Q4 2023 Johnson & Johnson Earnings Call
Operator: Good morning, and welcome to Johnson & Johnson's Fourth Quarter 2023 Earnings Conference Call. All participants will be in a 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 zero to reach the operator. I would now like to turn the conference call over to Johnson & Johnson. You may begin.
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 zero to reach the operator.
I would now like to turn the conference call over to Johnson & Johnson. You may begin.
Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the Fourth quarter and full-year 2023 and our financial outlook for 2024. Joining me on today's call are Joaquin Duato, Chairman and Chief Executive Officer; and Joe Wolk, Executive Vice President, Chief Financial Officer. As a remainder, you can find additional materials including today's presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com.
Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson <unk> Johnson welcome to our company's review of business results for the fourth quarter and full year 2023, and our financial outlook for 2020 for joining.
Speaker Change: Joining me on today's call are Joaquin Duato, Chairman and Chief Executive Officer, and Joe Walk Executive Vice President Chief Financial Officer. As a reminder, you can find additional materials, including today's presentation and associated schedules on the Investor Relations section of the job.
Incident, Johnson website at Investor Dot J&J Dot com.
Jessica Moore: Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. 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 the date of this recording and are subject to certain risk 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 SECs 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.
Speaker Change: The information available as of the date of this recording and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected.
Speaker Change: 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 Dot J&J Dot com and on the Sec's website. Additionally, several of the products and compounds discussed today are being developed.
Speaker Change: In collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships.
Jessica Moore: Moving to today's agenda. While Joaquin will open with the few comments on our 2023 performance and key milestones. As well as highlights from our enterprise business review. I will then review the fourth quarter sales and P&L results as well as full year 2023 results for the enterprise. Joe will then close by sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. 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 a little over 60 minutes. I'm now pleased to turn the call over to Joaquin.
Joaquin Duato: Well, then review the fourth quarter sales and P&L results as well as full year 2023 results for the enterprise.
Joaquin Duato: Joe will then close by sharing an overview of our cash position capital allocation priorities and guidance for 'twenty 'twenty four.
Joaquin Duato: The remaining time will be available for your questions.
Joaquin Duato: To ensure we provide enough time to address your questions. We anticipate the webcast will last a little over 60 minutes.
Joaquin Duato: I'm now pleased to turn the call over to Joaquin.
Joaquin Duato: Thank you, Jess and good morning, everyone. 2023 was a remarkable year for Johnson & Johnson in becoming a two sector company focused on innovative medicine at MedTech, we strengthened our position as an innovation powerhouse. We breakthrough science and transformative technology, we innovate across the entire patient pathway in ways no other company can. And as we share at our enterprise business review, we have a stronger growth margin profile and are more focused and agile than ever before, which is what you see with today's results. I'm particularly proud of our Q4 results with innovative medicine operational sales excluding the COVID-19 vaccine, growing by 9.5% and MedTech adjusted operational sales growing by an impressive 9.1%. For the full-year, we delivered strong and sustained performance with 9% operational sales growth, excluding the COVID-19 vaccine and 10.8% adjusted operational earnings per share growth. These results reflect the breadth and competitiveness of our portfolio. And when I look at the milestones we achieved in 2023 and the promise of our pipeline, I have confidence in our guidance for 2024 and beyond.
Joaquin Duato: <unk> 23 was a remarkable year for Johnson <unk> Johnson.
You can be called me not to shake total company focused on innovative maybe seen a mistake, we strengthen our position as an innovation powerhouse, we break through science and transformative technology, we innovate across the entire patient pathway.
Joaquin Duato: No Oh that a company can.
Joaquin Duato: And as we shared at our Enterprise business review, we have a stronger gross margin profile in automotive focused and agile than ever before with.
Joaquin Duato: Which is what you'll see with today's results.
Joaquin Duato: I'm, particularly proud of our Q4 results with even though they may be seen operational sales, excluding the COVID-19 vaccine growing by nine 5% amid take adjusted operational sales growing by an impressive 9.1.
Joaquin Duato: St.
Joaquin Duato: For the fourth year, we delivered strong and sustained performance with 9% operational sales growth, excluding the COVID-19 vaccine.
Joaquin Duato: 10.8% adjusted operation it means per share growth.
Joaquin Duato: These results reflect the breadth and competitiveness of our portfolio.
Joaquin Duato: And when I look at the milestones we achieved in 'twenty to 'twenty three and they put on me. So if our pipeline I have confidence in our guidance for 'twenty 'twenty four and beyond.
Joaquin Duato: So, let's take a deeper look at the business and what we achieved last year. Starting with innovative medicine. For the full-year, we delivered above-market operational sales growth of 7.2% excluding the COVID-19 vaccine. Our innovative medicine business continues to be fueled by growth from key brands and the acceleration of sales of new products. Our multiple myeloma portfolio is a good example with significant contribution from recently launched products including CARVYKTI, TECVAYLI and TALVEY. Turning to clinical trials, key results from the year included positive Phase III readout for more than 10 of our in-line and pipeline medicines, including CARVYKTI in one to three prior lines of therapy in multiple myeloma. DARZALEX in front-line multi myeloma transplant-eligible patients, RYBREVANT, in combination with chemotherapy and RYBREVANT plus lazertinib in non-small cell lung cancer. And finally, Tremfya monotherapy in [inaudible]. In addition, we saw positive Phase I and Phase II readout for nipocalimab [inaudible] and we initiated our Phase III clinical development programs for [inaudible] and our targeted oral peptide J&J 2113.
Joaquin Duato: Starting with the nobody if maybe you've seen for the full year, we delivered above market operational sales growth of seven 2%, excluding the COVID-19 vaccine.
Joaquin Duato: Our innovative medicines business continues to be fueled by growth from key brands and the acceleration of sales of new products.
Joaquin Duato: Our multiple myeloma portfolio is a good example, with significant contribution from recently launched products, including <unk> got a big T take by leap on T V.
Joaquin Duato: Turning to clinical trials key results from the year included 40, the phase III readouts for more than 10 of our inline and pipeline maybe scenes, including Gotta Vic do you want to see prior lines of therapy in multiple myeloma data lakes in front line multiple myeloma.
Joaquin Duato: Transplant eligible patients.
Joaquin Duato: And in combination with chemotherapy and I believe plus law therapy in non small cell lung cancer. Finally, let them fight yet mono therapy, you know we set out the full ITC.
Joaquin Duato: In addition, we saw positive phase one and phase two Readouts for me, Bob Collymore I'm tired of 200 and started to turn and we initiated our phase three clinical development programs for <unk> and I would have thought to get the oral peptide J&J to one one city.
