Johnson & Johnson

Good morning. Welcome to Johnson & Johnson's fourth quarter 2021 earnings conference call. All participants will be in 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.

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 of 2021 and our financial outlook for 2022. Joining me on today's call are Joaquin Duato, Chief Executive Officer, and Joe Wach, Executive Vice President, Chief Financial Officer. 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 regarding, among other things, our future operating and financial performance, and the anticipated separation of the company's consumer health business. We encourage you to review the cautionary statement included in today's presentation, which identifies certain risks and factors that may cause the company's actual results to differ materially from those projected. In particular, there is significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic and other marketplace dynamics. This means that results could change at any time, and the contemplated impact of COVID-19 on the company's business results and outlook is a best estimate based on the information available as of today's date. A further description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2020 Form 10-K and subsequent Form 10-Qs. along with reconciliations of the non-GAAP financial measures utilized for today's discussion to the most comparable GAAP measures. These materials are also available at investor.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. Moving to today's agenda, I will review the fourth quarter sales and P&L results for the corporation and the three business segments and additionally full year 2021 results for the enterprise. Joe will provide some additional business commentary, insights about our cash position and capital allocation deployment and our guidance for 2022. Joaquin will close the call by sharing his perspective on the healthcare environment and his strategic priorities as the new CEO of Johnson & Johnson. The remaining time will be available for your questions. We anticipate the webcast will last up to 90 minutes. Now to recap the fourth quarter. Worldwide sales were $24.8 billion for the fourth quarter of 2021, an increase of 10.4% versus the fourth quarter of 2020. Operational sales growth, which excludes the effect of translational currency, increased 11.6%, as currency had a negative impact of 1.2 points. In the U.S., sales increased 3%. In regions outside the U.S., our reported sales growth was 18.5%. Operational sales growth outside the U.S. was 21.2%, with currency negatively impacting our reported OUS results by 2.7 points. Excluding the net impact of acquisition and divestitures, adjusted operational sales growth was 12.3% worldwide, 3.1% in the US, and 22.4% outside the US. I would like to remind everyone that our 2020 fiscal year included additional shipping days which negatively impacted 2021 fourth quarter growth by approximately 400 basis points and full year growth by about 100 basis points. These impacts can be roughly applied across all segments, but were more heavily skewed to the U.S. Turning now to earnings. For the quarter, net earnings were $4.7 billion and diluted earnings per share were $1.77 versus diluted earnings per share of $0.65 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.7 billion and adjusted diluted earnings per share were $2.13, representing increases of 14.4% and 14.5% respectively, compared to the fourth quarter of 2020. On an operational basis, adjusted diluted earnings per share increased 17.2%. For the full year 2021, consolidated sales were $93.8 billion, an increase of 13.6% compared to the full year of 2020. Operationally, full year sales grew 12.2%, with currency having a positive impact of 1.4 points. Sales growth in the U.S. was 9.3%. In regions outside the U.S., our reported year-over-year sales growth was 18.2%. Operational sales outside the U.S. grew by 15.3%, with currency positively impacting our reported OUS results by 2.9 points, excluding the net impact of acquisition and divestitures adjusted operational sales growth was 12.8% worldwide, 9.5% in the US, and 16.6% outside the US. Net earnings for the full year 2021 were $20.9 billion and diluted earnings per share were $7.81 versus diluted earnings per share of $5.51 a year ago. 2021 adjusted net earnings were $26.2 billion and adjusted diluted earnings per share was $9.80, representing increases of 22.2% and 22% respectively versus full year 2020. On an operational basis, adjusted diluted earnings per share increased by 20.2%. Beginning with consumer health, 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 2020, 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 2021 sales by segment to assist you in updating your models. Worldwide consumer health sales totaled $3.7 billion and grew 1.8%, with growth in the U.S. of 1.3% and 2.1% outside the U.S. Excluding the impact of acquisitions and divestitures, Worldwide adjusted operational sales growth was 2.9%. Consumer health was negatively impacted by the 2020 additional shipping days worth approximately 