Q3 2021 Johnson & Johnson Earnings Call

Good morning, and welcome to Johnson, <unk> Johnson's third quarter 2021 earnings conference call.

Operator: Welcome to Johnson & Johnson's third quarter 2021 earnings conference call. All the Distrance participants will be in listen-only mode for the question and answer session.

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

Operator: Question and answer session of the conference. This call is being recorded. If you have any objections, you may disconnect at this time.

The call is being recorded if you have any.

You may disconnect at this time.

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

Operator: 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 now begin.

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

Good morning. This is Sarah Wood Senior director Investor Relations for Johnson <unk> Johnson welcome to our company's review of business results for the third quarter and our updated financial outlook for 2021 on today's call is Joe Wolk Executive Vice President Chief financial.

Sarah Wood: Good morning. This is Sarah Wood, Senior Director of Investor Relations for Johnson and Johnson. Welcome to our company's review of business results for the third quarter and our updated financial outlook for 2021. On today's call is Joe Walk, Executive Vice President and Chief Financial Officer, and during the Q&A portion of the call, Joe will be joined by Ashley McAvoy, Executive Vice President and Worldwide Chair Medical Devices, Thibomongan, Executive Vice President and Worldwide Chair Consumer Health, and Jennifer Taubert, Executive Vice President and Worldwide Chair Pharmaceuticals. A few logistics before we get into the details.

Sir.

And during the Q&A portion of the call Joe will be joined by Ashley Mcevoy Executive Vice President and worldwide share medical devices keep in mind on executive Vice President and worldwide share consumer health and Jennifer Taubert Executive Vice President worldwide Chairman Pharmaceuticals.

A few logistics before we get into the details. This review is being made available via webcast accessible through the Investor Relations section of the Johnson <unk> Johnson website at Investor Dot J&J Dot Com, where you can also find additional materials, including today's presentation and associated Scott.

Sarah Wood: This review is being made available via webcast, accessible through the Investor Relations section of the Johnson & Johnson website at investor.johnsen.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. In particular, there is uncertainty about the duration and contemplated impact of the COVID-19 pandemic and other marketplace dynamics. This means that results could change at any time.

<unk>.

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 uncertainty.

About the duration and contemplated impact of the COVID-19 pandemic and other market place dynamics. 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.

Sarah Wood: 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's date. A further description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2020 Form 10K and subsequent Form 10Qs, along with reconciliations of the non-gap financial measures utilized for today's discussion to the most comparable gap measures. These materials are also available at investor.j.com.

A further description of these risks uncertainties and other factors can be found in our SEC filings, including our 2020, a 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.

These materials are also available at Investor Dot J&J dotcom.

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.

Sarah Wood: Several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will review the third quarter sales and P&L results for the corporation and the three segments. Joe will provide some additional business and financial commentary before providing an overview of our cash position and capital allocation, and then conclude with updated guidance on 2021 results. The remaining time will be available for your questions. We anticipate the webcast will last up to 60 minutes.

Moving to today's agenda I will review the third quarter sales and P&L results for the Corporation and the three segments, Joe will provide some additional business and financial commentary before providing an overview of our cash position and capital allocation and then conclude with updated guidance on 2021 results.

The remaining time will be available for your questions. We anticipate the webcast will last up to 60 minutes.

Now, let's move to the third quarter results.

Sarah Wood: Now let's move to the third quarter results. Worldwide sales were $23.3 billion in the third quarter of 2021, an increase of 10.7% versus the third quarter of 2020. Operational sales growth, which excludes the effect of translational currency, increased 9.9% as currency had a positive impact of 0.8 points. In the U.S., sales increased 7.9%. In regions outside the U.S., our reported growth was 13.8%.

<unk> sales were $23 $3 billion for the third quarter of 2021, an increase of 10, 7% versus the third quarter of 2020 operational sales growth, which excludes the effect of translational currency increased nine 9% as currency had a positive impact of 0.8.

Eight points in the U S sales increased seven 9% in regions outside the U S. Our reported growth was 13, 8% operational sales growth outside the U S was 12, 1% with currency positively impacting our reported O U S results by 1.7.

Sarah Wood: Operational sales growth outside the U.S. was 12.1%, with currency positively impacting our reported OUS results by 1.7 points. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 10.6% worldwide, 8% in the U.S., and 13.5% outside the U.S. Now, we turn to earnings.

<unk>, excluding the net impact of acquisitions and divestitures adjusted operational sales growth was 10, 6% worldwide, 8% in the U S and 13.5% outside the U S.

Turning now to earnings for the quarter net earnings were $3 $7 billion and diluted earnings per share was one dollar and 37 cents versus diluted earnings per share of one dollar and 33 cents a year ago.

Sarah Wood: For the quarter, net earnings were $3.7 billion, and diluted earnings per share was $1.37 versus diluted earnings per share of $1.33 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7 billion, and adjusted diluted earnings per share was $2.60, representing increases of 18.7% and 18.2%, respectively, compared to the third quarter of 2020. On an operational basis, adjusted diluted earnings per share increased $16,000. 16.4%

Excluding after tax intangible asset amortization expense and special items for both periods adjusted net earnings for the quarter were $7 billion and adjusted diluted earnings per share was $2 and 60 sentence, representing increases of 18, 7% and 18 point too.

2%, respectively compared to the third quarter of 2020 on an operational basis adjusted diluted earnings per share increased 16, 4%.

I will now comment on business segment sales performance highlighting items that build upon the slides you have in front of you unless otherwise stated percentages quoted represent the operational sales change in comparison to the third quarter of 'twenty 'twenty and therefore exclude the impact of currency translation.

Sarah Wood: I will now comment on business segment sales performance, highlighting items that build upon the slides you have in front of you. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the third quarter of 2020 and therefore exclude the impact of currency translation. Beginning with Consumer Health, worldwide consumer health sales of $3.7 billion increased 4.1%, with growth of 4.5% in the U.S. and growth of 3.7% outside of the U.S. Excluding the impact of divestitures, worldwide growth was 5.7%.

Beginning with consumer house worldwide consumer health sales of $3 $7 billion increased four 1% with growth of four 5% in the U S and growth of 3.7% outside of the U S. Excluding the impact of divestitures worldwide growth was five point.

7%.

Although there is variability across the franchises due to the impact of COVID-19. The overall portfolio is performing well when comparing to 2019, the consumer health business grew approximately 8% operationally in the quarter.

Sarah Wood: Although there is variability across the franchises due to the impact of COVID-19, the overall portfolio is performing well. When compared to 2019, the consumer health business grew approximately 8% operationally in the quarter. Over-the-Counter medicines saw strong growth of 18.2% globally due to share gains in the U.S., along with an increase in pediatric fever incidences and demand for vaccination symptom relief that drove increased sales of Tylenol and Motrin globally. Additionally, Category Recovery increased demand for cough, cold, flu, and digestive health brands such as modium. Sales outside the U.S. benefited from prior year comparisons, specifically prior year reductions in consumption in China.

Over the counter medicines saw strong growth of 18, 2% globally due to share gains in the U S. Along with an increase of pediatric fever incidences and demand for vaccination symptom relief that drove increased sales of tylenol and motrin globally.

Additionally category recovery increased demand for cough cold flu and digestive health brands, such as Imodium sales outside the U S benefited from prior year comparisons specifically prior year reduction in consumption in China.

Our skin health beauty franchise declined by 3% globally, largely due to the 330 basis point impact of the divestiture of Sedona. The Salon based portion of Doctor Salobo in Asia Pacific.

Sarah Wood: Our Skin Health Beauty franchise declined by 3% globally, largely due to the 330 basis point impact of the divestiture of Sedona, the salon-based portion of Dr. Salabo in Asia Pacific. Excluding this impact, the franchise experienced modest growth, driven by strong performance in Avino and Neutrogena facial moisturizing and body care, driven by COVID-19 market recovery and e-commerce growth, partially, partially offset by and lost sales from the Sun Aerosol recall, oral care declined 4.5% globally, largely due to the impact of divestitures worth approximately 300 basis points.

Excluding this impact the franchise experienced modest growth driven by strong performance in Aveeno and neutrogena facial moisturizing and body care driven by COVID-19 market recovery and e-commerce growth, partially offset by external supply constraints and lost sales from the Sun aerosol recall.

Oral care declined four 5% globally, largely due to the impact of divestitures worth approximately 300 basis points. Excluding this impact the franchise declined due to external supply constraints for LISTERINE and the U S and negative comparisons to prior year COVID-19 related impacts.

Sarah Wood: Excluding this impact, the franchise declined due to external supply constraints for Listerine in the U.S. and negative comparisons to prior year COVID-19 related impacts in Amaya, partially offset by strong performance in Asia Pacific, driven by strong promotions and brand building behind Listerine's germ-fighting ability. The baby care franchise declined 1.2% globally, resulting from Asia-Pacific COVID-19 lockdowns and competitive pressure, mostly offset by strong Avino performance, along with category and e-commerce growth in the U.S. Our Women's Health franchise grew 0.8% globally, primarily due to lapping prior year COVID-19 impact.

EMEA, partially offset by strong performance in Asia Pacific driven by strong promotions and brand building behind Listerines germ fighting ability.

The baby care franchise declined 1.2% globally, resulting from Asia Pacific Covid, 19, Lockdowns and competitive pressure, mostly offset by strong aveeno performance, along with category and e-commerce growth in the U S.

Our women's health franchise grew 0.8% globally, primarily due to lapping prior year, COVID-19 impact and finally, our wound care franchise declined 4.8% globally, driven by unfavorable comparisons to prior year stocking in the U S and competitive pressure.

Sarah Wood: And finally, our Wound Care franchise declined 4.8% globally, driven by unfavorable comparisons to prior year stocking in the U.S. and competitive pressure in Asia Pacific. Moving on to our pharmaceutical segment, worldwide pharmaceutical sales of $13 billion increased 13.2%, with growth of 12.2% in the U.S. and growth of 14.6% outside of the U.S. Excluding the net impact of acquisitions and divestitures, worldwide growth was 13.

In Asia Pacific.

Moving on to our pharmaceutical segment worldwide pharmaceutical sales of $13 billion increased 13, 2% with growth of 12, 2% in the U S and growth of 14.6% outside of the U S.

Excluding the net impact of acquisitions and divestitures worldwide gross was 13, 8%.

Additionally, as a reminder for comparison purposes Q3 of 2020 was negatively impacted by access related constraints due to COVID-19, resulting in a decrease of roughly 200 basis points in total across key brands.

