Q4 2020 Johnson & Johnson Earnings Call

Good morning, welcome to Johnson <unk> Johnson is fourth quarter of 2020 earnings conference call.

Operator: Good morning. Welcome to Johnson & Johnson's 4th Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode until the question and answer session of the conference.

All participants will be in listen only mode until the question and answer session of the conference.

Paul is being recorded if anyone has any objections you may disconnect at this time if.

Operator: This call is being recorded. If anyone has any objections, they 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 call over to Johnson & Johnson. You may begin. Good morning. This is Chris Delorfus, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the fourth quarter and full year of 2020 and our financial outlook for 2021. Joining me on today's call are Alex Gorski, Chairman of the Board of Directors and Chief Executive Officer, and Joe Walk, Executive Vice President, Chief Financial Officer. A few logistics before we get into the details.

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

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

Good morning. This is crystal Orvis, Vice President of Investor Relations for Johnson <unk> Johnson welcome.

Welcome to our company's review of business results for the fourth quarter and full year of 2020, and our financial outlook for 2021.

Joining me on today's call are Alex Gorsky, Chairman of the board of Directors, and Chief Executive Officer, and Joe Wolk Executive Vice President Chief Financial Officer.

A few logistics before we get into the details this.

This review is being made available via webcast accessible through the Investor Relations section of the Johnson <unk> Johnson website at Investor <unk>, J&J Dot com, where.

Chris Schott: This review is being made available via webcast, accessible through the Investor Relations section of the Johnson & Johnson website at investor.jnj.com, where you can also find additional materials, including today's presentation and associated schedules. 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.

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.

In particular, there is significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic.

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 reconciliations of non-GAAP financial measures utilized for today's discussion to the most comparable GAAP measures are also available at investor.jnj.com. 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

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

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 reconciliations of the non-GAAP financial measures utilized for today's discussion to the most comparable GAAP measures are also available at investor.

The J&J dot com.

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.

Chris Schott: Moving to today's agenda, Alex will provide perspective on our overall results and business highlights for the year. I will review the fourth quarter sales and P&L results for the Corporation and the three business segments. Joe will conclude by providing insights about our cash position, Capital Allocation Deployment, and our guidance for 2021. The remaining time will be available for your questions. We anticipate the webcast will last up to 90 minutes.

Alex will provide perspective on our overall results and business highlights for the year.

I will review the fourth quarter sales and P&L results for the corporation and the three business segments.

Joe will conclude by providing insights about our cash position.

Capital allocation deployment and our guidance for 2021.

The remaining time will be available for your questions. We anticipate the webcast will last up to 90 minutes.

I will now turn the call over to Alex to share our overall results and business highlights.

Alex Gorski: I will now turn the call over to Alex to share our overall results and business highlights. Thank you, Chris. And thank you, everyone, for taking time to join us today to discuss our full year 2020 results and outlook for 2021. At the start of last year, no one could have imagined just how drastically our lives were about to change because of a virus that would impact billions of people around the world. By any measure, 2020 was a year dominated by uncertainty.

Chris and thank you everyone for taking time to join US today to discuss our full year 2020 results and outlook for 2021.

At the start of last year no one could have imagined just how drastically our lives we're about to change because of a virus that would impact billions of people around the world.

By any measure 2020 was a year dominated by uncertainty yet.

The pandemic also helped to clarify both our priorities and our values.

Alex Gorski: Yet the pandemic also helped to clarify both our priorities and our values, and within Johnson & Johnson, it illustrated the power and importance of our credo in guiding our actions to meet the needs of all our stakeholders. Now, because of COVID-19, we have a deeper appreciation of just how pivotal good health is to our safety, security, and prosperity as a society. We have profound respect and gratitude for all the doctors, nurses, and hospital staff serving on the front lines of care, for the everyday heroism of the essential workers who show up every day to keep the world's critical infrastructure up and running, and expectations that companies can and should help drive positive change in society are higher than ever.

And within Johnson, <unk> Johnson and is illustrated the power and importance of our credo and guiding our actions to meet the needs of all our stakeholders.

Now because of COVID-19, we now have a deeper appreciation of just how pivotal good health is to our safety security and prosperity in the society.

We have a profound respect and gratitude for all the doctors nurses and hospital staff, serving on the front lines of care.

Every day heroism of essential workers, who show up every day to keep the world's critical infrastructure up and running.

And expectations of the companies can and should help drive positive change in society are higher than ever.

As the world's largest and most broadly based global health care Company Johnson <unk> Johnson was built for times like these.

Alex Gorski: As the world's largest and most broadly based global healthcare company, Johnson & Johnson was built for times like these. We've been leading the world's biggest public health challenges for over a century, and today, our diversified businesses touch so many parts of people's lives. We had both the ability and the responsibility to act when the COVID-19 outbreak turned into a global pandemic.

We've been leading to the world's biggest public health challenges for over a century and today, our diversified businesses that so many parts of People's lives. We have both the ability and the responsibility to act when the COVID-19 outbreak turned into a global pandemic.

Within weeks of the DNA sequencing of the COVID-19 virus Janssen scientists were working 24 seven to identify the most promising lead candidate for a vaccine.

Alex Gorski: Within weeks of the DNA sequencing of the COVID-19 virus, Johnson & Johnson scientists were working 24-7 to identify the most promising lead candidate for a vaccine. I am proud of the progress of our COVID-19 vaccine candidate and the fact that we moved so quickly while maintaining the highest level of science and safety standards. This is truly a remarkable accomplishment and a testament to the ingenuity and determination of our vaccine and supply chain team. We look forward to sharing further details from our Phase 3 study by early next week.

I am proud of the progress of our COVID-19 vaccine candidate and the fact that we moved so quickly while maintaining the highest level of science and safety standards.

This is truly a remarkable accomplishment and a testament to the ingenuity and determination of our vaccine and supply chain teams.

We look forward to sharing further details of our phase III study by early next week.

Additionally, I'm just as proud of the ways each of my Johnson <unk> Johnson colleagues have gone above and beyond the call of duty to provide uninterrupted access to our medicines embraced radically new ways of working and use the full breadth and depth of our expertise to deliver our important medicines and products to patients and consumers.

Alex Gorski: Additionally, I'm just as proud of the ways each of my Johnson & Johnson colleagues have gone above and beyond the call of duty to provide uninterrupted access to our medicines, embrace radically new ways of working, and use the full breadth and depth of our expertise to deliver our important medicines and products to patients and consumers and support healthcare systems that have been overwhelmed by the pandemic. The fact that we've been able to not just weather this crisis but bring our broad-based capabilities to support this crisis and deliver on our shorter-term top and bottom line business goals, while increasing our investments and innovation to record levels, is a remarkable testament to our purpose-driven culture and the core strengths that have characterized our company for over a century – execution, innovation, and people. Our relentless focus on excellence in execution is key to meeting the needs of all our stakeholders today and tomorrow.

Support health care systems that have been overwhelmed by the pandemic.

The fact that we've been able to not just for weather. This crisis bring our broad based capabilities to support this crisis and deliver on our shorter term top and bottom line business goals, while increasing our investments in innovation are record levels is a remarkable testament to our purpose driven culture the core strengths of characterized.

Our company for over a century execution innovation and people.

Our relentless focus on excellence and execution is key to meeting the needs of all our stakeholders today and tomorrow.

The performance of our business in 2020 reflects the continued confidence from patients physician customers and consumers and our life saving medicines and products.

Alex Gorski: The performance of our business in 2020 reflects the continued confidence from patients, physicians, customers, and consumers in our life-saving medicines and products. Our pharmaceutical business performed well above market, kept pipeline submissions and approvals on track, and exceeded patient enrollment in clinical trials compared to 2019. Our consumer health business also performed above market for the year, and our medical devices business demonstrated resiliency and agility, leading to a strong second-half recovery. Our unparalleled scientific expertise allows us to create life-enhancing innovation. Our R&D colleagues across Johnson & Johnson have continued to advance our robust pipeline of innovative and transformational new products. Of note, we initiated our U.S. filing for our BCMA, CAR-T, and multiple myeloma in December. In addition, we filed amivatinab for the treatment of exon 20 mutations in non-small cell lung cancer in the U.S. and Europe.

Our pharmaceutical business performed well above market gas pipeline submissions and approvals on track and exceeded patient enrollment in clinical trials compared to 2019.

Our consumer health business also performed above market for the year and our medical devices business demonstrated resiliency and agility, leading to a strong second half recovery.

Our unparalleled scientific expertise allows us to create life enhancing innovation.

Our R&D colleagues across Johnson <unk> Johnson have continued to advance our robust pipeline of innovative and transformational new products.

Note, we initiated our U S filing for our be CMA car T. In multiple myeloma in December. In addition, we filed Emma that nap for the treatment of exon 20 mutations in non small cell lung cancer in the U S and Europe.

Our medical device business has made strong progress advancing our pipeline, despite the pandemic, achieving and even accelerating certain key milestones throughout the year.

Alex Gorski: Our medical device business has made strong progress advancing our pipeline despite the pandemic, achieving and even accelerating certainty milestones throughout the year. As you heard from Ashley, Dr. Moll, and the team at the Medical Device Update in November, we are developing an end-to-end digital ecosystem across three robotics platforms, and we achieved a significant milestone this month, receiving FDA clearance for our Velys robotic assistant solution. We believe the industry is just starting to unlock the full potential and benefits of robotics and digital technologies.

As you heard from Ashley Dr. Molina team at the medical device update in November we are developing an end to end digital ecosystem across three robotics platforms, and we achieved a significant milestone this month, receiving FDA clearance for our balanced robotic assistance solution.

We believe the industry is just starting to unlock the full potential and benefits of robotic and digital technologies.

Johnson <unk> Johnson is well positioned to bring innovative differentiated solutions to the surgery suite over the next 10 20 and 30 years.

Alex Gorski: Johnson & Johnson is well positioned to bring innovative, differentiated solutions to the surgery suite over the next 10, 20, and 30 years. I'm also very proud of the great work from our supply chain colleagues in driving improvements and efficiencies over the past year. Gartner even honored Johnson & Johnson with a number 3 ranking across all industries on its annual 2020 Supply Chain Top 25 Index, five spots from our 2019 ranking. Gartner also awarded Johnson & Johnson the number one spot on its 2020 Healthcare Supply Chain Top 25, citing our commitment to continuous improvement while putting innovation into practice, particularly in our response to the COVID-19 pandemic. And finally, we are powered by our people, purpose, and value system.

I'm also very proud of the great work from our supply chain colleagues in driving improvements in efficiencies over the past year.

Gartner, even honor Johnson <unk> Johnson with a number three ranking across all industries on its annual 2000, Twenty's supply chain top twenty-five index.

That's up five spots from our 2019 ranking Gartner.

Gartner also award of Johnson <unk> Johnson, the number one spot on its 2020 healthcare supply chain popped twenty-five, citing our commitment to continuous improvement while putting innovation into practice.

Early in our response to the COVID-19 pandemic.

And finally, we are powered by our people purpose and value system.

More than 75 years since it was authored our Credo continues to guide all 135000 members at Johnson <unk> Johnson.

Alex Gorski: More than 75 years since it was authored, our Pareto continues to guide all 135,000 of us at Johnson & Johnson. And with that in mind, I want to highlight a recent appointment to our board of directors, an incredibly high honor awarded to one of our own directors. In December, Johnson & Johnson appointed retired U.S. Army Lieutenant General and former U.S. Army Surgeon General, Dr. Nadia West, to our Board of Directors.

And with that in mind I want to highlight a recent appointment to our board of directors that incredibly high honor awarded to one of our own directors.

In December Johnson, and Johnson appointed retired U S Army Lieutenant General and former U S Army surgeon General Dr. Nadia, we'll adds to our board of directors.

Doctor, What's accomplished health care background. In addition, there are deep strategic leadership experience are strong additions to our board of directors.

Alex Gorski: Dr. West's accomplished healthcare background, in addition to their deep strategic leadership experience, are strong additions to our board of directors. In October, Johnson & Johnson Board Director Dr. Jennifer Doudna, along with her colleague Dr. Emmanuelle Charpentier, was awarded the 2020 Nobel Prize in Chemistry for the revolutionary discovery of CRISPR-Cas9 gene editing technology, considered to be one of the most significant breakthroughs in molecular biology in the We are truly proud of her recognition for this incredible work.

In October Johnson, <unk> Johnson Board director, Dr. Jennifer Doudna, along with her colleague Doctor Emmanuel I'll sharpen Tara was awarded the 'twenty 'twenty Nobel Prize in chemistry for the Revolutionary Discovery of CRISPR Cats, nine gene editing technology considered to be one of the most significant breakthroughs in molecular biology in the past.

Decade, we.

We are truly proud of our recognition for this incredible work.

Our commitment to diversity equity and inclusion in both our workforce and the communities in which we serve has always been an important part of our culture.

Alex Gorski: Our commitment to diversity, equity, and inclusion in both our workforce and the communities in which we serve has always been an important part of our culture. However, the past year has also spotlighted the fact that we can all do more. To that end, I am proud of our Race to Health Equity platform, which aims to help improve racial equity by eliminating health inequities for people of color through our $100 million commitment to invest in and promote health equity.

However, the past year has also shown a spotlight on the fact that we can all do more.

To that end I am proud of our race to health equity platform launched in November.

Our race to health equity aims to help improve racial equity by eliminating health in equities, where people of color and our $100 million commitment to invest in and promote health equity.

I'm excited to be part of this progress and for Johnson <unk> Johnson to play a part in impactful lasting change.

Alex Gorski: I'm excited to be part of this progress and for Johnson & Johnson to play a part in impactful, lasting change. And most importantly, the talented and committed people of Johnson & Johnson drive our success by putting the patients and consumers we serve around the world at the forefront of all we do. We thank and rely on them to continue to innovate, execute, and focus on our shared purpose to deliver better health for everyone, everywhere. I look forward to answering your questions during the Q&A portion of the webcast. Right now, I'll turn the call over to Chris to share details related to our performance for the quarter. Thank you. Thanks, Alex.

And most importantly, the talented and committed people of Johnson, <unk> Johnson and drive our success by putting the patients and consumers we serve around the world at the forefront of all we do.

We think and rely on them to continue to innovate execute and focus on our shared purpose to deliver better health for everyone everywhere.