400 basis points, which can be roughly applied to all franchises, as well as industry-wide external supply constraints, primarily due to raw material availability and labor shortages largely reflected in our skin health and beauty business. worth approximately 360 basis points. Adjusting for these items, solid results were primarily driven by above-market growth and OTC. E-commerce continues to have strong double-digit growth. Finally, when comparing to 2019, consumer health grew approximately 4% in the quarter. When adjusting for acquisition and divestitures, sales growth was closer to 5%. Over-the-counter medicines globally grew 15.8% due to increased incidence in U.S. adult and pediatric fever and worldwide category recovery in cough, cold, and flu and digestive health. The U.S. also saw share gains primarily in Tylenol and Motrin. Strength was seen across multiple areas in the portfolio, including analgesics, upper respiratory, digestive health, naturals, and anti-smoking aids. The skin health and beauty franchise declined 7.1% driven by external supply constraints, primarily in Neutrogena and OGX, and divestitures worth approximately 230 basis points, primarily due to Sedona, the salon-based portion of Dr. Salabo and Asia Pacific. Declines were partially offset by market recovery and e-commerce strength. Oral care declined globally 6.5% as compared to strong double-digit growth in the prior year, driven by the FOS divestiture worth approximately 170 basis points, and category declines in EMEA. Declines were partially offset by successful brand building and promotional campaigns in Asia Pacific. The baby care franchise declined 0.8%, with U.S. declines of 7.5% and growth of 1.3% outside the U.S. Declines were driven by prior year retailer stocking and external supply constraints in the US, partially offset by e-commerce growth of Aveeno Baby and Asia Pacific. Wound care declined 6.4% primarily due to the divestiture of the professional tape business worth approximately 150 basis points, partially offset by strong performance of Band-Aid brand adhesive bandages in the US. Women's health grew 1.3%, driven by market recovery in Latin America. Moving on to our pharmaceutical segment. Worldwide pharmaceutical sales of $14.3 billion grew 17.9%, enabled by strength in all regions, with U.S. sales increasing by 4.2% and OUS sales increasing by 36.9%. Worldwide sales included a $1.6 billion contribution from the COVID-19 vaccine. Excluding the net impact of acquisition and divestitures, worldwide growth was 18.6%. Our strong portfolio of products and commercial capabilities has enabled us to deliver the 10th consecutive full year of worldwide above-market adjusted operational growth. Our immunology therapeutic area delivered global sales growth of 7.1%, driven by strong performance of Tremphia and Stelara, offset by declines in Remicade due to biosimilar competition. Tremphia was up 82.8% worldwide, with continued share growth and additional penetration into the psoriatic arthritis indication. U.S. share increased nearly three points in both the psoriasis and psoriatic arthritis indications. Celara grew 5.1% worldwide driven by strong share gains in Crohn's disease and ulcerative colitis with increases of roughly four points and roughly six points respectively in the U.S. Current quarter growth was impacted by a negative prior period rebate adjustment and reserve adjustment recorded in Q4 2021 in the US, worth approximately 700 basis points on worldwide growth for the quarter versus the prior year. Our oncology portfolio delivered another robust quarter with worldwide growth of 12.3%. Darzalex continued its double-digit performance with 33.4% growth in the quarter, driven by share gains, increased penetration of the subcutaneous formulation in the US and EU, and continuing launches globally. Darzalex grew share across all lines of therapy, with nearly eight points of share growth in the US this quarter. Erleada grew 61.3% worldwide, driven by strong share uptake, increased market penetration in the U.S., and new launches outside of the U.S. Imbruvica maintained its market leadership position, however, declined 3.1% worldwide due to competitive pressures from novel oral agents. U.S. decline was partially offset by growth in all regions outside of the U.S. Neuroscience grew 7.1% worldwide, driven by the polyperidone long-acting portfolio, posting market and share growth due to increased new patient starts, strong persistency globally, and the launch of Invega Heffera in the quarter. The cardiovascular, metabolism, and other business declined 13.8% worldwide due to competitive pressures in Invokana and biosimilar competition for Procrit. Our pulmonary hypertension portfolio was roughly flat, driven by COVID-19 market constraints and generic entrance and other pulmonary hypertension, offset by U.S. share uptake in both OpSummit and UpTravi. I'll now turn your attention to the medical devices segment. Worldwide medical devices sales were $6.9 billion, growing 5.3%. Excluding the net impact of acquisition and divestitures, primarily the divestiture of