Sarah Wood: Additionally, as a reminder, for comparison purposes, Q3 of 2020 was negatively impacted by access-related constraints due to COVID-19, resulting in a decrease of roughly 200 basis points in total across key brands. However, our strong portfolio of products and commercial capabilities continue to enable us to deliver adjusted operational growth at above market levels. The immunology portfolio delivered strong global sales growth of 11.7% driven by double-digit performance of Stellara and Tramphaya, offset by declines in Remikade due to biosimilar competition.

Our strong portfolio of products and commercial capabilities continue to enable us to deliver adjusted operational growth at above market levels.

Immunology portfolio delivered strong global sales growth of 11.7% driven by double digit performance of still Lara and Trumpf fire offset by declines in Remicade due to Biosimilar competition.

Still our have continued to show strength in all regions growing at 21, 7% driven by market growth and share gains of roughly four points in crohn's disease, and nearly seven points and I'll sort of colitis and the U S. Trumpf.

Sarah Wood: Stilara continued to show strength in all regions, growing at 21.7% driven by market growth and share gains of roughly four points in Crohn's disease and nearly seven points in all sorts of colitis in the U.S. Tramphaya was up 63.5% with strong double-digit growth worldwide due to continued positive share growth and additional penetration into the psoriatic arthritis indication. The U.S. share increased over two points in psoriasis and over three points in psoriotic arthritis.

Fire was up 63, 5% with strong double digit growth worldwide due to continued positive share growth and additional penetration into the psoriatic arthritis indication U S share increased over two points in psoriasis and over three points in Psoriatic arthritis.

Oncology also delivered another strong quarter with global sales growth of 16, 5%.

Sarah Wood: Oncology also delivered another strong quarter with global sales growth of 16.5%. Darzilex continued its double-digit performance with 42.9% growth in the quarter, driven by share gains, increased penetration of the subcutaneous formulation in the U.S. and EU, and continued launches globally. Darzalex grew share across all lines of therapy, with nearly five points of share growth in the U.S. this quarter as an example. Elita also continued its global uptake, with growth of 65.8% in the quarter, driven by global market share gains, which increased in the U.S. alone by nearly two points across all indications, led by the metastatic indication.

<unk> continued its double digit performance with 42, 9% growth in the quarter driven by share gains increased penetration of the subcutaneous formulation in the U S and EU and continued launches globally.

<unk> grew share across all lines of therapy with nearly five points of share growth in the U S. This quarter as an example.

Our leader also continued its global uptake with growth of 65, 8% in the quarter driven by global market share gains, which increased in the U S alone by nearly two points across all indications led by the metastatic indication.

<unk> grew 2.5% globally due to the brand's market, leading share position, but was partially offset by modest share losses in the U S and a market that remains constrained due to temporary COVID-19 impact on new patient starts. In addition growth was negatively impacted by a prior.

Sarah Wood: In Brubica, growth was 2.5% globally due to the brand's market-leading share position, but was partially offset by modest share losses in the U.S. and a market that remains constrained due to temporary COVID-19 impact on new patient initiation. In addition, growth was negatively impacted by a prior period adjustment in the U.S. that was worth nearly 350 basis points on worldwide imbrivica growth.

Period adjustment in the U S that was worth nearly 350 basis points on worldwide and broke a gross.

Neuroscience grew four 6% globally, driven by Palo paradigm, <unk> long acting portfolio posting market and share growth due to increased new patient starts and strong persistency in the U S.

Sarah Wood: Neuroscience grew 4.6% globally, driven by the Palo-Peridone long-acting portfolio, posting market and share growth due to increased new patient starts and strong persistency in the U.S. The cardiovascular metabolism and other business declined 12.4% globally due to competitive pressures in Invecona and biosimilar and biosimilar competition for ProCrit. Pulmonary hypertension achieved strong growth of 16.1% driven by upsummit growth of 17.1% and uptravi growth of 17.1% and uptravi growth of 18.8%, both driven by market penetration and share gains.

The cardiovascular metabolism and other business declined 12, 4% globally due to competitive pressures in <unk> and Biosimilar competition for Procrit.

Pulmonary hypertension achieved strong growth of 16.1% driven by a summit growth of 17, 1% and up Trabi grows from 18, 8%, both driven by market penetration and share gains.

And lastly, global sales in the quarter included a 502 million dollar contribution from the COVID-19 vaccine, bringing the year to date total to 766 million through the first nine months of the year revenue has been recorded at a not for profit price of $7.50.

Sarah Wood: And lastly, global sales in the quarter included a $502 million contribution from the COVID-19 vaccine, bringing the year-to-date total to 766 million. Through the first nine months of the year, revenue has been recorded at a not-for-profit price of $7.50.

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

Sarah Wood: I'll now turn your attention to the medical devices segment. Worldwide Medical Devices sales of $6.6 billion increased 7%, with growth of 0.8% in the U.S. and growth of 13.3% outside of the U.S., excluding the impact of divestitures, worldwide growth was 7.6%. In the medical devices segment, we have seen mixed marketplace recovery as the COVID-19 delta variant and related factors impacted our sales across most of the categories in which we participate within the quarter. Additionally, certain procedures, such as spine and knees within orthopedics, deemed to be more elective in nature, continuing to lag in terms of recovery.

Worldwide medical devices sales of $6 $6 billion increased 7% with growth of 0.8% in the U S and growth of 13, 3% outside of the U S. Excluding the impact of divestitures worldwide growth was seven 6%.

In the medical devices segment, we have seen mixed market place to recovery as the COVID-19 Delta variant unrelated factors impacted our sales across most of the categories in which we participate within the quarter with certain procedures, such as spine and knees within orthopedics deemed to be more elective in nature Kantar.

<unk> to lag in terms of recovery.

The interventional solutions franchise delivered another quarter of worldwide double digit growth at 13, 2% driven by market recovery success of new products in both the electrophysiology and neuro vascular and strong commercial execution.

Sarah Wood: The Interventional Solutions franchise delivered another quarter of worldwide double-digit growth at 13.2% driven by market recovery, the success of new products in both electrophysiology and neurovascular, and strong commercial execution. Worldwide surgery grew 10.2%, primarily driven by recovering procedure volumes and market expansion in Asia-Pacific. Advanced surgery grew 12.6% globally, driven by the positive impact of procedure recovery, new product introductions, and China Tier 2 and 3 hospital market expansion across endocutters, biosurgicals, and energy, partially offset by continued competitive pressure in endocutters and energy in the U.S. Building on the Monarch Robotic Milestone communicated last quarter, we reached another significant commercial achievement, now enabling over 10,000 bronchoscopy procedures.

Worldwide surgery grew 10, 2%, primarily driven by recovering procedure volumes and market expansion in Asia Pacific.

Advanced surgery grew 12, 6% globally, driven by the positive impact of procedure recovery, new product introductions, and China tier two and three hospital market expansion across Endo cutters, Biosurgery Gulf and energy, partially offset by continued competitive pressure and endo cutters.

In energy in the U S.

Building on the monarch robotic milestone communicated last quarter, we reached another significant commercial achievement now, enabling over 10000 bronchoscopy procedures.

General surgery grew 8.1% globally wound closure is the largest contributor with growth driven by procedure recovery, China tier two and three hospital market expansion and continued competitive growth in both traditional and barb suits your markets.

Sarah Wood: General surgery grew 8.1% globally. Wound closure was the largest contributor, with growth driven by procedure recovery, China Tier 2 and 3 hospital market expansion, and continued competitive growth in both traditional and barb suture markets. The Worldwide Orthopedics franchise declined 0.3%, with U.S. declines of 4.5% reflecting the impact of COVID-19 on procedures within the quarter, partially offset by 6.8% of U.S. growth. Trauma grew 3.7% globally, 5.3% increase in the U.S., and a 0.9% increase outside the U.S.

The worldwide Orthopedics franchise declined 0.3% with U S declines of four 5%, reflecting the impact of COVID-19 on procedures within the quarter, partially offset by six 8% O U S growth.

Rama grew 3.7% globally, five 3% increase in the U S and a 0.9% increase outside the U S results reflect global market recovery dynamics and the success of recent product introductions like our cumulated compression had the screws advanced nailing system.

Sarah Wood: Results reflect global market recovery dynamics and the success of recent product introductions, like our cannulated compression headless screws, advanced nailing systems, and fibulink. Hips grew 2.3% globally, driven by recovery and procedures, primarily outside the U.S., and continued leadership in the interior approach, supported by our robust portfolio of new products such as actus femoral stem, pinnacle duomobility, and vellis hip In Q3, we introduced new image guidance capability for vellis hip navigation, which supports surgeons who prefer the posterior approach, in addition to the future. to the interior approach.

And should be a link.

<unk> grew two 3% globally driven by recovery in procedures, primarily outside the U S and continued leadership in the anterior approach supported by our robust portfolio of new products, such as active femoral stem pinnacle's dual mobility and zealous hip navigation in.

Q3, we introduced new image guidance capability for Vela hip navigation, which support surgeons, who prefer the post terrier approach. In addition to the anterior approach.

Knees grew two 1% this quarter, reflecting a recovery of procedures, especially in markets outside of the U S.

Sarah Wood: Needs grew 2.1% this quarter, reflecting recovery of procedures, especially in markets outside of the U.S., growth in the U.S. outpatient surgery channel, and continued momentum from recently launched products, including the Vellus robotic-assisted solution and our attunee portfolio. Results in the quarter also benefited from the timing of international tender orders worth approximately 350 basis points of global growth. Lastly, within orthopedics, spine declined 11% globally, driven primarily by a decline in procedure volume related to COVID-19.

Growth in the U S outpatient surgery channel and continued momentum from recently launched products, including the <unk> robotic assisted solution and our attune knee portfolio results in the quarter also benefited from the timing of international tender orders worth approximately 350 basis points of global growth.

Lastly, within orthopedics spine declined 11% globally, driven primarily by a deceleration in procedure volume related to COVID-19.

The worldwide vision franchise grew 10% this quarter, primarily driven by market recovery commercial initiatives and new products driving enhanced competitiveness.

Sarah Wood: The Worldwide Vision franchise grew 10% this quarter, primarily driven by market recovery, commercial initiatives, and new products driving enhanced competitiveness. Contact Lens Global Growth of 6.4% reflects continued positive momentum for our market-leading Acquevue portfolio, the success of commercial initiatives, and recently launched products such as Acquivu Oasis Multifocal and Acqueview Defined Fresh. The decline of 4.3% in the U.S. includes a negative impact of prior year stocking worth about 10 points. Surgical Vision delivered global growth of 22.1% driven by market recovery across all regions and the success of recently launched products continuing to enhance competitiveness, including technus Ihance and technus Synergy.

