Johnson & Johnson

Good morning. Welcome to Johnson & Johnson's fourth quarter 2018 earnings conference call. All participants will be in listen-only mode until the question and answer session in 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.

Hello. This is Chris DeLorphis. Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the fourth quarter and full year of 2018. Joining me on today's call are Alex Gorski, Chairman of the Board of Directors and Chief Executive Officer, and Joe Wolk, Executive Vice President, Chief Financial Officer. Thank you for your interest in Johnson & Johnson. We are very pleased with our 2018 fourth quarter and full year results. Once again, our performance illustrates a track record of consistent growth, exceeding financial expectations, and making progress on our long-term strategies. Sales for the business accelerated versus 2017 on both an operational and adjusted basis. Consistent with the guidance we provided at the beginning of the year, This acceleration was driven by the continued strength of our pharmaceutical segment, delivering on our objective of restoring consumer growth to above market levels and improving performance in medical devices. 2018 also marked another year of disciplined portfolio management, including the completion of key divestitures while also advancing our portfolio with strategic acquisitions and collaborative agreements that we believe will fortify long-term performance. As we enter 2019, we are confident in the strength of our business. We believe our pharmaceutical business will deliver growth while absorbing significant impacts from biosimilar and generic competition. We expect consumer to maintain above-market growth, and we anticipate our medical devices segment will continue to improve. We plan to deliver innovation that will have an enduring impact on patients, caregivers, and consumers while also delivering solid financial performance. A few logistics before we get into the details. This review is being made available via webcast accessible through the investor relations section of the Johnson & Johnson website at investor.jnj.com where you can also find additional materials including today's presentation and associated schedules. Please note that today's presentation includes forward-looking statements. We encourage you to review this cautionary statement regarding such statements included in today's presentation, as well as the company's Form 10-K, which identifies certain factors that may cause the company's actual results to differ materially from those projected. Our SEC filings, including our 2017 Form 10-K and most recently filed Form 10-Q, along with reconciliations of the non-GAAP financial measures utilized for today's discussion to the most comparable GAAP measures are also available at investor.jnj.com. Several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. In terms of today's agenda, I will begin with review of the results for the corporation and its three business segments. Alex will then reflect upon our 2018 performance and share his perspectives on healthcare and Johnson & Johnson's performance drivers in 2019. Joe will conclude by providing insights on the P&L, cash, and guidance for 2019. The remaining time will be available for your questions. We anticipate the webcast will last 90 minutes. Now I'm pleased to share our results for the quarter. Worldwide sales were $20.4 billion for the fourth quarter of 2018. up 1% versus the fourth quarter of 2017. On an operational basis, sales increased 3.3% as currency had a negative impact of 2.3%. In the U.S., sales were up 1.5%. In regions outside the U.S., our operational growth was 5.1% as currency negatively impacted our reported OUS results by 4.7 points. Excluding the net impact of acquisitions and divestitures, operational sales growth was 5.3% worldwide, 2.6% in the U.S., and 8.3% outside the U.S. For the full year of 2018, consolidated sales were $81.6 billion, an increase of 6.7% compared to the full year of 2017. Operationally, full-year sales grew 6.3%, with currency having a positive impact of 0.4%. Operational sales growth was strong in both the U.S., increasing 5.1%, and in regions outside the U.S., increasing 7.7%, with currency positively impacting our reported OUS results by 0.8 points. Excluding the net impact of acquisitions and divestitures, operational sales growth was 5.5% worldwide 3.4% in the U.S. and 7.8% outside the U.S. Turning now to earnings. For the quarter, net earnings were $3 billion and diluted earnings per share was $1.12 versus diluted earnings per share of negative $3.99 a year ago. Excluding amortization expense and special items for both periods, adjusted net earnings for the current quarter were $5.4 billion and adjusted diluted earnings per share was $1.97, representing increases of 12.5% and 13.2%, respectively, compared to the fourth quarter of 2017. On an operational basis, adjusted diluted earnings per share grew 16.1%. Regarding the full year, 2018 net earnings were $15.3 billion, and diluted earnings per share was $5.61. 2018 adjusted net earnings were $22.3 billion, and adjusted earnings per share was $8.18, up 11.4% and 12.1% respectively versus full-year 2017 results. On an operational basis, adjusted diluted earnings per share grew 10.4%. Joe will provide additional details about earnings in his remarks. Beginning with consumer, I will now comment on business segment sales performance for the fourth quarter, highlighting items that build upon the slides you have in front of you. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the fourth quarter of 2017, and therefore exclude the impact of currency translation. While not part of the prepared remarks for today's call, We have provided additional commentary on our website for the full year 2018 sales by segment to assist you in updating your models. Worldwide consumer segment sales totaled $3.5 billion, growing above the market at 3.3%, excluding the net impact of acquisitions and divestitures, such as the divestiture of Compede in the wound care franchise and Nizoral in the beauty franchise, offset by the acquisition of Zarbi's portfolio of naturally-based products in our OTC business, adjusted operational sales growth was 3.8%. Consumer continues to grow share in the e-commerce channel, outpacing category growth rates with strong double-digit growth across all regions. The beauty franchise continues to deliver strong performance, growing 2.5% or 4.5% adjusted for the impact of the Nisarol divestiture. U.S. growth was driven by strength in Aveeno and Neutrogena due to new products and market growth. OUS growth was primarily driven by the continued market expansion of the Vogue portfolio, including OGX and Maui Moisture brands in EMEA and Latin America. Additionally, Neutrogena continues to perform strong in Asia, fueled by new products, including our HydroBoost platform. Over-the-counter medicines grew globally 6.4%, or 3.7% when adjusting for the impact of the Zarbi's acquisition. In the U.S., OTC share growth is well outpacing the category, with 13 brands gaining share, driving growth of over 13%. Tylenol, in particular, showed solid growth driven by strong consumption in addition to benefiting from seasonal and other retail stocking dynamics. OUS performance declined 2%. driven by declining sales of upper respiratory brands in Russia due to a soft cough, cold, and flu season, partially offset by strong growth in our smoking cessation business in Canada. Oral care grew 4.4% globally, with strong growth in the U.S. driven by the performance of innovative new launches, including Listerine Ready Tabs, and strong growth outside the U.S., primarily in China. Concluding the consumer segment, baby care grew 2.1% globally, Recent performance trends of the Johnson's baby relaunch continue to be positive, with U.S. consumption data up seven points since the launch. The U.S., however, experienced net sales declines in the quarter, driven by lower baby center media sales, coupled with declines in decedent due to trade promotion spending shifts and prior year comparables. Sales growth outside the U.S. was led by strong Aveeno baby growth, primarily in China. Moving on to our pharmaceutical segment, Worldwide sales of $10.2 billion grew 7.2% with double-digit growth in seven key products, resulting in continued above-market performance. Sales increased in the U.S. by 2.8% and outside the U.S. by 13.7%. U.S. sales growth slowed in the fourth quarter primarily due to the impact of generic competition for Zytiga, which had about 100 basis point impact on U.S. growth. along with some increased discounts, primarily in Xarelto. Sales growth was led by the oncology therapeutic area with worldwide growth of 25%. Darzalex continued its strong performance, growing about 60% globally. U.S. grew 34% and continues to benefit from strong market growth and a six-point increase in U.S. market share across all lines of therapy based on third-quarter data. Outside the U.S., Darzalex is experiencing increased penetration and share gains in the 31 AMEA countries where it is commercially available, as well as in Latin America and the Asia Pacific region. And Bruvica grew about 39% globally, driven largely by market share gains and strong market growth across multiple indications in the U.S. and strong uptake outside the U.S. in the European and Asia Pacific markets. In the U.S., based on third-quarter data across all lines of therapy, Imbruvica gained approximately four points of market share and is the new patient and total patient share leader in chronic lymphocytic leukemia. Worldwide Zytiga growth slowed to about 6%, with 27% growth outside the U.S., which was partially offset by declines of about 13% in the U.S. due to generic competition. Strong sales growth in Europe and Asia were driven by market growth and share gains, primarily from the expanded indication in metastatic high-risk castration-sensitive prostate cancer based on the Latitude Clinical Trial. In non-metastatic castration-resistant prostate cancer, we continue to be pleased with the launch progress of Erleada, with the penetration of prescribers split evenly among urology and oncology practices. We also just received approval in the EU for non-metastatic castration-resistant prostate cancer. In immunology, we delivered global sales growth of just under 10%, driven by continued strong performance in Stelara of 35%, offset by continued erosion of Remicade of 15% due to increased discounts and modest share loss to biosimilars. Remicade has maintained approximately 93% of the infliximab volume share. We remain very pleased with the uptake of Stelara in Crohn's disease, where market share has increased by approximately eight points in the U.S. compared to the fourth quarter of 2017. Lastly, sales for our newly launched treatment for psoriasis, Tramphia, totaled $175 million globally. Tramphia is experiencing strong demand with over 