I look forward to addressing your questions during the Q&A portion of the webcast right now I'll turn the call over to Chris to share details related to our performance for the quarter. Thank you Chris.

Chris Thanks, Alex now to recap the fourth quarter.

Chris Schott: Now, to recap the fourth quarter. Worldwide sales were $22.5 billion in the fourth quarter of 2020, an increase of 8.3% versus the fourth quarter of 2019. Operational sales growth, which excludes the effect of translational currency, increased 7.1 percent, as currency had a positive impact of 1.2 points. In the U.S., sales increased 9.6%. In regions outside the U.S., our reported growth was 7%.

Worldwide sales were $22 $5 billion for the fourth quarter of 2020.

An increase of eight 3% versus the fourth quarter of 2019.

Operational sales growth, which excludes the effect of translational currency increased seven 1%.

As currency had a positive impact of 1.2 points.

In the U S sales increased nine 6% in regions outside the U S. Our reported growth was 7%.

Operational sales growth outside the U S was four 3%.

Chris Schott: Operational sales growth outside the U.S. was 4.3%, with currency positively impacting our reported OUS results by 2.7 points. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 7.3% worldwide. 9.6% in the U.S. and 4.8% outside the U.S. As referenced on prior calls, I would like to remind everyone that our 2020 fiscal year included an additional week. Since this week occurred during a holiday period, it does not represent a full week of sales, but rather a few more shipping days, with these additional shipping days adding approximately 4 points to the quarterly sales growth rate and 1 point to the annual growth rate. This can be roughly applied across all segments.

With currency positively impacting our reported <unk> results by two seven points.

Excluding the net impact of acquisitions and divestitures adjusted operational sales growth was seven 3% worldwide.

Nine 6% in the U S.

Four 8% outside the U S.

As referenced on prior calls I would like to remind everyone that our 2020 fiscal year included an additional week.

This week occurred during a holiday period. It does not represent a full week of sales, but rather a few more shipping days with these additional shipping days, adding approximately four points to the quarterly sales growth rate at one point to the annual growth rate. This can be roughly applied across all segments.

The additional sales were more heavily skewed to the U S.

Chris Schott: The additional sales were more heavily skewed to the U.S. For the enterprise, offsetting this sales benefit was the estimated negative impact of the COVID-19 pandemic. Lastly, while these few shipping days added to sales, we also had a full week's worth of operating costs. Therefore, the impact on earnings was negligible.

For the enterprise offsetting the sales benefit was the estimated negative impact of the COVID-19 pandemic.

Lastly, while these few shipping days added to sales. We also had a full week's worth of operating costs. Therefore, the impact to earnings was negligible.

Chris Schott: Turning now to earnings, for the quarter, net earnings were $1.7 billion, and diluted earnings per share was $0.65 versus diluted earnings per share of $1.50 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5 billion, and adjusted diluted earnings per share was $1.86, representing decreases of 1.2% and 1.1%, respectively, compared to the fourth quarter of 2018. On an operational basis, adjusted diluted earnings per share declined 3.2%.

Turning now to earnings for the quarter net earnings were $1 7 billion and diluted earnings per share was <unk> 65 cents versus diluted earnings per share of $1.50 a year ago, excluding after tax intangible asset amortization expense and special items for both periods.

Adjusted net earnings for the quarter were $5 billion and adjusted diluted earnings per share was $1.86 representing decreases of one 2% at 1.1% respectively compared to the fourth quarter of 2019.

On an operational basis adjusted diluted earnings per share declined three 2%.

For the full year 2020, consolidated sales were $82 $6 billion, an increase of 0.6% compared to the full year of 2019.

Chris Schott: For the full year 2020, consolidated sales were $82.6 billion, an increase of 0.6% compared to the full year of 2019. Operationally, full year sales grew 1.2%, with currency having a negative impact of 0.6 points. Sales growth in the U.S. was 2.5%, and regions outside the U.S. were reported year-over-year change of negative 1.3%. Operational sales growth outside the U.S. declined by 0.2 percent, with currency negatively impacting our reported OUS results by 1.1 points.

Operationally full year sales grew one 2% with currency, having a negative impact of 0.6 points.

Sales growth in the U S was two 5%.

In regions outside the U S. Our reported year over year change was negative one 3%.

Operational sales growth outside the U S declined by 0.2% with currency negatively impacting our reported <unk> results by one one points, excluding the net impact of acquisitions and divestitures adjusted operational sales growth was 1.5% worldwide two 8% in the U S.

Chris Schott: Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 1.5 percent worldwide, 2.8 percent in the U.S., and 0.2 percent outside the U.S. Net earnings for the full year 2020 were $14.7 billion, and diluted earnings per share were $5.51 versus diluted earnings per share of $5.63 a year ago. In 2020, adjusted net earnings were $21.4 billion, and adjusted diluted earnings per share was $8.03, representing decreases of 8.1% and 7.5%, respectively, versus full year 2019. On an operational basis, adjusted diluted earnings per share decreased by 7.8%.

S and 0.2% outside the U S.

Net earnings for the full year 2020 were $14 $7 billion and diluted earnings per share was $5.51.

Diluted earnings per share of $5 63, a year ago to.

2020, adjusted net earnings were $21 $4 billion.

And adjusted diluted earnings per share was $8.03, representing decreases of eight 1% and seven 5% respectively versus full year 2019.

On an operational basis adjusted diluted earnings per share decreased by seven 8%.

Beginning with consumer health I will now comment on business segment sales performance for the fourth quarter highlighting items that build upon the slides you have in front of you.

Chris Schott: Beginning with consumer health, I will now comment on business segment sales performance for the fourth 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 fourth quarter of 2019 and therefore exclude the impact of currency translation. While not part of the prepared remarks for today's call, we have provided additional commentary on our website for the full year 2020 sales by segment to assist you in updating your models. Worldwide consumer health sales totaled $3.6 billion and grew 2%, with growth in the U.S. of 2.7% and 1.5% outside of the U.S. Consumer health delivered strong above-market growth due to our oral care, wound care, and OUS skin health beauty businesses partially offset Over-the-counter medicines had a decline of 1.5 percent. In the U.S., OTC sales were flat, and the OUS declined by 2.9 percent.

Unless otherwise stated percentages quoted represent the operational sales change in comparison to the fourth quarter of 2019, and therefore exclude the impact of currency translation.

While not part of the prepared remarks for today's call. We have provided additional commentary on our website for the full year of 2020 sales by segment to assist you in updating your models.

Worldwide consumer health sales totaled $3 $6 billion and grew 2% with growth in the U S of two 7%.

And 1.5% outside of the U S.

Consumer health delivered strong above market growth due to our oral care wound care and O U S skin health beauty businesses, partially offset by the negative impact of COVID-19, primarily in our OTC business and the SKU rationalization program, which predominantly impacted baby and skin health beauty outside the.

U S E commerce growth continues to be strong across regions and franchises.

Over the counter medicines had a decline of one 5%.

In the U S. OTC sales were flat in the O U S declined by two 9%.

Globally results were negatively impacted by COVID-19 restrictions, resulting in lower cough cold and flu incidents is impacting children's tylenol global cough, and cold and digestive products.

Chris Schott: Globally, results were negatively impacted by COVID-19 restrictions resulting in lower cough, cold, and flu incidences impacting children's Tylenol, global cough and cold, and digestive products. However, offsetting these declines was strong adult Tylenol market and share growth attributed to elevated demand driven by COVID-19, Zyrtec share growth partially due to competitive out-of-stock and strong market growth in anti-s The skin health and beauty franchise experienced recovery with a 2.6% increase driven by strong performance of OGX due to share gains and OUS growth for Dr. Salabo, although partially offset by Neutrogena declines as retailers carry less inventory coupled with market declines primarily in the makeup category due to fewer use occasions driven by COVID-19 restrictions and SKU rationalization.

Offsetting these declines was strong adult tylenol market and share growth attributed to elevated demand driven by COVID-19, zertec share growth, partially due to competitive out of stock and strong market growth and anti smoking AIDS in Omega.

The skin health and beauty franchise experienced recovery with a two 6% increase driven by strong performance of O G X due to share gains and O U S growth for doctors Salobo, partially offset by neutrogena declines as retailers carry less inventory coupled with market declines primarily in the makeup category.

Due to fewer use occasions, driven by COVID-19 restrictions and SKU rationalization.

As consumers continue to focus on products related to personal health and hygiene oral care grew by 12% on continued growth of LISTERINE mouthwash due to new flavor and product innovations and increased demand globally related to COVID-19.

Chris Schott: As consumers continue to focus on products related to personal health and hygiene, oral care grew by 12% on continued growth of Listerine mouthwash due to new flavor and product innovations and increased demand globally related to COVID-19. Wound care grew 12.2% primarily due to strong performance across Neosporin and Band-Aid brand adhesive bandages in the U.S. and Asia Pacific. In the baby franchise, we saw Aveeno baby strength offset by our planned SKU rationalization program primarily outside the U.S. Moving on to our pharmaceutical segment,

When care grew 12, 2%, primarily due to strong performance across Neosporin and band aid brand adhesive bandages and the U S and Asia Pacific.

And the baby franchise, we saw Aveeno baby strength offset by our planned SKU rationalization program, primarily outside the U S.

Moving on to our pharmaceutical segment.

Worldwide pharmaceutical sales of $12 $3 billion grew 14, 6% enabled.

Chris Schott: Worldwide pharmaceutical sales of $12.3 billion grew 14.6% enabled by Strength in all regions, with U.S. sales increasing by 15.3% and OUS sales increasing by 13.5%. The business realized double-digit growth in 8 key products across our portfolio, supporting growth in all therapeutic areas except for cardiovascular, metabolism, and other, which experienced a decline of 1%, primarily driven by continued biosimilar competition for Procrit. Our strong portfolio of products and commercial capabilities has enabled us to deliver our ninth consecutive year of global adjusted operational growth at above market levels. Our oncology portfolio delivered another robust quarter with worldwide growth of 23.7%. Darzalex continued its strong performance, growing 49%, led by share gains globally, with the U.S. market share up about 4 points across all lines of therapy.

Enabled by strength in all regions with U S sales, increasing by 15, 3% and O U S sales increasing by 13, 5%.

The business realized double digit growth in eight key products across our portfolio supporting growth in all therapeutic areas, except for cardiovascular metabolism. Other.

Which experienced a decline of 1% primarily driven by continued biosimilar competition for Procrit.

Our strong portfolio of products and commercial capabilities has enabled us to deliver our ninth consecutive year of global adjusted operational growth at above market levels.

Our oncology portfolio delivered another robust quarter with worldwide growth of 23, 7%.

<unk> continued its strong performance growing 49% led by share gains globally with the U S market share up about four points across all lines of therapy.

Furthermore, the U S and European markets continue to exhibit increased adoption of the subcutaneous formulation launched in the second quarter.

Chris Schott: Furthermore, the U.S. and European markets continue to exhibit increased 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. Additionally, we continue to advance the Darzalex innovation pipeline with the recent U.S. approval of Darzalex FastPro for the treatment of patients with newly diagnosed light-chain amyloidosis. Imbruvica grew 25.3% globally, mainly driven by market growth and our strong leadership position in all key indications. We continue to progress the development of Imbruvica and further differentiate this BTK inhibitor, as evidenced by the robust data presentation at the American Society of Hematology Conference in December.

As feedback continues to be very positive on the east and reduce time to administer the new formulation.

Also we continue to advance the doors <unk> innovation pipeline with the recent U S approval of doors, Alex fast pro for the treatment of patients with newly diagnosed light chain amyloidosis.

<unk> grew 25, 3% globally, mainly driven by market growth and our strong leadership position in all key indications.

We continue to progress the development of <unk> and further differentiate this be TK inhibitor as evidenced by the robust data presentation at the American Society of Hematology Conference in December.

Or leave it continued its strong growth momentum with sales of just over $240 million in the quarter driven by market share and penetration gains, especially in the metastatic indication.

Chris Schott: Erleada continued its strong growth momentum with sales of just over $240 million in the quarter, driven by market share and penetration gains, especially in the metastatic indication. Our immunology therapeutic area delivered global sales growth of 15.3%, driven by the strong double-digit performance of Stelara and Tremfya. Stelara grew 30.3%, driven by a global demand increase in Crohn's disease, with over a five-point share increase in the U.S., and continued growth in ulcerative colitis. Tremfya grew 39.3% and is up about 3 points of share from the fourth quarter of 2019 in the psoriasis market in the U.S. Tremfya continues to strengthen its leadership position as the most prescribed IL-23 inhibitor for patients worldwide through its differentiated data package in both psoriasis and psoriatic arthritis.

Our immunology therapeutic area delivered global sales growth of 15, 3% driven by strong double digit performance as to Lora interim fire Stella grew 33% driven by global demand increase in Crohn's disease with over a five point share increase in the U S and.

And continued growth in ulcerative colitis.

<unk> grew 39, 3% and is up about three points of share from the fourth quarter of 2019 in the psoriasis market in the U S.

It continues to strengthen its leadership position as the most prescribed IL 23 inhibitor for patients worldwide through its differentiated data package in both psoriasis and Psoriatic arthritis.

We also continue to advance from fires pipeline as evidenced by phase two crohn's disease data that was presented earlier this year.

Chris Schott: We also continue to advance Tremfya's pipeline, as evidenced by the Phase 2 Crohn's disease data that was presented earlier this year. In neuroscience, our paliperidone long-acting portfolio performed well, growing 9% driven by market and share growth due to increased new patient starts and strong persistency. In 2020, we filed submissions in the U.S. and EU for paliperidone-palmitate six-month formulation for the treatment of adults diagnosed with schizophrenia, and if approved, it will be the first and only long-acting injectable medication with a twice-yearly dosing regimen.

In neuroscience, our Palo Verde on long acting portfolio performed well growing 9% driven by market share growth due to increased new patient starts and strong persistency in 2020, we filed submissions in the U S and EU for Palo Verde, one palmitate six month formulation for the treatment of adults diagnose.

As for schizophrenia, and if approved it will be the first and only long acting injectable medication with a twice yearly dosing regimen.