Contact lens global growth of six 4% reflects continued positive momentum for our market, leading <unk> portfolio success of commercial initiatives and recently launched products such as <unk> keeps you Oasis multifocal and active you define fresh.

The decline of four 3% in the U S includes a negative impact of prior year stocking worth about 10 points.

Surgical vision delivered global growth of 22, 1% driven by market recovery across all regions and success of recently launched products continuing to enhance competitiveness, including Texas, I hands and tech the synergy.

Now regarding our consolidated statement of earnings for the third quarter of 2021.

Sarah Wood: Now regarding our consolidated statements of earnings for the third quarter of 2021, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold improved by 200 basis points, driven by recovery from prior year COVID-19-related impacts and favorable enterprise mix from growth in pharmaceuticals. We continue to invest strategically in research and development at competitive levels, investing 14.7% of sales this quarter.

To highlight a few noteworthy items that have changed compared to the same quarter of last year.

Cost of product sold improved by 200 basis points driven by recovery from prior year, COVID-19 related impacts and favorable enterprise mix from growth in pharmaceuticals.

We continue to invest strategically in our research and development at competitive levels investing 14.7% of sales. This quarter. The 3.4 billion dollar investment was a 25% increase versus the prior year due to portfolio progression.

Sarah Wood: The $3.4 billion investment was a 20.5% increase versus the prior year due to portfolio progression. In-process research and development reflects a partial impairment expense of $900 million for assets associated with the acquisition of ORIS. The other income and expense line changed from a net expense of $1.2 billion in the third quarter of 2020 to a net expense of $1.9 billion in the third quarter of 2021, primarily due to an increase in litigation-related charges. Joe will provide more details on both the IPR&D and litigation-related charges.

In process research and development reflects a partial impairment expense of $900 million for assets associated with the acquisition of Auris.

The other income and expense line changed from a net expense of $1 $2 billion in the third quarter of 2020 to net expense of $1 $9 billion in the third quarter of 2021 primarily due to an increase in litigation related charges.

Bill will provide more details on both the IP R&D and litigation related charges.

Regarding taxes in the quarter on a GAAP basis, our effective tax rate was four 7% in the third quarter of 2021 compared to 19, 2% in the third quarter of 2020, mostly driven by unfavorable tax reserves and positions from the prior year, which did not reoccur.

Sarah Wood: Regarding taxes in the quarter, on a gap basis, our effective tax rate was 4.7% in the third quarter of 2021, compared to 19.2% in the third quarter of 2020, mostly driven by unfavorable tax reserves and positions from the prior year, which did not reoccur. Along with lower income and higher tax jurisdictions driven by one-time current quarter special items, excluding special items, the effective tax rate was 13.5% versus 19% in the same period last year.

Along with lower income and higher tax jurisdictions, driven by one time current quarter special items.

Excluding special items, the effective tax rate was 13, 5% versus 19% in the same period last year I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax matters.

Sarah Wood: I encourage you to review our upcoming third-quarter 10Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the boxed section of the slide, where we have also provided our income before tax, net earnings, and earnings per share, adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segments. In the third quarter of 2021, our adjusted income before tax for the enterprise as a percentage of sales remained fairly consistent with the prior year, with some changes between our three segments.

Lastly, I'll direct your attention to the boxed section of the slide where we have also provided our income before tax net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items.

Now, let's look at adjusted income before tax by segment in the third quarter of 2021 our adjusted income before tax for the enterprise as a percentage of sales remained fairly consistent to the prior year with some changes between our three segments.

I'm a suitable margins declined from 46, 4% to 43, 9% driven by research and development investment to enable portfolio progression.

Sarah Wood: Pharmaceutical margins declined from 46.4% to 43.9% driven by research and development investment to enable portfolio progression. Medical devices margin improved from 21.6% to 25.5% driven by recovery from prior year COVID-19-related impacts and overall expense leveraging resulting from sales recovery. Finally, consumer health margins declined from 24.4% to 23.3% driven by a 2020 one-time item and increased brand marketing expenses, partially offset by COGS improvement. That concludes the sales and earnings portion of Johnson and Johnson's third quarter results. I'm now pleased to turn the call over to Joe Walk.

Medical devices margin improved from 21, 6% to 25, 5% driven by recovery from prior year, COVID-19 related impacts and overall expense leveraging resulting from sales recovery.

Finally, consumer health margins declined from 24, 4% to 23, 3% driven by a 2021 time item and increased brand marketing expenses, partially offset by Cogs improvement.

That concludes the sales and earnings portion of the Johnson and Johnson third quarter results I'm now pleased to turn the call over to Joe walk.

Thank you Sarah and good morning, everyone. We appreciate you joining us to discuss our third quarter results, which reflected continued strength in our pharmaceutical and consumer health businesses and solid growth in medical devices. Despite COVID-19 variability across geographies.

Joseph J. Wolk: Thank you, Sarah, and good morning, everyone. We appreciate you joining us to discuss our third quarter results, which reflect continued strength in our pharmaceutical and consumer health businesses and solid growth in medical devices despite COVID-19 variability across geographies. How do we see the current medical device landscape? In the U.S., surgical procedures across most specialties in which we compete decelerated in late July and August with the highest impact consistently in those procedures deemed to be more elective, such as knees and spine.

Do we see the current medical device landscape in the U S surgical procedures across most specialties in which we compete decelerated in late July and August with the highest impacts consistently in those procedures deemed to be more elective such as knees and spine.

Globally, New cases of COVID-19, and hospitalizations related to the Delta variant have gradually declined in recent weeks and we are encouraged by more positive procedure trends in many western European markets, where restrictions are beginning to ease.

Joseph J. Wolk: Globally, new cases of COVID-19 and hospitalizations related to the Delta variant have gradually declined in recent weeks, and we are encouraged by more positive procedure trends in many Western European markets, where restrictions are beginning to ease. However, some hotspots still remain in parts of the U.S., the U.K., Eastern Europe, and Southeast Asia, and the growing impact from reduced medical staffing is constraining procedure volumes.

Some hotspots still remain in parts of the U S. The UK Eastern Europe, and southeast Asia, and the growing impact from reduced medical staffing or constraining procedure volumes.

We continue to believe these variables are more short term in nature and the medical devices market remains attractive as the long term factors, leading to the need for medical and surgical intervention have not changed due to COVID-19.

Joseph J. Wolk: We continue to believe these variables are more short-term in nature, and the medical devices market remains attractive as the long-term factors leading to the need for medical and surgical intervention have not changed due to COVID-19. The segment leaders on the call will provide more insights into each of their businesses during the Q&A, but let me briefly touch upon some pipeline updates for the quarter. We continue to advance our strong pipeline of innovative medicines and products.

The segment leaders on the call, we'll provide more insights into each of their businesses during the Q&A, but let me briefly touch upon some pipeline updates for the quarter.

We continue to advance our strong pipeline of innovative medicines and products.

This progress is supported by our commitment to investments in R&D that have increased $1.9 billion or 23% on a year to date basis.

Joseph J. Wolk: This progress is supported by our commitment to investments in R&D that have increased $1.9 billion, or 23% on a year-to-date basis. In the quarter, we received U.S. approval for In Vega half-yeara, the first and only twice-yearly treatment for adults with schizophrenia. And we announced the start of a phase three study of our investigational RSV vaccine in older adults. Subsequent to the quarter, the FDA granted orphan drug designation for Nipacalamab for chronic, inflammatory, demyelilinating, polyneoprathy, or CIDP, a rare neurological disorder of the peripheral nerves characterized by gradually increasing sensory loss and weakness associated with loss of reflexes.

In the quarter, we received U S approval for Invega have euro the first and only twice yearly treatment for adults with schizophrenia, and we announced the start of a phase III study.

Our investigational RSV vaccine in older adults subs.

Subsequent to the quarter the FDA granted orphan drug designation for <unk> in chronic inflammatory demyelinating polyneuropathy or C. I D. P. A rare neurological disorder of the peripheral nerves characterized by gradually increasing sensory loss and weakness associated with loss of brief flexes.

This represents nipper calum apps for the orphan drug designation, we also anticipate U S approval for our B C. I'm a car T. Later, this year, which will represent a third new product approval in 2021.

Joseph J. Wolk: This represents Nipakalimab's fourth orphan drug designation. We also anticipate U.S. approval for our BCMA CART later this year, which will represent a third new product approval in 2021. However, we are stopping further investigation in the Fonton-Paliated population of massotentin, 10 milligram, and pulmonary hypertension, as results from the Roboto Phase 3 trial did not yield sufficient clinical benefit.

However, we are stopping further investigation in the Fontana palliative population of mass attention 10 milligram and pulmonary hypertension as results from the Rabato phase III trial did not yield sufficient clinical benefit.

Regarding our COVID-19 vaccine we are pleased that on Friday, the F D as vaccines and related biological products Advisory Committee voted unanimously to recommend emergency use authorization for a booster dose of the Johnson <unk> Johnson COVID-19 vaccine for adults, aged 18 and older at least two months.

Joseph J. Wolk: Regarding our COVID-19 vaccine, we are pleased that on Friday, the FDA's Vaccines and Related Biological Products Advisory Committee voted unanimously to recommend emergency use authorization for a booster dose of the Johnson & Johnson COVID-19 vaccine for adults aged 18 and older at least two months following the initial single-shot vaccine. The recommendation is based on the totality of the evidence, with clinical and real-world data showing that while a single shot offers strong and lasting protection, a booster dose increases protection, particularly against symptomatic COVID-19.

Following initial single shot vaccine.

The recommendation is based on the totality of evidence with clinical and real world data showing that while a single shot offer strong and lasting protection.

Booster increases protection, particularly against symptomatic COVID-19.

We are very excited to share more about the entirety of our robust pharmaceutical pipeline, our long term growth outlook at our business review on November 18th.

Joseph J. Wolk: We are very excited to share more about the entirety of our robust pharmaceutical pipeline and long-term growth outlook at our business review on November 18th. In our medical device business, we built upon a record number of 17 significant product introductions in the first half of 2021 by introducing the enhanced shoulder system in the third quarter. A first-to-market, fully integrated shoulder orthopaedic system designed to treat a broad range of cases in hospital or outpatient settings where economic value and operational efficiency are important considerations.

In our medical device business, we built upon a record number of 17 significant product introductions in the first half of 2021 by introducing the enhanced shoulder system in the third quarter, a first to market fully integrated shoulder arthroplasty system designed to treat a broad range of cases in hospital.

Or outpatient settings, where economic value and operational efficiency are important considerations.