28,000 patients on therapy and achieved a 6.6% share of the psoriasis market in the U.S., which is up one point from the third quarter. In neuroscience, our paliperidone long-acting portfolio performed well, growing almost 12% with higher market share driven by increased new patient starts and strong persistency. We did experience declining sales of about 13% in our cardiovascular, metabolism, and other product portfolio, primarily driven by declines in Xarelto and Invokana. Xarelto continues to increase TRX share growth. However, this growth was offset by increased discounts and higher Medicare donut hole utilization. We remain excited by the potential to significantly increase Xarelto's treatable patient population by approximately 13 million patients in the U.S., supported by the U.S. FDA's recent approval of Xarelto's new 2.5 milligram vascular dose for the CAD and PAD indication. Initial customer response has been positive, and we are confident in the value this indication will provide to patients. Our total pulmonary hypertension portfolio grew by double digits, increasing by about 11%. We realized strong growth in both Upsummit and Uptravi, growing by about 22% and 40% respectively on a global basis. Both benefited from further market penetration and increased share. As expected, Triclir is declining due to increased use of Epsomit as well as generic competition in Europe. I'll now turn your attention to the medical devices segment. Worldwide medical devices sales were $6.7 billion, declining 2.2%. Excluding the net impact of acquisitions and divestitures, primarily the divestiture of LifeScan, adjusted sales growth was 3.3% worldwide and accelerated versus the third quarter. The adjusted operational growth was driven by continued strong performance in interventional solutions, advanced surgery, general surgery, and vision. Orthopedics continues to lag market growth with operational sales growth of 0.5% globally, but continued its fourth straight quarter of sequential improvement due to strengthening fundamentals, including the uptake of new launches. Interventional solutions grew over 12% globally, with continued strength in our electrophysiology business, which grew more than 14% worldwide, fueled by our market leadership position from newer product offerings in ablation and advanced catheters, contributing to atrial fibrillation procedure market growth. This represents 10 consecutive years of double-digit growth. Additionally, we realized strong growth in our seronovus business, with double-digit growth in all regions, driven by new product innovation including embotrap for the treatment of ischemic stroke. Strong vision results were driven by contact lenses, which grew over 4% globally on the strength of the astigmatism and daily disposable lenses in the OASIS family. Growth outside the U.S. of about 7% was strong, with penetration in emerging markets being a large contributor. The U.S. continues to experience high consumption of approximately 7%, However, sales were basically flat due to year-over-year inventory dynamics. Contact lenses have now grown at or above the market for three consecutive years. In orthopedics, hips grew 2%, which we expect to represent performance in line with the market, driven by our leadership position in the anterior approach and continued strong demand for the primary stem actus. Trauma growth increased versus the prior quarter to just over 2% globally, driven by improved market growth. We continue to see strong adoption of newer innovations, such as our TFNA femoral nail, and experience strong growth in Asia, led by China and India. Spine delivered adjusted operational growth of about 1%. However, this growth was aided by one-time pricing-related true-ups worth about 250 basis points. Adjusting for this, our performance was consistent with third quarter growth. We continue to see stabilization of performance driven by new products such as the Concord Lift expandable cage and the Viper Prime system for minimally invasive surgery. Knees grew 0.2% in the quarter. As previously disclosed, our third quarter 2018 results were aided by the one-time impact of 2017 price legislation in India that contributed about 280 basis points to growth in the third quarter of 2018. When adjusting for this, our need portfolio showed strong sequential improvement, primarily outside of the U.S. due to strong performance in Asia. We continue to see strong uptake of the Attune revision system. Pricing pressure continued to impact all categories in orthopedics. For the quarter, U.S. pure price was negative across all platforms, by approximately negative 4.5% in spine, excluding the one-time pricing true-up I mentioned earlier, negative 3.5% in hips, negative 2.5% in knees, and negative 2% in trauma. We were very pleased with the results for the surgery business. The advanced surgery performance of 5.7% growth globally was led by biosurgery with growth of over 9% along with strong performance in energy at 5.5%. Biosurgery strength was driven by strong demand aided by new innovation, such as Surgicel powder. Endocutters also grew at over 3%, despite high growth comparables from Q4 2017 that were partially driven by a competitor's supply disruption last year. In general surgery, wound closure grew over 7%, with growth in all regions as barbed and plus sutures are experiencing strong adoption. Additionally, the U.S. market benefited from customers adopting innovative technologies with associated