Q2 2023 Johnson & Johnson Earnings Call

And.

Good morning and welcome to Johnson & Johnson's second quarter 2023 earnings conference call. All participants will be in the listen-only mode until the question-and-answer session of the conference. This call is being recorded. If anyone has any objections, you may disconnect at this time. If you experience technical difficulties during the conference, you may press star 0 to reach the audience.

results and full year financial outlook. Joining me on today's call are Joaquin Duato, Chairman of the Board and Chief Executive Officer, Joe Wach, Executive Vice President, Chief Financial Officer, and Eric Koss, Worldwide Vice President of Litigation.

A few logistics before we get into the details. As a reminder, you can find additional materials, including todayís presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com.

Please note that today's meeting contains forward-looking statements regarding, among other things, the company's future operating and financial performance, product development, market position and business strategy, and the anticipated separation of the company's consumer health business.

You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of today's date and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected.

A description of these risks, uncertainties, and other factors can be found in our SEC filings including our 2022 Form 10-K , which is available at investor.jnj.com and on the SEC website.

Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships.

Moving to today's agenda, Joaquin will open with a few comments highlighting business performance achievements in the quarter and outlook for the remainder of the year. I will then review the second quarter sales and P&L results for the Corporation and highlights related to the three segments.

Joe will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and updated guidance for 2023. Finally, Eric will provide comments regarding the TALC litigation.

The remaining time will be available for your questions. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 75 minutes. I am now pleased to turn the call over to Joaquin.

Thank you, Jess, and good morning, everyone. This was a strong quarter for Johnson & Johnson with market-leading performance, important advances across our innovative pharmaceutical and medtech pipelines, and a successful initial public offering of ChemView.

We delivered solid sales and earnings growth for the second quarter of 2023, reporting operational sales of 7.5% and adjusted operational EPS growth of 9.7%.

These strong results contributed to our confidence in raising our expectations for this year.

You may have seen this morning the announcement that we intend to split up KenVue shares through an exchange offer as the next step in the separation of KenVue.

Joe will provide additional information later in the call.

We're excited about entering a new era for Johnson & Johnson, one built around science, innovation and technology, and strategically focused on pharmaceutical and medtech while maintaining our position as the world's largest, most diversified healthcare products company with 25 platforms over...

confidence in our near and long-term future performance.

Starting with METEC, for the second quarter of 2023, we generated 14.7% operational and 9.9% adjusted operational growth, which excludes the impact of the ABIOMED acquisition. On a pro forma basis, the ABIOMED acquisition is a very important tool for the ABIOMED acquisition.

using sales publicly reported by a bill made prior to our acquisition met the GRU 10.2%.

These strong results continue to show that our efforts to improve the growth of the MedTech business are working.

Due to highlights in electrophysiology, include the publication of clinical data supporting the safety and effectiveness of CUDOT, our newest ablation catheter for atrial fibrillation. In fact, this is a demonstrated clinical success rate of 86% as well as achieving shorter procedure and full horoscopes.

energy catheter which enables physicians to instantly switch energy source with the radio frequency or pulse field based on patient needs.

The Abiomed integration continues to deliver against planned milestones and is on track across all areas and regions with no disruption to commercial activities or pipeline progression. Second quarter sales of 331 million compared to Abiomed's publicly reported sales in the same period last year as a standalone company.

will become a significant multi-year growth platform for Johnson and Johnson.

In orthopedics, the Bellis robotic-assisted solution is poised for further acceleration, having recently received CE and CA MARC international approvals.

In surgery, we are pleased with our progression on Otaba, our next generation soft tissue surgical robotic system, and we look forward to providing an investor update later in the year.

In vision, we recently launched products such as AQV or ACS MAX and Technis IHANs and we are performing very well across both contact lenses and surgical vision.

Now, turning to pharmaceuticals. In the second quarter of the year, we delivered about market operational growth of 6.2% excluding the COVID-19 vaccine. Of note, our multiple myeloma portfolio has grown more than 30% year-on-year, which includes the acceleration.

We also achieved important regulatory and operational milestones, including multiple redouts from our pipeline.