Our total pulmonary hypertension portfolio achieved strong growth of 37, 4% with up summit growth of 36, 7% and a trabi growth of 44, 1%, both driven by market penetration and share growth as well as a one time benefit of about 10 points, each resulting from the U S.

Chris Schott: Our total pulmonary hypertension portfolio achieved strong growth of 37.4%, with Upsummit growth of 36.7% and Uptravi growth of 44.1%, both driven by market penetration and share growth, as well as a one-time benefit of about 10 points each, resulting from the U.S. distributor model change we communicated in Q4 2019. I'll now turn your attention to the medical devices segment. Worldwide medical device sales were $6.6 billion, declining 2.

<unk> model change, we communicated in Q4 2019.

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

Worldwide medical devices sales were $6 6 billion declining two 2%.

Alluding the net impact of acquisitions and divestitures, primarily the divestiture of ASP.

Chris Schott: Excluding the net impact of acquisitions and divestitures, primarily the divestiture of ASP, adjusted operational sales declined by 1.5% worldwide. One-time items positively impacted the current quarter by about 200 basis points. The net benefit from these one-time items is comprised of the benefit of the extra shipping days associated with the 53rd week, partially offset by the anticipated inventory contractions in China across our portfolio and in our U.S. contact lens business, as communicated last quarter. Adjusting for the impact of these one-time items, Q4 results were in line with Q3 2020 performance. COVID-19 remains a dynamic variable within the medical device market. In Q4, COVID-19 cases and hospitalizations reached their highest levels in certain parts of the world, while cases remained relatively stable in others. This did lead to some softening in recovery trends late in the quarter, but impacts varied across geographies and procedure types.

Adjusted operational sales decline was one 5% worldwide.

One time items positively impacted the current quarter by about 200 basis points.

The net benefit from these one time items is comprised of the benefit of the extra shipping days associated with the 50 <unk> week, partially offset by the anticipated inventory contractions in China across our portfolio.

And in our U S contact lens business as communicated last quarter.

Adjusting for the impact of these onetime items Q4 results were in line with Q3 2020 performance.

COVID-19 remains a dynamic variable within the medical device market in Q4, COVID-19 cases, and hospitalizations reached their highest levels in certain parts of the world.

All cases remained relatively stable and others. This.

This did lead to some softening in recovery trends late in the quarter, however impacts varied across geographies and procedure types.

Looking geographically, China, where COVID-19 cases have continued to remain more stable deliver double digit growth within the quarter.

Chris Schott: Looking geographically, China, where COVID-19 cases have continued to remain more stable, delivered double-digit growth within the quarter. Excluding the benefit of the additional shipping days, the U.S. declined by low single digits due to COVID-19-related restrictions occurring late in the quarter. Sales also declined in Europe, where some of the strictest restrictions were deployed to curb the increases in COVID-19 cases.

Excluding the benefit of the additional shipping days the U S declined low single digits due to COVID-19 related restrictions occurring late in the quarter.

Sales also declined in Europe, where some of the strictest restrictions were deployed to curb the increases in COVID-19 cases.

As we have noted previously health care systems continue to demonstrate their resiliency and dedication to treating both COVID-19, and non COVID-19 patients, resulting in significantly less disruption. During this recent surge of cases versus the impact seen earlier this year.

Chris Schott: As we have noted previously, healthcare systems continue to demonstrate their resiliency and dedication to treating both COVID-19 and non-COVID-19 patients, resulting in significantly less disruption during this recent surge of cases versus the impact seen earlier this year. Interventional solutions continue to demonstrate strong performance, delivering another quarter of double-digit growth. Electrophysiology grew 12.7% globally, led by market recovery and share gains from new products. Serenovus returned to double-digit growth with strong sales in China.

Interventional solutions continue to demonstrate strong performance delivering another quarter of double digit growth.

Electrophysiology grew 12, 7% globally led by market recovery and share gains from new products.

Novus returned to double digit growth with strong sales in China.

Worldwide Orthopedics declined five 3% versus prior year, driven by the negative impact of COVID-19 on procedures seem to be more elective in nature.

Chris Schott: Worldwide orthopedics declined 5.3% versus prior year, driven by the negative impact of COVID-19 on procedures deemed to be more elective in nature. Worldwide trauma delivered growth of 3.6% globally; U.S. growth of 10% for the quarter reflects market recovery, as well as the success of our new products, such as the cannulated compression headless screws. Declines of about 6% outside the U.S. reflect slower procedural volumes due to COVID-19 restrictions, as well as contractions in inventory in China worth around 400 basis points. Worldwide HIPs declined 2.7% primarily due to the impact of COVID-19 on the market.

Worldwide trauma delivered growth of three 6% globally U S growth of 10% for the quarter reflects market recovery as well as success of our new products such as the calculated compression headless screws.

Declines of about 6% outside the U S reflects slower procedure volumes due to COVID-19 restrictions.

As well as contractions in inventory in China worth around 400 basis points.

Worldwide hips declined two 7% primarily due to the impact of COVID-19 on the market.

U S declined <unk>, 7% versus prior year and continues to benefit from our leadership position in the anterior approach and strong demand for the actis stem and enabling technologies, helping to partially offset the negative COVID-19 impact.

Chris Schott: The U.S. declined 0.7% versus the prior year and continues to benefit from our leadership position in an interior approach and strong demand for the active stem and enabling technologies helping to partially offset the negative COVID-19 impact. We continue to introduce innovation in this space, and in December, we entered the modular dual-mobility market with the first implant of pinnacle dual-mobility, which is planned for a full U.S. market launch this year. These declined 13.9% globally as we continue to see procedures in this space highly impacted by COVID-19, especially revision procedures where we have a higher share than primary. The 20.6% decline outside of the U.S. reflects the impact of COVID-19 on procedures, especially in markets like the U.K. and India, where we hold higher share positions. We are very excited about the FDA clearance of our Velys orthopedic robotic system and bringing this to the U.S. market in 2021. The combination of the differentiated robotic system with our 2-knee platform is expected to drive enhanced performance in this segment.

We continue to introduce innovation in this space and in December we entered the modular dual mobility market with the first implant of Pinnacle tool mobility, which is planned for a full U S market launch this year.

He's declined 13, 9% globally as we continue to see procedures in this space highly impacted by COVID-19, especially revision procedures, where we have a higher share than primary.

The 26% decline outside of the U S reflects the impacts of COVID-19 on procedures, especially in markets like the U K and India, where we hold higher share positions.

We are very excited about the FDA clearance of our <unk> orthopedic robotic system and bringing this to the U S market in 2021, the combination of the differentiated robotic system with our attune knee platform are expected to drive enhanced performance in this segment.

Worldwide decline in spine of seven 1% reflects the impact of COVID-19 on the market as well as inventory reductions in China impacting global performance by about 350 basis points.

Chris Schott: Worldwide decline in spine of 7.1% reflects the impact of COVID-19 on the market, as well as inventory reductions in China impacting global performance by about 350 basis points. Offsetting this decline is the growth we continue to see from the success of recent launches of new products such as Symfony and Conduit. For the quarter, U.S. price remained consistent with historical levels down low single digits.

Offsetting this decline is the growth we continue to see from the success of recent launches of new products, such as Symphony and conduit.

For the quarter U S price remained consistent with historical levels down low single digits.

Moving to the results for the surgery business advanced surgery returned to growth with a 2% increase versus prior year led by strong performance in U S. Biosurgery.

Chris Schott: Moving to the results for the surgery business, advanced surgery returned to growth with a 2% increase versus the prior year, led by strong performance in U.S. biosurgery, which grew 12.1% in the quarter. U.S. biosurgery growth is due to the strength of surgery flow and the continued recovery from the previously disclosed 2019 stop shipment. EndoCutters delivered 1.6% growth, mainly driven by the success of new products in China, offsetting impacts from COVID-19. Energy declined by 3.1 percent, reflecting the negative impact of COVID-19 and competitive pressures in the U.S. partially offset by the strength of new products outside the U.S. This month, we received FDA 510K clearances for both the EnSeal X1 curved and straight jaw tissue sealer instruments, which will further strengthen our portfolio of advanced energy devices. Global wound closure grew by 1.5% through the strength of Stratafix Barb Suture and Prineo Topical Skin Adhesive products in both the U.S. and O.U.S.

Which grew 12, 1% in the quarter.

U S. Biosurgery growth is due to the strength of surge of flow and the continued recovery from the previously disclosed 2019 stopped shipment.

Endo cutters delivered one 6% growth.

Mainly driven by the success of new products in China offsetting impacts from COVID-19.

Energy declined by three 1%, reflecting the negative impact of COVID-19, and competitive pressures in the U S. Partially offset by the strength of new products outside the U S.

This month, we received FDA 500, 10-K clearances for both the NCL X, one curved and straight Shaw tissue sealer instruments, which will further strengthen our portfolio of advanced energy devices glue.

Global wound closure grew by one 5% through the strength of strata fixed barb suture, and preneed topical skin adhesive products in both the U S and O U S markets inventory dynamics in the quarter added about 350 basis points to the U S growth of eight 5% and negatively impacted the <unk> decline.

Chris Schott: markets. Inventory dynamics in the quarter added about 350 basis points to the U.S. growth of 8.5% and negatively impacted the OUS decline of 2.9% by about 150 basis points. The Vision business declined 6.6% globally.

Of two 9% by about 150 basis points.

The vision business declined six 6% globally U S contact lens declined seven 1%. However, after adjusting for the impact of both the additional shipping days this quarter and the impact of anticipated channel inventory correction communicated last quarter worth about nine points the underlying U S contact.

Chris Schott: U.S. contact lens sales declined 7.1%. However, after adjusting for the impact of both the additional shipping days this quarter and the impact of the anticipated channel inventory correction communicated last quarter, worth about 9 points, the underlying U.S. contact lens business grew and continues to deliver competitive performance. While surgical vision declined 10.1% globally, this represents an improvement from Q3, where the business declined 16.4%, with the most notable improvement in the U.S. This improvement is due to both improvement in the cataract and refractive markets, as well as new products like Tecnis Toric II IOL for stigmatism. Now, regarding our consolidated statement of earnings for the fourth quarter of 2020, please direct your attention to the box section of the schedule. You will see we have provided our earnings adjusted to exclude intangible amortization expense and special items. As reported earlier, our adjusted EPS of $1.86 reflects a reported decrease of 1.1% and an operational decrease of 3.2%.

Lens business grew and continues to deliver competitive performance.

While surgical vision declined 10, 1% globally. This represents an improvement from Q3, where the business declined 16, 4% with the most notable improvement in the U S.

This improvement is due to both improvement in the cataract and refractive markets as well as new products like <unk> towards to I O L for astigmatism.

Now regarding our consolidated statement of earnings for the fourth quarter of 2020. Please direct your attention to the box section of the schedule you.

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

As reported earlier, our adjusted EPS of $1.86 reflects a reported decrease of one 1% and an operational decrease of three 2%.

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.

Chris Schott: 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, deleveraged slightly, primarily driven by COVID-19 period costs and fixed costs impacting the medical device business, partially offset by favorable enterprise portfolio mix and portfolio mix within the pharmaceutical business. Selling, marketing, and administrative margins improved for the quarter as a result of favorable segment mix and expense leveraging in the pharmaceutical and consumer businesses, partially offset by the negative COVID-19 impact on medical devices sales. We continue to invest in research and development at competitive levels, investing 17.9% of sales this quarter. This was higher than the fourth quarter of 2019 by 230 basis points, driven by portfolio progression, including the COVID-19 vaccine in the pharmaceutical business.

Cost of products sold Deleveraged slightly primarily driven by COVID-19 period costs and fixed cost impacting the medical device business, partially offset by favorable enterprise portfolio mix and portfolio mix within the pharmaceutical business.

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

We continue to invest in research and development at competitive levels investing 17, 9% of sales this quarter.

This was higher than the fourth quarter of 2019 by 230 basis points, driven by portfolio progression, including the COVID-19 vaccine in the pharmaceutical business.

The other income and expense line showed net expense of $2 $4 billion in the fourth quarter of 2020 compared to net expense of $16 million last year.

Chris Schott: The other income and expense line showed net expense of $2.4 billion in the fourth quarter of 2020 compared to net expense of $16 million last year. This was primarily driven by higher litigation expenses related to a Missouri Supreme Court verdict on TALC in the fourth quarter of 2020, which was previously disclosed in our November 3rd 8K filing, and we intend to seek review of that decision by the United States Supreme Court. Regarding taxes in the quarter, our effective tax rate decreased from 4.9% in the fourth quarter of 2019 to a 5.5% benefit in the fourth quarter of 2020. This decline was primarily driven by the tax benefit associated with the fourth quarter of 2020 litigation expenses. Excluding special items, the effective tax rate was 11.4% versus 10.7% in the same period last year.

This was primarily driven by higher litigation expenses related to our Missouri Supreme Court verdict on talc and the fourth quarter of 2020, which was previously disclosed in our November <unk> 8-K filing and we intend to seek review of that decision by the United States Supreme Court.

Regarding taxes in the quarter, our effective tax rate decreased from four 9% in the fourth quarter of 2019 to a five 5% benefit in the fourth quarter of 2020.

This decline was primarily driven by the tax benefit associated with the fourth quarter 2020 litigation expenses.

Excluding special items, the effective tax rate was 11, 4% versus 10, 7% in the same period last year.

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

Chris Schott: I encourage you to review our 10-K for further details on specific tax matters. Let's now look at adjusted income before tax by segment. In the fourth quarter of 2020, our adjusted income before tax for the enterprise, as a percentage of sales, decreased from 27.1% to 24.9%, primarily driven by the COVID-19 impact this quarter. The following are the main drivers of Adjusted Income Before Tax by Segment.

Let's now look at adjusted income before tax by segment in the fourth quarter of 2020, our adjusted income before tax for the enterprise as a percentage of sales decreased from 27, 1% to 24, 9% primarily driven by the COVID-19 impact this quarter.

The following are the main drivers of adjusted income before tax by segment.

Medical devices declined by 900 basis points, driven by COVID-19 impacts on the business, including fixed cost deleveraging associated with sales declines.