price premiums. As expected, selling days did not have a material impact on our global growth rates in the fourth quarter. As a final comment regarding the U.S. hospital setting, let me provide utilization trends. For the third quarter of 2018, we saw an increase in hospital admissions and surgical procedures with both increasing about 1.5%. Lab procedures were also up about 1%. Our preliminary estimates for the fourth quarter indicate a slight declining trend in both hospital admissions and surgical procedures growth to 1% and lab procedures growth consistent with the third quarter at approximately 1%. That concludes the segment sales highlights for Johnson & Johnson's fourth quarter 2018. For your reference, here is a slide summarizing notable developments occurring in the fourth quarter, some of which were mentioned in my comments. It is now my pleasure to turn the call over to Alex.

Thank you, Chris, and thanks to all of you for joining us today. We're pleased to be highlighting the strong results we delivered in 2018. Given the focused execution of our performance-driven strategy, I'm proud to share that we exceeded the financial performance metrics we set at the beginning of last year and we also delivered on the commitments and responsibilities to our patients, employees, and communities as defined in our Credo. Now, as you've heard me mention throughout 2018, we have been celebrating the 75th anniversary of our Credo. Introduced in 1943 by General Robert Wood Johnson, our Credo has been the blueprint for shaping the caring role that Johnson & Johnson plays in society. Although our Credo is etched in stone, it is a living document that on a few select occasions we have evolved to keep pace with the world in which we live. To that end, in anticipation of the 75th anniversary, we introduced some enhancements to our creative responsibilities that were inspired by feedback from more than 2,000 of our diverse Johnson & Johnson employees representing all regions, sectors, and functions. These enhancements explicitly put the patient first and at the center of our focus. reflect the needs of a changing world and a new generation of employees, underscore our commitment to diversity and inclusion, and solidify our commitment to improving the health of humanity. Our cradle remains as relevant today as when it was first introduced 75 years ago, and I'm excited and confident that together we will propel Johnson & Johnson forward to shape the next 75 years and beyond of healthcare. With that long-term mindset, We remain focused on leveraging our broad-based capabilities to continue to drive the next generation of growth across our entire portfolio, both in markets where we have greater opportunity to compete, as well as in the markets where we lead, which include our 26 platforms that each deliver a billion dollars or more in sales annually. In consumer, we improved operational performance and delivered above-market growth in 2018 while also making investments for the future, which I'll discuss in greater detail shortly. Key drivers were the development and rollout of innovative new products, the continued geographic expansion across the evolving consumer channels, and the strong sales performance of our most popular brands, such as Neutrogena, Aveeno, Tylenol, Motrin, and Listerine, as well as strong performance in newer brands, such as OGX. Additionally, our Global Johnson's Baby relaunch is off to a strong start and we will continue to launch into other markets in 2019. In pharmaceuticals, our strong track record of success continued throughout 2018. We achieved above-market performance even in the face of biosimilar competition for Remicade, which was driven by double-digit growth in 10 key products, including Stellara, Darzalex, Imbruvica, Invegas Astena, and Upsummit, to name a few. At the same time, we continue to invest in and advance our robust pipeline, which translates to better outcomes and treatment options for patients fighting cancer, HIV, pulmonary arterial hypertension, cardiovascular disease, schizophrenia, and diseases of the immune system. In fact, we were just recently ranked among the top three companies worldwide working to expand access to medicines by the 2018 Access to Medicines Index. In medical devices, consistent sales momentum throughout the year was fueled by interventional solutions, advanced surgery, and vision. We promised improved performance starting in 2018, and our team is delivering on this promise by improving our cadence of innovation coupled with continued portfolio optimization as we completed the divestiture of LifeScan and completed more than 30 acquisitions or strategic partnerships that we expect will further augment our future growth. We know we still have more work to do, and we are committed to continuing to build upon this momentum in return to above-market growth in 2020. Now, when I think about value creation, I'm proud to highlight that 2018 marked our 35th consecutive year of adjusted operational earnings growth for Johnson & Johnson of approximately 10%. This robust performance is indicative of the strength of our broad-based business, and these results reflect our ongoing commitment to manage for the long term, our relentless drive for innovation, our strategic portfolio management, and our disciplined capital allocation strategy, all of which are regularly discussed with our board of directors as part of our ongoing strategic planning. As you've heard me