Joaquin Duato: Beyond that, we received FDA breakthrough designation for TAR-200 for the treatment of bladder cancer and Fast- Track designations for mill vaccine in intrafibrillation stroke and acute coronary syndrome. And with 19 US and EU filings across our Innovative Medicine business in 2023, we have high expectations for the year ahead. Our recent announcement of a definitive agreement to acquire Ambrx to develop next- generation antibody-drug conjugates further strengthens our oncology pipeline. Now moving to MedTech. In 2023, we delivered full- year operational sales growth of 12.4% and full year adjusted operational sales growth of 7.8%. For the first time our MedTech team deliver more than $30 billion in sales as we continue to build our best-in-class business. We are accelerating growth through commercial execution, differentiated innovation and moving into higher- growth markets. As you saw with our successful integration of Abiomed and our recent acquisition of Laminar, which focused on eliminating the Left Atrial Appendage Elimination in-patients with non valvular atrial fibrillation. And at the same time, we are making strong progress in our pipeline, including advancing our TAVR surgical robot monarch approval in China for bronchoscopy and continued market expansion for bellies our robotic- assisted solution for total knee replacement with CE Mark approval in 2023.
Joaquin Duato: And with 19 U S and EU filings across our innovative maybe some business in 'twenty two 'twenty three we have high expectations for the year ahead.
Joaquin Duato: Our recent announcement of a definitive agreement to acquire I'm bricks to develop next generation antibody drug conjugates further strengthens our oncology pipeline.
Joaquin Duato: Now moving to mid tick in 'twenty two in D. C. We delivered 40 or operational sales growth of 12, 4% for adjusted operational sales growth of seven 8% for the first time, our mythic team de lever more than seven.
Joaquin Duato: 3 billion in sales as we continue to build a best in class business, we had accelerating growth through commercial execution differentiated innovation I'm moving into higher growth markets. As you saw with our successful integration of five P. M N and our recent acquisition.
Joaquin Duato: You don't have lamanna, who is focused on eliminating the left atrial appendage in patients with known valvular atrial fibrillation.
Joaquin Duato: And at the same time, we are making strong progress in our pipeline, including advancing our taobao surgical robot Morenatti approval in China for Bronchoscopy, and continuing market expansion for our beliefs, our robotic assisted solution for total knee replacement with C E.
Joaquin Duato: Approval in 'twenty to 'twenty three.
Joaquin Duato: In electrophysiology, we'd have a lot of momentum in our pulsed field ablation portfolio, we announced regulatory approval a few weeks ago for the body pools P. F. A platform in Japan I happened to meet did foresee might've got approval in the EU.
Joaquin Duato: The through pulse generator has received approval in the EU and we received first on all the approval from the U S. F D. A four zero fluoroscopy workflow for cardiac ablation.
Joaquin Duato: And in the fourth quarter findings from our accumulative micro catheter third Q efficiency study showed that many high power short duration oblations improve quality of life and reduced costs getting utilization for atrial fibrillation patients.
Joaquin Duato: In addition, we had strong performance across our taken these io else on Oasis, one day family of contact lenses, including our most premium lens I keep you Oasis Max one day, which has proven superiority in going forward. Thank cloudy D versus the competition.
Joaquin Duato: Turning to our pyramid, we recently completed our Impella ECP people without clinical trial in Q4, we also enrolled our first patient India pyramid recovered afford but randomized controlled trial.
Joaquin Duato: As we look ahead I have never been more excited about the future of our business.
Joaquin Duato: Our enterprise business review, we shared that we expect our innovative medicines business to grow.
Joaquin Duato: 5% to 7% from 'twenty to 'twenty five to 'twenty therapy, with our industry, leading pipeline portfolio. They leave any more than 10 assets that have the potential to generate over $5 million in peak year sales by 'twenty one.
Joaquin Duato: We also expect a further 15 assets do have the potential for $1 million to $5 million in peak year sales.
Joaquin Duato: In 'twenty 'twenty, four and we expect data readouts for many of these assets, including phase III trials for that aim fire in IBD.
Joaquin Duato: They're a leader in earlier stage prostate cancer.
Joaquin Duato: Our targeted oral peptide G&A to 113 ensured I S S.
Joaquin Duato: Nipper Calumet be myasthenia gravis, as well as a big upfront and set a door accent in major depressive disorder.
Joaquin Duato: We also expect phase two readouts for our combination therapy with Cellcom up I'm, calling them a J&J 4804 in Psoriatic arthritis, NEPA gallium up insurance disease, and about 200 in non muscle invasive bladder cancer.
In Med Tech and we shared that we expect to do that.
Joaquin Duato: I bet range of our markets, which are anticipated to grow by 5% to 7% between 'twenty to 'twenty, two and 'twenty 'twenty seven and that by 'twenty two in December and we expect one third of our revenue to be generated by new products.
Joaquin Duato: In 'twenty 'twenty four will see strong progress towards these goals in electrophysiology that includes the four U S market release of <unk> micro catheters, and we are expecting CE Mark approval for our pulse field ablation catheter body pose in Europe in the first half.
Joaquin Duato: All the 'twenty 'twenty four we plan to submit an investigational device exemption to the FDA for Thai baht in the second half of 'twenty 'twenty four.
Joaquin Duato: I need not be human we expect U S. Commercial launch of Impella, RP flex with Smart pass east and and Impella ECP submission in 'twenty to 'twenty four.
Joaquin Duato: As you can see our pipeline is advancing our amusements east transforming before I turn the call to Jeff and Joe I want to thank God one of the themes around the world for everything they don't do help our patients. We have entered 'twenty 'twenty four from a portion of his friends and I'm confident in our ability.
Joaquin Duato: To lead the next wave of innovation with that I'll turn the call older do Jess.
Jess: Thanks, a lot Kim unless otherwise stated the financial results and guidance highlighted reflects the continuing operations of Johnson <unk> Johnson, We will report the consumer health financial results as discontinued operations.
Jess: Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation.
Jess: Starting with Q4 2023 sales results.
Jess: Worldwide sales were $21.4 billion for the fourth quarter of 'twenty two 'twenty three.
Jess: The increased seven 2% with 11% in the U S and 2.7% outside of the U S.
Jess: Excluding the net impact of acquisitions and divestitures.
Jess: Adjusted operational sales growth was 5.7% worldwide.
Jess: Eight 8% in the U S and 2.1% outside the U S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of <unk> by approximately 1500 basis points operationally.
Jess: Turning now to earnings for the quarter net earnings were $4 $1 billion and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago.
Jess: Excluding after tax intangible asset amortization expense and special items for both periods adjusted net earnings for the quarter were $5 $6 billion and adjusted diluted earnings per share was $2.29 representing increases of 2.4%.
Jess: And a 11, 7% respectively compared to the fourth quarter of 2022 on an operational basis adjusted diluted earnings per share increased 11.2%.
Jess: For the full year 2023 sales were $85 $2 billion sales grew seven 4% with 10.6% in the U S and three 8% outside of the U S.