ASP, adjusted operational sales grew 5.6% worldwide. The medical devices market continued to be impacted by COVID-19, with the Omicron variant contributing to a softening of recovery trends in medical and surgical procedures, especially late in the quarter. Consistent with prior COVID-19 surges, impacts were more acute in areas deemed to be more deferable in nature, including spine and knees. Comparing to 2019, medical devices grew about 4% on an adjusted operational basis. On a full year basis, medical devices growth versus 2019 was just over 4.5%, building on the pre-COVID growth momentum. Interventional solutions continued to demonstrate strong performance, delivering another quarter of double-digit worldwide growth at 15.3%, driven by market recovery, successful penetration of new products, and commercial execution across both electrophysiology and Cernobis. Advanced surgery grew 7.6% worldwide, driven by market recovery, expansion into Tier 2 and 3 hospitals in China, and performance of newer products, such as NCLX1 in energy, Echelon Plus in endocutters, and Surgicel powder in biosurgery. Monarch system orders in the fourth quarter marked the highest number of orders in any quarter since launch. And more importantly, as a positive indicator of Monarch technology adoption and patient treatment regiments, we continue to see strong growth in the number of Monarch-enabled bronchoscopy procedures, with total procedures since launch exceeding 12,000. In fact, 2021 Monarch procedures more than doubled those performed in the prior year. General surgery grew 1.7% worldwide, led by wound closure, primarily due to market recovery coupled with innovation penetration. Inventory dynamics in the prior year negatively impacted wound closure US results by about 350 basis points and positively impacted results outside the US by about 250 basis points. Worldwide orthopedics declined 0.7% versus prior year, reflecting the continued impact of COVID-19 on procedures. Worldwide trauma delivered growth of 2.0%, driven by continued market stabilization and the success of recently launched products, partially offset by competitive pressures in China. The positive impact on growth from prior year inventory contractions in China was primarily offset by the additional shipping days in 2020. Worldwide hips grew 2.7% driven by continued strength from our portfolio, including the active stem and technologies such as VELUS hip navigation, sustaining our leadership in the anterior approach. Growth in the outpatient surgery channel in the US and market recovery outside the US were additional contributors to growth. Worldwide needs was relatively flat with a decline of 4.2% in the U.S. and growth of 6.5% outside the U.S. The U.S. market was negatively impacted by COVID-19 and healthcare resource constraints on procedures. These impacts were partially offset by strong growth in the outpatient channel and positive momentum from recently launched products, including the VELUS robotic assisted solution and our Attune portfolio. Growth outside the U.S. was driven by market recovery and success of products such as Attune Revision. Lastly, in orthopedics, worldwide spine declined 9.4%, primarily driven by deceleration and procedure volumes related to COVID-19 and health system resource constraints. Partially offsetting this decline are the positive impacts from the continued success of new products such as XPAC, Conduit and Symphony, and prior year inventory reductions in China contributing approximately 360 basis points to worldwide growth. Worldwide vision grew 11%. Contact lens and other grew 7.1% worldwide. U.S. growth of 9.4% was driven by successful commercial campaigns and adoption of recently launched AccuView Oasis Multifocal for presbyopia. U.S. growth was impacted by inventory fluctuations in both the current and prior year worth about 550 basis points. Growth outside the U.S. of 5.8% was driven by market recovery coupled with strength of new product launches such as AccuView, DivineFresh. Surgical vision grew 22.1% globally with both the U.S. and OUS businesses growing double digits. These positive results were driven by market recovery and share gains from recent differentiated product launches across all surgical vision product lines, including Technus Eyehance and Technus Synergy in our ocular lenses used in cataract surgery. Now regarding our consolidated statement of earnings for the fourth quarter of 2021, I'd like to now highlight a few noteworthy items that have changed on the statement of earnings compared to the same quarter last year. As reported earlier, our adjusted earnings per share of $2.13 reflects a reported increase of 14.5% and an operational increase of 17.2%. Cost of products sold leveraged by 270 basis points primarily driven by favorable mix within the pharmaceutical business. A reduction in prior year COVID-19 related costs in the medical devices business and favorable mix within the enterprise, with a larger portion of sales from the pharmaceutical business. Selling, marketing, and administrative margins remained relatively flat, driven by increased brand