our plan is to continue the 60,000-person study that we're on route to. And the vaccine efficacy specifically was your question. All statistical analysis plans assume something, and we've assumed a 70% vaccine efficacy for this trial.

The vaccine efficacy there was a question all statistical analysis plan assume something and we've assumed a 70% doxey activity for this trial, but of course, probably based on the phase one two data.

We are very bullish on that or better.

So if we have to see better EBITDA, what will happen is the asset that will as they come in and we'll show a greater balance between placebo and vaccine and we have a chance to finish even faster and so.

Jennifer Taubert: But, of course, based on the Phase 1-2a data, we're very bullish on that or better efficacy. So if we happen to see better efficacy than that, what will happen is the events will, as they come in, show a greater imbalance between placebo and vaccine, and we have a chance to finish even faster. And so that's how it will manifest. We just assumed something for the moment, but that doesn't actually dictate how the study is conducted.

So that's how it will manifest we just assume something because of all the body.

That does this actually dictate.

Dictate how the studies conducted.

Hi, Jeff.

Jennifer do you want to take the broader vaccine question, we can come back to Evan Thats not sure.

Matthew Miksic: Jennifer, do you want to take the broader vaccine question and we can come back to that? Sure. So, a couple of points.

Sure so on.

Couple of points. So I mean first our industry is demonstrating really heroic and historic leadership during this public health crisis.

Jennifer Taubert: So, I mean, first, our industry is demonstrating really heroic and historic leadership during this public health crisis. And, you know, between everything that the R&D teams and manufacturing teams are doing around the clock to help bring forward new vaccines and new treatments, as well as what the commercial teams are doing to be prepared to both be able to supply these products in the marketplace but also make sure that there's going to be a receptive audience and demand, people actually wanting to get these vaccines once they get to market. There's a lot of work that's underway there now.

You know between everything that the R&D teams and manufacturing teams are doing around the clock.

Help bring forward, new vaccines, and new treatments as well as what the commercial teams are doing to be prepared to both be able to supply. These products in the marketplace, but also make sure that there's going to be a receptive audience and to.

And demand people actually want to get these vaccines once they get to market Theres a lot of work that's underway there now.

Matthew Miksic: What I can say is, as an industry group, we really have come together. And in working with our local industry associations, be they bio or pharma in the U.S., be it IFPMA, on broad campaigns, to even very targeted local campaigns to get at specific minority populations who otherwise might not be as receptive. All of this work is currently underway, and I think you can look forward to many types of different campaigns to enroll all of the appropriate folks at the appropriate time once we have a greater line of sight into when these products will actually be able to reach the market. But safe to say, everybody realizes that vaccine confidence is really, really key, and there's a lot of great work that's being done and more to come on that as we're able to Thanks, Jennifer.

All I can say is as an industry group, we really have come together and working with our local industry Association B. They file our pharma in the us be it I ask Pierre May ex us there's a lot of work that's underway to help develop and build vaccine confidence.

Across the board by different types of of audiences, so everything from making sure that provide.

Providers.

Physicians.

Mrs Pharmacists people, who would be involved in the administration.

Have accurate information and information that they can use with their patients because they are there.

So positively to broad campaigns to even very targeted local campaigns to get add on specific minority population, who otherwise might not be as receptive. All of this work is currently underway and I think you can look forward to me.

Matthew Miksic: Maybe I can take the question on the EGFR-CMET antibody and vancimab. It is, indeed, a really exciting project for us. You asked about near-term and long-term. First, on the antibody itself: it's a really interesting antibody. It's unique to us, and it incorporates both an EGFR binding piece and a CMET binding piece. CMET is a common resistance mechanism for EGFR therapy. It hits both the primary mutation and the resistance mechanism at the same time.

Many types of different campaigns to to enroll all of the appropriate folks at the appropriate time once we have greater line of sight into when these products will actually be able to reach the market, but safe to say everybody realizes that vaccine confidence is really really key and there is a lot of great work, that's being done in March more to come on that.

As we are able to start on nailing it as the products get closer to go out to the market and emergency use authorization.

Thanks, Jennifer maybe I can take the question on you are seeing that antibody and with Adimab. It is indeed really exciting project for us.

Matthew Miksic: The near-term plan is to go forward with an exon 20 EGFR tumor, non-small cell lung cancer. There are really no good options for patients with exon 20 signatures. That's how we will begin, but our eyes are on the larger EGFR mutation market and patients with non-small lung cancer. With time, we plan on exploring multiple lines of therapy and, eventually, all EGFR-containing tumors. Great. Thank you, Terrence. I appreciate the questions. Rob, last question, please. Yes, that comes from Louise Chin with Canterford, Charlotte.

Yes to both near term and long term first on the antibody itself. It's a really interesting excellent it's unique to us.

As it incorporates both the DGF, our vitamin D and C met guidance and.

And see Matt is a common resistance mechanism for Egypt are easy.

Asia car therapy.

It's both the high mutational resistance mechanism.

Hi, good near term clad is to go forward with an exon 20, DGF are tumor non small cell lung cancer.

Operator: Hi, thanks for taking my question here. So I wanted to ask you about the FDA: have you seen any change in their appetite for risk? We've seen a recent spate of complete response letters; not sure if that's just a timing issue or if they've truly changed their thinking there. And then, just a follow-up question on the vaccine: how will any potential changes to your vaccine program impact the manufacturing process you've already started and how many patients have you dosed thus far? Thank you. Jennifer and or Mattai weigh in on the FDA. Thank you, Wally. Taiwan East Star with the vaccine. Yeah, the vaccine question.