say before, while we're pleased with our 2018 performance, it's important to remember that we are never satisfied. Looking ahead, we are committed to advancing the innovation pipeline in our pharmaceutical business, broadening the reach of our consumer business, in meeting the full potential of our medical devices business. I want to emphasize that our number one priority is to drive superior performance across all our businesses. To ensure this, we benchmark, track, and hold every one of our Johnson & Johnson leaders accountable for key metrics that focus on innovation, execution, customer satisfaction, financial performance, portfolio management, quality, long-term value creation, and importantly, credo values and leadership. We believe that sustaining our investment in innovation is a key aspect of our strategy. We achieve record levels of investment, investing approximately $11 billion in R&D. And across all industries, we are one of the top 10 companies that invest at the highest levels in innovation and R&D. We remain committed to being a strategic partner of choice, evidenced by the over $1 billion we invested in 2018 across a number of value-creating acquisitions and collaborations, which include Zarbis, Orthotaxi, our collaboration with Arrowhead and Hepatitis B, and most recently, our agreement with Argenix for the treatment of acute myeloid leukemia, high-risk myelodysplastic syndrome, and other hematological malignancies, which closed last week. In total, We signed 13 acquisitions and licenses of various sizes, including our acquisition of the company that markets the Dr. Salabo line of skincare products, which we closed last week. We also signed 74 innovation deals, and we made 29 new investments from our Johnson & Johnson Development Corporation during 2018. Additionally, I'm pleased to share that last week, we announced that in collaboration with Apple Inc., Johnson & Johnson will conduct a research study to analyze whether a new heart health program Using an app from Johnson & Johnson, in combination with the Apple Watch's irregular rhythm notifications, an electrocardiogram app can accelerate the diagnosis and improve health outcomes of the 33 million people worldwide living with atrial fibrillation, or AFib. Now, this is a condition that can lead to stroke and other potentially devastating complications. In fact, in the U.S. alone, AFib is responsible for approximately 130,000 deaths worldwide. and 750,000 hospitalizations every year. We are very optimistic about the potential of this wearable technology, which can aid in the earlier detection and prevention of a frequent cause of stroke. And based upon the insights generated through this research program, in the future we may be able to develop new ways to detect other health conditions earlier that also exhibit measurable physiological symptoms. Now moving forward, we will continue to enhance our status as a preferred partner. be agnostic to where the best science and technology resides, and aggressively pursue transformational innovation internally and through our innovation ecosystem across our innovation centers, JLABS, and JJDC, and various strategic partnerships. As our portfolio evolves through innovation, acquisitions, and growth initiatives, we also regularly evaluate each of our existing businesses to determine if they still fit our strategy and our criteria for value creation. As a result, and as you have seen us do, we undertake a process to consider if different ownership for a business might be value-enhancing or if a business might be a better fit in another company's portfolio. This process also ensures that we continue to invest in the most promising areas of our portfolio where we believe we can make a significant difference for patients and consumers and create greater value for our shareholders. In 2018, we executed six divestitures, including LifeScan in October, And we also accepted a binding offer to divest our ASP business, which we expect to close in the first half of 2019. Now, I'm sure we've all come to accept that the change we are seeing across the healthcare industry and around the world is the new normal. It's constant and it's rapid. Challenges and opportunities arise with breathtaking speed. And we are committed to thriving in this environment. We feel strongly that our broad base in healthcare provides a distinct competitive advantage. By being positioned across three vital aspects of healthcare, pharmaceuticals, consumer and medical devices, we have a unique insight into challenges and opportunities as they emerge and are better positioned, I believe, than any other organization to meet the needs of patients and consumers around the world and to address the challenges and opportunities that the world and economy present. Our broad base, well, it's not just our heritage. It's a strategic choice, grounded and proven in a long-term performance and our understanding of the industry's present and future. As the world's largest and most broadly based healthcare company, we understand the important role we play in leading responsibly and representing our industry with integrity. We work with many organizations with similar aspirations, such as the Business Roundtable, the CEO Force for Good, and the Embankment Project for Inclusive Capitalism. When we look at the current marketplace, business landscape, and our external environment, We are often asked about the potential impacts to our business and industries. To