Jess: Excluding the net impact of acquisitions and divestitures adjusted operational sales growth was 5.9% worldwide, 8.2% in the U S and 3.4% outside the U S.
Jess: Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of <unk> by approximately 1000 basis points operationally.
Jess: Net earnings for the full year 2023 were $13 $3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago.
Jess: Full year 2023 adjusted net earnings were $25 $4 billion and adjusted diluted earnings per share was $9.92 representing increases of six 8% and 11, 1% respectively versus full year 2022.
Jess: On an operational basis adjusted diluted earnings per share increased by 10, 8% I will now comment on business sales performance in the quarter.
Jess: Beginning with innovative medicine worldwide innovative medicine sales of $13 $7 billion increased 4% with growth of nine 5% in the U S and a decline of 3.1% outside of the U S. Exco.
Excluding COVID-19 vaccine sales worldwide and U S sales growth was 9.5% and growth outside of the U S was 9.4%.
Jess: Sales outside the U S. Excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity as a T got in Europe.
Jess: Innovative medicine growth was driven by our key brands and continued uptake from recently launched products with nine assets delivering double digit growth.
Jess: We continue to drive strong sales growth for both <unk>, and our leader with increases of 22.2% and 19% respectively.
Jess: Within immunology, we saw sales growth in both still Lara and Trumpf via with increases of 14.5% and 25% respectively. This growth was driven by market growth and share gains as well as favorable patient mix and trumpf via <unk>.
F, 17.4% and pulmonary hypertension was driven by favorable patient mix share gains and market growth.
Jess: Turning to newly launched products, we continue to make progress on our launches of car victim and provide out. We are also encouraged by the early success of our launches of tech Bally and holiday sales of which are driving the growth in other oncology as a reminder, we expect to begin disclosing tech daily sales.
Jess: In Q1, 'twenty 'twenty four.
Jess: Total innovative medicine sales growth was partially offset by unfavorable patient mix and thorough alto a decrease and umbrella car sales due to competitive pressures and the loss of exclusivity of say tigger Remicade and Prezista.
Jess: And now I'll turn your attention to med Tech.
Jess: Worldwide Med Tech sales of $7.7 billion increased 13.4% with Abiel mad contributing four 5% to growth.
Jess: Growth in the U S was 14.1% and 12, 8% outside of the U S exclude.
Excluding the impact of acquisitions and divestitures worldwide adjusted operational sales growth was nine 1%.
Jess: Med Tech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in advanced surgery and vision.
Jess: Electrophysiology delivered double digit growth of 25, 2% with strong growth in all regions, including Europe. This growth was driven by our global market, leading portfolio, including the most recently launched kudos RF ablation and Andre catheters.
Jess: <unk> contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology.
Jess: A six 4% in surgery was driven primarily by procedure recovery and strength of our bio surgery and wound closure portfolio's growth was partially offset by volume based procurement in China, primarily in Endo cutters.
Jess: Whereas the Phoenix growth of 5% reflects procedure growth and success of recently launched products such as the global expansion of our various digital solutions and expansion in the ambulatory surgical centers as well as lapping of prior year, China V. B P price concessions in spine.
Growth of 6.6% envision was driven by price actions and contact lenses as well as strength of new products, including active you Oasis one day family of products in contact lenses and techniques I hands, our mono focal and our ocular lens and surgical vision.
[noise] of contact lenses was partially offset by U S stocking dynamics.
Jess: Global vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3.
Jess: Now turning to our consolidated statement of earnings for the fourth quarter of 2023, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year.
Jess: Cost of products sold margin Deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in med tech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost and innovative medicine.
Jess: We continue to invest strategically in research and development at competitive levels investing $4 $5 billion or 29% of sales. This quarter, we invested $3 $4 billion or 24.5% of sales and innovative medicine with the increase in investment being driven by <unk>.
Jess: Higher milestones, partially offset by portfolio prioritization and med Tech R&D investment was $1 $1 billion or 14, 6% of sales with the increase in investment primarily driven by the lamina acquisition.
Jess: Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 'twenty 'twenty. Two the increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance.
Jess: The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower.
Jess: Our COVID-19 vaccine related exit cost.
Jess: Regarding taxes in the quarter, our effective tax rate was 14, 4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U S tax.
Speaker Change: Got it.
Speaker Change: Excluding special items, the effective tax rate was 10, 8% versus 16, 2% in the same period last year I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax related matters.
Speaker Change: Lastly, I'll direct your attention to the box 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.
Speaker Change: Now, let's look at adjusted income before tax by segment.
Speaker Change: In the fourth quarter of 2023 our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%.
Speaker Change: Innovative medicine margins declined.
Speaker Change: From 37, 7% to 37, 4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging in selling and marketing expense med.
Speaker Change: Med Tech margins declined from 24, 5% to 15.5% primarily driven by in process research and development expense from the lamina acquisition commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage.
Speaker Change: <unk>.
Speaker Change: This concludes the sale and earnings portion of the call I'm now pleased to turn it over to Joe.
Joseph J. Wolk: Thank you Jessica and thanks, everyone for joining us today as Joaquin and Jessica commented 2023 was a strong year for Johnson <unk> Johnson evidenced by notable top and Bottomline performance beats relative to what we guided to 2023 at this time last year.
Joseph J. Wolk: We are particularly proud of the innovation, we advance to strengthen our development pipelines. The continued expansion of our portfolio and investments made for future success. All of this provides us with a strong foundation as we enter 2024.
Joseph J. Wolk: Thus far during the call you've heard about sales and income performance in 2023, So now let's dive into some detail on capital allocation highlights.
Joseph J. Wolk: We generated free cash flow of more than $18 billion in 'twenty twenty-three.
Joseph J. Wolk: At the end of the year, we had approximately $23 billion of cash and marketable securities and approximately $29 billion of debt for a net debt position of $6 billion.
Joseph J. Wolk: We maintained a healthy balance sheet and robust credit rating underscoring the strength of Johnson, <unk>, Johnson's financial position, which enables us to strategically invest and deploy capital to unlock value.
Joseph J. Wolk: To that end, we executed against all of our capital allocation priorities in 2023.
Joseph J. Wolk: For starters, we invested more than $15 billion in research and development were 17, 7% of sales an all time high for the company as we remain one of the top investors in R&D across all industries.
Speaker Change: Jessica provided R&D investment by business segment information, we will continue to provide on a quarterly basis moving forward.
Speaker Change: As far as dividends 2023, more to 61st consecutive year in which we increased our dividend. We know this use of capital is a priority for our investors and we plan to continue to increase our dividend annually.
Speaker Change: We also deployed announced or committed over $3 billion in strategic value, creating inorganic growth opportunities in the last 12 months.
Speaker Change: This amount includes the recent and brakes and lemon our transactions as well as more than 50 smaller early stage licensing deals and partnerships that complement our current innovative medicine in med Tech pipelines.