A few things I'm particularly excited by include...

First, the receipt of fast-track designation from the US FDA for all three prospective indications for Millevexian, our factor 11 oral anticoagulant, in partnership with Bristol Mayor's Squeep, which has the potential to treat a broader set of patients, such as those who currently have limited their...

new earlier indication in Trident Relaxed or refractory multiple myeloma.

Third, the presentation of initial TAR 200 data from the San Rice One Study in Bladder Cancer at the American Eurological Association Meeting. And finally, we announce positive top-line results from the Phase 3 Papillon Study evaluate in River Event in Combination with Kimo.

I assume we are tested. There is a marked cases of

In addition, I want to highlight the face to study data that we presented earlier this month at the World Congress of Dermatology for G&J to 1-1-3. Our novel or a IL-23 receptor antagonist peptide in psoriasis.

The findings suggest that Gen.J. 2113 has brought potential across the spectrum of IL-23 mediated diseases, including inflammatory bowel disease.

We are already advancing into Phase 3 in moderate to severe plexoriasis and initiating a phase 2B in ulcerative colitis. I will continue to assess additional opportunities.

We are very excited about the potential of this asset and believe it represents a billion dollar plus commercial opportunity.

We also continue to defend the intellectual property associated with our medicines, including Stellara. In fact, we have reached settlements regarding our Stellara IP with both Amgen and Albotec. We expect Amgen to launch in the US on January 1, 2025.

and all voted to launch in the US on February 21st, 2025.

In all, our pharmaceutical business delivered very strong results. Our pipeline is progressing well and we continue to be confident in meeting our 2025 sales target of 57 billion.

We are excited to enter the pack-up of the year from opposition of strength and we have high expectations as we evolve to a two-sector Johnson and Johnson with a higher growth profile. I am now pleased to turn the call over to Jess to review our financial results in more detail. Yes?

Thanks, Joaquin. As a reminder, on May 8, 2023, Kenview Inc. closed its initial public offering. Johnson and Johnson continues to own 89.6% of total outstanding shares of Kenview's common stock and remains the majority shareholder. Therefore, the following financial results continue to include the Consumer Health Business.

with the 10.4% of consumer health net earnings no longer attributed to Johnson and Johnson being adjusted for and other income and expense from the date of the IPO through the end of the quarter.

Starting with Q2 2023 sales results.

Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5% as currency had a negative impact of 1.2 points.

In the US, sales increased 10.2%.

In regions outside the U.S., our reported growth was 2.2 percent.

Operational sales growth outside the US was 4.7% with currency negatively impacting or reported. OUS results by 2.5 points.

Operational sales in Europe were negatively impacted by the COVID-19 vaccine and the off-the-victus exclusivity of ZITIGA.

Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 6.2% worldwide, 8% in the US, and 4.4% outside the US.

Turning now to earnings. For the quarter, net earnings were $5.1 million and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago.

Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1% in the year 2020.

percentages quoted represent the operational sales change in comparison to the second quarter of 2022 and therefore exclude the impact of currency translation.

Beginning with the pharmaceutical segment. Worldwide pharmaceutical sales of $13.7 billion increased 3.1% with growth of 9.2% in the US and a decline of 4% outside the US.

Operational sales growth increased 3.8 percent, as currency had a negative impact of 0.7 points.

excluding COVID-19 vaccine sales worldwide operational sales growth with 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S.

Sales outside the US, excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points due to the loss of exclusivity of ZITGA in Europe .

For our mystutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth.

We continue to drive strong sales growth for both Darzilex and Arlida, with increases of 23.4% and 26.9% respectively. Zalara grew 8% driven by market growth and IBD share gains in the US, partially offset by unfavorable patient mix and increase rebates.

Trump via Group 18.9% driven by market growth and share gains in the U.S. partially offset by un favorable patient mix.

Growth of 16.5% impolinary hypertension was driven by favorable patient mix, share games in the US and market growth.

Turning to newly launched products, we continue to make progress on our launch of CARVICTI and continue to expand access and reimbursement for Supervado. We are also encouraged by the early success of our launch of Tech Bailey, sales of which are included in other oncology.