this end, throughout the course of 2018, we engaged with global leaders, government officials, business partners, and customers in countries around the world on a variety of topics that not only impact current access to quality healthcare, but that will also drive the quality of healthcare for the future. I'd like to share a perspective on a few of those key topics today. Now, regarding overall healthcare costs and drug pricing in the United States, The cost of health care is one of the most pressing issues facing our country today, and we greatly recognize the importance of quality and accessible health care and medication as central to every individual's quality of life. We share the administration's goals of reducing health care costs while improving the quality and efficiency of care. In our effort to offer solutions that help achieve these goals, we responded to several administration proposals offering insights on ways to expand value-based care and value-based arrangements. We understand why there is such a passionate dialogue on health care costs and drug pricing. There is likely nothing more personal and important to every individual than quality and accessible health care. We also recognize that people are facing higher out-of-pocket costs when they seek medical care from a hospital, a doctor's office, or some other alternative health care provider, and especially when they go to the pharmacy to get medication. But it's important to note, medicines represent 14% of the total healthcare costs in the U.S., and medical devices represent 6% of the total healthcare costs in the United States. The remaining 80% is accounted for by areas outside of our industry. Additionally, we can all agree that the value derived from innovative medicines has been and continues to be significant in addressing health issues today and reducing morbidity rates in the future. Furthermore, medicines have contributed greatly to extending life expectancy. For example, back in the 1980s, the life expectancy of an HIV patient was just six months. Today, we are close to providing patients a near normal life expectancy. People are now surviving 30 to 40 years after diagnosis. While HIV patients still need to take medication every day, we can keep them healthy for the rest of their lives. We're also working with various partners in the healthcare system to transform the way healthcare is paid for. so everyone involved is held accountable and rewarded for the value they deliver. Now, there are a few key priorities that we focus on when participating in the healthcare costs and drug pricing dialogue, and they include a system that rewards innovation. We believe companies have an obligation to continually help improve the standard of healthcare by investing in science and technology to develop new solutions and new products. Additionally, we want to see a personalized and value-based healthcare system which keeps the patient at the center and is held accountable for the overall outcome. Next, a system that values transparency. Transparency benefits all participants in the healthcare system, and I'm really proud that our pharmaceutical business has taken such a strong leadership stance on increasing transparency in the industry. Last year, we issued our second annual report on transparency, which showed that the net price of our medicines in the U.S. decreased in 2017. We are preparing to issue our 2018 transparency report in the next couple of months, but I can already tell you that in 2018, our net prices declined between 6 and 8 percent, and we look forward to providing more information when the report is released. These results demonstrate our commitment to responsible business practices that put patients first, including how we invest our resources, price our medicines, and help people who need our medicines get access to them. Third, as we continue to engage in dialogue and develop proposals to contain healthcare costs, stakeholders need to be extremely careful and cognizant about avoiding unintended consequences which may increase patients' costs further and or decrease patients' access to affordable and quality healthcare. We know this continues to be a very important issue, and it's our responsibility to help lead and identify solutions. And we will continue to unite around efforts that address some of the most critical health and consumer needs of people around the world. We will continue to seek opportunities to work with the administration and others who share our commitment to developing a more results-based health system. Turning to the topic of global trade. As a global healthcare company, Johnson & Johnson relies on free trade and open markets to bring its products to patients and consumers around the world. We are hopeful that an agreement can be reached with China that addresses concerns and creates a long-term framework for partnership in the future. We'll continue to work with government officials across the globe because fair and equitable trade is in everyone's best interest, not just for companies, but for the consumer. We'll also continue to monitor developments closely on this front as we expect this to be an issue in motion for some time. Lastly, regarding our global view, we are committed to being a leader in the global healthcare space to help drive the change that people around the world want and need to see. We recognize that through collaboration and viable strategies, which are developed in conjunction