Finally share repurchases in early 2023 we completed the $5 billion share repurchase program initiated in late 2022 and in combination with our dividend returned over $14 billion to shareholders last year.
Speaker Change: Through the can view separation, we further reduced the Johnson <unk> Johnson's outstanding share count by 191 million shares or approximately 7% without the use of cash in a tax free manner.
Speaker Change: Looking ahead to 2024.
Speaker Change: Johnson <unk> Johnson's robust free cash flow generation should continue to solidify our already strong financial foundation and fuel further investment leading to growth for our business or returns to shareholders.
Speaker Change: Now turning to our full year 2020 for guidance.
Speaker Change: Today, we are confirming the 'twenty 'twenty four guidance for those items previewed at our enterprise business review in early December while filling in some of the details.
Speaker Change: We expect operational sales growth for the full year to be in the range of 5% to 6% or $88 $2 billion to $89 billion. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales.
Speaker Change: An innovative medicine, we expect 2020 for it to deliver a 13th consecutive year of above market growth driven by market share gains from key brands such as doors, all ex Trumpf fire and a leader as well as continued adoption of recently launched newer products such as car Victor <unk> Tec Bailey tell they.
Speaker Change: And to provide them.
Speaker Change: In Med Tech, we remain focused on executing our key value drivers first advancing our differentiated pipeline such as programs impulse field ablation, abiomed and surgical robotics further shifting our portfolio into high growth markets.
Speaker Change: Expanding our reach and scale around the world and third building operational resilience across our portfolio.
Speaker Change: We don't speculate on future currency movements, but utilizing the euro spot rate relative to the U S. Dollar as of last week at 1.09 as well as other major currencies. We estimate there would be a slight unfavorable impact of $400 million or a negative 0.5% on reported sales growth for.
Speaker Change: Of the year.
Speaker Change: Turning to other items on our P&L.
Speaker Change: We expect our 'twenty 'twenty four adjusted pretax operating margin to improve by approximately 50 basis points, driven primarily by a continuation of efficiency programs across the organization.
Speaker Change: We expect this to be partially offset by anticipated still are a biosimilar entrants in Europe in the second half of this year and some lingering inflation impact in med tech inventory that will flow through 'twenty 'twenty four is P&L.
Speaker Change: This margin improvement encompasses dilution of additional investment associated with our planned acquisition of Ann bricks, which will be treated as a business combination.
Speaker Change: Now we do acknowledge that this 50 basis point improvement simply gets us back to what your model is expected given the elevated Q4 2023, R&D investment for new pipeline assets.
Regarding other income and expense, we anticipate income to be $1.2 billion to $1 $4 billion for 2024. This is less than the 20th twenty-three amount driven by the impact of actuarial assumptions on certain employee benefit programs, such as lower discount rates.
Speaker Change: We are comfortable with you modeling net interest income between $450 million and $550 million consistent with 2023 levels.
Speaker Change: Finally, we are projecting an effective tax rate for 2024 in the range of 16% to 17% based on current tax laws and anticipated geographic income mix across our businesses.
Speaker Change: This tax rate takes into account an increase of approximately 1.5% or 150 basis points relative to the recently enacted pillar to legislation. We continue to believe the U S. Treasuries current perspective on pillar two is harmful reducing U S incentives for innovation and <unk>.
Speaker Change: <unk> and U S based multinational companies paying more tax revenue to foreign governments.
Our full year share count calculation for adjusted earnings per share in 'twenty 'twenty. Four will include the remaining benefit equal to approximately 120 million shares from the approximately $191 million net share reduction and outstanding J&J shares following the can view exchange offer.
Speaker Change: Given all these factors, we expect adjusted operational earnings per share to grow 7.4% at the midpoint for a range of $10.55.
Speaker Change: To $10.75.
Just on the euro spot rate of 1.09 from last week, we do not estimate any currency impact on earnings per share.
Speaker Change: I'll now provide some qualitative considerations on quarterly phasing for your models.
Speaker Change: We expect innovative medicines sales growth to be slightly stronger in the first half of the year compared to the second half given the anticipated entry of still our biosimilars in Europe towards the middle of the year.
Speaker Change: This headwind will be partially offset by continued uptake from our recently launched products.
Speaker Change: We project Med tech operational sales growth to be relatively consistent throughout the year expecting procedures in 'twenty 'twenty four to remain above pre COVID-19 levels. The first half of the year, we'll continue to have modest impact from Russia sanctions as our licenses are approved we anticipate China V B P pricing.
For surgical I O LS and orthopedic sports to begin in 2024 with impacts from 'twenty to 'twenty three V. P. In electrophysiology Endo cutters energy spine and trauma to begin to anniversary throughout 'twenty 'twenty four.
Speaker Change: Regarding EPS phasing it is important to highlight that the first half of the year will benefit from the full 191 million net share reduction following the can view exchange offer with only a partial comparative benefit in the third quarter versus Q3, 'twenty 23, and the fourth quarter being neutral versus Q4 2023.
Speaker Change: So based on the foundation strengthened in 2023, and numerous catalysts that joaquin outlined across our business in 'twenty 'twenty. Four we are confident in our ability to achieve both near and long term financial targets.
Speaker Change: I'd like to close by thanking our colleagues for their dedication and commitment to benefit patients around the world. It is there effort that enables Johnson <unk> Johnson to deliver innovative therapies and solutions that address serious unmet medical needs and creates long term sustainable value for shareholders.
Speaker Change: With that I am now pleased to turn the call over to Kevin to begin the Q&A portion of the call.
Kevin: Thank you, ladies and gentlemen, if you like to ask a question at this time. Please press Star then 100 telephone keypad, if you'd like to withdraw your question. Please press Star then two please limit your questions to one question only our first question today is coming from Joanne Wuensch from Citi. Your line is now live.
Hi, good morning, and thank you for taking the questions.
Kevin: One question I'm curious why you're looking for 'twenty 'twenty four procedure volumes remained above pre COVID-19 levels and your expectations for how long that will last.
Speaker Change: Thank you do on an and good morning, everyone first let me let.
Speaker Change: Let me remark the strong close.
Speaker Change: Our mythic business in 'twenty two 'twenty three.
Speaker Change: We deliver annually more than $50 billion in sales, which is what our all time high in our company history with.
Operational adjusted operational growth in the fourth quarter of $9. One so a very strong result across the board.
Physiology heartbeat corvidae in surgery in orthopedics and he'd be sure. So when we think about our results in 'twenty to 'twenty. Three we think it's going to be aligned with our company to compensate for the year by the head of our competitor composite in the fourth quarter now.
Speaker Change: Certainly COVID-19 impacts coffee stabilize globally are on Oh, while we continue to see some challenges.
Speaker Change: Macro challenges from their point of view of inflation hospitalist stuffing on the like the there is there was a bolus of patients coming out.