Theres really no good options for patients with Exxon 20 signatures, but that's how we will begin but our eyes are on the larger each year car.

Mutation.

Market at patients in non small lung cancer. So with time, we plan on exploring multiple lines of therapy and eventually all easier our containing.

Two years.

Great. Thank you Terence appreciate the questions Rob last question. Please.

Comes from Louise Chen with Cantor Fitzgerald.

Hi, Thanks for taking my question here. So I wanted to ask you on the Ft have you seen any change in their appetite for risk we seen a recent speed of complete response letters not sure. If that's just a timing issue where Steve truly changed your thinking there and then just a follow up question here on the vaccine how any potential changes.

Jennifer Taubert: So this interaction right now we're having with regulators and DSMD doesn't change our manufacturing process or plans at all. And we're well underway with our program right now, and we're looking forward to getting going. Our overall plan is to complete recruitment of the 60,000 subjects in two or three months.

Vaccine program impact the manufacturing process, you've already started and how many patients have you dosed thus far thank you.

Matthew Miksic: And that remains on track. Yeah, and in terms of our working with the agency, we've had a really good track record over the past few months, really, during the height of COVID, in continuing to submit files, have them accepted, and really importantly, get approvals, not only on time, but actually ahead of time. So, as an example, our Darzalex FasPro formulation, our SubQ form for multiple myeloma, was actually approved ahead of schedule. We had a new indication for Imbruvica. As you know, we've got 11 indications now for Imbruvica, and we had one of the new ones there approved ahead of time. I mentioned Tremfya PSA in that approval, and I could go on and list others, but, you know, we continue to have very productive conversations with the FDA and continue to have our products moving through the pipeline as anticipated, and in some cases, even faster than planned. and Illuminal diagnostic, coupled with our NuWave ablation technology for lung nodules.

Hi.

The vaccine and.

And Jennifer Enormity highway and on the FDIC.

I actually want to talk about.

I want to start the vaccine.

Yes, that's being question so.

This interaction right now we are having with regulators and get somebody doesn't change our manufacturing process. Our plans at all and we're well underway with our program right now and we're looking forward to getting going our overall plans are to complete recruitment 63.

Subject into agreements and that that remains on track.

Yes, and in terms of our working with the agency we had a really good track record over the past few months really during the height of co that income.

And continuing to submit.

Submit files have them accepted and really importantly get approvals not only on time, but actually ahead of time. So as an example, our darzalex fast pro formulation, our subcu form for multiple myeloma was actually approved ahead of schedule we.

Jennifer Taubert: But from a notion of regulatory approvals and engagement, as well as audits, I couldn't be more encouraged. Great. Thank you, everyone. Thanks, Louise. I appreciate the question.

We had an imbruvica do indication as you know we've got 11 indications now for Imbruvica and we had one of the new ones. They're approved ahead of time I mentioned trend Fi MPS say in that approval and I could go on and enlist others, but you know we continue to have very productive conversations with the FDA.

Okay and continue to have our product moving through the pipeline and as anticipated and in some cases, even faster than plant yes.

Yeah, just to complement what Jennifer mentioned this is Ashley Lee is I would just add to that from the Medtech point of view.

You heard a share around the new indication NRP M&A for a persistent Ethan.

Joseph J. Wolk: And thanks to everyone for your questions and your continued interest in our company. Apologies to those we couldn't get to because of time, but don't hesitate to reach out to the Investor Relations team as needed. I'll now turn the call over to Joe for some brief closing remarks.

Recently in the past couple of months, we were granted breakthrough designation for this line on the progression of myopia in our vision business as moving forward nicely and we were granted breakthrough designation. This moving forward nicely on the combination of our monarch and aluminum diagnostic coupled with our new lease ablation technology.

Thank you, Chris. And thank you again, everyone, for joining today's call to discuss our third quarter results and your very thoughtful questions. I'd also like to take a moment to just thank the Johnson & Johnson associates around the world for their unrelenting commitment to delivering for patients and all of our stakeholders around the world. Don't forget to mark your calendars to join us for our virtual medical device update on Thursday, November 19th. Best wishes for continued safety and health, and know that we will responsibly provide relevant transplant updates as warranted. Bye for now. Thank you. This concludes today's Johnson & Johnson 3rd Quarter 2020 Earnings Conference Call. You may now disconnect.

Gene for lung nodules, and aside from that from a notion of regulatory approvals and engagement as well as on it.

I couldn't be more encouraged.

Great. Thank you everyone. Thanks Louise appreciate the question and thanks to everyone for your questions and your continued interest in our company apologies to those we couldn't get to because of time, but don't hesitate to reach out to the investor relations team as needed I'll now turn the call over to Joe for some brief closing remarks, great. Thank you, Chris and thank you again, everyone for joining.

During today's call to discuss our third quarter results and your very thoughtful questions. I'd also like to take a moment to just thank the Johnson and Johnson associates around the world for their unrelenting commitment to deliver for patients and all of our stakeholders around the world.

Don't forget to Mark your calendars to join us for our virtual medical device update on Thursday November 19th best with.

Best wishes for continued safety and health and know that we will responsibly provide relevant transplant parent updates as warranted by for now.

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