Total pharmaceutical sales growth was partially offset by the loss of exclusivity and remunicate in Cytiga, along with a decrease in in bruvacust sales due to competitive pressures. And bruvacum maintains its market leadership position worldwide.

I will now turn your attention to the MedTech segment.

Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the US and 11.3% outside of the US.

Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points.

Abium ed contributed 4.8% to operational growth. Excluding the impact of acquisitions and investitures, worldwide adjusted operational sales growth was 9.9%.

Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued to uptake a recently launched products and commercial execution. Partially offsetting growth in the quarter was the impact of volume-based procurement in China.

Electrophysiology is a major contributor to the growth with a double digit increase of 25.9%. This reflects strong growth in all regions, including Europe , driven by our comprehensive portfolio, including the most recently launched QDOT-RF catheter.

Orthopedics operational growth of 5.7% reflects strong procedure recovery, success of recently launched products such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELUS robotic assisted solution.

Growth was partially offset by the impact of volume-based procurement in China, and continued to supply challenges primarily in HIPs. Operational growth of 8.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios.

Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses in other as well as strength of new products including AccuView Oasis one day family of products and contact lenses and Technis Eye Hands

Our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges, although these continue to improve. Moving to the Consumer Health segment. Worldwide consumer health sales of $4 billion increased 5.4% with growth of 6% in the US.

and growth in OTC globally due to strong pain performance and cold cough and flu season.

Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.Kenview.com.

Now turning to our consolidated statement of earnings for the second quarter of 2023, I'd like to highlight a few note-worthy items that have changed compared to the same quarter of last year. Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix.

Dying, marketing, and administrative margins delivered 20 basis points driven by incremental costs to support the standalone consumer health business partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter.

The $3.8 billion invested was a 3.4% increase versus the prior year.

The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022.

This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related costs.

And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson and Johnson, which resulted in a $37 million reduction in consolidated earnings.

Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax costs incurred as part of the plan separation of the consumer health business due to the internal reorganization of certain international subsidiaries. Excluding special items, the effective tax rate was 16.6%

impact of intangible amortization expense and special items.

Now let's look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%.

primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales marketing and administrative expense leverage.

and R&D portfolio prioritization, partially offset by higher milestone payments.

Medtech margins improved from 26.5% to 28.6%. Driven by favorable intellectual property-related litigation settlements and cost management initiatives, partially offset by commodity inflation.

Finally, Consumer Health margins declined from 25.9% to 23.5%. Due to incremental cost to support to stand-alone consumer health business.

Foreign exchange impacts and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson and Johnson differs from the financial results reported by Kenview and this morning.

The difference is primarily driven by incremental costs required to run Kenview as an independent company. Additional differences also exist on an after-tax basis due to the application of different tax rates.

This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I'm now pleased to turn the call over to Joe Walk. Joe?

Thank you, Jessica, and thanks everyone for joining us today. As previously shared, we reported particularly strong results across all segments for the second quarter and the first half of 2023.

During the second quarter, adjusted operational sales growth by pharmaceuticals, excluding COVID-19 revenue, accelerated 6.2% over the first quarter of 2023.

Similarly, on a sequential basis, Medtech operational sales increased 4.5% over an already strong first quarter.

During the first half of the year, we executed against our long-term business strategy and achieved key clinical and regulatory milestones. These advancements provide a strong foundation for long-term growth and are a testament to the hard work and dedication of our talented colleagues around the world.

We also made considerable progress toward the separation of Kenview. On May 8th, as partial consideration for the transfer of the consumer health business, Kenview paid $13.2 billion to Johnson & Johnson from the net proceeds of the initial public offering and debt financing transactions in connection with the

in the separation. As part of the proposed exchange offer, Johnson and Johnson shareholders will have the choice to exchange all some or none of their shares of Johnson and Johnson common stock for shares of Kenview common stock subject to the terms of an offer.