Speaker Change: Into the market after COVID-19, which has made our 'twenty to 'twenty three the market grows faster than historical historical averages and we see that trend continuing into a good part of 'twenty 'twenty, four and therefore being a tailwind.
Into 'twenty to 'twenty four there is theres a lot of factors playing into that but overall, we see the amended procedures continuing into at least the first half of 'twenty 'twenty. Four now we also have a non bid of day wins on our side or the amount. They perceive there was that make me optimistic about 2000.
Speaker Change: 24, we have.
Speaker Change: Deep directory of Oh, maybe heartbeat quality, which is very strong with the adoption of Impella five five we file already for our Impella ECP, which is the smaller version of Impella CP in orthopedics, we continue to move into higher growth markets.
Speaker Change: With the expansion of our water bally's robotic assisted solution, we obtained CE Mark in Europe in surgery, we continued to launch innovations across our surgery business with the NCL X one.
Speaker Change: Kurt Joe diesel sealer in energy on Epsilon 30000, a stapler and we continue to see good expansion of our plus shooter stoop.
Speaker Change: <unk>.
Speaker Change: Would it be some business, we are expanding our big news family into the premium segment of iOS and finally and I know this is an area of interest to you in electrophysiology.
Speaker Change: Continued to expand our wad PFA portfolio of catheters.
We obtained approval for our body pools.
Speaker Change: Luke Captivate, a bofa Luca said in Japan.
Speaker Change: <unk> of this year and we continue to rollout the global launch of cute it pewter micro our newest.
Radiofrequency ablation classes, there so overall a number of catalysts.
Speaker Change: On on tailwind into our mythic business into 'twenty 'twenty, four and should we discussing our.
Speaker Change: Enterprise business review, we continue to see what a mid tier business are growing at the outbid and Oh power markets and becoming a best in class competitor in Med Tech.
Speaker Change: Thank you. Your next question is coming from Terence Flynn from Morgan Stanley. Your line is now live.
Terence Flynn: Great. Thanks, so much for taking the question maybe a two part for me on correctly.
Terence Flynn: I noticed that on OTA panel was just announced to review the cartoon for data I was just wondering if you can talk about the focus of that are upcoming meeting and your confidence in an odd time label expansion for <unk> four and then the second part of the question is I know in manufacturing you've been ramping up in Belgium.
Terence Flynn: And I believe that facility is now up and running so how should we think about supply for 2020 for broadly for perfect. Thank you.
Speaker Change: Thank you tuna so.
We saw more than 2000 patients treated <unk> got a big T. It's already the fastest launch party in the market or be it all on and we are pleased to continue to see quarter over quarter sequential growth in car T. On orbital would remain confusing two things both.
Speaker Change: The least benefit those kind of leap day and the indications that these munis studied and at the same time on the potential of kind of big deal to be a 5 billion plus acid at peak year sales regarding D. They all that that you commented we are very confident on the data.
Speaker Change: What a phase III gratitude for the study the das that'd be minor supports the efficacy and safety of quite a big D. One to three prior lines than it did even in those patients with relapsed refractory multiple myeloma.
Speaker Change: We presented these results at the Oscars, you know them well.
Speaker Change: Also probably is don't lose has seen the new England journal of maybe seen we very much look forward to review the updated survival and safety data with the FDA all that in the future.
Speaker Change: We are committed.
Speaker Change: What we the FDA in the continued development of car T and we continue to have difficult ocean, bringing these immuno setup b to multiple myeloma patients in earlier lines of therapy are we we are working with the FDA towards happy do 584.
Speaker Change: Cut into four indication in April 5th on with EMEA at the worst unanticipated C. H M. P opinion in the first quarter of 'twenty 'twenty four so all of it all we feel confident about the risk benefit profile in this indication and about the future of quite a big deal regarding your manufacturing.
Speaker Change: Question.
Speaker Change: They own a significant part of what I see now what I'm going to walk through and capacity, which is a major driver in the continuous growth. We've got a big T. On the cell processing side, we have doubled our cell processing capacity in that what I need them facility since.
Speaker Change: Scenes 'twenty to 'twenty, three we are making progress Toyota point tenants in our European cell processing facilities, we had already manufacturing the first batches of <unk> T for clinical use this month of January and we also have contracted additional capacity external capacity to scale up production on it.
Speaker Change: At least our ability moving forward that we will start mid this year on the other we have also made significant progress in the internalization and the scale up of our Lindsay Baidu production will have increased capacity.
Speaker Change: In Switzerland in our Switzerland side and at the same time, we continue to progress with new U S capacity additions heightening, the Netherlands to production to produce our lengthy virus leave December we did receive approval to expand our water Lindsay vital capacity from 20 <unk> tanks.
Speaker Change: 250 linked at 50 liters tanks of Lindsay by use production in our U S facility.
Speaker Change: So overall, we feel good that we at a point, where they've seen we've got a big T. A that we will continue to deliver quarter over quarter growth in 'twenty 'twenty four and we are we are working to worse.
Speaker Change: Building these.
B by billion dollar plus product and continue to transform the treatment paradigm in multiple myeloma as we have discussed in the bus moving for them are treating to progression to drift into Q2, we moved quite a bit into earlier lines of therapy.
Thank you. Your next question is coming from Larry <unk> from Wells Fargo. Your line is now live.
Larry: Good morning, Thanks for taking the question congrats to a nice finish to the year here.
Speaker Change: Joe will walk you know I'd love to hear just a general update on your M&A appetite and and and and expand on your recent comments about a happier being a <unk>.
Speaker Change: Wei and cardiovascular devices, which you are walking commented on our earlier this month. Thanks, so much for taking the question.
Speaker Change: Yeah. So Larry let me start good morning, and then I can turn it over to Joaquin. So we are very well positioned to continue to entertain.
Joaquin Duato: At many types of deals as you know we have the parameters of making sure that they are a strategic fit so that we've got scientific expertise and insights familiarity with the space has proven to be our most successful platforms. We want to make sure that we're earning a fair return to compensate shareholders for the risk that were.
On their behalf.
We it was only 13 months ago, we were able to deploy $17 billion in capital for Abiomed, We're very pleased with that acquisition not only has it beat our internal deal models, but it also is performing better than what the street had called for that business. Prior to the announcement of the acquisition. So it's been a really nice fit what I would say is we.
Joaquin Duato: We also deployed or announced as I said in my prepared remarks over $3 billion in capital for more than 50 smaller licensing partnerships or deals and while these those may have not made headlines. They usually are headlines when they become products for patients.
Joaquin Duato: <unk> and so that when you think about our history of doors of lax improve it.
Joaquin Duato: Car Victor for one it's it's been that's kind of been our track record or our appetite is still I would say.
Joaquin Duato: Interested in.