marketing expense in the consumer health business, mostly offset by expense leveraging in the pharmaceutical business. We continued to invest in research and development at competitive levels, investing 19% of sales this quarter. This was higher than the fourth quarter of 2020 by 110 basis points driven by portfolio progression in the pharmaceutical business and higher investment in the medical devices business. The other income and expense line is a net expense of $9 million in the fourth quarter of 2021 compared to net expense of $2.4 billion last year. This was driven by lower litigation expenses. Regarding taxes in the quarter, our effective tax rate increased to 2.1% compared to a benefit of 5.5% in the fourth quarter of 2020. This increase was primarily driven by the prior year tax benefit associated with litigation expenses partially offset by one-time tax benefits in the fourth quarter of 2021. Excluding special items, the effective tax rate was 10.4% versus 11.4% in the same period last year. I encourage you to review our upcoming 2021 10-K for additional details on specific tax matters. 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. Let's now look at adjusted income before tax by segment. In the fourth quarter of 2021, our adjusted income before tax for the enterprise as a percentage of sales increased from 24.9% to 25.6%, primarily driven by the COVID-19 recovery. The following are the main drivers of adjusted income before tax by segment. Medical devices improved by 160 basis points driven by recovery of prior year COVID-19 production-related slowdowns and related inventory impacts. Consumer health margins declined by 460 basis points primarily driven by increased brand marketing expenses and inflationary pressure, partially offset by supply chain efficiencies. The improvement in pharmaceutical margins of 110 basis points was primarily driven by favorable product mix and selling, marketing, and administration leverage. This slide provides our full year consolidated statement of earnings. As reported today, our full year 2021 adjusted earnings per share of $9.80 reflects a reported increase of 22% and an operational increase of 20.2%. The growth is primarily related to COVID-19 recovery realized predominantly in our medical devices business. Lastly, I would 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. Moving to the next slide. Our full year 2021 adjusted income before tax for the enterprise improved by 170 basis points versus 2020. Looking at the adjusted pre-tax income by segment, medical devices improved by 870 basis points to 25.7%, primarily driven by recovery of prior year COVID-19 production-related slowdowns and related inventory impacts. Pharmaceutical margins declined by 150 basis points to 40.5%, primarily driven by R&D portfolio progression. Consumer health margins were flat at 23.8%, driven by increased brand marketing expense and inflationary pressure, partially offset by supply chain efficiencies. We continue to advance our strong pipeline of innovative medicines and products. This progress is supported by our commitment to investment in R&D that have increased 2.6 billion, or 21%, on a full year basis. In the quarter, we received approval by the European Commission for the Long-Acting Injectable Antipsychotic Therapy, BIANLI, for the maintenance treatment of schizophrenia in adult patients. This approval makes BIANLI the first twice-yearly treatment for adults living with schizophrenia, providing the longest available dosing interval for an antipsychotic medication to be approved in Europe. Additionally, Ribervant received conditional marketing authorization in EMEA Riborvant, a bispecific therapy targeting both EGFR and CMET, is the first treatment approved for patients with non-small cell lung cancer with EGFR exon 20 insertion mutations after failure of platinum-based therapy. Finally, we submitted a biologics license application to the US FDA seeking approval of teclistamab for the treatment of patients with relapsed or refractory multiple myeloma as aligned with our strategy to expand treatment options for multiple myeloma patients. Teclistamab is an investigational, off-the-shelf, T-cell redirecting, bispecific antibody targeting both BCMA and CD3. Consistent with our disciplined approach to portfolio prioritization, we are discontinuing the Select Phase 3 study, assessing the efficacy and safety of Celexapag as an add-on to the standard of care therapy in patients with inoperable CTEP, as the study did not meet its primary endpoint. Medical Devices announced a strategic collaboration with Microsoft to further develop a secure and compliant digital ecosystem with a goal of connecting devices across the entire portfolio. This collaboration will help enhance the use of artificial intelligence and machine learning in order to generate insights leading to smarter, less invasive, and more personalized solutions across the entire patient care continuum. This concludes the sales and P&L highlights for Johnson & Johnson's fourth quarter and full year 2021. I am now pleased to turn the call over to Joe Wach.

