Johnson & Johnson

Good morning and welcome to Johnson & Johnson's second quarter 2023 earnings conference call. All participants will be in the listen-only mode until the question and answer session of the conference. This call is being recorded. If anyone has any objections, you may disconnect at this time. If you experience technical difficulties during the conference, you may press star 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 the 2023 second quarter business results and full year financial outlook. Joining me on today's call are Joaquin Duato, Chairman of the Board and Chief Executive Officer, Joe Wach, Executive Vice President, Chief Financial Officer, and Eric Haas, Worldwide Vice President of Litigation. a few logistics before we get into the details. As a reminder, 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. Please note that today's meeting contains forward-looking statements regarding, among other things, the company's future operating and financial performance, product development, market position and business strategy, and the anticipated separation of the company's consumer health business. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of today's date and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SEC website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, Joaquin will open with a few comments highlighting business performance achievements in the quarter and outlook for the remainder of the year. I will then review the second quarter sales and P&L results for the corporation and highlights related to the three segments. Joe will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and updated guidance for 2023. Finally, Eric will provide comments regarding the talc litigation. The remaining time will be available for your questions. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 75 minutes. I am now pleased to turn the call over to Joaquin.

Thank you, Jess, and good morning, everyone. This was a strong quarter for Johnson & Johnson with market-leading performance, important advances across our innovative pharmaceutical and medtech pipelines, and a successful initial public offering of ChemView. We delivered solid sales and earnings growth for the second quarter of 2023, reporting operational sales of 7.5% and adjusted operational EPS growth of 9.7%. These strong results contributed to our confidence in raising our expectations for this year. You may have seen this morning the announcement that we intend to split up Canview shares through an exchange offer as the next step in the separation of Canview. Joe will provide additional information later in the call. We're excited about entering a new era for Johnson & Johnson, one built around science, innovation, and technology, and strategically focused on pharmaceutical and medtech, while maintaining our position as the world's largest, most diversified healthcare products company with 25 platforms over $1 billion in annual sales. And on today's call, I would like to share recent highlights and achievements from across the business that have contributed to our year-to-date results, as well as upcoming catalysts that give me great confidence in our near and long-term future performance. Starting with Medtech, for the second quarter of 2023, we generated 14.7% operational and 9.9% adjusted operational growth, which excludes the impact of the AvioMed acquisition. On a pro forma basis, using sales publicly reported by AvioMed prior to our acquisition, Medtech grew 10.2%. These strong results continue to show that our efforts to improve the growth of the medtech business are working. Q2 highlights in electrophysiology include the publication of clinical data supporting the safety and effectiveness of QDOT, our newest ablation catheter for atrial fibrillation. In fact, This study demonstrated a clinical success rate of 86% as well as achieving shorter procedure and fluoroscopy times than ablation with conventional catheters. I'm also happy to share that this month we completed enrollment in the third clinical study evaluating our pulsed field ablation solutions. The SmartFire study evaluates our dual energy catheter, which enables physicians to instantly switch energy source, whether radiofrequency or pulse field, based on patient needs. The AbioMed integration continues to deliver against planned milestones and is on track across all areas and regions with no disruption to commercial activities or pipeline progression. Second quarter sales of 331 million compared to a Biomed's publicly reported sales in the same period last year as a standalone company reflects approximately 20% growth. We also continue to see strong enrollment in the ongoing pivotal clinical trials which aim to expand the use of our products into new patient populations. We anticipate that heart recovery will become a significant multi-year growth platform for Johnson & Johnson. In orthopedics, the VELYS robotic-assisted solution is poised for further acceleration, having recently received CE and CA-MARC international approvals. In surgery, we are pleased with our progression on Otava, our next generation soft tissue surgical robotic system, and we look forward to providing an investor update later in the year. In vision, we recently launched products such as Acuvue Oasis Max and Technis iHands, and we are performing very well across both contact lenses and surgical vision. Now, turning to pharmaceuticals. In the second quarter of the year, we delivered above-market operational growth of 6.2%, excluding the COVID-19 vaccine. Of note, our multiple myeloma portfolio has grown more than 30% year-on-year, which includes the acceleration of our newly launched products, Carvicti and Tecvali. These new launches, along with Spravato, are performing very well and are expected to be important contributors to achieving our 2025 sales target. We also achieved important regulatory and operational milestones, including multiple readouts from our pipeline. A few things I'm particularly excited by include... First, the receipt of fast track designation from the US FDA for all three prospective indications for milvexian, our factor 11 oral anticoagulant, in partnership with Bristol-Meyers Squibb, which has the potential to treat a broader set of patients, such as those who currently have limited therapeutic options due to bleeding risk. the recent submission of a supplemental BLA for CARB-ICT to the FDA and European Commission supported by data from the CARTITUDE-4 study, seeking approval for a new earlier indication in treating relapsed or refractory multiple myeloma. Third, the presentation of initial TAR-200 data from the SUNRISE-1 study in bladder cancer at the American Urological Association meeting. And finally, we announced positive top-line results from the Phase III Papillon study evaluating revivant in combination with chemotherapy in patients with newly diagnosed lung cancer with exon 20 insertion mutations. This is the first of several ongoing pivotal Phase III studies to read out for revivant-based regimens in EGFR-mutated lung cancer. In addition, I want to highlight the Phase II study data that we presented earlier this month at the World Congress of Dermatology for GnJ2113, our novel aura IL-23 receptor antagonist peptide in psoriasis. The findings suggest that JNJ2113 has broad potential across the spectrum of IL-23-mediated diseases, including inflammatory bowel disease. We are already advancing into Phase III in moderate to severe plaque psoriasis and initiating a Phase IIb in ulcerative colitis. And we'll continue to assess additional opportunities. We are very excited about the potential of this asset and believe it represents a billion-dollar-plus commercial opportunity. We also continue to defend the intellectual property associated with our medicines, including Stellara. In fact, we have reached settlements regarding our Stellara IP with both Amgen and Alvotek. We expect Amgen to launch in the U.S. on January 1, 2025, and Alvotek to launch in the U.S. on February 21, 2025. In all, our pharmaceutical business delivered very strong results. Our pipeline is progressing well, and we continue to be confident in meeting our 2025 sales target of $57 billion. We are excited to enter the backup of the year from a position of strength, and we have high expectations as we evolve to a two-sector Johnson & Johnson with a higher growth profile. I am now pleased to turn the call over to Jess to review our financial results in more detail.