Chris Schott: Medical devices declined by 900 basis points driven by COVID-19 impacts on the business, including fixed-cost deleveraging associated with sales declines. Consumer margins improved by 430 basis points. This was primarily driven by portfolio and investment optimization, including execution of our SKU rationalization program. The decline in pharmaceutical margins of 90 basis points was primarily driven by investment in R&D associated with portfolio progression, including the COVID-19 vaccine. This slide provides our full-year consolidated statement of earnings. Please direct your attention to the box section at the bottom of the schedule, where again you will see we have provided our earnings adjusted to exclude intangible amortization expense and special items.

<unk> margins improved by 430 basis points, primarily driven by portfolio and investment optimization, including execution of our SKU rationalization program.

The decline in pharmaceutical margins of 90 basis points was primarily driven by investment in R&D associated with portfolio progression, including the COVID-19 vaccine.

This slide provides our full year consolidated statement of earnings. Please direct your attention to the box section at the bottom of the schedule, where again you will see we have provided our earnings adjusted to exclude intangible amortization expense and special items.

As reported today, our full year 2020, adjusted EPS of $8 <unk> reflects a reported decrease of seven 5% and an operational decrease of seven 8%.

Chris Schott: As reported today, our full year 2020 adjusted EPS of $8.03 reflects a reported decrease of 7.5% and an operational decrease of 7.8%. The decline is primarily related to COVID-19 impacts realized predominantly in our medical device business, along with increased R&D investment, including the investment associated with our COVID-19 vaccine candidate. Moving to the next slide, our full year 2020 adjusted income before tax for the enterprise decreased by 360 basis points versus 2019. Looking at the adjusted pre-tax income by segment, medical devices declined from 35.4% in the previous year to 17%, primarily driven by COVID-19 impacts on the business, including fixed cost deleveraging associated with sales decline.

The decline is primarily related to COVID-19 impacts realized predominantly in our medical device business, along with increased R&D investment, including the investment associated with our COVID-19 vaccine candidate.

Moving to the next slide our full year 2020, adjusted income before tax for the enterprise decreased by 360 basis points versus 2019.

Looking at the adjusted pre tax income by segment medical devices declined from 35, 4% in the previous year to 17%.

Primarily driven by COVID-19 impacts on the business, including fixed cost deleveraging associated with sales declines too.

Chris Schott: 2019 also includes approximately $2 billion related to the divestiture of the advanced sterilization products business. Pharmaceutical margins improved by 200 basis points to 42%, driven by favorable product mix and sales marketing and administrative expense leveraging. Consumer margins improved by 240 basis points to 23.8%, driven by portfolio and investment optimization, including the execution of our SKU Rationalization Program.

2019 also includes approximately 2 billion related to the divestiture of the advanced sterilization products business.

Pharmaceutical margins improved by 200 basis points to 42% driven by favorable product mix and sales marketing and administrative expense leveraging.

Consumer margins improved by 240 basis points to 23, 8% driven by portfolio and investment optimization, including the execution of our SKU rationalization program move.

Moving on two important developments for your reference here's a slide summarizing notable developments occurring in the fourth quarter some of which were mentioned in my comments.

Chris Schott: Moving on to important developments, for your reference, here is a slide summarizing notable developments occurring in the fourth quarter, some of which were mentioned in my comments. For your planning purposes, we plan to host a business review featuring our pharmaceutical business on November 18th this year. The format and location will be announced at a later date.

For your planning purposes, we plan to host a business review featuring our pharmaceutical business on November 18th of this year.

The format and location will be announced at a later date.

Chris Schott: But we hope that you were able to join us for this event, where we look forward to sharing the details about a robust pipeline and differentiated capabilities that give us confidence in our ability to sustain growth in pharmaceuticals at above market levels. That concludes the sales and P&L highlights for Johnson & Johnson's fourth quarter and full year 2020. I'm now pleased to turn the call over to Joe Walks.

But we hope that youre able to join US for this event, where we look forward to sharing the details about our robust pipeline and differentiated capabilities that gives us the confidence in our ability to sustain growth in pharmaceuticals at above market levels.

That concludes the sales and P&L highlights for Johnson, <unk>, Johnson's fourth quarter and full year 2020.

Now pleased to turn the call over to Joe walk.

Thank you, Chris and thanks to everyone. Joining today's call as you heard Johnson and Johnson <unk> results reflect the strength and resilience of an agile broad based business predicated on innovation. Despite unique challenges throughout 2020, the unwavering commitment of our 135000 global colleagues was on full display.

Joseph J. Wolk: Thank you, Chris, and thanks to everyone joining today's call. As you heard, Johnson & Johnson's results reflect the strength and resilience of an agile, broad-based business predicated on innovation, despite unique challenges throughout 2020. The unwavering commitment of our 135,000 global colleagues was on full display, delivering trusted, life-saving, and life-enhancing products to patients and consumers around the world. Their efforts resulted in sound shareholder returns, while advancing value-creating opportunities that benefit all of our stakeholders now and over the long term. Alec stated on this call, and really throughout 2020, that Johnson & Johnson is built for times like this. Our disciplined, long-term focus yields financial strength that affords us the ability to quickly act to address the COVID-19 pandemic in many ways, most notably on our ongoing vaccine development, but also to continue investing in innovative solutions to better the future of healthcare, even when short-term uncertainty exists. I am very pleased today to share our financial guidance for 2021, which reflects these principles. But first, let me review our cash position and capital allocation priorities. We generated free cash flow for the year of $20 billion, surpassing last year's record high.

Levering trusted lifesaving life enhancing products to patients and consumers around the world.

Their efforts resulted in sound shareholder returns, while advancing value, creating opportunities that benefit all of our stakeholders now and over the long term.

Alex stated on this call and really throughout 2020 that Johnson <unk> Johnson is built for times like this.

Disciplined long term focus yields of financial strength that affords us the ability to quickly act to address the COVID-19 pandemic in many ways, most notably on our ongoing vaccine development, but to also continue investing in innovative solutions to better the future of health care, even when short term uncertainty exists.

I am very pleased today to share our financial guidance for 2021, which reflects these principles.

But first let me review, our cash position and capital allocation priorities.

We generated free cash flow for the year of $20 billion, surpassing last year's record high we didn't mess it by having our fiscal yearend lapse into 'twenty and 'twenty one as Chris noted and we are now planning for a payment related to the anticipated final opioid litigation agreement in principal in 2021 versus the previous <unk>.

Joseph J. Wolk: We did benefit by having our fiscal year-end lapse into 2021, as Chris noted, and we are now planning for payment related to the anticipated final opioid litigation agreement in principle in 2021 versus the previous planned 2020 payment. In terms of our cash position, at the end of 2020, we had approximately $10 billion of net debt, comprised of approximately $25 billion of cash and marketable securities and approximately $35 billion of debt. One element of our business that we're particularly proud of is that, despite the challenges of 2020, we maintained our long-term approach to drive growth and value creation across the enterprise. From an innovation standpoint, the development of a safe and effective COVID-19 vaccine was certainly a top priority throughout the year.

Land 2020 payment in terms of our cash position at the end of 2020, we had approximately $10 billion of net debt comprised of approximately $25 billion of cash and marketable securities and approximately $35 billion of debt.

One element of our business that we're particularly proud of that despite the challenges of 2020 offered we maintained our long term approach to drive growth and value creation across the enterprise.

From an innovation standpoint, the development of a safe and effective COVID-19 vaccine was certainly a top priority throughout the year, yet as I said earlier, we continued to make other strategic investments that fortified our pipeline and further enhanced our competitive advantage even during the pandemic our level of R&D invest.

Joseph J. Wolk: Yet, as I said earlier, we continue to make other strategic investments that fortify our pipeline and further enhance our competitive advantage, even during the pandemic. Our level of R&D investment reached an all-time high of $12.1 billion, $800 million more than our 2019 R&D investment. On the transaction front, we continue to evaluate opportunities that strategically complement our portfolio and where our scientific expertise or commercial capabilities can create unique value. During the course of 2020, we invested over $7 billion in such opportunities. As discussed in our third quarter earnings call in October, we acquired Momenta Pharmaceuticals and a lead therapeutic candidate, Nipocalimab, which is in phase two and phase three clinical development for the treatment of rare autoantibody-driven diseases. We believe Nipocalimab represents a pipeline and a product opportunity that can treat a broad range of devastating autoantibody-driven diseases. In December, we expanded our retina pipeline by acquiring the rights to Hemera Biosciences Investigational Gene Therapy, HMR-59, a one-time outpatient intervitreal injection to help preserve vision in patients with geographic atrophy, a severe form of age-related macular degeneration where currently, there are no other approved therapies.

<unk> reached an all time high of $12 $1 billion $800 million more than our 2019 R&D investment.

On the transaction front, we continue to evaluate opportunities that strategically complement our portfolio and where our scientific expertise or commercial capabilities can create unique value over the course of 2020, we invested over $7 billion in such opportunities as.

As discussed on our third quarter earnings call in October we acquired momentum Pharmaceuticals, and a lead therapeutic candidate <unk>, which is in phase II and phase III clinical development for the treatment of rare auto antibody driven diseases. We believe nipper <unk> encompasses a pipeline in a product opportunity that can treat a broad.

Range of devastating auto antibody driven diseases.

In December we expanded our retina pipeline by acquiring the rights to Humira Biosciences, investigational gene therapy H M. <unk> 59, a onetime outpatient interdigital injection to help preserve vision in patients with geographic atrophy, a severe form of age related macular degeneration, where.

Currently there are no other approved therapies.

And as shareholders and Johnson and Johnson have come to expect we continued to prioritize our dividend by announcing last April a six 3% increase this translated in returning $10 $5 billion to investors in 2020, approximately 50% of our free cash flow.

Joseph J. Wolk: And, as shareholders in Johnson & Johnson have come to expect, we continued to prioritize our dividend by announcing last April a 6.3% increase. This translated into returning $10.5 billion to investors in 2020, approximately 50% of our free cash flow. Let's now turn to our full year 2021 guidance. Given our full year 2020 performance in this unprecedented environment and the underlying strength of our broad-based business, we are well positioned to continue delivering long-term value to our stakeholders. We continue to monitor and work with healthcare systems around the globe as they balance surges in COVID-19 cases with treatment for non-COVID-19 patients. I would be remiss if I didn't acknowledge the tremendous efforts of healthcare providers around the world that have society in a much better place today with improved treatment protocols and resource allocation compared to the start of the pandemic.

Let's now turn to our full year 2021 guidance.

Given our full year 2020 performance in this unprecedented environment and the underlying strength of our broad based business. We are well positioned to continue delivering long term value to our stakeholders. We continue to monitor and work with health care systems around the globe as they balanced surges in COVID-19 cases with treatment for non COVID-19.

Patients I would be remiss, if I didn't acknowledge the tremendous efforts of health care providers around the world that have society in a much better place today with improved treatment protocols and resource allocation compared to the start of the pandemic.

We are also encouraged by the recent availability of COVID-19 vaccines that will provide added reassurance to people in need of medical procedures.

Joseph J. Wolk: We are also encouraged by the recent availability of COVID-19 vaccines that will provide added reassurance to people in need of medical procedures. From a macroeconomic perspective, our outlook assumes stabilizing employment levels and a reduction in social restrictions as the year progresses. From a legislative standpoint, we are not assuming significant changes in current tax policy and, consistent with the past four years in our pharmaceuticals business, we expect net price decreases at similar levels.

From a macroeconomic perspective, our outlook assumes stabilizing employment levels and a reduction in social restrictions as the year progresses from a legislative standpoint, we're not assuming significant changes in current tax policy and consistent with the past four years in our pharmaceuticals business, we expect net price decrease.

<unk> at similar levels, we will continue to focus on providing access to more patients for our innovative products, resulting in growth being volume driven.

Joseph J. Wolk: We will continue to focus on providing access to more patients for our innovative products, resulting in growth being volume-driven. So let's get into the details of full year 2021 guidance for you to consider in updating your models. I'd like to note up front that our guidance excludes the financial impact from the potential distribution of our COVID-19 vaccine candidate. As Alex noted, we remain committed to providing a safe and effective vaccine. Being in the final stages of a robust 45,000-person study, analytics will be completed, and we plan to report out the results by early next week. Therefore, it would be premature to speculate.

So let's get into the details for full year 2021 guidance for you to consider in updating your models.

I'd like to note upfront that our guidance excludes the financial impact from the potential distribution of our COVID-19 vaccine candidate as Alex noted, we remain committed to provide a safe and effective vaccine.

Being in the final stages of a robust 45000 person study analytics will be completed and we plan to report out the results by early next week.

Therefore, it would be premature to speculate we will let the science play out.

Joseph J. Wolk: We will let the science play out. Once we have the data, obtain regulatory authorization, and finalize agreements to supply, we will provide financial updates as warranted, likely during our first quarter earnings call in April. Starting with sales, we expect adjusted operational sales growth for the full year 2021 of between 8.0% and 9.5%. This adjusted operational sales growth is on a constant currency basis, reflecting how we manage our business performance.

Once we have the data obtained regulatory authorization and finalized agreements to supply we will provide financial updates as warranted likely during our first quarter earnings call in April <unk>.

Starting with sales, we expect adjusted operational sales growth for the full year 2021 of between 8.0% and nine 5%.

This adjusted operational sales growth is on a constant currency basis, reflecting how we manage our business performance.

We estimate the negative impact from net acquisitions and divestitures of approximately 50 basis points and as such are comfortable with your models, reflecting operational sales growth in the range of seven 5% to 9.0% or $88 $8 billion to 90.0 billion.

Joseph J. Wolk: We estimate the negative impact from net acquisitions and divestitures of approximately 50 basis points and, as such, are comfortable with your models reflecting operational sales growth in the range of 7.5% to 9.0% or $88.8 billion to $90.0 billion. As you know, we do not predict the impact of currency movement, but for some context, utilizing the euro spot rate relative to the US dollar as of last week at 1.21, there is an estimated positive impact of foreign currency translation of approximately 200 basis points, resulting in an estimated reported sales growth of between 9.5% and 11.0%, or 10.3% at the midpoint compared to 2020, or $90.5 billion to $91.7 billion. Let's now turn to earnings per share. This slide illustrates the components of our 2021 EPS guidance.

As you know, we do not predict the impact of currency movement.

For some context utilizing the euro spot rate relative to the U S. Dollar as of last week at one point to one there is an estimated positive impact of foreign currency translation of approximately 200 basis points, resulting in an estimated reported sales growth of between nine 5%, an 11.0% or 10 points.