Thank you, Jess, and thanks to everyone for joining us to discuss our fourth quarter and full year 2021 results and our outlook for 2022. We continue to manage the implications of COVID-19 globally, but it is encouraging to see the resilience of our business, driven by the dedication of countless healthcare professionals and the 136,000 Johnson & Johnson colleagues around the world. Their collective commitment and focus on providing healthcare solutions enabled us to deliver another year of strong financial performance. Our pharmaceutical segment delivered a 10th consecutive year of above-market adjusted operational sales growth. Medical devices continued to manage through the ongoing impact of COVID-19 to experience a partial recovery, and consumer health grew competitively while navigating industry-wide supply constraints. All of this culminated in Johnson & Johnson posting adjusted operational sales growth of 12.8% and adjusted earnings per share growth of 22% for the year, while also investing in our business for the future. We are well positioned as we head into 2022. Before we recap our year-end cash position and guidance for 2022, I'd like to touch on the announcement we made in the fourth quarter regarding our intent to separate our consumer health business to create two market-leading companies. As independent companies, the new Johnson & Johnson and the new Consumer Health Company will each be better positioned to exercise more focused strategic and capital decisions. We intend for each company to possess compelling financial profiles that reflect the strengths and opportunities of each business, enabling each company to be in a position to enhance the strong results that you've come to expect. As far as where we stand in the process, we have established a very strong, largely separate team focused on advancing the separation, and the financial and operational work streams are well underway. As conveyed in November, the Board of Directors' intent is for the planned separation to occur through the capital markets, and there are multiple capital market separation pathways being considered. Depending on the pathway, there are different SEC requirements that must be adhered to. In order to preserve optionality on the various separation pathways, we cannot at this time disclose specific consumer health financial information not previously disclosed or that which is associated with the separation. As such, you can expect that consumer health, as well as the rest of our business, will be reported as it has been reported previously for the entirety of 2022. We can, however, provide a high-level timeline for some non-financial items which may be of interest. In the first half of 2022, we anticipate announcing key executive leadership appointments for the new consumer health company with plans to provide the new company name and headquarters location around the middle of this year. In the second half of 2022, we plan to provide the updated path forward and applicable financial information, such as refined stand-up cost estimates and potential short-term dis-energies. Finally, consistent with our previous communications, we expect to execute the separation in 2023. You have our ongoing commitment, working within the regulatory framework, to provide transparent updates for material decisions on a timely basis. Let's now discuss our 2021 year-end cash position and future capital allocation priorities. We generated free cash flow for the year of nearly $20 billion. At the end of 2021, we had approximately $32 billion of cash and marketable securities and approximately $34 billion of debt for a net debt position of $2 billion. We are pleased that 2021 was another record year in terms of R&D investment at $14.7 billion, a 21% increase over our previous all-time high recorded in 2020. We recognize that investment in innovation is critical to our future growth profile and remains a top priority from a capital allocation standpoint. Given that we are at our lowest levels of net debt in almost five years, progressing towards a net cash position, we anticipate leaning in on some of our other capital allocation priorities beyond internal R&D. This includes building upon the 59 consecutive years of annual dividend increases. It also includes, as Joaquin has mentioned in recent forums, utilizing our cash to complement the current portfolio with acquisitions that build upon our capabilities, address portfolio gaps, and play in higher growth markets while yielding solid financial returns. We will assess opportunities of all sizes. However, our preferred option is tuck-in deals, which typically offer greater value creation. It is also important to note that should we find the right opportunities, the consumer health separation workstream will not prevent us from forging ahead. And finally, with respect to capital allocation, modest share repurchases may be evaluated as part of our capital deployment actions. Let me provide a few comments regarding our guidance for full year 2022, which encompasses expectations for our three business segments. In our pharmaceuticals business, We will continue to drive innovation and market-leading sales growth with continued expansion of existing brands such as Darzalex, Trimfiya, Stellara, Herlita, and the recently launched Ribrovant for lung cancer. We are particularly excited about the anticipated FDA approval for CARVICTI, our BCMA CAR-T therapy for patients with relapsed refractory multiple myeloma. We believe this medicine is best in class, showing unprecedented results in clinical trials. In our medical devices business, we expect COVID-19 and hospital staffing to continue to be a dynamic variable, likely more impactful in the first half of 2022 as we cycle through Omicron. Our 2022 guidance assumes continued medical devices market recovery. but it also assumes, as you