We also announced results from a real world study showing that the echelon circular powered stapler is associated with a major reduction in serious complications following colorectal surgery, when compared with manual staplers reinforcing clinical evidence as a meaningful differentiator in product selection.

Joseph J. Wolk: We also announced results from a real-world study showing that the Echelon circular powered stapler is associated with a major reduction in serious complications following colorectal surgery when compared with manual staplers, reinforcing clinical evidence as a meaningful differentiator in product selection.

Let's transition to financials, starting with commentary on special items for the quarter.

Joseph J. Wolk: Let's transition to financials starting with commentary on special items for the quarter. Other income and expense in the third quarter includes a $2.1 billion charge for litigation expenses, primarily driven by an incremental $1.4 billion charge associated with the recently announced qualified settlement fund for current and future talc claims. The qualified settlement fund is intended to facilitate a final, equitable resolution of all talc litigation in a structured manner through established bankruptcy law precedent.

Other income and expense in the third quarter includes a $2 1 billion dollar charge of litigation expenses, primarily driven by an incremental $1 4 billion dollar charge associated with the recently announced qualified settlement fund for current and future tell claims.

Qualified settlement fund is intended to facilitate a final equitable resolution of all talc litigation in a structured manner through established a bankruptcy law precedent.

Additionally, there was another $800 million legal expense in the quarter, representing final resolution of outstanding claims related to risk or at all.

Joseph J. Wolk: Additionally, there is another $800 million legal expense in the quarter representing the final resolution of outstanding outstanding claims related to Rispergal. Another special item worth noting is on the in-process research and development line. We have a broad offering across the digital robotic surgery landscape and continue to make meaningful progress in advancing differentiated solutions across our portfolio. We are very pleased with the adoption of our monarch-plot platform for lung bronchoscopy and are well on our way to expanding monarch indications, including initiating a clinical trial exploring the potential for localized drug delivery for the treatment of lung cancer and submitting an application to the FDA for Monarch to be used in the treatment of

Another special item worth noting is on the in process research and development line.

We have a broad offering across the digital robotic surgery landscape and continue to make meaningful progress in advancing differentiated solutions across our portfolio.

We are very pleased with the adoption of our monarch platform for long Bronchoscopic and are well on our way to expanding monarch indications, including initiating a clinical trial exploring the potential for localized drug delivery for the treatment of lung cancer and submitting an application to the FDA for monarch to be used in the treatment of kidney stones.

Our village robotic assisted solution for total knee replacement is commercialized in the U S has received several O U S approvals and we are experiencing higher utilization on the systems placed to date than we projected.

Joseph J. Wolk: Our VELIS robotic-assisted solution for total knee replacement is commercialized in the U.S. and has received several OUS approvals, and we are experiencing higher utilization on the systems placed to date than we project. We continue to be committed to the development of a general surgery offering with Otava. But, as Sarah mentioned, we recorded a partial in-process R&D charge for $900 million in the third quarter. The accounting for this charge contemplates a first in human delay of approximately two years from our earlier projections of the second half of 2022, reflecting technical development challenges and COVID-19-related disruptions, including supply chain constraints being experienced broadly across all industries. Clearly, we realize the importance that a differentiated digital robotic platform can have for patient outcomes and the market.

We continue to be committed to the development of a general surgery offering with ottava, but as IRA mentioned, we recorded a partial in process R&D charge for $900 million in the third quarter.

The accounting for this charge contemplates a first in human delay of approximately two years from our earlier projections of the second half of 2022 reflecting technical development challenges and COVID-19 related disruptions, including supply chain constraints being experienced broadly across all industries.

Clearly, we realize the importance that a differentiated digital robotic platform can have for patient outcomes and the market. We continue to invest in and be committed to the platform and we'll provide updates to the external community as warranted.

Joseph J. Wolk: We continue to invest in and be committed to the platform, and we'll provide updates to the external community as warranted. Let's transition to a few comments on our cash position. We continue to generate strong free cash flow with $15 billion year-to-date. We ended the third quarter with $31 billion of cash in marketable securities and approximately $34 billion of debt, resulting in $3 billion of net cash.

Let's transition to a few comments on our cash position.

We continue to generate strong free cash flow with $15 billion year to date, we ended the third quarter with $31 billion of cash and marketable securities and approximately $34 billion of debt, resulting in $3 billion of net debt.

Our financial position and balance sheet remains strong and we are well positioned to continue to deploy capital in a strategic value, creating way consistent with our priorities that will benefit stakeholders over the long term.

Joseph J. Wolk: Our financial position and balance sheet remain strong, and we are well positioned to continue to deploy capital in a strategic, value-creating way consistent with our priorities that will benefit stakeholders over the long term. Moving to our full year 2021 guidance. Given where we are in the year, our current assumptions around the continued recovery in medical device markets and confidence in the business, we are tightening our adjusted operational sales range to 12.9% to 13.5%. This adjusted operational sales growth is on a constant currency basis, consistent with how we assess our business performance.

Moving to our full year 2021 guidance, given where we are in the year. Our current assumptions around continued recovery in medical device markets and confidence in the business. We are tightening our adjusted operational sales range to 12, 9% to 13.5%.

This adjusted operational sales growth is on a constant currency basis, consistent with how we assess our business performance.

This guidance also incorporates the estimated $2 $5 billion of COVID-19 vaccine sales consistent with our July guidance.

Joseph J. Wolk: This guidance also incorporates the estimated $2.5 billion of COVID-19 vaccine sales consistent with our July guidance. We are maintaining our estimate for the net impact of acquisitions and investments of approximately 50 basis points, resulting in an operational sales range of 12.4% to 13.0% or $92.8 billion to $93.3 billion for a midpoint of 12.7% or 93.1 billion. As you know, we do not predict the impact of currency movements, but utilizing the Euro spot rate relative to the U.S. dollar as of last week at 1.16, there's an estimated positive impact of foreign currency translation of approximately 150 basis points, consistent with our July guidance, resulting in estimated reported sales growth between 13.9% and 14.5% compared to 2020, or $94.4.1 billion to $94.6 billion.

We are maintaining our estimate for the net impact of acquisitions and divestitures of approximately 50 basis points, resulting in an operational sales range of 12, 4% to 13.0% or $92 $8 billion to $93 $3 billion for a midpoint of 12, 7%.

Were $93 1 billion.

As you know, we do not predict the impact of currency movements, but utilizing the euro spot rate relative to the U S. Dollar as of last week at 1.16, there's an estimated positive impact of foreign currency translation of approximately 150 basis points consistent with our July guidance, resulting in.

Estimated reported sales growth between 13, 9% and 14, 5% compared to 2020 were $94 $1 billion to $94 $6 billion.

Moving to other items of the P&L consistent with our previous guidance you can expect our operating margins to be nearly a 200 basis point improvement over last year.

Joseph J. Wolk: Moving to other items of the P&L, consistent with our previous guidance, you can expect our operating margins to be nearly a 200 basis point improvement over last year. Given year-to-day trends, we are modestly increasing and tightening our other income estimate to be a range of $900 million to $950 million. Regarding interest expense, again, based on our year-to-date experience, we are also tightening the range of our estimate to $100 million to $150 million. And finally, we are lowering our effective tax rate estimate to a range of 14.5% to 15.5% based on the occurrence of certain one-time favorable tax positions and settlements, both in the U.S. and abroad.

Given year to date trends, we are modestly increasing and tightening our other income estimate to be a range of $900 million to $950 million.

Regarding interest expense again based on our year to date experience. We're also tightening the range of our estimate to $100 million to $150 million.

And finally, we are lowering our effective tax rate estimate to a range of 14, 5% to 15, 5% based on the occurrence of certain one time favorable tax positions and settlements both in the U S and abroad.

Considering those updates we are comfortable with adjusted earnings per share guidance, ranging from $9.65 to $9 70 on a constant currency basis.

Joseph J. Wolk: Considering those updates, we are comfortable with adjusted earnings per share guidance ranging from $9.65 to $9.70 on a constant currency basis, a guidance increase of 13 cents at the midpoint. While not predicting currency movements, but to provide some insights on the potential impact on EPS, a reported adjusted EPS would be positively impacted by approximately 12 cents per share. Accounting for that, we would be comfortable with your models reflecting reported, adjusted EPS ranging from $9.77 to $9.82, an increase versus 2020 of 22% at the midpoint.

A guidance increase of 13 cents at the midpoint.

While not predicting currency movements, but to provide some insights on the potential impact on EPS.

Reported adjusted EPS would be positively impacted by approximately <unk> 12 cents per share.

Accounting for that we would be comfortable with your models, reflecting reported adjusted EPS ranging from $9.77 to.

$9.82, an increase versus 2020 of 22% at the midpoint.

Consistent with what we shared before given the not for profit nature of the vaccine. There is no significant EPS contribution in 2021, and therefore, the EPS guidance I provided is inclusive of the vaccine revenue.

Joseph J. Wolk: Consistent with what we shared before, given the not-for-profit nature of the vaccine, there will be no significant EPS contribution in 2021, and therefore, the EPS guidance I provided is inclusive of the vaccine. As always, none of our achievements are possible without the hard work of our world-class team of employees around the globe, whose dedication ensures that we deliver for all our stakeholders. We continue to make significant strides towards our mission of improving human health and well-being for everyone everywhere, and I am grateful for their efforts and commitment.

As always none of our achievements are possible without the hard work of our world class team of employees around the globe, whose dedication insurers that we deliver for all our stakeholders.

We continue to make significant strides towards our mission of improving human health and wellbeing of everyone everywhere and I am grateful for their efforts and commitment.

I'd like to close my prepared remarks by briefly commenting on the CEO transition that was announced earlier in the third quarter.

Joseph J. Wolk: I'd like to close my prepared remarks by briefly commenting on the CEO transition that was announced earlier in the third quarter. First, I want to acknowledge Alex for his leadership and contributions to Johnson and Johnson during his tenure. It has been my pleasure to work alongside him, particularly over the last three years, and to observe and learn from him both professionally and personally. I am also pleased to congratulate Joaquin on his new role starting this January.

First I want to acknowledge Alex for his leadership and contributions to Johnson <unk> Johnson during his tenure.

Ben.

Cause you to work alongside him, particularly over the last three years and to observe and to learn from him both professionally and personally.

I'm also pleased to congratulate Joaquin on his new role starting this January I know firsthand that he shares the same commitment to patients employees in society that Alex considered core.