We believe a split off is the most advantageous form of separation for Johnson & Johnson, Kenview, and our shareholders. Specifically, an exchange offer provides Johnson & Johnson the potential opportunity to acquire a large number of outstanding shares of Johnson & Johnson common stock at one time in a tax-free manner for U.S. federal income tax purposes without reducing overall cash or future financial investments. COR Therapy

the tender could occur as early as the coming days.

offer terms for the exchange inclusive of applicable discounts as well as the duration of the exchange tender period would be set upon launch.

We understand that you may have questions on this process. At this point, there are no additional details about the contemplated split-off to share, but we are committed to providing timely updates as appropriate.

Let's now turn it to cash and capital allocation. We ended the second quarter with approximately $29 billion of cash and marketable securities and approximately $46 billion of debt for a net debt position of $17 billion, inclusive of approximately $7 billion of Kenview net debt.

Precash flow through the second quarter was approximately $5.4 billion compared to $8.1 billion in the prior year. The second quarter reflects elevated tax payments of approximately $2 billion related to TCJA and past auto-related matters.

Our capital allocation priorities remain unchanged with continued investment in our business being the highest priority to drive new and better solutions for patients, followed by dividends, increasing on an annual basis, adding strategic opportunities for inorganic growth and share repurchases when attractive. Our R&D investment in the first half of 2023 was $7.4 billion or approximately 15% of sales.

$5 billion share repurchase program authorized by the board in September of 2022 and completed earlier this year, we returned $8.5 billion to shareholders in the first half of 2023.

Let's discuss our outlook for the balance of 2023. Before I get into the specifics of guidance, in light of the potential Kenview split-off transaction, I will remind you that our updated full year guidance today continues to include results from the consumer health business, given Johnson & Johnson remains the majority shareholder of Kenview.

I suspect you already know this, but it would not be accurate to subtract any guidance provided separately by Kenview from total Johnson & Johnson guidance and assume that the resulting total reflects guidance for the new Johnson & Johnson. When Johnson & Johnson is no longer the majority shareholder of Kenview, we will provide timely, updated new Johnson & Johnson guidance that will reflect, among other things, the removal of consumer health's current contribution.

as detailed on this schedule. Specifically, the lost income related to the approximate 10% non-controlling interest in Kenview and the acquired in-process research and development costs related to our investment in Cellular Biomedicine Group.

We now expect operational sales growth for the full year 2023 to be in the range of 7 to 8%, or up $1.4 billion in the range of $99.3 billion to $100.3 billion on a constant currency basis, and adjusted operational sales growth in the range of 6%.

1.10. However, the US dollar has strengthened versus other select currencies such as the Yuan and the Yen. As such, we now estimate a negative impact of foreign currency translation of approximately 500 basis points, resulting in estimated reported sales growth between 6.5% to 7.5% compared to 2022.

billion primarily related to the company's 10.4% non-controlling interest in Kenview.

Regarding interest income and expense, we now anticipate a reduction of net interest expense to the range of $150 million to $250 million due to interest income on the net proceeds linked to the Kenview separation.

And finally, based on current tax law, we are maintaining our effective tax rate estimate in the range of 15.5% to 16.5%.

These changes result in us increasing our adjusted operational earnings per share guidance by 10 cents per share to a range of $10.60 to $10.70 or $10.65 at the midpoint on a constant currency basis. Constant currency growth of 5% at the midpoint.

While not predicting the impact of currency movements, assuming recent exchange rates I previously referenced, our reported adjusted earnings per share for the year assumes no additional foreign exchange impact. As such, our reported adjusted earnings per share for the year increases by 10 cents per share to a range of $10.70 to $10.80.

We continue to anticipate stable procedure volumes and health care staffing levels in the back half of the year with normal seasonality. We expect continued competitive performance attributable to commercial execution, recently launched products, and improvement in supply.

Headwinds from volume-based procurement in China, as well as potential impacts from international sanctions in Russia are expected to be higher in the second half than the first half of the year. In pharmaceuticals, we continue to expect to deliver our 12th consecutive year of above-marked growth in 2023. Driven-

Looking ahead, we have many important catalysts for the remainder of the year that can drive meaningful near and long-term value.

Beyond the separation, in the near term, we are continuing to drive performance in MedTech with better commercial execution and recently launched innovative products, being a significant factor in driving the continued higher growth trajectory across the MedTech business.