Joaquin Duato:
Moving into spaces that complement our existing portfolio, whether that be for the near or long term.
Joaquin Duato: Luke you know talking about that a lot of B b.
Speaker Change: And you say, we ought to know.
Speaker Change: Agnostic to sector and agnostic to size.
As Joe commented, our but if it ends is clearly to be in a D. S in which we have the internal capabilities and knowhow.
Speaker Change: And also to go into products that represent a significant a significant progress from the point of view of improving the current standard of care and that are first in class and best in class.
Speaker Change: Illustrate that you know the two deals that we completed this year lobbying and analytics would be in that data exchange. So for example.
Speaker Change: I mean, it is a deal in that area, we know well, which is a bit of fibrillation, we believe could be first in class.
Speaker Change: To be a device that can eliminate the left atrial appendage when it goes through analytics is ideally in an area that we have a strong legacy like prostate cancer with a number of products marketed already and this could be a first in class antibody drug conjugate in order to weather is a significant medical need.
Speaker Change: In mid desktop.
Speaker Change: There is just the cash then dishes in prostate cancer in patients that failed androgen therapy. So very much so and in that context. You know we continue to see also opportunities when it comes to innovative maybe seen some neuroscience and in immunology.
Speaker Change: It comes through <unk> to your point in order to kind of immunology Ats are based on the strength that we have now with Biogen switch that on the B M. It.
Speaker Change: On not excluding also the potential for that idiot like robotic surgery or segments of orthopedics that that are growing faster and also 80 or so patients show up at all that's what approach. We tried to put this stuff, they're unique scientific and to Joe's point scientific lens in order to be able to deliver value.
Speaker Change: For patients and also value for our shareholders.
Speaker Change: Thank you next question is coming from Chris Schott from J P. Morgan Your line is our lives.
Chris Schott: Great. Thanks, so much I'm just Joe a question for you how should we think about gross margins in 2024 and beyond I know you've talked about operating margins, but it did seem like adjusted gross margins came down in <unk> and I'm. Just wondering if that's a one off result, or a longer term trend we need to think about them as we think about kind of the cadence of your P&L over the next few years.
Speaker Change: Yeah. Good morning, Chris. Thanks for the question I think as you look at that specifically for the fourth quarter. What you have in our operating margins as obviously the limit of our transaction that was part of that mix. So on our slide that details. The I B T. You likely saw a quarterly reduction in med tech specifically of about nine.
Speaker Change: <unk> about two points for the full year I would say two thirds of that is represented by the laminate transaction. You. Also then have I would say in the fourth quarter specific some mix as orthopedics performed probably a little bit better than it had in previous quarters, and then you have the inflationary impact obviously with higher levels of inventory on our balance sheet.
Speaker Change: That flowed through the P&L that is occurring throughout 2023, and we expect it to occur throughout at least the first half of 'twenty 'twenty four we're not seeing any incremental inflation in I'll call. It current activity. So it's not being additive to the inventory, but it's also not subsiding, either so what kind of a new.
Speaker Change: I'd say water level. If you will are that should be going forward, but not hurting the P&L as we look out beyond the second half of 2024.
Speaker Change: Thank you next question is coming from sequencing from RBC capital markets. Your line is now live.
Sequencing: Thank you so much I was just wondering if we could get your latest thoughts on the potential impact of Nova's osteoarthritis data on orthopedic utilization given the focus on woodmac or our pain scores I believe the presentation could be here soon.
Sequencing: Just to hear your thoughts and also you know what kind of scores go down.
Speaker Change: You may not have a potential impact. Thank you for taking the question.
So.
Speaker Change: Overall look Oh stuff that is a is a contributor to a knee surgery, sometimes higher mask, how about those two things in the context of the Oh boy DLP, one sudden weight and eastern or factored in osteoarthritis. We continue to look at these data on it suddenly for us to give you.
And I'm sure. They are now what we can tell you is that we continue to see an increased volume of procedures in in orthopedics based on coming out of Kobe, and we don't see any change in that.
Speaker Change: Neither in the heaps or in the knee idea or any of the segments that we compete so we are optimistic about our our orthopaedics that I Jim Doherty.
Speaker Change: Specifically, we are optimistic about how we are progressing with our beliefs are or.
Speaker Change: Robotic system for total knee replacement, we have already hopper therapy fell simpler see those with very positive feedback from the surgeons, especially in the ambulatory surgical centers.
Speaker Change: We are now working to shoot meet what a five 10-K for our valleys Uni knee application and we are seeing a strong liquidity also in our hip business with a combination of new products Like Act. These king size Billy's keeping obligations. So we we feel good about our.
Speaker Change: For PBX business as we continue to see a global perceive you recall very emotional markets.
Speaker Change: We continue to succeed with our Newport, Oh Duke's on you know we lap also part of the headwind that we had in China. During this year, so very positive outlook moving forward for our orthopedics business and she's done. It's also important to maybe provide US a reminder of what we commented two last quarter and that's where.
Speaker Change: Looking very hard at improving the profitability of the orthopedics units, so being very selective as to what geographies. We play in and what Skus are actually going to be offered so not only will you see some of the the strength in the topline as Joaquin outlined but you should see an improved margin profile for that business as well.
Speaker Change: Thank you. Our next question today is coming from almost <unk> from Guggenheim Securities. Your line is now live.
Matthew Miksic: Great. Thanks, so much for taking my question. So just maybe an area we don't spend as much time on it on the respiratory side.
Speaker Change: P H.
Speaker Change: It's sort of a two part question, but that franchise continues to outperform expectations. So curious if you can talk about sort of what's driving that.
Speaker Change: There was also an area, where you don't have a lot of sort of longer term investment so going back to some of the business development question I'm just curious in your interest in sort of gauge your respiratory more generally as an area for us.
Speaker Change: Our focus given your key franchises are going to be going away, but you do have the infrastructure there already.
Speaker Change: So first let me underline the the the great results of our P. A H franchise in 'twenty to 'twenty three we.
We had a you know.
Speaker Change: The growth in the high teens.
Speaker Change: By improve patient mix.
Speaker Change: Market growth coming out of <unk> to these words haneda that was heavily impacted by Covid spoon Monologist were working at Colby then no diagnosing new patients. So overall, it's been a very positive trajectory of our P. A H mucinous, we remain confident about the.
Speaker Change: The short term future of these music into 'twenty 'twenty four we are working towards the combination of our multi tenant and hope. So I mean, we thought a few which that there isn't much would be obscene b that would being another option for patients they are to enhance our enhance.
Speaker Change: Compliance on a you know in my talks with our with our physicians treating pulmonary hypertension. They seem very positive about all with it and we expect an approval of that combination in 2024. So that's the the outlook forward at what point what are your franchise are we looking at all of that.