Joseph J. Wolk: I know firsthand that he shares the same commitment to patients, employees, and society that Alex considered KOR. Watkin similarly values innovation, which underpins our strategy for long-term success. Both gentlemen will be featured at the previously mentioned November 18th Analyst Day, sharing their thoughts on our business and plans for the future. I am pleased our worldwide chairs, Ashley McAvoy, Tebowongan, and Jennifer Talbert, are here with me today to address your questions. Jen McIntyre from our Investor Relations team will facilitate the Q&A portion of the call, so I will now turn it over to her to begin the Q&A.

What key similarly values innovation that underscores our strategy for long term success.

Both gentlemen will be featured at the previously mentioned November 18th Analyst day sharing their thoughts on our business and plans for the future.

I am pleased our worldwide chairs actually Mcevoy Tebow, Mongol and Jennifer Calvert are here with me today to address your questions.

Jen Mcintyre from our Investor Relations team will facilitate the Q&A portion of the call. So I will now turn it over to her to begin to Q&A Jen.

Jennifer Taubert: Thank you, Joe. Good morning, everyone. Rob, can you please provide instructions for those on the line wishing to ask a question?

Yeah. Good morning, everyone. Bob can you. Please provide instructions for those on the line wishing to ask a question.

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

Operator: Sure. Ladies and gentlemen, if you'd like to ask a question at this time, please press Star Than 1 on your telephone keypad. If you'd like to withdraw your question, press Star Then 0.

If you'd like to throw your question Press Star then too please.

Please let me your questions to one question only.

Operator: Please limit your questions to one only. Your first question comes from Chris Schott with J.P. Morgan.

Your first question comes from Chris shot with J P. Morgan. Please proceed with your question.

Great. Thanks, so much for the the questions I guess, just first can you just quantify or elaborate on the impact that the delta variant head on three key results in your guidance I guess I'm trying to get to was the impact you saw in the third quarter basically in line with what you had contemplated and guidance or did we have upside elsewhere in the portfolio that offset.

Chris Schott: Great, thanks so much for the questions. I guess first, can you just quantify or elaborate on the impact that the Delta variant had on the three Q results and your guidance? I guess I was trying to get to, was the impact you saw in the third quarter basically in line with what you had contemplated in guidance, or did we have upside elsewhere in the portfolio that offset some of those slowdowns that you mentioned that hit parts of the businesses? And then maybe building on that, as we think up to 2022, I know you're giving guidance yet.

Some of those the slowdowns that you mentioned that hit part of the businesses and.

And then just kind of maybe building on that as we think up to 2022.

Giving guidance yet but is there more in the way of Covid recovery that can aid growth next year. So think about the portfolio as a whole. So I guess, we're gonna get to basically as pharma growth sustainable at these levels and should we think about still device growth maybe above historic levels as we kind of get COVID-19 more in the in the rearview mirror, but thanks so much.

Chris Schott: but is there more in the way of COVID?

Chris Schott: recovery that can aid growth next year as I think about the portfolio as a whole. So I guess we're trying to get to, basically, is farmer growth sustainable at these levels.

Chris Schott: and should we think about still device growth, maybe above his?

Chris Schott: Maybe above historic levels as we kind of get COVID more in the rearview mirror a bit. Thanks so much.

Yeah, Chris. So this is Joe won't let me answer some of it quantitatively and then maybe I'll hand, it over to Ashley and Jennifer to discuss Ah.

Joseph J. Wolk: Yeah, Chris, so this is Joe Wolk. Let me answer some of it quantitatively, and then maybe I'll hand it over to Ashley and Jennifer to discuss their outlook on their particular segments. In terms of the guidance for the balance of the year as it relates to where we end in the third quarter, if you look at what, I guess, has been labeled this early morning here as a miss, I would say, I think about it in two categories.

Their outlook for their particular segments in terms of the guidance for the balance of the year as it relates to where we ended the third quarter. If you look at what I guess it has been labeled early morning here is amiss I would say I think about it in two categories. The vaccine quite frankly and as you saw we did not change the full year guidance. So that is simply.

Joseph J. Wolk: The vaccine, quite frankly, and as you saw, we did not change the full-year guidance. So that is simply timing. We expect that to be fulfilled in the fourth quarter, and we're still very much committed to the $2.5 billion of revenue and the supply that is correlated to that. With respect to medical devices, I think we're very pleased that we had above 7% growth in the quarter, given the different dynamics of Delta variant and hospital shortages.

Timing, we expect that to be.

Fulfilled in the fourth quarter, and we're still very much committed to the $2.5 billion of revenue in the supply that is correlated to that with respect to medical devices. I think we're very pleased that we had above 7% growth in the quarter.

Given the different dynamics of Delta variant and hospital shortages and we do anticipate that those procedures will be recovered it's hard to say whether there'll be recovered in the fourth quarter. Early next year. So that could provide some tailwind as you think about 2022, but let me turn it over first to Ashley to comment on medical devices, and then to Jennifer.

Joseph J. Wolk: And we do anticipate that those procedures will be recovered. It's hard to say whether they'll be recovered in the fourth quarter or early next year, so that could provide some tail win as you think about 2022. But let me turn it over first to Ashley, to comment on medical devices, and then to Jennifer, to discuss pharmaceuticals.

To discuss pharmaceuticals sure. Thank so and thanks for the question Chris I, you know I would when I look at quarter. Three you know I see shared procedures across in those categories in which we participated did decelerate through the quarter, primarily due to obviously the delta. So if I take you a little bit around the world.

Ashley A. McEvoy: Sure, thanks, Joe. And thanks for the question, Chris.

Ashley A. McEvoy: You know, I would, when I look at quarter three, you know, as we share, procedures across most categories in which we participated did decelerate through the quarter, primarily due to, obviously, the delta. So if I take you a little bit around the world, Asia-Pacific and aggregate continue to operate above pre-COVID levels. However, COVID does continue to be a challenge with, like, mobility restrictions being reinstated or remaining in places like Japan, Australia, and South Southeast Asia. China clearly is setting a new pace for the world.

Asia Pacific an aggregate continues to operate about pre COVID-19 levels.

However, COVID-19 does continue to be a challenge with like mobility restrictions being reinstated or remaining in places like Japan, Australia, South East Asia, China, clearly of setting a new pays for the world. When we look in the United States, We saw procedure trans decelerate in quarter three.

Ashley A. McEvoy: When we look in the United States, we saw procedure trends decelerate in quarter three. You'll recall, on our quarter two call, we were feeling pretty good around 5% growth in procedures in May. We saw a stabilization in June and July. In August, we saw the numbers of procedures dip around mid-single digit, and we saw that continue into the early part of September. We are starting to see, you know, qualitatively, from hospital systems in the past four weeks.

You'll recall on our quarter to call, we were feeling pretty good around 5% growth procedures and May we saw a stabilization in June and July and August we saw the numbers of procedures dip them around mid single digit and we saw that continue into the early part of September.

We are starting to see qualitatively recovered from hospital systems. The past four weeks when we look at early indicators of of really filling the patient funnel, we look at diagnostic procedures in the past four weeks Racine diagnostic procedures in the United States flat relative to pre Covid numbers.

Ashley A. McEvoy: When we look at early indicators of really filling the patient funnel, we look at diagnostic procedures. In the past four weeks, we're seeing diagnostic procedures in the United States flat relative to pre-COVID numbers. And as we talked about, we do expect some microsurges in areas like the Northwest, as well as the Midwest. And then, in Amaya, rounding it out, we are encouraged. The countries are beginning to ease the strict mobility restrictions and are really starting to resume procedures given the vaccine deployment accelerations, you know, the decreasing rates of new cases and hospitalizations.

And as we talk about we do expect some microsurgeon areas like the northwest as well as the Midwest and then in EMEA around in N out. We are encouraged the countries are beginning to ease the strict mobility restrictions and are really starting to resume procedures given the vaccine deployment acceleration <unk> the decreasing rates of new case.

<unk> and hospitalizations and overall procedure volumes are gradually improving like Spain, Italy, Germany are all above pre COVID-19. The UK, where I was just there two weeks ago clearly below 2019 long waiting lists really working to go make progress on that on that patient funnel.

Ashley A. McEvoy: And overall, you know, procedure volumes are gradually improving in Spain, Italy, Germany, or all above pre-COVID in the UK, where I was just there two weeks ago, clearly below 2019, long waiting lists, really working to make progress on that patient funnel. I'll turn it to John Dorfer for any other commentary. Thanks, Ashley, and hi, Chris.

So I'm trying to <unk> for for any of their commentary, thanks, Ashley and and Hi, Chris Yeah.

So we've got a real positive outlook on the pharmaceutical business I didn't give you take a look at our third quarter results, we had clear double digit growth cross a number of our key brands, including Darzalex and our leader in oncology Trunklines to Laura and immunology and up summit in a <unk> in pulmonary hypertension.

Jennifer Taubert: Chris. Yeah, so we've got a real positive outlook on the pharmaceutical business. I think if you take a look at our third-quarter results, we had clear double-digit growth across a number of our key brands, including Darzilex and Erlita in oncology, Tramphian, Dahlia, and Immunology, and Upsummit and Uptravi in Pulmonary Hypertension. Those areas have seen strong recovery, and we believe that the trajectory on those assets is really going to continue.

<unk> those areas, we have seen strong recovery and we believe that the trajectory on those assets is that really going to continue so yeah, and you need trajectory in 21 and into 22 on the area part of the market, where we're still seeing a bit of a slower recovery, but we're starting to see it it take back is really.

Jennifer Taubert: So, you know, continued trajectory in 21 and into 22. The area, part of the market where we're still seeing a bit of a slower recovery, but we're starting to see it pick up, is really chronic lymphocytic leukemia and mantle cell lymphoma, the market where Bruvica is, right now from Brubica, we just achieved double-digit growth X-U. But in the U.S., it's actually been a little bit lower than that.

<unk> and chronic lymphocytic leukemia in mantle cell lymphoma, Margaret where Imbruvica is right now from Brubeck, how we just achieve double digit growth X U S. But in the U S. It's actually been a <unk> a little bit lower than that and so I think that's one that as you take a look can we move into 2022, we're anticipating too.

Jennifer Taubert: And so I think that's one that, as you take a little bit more, look and we move into 2022, we're anticipating to see some positive recovery there, but really strong results in 3Q, and we anticipate continued strong trajectory through the rest of the year and into 22. Great, thanks, Ashley and Jen.

To see some positive recovery, there, but really strong results in three Q and we anticipate continued strong trajectory through the rest of the year and into 22.

Great, Thanks, Ashley and Jennifer and Christian I know you asked about medical devices and pharmaceuticals, but to be complete a tivo I know you're a great success.