<unk>, 3% at the midpoint compared to 2020 or $95 billion to $91 $7 billion.

Let's now turn to earnings per share.

This slide illustrates the components of our 'twenty 'twenty, one EPS guidance.

Roughly half of our EPS growth is attributed to the robust operational sales growth and the other half is attributable to strong net income margin improvement driven by expected operating margin improvement of more than 200 basis points versus 2020.

Joseph J. Wolk: Roughly half of our EPS growth is attributed to robust operational sales growth, and the other half is attributable to strong net income margin improvement, driven by expected operating margin improvement of more than 200 basis points versus 2020. The medical device COVID-19 recovery and other cost improvement initiatives are planned to more than offset our continued investment to accelerate our business and further strengthen our pipeline of new products for the long term. As a reminder, included in our 2021 guidance is the dilution from the recent acquisition of Momenta, negatively impacting EPS by about $0.15 or $0.10 versus 2020. Considering these items results in adjusted operational EPS in a range of $9.25 to $9.45 or $9.35 at the midpoint, reflecting a 16.4% year-over-year increase.

The medical device COVID-19 recovery and other cost improvement initiatives are planned to more than offset our continued investment to accelerate our business and further strengthen our pipeline of new products for the long term.

As a reminder included in our 'twenty 'twenty, one guidance as the dilution from the recent acquisition of momentum negatively impacting EPS by about 15 or.

Or 10 cents versus 'twenty 'twenty.

Considering these items results in adjusted operational EPS in a range of $9 25.

To $9.45 or $9.35 at the midpoint, reflecting a 16, 4% year over year increase.

Joseph J. Wolk: While not predicting the impact of currency movements, assuming recent exchange rates, our reported adjusted EPS would be positively impacted by approximately $0.15 per share, resulting in adjusted reported earnings per share of $9.50 at the midpoint, reflecting growth of 18.3% versus the prior year. Continuing with EPS guidance, this slide provides a summary of what I just shared, along with some additional P&L items to give you more insight into the drivers of our full-year guidance. Beginning with other income and expense, the line on the P&L where we record royalty income as well as gains and losses related to items such as investments by our Johnson & Johnson Development Corporation, litigation, and write-offs.

While not predicting the impact of currency movements, assuming recent exchange rates, our reported adjusted EPS would be positively impacted by approximately 15 cents per share, resulting in adjusted reported earnings per share of $9.50 at the midpoint, reflecting growth of 18, 3%.

The prior year.

Continuing with EPS guidance. This slide provides a summary of what I just shared along with some additional P&L items to give you more insight into the drivers of our full year guidance.

Beginning with other income and expense line on the P&L, where we record royalty income as well as gains and losses related to the items such as investments by our Johnson <unk> Johnson Development Corporation litigation and write offs.

As I discussed on previous earnings calls, we will continue to be rigorous regarding portfolio management, but going forward. We will not include the impact of significant divestiture gains in adjusted EPS.

Joseph J. Wolk: As I discussed on previous earnings calls, we will continue to be rigorous regarding portfolio management, but going forward, we will not include the impact of significant divestiture gains in adjusted EPS. Given those considerations, we would be comfortable with your models for 2021 reflecting net other income and expense, excluding special items, as net income ranging from between $600 million and $700 million. We continue to actively evaluate external value-creating opportunities, but for purposes of your financial models, we are not assuming any major acquisitions or other major uses of cash at this time. Therefore, we are comfortable with you modeling a net interest expense of between $150 million and $250 million. We are also projecting a higher effective tax rate for 2021 in the range of 16.5% to 17.5% or a midpoint of 17% due to beneficial one-time items in 2020 related to the closeout of audits in several jurisdictions that will not repeat in 2021.

Given those considerations, we would be comfortable with your models for 2021, reflecting net other income and expense excluding special items as net income ranging from between $600 million and $700 million.

We continue to actively evaluate external value, creating opportunities, but for purposes of your financial models. We are not assuming any major acquisitions or other major uses of cash at this time.

Therefore, we are comfortable with your modeling net interest expense of between $150 million and $250 million.

We are also projecting a higher effective tax rate for 2021, and the range of 16, 5% to 17, 5% or a midpoint of 17% due to beneficial onetime items in 2020 related to the closeout of audits in several jurisdictions that will not repeat in 2021.

Let me spend a few minutes, providing some qualitative context about 2021, although not intended to specifically provide segment or quarterly guidance.

Joseph J. Wolk: Let me spend a few minutes providing some qualitative context about 2021, although not intended to specifically provide segment or quarterly guidance. Given the variability that occurred due primarily to COVID-related dynamics, this slide, while not to scale and meant to be illustrative, offers some perspectives on the quarterly phasing across our businesses. From a sales perspective, as Chris noted earlier, we benefited from additional selling days in 2020 that will not repeat in 2021. That should be applied to both the full year and the fourth quarter for the enterprise and by segment.

Given variability that occurred due primarily to COVID-19 related dynamics. This slide while not to scale and meant to be illustrative offer some perspectives on the quarterly phasing across our businesses.

From a sales perspective as Chris noted earlier, we benefited from additional selling days in 2020 that will not repeat in 2021 that should be applied to both the full year and the fourth quarter for the enterprise and by segment.

I'll address each segment, starting with pharmaceuticals, where we anticipate another strong year of above market growth.

Joseph J. Wolk: I'll address each segment, starting with pharmaceuticals, where we anticipate another strong year of above-market growth. Throughout 2020, we saw COVID-19-driven fluctuations, and the most pronounced was the first quarter when, as we noted, we benefited from longer script durations. We continue to invest in COVID-19 vaccine development, impacting the first quarter while we pursue authorization. For 2021, we expect more balanced quarter-to-quarter growth. Lastly, while we expect to continue to face pricing pressures and the ongoing negative impact of generic and biosimilar competition, we do not expect any significant new generic or biosimilar entrants in 2021.

Throughout 2020, we saw COVID-19, driven fluctuations and most pronounced was the first quarter when as we noted we benefited from longer script durations.

We continue to invest in COVID-19 vaccine development impacting the first quarter, while we pursue authorization for 2021, we expect more balanced quarter to quarter growth.

Lastly, while we expect to continue to face pricing pressures and the ongoing negative impact of generic and Biosimilar competition, we do not expect any significant new generic or biosimilar entrants in 2021.

Joseph J. Wolk: Turning to our medical device segment, as mentioned earlier, we observed instances of non-emergency procedure postponements late in the fourth quarter, but healthcare systems continued to meet the needs of both COVID-19 and non-COVID patients, resulting in less COVID-19 market disruption as we progressed through 2020. While macro market dynamics such as vaccine deployment, unemployment, and healthcare coverage remain fluid, we are anticipating some moderate procedural disruption to carry into the first quarter, but we expect continued medical device market improvement throughout 2021, fluctuating by quarter. As you heard during our medical device update in November, our core platforms continue to strengthen, driven by enhanced execution, an improved cadence of innovation, and filling critical portfolio gaps, including, and most notably, advancing our future digital surgery offerings.

Turning to our medical device segment as mentioned earlier, we observed instances of non emergency procedure postponements late in the fourth quarter, but health care systems continue to meet the needs of both Covid and non COVID-19 patients, resulting in less COVID-19 market disruption as we progressed through 2020.

While macro market dynamics, such as vaccine deployment unemployment and health care coverage remain fluid we.

We are anticipating some moderate procedural disruption to carry into the first quarter, but expect continued medical device market improvement throughout 2021 fluctuating by quarter.

As you heard during our medical device update in November our core platforms continue to strengthen driven by enhanced execution and improved cadence of innovation and filling critical portfolio gaps, including most notably advancing our future digital surgery offerings.

We believe the combination of the expected market recovery and the actions taken to strengthen our device business positions us to drive revenue growth each quarter versus 2020 with some continued headwinds due to COVID-19, tempering growth in the first quarter and the highest growth rate expected in the second quarter, given the significant market disruption.

Joseph J. Wolk: We believe the combination of the expected market recovery and the actions taken to strengthen our device business positions us to drive revenue growth each quarter versus 2020, with some continued headwinds due to COVID-19 tempering growth in the first quarter and the highest growth rate expected in the second quarter, given the significant market disruption realized in the second quarter of 2020. Our consumer health segment delivered solid performance throughout the pandemic, resulting in above-market growth, but as noted on our third quarter earnings call, that performance is likely to yield negative COVID-related sales comparisons in the first quarter of 2021, primarily in over-the-counter products. We also plan that our continued SKU rationalization program will have a negative impact on sales in the first half of 2021 while we continue progressing with our margin expansion. For the second half, we would anticipate more normalized growth as consumers return to more typical usage patterns for products in areas like skin health and beauty.

Realized in the second quarter of 2020.

Our consumer health segment yielded solid performance throughout the pandemic, resulting in above market growth, but as noted on our third quarter earnings call that performance is likely to yield negative COVID-19 related sales comparisons in the first quarter of 2021, primarily an over the counter products.

We also plan that our continued SKU rationalization program will have a negative impact on sales in the first half of 2021, while we continue progressing our margin expansion for the second half we would anticipate more normalized growth as consumers return to more typical usage patterns for products in areas like skin health and beauty.

Before although not linear for the full year, we anticipate growing competitively with the markets in which we compete.

Joseph J. Wolk: Therefore, although not linear, for the full year, we anticipate growing competitively with the markets in which we compete. We are confident in the strength of our broad-based business and its underlying fundamentals. We are positioned to deliver meaningful value to all of our stakeholders, not just in 2021 but over the long term. Alex and I look forward to addressing your questions, so I'm now pleased to turn the call back over to Chris to initiate the Q&A session. Chris?

We are confident in the strength of our broad based business and its underlying fundamentals, we are positioned to deliver meaningful value to all of our stakeholders not just in 2021, but over the long term.

Alex and I look forward to addressing your questions. So im now pleased to turn the call back over to Chris to initiate the Q&A session Chris.

Thank you Joe we will now move to the Q&A portion of the webcast. Operator can you. Please provide instructions for those on the line wishing to ask a question.

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

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

Operator: Please limit your questions to one question. And your first question is from Terrence Flint with Goldman Sachs. Hi, good morning.

And your first question is from Terence Flynn with Goldman Sachs.

Hi.

Good morning, Thanks, again for all the work Youre doing to combat the pandemic and looking forward to the vaccine into next week.

Terence Flynn: Thanks again for all the work you're doing to combat the pandemic. I'm looking forward to the vaccine data next week. I was just wondering, with respect to the vaccine trial, if you could remind us what percentage of participants were enrolled in South Africa and Brazil, and if you're gathering sequencing data from these participants that become infected, and when you report the data, are you going to break out results by geography, and hence, will we have any insight in terms of the vaccine efficacy against some of these new variants? Thank you. Hey Terence, this is Alex.

Just wondering with respect to the vaccine trial, if you can remind us what percentage of participants were enrolled in South Africa, and Brazil, and if you're gathering sequencing data from these participants.

That'd become infected and when you report the data are you going to break out results by geography, and hence will we have any insight in terms of the vaccine efficacy against some of these new variance. Thank you.

Hey, Terence this is Alex. Thank you very much for your question and look maybe before I answer this.

Alex Gorski: Thank you very much for your question. Look, maybe before I answer your question, let me just back up to a higher level and once again note what I think has been the tremendous contributions and performance of our 150,000 associates around the world, 50,000 of whom have been going to work every day in our factories and our laboratories to ensure that products and services can continue to flow to patients and hospital systems around the world. Let alone the important work that we're doing on the vaccine. Next, I also think it's very important to reflect on the tremendous impact that COVID-19 has had around the world. You've heard some of the numbers that we mentioned earlier today, whether it's almost 100 million cases around the world, let alone 2 million deaths globally or right here in the United States, almost 25 million people and over 400,000 deaths.

Question, Let me just back up for a higher level and once again.

No what I think has been just been a tremendous contributions and performance of our 150000 approximate associates around the world 50000 of whom have been going to work every day in our factories in our laboratories to ensure the products and services could continue to flow to patients in hospital systems around the world.

Let alone the important work that we're doing on the vaccine next I also just think it's very important to reflect on the tremendous impact that COVID-19 has had around the world.

You've heard some of the numbers that we mentioned earlier today, whether it's almost 100 million cases around the world, let alone 2 million deaths globally or right here in the United States, almost 25 million people and over 400000 deaths.

That's taken a tremendous costs are on and certainly families individuals businesses our economy on just so many different aspects of our life.

Alex Gorski: That's taken a tremendous cost on families, individuals, businesses, our economy, just so many different aspects of our lives that it's all the more important for us to be doing everything we can to make a difference during this pandemic. Last but not least, I'm just very proud of the performance that we had not only in the fourth quarter but throughout 2020. If you look at the various segments, almost each of our sectors, all of our major platforms, what you see is us ending the year in a better position than where we started. And that wasn't only for what I would call the near-term financial performance, where we saw things like market share gains and position improvements, but also if you look at the investment that we made in research and development in sales and marketing, preparing for the future, not only in 2021 Again, we think we're well-positioned and stronger as we finish the year than we were when we began. Now getting back to your specific question regarding the breakouts, we're going to have much more information in the coming days.

That are all the more important for us to be doing everything we can to make a difference during this pandemic last but not least I'm just very proud of the performance that we had not only in the fourth quarter, but throughout 2020, if you look at the various segments in almost each of our sectors all of our major.

Farms, what you saw is us ending the year in a better position than where we started and that wasn't only for what I would call. The near term financial performance, where we saw things like market share gains and in position improvements, but also if you look at the investments that we made in research and development and sales and marketing preparing for the future not only 20.

'twenty, one but that and beyond.

We think we're well positioned and stronger as we finished the year then even when we began.

Now getting back to your specific question regarding the breakouts were going to have much more information in the coming days, we think it's very important.

Alex Gorski: We think it's very important to follow the data, to follow the science. At that time, we think it will be more appropriate to provide you with all of the various cuts of the data that we anticipate having consistent with the statements that we made from the very beginning. We want to ensure that we've got a very robust program, not only geographically but also by ethnicity, gender, as well as a number of other different parameters, all as part of an effort to give us the best possible understanding of the efficacy and safety profile of our vaccine. So stay tuned.