with the healthcare industry, governments, community leaders, and other healthcare professionals, that we can successfully solve issues and seek solutions that advance health for humanity. And despite any challenges that lie ahead, we remain optimistic about the future of the healthcare industry based upon the strategic plans we have in place, the innovative technology and solutions we leverage every day, and the talented people across Johnson & Johnson who remain committed to delivering life-saving and life-changing solutions to our patients and consumers everywhere. Now, before I move on to talk about our long-term objectives and 2019 outlook, I do think it's important to reiterate that that the quality and safety of our products are a top priority. As it relates to our baby powder, which has been a trusted product for over 100 years, we remain committed to ensuring the facts about talc are understood, and we will continue to defend the safety of our product. We have a legacy of working hard to earn our customers' trust and working equally hard to keep it. We will continue to focus on meeting the needs of the patients and consumers around the world who have come to depend on us and put their trust in us each and every day. As I have consistently shared with you, our long-term objectives remain focused on growing ourselves organically at a faster rate than the market and growing our earnings faster than sales. That, coupled with value creating M&A and our strong dividend yield, is the basis for our strong long-term total shareholder returns. And in keeping with our cradle commitment that everything we do must be of high quality, Quality and safety remain paramount across Johnson & Johnson, and this enables us to operate from a position of strength. This is important for all stakeholders, especially the value that is experienced by every patient and consumer we touch. And as the healthcare landscape continues to evolve and change, so does our business and business strategies. In response to these changing dynamics, at an enterprise level, we remain committed to our near-term priorities, which are consistent with our long-term growth objectives. With regard to our 2019 outlook, we remain focused on bringing innovative solutions to patients and consumers globally, as well as driving strong growth while anticipating biosimilar and generic impact to some of our pharmaceutical products in the near term, which we expect will impact sales by approximately $3 billion. To address this impact, we have deliberately and actively managed our portfolio for the last few years, and especially throughout 2018. As I've already mentioned, we regularly make portfolio management decisions that give us the flexibility to invest in innovation, pursue M&A deals, divest, and withstand the impact of patent erosion. Our robust long-term strategy has enabled us to make the investments necessary to not only withstand this impact, but to grow at competitive rates in 2019. Additionally, we are continuing to progress our current robust pipeline of differentiated and novel products. So even in the face of these short-term pressures, we remain confident that our marketed portfolio and near-term pipeline across our pharmaceutical business will be one of our key growth drivers into the future. Additionally, we expect to deliver on our financial, quality, and innovation commitments, as well as to continue to optimize our portfolio. Now, let me provide some greater detail and deeper insights regarding each of our business segments. As I just mentioned in pharmaceuticals, we expect to drive the growth of our in-market products and successfully launch new products and line extensions while replenishing our pipeline to support sustained long-term above market growth. With an industry-leading pipeline and established excellence, our pharmaceutical business has delivered outstanding and sustained performance for the past several years, growing operationally in 2018 at approximately 12%, inclusive of the impact of negative net price, driven by the successful launches and growth of many blockbuster medicines. Pharmaceuticals has been an industry leader in all performance measures, including R&D productivity and commercial capabilities. Our key catalysts for growth include reaching more patients, continuing to penetrate and secure new indications for life-changing products such as Darzalex, Imbruvica, and Stelara, driving best-in-class uptake of the successful new product launches such as Tomfaya and Erlita, and securing regulatory approvals for Esketamine and Erdofitinib, which are two promising new therapeutics with a potential for more than $1 billion of peak revenue. In 2018, fueled by iconic brands and unparalleled consumer insights, our consumer business achieved above-market growth. Moving forward, we'll concentrate on enhancing our leadership and priority categories by focusing on critical geographies and our mega-brands. We will also continue to look to expand into the fast-growing natural category, as evident by the acquisition of Zarbis and OTC, and the premium beauty category with our recent acquisition of the company that markets the Dr. Salabo line of skincare products. I am confident that we have the strategies in place to allow us to move with the agility needed to address new market needs with an omni-channel approach from the large box retailers to the e-commerce channels to better serve our consumers. In consumer, we expect to