Jennifer Taubert: Great, thanks, Ashley and Jennifer. And Chris, I know you asked about medical devices and pharmaceuticals, but to be complete, Tivo, I know you had great success in the quarter, 6%, almost 9% when you compare it to Q3 of 2019, maybe you could give a little bit of an outlook as to what you're seeing for the balance of the year and into next. Yes, certainly, Joe.

Success in the quarter, 6% almost 9% when you compare it to Q3 of 2019, maybe you give a little bit of an outlook as to what you are seeing for the balance of the year and into next yeah. So any Joe as you go.

You said the consumer segment continues to experience very strong momentum. So we are very pleased with how the portfolio continues to be a foam around the world clearly Z 's quarter. The star is R. O T C segments.

Tibo Mongan: As you just said, the consumer segment continues to experience very strong momentum, so we are very pleased with how the portfolio continues to perform around the world. Clearly, this quarter, the star is our OTC segment, growing double digits with continued strong demand for trusted brands in analgesics, but also digestive health, and continued demand for smoking cessation as well. So across our categories and around the world, there is continued strong demand for our products.

<unk> double digit with continued strong demand false trusted brands.

In energetics, but also of digestive health continued demand and the.

Smoking sufficient as well so across all categories and around the world continues strong demand for a product as we get into a queue for and into 2022, we expect a portfolio of brands to continue to be very well positioned.

Tibo Mongan: As we get into Q4 and into 2022, we expect our portfolio of brands to continue to be very well positioned in the markets and categories in which we compete. Our brands, many of our brands are iconic, and we would expect continued growth for these brands around the world.

In the markets and categories in which we compete at all.

Brown many of all brands.

Clinic, and we would expect continued.

Growth for policies bronze around the world great. Thanks, T Bo and back to Ya.

Tibo Mongan: Great. Thanks, Tibo. And back to you.

Thank you for your question, Chris Rob next question. Please your.

Your next question comes from Josh settings, with Cowen and company.

Joseph J. Wolk: Please.

Operator: Hi, good morning. Thanks so much for taking the questions. I wanted to just circle back on the announcements around the top litigation and the process that J&J is undergoing. Is there any way?

Hi, good morning, Thanks, so much for taking the questions.

I wanted to just circle on the announcements around.

Nation and in the process.

He is undergoing is is there any way I know you're not going to tell us about deeply about this strategy, but just thinking about milestones for this process.

Josh Jennings: I know you're not going to talk about this strategy deeply, but just thinking about milestones for this process, and any way you can help us understand when this strategy will be fully cleared and in play, and I guess, a stamp of approval by the bankruptcy court, sir. How should we think about this process through the rest of this year and in 2022? Yeah, thanks for that.

And any way you can help us understand when this this strategy will be fully cleared and play and get stamp of approval by the bankruptcy Court Sir.

Should we be thinking about this process.

Rest of this year and into 2022.

Yeah. Thanks for the question Josh Let me start this response by underscoring just our conviction in the safety based on decades of science that these products are safe. What we've done is acknowledged that there is an established process that allows companies facing abusive towards systems to resolve.

Joseph J. Wolk: Yeah, thanks for the question, Josh. You know, let me start this response by underscoring just our conviction in the safety based on decades of science that these products are safe. What we did is acknowledge that there is an established process that allows companies facing, you know, abusive tort systems to resolve claims in an efficient and equitable manner. We initiated this process specifically for our cosmetic TAL claims, both current and future.

All claims in an efficient and equitable manner.

We initiated this process specifically for cosmetic talc claims both current and future.

And while we believe the cases lack merit and by the way an overwhelming number of courts juries and judges who have opined on this to full adjudication ultimately agree with US we did establish a $2 billion qualified settlement fund, but as you note in your question, Josh It's really the.

Joseph J. Wolk: And while we believe the cases lack merit, and by the way, an overwhelming number of courts, juries, and judges who have opined on this to full adjudication ultimately agree with us, we did establish a $2 billion qualified settlement fund. But as you note in your question, Josh, it's really the bankruptcy courts that will ultimately decide this. It's not plaintiffs' attorneys. It's not Johnson & Johnson. But we do know, based on prior experience and precedent, that claimants are far better off, and clarity and resolution are in the best interest of all stakeholders. So we'll continue to monitor the process, but it will really be dependent on how the bankruptcy court decides to proceed on its timeline.

Bankruptcy courts that will ultimately decide this is not plaintiffs attorneys, it's not Johnson and Johnson and but we do know that.

Based on prior experience precedent that claimants are far better off and clarity and resolution is in the best interests of all stakeholders. So we'll continue to monitor the process, but it will really <unk>.

Ah hold into how the bankruptcy court decides to proceed on their timeline.

Thanks to ask Rob next question. Please.

Operator: The next question comes from the line of Larry Beaglesson as Wells Fargo. Please see with your questions.

Next question comes from the line of Larry Biegel said was Wells Fargo place with your question.

Good morning, Thanks for taking the question just just one for Ashley just Ashley it looks like Q3 growth and devices relative to 2019 was about 4% could you confirm that and what are your expectations for Q4 relative to.

Larry Biegelsen: Good morning. Thanks for taking the question. Just one for Ashley.

Ashley A. McEvoy: Just Ashley, you know, it looks like Q3 growth in devices relative to 2019 was about 4%. You know, could you confirm that? And what are your expectations for Q4 relative to, you know, that metric, relative to, you know, Q4 2019, after adjusting for one less week? I think people are trying to understand if Q4 growth could be better than Q4. on an underlying basis, you know, versus 2019. And how are you thinking about the staffing shortages and supply constraints that I think Joe alluded to and inflation? How are you thinking about those factors that people are concerned about in the device industry? Thanks for taking the time to answer the question.

That metric.

Relative to Q4 2019 after adjusting for one last week and then people are trying to understand if if queue for growth could be better than Q3 on an underlying basis versus 2019, and how are you thinking about the staffing shortages in supply constraints I think Joe alluded to in inflation.

You know how are you thinking about those factors that people are concerned about in the device industry. Thank you for taking the question.

Yeah. Thanks for the question, Larry and and before I get to quarter for let me just give a quick frame per quarter three just send a at a macro level first Israeli the market and walk over 19 has temporarily disrupted the med Tech markets. We absolutely believe that their underlying foundation of these and state markets continue to remain attractive.

Ashley A. McEvoy: Thanks for the question, Larry. And before I get to quarter four, let me just give a quick frame for quarter three, just going at a macro level. First, the market. And while COVID-19 has temporarily disrupted the MedTech markets, we absolutely believe that the underlying foundation of these end-state markets continue to remain attractive, really due to, you know, what we say are oodles of clinical unmet need and, quite frankly, the overall state of the technology on the S-curve. You know, a quick refresh.

Really do too you know, what we say are oodles of clinical unmet need and and quite frankly, the overall state of the technology an S curve.

You know quick refresh is our standing in our competitiveness as the second largest med Tech company with 11 platforms delivery and at least 1 billion in annual sales. We are very much focused on competitiveness and innovation in quarter to almost all of our priority platforms Helder gain share some notables.

Ashley A. McEvoy: Our standing and our competitiveness, you know, as the second largest mid-tech company with 11 platforms delivering at least a billion in annual sales. We are very much focused on competitiveness and innovation. In quarter two, almost all of our priority platforms held or gained share.

Include continuing to enhance our global market position electrophysiology by a surgery gaming chair and hips seen the impact of recent innovation in surgical vision now seen several sequential quarters of share gains and even seen stabilization in knees here to date. So this is really about our focus on commercial effectiveness in our.

Ashley A. McEvoy: Some notables include continuing to enhance our global market position in electrophysiology and biosurgery, gaining share in hips, seeing the impact of recent innovation in surgical vision, now seeing several sequelaepressions, quarters of share gains, and even seeing stabilization in needs year-to-date. So this is really about our focus on commercial effectiveness and our ability to deliver innovation. As Joe mentioned earlier in the year, in 2020, we had 17 new product launches year-to-date, and this is a significant amount over the previous year. So year-to-date through 2021, Larry, we are tracking to 5% growth versus 2019. We did achieve 4% growth in quarter three.

80 to deliver innovation as Joe mentioned earlier in the in the <unk> in 2021, we had 17 new product launches ear to date and this is a significant amount over last year. So here today through 2021, Larry we are tracking to five per cent growth verses 2019, we did achieve 4% growth in quarter three.

Obviously, that's an improvement of how we exited 2019, the full year and then last I would just say you know you you've heard US talk a lot about digital surgery were absolutely committed to leading in the future of surgery and making it you know our medical innovation smarter less invasive a more personalized Joe talked a little bit about.

Ashley A. McEvoy: Obviously, that's an improvement on how we exited 2019 the full year. And then last, I would just say, you know, you heard us talk a lot about digital surgery. We're absolutely committed to leading the future of surgery and making our medical innovations smarter, less invasive, and more personalized. Joe talked a little bit about our monarch reaching 10,000 patients this year and having a very rich pipeline. The Veles Knees is now approved in five countries.

Our monarch, reaching 10000 patients. This year has a very rich pipeline zealous knees has now approved five countries are smart digital tools continue to scale and lastly, ottava are soft tissue offering you heard of shareware experiencing a temporary setback in its development.

Ashley A. McEvoy: Our smart digital tools continue to scale. And lastly, Otava, our soft tissue offering, you heard a share we're experiencing a temporary setback in its development. You know, transformational innovation is all kinds of fun, I will tell you.

Transformational innovation is a call all kinds of fun I will tell you it's highly complex, but sometimes we do experienced technical challenges, but we are absolutely committed to resolving our challenges continuing to invest in bringing to market a competitive differentiated offering as soon as possible. When we look at quarter for we do expect to.

Ashley A. McEvoy: It's highly complex, but sometimes we do experience technical challenges. But we are absolutely committed to resolving our challenges, continuing to invest, and bringing to market a competitive differentiated offering as soon as possible. You know, when we look at quarter four, we do expect to see continued improvement. But we do expect hospitals are going to have to continue to manage through labor shortages. I don't expect that to get better in the quarter full nor in 2022, but they've been quite masterful in how to manage patient flows.

See continued improvement and we do expect hospitals.

Are going to have to continue to manage through labor shortages, I don't expect that to get better and quarter for nor in 2022, but they've been quite master on how to manage patient flows. We are when I talk to hospital systems over the past three weeks in particular, and then I'm. It states. They are ramping up again and resuming elective procedures, we're keeping our eye on.

Ashley A. McEvoy: We are, when I talk to hospital systems, particularly in the United States, they are ramping up again and resuming elective procedures. We're keeping our eye on vaccination rates, patient sentiment, the cold weather. But we are planning for a strong recovery in quarter four, you know, versus how we exited quarter three.