To follow the data to follow the science.

At that time, we think it will be more appropriate to provide you with all of the various cuts of the data that we anticipate having consistent.

Consistent with the statements that we made from the very beginning we want to ensure that we've got a very robust program not only geographically, but also by ethnicity gender as well as a number of other different parameters all as part of an effort to give us the best possible understanding of the efficacy and safety profile.

Of our vaccine.

So stay tuned as Joe alluded to in his earlier comments and Chris We expect to have these results in the coming days and our scientists.

Alex Gorski: As Joe alluded to in his earlier comments and Chris, we expect to have these results in the coming days. And our scientists, Dr. Mattai-Maman, Dr. Paul Stoffels, and others will be providing much more detail once we have those results. Thank you.

Dr <unk>, Dr. Paul Stoffels, and others will be providing much more detail.

Once we have those results. Thank you.

Thanks <unk> I appreciate the question Rob next question. Please your next question comes from Larry <unk> with Wells Fargo.

Joseph J. Wolk: I appreciate the question. Rob, next question, please. Your next question comes from Larry Beagleson with Wells Fargo. Good morning.

Good morning, Thanks for taking the question just one more one on the vaccine and then one financial question.

Larry Biegelsen: Thanks for taking the question. Just one more, one on the vaccine and then one financial question. So Alex or Joe, you know, I heard Joe's comment on CNBC about your expectations for the vaccine to be robust. You know, what do you think you need to show to be competitive? Is 70% a good floor?

So so Alex or Joe you know Ah I heard Joe's comment on CNBC about your expectations for the vaccine to be robust. What do you think you need to show to be competitive at 70% a good floor and Joe do you still expect to produce 1 billion doses in 'twenty 'twenty, one and then just lastly, I know you.

Alex Gorski: And Joe, do you still expect to produce 1 billion doses in 2021? And just lastly, I know you said you're not going to give any financial guidance until, I think, your next call, but since the data is coming next week, any color on, you know, pricing and margins, you know, during and after the pandemic? Thanks, guys. Hey Larry, thank you very much for your question.

The you're not going to give any financial guidance until I think your next call, but since the data is coming next week any color on pricing and margins you know during and after the pandemic. Thanks.

Thanks, guys.

Hey, Larry Thank you very much for your question.

I mentioned earlier I think it would be inappropriate for us to speculate in any significant way given the proximity of that we are today versus when we expect the results of what we said from the very beginning is that we put a lot of work and thought in and very strong science and review into the.

Joseph J. Wolk: As I mentioned earlier, I think it would be inappropriate for us to speculate in any significant way given the proximity that we are today versus when we expect the results. What we said from the very beginning is that, you know, we put a lot of work and thought and very strong science and review into the selection of our lead candidate. I think the phase 1 and 2A results, particularly those that were recently published, we are hopeful that they are a good precursor to the kind of efficacy and safety that we'll see in a larger population, of course, until we see this final data. We won't know for certain, but look, we remain optimistic, and we're going to remain very diligent, you know, as we go through this final review. I'll hand it over to Joe to take the second part of that question. Sure.

<unk> of our lead candidate I think the phase one and two a results, particularly those that were recently published.

We are hopeful that that's a good precursor to the kind of efficacy and safety that we'll see in a larger population of course until we see this final data.

We won't know for certain but I look we remain optimistic.

And we're going to remain very diligent as we go through this final review I'll hand, it over to Joe to take the second part of that question sure. Good morning, Larry and thanks for the question.

Alex Gorski: Good morning, Larry, and thanks for the question. I would say with respect to supply, consistent with the comments that were made earlier, we intend to meet all of the firm order commitments that we have, whether that be to the United States, to the European Union, or to developing countries through the IGABI organization. And right now, we're well on track to do that. But, as Alex alluded to, there's still some fluidity with respect to timelines.

I would say with respect to supply consistent with the comments that were made earlier, we intend to meet all of the firm order commitments that we have with us that beats the United States.

To the European Union or to developing countries through the guy of the organization and right now we're well on track to do that as Alex alluded to Theres still.

Some fluidity with respect to timelines and I think what we're seeing happening with a little bit of confusion as people are trying to parse this down in two weeks.

Joseph J. Wolk: And I think what we're seeing happening with a little bit of confusion is people trying to parse this down into weeks. I think the definitive statement here is that we are very comfortable with meeting our commitments to those respective countries or organizations that I just outlined. In terms of financial implications and pricing, as you can imagine, once countries get a chance to see the data, we're in active negotiations with other countries and other organizations, and the volume will impact the selling price. So it's somewhat of a fluid situation, and that's why we're kind of projecting or leading folks to think about the April first quarter earnings call as a good time when many of those pieces will be in place, and we can give Thanks, Larry.

I think the definitive statement here is that we are very comfortable in meeting our commitments to those respective countries organizations that I just outlined in terms of financial implications in pricing as you can imagine once countries get a chance to see the data we're in active negotiations for other countries and other organizations.

And the volume will impact the selling price. So it's somewhat of a fluid situation and that's why we're kind of projecting a or leading folks too to think about the April 1st quarter earnings call as a good time when many of those pieces will be in place and we can give you some credible information to bank on for the balance of 2021.

Thanks, Larry I appreciate the question Rob next question. Please your next question comes from David Lewis with Morgan Stanley.

Joseph J. Wolk: I appreciate the question. Rob, next question, please. Your next question comes from David Lewis with Morgan Stanley. Good morning and thanks for taking the question. I guess just maybe just two quick ones here for me.

Good morning, and thanks for thanks for taking the question I guess, just maybe just two quick ones here for me. The one would just be just in general as you think about your variance in the marketplace and the need for a booster I wonder if you'd just comment on number one when can we expect the dual dose data and what are your thoughts about the booster.

David Lee: The one would just be, just in general, as you think about your variants in the marketplace and the need for a booster, I wonder if you could just comment on number one, when can we expect the dual dose data, and what are your thoughts about the booster relative to the mRNA-based platforms? And then I guess just on earnings strength for next year, 21, Joe, just under the 200 basis points of year-over-year margin expansion. It just seems like given the earnings upside relative to consensus estimates, you probably need a margin number that is maybe closer to 300 basis points of year-over-year upside versus two. So just give us any sense of what's driving, you know, margin strength. Some of that's medical device recovery. I'm sure some of that's pharma strength as well. It would be super helpful to just give us a sense of the earnings momentum into 21. Thanks so much. Hey David, this is Alec.

Relative to the mrna based platforms and then I guess just.

On earnings strength for next year 'twenty, one Joe just they know the 200 basis points of year over year margin expansion just seems like given the earnings upside relative to consensus estimates you probably need a margin number that is maybe closer to 300 basis points of year on year upside versus two so just give us any sense of what's driving you know Martin strength some of Thats medical devices.

I'm sure some of that's pharma strength as well that'd be super helpful. Just give us a sense of the earnings momentum into 'twenty. One thanks, so much.

Hey, David This is Alex I'll take the first part and then let Josh take the second one.

Alex Gorski: I'll take the first part and then let Joe take the second one. Look, we, as I mentioned earlier, are continuing to pull together all of our data. We're enrolling, as we speak, in the dual-dose information. We would expect that by the back end of this year.

Look we are as I mentioned earlier, we're continuing to pull together all of our data were enrolling as we speak in the dual dose information.

We would expect that to have that in the back end of this year and again as we just as we tried to be very transparent and very thorough in the disclosure that we're releasing we certainly plan to follow that course with that trial as well and you know what we'll.

Alex Gorski: And again, as we try to be very transparent and very thorough in the disclosure that we're releasing, we certainly will plan to follow that course with that trial as well. And, you know, and we'll get out information as soon as we can. Regarding some of the variants, obviously, we're watching that closely based upon some of the regional and geographical differences that we've seen.

We'll get that information as soon as we can.

Regarding some of the variance are obviously, we're watching that closely based upon some of the regional the geographic Jean.

Geographical differences that we've seen and look our scientists are all ready anticipating as you've heard from some of the other companies about what our potential scenarios to ensure that we're prepared but look I think it starts with taking a look at the data that we currently have that we should have shortly and and I think Dr.

Alex Gorski: And look, our scientists are all ready, anticipating, as you've heard from some of the other companies, about what potential scenarios to ensure that we're prepared. But, look, I think it starts with taking a look at the data that we currently have, which we should have shortly. And I think Dr. Paul Stoffels and Dr. Mattiam Maman, once we have that, we'll be able to give a much more comprehensive review of exactly how we think our vaccine will work against the current strains and variants and our plans for the future. Joe?

Paul Stoffels and Dr. <unk> mom and once we have that we'll be able to give a much more comprehensive review on exactly how we think our vaccine will work.

Against the current strains and variance in our plans for the future Joe.

Good morning, David with respect to kind of the earnings outlook and specifically the operating margins you.

Joseph J. Wolk: Good morning, David. With respect to kind of the earnings outlook and specifically the operating margins, you're correct. And not to get cute, but the numbers were actually greater than 200 basis points. So that could gravitate upward.

Correct.

Not to get cute, but the words were actually greater than 200 basis points. So that it could gravitate upward we certainly want to keep the flexibility that we've what we've had even during 'twenty 'twenty, one and all of that uncertainty to continue to invest in innovative ideas.

Joseph J. Wolk: We certainly want to keep the flexibility that we've had even during 2021 and all that uncertainty to continue to invest in innovative ideas that really strengthen not just this year but well beyond. In terms of some of the programs we have that are improving our operating margins, I'd point you to this consumer SKU rationalization. That is certainly something that will have an impact on consumer sales in the first half of the year.

And that really fortify not just this year, but well beyond.

In terms of some of the programs we have that are improving our operating margins I'd point you to the consumer SKU rationalization that is certainly something that will have an impact on consumer sales in the first half of the year, but again with this objective of improving profit margins and that team has done a great job under <unk> leadership with respect to improving the margin.

Joseph J. Wolk: But again, with this objective of improving profit margins, and that team has done a great job under Thibault's leadership with respect to improving the margin profile over the last two years. You may also recall that a few years ago, we made significant investments in our supply chain infrastructure. Some of those are starting to pay off in 2021 as well. And then, you know, like it or not, we are working differently. And there are efficiencies that correlate to some of this working differently.

File over the last two years you may also recall a few years back we made significant investments in our supply chain infrastructure.

Those are starting to pay off in 2021 as well and then you know like it or not we are working differently and there are efficiencies that correlate to some of this working differently I'm not suggesting that we found the steady state in terms of the balance between virtual work and work in the office, but there are some efficiencies that are being.

Joseph J. Wolk: I'm not suggesting that we have found a steady state in terms of the balance between virtual work and work in the office, but there are some efficiencies that are being realized that I think will actually sustain long term as we move forward. So those are some of the factors that are going into our bullish call of above 200 basis points margin improvement.

Being realized that I think will actually sustain long term.

As we move forward. So those are some of the factors that are going into our our bullish call of above 200 basis points margin improvement.

Great. Thanks, David appreciate the question Rob next question. Please.

Your next question is from Louise Chen with Cantor Fitzgerald.

David Lee: Thanks, David. I appreciate the question. Rob, next question, please.

Hi, Thanks for taking my questions.

Curious if you could comment on the durability of your vaccine versus the other vaccines that are in development or at least your goals for durability. You did highlight that in your phase two data and then second question is just as bad in rules that on is health care policies are there any big moving parts that you see as potential pushes and pulls to the health care industry. Thank you.

Operator: Your next question is from Louise Chen with Cantor Fitzgerald. Hi, thanks for taking my questions. I was just curious if you could comment on the durability of your vaccine versus the other vaccines that are in development or at least your goals for durability.

Louise Chen: You did highlight that in your phase one, two data. And the second question is, just as Biden rolls out his healthcare policies, are there any big moving parts that you see as potential pushes and pulls on the healthcare industry? Thank you. Hey, Louise, Alex.

Hey, Louise Alex.

Thanks again for your question regarding durability again, we're going to have to see how some of the early data and some of the preclinical work that we've done plays out in the actual large scale trials, we're certainly hopeful that youre going to see a durable and sustainable and patent response, particularly from our.

Alex Gorski: Thanks again for your question. Regarding durability, again, we're going to have to see how some of the early data and some of the preclinical work that we have done plays out in the actual large-scale trials. We're certainly hopeful that you're going to see a durable and sustainable patent response, particularly from our, you know, vector approach. We have seen that in other programs that we've run, so we're hopeful that we'll see it here. But, you know, we would expect that to play out.

Vector approach.

We have seen that and other programs that we've run.

So we're hopeful that we'll see it here, but we you know we would expect that to play out where we.

We were pleased with not only the antibody response that we saw but also some of the cellular cellular level responses with b and T cells, but again more information.

Alex Gorski: You know, we're pleased with not only the antibody response that we saw, but also some of the cellular-level response that would be in T cells. But, again, more information, you know, will be available, you know, once we have our other final results. You know, secondly, more broadly about health care, you know, I do think that and we do feel that COVID-19 has had a very profound effect on health care systems, both near term and short and longer term. I think in the near term, what we've learned is, frankly, the importance of innovation and science. And if you reflect back on where we were just 11 or 12 months ago, at the beginning of COVID-19, where we are now and the number not only of very innovative vaccine candidates, but therapeutics and the differences that they made, if you take a look at the way hospital protocols very rapidly and quickly started, you know, using data sciences and information to better understand what was going on with patients entering those facilities, how they should be treated, what led to better outcomes, how that's impacted a reduction in morbidity, I think clearly, you know, another example.

We will be available once we have our other final results.

Secondly, more broadly about health care I do think that and we do feel.

COVID-19 has had a very profound effect on health care systems, both near term and short and longer term I think in the near term. What we've learned is frankly the importance of innovation in science and if you reflect back on where we were just 11 or 12 months ago at the beginning of COVID-19 in.

Where we are now in the number not only of a very innovative vaccine candidates with therapeutics and the difference that they made if you take a look at the way hospital protocols very rapidly and quickly started using data sciences and information to better understand what was going on with patients entering those facilities.

<unk>, how they should be treated what lead to better outcomes.

How that's impacted the reduction.

And morbidity I think clearly another example, third we've seen a rapid expansion in telehealth.

And that's in primary care offices, but also specialty offices, the way that companies like ours actually communicate and engage and educate physicians and health care systems, we would see that lasting.