Many of the solutions mentioned are early in their commercialization, which means there's still significant opportunity ahead. For example, in electrophysiology, we are excited to begin the commercialization of the Q.MicroCatheter in the US during the second half of this year. In orthopedics, the vellus robotic assisted solution, we...

large and growing Presbyopia market. We look forward to continued growth from this and other recent vision launches.

Related to our pharmaceutical business, we are excited about upcoming advancements in our pipeline with a number of important regulatory and clinical milestones for our key future assets, including on the regulatory front, there is expected approval of talcetimab in relapsed or refractory multiple myeloma. Clinically, we expect phase 3 data for Trempphia for Crohn's disease.

and phase two data for nipocalumab in rheumatoid arthritis.

A couple of other items to highlight. In case you missed them, we recently published our Health for Humanity report, our U.S. pharmaceutical pricing transparency report, and our U.S. patent table, all of which can be found on our website.

Also, a reminder that we will be hosting an enterprise business review featuring both pharmaceutical and medtech at the New York Stock Exchange on December 5th.

I'll conclude my prepared remarks by reiterating that we have had a strong first half of the year both financially and Operationally and we expect to continue to build upon that momentum in the second half of this year with that I will now turn the call over to Eric Haas Thank you Joe on Tuesday July 18th in the case of Valadez v. Johnson & Johnson a jury in Alameda County

mesothelioma was not caused by baby powder. Without the benefit of that evidence, the jury rendered a verdict that is irreconcilable with the decades of independent scientific evaluations confirming Johnson's baby powder is safe.

does not contain a spesas and does not cause cancer. The research, clinical evidence, and over 40 years of studies by independent medical experts around the world continue to support the safety of our cosmetic talc.

The verdict award will not be paid while the bankruptcy proceeding continues, and this decision has absolutely no impact on that process, which has the support of lawyers representing the majority of claimants.

We remain focused on all claimants having the opportunity to vote and decide for themselves on our plan to compensate them in a timely and efficient manner. Looking ahead with respect to the bankruptcy refiling by LTL, the bankruptcy judge is expected to rule by August 2nd on the motion to dismiss hearing that took place in the last week of this year.

or safe has confirmed through decades of numerous independent scientific tests and studies. I would now like to hand the call back over to Jess.

Thanks, Eric. This concludes the prepared remarks section of our call. I will now turn the discussion over to the Q&A portion of the call. Kevin, can you please provide instructions for those wishing to ask a question?

Certainly, ladies and gentlemen, if you'd like to ask a question at this time, please press star then one on your telephone keypad. If you'd like to withdraw your question, press star then two. Please let me your questions to one question only. Our first question is coming from Larry Beegleston from Wells Fargo, your line is now live.

Good morning, thanks for taking the question and congratulations on another strong quarter here. You know, for Eric, if Judge Kaplan dismisses the bankruptcy proposal, what's the backup settlement in mind that would proceed outside of bankruptcy, you know, that could ring fence, you know, the cost and Joe or Joaquin and Medtech, how are you thinking about the sustainability of the first half strength? Are you 8% organic?

You still expect the MedTech market to grow 5 to 7% this year, you know, we're changing it in that range. It seems conservative. Thanks for taking the question. Larry Hyatt, Eric, thanks for the question. If Judge Kaplan dismisses the bankruptcy, we will be back into the Torch system and in that scenario, we intend to fight the claims aggressively.

we feel very confident in our ability to continue to prevail in the vast majority of claims as we have done in the past in the tort system.

Thank you. Thank you, Larry. And thank you for complimenting some of the results on the first quarter and also on the Met the Guant. When it comes to the Met the results, the growth in the first half of the year was north of 8%. So this is a continuation of the sustained improvement in our performance that we have had in the last couple of years in which we have grown.

product launches that we are having in the market, we see our trajectory in May taking the first half of the year continuing in the second half of the year. So we expect a similar trajectory for May taking the second half of the year. Yeah, Larry, maybe I might just add to Joaquin's comments. The only thing that is limiting the growth, I would say, in the back half of the year is China volume-based pricing as well as some international sanctions in Russia.

guidance coming to us. I appreciate what you said around the CanVue and cellular biomedicine dynamics but I'm curious about Stellara because you have the two settlements now. I don't think there's any chance for having a biosimilar enter this year and I think before you had expected that so I'm curious what your expectations are now in terms of biosimilar entry before Amgen and how does that impact sort of your guidance expectations for this year and if you want to...

comment on next year or how it might impact 2025 with the $57 billion there. And then one other one that I could just un-merit post it. We've been getting a lot of questions on just sort of what's changed there. I know before the study is supposed to end next year, we obviously heard about the interim on your last earnings call.