Uhm vaccination rates and patient sentiment.

The cold weather, but we do we are planning for a strong recovery and quarter for you know versus how we exited quarter three eight.

Thanks for your question Larry Rob next question. Please.

Operator: Great. Thanks for your question, Larry. Rob, next question, please?

Question is from Luis chat with cancer.

Operator: The next question is from Louise Chen with Cantor.

Hi, Thanks for taking my question. So I wanted to ask you about some of the <unk> management changes that were announced and how we should think about what could change what could stay the same under a new C. E. O N C. S O and then any anticipated changes to business mix between pharma med device and consumer.

Louise Chen: Hi, thanks for taking my question. So I wanted to ask you about some of the management changes that were announced and how we should think about what could change or what could stay the same under a new CEO and CSO, and then any anticipated changes to the business mix between pharma, medical device, and consumer as a result of new leadership. Thank you.

As a result of new leadership. Thank you.

Thanks, Louise for the question or try to address that one you know what I would say is first off I, probably repeat the words I had both to congratulate Alex as well as walking Alex clearly on a stellar career a great run as his tenure a C E O and he'll be.

Joseph J. Wolk: Thanks, Louise, for the question. I'll try to address that one.

Joseph J. Wolk: You know, what I would say is, first off, I probably repeat the words I had both to congratulate Alex as well as Joaquin. Alex has clearly had a stellar career, a great run in his tenure as CEO, and he'll be a very active executive chairman, I suspect. It's not as if he's riding completely off into the sunset.

Very active executive chairman I suspect, it's not as if he's writing completely off into the sunset walking values. The same principles that have made Johnson and Johnson successful that's investing in innovation and making sure that we've got differentiated products and solutions to improve the standard of health care across the globe.

Joseph J. Wolk: that Waukeen values the same principles that have made Johnson & Johnson successful. That's investing in innovation and making sure that we've got differentiated products and solutions to improve the standard of health care across the globe. The nice thing about the transition is that I don't expect any significant bumps.

The nice thing about the transition is I don't expect any significant bumps they've worked together for a number of years the strategies that they have talked about and that you'll probably see in the early part of joachim's tenure have been contemplated with Alex in mind and they've collaborated this chair and vice.

Joseph J. Wolk: They've worked together for a number of years, and the strategies that they have talked about, and that you'll probably see in the early part of Waukeen, tenure have been contemplated with Alex in mind, and they've collaborated as chair and vice chair over a number of years. So I would expect, as the organization does, a very smooth transition. With respect to CSO, we have not had a chance to acknowledge just the impact that Paul has had on the scientific community, not just here at Johnson and Johnson but across the globe.

Sure over a number of years, so I would expect as the organization does a very smooth transition.

With respect to see us so we have not had a chance to acknowledge just really.

Really the impact that Paul has had on the scientific community not just here at Johnson and Johnson, but across the globe. He was a pioneer in infectious diseases. When nobody had an answer for H I V. Pole emerged is clearly a leader there and then just most recently his notable leadership on the the Covid.

Joseph J. Wolk: He was a pioneer in infectious diseases when nobody had an answer for HIV. Paul emerged as clearly a leader there. And then, just most recently, his notable leadership on the COVID-19 vaccine, again, here at J&J, but also on the global stage. You know, I think probably the greatest testament to Paul's legacy is the fact that our R&D investment this year is 23% higher through nine months than it was last year.

19 vaccine again here a J&J, but also on the global stage you know I think they're probably the greatest Testament to Paul's legacy is the fact that our R&D investment. This year is 23% higher through nine months than what it was last year and last year was a record setting year in terms of what we've invested in innovation.

Joseph J. Wolk: And last year was a record-setting year in terms of what we've invested in innovation. We've got a great team of scientists that Paul has assembled over the years across all of our therapeutic areas, across all of our franchises. And I just look forward to the success that they will continue to carry on that Paul has really... I guess cemented in terms of how we approach our business.

We've got a great team of scientists that Paul has assembled over the years across all of our therapeutic areas across all of our franchises and I just look forward to the success that they will continue to carry on that that Paul has really I.

I guess the cement it in terms of how we approach our business.

Joseph J. Wolk: Louise, thanks for your question. Rob, next question, please. Next question.

<unk>. Thanks for your question Rob next question. Please.

The next question is from Matthew Harrison Morgan Stanley.

Operator: The next question is from Matthew Harrison and Morgan Stanley.

[noise] great. Good morning, Thanks for taking my question I guess I was hoping you could focus a little bit on the upcoming be CMA cartoon launch and just talk a little bit about how you think about your capacity to supply that market and and your preparations for that lunch. Thanks.

Matthew Miksic: Great, good morning, thanks for taking the question. I guess I was hoping you could focus a little bit on the upcoming BCMA car key launch and just talk a little bit about how you think about your capacity to supply that market and your preparations for that launch. Thanks.

Sure. It's Jennifer So we are really looking forward to our upcoming Paducah date in the fourth quarter for our B C. M. A car T. This is going to be our first entry into cell therapy and so the team. The total team from R&D to supply chain to commercial has been really really invested in this asset over the past couple of years.

Jennifer Taubert: Sure, hi, it's Jennifer. So we are really looking forward to our upcoming Padofa date in the fourth quarter for our BCMA CART. This is going to be our first entry into cell therapy, and so the team, the total team, from R&D to supply chain to commercial, has been really, really invested in this asset over the past couple of years preparing to launch. I think the results that you've all seen and the really deep and durable responses that have been proven through our clinical programs really highlight that this is going to be a really meaningful and transformational asset for patients.

Preparing to launch I think on the results that you've all seen and they're really deepened durable responses that had been proven through our clinical programs really highlight that this is going to be a really meaningful and transformational asset for patients you know as we have been planning the the launch we're really taking a thoughtful approach to.

Jennifer Taubert: You know, as we have been planning the launch, we're really taking a thoughtful approach to scaling our global manufacturing, making sure that we learn from those who have come before us, and that we're really going to plan to deliver an optimal patient experience and a patient treatment or provider treatment center experience as well as we scale up. So the team has been working very hard. heavily on this, and we're gearing up for what we believe will be a very successful year.

Scaling our global manufacturing, making sure that we're learning from those who come before us and that we're really going to plan to deliver an optimal patient experience and a patient treatment or provider treatment center experience as well as we scale up so the team has been working very heavily on this.

And we're gearing up for what we believe will be a very successful launch for patients. Hopefully later this year I also want to call out the very strong partnership that we have with legend biotech where we've been attached at the hip throughout and we're so excited to be working in partnership with them to be bringing that to market. So I'm looking forward to a good lunch later this year.

Jennifer Taubert: launch for patients, hopefully later this year. I also want to call out the very strong partnership that we have with Legend Biotech, where we've been attached at the hip throughout, and we're so excited to be working in partnership with them to be bringing

Jennifer Taubert: that to market. So I'm looking forward to a good launch later this year

Jennifer.

Jennifer Taubert: later this year. Thanks, Jennifer. Matt, thanks for your question. Rob, next question, please? Your next question?

Thanks for your question Rob next question. Please.

Your next question comes from mixing with credit Suisse.

Operator: Your next question comes from Matt Mixick with Credit Suite.

Matt Miksic: Hi, thanks so much for taking the questions. So, I had one for Ashley, just on the knee business in the U.S., and one quick follow-up, if I could, on COVID vaccines. So, Ashley, I think one of the things that were mentioned was, you know, sort of continued growth and expansion in the knee business, if I'm not mistaken, in ASCs, and obviously the VELIS launch. If you could talk maybe about, it's an ASC, I guess, in knees or something we see some regional fluctuation around the U.S. in uptake some areas stronger than others, and I would love to get and how you see that playing out. And, as I mentioned, one follow-up on vaccines.

Alright, thanks, so much for taking the questions. So I and one for Ashley just done the knee business and U as in one quick follow up if I could on October vaccines.

Uhm Ashley I think one of the things that was mentioned was sort of continued growth and expansion in around the knee business if I'm not mistaken in in a season, obviously those launch if you could talk maybe it is it is it is.

I guess, the knees or something that would ease and regional original fluctuation around the U S. Just a big cemetery stronger than others and love to get your sense of how that is progressing where it's stronger and why and how you see that playing out and then as I mentioned, one one follow up for Oh and.

Vaccines.

Yeah no. Thank you for that question Matt.

Ashley A. McEvoy: Yeah, no, thank you for the question, Matt. You know, as Sarah shared in quarter three, the knees grew 2% versus 2020, and a lot of that was due to really two things. One is the state of innovation. So the Vellis knee robot is obviously getting some nice traction. As Joe shared earlier, the utilization rates are very encouraging from hospital systems that have adopted this new technology. That, coupled with a very proven.

I sure as Sarah shared.

In quarter, three niece grew 2% versus 2020 and a lot of that was due to really two fold. One is the state of innovation. So the villus knee robot is obviously getting some nice traction as Joe shared earlier the utilization rates are very encouraging them from hospital systems that.

Have adopted this new technology that coupled with a very proven differentiate it two knee implant with a revision offering as well as the cementless rotating platform have all really help shore up I would say our portfolio and knees and then you mentioned the channel and we are seeing really healthy.

Ashley A. McEvoy: Differentiating a two knee implant with a revision offering as well as a cementless rotating platform have all really helped shore up, I would say, our portfolio in knees. And then you mentioned the channel, and we are seeing really healthy growth in the ASC channel. We continue to be encouraged by our market share gains, predominantly in-joint, in ASCs. And really, we started to deploy what we call advanced case management, which is really how you simplify.

Growth and the I S E channel, we continue to be encouraged by our market share gains predominantly enjoy it N. A S. C S and really we started to play what we call. It an advanced case management, which is really how you simplify the preop planning Uhm N a CS and that new advanced case management service.

Ashley A. McEvoy: The pre-op planning in ASCs. And that new advanced case management service is starting to really take effect. And we expect to have these new sites of care start to really improve, not just in taking hold, not just in the U.S., but even in areas of Europe and really moving joints to more of a day surgery. Thank you for the question. Thanks, Ashley.

It's starting to really take effect and we <unk>. We expect to have this these new site to care start to really improve not just didn't take hold not just in the U S, but even in areas of Europe, and and really moving joints to more of a day surgery. Thank you for the question. Thanks, Ashley do you Wanna ask your vaccine follow up yeah just.

Ashley A. McEvoy: Thanks, Ashley. Sure.