have heard us say previously, enhanced competitiveness. Almost all of our priority platforms are holding or gaining share based on third quarter 2021 year-to-date information, illustrating the positive business momentum versus 2019 when only about 50% of our platforms were holding or gaining share. This improved market performance enables us to maximize the value of recently launched products. In consumer health, we are confident that our well-balanced portfolio positions us well. Consistent with current global macroeconomic trends, we are experiencing the impact of inflationary pressures, including higher input costs across our business and more significantly with respect to consumer health. These external challenges include availability and cost of certain commodities, labor and transportation. Similar to competitors, we are instituting price increases across our consumer health portfolio in 2022, enabling us to remain competitive as we continue to deliver the products that consumers love and trust. So with that backdrop, let's get into the details for the full year 2022 guidance for you to consider in updating your models. Starting with sales, We expect operational sales growth for the full year 2022 between 7.0% and 8.5%. This guidance is provided on a constant currency basis, reflecting how we manage our business performance. We estimate the negative impact from net acquisitions and divestitures to be negligible, and thus are comfortable with your models reflecting the same range as adjusted operational sales growth in the range of 7.0% to 8.5% or $100.3 billion to $101.8 billion. Our 2022 sales guidance includes approximately $3 billion from our COVID-19 vaccine. The majority of this volume is outside of the US for low and middle income countries corresponding to previously signed advanced purchase agreements. As you know, we do not predict currency movement, but for context, utilizing the Euro spot rate relative to the US dollar as of last week at 1.14, there is an estimated negative impact of foreign currency translation of approximately 150 basis points, resulting in an estimated reported sales growth of between 5.5% and 7.0%, or 6.2% at the midpoint compared to 2021. representing a range of $98.9 billion to $100.4 billion for 2022. As done in the past, I will provide a few qualitative comments related to quarterly phasing. Starting with consumer health, the supply constraints that were mentioned as part of Jess's commentary for the quarter will continue into 2022. We estimate that the majority of that impact will be experienced in the first half of the year primarily in the first quarter and primarily in skin health beauty. We therefore expect the second half performance to outperform the first half. In medical devices, we expect some COVID-19 headwinds and hospital staffing shortages to continue into 2022, but anticipate market recovery as global health systems treat new patients and work through procedure backlogs. Given this, we expect market recovery to improve as the year progresses and greater contribution from the new products launched in 2021 for an overall better second half. Finally, in pharmaceuticals, we anticipate our market leading performance will be fairly stable throughout the year with perhaps some modest adjustments for timing of events associated with alliance revenue or tenders. We are monitoring reports surfaced by large insurers that recent office visits are slightly down in both primary care and specialists. I'll continue to go through the items on our P&L, starting with operating margin. We expect 2022 adjusted pre-tax operating margin to improve by approximately 50 basis points driven by operating expense leverage, partially offset by continued inflationary pressures and cost of goods sold. Regarding other income and expense, the line on the P&L where we record royalty income, the return on assets and actuarial costs associated with certain employee benefit programs, as well as gains and losses related to the items such as investments by Johnson & Johnson Development Corp., litigation, and write-offs. We expect this to be between $1.2 billion and $1.4 billion for 2022, consistent with 2021 levels. Finally, we are comfortable with you modeling net interest expense of between $0 and $100 million. We are also projecting a higher effective tax rate for 2022 in the range of 15.5% to 16.5% based on current assumptions for geographic mix and certain international tax legislation changes for research and development expenses in 2022. Considering all these factors, we are guiding adjusted earnings per share in the range of $10.60 to $10.80 per share on a constant currency basis, reflecting operational or constant currency growth of approximately 8.2% to 10.2% or 9.2% at the midpoint. While not predicting the impact of currency movements, assuming recent exchange rates previously referenced, our reported adjusted operational earnings per share for the year would be negatively impacted by approximately 20 cents per share, resulting in adjusted reported earnings per share in a range of $10.40 to $10.60 or $10.50 at the midpoint, reflecting growth of 7.1% versus the prior year. We expect the company's COVID-19 vaccine to contribute approximately an incremental 20 cents to earnings per share in 2022. That concludes my prepared remarks. I am now thrilled to welcome Joaquin DeWato to his first earnings call as the CEO of Johnson & Johnson. Joaquin, as a colleague who has worked alongside you for the past several years, it's clear that healthcare and providing good health for everyone everywhere is not just your business, but a passion. I am excited to welcome you in your new capacity and look forward to continuing to partner with you, the Executive Committee, and our colleagues across the globe in our mission to change the trajectory of health for humanity. Over to you, Joaquin.