Alex Gorski: Third, we've seen a rapid expansion in telehealth, and that's in primary care offices, but also in specialty offices. The way that companies like ours actually communicate with, engage with, and educate physicians and health care systems, we would see that lasting for some time as well. And clearly, on the public health side, we think that's also a very important dynamic for us to consider going forward. I mean, I think it's clear from this that the world now has a much better understanding of the importance of well-established, well-funded global public health programs without which we are at significant risk around the world, whether it's our economies, as a society, just at a number of different levels. So those are perhaps some of the longer-term trends.

For some time as well and clearly on the public health side. We think that's also a very important dynamic for us to consider going forward I mean, I think it's clear from this that the world Ah now has a much better understanding of the importance of well established well funded.

Global public health programs without which were at significant risk around the world, whether it's our economies.

<unk> just had a number of different level. So those are some perhaps some of the longer term trends and then last but not least I'd like to do a just a shout out for the partnership and collaboration that we've seen with not only within the industry and across industry, but also with regulators around the world and it's certainly our hope.

We can take some of that and apply it to other advancements whether it's cures for cancer neuroscience. Other conditions. If we can take some of those same paradigms and acceleration and apply them there.

Joseph J. Wolk: And last but not least, I'd like to do just a shout-out for the partnership and collaboration that we've seen with not only within industry and across industry but also with regulators around the world. And it's certainly our hope that we can take some of that and apply it to other advancements, whether it's cures for cancer, neuroscience, or other conditions. If we can take some of those same paradigms and accelerations and apply them there, that would be great news, not only for patients, certainly in health care systems, but for the industry as well. Hey Louise, maybe just one other comment to build upon Alec's commentary is that you mentioned towards the end of your question about the new administration and what kind of policies they may have around healthcare. What I would say is, you know, we've been around for 135 years. It's, I think, 24 different administrations from both Republican and Democratic parties.

That would be great news not only for patients certainly in health care systems, but for the industry as well.

And Louise maybe just one other comment to build upon Alex is commentary as you referenced towards the end of your question about the new administration and what kind of policies. They may have around health care. What I would say is you know we've been around for 135 years, I think 24 different administrations from.

Both Republican and Democrat were going to continue to do what we do best and that's innovate and if I look at our pharmaceutical portfolio the great performance that they did.

Delivered in 2020 was once again that was for the fourth consecutive year of price decreases overall in the portfolio. So we're seeing the benefit of innovation, whether it be for the COVID-19 vaccine or other solutions in immunology oncology pulmonary hypertension in neuroscience.

And so that's what we're going to be focused on.

And by the way Louise I, just kind of comment you did a really nice job on on the news program. This morning that was the outstanding work by you.

And Louise I might just add one other point and that is we actually look forward to working with the new administration on issues related to health care.

Joseph J. Wolk: We're going to continue to do what we do best, and that's innovate. And if I look at our pharmaceutical portfolio, the great performance that they delivered in 2020 was once again met with, for the fourth consecutive year, price decreases overall in their portfolio. So, we're seeing the benefit of innovation, whether it be for the COVID-19 vaccine or other solutions in immunology, oncology, pulmonary hypertension, and neuroscience, and so that's what we're going to be focused on. And by the way, Louise, I just got a comment. You did a really nice job on the news program this morning. That was outstanding work by you.

Clearly the pandemic, we feel will shape up.

The perspective in terms of the prioritization.

Around access around innovation, and and frankly, using this as an opportunity to improve the overall health care system.

Thank you.

Thanks Louise appreciate the questions. Rob next question. Please.

Yes. Your next question is from Chris Schott with J P. Morgan.

Great. Thanks, so much for the questions.

Just on 'twenty 'twenty, one device sales can you just help us quantify or provide more color around how much of an impact COVID-19 will still be having on sales versus what you consider to be I guess normalized levels I was trying to get a sense of how close to normalized is 'twenty 'twenty. One as we maybe think about 2022 and beyond is there another step up in sales rate to be thinking.

Louise Chen: Hey, Louise, I might just add one other point, and that is we actually look forward to working with the new administration on issues related to health care. You know, clearly, the pandemic will shape the perspective in terms of prioritizing access, around innovation, and frankly, using this as an opportunity to improve the overall health care system. Thank you.

And in that time frame and my second quick one was just on the Lora the products, obviously generating very healthy growth. Despite increased competition in the psoriasis spaces, maybe a little bit more color. There in terms of the sustainability of growth you see and as we just think about that franchise evolving over time. Thank you.

Operator: I appreciate the questions. Rob, next question, please. Hi, yes, your next question is from Chris Schott with JP Morgan. Great, thanks so much for the questions.

Chris look overall, we remain very confident in the long term prospects around a medical device market and I think we saw very good signs of that actually over the course of 2020, where we saw the medical device market.

Chris Schott: Just on 2021 device sales, can you just help us quantify or provide more color around how much of an impact COVID will still be having on sales versus what you consider to be, I guess, normalized levels? I'm just trying to get a sense of how close to normalized 2021 is as we maybe think about 2022 and beyond. Is there another step up in sales we need to be thinking about in that timeframe? My second quick one was just on Stellara.

Drop anywhere from 30 to up to 70%, depending on which category you're looking at.

To return to.

Mid single digit.

No drops in the third quarter as we went through the rest of the year as Joe and I believe Chris alluded to earlier in some of their commentary we would expect to see continued impact certainly in the first quarter of 2021, although the early signs we're encouraged by what we're seeing in hospitals ability.

Alex Gorski: The product's obviously generating very healthy growth despite increased competition in the psoriasis space. Maybe a little bit more color there in terms of the sustainability of growth you see as we just think about that franchise evolving over time. Thank you.

To manage through.

Some of the the current Ah patient demands there are certainly regions in hospitals around the world, let alone in the United States, where you see a tremendous strain on the systems, but overall, we're saying hospital volumes.

Alex Gorski: And Chris, look, overall, we remain very confident in the long-term prospects of the medical device market. And I think we saw, you know, very good signs of that, actually, over the course of 2020, where we saw the medical device market drop anywhere from 30 to 70 percent, depending on which category you were looking at, to return to mid-single-digit drops in the third quarter and as we went through the rest of the year. As Joe and I believe Chris alluded to earlier in some of their commentary, you know, we would expect to see continued impact, certainly in the first quarter of 2021. Although the early signs are encouraged by what we're seeing in hospitals' ability to manage through, you know, some of the current patient demands, there are certainly regions and hospitals around the world, let alone in the United States, where you see a tremendous strain on the systems. But overall, we're seeing hospital volumes decrease no more than about 10 or 15 percent in areas such as, for example, the U.K. and a couple of other places in Europe.

Decrease no more than about 10 or 15% in areas such as for example in the U K a couple of other places in Europe, but overall, the resiliency and the ability of the hospital systems that continue with elective surgeries has improved quite significantly and as you as I'm sure you would <unk>.

If we look at second quarter in particular, the year on year comparisons should return.

As we look at our team's performance and and consider 2021, we're actually looking at 2019 as more of a benchmark to and to use that as an indicator of more of what a baseline or a normal would be but again, we can we would expect to continue to see expansion.

Over the course of 2020.

One and a.

And beyond that again see a return to a market that was growing in the mid single digits previously and we would expect that to continue going forward as well.

Alex Gorski: But overall, the resiliency and the ability of hospital systems to continue with elective surgeries have improved quite significantly. And as you, as I'm sure you would project, if we look at the second quarter in particular, the year-on-year comparison should return. As we look at our team's performance and consider 2021, we're actually looking at 2019 as more of a benchmark to use that as an indicator of more of what a baseline or normal would be.

It was also.

About store.

Yes regarding <unk> look we were main very upbeat on the overall performance is still are I mean, if you look at our performance in the fourth quarter. It was about 30% growth.

For the full year, we're looking at 20% growth.

What's really important to remember about still or is just the diversity of indications now that we have with that compound, especially in Gi conditions, where we think it's particularly differentiated and unique both in terms of its efficacy and now a very robust safety profile as well based upon the years of experience. It is a competitive.

Alex Gorski: But again, we can, we would expect to continue to see expansion over the course of 2021, and beyond that, we would see a return to a market that, you know, was growing in the mid-single digits previously. And we would expect that to continue going forward as well. There's also a question about Stelara.

There are a number of new agents, but we also know that this is an area of significant unmet medical need again, particularly in the in the Crone space.

And the rest of the GI category and so we think there remains really good opportunity for us to continue to.

Alex Gorski: Yep. Regarding Stelara, look, we remain very upbeat on the overall performance of Stelara. I mean, if you look at performance in the fourth quarter, it was about 30 percent growth for the full year. We're looking at 20 percent growth. And what's really important to remember about Stelara is just the diversity of indications now that we have with that compound, especially in GI conditions where we think it's particularly differentiated and unique, both in terms of its efficacy and now a very robust safety profile as well, based on years of experience. It is a competitive category. There are a number of new agents, but we also know that this is an area of significant unmet medical need, again, particularly in the Crohn's space and the rest of the GI category.

Not only maintain but grow our position and Chris If you look at where the growth is coming from <unk> in recent quarters. It has been in the GI indications that Alex has noted where we're really seeing nice growth in uptake in psoriasis as Trump fire Youre right. Its a its a competitive market space, but we're seeing some switches out are still are to transpire and then from fires picking.

New scripts on its own for psoriasis play.

And just for context, the share growth in Crohn's and store was over five points quarter over quarter, So seeing great progress there.

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

Question comes from Joanne Wuensch with Citi.

Good morning, everybody too.

Two questions and medical device land with the Dallas approval can you sort of give us an update on how you're thinking about rolling that out and whether or not those plans change in the current environment.

Alex Gorski: And so we think there remains really good opportunity for us to continue to not only maintain but, you know, grow our position. And, Chris, if you look at where the growth is coming from for Stelara in recent quarters, it has been in the GI indications that Alex has noted, where we're really seeing nice growth and uptake in psoriasis with Trem Fire. You're right.

And then in vision care, there are a couple of different pushes and pulls going on both in contact lenses as well as in vision surgery.

Could you tease that out a little bit as we think about SKU rationalization versus competitive pressures.

Joseph J. Wolk: It's a competitive market space, but we're seeing some switches out of Stelara to Trem Fire, and then Trem Fire is picking up new scripts on its own for our psoriasis play. And just for context, the share growth in Crohn's and Stelara was over 5 points quarter over quarter, so we are seeing great progress there. Thanks Chris, I appreciate the questions. Rob, next question, please. Your next question comes from Joanne Wench with Citi. Good morning, everybody.

Sure.

And good to hear from you Joanne Joanne regarding Vela is.

Look we were we're very excited about the approval.

With the FDA as we were able to share with you during our innovation day with our medical device group. If if we look at the flexibility the accuracy.

The reduced footprint.

That it provides the surgeon and in surgical teams, we think that it just has tremendous potential again. This is a market that is still as we think is a significant opportunity for growth in terms of penetration. We also think it will be a nice complement.

Joanne K. Wuensch: Two questions in medical device land. With the Velys approval, can you sort of give us an update on how you're thinking about rolling that out and whether or not those plans have changed in the current environment? And then in vision care, there are a couple of different pushes and pulls going on both in contact lenses as well as in vision surgery.

To our attune fixed bearing some atlas knee and and remember we also have plans to expand vela significantly.

Alex Gorski: Could you tease that out a little bit as we think about SKU rationalization versus competitive pressures? Sure. And good to hear from you, Joanne. You know, Joanne, regarding Velys, look, we're very excited about the approval with the FDA. As we were able to share with you during our Innovation Day with our medical device group, if we look at the flexibility, the accuracy, the reduced footprint that it provides for the surgeon and surgical teams, we think that it just has tremendous potential. Again, this is a market that, we think, has significant opportunity for growth in terms of penetration. We also think it will be a nice complement to our attuned fixed-bearing cementless knee.

Just D a.

Replacement, but to other areas as well so when you combine that we think it will be very competitive.

And more importantly, we think it will be a great new option for physicians for orthopedic surgeons and ultimately for patients and their families.

I'm not going to get into all the launch plans are but what I would tell you is the team has got an aggressive agenda lined up and.

And.

There are they are completing all the other associated testing as we speak but we look forward to launching that over the course of 2021.

Alex Gorski: And remember, we also have plans to expand Velys significantly, you know, beyond just knee replacement but to other areas as well. We've also made a number of changes regarding our surgical business. We're excited about the Technus Symphony launch in 2021 with a depth-of-focus lens. It's got improved near-term focus, and we also have the Technus Synergy IOL, a first-in-class product, combining a number of different technologies to really deliver a great range with high contrast.

And and again, expanding our overall position regarding vision care you're right.

There are a lot of dynamics that we certainly saw in the past year are in.

In the contact lens market.

<unk> contraction as well as in the surgery market, we believe that our position overall in the contact lens has continued to strengthen and.

And we did see improvement as we went quarter to quarter and ended the year and we think we'll be well positioned as we enter 2021. We've also made a number of changes.

Regarding our surgical business. We're excited in 2021 about the techniques Symphony are launched with a depth of focus lens. It's got improved near term focus and we have also have a techno synergy I O L. A first in class product.

Alex Gorski: We expect that in 2021. So, again, we remain very confident and optimistic about the potential overall in our vision care business. Yeah, Joanne, just a couple small builds.

Combining a number of different technologies to really deliver a great range with high contrast, we expect that in 'twenty. One. So again, we are we remain very confident and optimistic about the potential and overall in our vision care business.

Joseph J. Wolk: In contact lenses, as we had noted in the prior quarter, if you remember, in the U.S., there was double-digit growth. And some of that was some of the retail dynamics as it related to inventory and stocking that you noted. Adjusting for that, contact lenses did grow. It was worth almost nine points.

Joanne just a couple of small builds in contact lens.

As we have noted in prior quarter. If you remember in the U S. There was double digit growth in some of those were some of the retail dynamics as it related to inventory and stocking that you noted adjusting for that contact lens did grow as well.

With almost nine points.

And we do view our growth is still competitive versus the market.

Matt Miksic: And we do view our growth as still competitive versus the market. And then on the surgical side, it was actually good. We did see some recovery in the market there. So it's good to see the trend. While we're still declining, it's improving sequentially. And we remain optimistic, including the innovation that Alex mentioned. Thanks, Joanne. Rob, next question, please.