Matt Miksic: follow-up? Yeah, just we hadn't touched on it on this call, but the sort of pivot to commercial. We'd love to get your sense of how we should think about timing and, you know, the sort of catalysts for that product becoming a commercial product, whether next year or the year after.

Just we haven't touched on it this call this call, but the pivot to commercial we'd love to get your sense of you know, we should think about timing yeah.

Mhm catalysts for for that product, becoming a commercial with her next year.

A year after.

Yeah. So you know we're really proud of the role that are vaccines, playing and really helping address the global COVID-19 pandemic throughout the world and hopefully you saw last week that the F. D. A advisory panel unanimously recommended booster for our Covid vaccine. We are in the process right now of of continuing under.

Jennifer Taubert: Yeah, so hi. We're really proud of the role that our vaccines are playing and really helping address the global COVID pandemic throughout the world. And hopefully, you saw last week that the FDA advisory panel unanimously recommended a booster dose for our COVID vaccine. We are in the process right now of continuing under emergency use authorization to roll out our vaccine across the globe, both in developed markets as well as developing markets.

Emergency use authorization to roll out our vaccine across the globe.

And both in developed markets as well as developing markets I think as the.

Jennifer Taubert: I think as the pandemic continues to spread, as we continue to work through and fulfill our existing contracts that we have throughout the globe, and as we move into more of a booster market in later 22, potentially into 2023, we'd be looking at moving into more of a commercial market. I know our R&D team is gearing up and getting ready to file for full approval. I think we should be moving into a full approval market for that switchover.

Pandemic as we continue to work through and fulfill our existing contracts that we have throughout the globe and as we move into more of a booster market and later 22 potentially into 2023, we'd be looking at moving into a more of a commercial market. I know are R&D team is gearing up and getting.

Ready to file for full approval I think we want to be moving into a full approval market for that switch over to to a commercial.

And that this is Joe just thanks for raising the point because I I do think that underscores and that question just the strength of our core business right. So vaccines in of itself. This year's not for profit is Jennifer shed will rely on the science and the data the guide us how we perceive commercially but you should all consider that as upside to our base.

Jennifer Taubert: to commercial. Hey, Matt, this is Joe.

Joseph J. Wolk: Just thanks for raising the point, because I do think that underscores in that question just the strength of our core business, right? So, vaccines in and of themselves this year are not-for-profit, as Jennifer said, and will rely on the science and the data to guide us how we proceed commercially. But you should all consider that as an upside to our base plan.

Plan was so proud of the results that we've been able to accomplish the investment in R&D and just the strength of the portfolio.

Joseph J. Wolk: We're so proud of the results that we've been able to accomplish, the investment in R&D, and just the strength of the portfolio. Not just this year, but how it really sets up for the balance of this decade, I think, is something that people should take away from the call. I always smile a little bit whenever there's vaccine news because it seems to have an overly pronounced impact on our stock, good or bad.

Not just this year, but how it really sets up for the balance of this decade, I think is something that people should take away from the call I always smile, a little bit whenever there's vaccine news because it seems to be overly pronounced <unk>.

Impact on our stock good or bad and it always just makes me chuckle, a little bit because of the strength of our business is really in our pharmaceutical medical device and consumer strength. These days and if I can if I can jump in as well and just put in a commercial for our upcoming pharmaceutical business review on November 18th we're really looking forward to having a comprehensive.

Joseph J. Wolk: And it always just makes me chuckle a little bit because the strength of our business is really in our pharmaceutical, medical device, and consumer strength these days. And if I can jump in as well and just put in a commercial for our upcoming pharmaceutical business review on November 18th, we're really looking forward to having a comprehensive overview of the business. You know, our robust pipeline, featuring our therapeutic area leaders and also really outlining our long-term growth outlook.

Overview of the business you know a robust pipeline.

Featuring our therapeutic area leaders and also really outlining or a longterm growth outlook. So we're real excited I think at that meeting we're planning for a great day and will be highlighting a number not only are key therapeutic areas in delving deepened the pipelines, but also having a chance to feature a number of the key assets.

Joseph J. Wolk: So we're really excited. I think at that meeting, we're planning for a great day and we'll be highlighting a number, not only our key therapeutic areas and delving deep into the pipelines, but also having a chance

Jennifer Taubert: feature a number of the key assets that folks I know are really, really interested in learning more about. So everything from Carvicti, our BCMA CART, to Nipacalimab that we got through our momentum acquisition last year, our new treatment for lung cancer and what we hope will be expanding into a much broader market, ribavant plus Lzertinib, our retina portfolio, also things like our RSV vaccine and our terrorist drug delivery platform for bladder cancer. On and on. But nonetheless, we're really planning for a very exciting day on November 18th and look forward to having y'all join us.

That that folks I know, how really really interested in learning more about so everything from car Victor R. B CMA car T. Two nipper Callum AB that we got through our momentum acquisition last year, our new treatment for lung cancer, and what we hope will be expanding into a much broader market right prevent plus dessert Nab a retina portfolio.

Oh I'm also things like our RSV vaccine and are terrorists drug delivery platform for bladder cancer, and then I could go on and on but Nonetheless, we're really planning for a very exciting day on November 18th and look forward to having you all join us.

And there was a 62nd spot Jennifer he was going to tell you about the rates on that one [laughter].

We're we're really looking forward to a great day I couldn't pass on this opportunity did not highlighted.

My favorite question, Rob last question. Please.

Jennifer Taubert: That was a 60-second spot, Jennifer. Teebos is going to tell you about the rates on that one. We're really looking forward to a great day, so I couldn't pass up this opportunity to highlight it.

Your last question comes from Daniel unhealthy with S V V lyric.

Hi, good morning, everyone. Thank you so much for taking the question.

I just had a quick question a follow up to Ashley on the medical Divisiveness and I'm just curious it feel like now there might be a little bit more uncertainty around the piece of recovery I just wanted to be sure I'm getting that message message correct.

Operator: Thanks, Matt, for your question. Rob, last question, please. Your last question comes from Danielle Antelfi with SVB Learing. Hey, good morning, everyone. Thank you so much for taking the question. I just had a quick question, a follow-up to Ashley on the medical device.

And you did mention that you didn't expect the hospital labor shortages to necessarily improve as we go through Q4. So I was just curious about how to reconcile that with a strong recovery. Thanks. So much no. Thanks for the question Danielle I think what we're planning for quarter. Four is you know I think we will still continue to see microsurgeon as in case.

Danielle Antalffy: Your last question comes from Danielle Antelfi with SVB Lairink.

Ashley A. McEvoy: No, thanks for the question, Danielle. I think, you know, what we're planning for quarter four is, you know, I think we'll still continue to see microsurges in cases. You know, there'll always be little hot spots. Hospitals, you know, are still going to experience some labor challenges. We don't see that getting better in the near term. I will qualify that, though, to say that they have been, quite frankly, masters at understanding how to manage, you know, patient flow and procedure flow.

Is there always be a little hot spots hospitals are still going to experience. Some labor challenges, we don't exceed that getting Betty better in the near term immediately I will qualify that though to say that they have been quite frankly masters at understanding how to manage patient flow and procedure flow.

When we look at diagnostic and routine screening and surgical procedures. We expect the trends will continue to recover globally similar to the trends we saw in quarter to wear surgical procedures grew low single digit above 2019, baselines you know as we've referenced there are more procedural backlogs in the highly <unk>.

Ashley A. McEvoy: So when we look at diagnostic and routine screenings and surgical procedures, we expect the trends will continue to recover globally, similar to the trends we saw in quarter two, where surgical procedures grew low single-digit above 2019 baselines. You know, as we've referenced, there are more procedural backlogs in highly elective procedures like knees and spine. We expect those to recover, although maybe not as much in terms of hospital capacity at levels.

The procedures like knees and spine.

Uhm, we expect those to recover although maybe not as in terms of hospital capacity at levels significantly above 2019 in the near term, but I would just say you know going into November relative to where we were entering November last year.

Ashley A. McEvoy: significantly above 2019 in the near term. But I would just say, you know, going into November, relative to where we were entering November last year, we are encouraged to look at the worldwide case data, look at the worldwide hospitalization data, and the freeing up of mobility restrictions. So we are encouraged by quarter over core performance from 2021 Q4 versus last year. You'll recall, we ended around one and a half percent medical device revenue versus 2019. So we are anticipating a healthier recovery.

We are encouraged to look at the world like case data to look at the worldwide hospitalization data.

And the freeing up of mobility restrictions. So we are encouraged by quarter Evercore performance from 2021 Q4 versus last year, you'll recall, we ended around 1.5% medical device did in revenue versus 2019. So we are anticipating a healthier recovery.

Okay, and Danielle maybe just to clarify too it's a recovery no matter what it's just the intensity of the recovery. So I would not expect based on what we know today any backwards step with respect to medical devices performance going forward across the industry.

Joseph J. Wolk: And Danielle, maybe just to clarify too, it's a recovery no matter what; it's just the intensity of the recovery. So I would not expect, based on what we know today, any backward step with respect to medical device performance going forward across the industry.

Thanks, Danielle for your question and thanks to everyone for your questions and your continued interest in our company our apologies to those we couldn't get to today because of time, but please don't hesitate to reach out to Investor Relations.

Jennifer Taubert: Thanks, Danielle, for your question, and thanks to everyone for your questions and your continued interest in our company. Our apologies to those we couldn't get to today because of time, but please don't hesitate to reach out to investor relations as needed. I'll now turn the call back to Joe for some brief closing remarks.

Needed I'll now turn the call back to jail for some brief closing remark great.

Great. Thanks Jen.

Joseph J. Wolk: Great, thanks, Jen. So I hope you take away from the third quarter results, as well as this call, just how broad our financial strength is, setting us up very well to close out 2021 and, more importantly, 2022 and beyond. We certainly do look forward to seeing many of you in New Brunswick on November 18th, where Jennifer, Mattai, and a number of pharmaceutical leaders will be featuring our product portfolio and just how optimistic we are about the future. With that, I'll close the call and wish everyone a great day.

So I hope you take away from the third quarter results as well as this call just how broad our financial strength is setting us up a very well to close out 2021.

But more importantly, 2022 and beyond we certainly do look forward to seeing many of you in new Brunswick on November 18th where Jennifer Matai and a number of the pharmaceutical leaders will be featuring our product portfolio and just how.

Optimistic we are about the future with that I'll close the call on whichever you want a great day.

Thank you. This concludes today's Johnson and Johnson the third quarter of 2021 earnings Conference call you may now disconnect.

Operator: Thank you. This concludes today's Johnson & Johnson's third quarter of 2021 earnings conference call. You may now disconnect.