Speaker Change: Is there you know that we are looking at this space and see if there are potential opportunities to be able to improve their standard of care are we continue to look to see how we can continue to extend the success of our pulmonary franchise into the future, but overall, we're very happy with the trajectory of our franchisee in 'twenty two.
Speaker Change: We expect a similar trajectory.
Speaker Change: My intent on Osama.
Speaker Change: <unk> become a standard of care it clearly established in the stadium.
Speaker Change: Thank you. Our next question today is coming from Louise Chen from Cantor Fitzgerald. Your line is now live.
Hi, Thank you for taking my question here I just wanted to ask you with respect your oncology franchise do you have any thoughts on car Ts or autoimmune disease at all and then secondly radiopharmaceuticals.
Speaker Change: So thank you Luis on a you know we have a strong oncology franchising decent in Ats, how you've commented that'd be in prostate cancer.
Speaker Change: With without a leader that I discussed before we see data in highly localized prostate cancer in 2024 with the addition of analytics now on an antibody drug conjugate the sadia.
Speaker Change: We are very very excited about that.
Speaker Change: EBIT band at the combination of <unk> plus lots that they need a phase III study is completed we expect we have filed all the three indications and we expect approval of that in 2024. So we are very excited about the bond and the combination of driver ample Athene Eve in Egfr.
Speaker Change: Mutated non small cell lung cancer in first line are moving into a into bladder cancer. You also we see data we start is 210.
Speaker Change: No muscle invasive localize bladder cancer, we received FDA breakthrough designation for that is 200 in 2000 on a in 2023.
Speaker Change: We continue progressing our move to the myeloma franchise, we talked about was kind of a deep, but it's important to recognize how well take viably on on T V. Our two by specific antibodies out of bed in the marketplace and the continued growth of all of that Alex with impressive better say was data that we presented in first line.
Speaker Change: In newly diagnosed transplant eligible multiple myeloma patients.
Speaker Change: So we are looking at kind of be in.
Speaker Change: Our two immune D C. So to your question, yes, but the 78 up a you know we did a deal earlier in 'twenty two 'twenty three to Partnerre two car T cell C 19, and a CD 19, CD 20 by car. So we are looking at that and it's early data it looks promising.
Speaker Change: We are interested in Radiopharmaceuticals, we believe that the Avenue that we are doing with antibody drug conjugates. It's it's an important set of boutique option on when it comes to Radiopharmaceuticals. We did a deal earlier this year with a with nano biotics for that radio enhances that.
Speaker Change: <unk> been developing head and neck cancer, we expanded at one right at the end of the year and this could be another avenue to be there for us in which we could combine our expertise.
Speaker Change: In in in medical devices medical technology on Pharmaceuticals, and we plan to do a pro rata development plan of a water. What are you doing Hansen and will provide you more information about it is we continue to move. So overall, we are we are very pleased with the progress that we see in our oncology franchise, both in solid tumor setting.
Speaker Change: Hematology I need remains a core strength of our innovative maybe seen group.
Speaker Change: Thank you next question is coming from Matt mixing from Barclays. Your line, there's not a lot.
Matt Miksic: Alright, thanks, so much for taking the question.
Just follow up on.
Okay.
Matt Miksic:
Matt Miksic: Trends and in margins and I think you mentioned.
Matt Miksic: Some of the some of them you know headwinds there were patient mix would love to get an idea you know kind of in the middle.
Our margin progression throughout the year, which ones of those.
Matt Miksic: Or is there anymore.
Reflecting that negative mix that you described and how that progresses.
Matt Miksic: During the year.
Speaker Change: Yeah that I apologize, but I was a little bit tough to hear your question entirely I think was around margins specifically in med tech and how that may progress through the year. So as I stated earlier I would say that the margin profile is going to be impacted by inflationary pressures that were incurred really in 2020 to sit on.
Speaker Change: Our balance sheet as inventory and then kind of flow through the P&L throughout the corresponding 2023, and probably a good piece of 'twenty 'twenty four that being said, Tim and the team are doing magnificent work in terms of finding efficiencies across the business I highlighted one of the earlier ones with respect to orthopedics, but we're quite frankly doing.
Speaker Change: Across the entire med tech portfolio at this point in time looking for opportunities whether it be aided by artificial intelligence or just our infrastructure overall as to how we can further improve the med tech our profitability profile right now we stand a little bit above the middle of the pack in terms.
Speaker Change: Our peer set on margin and we're looking to get towards the upper end of that peer set.
Okay.
Speaker Change: Thank you. Our next question today is coming from Geoff Meacham from Bank of America. Your line is not a lot.
Great. Thanks, so much for the question.
Geoff Meacham: Wanted to ask you about the Saar also a patient mix that you guys called out just to help us with kind of current dynamics and maybe.
Geoff Meacham: Looking forward you know whether this trend you expect to continue thank you.
Speaker Change: Yeah, Jeff I can't I can answer that one specifically on <unk> alto in that quarter, we would say there's two items, it's patient mix, but there was also a one time entry moving forward in 'twenty 'twenty four or we do expect that there will be a decline, but not to the extent that you saw in Q4.
Speaker Change: Thank you. The next question is coming from Daniela unhealthy from UBS. Your line is now live.
Daniela: Hey, good morning, everyone. Thanks, so much for for taking the question I'm sorry.
Daniela: Sorry to harp on the Med Tech margin side of things I. Appreciate everything you are saying for going forward, but just look at Q4, specifically, even adding back laminarin, we're still getting to sort of down 400 basis points year over year in the quarter and I was just hoping maybe you could bridge us a little.
Daniela: Or is there any component of that sort of price increases taken in late 'twenty two into 'twenty, three rolling off or anything that you would highlight.
Speaker Change: Highlight there thanks, so much.
Speaker Change: No Danielle I think it's really the inflationary impacts of out of the 9% drop that you saw in Q4 five points are really lamina or the other.
Speaker Change: Balance of four points I would chalk up to the inflationary impact that I spoke of earlier and then the mix component, whereby orthopedics, which is our lowest margin portfolio within the med Tech portfolio overall performed a little bit better. So there's really nothing magical behind it other than.
Speaker Change: The explanation is that we're already given on the call again, we are looking at our cost improvement initiatives, specifically in orthopedics, but across the entire portfolio as we move through a 'twenty 'twenty four but theres nothing that happened. Maybe this is the best way to state. It there's nothing that happened in Q4.
That has us concerned about our outlook or calls around margin profile or EPS for.
Speaker Change: For the balance of this upcoming year.
Thank you. Our next question is coming from David Risinger from Leerink Partners. Your line is now live.
David Risinger: Yes, thanks, very much and thanks for all of the details today. So notwithstanding the recently announced <unk> acquisition in recent years, a J&J has executed more med Tech M&A, then pharma M&A.
Speaker Change: And I don't mean to belabor the point I know that you got some specific therapeutic area questions, but could you just comment at a high level on what has held J J back in pharma M&A in recent years and whether we should expect greater cash deployment to accelerate long term pharma revenue.