But then in the last few weeks it sounds like there's a chance we'll get the data sooner this year and you may even be able to present it. So kind of what's changed from April to now to give you a sense that the data may come a little bit earlier and give you a chance to present it this year.

last few weeks it sounds like there's a chance we'll get the data sooner this year and you may even be able to present it. So kind of what's changed from April to now to give you a sense that the data may come a little bit earlier and give you a chance to present it this year. Thank you.

Thanks for the questions Vamil. I'll start with Stellarra and then see if Eric can add anything from a legal perspective and then we'll hand it over to Joaquin for your question on the Mariposa study. With respect to Stellarra, this year there won't be a significant impact. As you can imagine, most of that business was contracted for the full year, about this time last year. So there really wasn't any material impact. And our current assumption, based on some of the agreements you read about, similar to what we said previously, is that we wouldn't expect...

Thank you. With respect to Mariposa, nothing has changed. This is an event-driven study with a final analysis expected, as we said, by the end of 2023, with the potential to be presented at a major medical meeting in 2023. We remain...

in a medical meeting potentially this year.

Thank you. Next question. Today is coming from Joanne Wench from Citibank. Your line that live.

Good morning and thank you for taking the questions. I'm trying to think about two things as I look forward to. Given the strength in the first half of the year in MedTech, does this create, in your opinion, a new base from which we grow from? Where are we going to be writing about difficult comps next year? And second of all, with Kenview's split off by?

within days or by the end of this year, I anticipate. How do we think about different investments in the MedTech and the pharmaceutical franchises, either through pure R&D internally or externally? Thank you. So, as I commented in the earlier question, we are pleased with the strength of our MedTech business in the first half of the year with 8% growth. We, this is driven by...

quite successful in introducing some important new products in all segments of our business. For example, if I start with electrophysiology that grew north of 25% in the quarter, we have introduced a new mapping cathecer, OctaRay, and also a new treatment cathecer, QDOT, which is quite successful at using a cathecer.

techniques eye hands, the first monofocal intraocular lens which is progressing also very well. Moving into orthopedics, the good news is that we have received CE mark and CA mark for our robotic assisted system, VELIS, and we continue to have an enhanced portfolio of knees and hips.

Finally, in surgery, we continue to enhance our endocatine and our energy portfolio with the launch of NCL jaw curve and also with the launch of H-elon 3000 in the stapler side. So overall, good reception of our new products that portend well for a continuation of growth, as I said before. Bye.

the most widely used with the option of having both radio frequency and PFA to adapt to every patient anatomy. And then on the robotic side, we will provide you more updates on our progress on OTAVA, our soft tissue robotic system before the end of the year as we committed. And we have also...

and innovation as the year moves forward. And Joanne, with respect to your second question and completing the consumer health separation, our capital allocation priorities aren't changing. So we're going to continue to invest organically in our own pipeline. You saw that we pretty much have kept our percent to sales, which leads across industries as a top 10 investor in R&D on an annual basis.

or scientific expertise we have or commercial capabilities that we can offer that drive more value out of a potential asset in our hands than where it currently resides. So we are looking feverishly as we always do across both MedTech and farm. Thank you. Next question is coming from Chris Shauf for JP Morgan. Youíre live.

updates over the past few months. I'm just wondering, just level of confidence that target and is that increased as we've gone through this year? And then my second question is just for Eric on TALC. Is there any update in terms of the number of plaintiffs where you have an agreement on the settlement terms relative to where we stood with the comments in April and just where you stand right now relative to that 75% threshold you ultimately need? Thanks so much.

