Johnson & Johnson

Good morning, this is Chris DeLorphis, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the second quarter of 2019.

Joining me on today's call is Joe Wolk, Executive Vice President, Chief Financial Officer. Additionally, during our Q&A session, Joe and I will be joined by Joaquin Duado, Vice Chairman of the Executive Committee, and Dr. Paul Stoffels, Vice Chairman of the Executive Committee and Chief Scientific Officer. This is a great opportunity for you to engage with our Vice Chairman and not only obtain insights into the drivers of our current performance related to their areas of expertise, but also hear their perspective on our approach to innovation and building differentiated capabilities that we expect to enable continued strong performance over time. 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 2018 Form 10-K and our most recent 10-Q, along with reconciliations of non-GAAP financial measures utilized for today's discussion to the most comparable GAAP measures are also available at investor.jnj.com. Several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Regarding today's agenda, Joe will first provide some perspective on our overall results for the second quarter. I will then review the sales and P&L results for the corporation and the three business segments. Joe will conclude by providing insights on our cash position, capital allocation deployment, and our updated guidance for 2019, along with some considerations for the balance of the year. The remaining time will be available for your questions. We anticipate the webcast will last about 75 minutes. I'm now pleased to turn the call over to Joe Wolk.

Great, Chris. Good morning, everyone. Thank you for your interest in Johnson & Johnson. I'm pleased to discuss with you our solid results for the second quarter and how our performance during the first half of 2019 positions us well for the rest of the year and beyond. During the quarter, we continue to deliver growth across the three segments of our broad-based business while also optimizing our portfolio and making progress against long-term strategies. Revenue and earnings per share were in line with our expectations. As expected, we did experience sales deceleration from the first quarter, primarily due to the impact of generic and biosimilar competition in our pharmaceutical business. Income in the first half of 2019 provides us the opportunity to continue investing to fortify, accelerate, and potentially add to our pipelines across all three segments. We are committed to driving solid financial and operational performance for our shareholders while also delivering on our responsibilities to patients, employees, and communities as outlined in our credo. Chris will provide additional franchise and product detail, but let me provide some high-level framing. Our pharmaceutical business continues to deliver strong growth across our oncology, pulmonary hypertension, and immunology portfolios. We are particularly pleased with the success of Dargelex, Stellara, Imbruvica, and the Invega portfolio. As highlighted during our May pharmaceutical business review, our performance demonstrates our ability to consistently obtain approval for new products and line extensions. Once again, our performance was driven by volume of transformational medicines that address high unmet medical need rather than price. In our consumer segment, we accelerated growth in the second quarter in our stronghold beauty lines of Neutrogena and Aveeno. We are also pleased with the contributions from newly acquired businesses, Dr. Shilabo and Zarby's. This growth more than offset the one-time impacts related to seasonality and inventory levels we mentioned during our first quarter call. We expect to deliver competitive growth relative to the market for the year. In our medical devices segment, we did incur some isolated supply disruptions in the quarter, which Chris will outline, and the impact limited growth by one point. Accounting for that, we grew above 4%, in line with last quarter, and we are on track towards our goal of exceeding last year's performance. We continue to enhance our leadership positions in platforms such as electrophysiology, energy, and endocutters. Orthopedics grew modestly during the quarter, in line with Q1, led by hips and trauma. That being said, we remain intent on improving our performance in orthopedics and the segment at large. Turning to earnings, earnings per share was favorably impacted by a significant gain recorded in other income, specifically the approximately $2 billion pre-tax gain related to the sale of the advanced sterilization products business. We closed this transaction in early April, and as mentioned during the first quarter call, this gain comprises a large majority of our other income guidance for the full year 2019. Other income for 2019 is on par with levels experienced in 2015, and consistent with past practice, we intend to utilize these gains to invest in opportunities that increase shareholder value and better position the business for long-term success. I'll now turn the call back to Chris to discuss second quarter sales drivers as well as highlight notable line items in our P&L before I return with some comments regarding our cash position, capital allocation priorities, and guidance.