continue to grow slightly above market, advance our e-commerce and digital capabilities, and deliver innovation to win both globally and locally while expanding margins. Our key catalysts for growth focus on continuing to build upon the early success of the Johnson's Baby brand relaunch, broadening the scope of our innovation model to accelerate growth of our beloved brands to more consumers around the world wherever and however they shop, and enduring brand portfolio strength through sustained innovation, delivering differentiated products that are professionally endorsed and science-based. That's our history, and that will be our future. In medical devices, we expect to accelerate growth through improved execution and enhance the flow and value of innovation, which includes the progression of digital surgery platforms. And as we capitalize on our comprehensive portfolio and an accelerated growth strategy, we expect to deliver on our commitment to improve performance as we did in 2018 where we improved operational growth excluding acquisitions and divestitures by 1.1% as compared to 2017. Additionally, we delivered on our commitment to improve our cadence of innovation by exceeding our goal in delivering 21 major product launches in 2018. Still, we fully recognize that our progress has not been uniform across the entire portfolio. There are areas where we must and we will improve, specifically in orthopedics. We demonstrated positive progress throughout 2018 in our knees and spine businesses, and we believe this sets us up well for 2019 and beyond. In medical devices, we will continue to accelerate growth through innovation, strategic partnerships, portfolio management, and new business models. Our key catalysts for growth in medical devices include fueling growth from top platforms such as electrophysiology, advanced surgery, and vision, continuing to increase our cadence of innovation by launching 20 to 25 major new products across our orthopedic, surgery, interventional, and vision portfolios, such as Attune Cementless, Echelon Next Gen Powered Stapler, the Visigo Steerable Sheath, and AccuView Oasis with Transitions Light Intelligent Technology. and by maximizing new market growth opportunities such as stroke and sites of care beyond the hospital, and simplifying operations while relentlessly focusing on execution. We will do this while progressing our efforts in digital surgery, including robotics, which is a critical element to our future success, not just in the near term, but as we look to the next decade and beyond. Throughout Johnson & Johnson's history, We have proudly and passionately strived to create and maintain a strong, consistent, and sustainable business, and this is evidenced by 35 consecutive years of adjusted operational earnings growth, 56 consecutive years of dividend returns and increases, being one of only two companies that hold a AAA credit rating, and being among the Standard & Poor's top 10 market cap companies. There are also many notable annual recognitions on major publication lists, including Fortune, Diversity Inc., Time Magazine, and Working Mother, where we are one of the most admired, respected, diverse, and best places to work. These strong results and compelling recognitions would not be possible without our talented, diverse, and dedicated employees around the world. Today, we employ approximately 135,000 global employees, with more than 44,000 jobs here in the U.S. Those numbers continue to grow as we extend our capabilities and our reach. And we are all united around a shared commitment and a common purpose that inspires a world without disease. This is evident in the tireless efforts and relentless passion that drives our ambition to reach the next frontier of cancer care, continue to combat Ebola, bring healthy vision to people everywhere, and create a world free from tuberculosis just to name a few areas of focus. Our purpose-driven, credo-based culture puts patients and people first. And this is certainly true in the way we think about our employees and work to consistently cultivate the world's best, healthiest, and most engaged workforce. I believe this is critical for operating a healthy business. It also positions us very well to deliver another 133 years of quality healthcare that is within the reach of everyone, everywhere, and it enables us to continue to drive growth and strong shareholder returns. We are proud of the results we've delivered, not just in 2018, but over the past several years, and we will continue working to achieve and exceed your expectations of us in 2019 and beyond. We have a unique mission. We must lead as stewards of our credo and as leaders in healthcare around the world. It's not just to deliver great results and shareholder value. It's also to deliver the best medicines and solutions to our patients and consumers around the world. It's about the lives that we touch, the hopes that we raise, and the progress of healing, ultimately advancing health for humanity. Lastly, I'm honored to have led this company for almost seven years now, and I believe that no company is better positioned to lead the profound change during this dynamic era than Johnson & Johnson. I'm proud of our history and could not be more excited about our future. I look forward to addressing your questions during the upcoming Q&A, but I'll now turn it over to Joe, who will provide additional details about our fourth quarter results and guidance for 2019. Thank you.