Then on the surgical side was actually good we did see some recovery in the market. There. So it's good to see the trend while we're still declining it's improving sequentially and we remain optimistic including the innovation that Alex mentioned.

Thanks, Joanne Rob next question please.

Your next question is from Matt mixing with credit Suisse.

Alex Gorski: Your next question is from Matt Miksic with Credit Suisse. Hey, thanks. Good morning.

Matt Miksic: Thanks for taking the question. So, just a couple of follow-ups on medical devices. You've made some great progress in 2020, closing the gap on digital surgery and abdominal surgery, orthopedics, and lung. And I'm just curious, sort of following on from Joanne's question around the Velys rollout, how to think about, you know, you've got a recovery in volumes generally in the market, some of these end markets, and then you've got sort of the benefit of these new digital surgery launches. And is that, do we see that in the back half of the year? Do we start to see, you know, ortho this year and octava, you know, maybe the following year? If you could just maybe lay out the cadence for both the top line and any investments that those entail for medical devices, that'd be super helpful. Sure, Matt.

Hey, Thanks. Good morning, Thanks for taking the question. So just a couple of follow ups on unmet devices.

You you've you've made some great progress in 2020 closing the gap in digital surgery, and abdominal surgery orthopedics in lung.

And I'm, just curious sort of following on to Jo Ann's question around the zealous rollout is.

How to think about this you got a recovery in volumes generally in the market. Some of these end markets and then you've got sort of the benefit of these new digital surgery through the launches and is that do we do you see that in the back half of the year do we start to see.

So this year and it would cover.

So maybe the following year, if you could just maybe lay out the cadence through both the topline and any investments that does entail for med devices that'd be super helpful.

Sure Matt. Thank you very much look we were I think it's important to put perhaps some additional perspective on it if we really go back to 2017, where I believe the growth rate of our medical device Division was about a point and a half and if you look at the expansion as we went through 2019.

Alex Gorski: Thank you very much. Look, I think it's important to put, perhaps, some additional perspective on it. If we really go back to 2017, where I believe the growth rate of our medical device division was about a point and a half, and if you look at the expansion as we went through 2019, where it was growing at almost a 4% rate. And as we've articulated a number of times, our goal is to grow at or faster than the markets where we compete. We believe the markets where we compete overall in surgery and orthopedics and vision care and others, cardiovascular, are in the 4% to 5% range. And that's the goal for our businesses.

To where it was growing at almost a 4% rate and then you know as we've articulated a number of times our goal is to grow at or faster than the markets, where we compete with.

We believe the markets, where we compete overall.

And surgery in orthopedics in vision care and others cardiovascular are in the 4% to 5% range.

And.

The goal for our businesses as we of course with 2019 or 2020 excuse me.

Alex Gorski: As we, of course, with 2019, or 2020, excuse me, in the effect of COVID, that had a very significant impact. But again, here, too, if we normalize out our trends for third and fourth quarter, we think that overall, those quarters were pretty consistent, down about 3.5% after you pull everything else out. And we'll put us on a good rate, as we mentioned earlier, over the course of 2021 and beyond. You know, regarding VELUS. As I mentioned earlier, we think it does offer a number of unique advantages. Additionally, we think it can enhance a surgeon's ability to really personalize total knee arthroscopy.

And the effect of Covid that has some very significant impact, but again here too if we if we normalize out our trends for third and fourth quarter. We think that overall those quarters were pretty consistent down about three 5% after you pull everything else out.

And will put us on a good rate you know as we mentioned earlier over the course of 2021 and beyond.

Regarding Dallas.

As I mentioned earlier, we think it does offer a number of unique advantages we.

We think it can enhance the surgeon's ability to really personalize total knee arthroscopy.

At the same time.

Alex Gorski: At the same time, it has certain features that will make it easier for use potentially in the operating room, and again, we think it's going to be a great complement to not only our Attune system but further down the line to our hip procedures and others as well. We do feel that the overall knee market will recover in 2021. It will take place over the course of the year as hospitals are able to, you know, continue to get their capacity back. As patients get increasingly confident, you know, the knee market was perhaps hit more than others just because many of those procedures can be delayed, perhaps, you know, versus a hip procedure.

It has certain features that will make it easier for us potentially in.

In the operating room, and and again, we think it's going to be a great complement to not only our attune system, but further down the line to our hip procedures and others as well, we do feel that the overall knee market will recover in 2021, it will take place over the course of the year.

Hospitals are able to.

Continue to get their capacity back as patients get increasingly confident any of the knee market with perhaps hit more.

Than others, just because many of those procedures can be delayed perhaps versus the hip procedure, but we would expect that to return over the course of this year you know as we see.

Alex Gorski: But we would expect that to return over the course of this year, as we see the pandemic dealt with in a more effective way, and things hopefully return to a more normal state. And by the way, we think the outlook for that longer term, given some of the pent-up demand that we're likely to see, will be quite significant. As you saw in our review back in November, we're very excited about Otava.

You know the the pandemic dealt with in a more effective way.

And things hopefully return to a more normal state and by the way, we think the outlook for that longer term given some of the pent up demand that we're likely to see will be quite significant.

As you saw in our review.

Back in November we're very excited about ottava.

Alex Gorski: We truly think it's going to offer next-generation digital and robotic surgery. As you just mentioned, the team made great progress over the last 12 months as we brought the various technologies together. We continue to do the build-outs, and we remain on track with all the timelines that we have previously committed to. And we're confident that here, too, is a market that we think has very low penetration, less than 5 or 10 percent, certainly on a global basis, more so in certain categories here in the United States.

Truly think it is going to offer a.

Next generation digital and robotic surgery.

As you just mentioned the team made great progress over the last 12 months as we brought the various technologies together.

We continue to do the build outs and we remain on track with all the timelines that we've previously committed to and and we're confident.

Here too is a market that we think is very has.

Very low penetration of less than five or 10% certainly on a global basis more so in certain categories are here in the United States.

Alex Gorski: But whether it's penetration or the ability just to expand those kind of options to surgeons here in the United States and around the world, based upon the technology that we'll be bringing, we think it'll offer significant upside on the timelines that you just mentioned. Thanks, Matt. I appreciate the question. Rob, next question, please. Your next question is from Daniel Antalfi with SVB. Hey, good morning, everyone.

But whether its penetration.

Or the ability just to expand those kind of options to surgeons here in the United States around the world based upon the technology that we'll be bringing we think it will offer significant upside.

On the timelines that you just mentioned.

Thanks, Matt I appreciate the question Rob next question. Please.

Your next question is from Daniel and tell feet with SBB Leerink.

Hey, good morning, everyone. Thanks, so much for taking the question I had a quick COVID-19 question and I'm, sorry, if I missed this Alex I feel like you did allude to the and responsive Matt question, but over the last few quarters, you had given him pretty detailed numbers around the COVID-19 impact is there any way you could give that.

Danielle Antalffy: Thanks so much for taking the question. I just have a quick COVID question. And I'm sorry if I missed this, Alex, but I feel like you did allude to this in response to Matt's question. But over the last few quarters, you have given pretty detailed numbers around the COVID impact. Is there any way you could give that for this quarter, just to get a sense of sort of what the normalized growth rate actually would have been were it not for the COVID resurgence? Thanks so much. Yeah, thanks, Daniel. I can take that one.

Matt for each quarter, just to get a sense of sort of what the normalized growth rate actually would have been we're not.

Were it not for the Covid research and thanks, so much.

Yeah, Thanks, Danielle I can take that one.

Yeah, we were able to do that in Q1, because there was an early impact and then what we did was as we provided guidance throughout the year. We kind of gave you a range of expected impact by quarter based on what our original guidance would have been at the beginning of the year.

Joseph J. Wolk: Yeah, we were able to do that in Q1, because there was an early impact. And then what we did was, as we provided guidance throughout the year, we kind of gave you a range of expected impact by quarter, based on what our original guidance would have been at the beginning of the year. If you look at what we shared in Q4, ahead of this earnings, we'd anticipated that we could be anywhere from down 10% or flat versus our original thinking, which would have contemplated some growth year-over-year plus a 53rd week.

If you look at what we shared in Q4 ahead of head of this earnings we had anticipated that we could be anywhere from down 10% or flat versus our original thinking which would've contemplated some growth year over year, plus a 50 <unk> week. If you look at where we landed we basically landed at the low end of that range.

Joseph J. Wolk: If you look at where we landed, we basically landed at the low end of that range, given some of the additional softness that the market experienced in the December timeframe, where procedures were probably down more around that 10% range. So overall, in line with expectations, but more towards the low end, given some of the surge we saw at the very end. Thanks, Danielle. I appreciate the question. Rob, last question please.

Even some of the additional softness that the market experienced in the December timeframe, where procedures were probably down more around that 10% range. So overall in line with expectations.

But more towards the low end given some of the surge we saw at the very end.

Thanks, Danielle appreciate the question.

Rob last question please.

Bob Hopkins: Yes, that last question will be coming from Bob Hopkins with Bank of America. Oh, thank you very much. Just one quick one.

Last question will be coming from Bob Hopkins with Bank of America.

Oh, Thank you very much just one one quick one.

Alex Gorski: You know, I appreciate the comment that globally, in Q4, medical device revenue declines were really no worse than Q3 when you adjusted out the one-timers. Pretty impressive given the headlines. I was wondering if you could give us a sense of what happened to device growth in the United States in Q4 relative to Q3. Again, none of those one-timers.

<unk>.

You know I appreciate the comment that globally and in Q4, our medical device revenue declines were really no worse than Q3, when you adjust out the one timers that's pretty.

Pretty impressive given the headlines I was wondering if you could give us a sense to what happened to device growth maybe in the United States in Q4 relative to Q3 again net of those one timers and then also on the U S. If we think about 'twenty 'twenty. One is it is it too aggressive to assume that you know in the back half of 'twenty 'twenty.

Alex Gorski: And also, in the U.S., if we think about 2021, is it too aggressive to assume that in the back half of 2021, based on everything you're seeing today, that we might be able to approach normal levels of surgical procedure volumes in the United States? Appreciate the comments. Thank you. Hey Bob, thank you very much. What we saw in North America in Q4 was it down just about, or excuse me, up about 2%.

One based on everything Youre seeing today that we might be able to approach normal levels of surgical procedure volumes in the United States.

I appreciate the comments thank you.

Hey, Bob Thank you very much what we saw in North America in Q4, a was it down just about or excuse me up about 2% and and again there were regions around the country, where we saw a differential impact but.

Alex Gorski: And again, there were regions around the country where we saw a differential impact. But I think it's fair to say that, you know, we were pleased to see the ability of the majority of systems in the United States to be able to continue to provide elective procedures, even in spite of some of the later surges where we saw even more significant impacts in Europe and LATAM during that period. And because of our stronger position in certain places in Europe, that had a differential impact on us.

But I think it's fair to say that we were pleased to see.

The ability of the majority of systems in the United States be able to continue to provide elective procedures. Even in spite of some of the later searches where we saw even more significant impacts were in Europe and Latam during that period in Vietnam because of our stronger position in certain places in Europe that had a differential impact on us.

And again, so as hopefully we see improving trends with the virus in Europe over the course of 2021, we would expect to see that return.

Alex Gorski: And again, as we hopefully see improving trends with the virus in Europe over the course of 2021, we would expect to see that return. And so, you know, regarding your questions on volumes in the back end, look, it's hard to predict, you know, based upon where we currently are. As we said earlier, we think the most significant impact this year will be certainly in Q1, as we, you know, continue to deal with some of the ongoing surge. We would expect the year on year comparisons to change pretty significantly in Q2 and Q3. And again, assuming much improved vaccine distribution and better overall control of COVID-19. We would then expect to see volumes come back to more normalized levels as we finish the year. But obviously, there are a lot of moving parts. There are a lot of assumptions, a lot of dynamics that we'll have to watch closely. But, you know, our current plans would take those kinds of projections into consideration.

And so in.

Regarding your questions on volumes in the back in look.

It's hard to predict based upon where we currently are as we said earlier, we think the most significant impact this year will be certainly in Q1.

As we continue to deal with some of the ongoing surge we would expect the year on year comparisons to change pretty significantly in Q2, and Q3 and again assuming <unk>.

Much improved vaccine that distribution a better overall control of COVID-19, we would then expect to see volumes come back to.

To more normalized levels.

We finished the year, but.

Honestly, there's a lot of moving parts. There is a lot of assumptions a lot of dynamics that we'll have to watch closely.

But you know our.

Current plans would take those kind of projections in the consideration.

Bob Hopkins: Great. Thanks, Bob. I appreciate the question.

Great. Thanks, Paul I appreciate the question and thanks, everyone for your questions and your continued 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 back to Alex for some brief closing remarks.

Operator: And thanks, everyone, for your questions and your continued interest in our company. Apologies to those who 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 back to Alec for some brief closing remarks. Well, thank you, everyone, for your comments, for your questions, and for your ongoing interest, trust, and confidence in Johnson & Johnson. It's likely an overused term at this point, but 2020 was a remarkable year on just so many different fronts. And I want to again end where I started by acknowledging the tremendous toll that this has taken on patients, on families, on hospital systems around the world, but also give credit to healthcare systems and our employees who have worked so hard to continue to support the same, you know, through this challenging period. We're proud of our performance. We think we're positioned very well as we embark on 2021, and we look forward to keeping you updated as we go through the year and gain more information and insights. Thank you very much, everybody. Thank you. This concludes today's Johnson & Johnson 4th Quarter 2020 Earnings Conference Call. You may now disconnect.

Well. Thank you everyone for your comments for your questions and for your ongoing interest trust and confidence in Johnson <unk> Johnson.

It's likely an overused term at this point, but 2020 it was a remarkable.

Year on just so many different fronts.

And I want to again, and where I started by acknowledging the tremendous toll that this has taken on patients on families on the hospital systems around the world.

But also give credit to health care systems, and our employees, who have worked so hard to continue to support the same you know through this challenging period. We're proud of our performance. We think we're positioned very well as we embark on 2021 and we look forward to keeping you updated as we go through the year and gain more information and <unk>.

<unk>. Thank you very much everybody.

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