Thank you, Chris, and let me start with your first question. We have always been confident on the fact that we will reach our 57 billion target by 2025 as we announced back in 2021. And certainly what we are seeing now increases and reinforces and enhances our confidence. saving a billion dollars on every single volume to run to the BIthal

You're seeing the progression of our pharmaceutical portfolio in our existing products with excellent results in in Darthalex, Tremphaia and Erleada, also in our pulmonary hypertension franchise and in our long-acting injectable and anti-psychotic franchise which are key products in this period. We are very pleased with the trajectory of our...

TechValley launched a line data to see if Darthalax in the addressable patient population. TechValley is having a faster introduction. And finally, Spervato, which is doing well, and now we see Spervato as a $1 billion plus product. We have seen the results this quarter also reaching close to $1 billion.

CD3 by specific antibody which is going to give another option in the treatment of multiple myeloma. And we continue to progress and execute well in some of the key products in our pipeline. I commented on rivrevant and the combination of lacertinib as you know. We receive fast track designation for the three key indications of milvexian, our factor 11.

And we also, when it comes to CARVICTI, we were very pleased to show the data on CARTITUDE-4. We're filing the PLA now, both in Europe and in the U.S. And we are expecting to show you some data on NIPO CALIMA, VINROMO THORATITIS. We also have already presented in a hemolytic disease of the fetus of...

announced plans to continue developing into psoriasis and also a phase 2 study in ulcerative colitis. So overall when I look at the picture for 2025 you know we have increased confidence based on our portfolio in our new product launches on how we execute

Johnson & Johnson in pharmaceuticals beyond 2025. And that's something that we need to highlight, and I think it's important for everybody to recognize, this is going to put us in a great position beyond 2025.

Thank you. Next question. Turning to the question with respect to the number of claimants, good and important question. The most recent update comes from the hearing on the motions to dismiss that finished on June 30th. I would refer you to the post-trial findings of the fact that the most recent update comes from the hearing on the post-trial findings of the fact that

support or lawyers who represent 60,000 claimants in support of the plan and lawyers who represent about 40,000 claimants in opposition. So the numbers right now show that the vast majority of claimants support the proposed plan. Based upon the testimony during that hearing...

Your line is now live.

Oh hi, thanks for my questions, just two if I may. So just on, thanks for your thoughts on the TALC outcome. Could we just expect any more similar suits like the one in Alameda in the near future?

then secondly do you know just a clarification on Mariposa if another interim passed for Mariposa.

do you know, just a clarification on Mariposa, if another interim passed for Mariposa. Thanks very much.

So let me start with the mariposa, no. I mean, we are, as we communicated, we are moving into a final analysis by the end of the year, potentially presenting the data at the end of the year. And with respect to the talc suits, no, we don't anticipate additional individual actions to go forward outside the bankruptcy. Such capital lifted the state only with respect to that one particular...

from Terence Flynn from Morgan Stanley , your line is now live.

Great. Congrats on the quarter. Thanks for all the color. I had two. I was wondering, Joaquin, we've talked a lot about the myeloma market and evolution over the last decade or so. J&J has been a leader there. This is a $20 billion market. You obviously have a number of different options now for patients, including Tech Valley most recently.

idea you can give us in terms of how that structure could evolve post the full separation. Thank you. Yes, so thank you for the question and the answer is nothing prevents us from doing that. As a matter of fact, our aspiration in myeloma is that with the portfolio that we have today with that phalanx.

the Vile, the Alkettamab, and Karavicti, we would be in a position to have three out of every four patients starting in a Janssen-containing regimen by the end of this decade. So that's our aspiration in myeloma. Our aspiration is that there is a Janssen regimen for every line of the patient.

with multiple agents and then sequencing into carbic-T and talcetamat and tec-viale, which we are studying in combination with the arthalex and also in combination among each other and sequencing among them. So ultimately, our goal when it comes to multiple myeloma is to be able to see...

core of our pharmaceutical franchise and the number one growth driver that is going to be for 2025 and beyond. There's more factors that give us optimism about the business potential of this area is that as we combine and as we sequence treatments, the treatment duration itself is going to be significantly increased. We hope that all four see.

deleverage that could occur with the separation once Kenview is on its own entirely. You may recall a couple quarters ago on one of these calls we said that there was potentially $500 million to $750 million of deleverage in SG&A. We embarked on an initiative, and I guess the benchmarks would suggest companies usually take about two to three years to get the

eliminate that. So you should expect as you're modeling, no de-leveraging or very, very little de-leveraging from the Kenview separation.