Speaker Change: Growth going forward. Thank you.
Speaker Change: So thank you David on.
Speaker Change: M&A has been M&A and external intervention has been cold or what Fatima portfolio growth on transformation as I said initially we are agnostic to shake.
Speaker Change: In the case of Fatima.
For Ah mode has been trying to go to assets that were around proof of concept. So generally speaking from a size perspective, it's been about deals that have been either of a smaller size or harbin deepening modalities like licenses or partnerships.
Speaker Change: You know just last year, we completed Johnstown unusual more than 50 deals.
Speaker Change: The thing is that the headlines I'd only made by the ones that that money. So we've done multiple deals.
Speaker Change: What pharmaceutical side in order to be able to enhance our existing portfolio and our bias is to go for the transactions that are going to enable us to create more value.
By leveraging our clinical development the strength, our manufacturing capabilities and our commercial reach so hence why the majority of the deals that you're seeing now what pharmaceutical side out of Atlanta area. At this stage are we looking are broader than that dish, we do but.
Mainly we find more opportunities to create value.
Speaker Change: Up on stage for example.
Speaker Change: This year, we did a number of deals are that wind less publicize we need as I commented before that deal with C. M. B G. Now call I've been Cedar in a car T. We'd seen 1919, and 20, which we believe could be a best in class Codpiece N V sadia that could launch.
Speaker Change: <unk> Ah in this decade or are at the end of the year. We also need another Ah another another would be on an antibody drug conjugate with a Korean company called illegal Kim which works on their reported but we continue to work eat Andy Fae in DLT now what pharmaceutical space that enables us to be able to boot.
Speaker Change: All our capabilities to work in the in the in the clinical development of tiny amount of factoring on in and in commercial and that's been the source of very significant value creation.
Speaker Change: In products that all of you know like data lakes or did that come from that type of approach of going early our own into the development process.
Speaker Change: Thank you David we have time for one last question.
Speaker Change: Our final question today is coming from Rick Wise from Stifel. Your line is not a lot.
Rick Wise: Good morning. Thank you, maybe you could expand a little bit more on your electrophysiology comments, you had an extraordinary quarter I'm guessing the new products helped maybe you could get a little more color on maybe quantify the impact the negative impact from trying to D V P.
Rick Wise: And looking ahead.
Speaker Change: We've got no.
Speaker Change: We've got one P.
Speaker Change: P F. A device approved in the U S. Another one seeming like coming in the next month or three maybe.
Speaker Change: Should we think about the E. P franchise as we look ahead to 'twenty four what are you incorporating in your thinking thank you so much.
So thank you for the question get aid on the strong results of our EP franchisee in 'twenty. Two 'twenty three you should think about what you'd be franchise in 'twenty or 'twenty for US also a strong year. Another year of growth is strong growth for our U P. Franchisee if I look at the so you pointed out the drivers.
Speaker Change: So if growth in 'twenty two 'twenty three it was across the board I mean, it was in Asia Pacific and the U S and EMEA. It was driven by the possibility of quality, but also but a new product but for months on some offset also a slight offset to a value based procurement would be China.
Speaker Change: You know the new products that we introduced this year out of the engine generator.
Speaker Change: What what it might be and cut the data that I and.
Speaker Change: And also importantly, our qdoba micro catheter in radiofrequency ablation that has efficacy results higher than any any P. If it got to a theater and that together with our strong commercial execution on the clinical support across the board.
Speaker Change: What has driven these results there'll be Sheila you down in the fourth quarter was 25% growth globally, 22% growth in the U S and 29% outside of the U S. So they just don't reach out so we have a strong leadership in electrophysiology.
Speaker Change: On 20 years of understanding these field when it comes to our strategy in a cardiac ablation, we have multiple strategies, but one cordish threat. The east tower character mapping system that is a fundamental pillar of our Oh.
Speaker Change: Our strategy in cardiac ablation that supports a procedural efficiency and very importantly, now low to sito, Florida scoping workflow for the <unk>.
Speaker Change: Electrophysiologist eats it's very important to.
Speaker Change: No way out of the yard on what that would be doing to the hot band not taught me otherwise they are flying blind if they don't have a mapping system.
Speaker Change: The cargo system eats providing the electrophysiology is real time feedback on very important but I mean, there's like a diesel proximity contact force measurement on ablation indexes that give them an idea of how how durable the lesion, it's going to be on what theyre going.
Speaker Change: To be the outcome of the procedure. So that's key for us to be able to have a workflow that enables the type of progress that Electrophysiologist Cup been already used to with radiofrequency ablation and hence all our suite of Gartner says, it's gonna be from day, one fully integrated.
Speaker Change: What mapping system, we have 5000 character systems already deployed globally on an extensive network of markers to support the electrophysiologist when it comes to our catheters. We are developing a full portfolio of options you commented on body pools, our multi electrode catheter that was approved in Japan.
Speaker Change: We are developing.
Speaker Change: Our full color on that.
Speaker Change: For bulk coffee theater and also a single showed one so electrophysiology is I don't want to be able to choose the cost is added that is more appropriate for a bit or not to me for the workflow that they are selecting we have five Phoenix active three of them have completed and we have to meet.
Speaker Change: Our body pools gotten theater for the CE, Mark and we plan to meeting their body Scott as it flows through the U S. FDA in 'twenty 'twenty, four or FEMA leap you know b. If it is an important option, but I is also here to stay and that's why we believe that the Harbin.
Speaker Change: The workflow on the pursuit of efficiency that character gifts you plus the option of having that got deferred like our dual energy cat with enable electrophysiologist to simply the change depending on the anatomy abolition from PSA to RFA, it's gonna be important for the future and it's going to help them.
Opt in BFA species, the most widely used catheter in the world. So very positive about our growth in 'twenty 'twenty four based on the strength that we have and be sadia. Unfortunately, Bob what would the outlook of our ablation business moving forward, we have committed in multiple locations atrial fibrillation.
Speaker Change: It's on a teenager that these are still under treated and the outcomes of radiofrequency ablation on AR on most likely the outcomes would be if they have shown significant improvement even compared to medical therapy. So very positive about the outlook of our on the strength of our atrial fibrillation.
Speaker Change: Business.
Speaker Change: Yeah.
Speaker Change: Thank you Rick 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 just the strong performer.
Joaquin Duato: We delivered in 'twenty three gives me great confidence in that three of our business.
So I said earlier, we are entering 'twenty 'twenty four from a pushing into a a strength and we have multiple catalysts for growth no. Other company is as well positioned as Johnson and Johnson to lead the next wave of kept getting innovation and we look forward to sharing our progress in the year.
Speaker Change: Thank you.
Speaker Change: Thank you. This concludes today's Johnson <unk> Johnson's fourth quarter 2023 earnings Conference call you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.