Your next question today is coming from Danielle Antalpa from UBS. Your line is now live. Good morning everyone. Thank you so much for taking the question. Just to follow up on some of the capital allocation commentary. I appreciate what you're saying that things haven't changed.

I'm just curious now that you guys have integrated Abiamed, you're seeing some success there. How your appetite for specifically within medical devices and medtech, how your appetite for potentially larger deals may have changed and are there any specific areas you would call out?

within cardiology now that you do have Abimed or just with, you know, throughout medical devices as areas of interest or where you feel under scaled and you might benefit from building out there. Thanks so much.

Yeah, good to speak with you, Danielle. And I know you directed the question to me, and I'll answer it with one word. I would say our appetite is pretty voracious at this point, but I'll leave it to Joaquin with respect to the size of the deals. I don't think it unequivocally doesn't change whether it's big or small. It has to be a really good strategic fit utilizing the expertise and...

It's been 20% on the quarter and we continue to move forward with enrollment in the key PMA studies, protect, and STEMEDTU as well as the INTELLA ECP. So everything is moving well according to plan.

We continue to look for opportunities. And our number one criteria in looking for opportunities is the medical innovation, how they improve patient care, how do we see the science behind the product. So we are agnostic in that sense to MedTech and pharmaceuticals. It's all about identifying areas that are going to have a significant impact in patient care. When it comes to MedTech, certainly as we have

we will continue to look for these opportunities, trying to have a good return on capital, as well as things that are close to our existing expertise. When it comes to pharma, our history in tuck-ins, in licenses and collaborations has been very successful. As a matter of fact, external innovation represents about 50% of our pipeline.

we have to clear certain financial milestones for us to be able to move on. But M&A and also licensing acquisition collaborations remains a key factor in our growth moving forward.

Thanks. We have time for one more question. Thank you. Our final question today is coming from Louise Chen from Cancer

Hi, congratulations on the quarter, and thank you for taking my questions here. So I wanted to ask you where your latest thoughts on IRAR and the potential impact to the drug industry and also to J&J. And second question was just on Carvicti. Just curious how you expect to expand into earlier lines of treatment and then more widely into the community.

Thank you. Yes, so let me start with the IRA. Obviously, we remain very concerned about the government price setting environment that the IRA creates, which we believe creates a significant disincentive to innovation without addressing the core problem which is space.

to calculate it given the fact that many of the rules and procedures are still in flux so it would be too much to be able to try to anticipate that in our case when we look at Johnson & Johnson relatively speaking towards the industry based on our diversification between Metec and F-

successfully any situation coming from that relative to other industry players.

The second question was about carbonity. As I commented earlier, we are working to improve carbonity supply, which is very important. You've seen that improvement in our sales in the second quarter. We are working in different ways. One is we are increasing capacity.

going to be in the trajectory of increasing capacity gradually in order to be able to eventually meet the demand that exists in CARBIC-T. As far as reaching to other patients populations, the CARBIC-T 4, it's already been filed and it's moving CARBIC-T into earlier lines of therapy and we are also working in first-

convinced of the potential of Carpeti to be one of our more than $5 billion assets that we announced back in 2021. Thank you Luis and thanks to everyone for your questions and your continued interest in our company. We apologize to those we couldn't get to because of time, but don't hesitate to reach out to the investor relations team with any remaining questions you may have. I will now turn the call back over to Joaquin for some brief closing remarks. Thank you Jason.

with recent development and innovation. We look forward to having future engagements with you to update you on our continued progress. Thank you very much and enjoy the rest of your day. Thank you. This concludes today's Johnson & Johnson second quarter 2023 Earnings Conference call. You may now disconnect.