Johnson & Johnson

Good morning and welcome to Johnson & Johnson's fourth quarter 2023 earnings conference call. All participants will be in a listen-only mode until the question and answer session of the conference. This call is being recorded. If anyone has any objections, you may disconnect at this time. If you experience technical difficulties during the conference, you may press star zero to reach the operator. I would now like to turn the conference call over to Johnson & Johnson. You may begin.

Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the fourth quarter and full year 2023 and our financial outlook for 2024. Joining me on today's call are Joaquin DeWato, Chairman and Chief Executive Officer, and Joe Wach, Executive Vice President, Chief Financial Officer. As a reminder, you can find additional materials, including today's presentation and associated schedules, on the investor relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position, and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of the date of this recording and are subject to certain 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 including our 2022 Form 10-K, which is available at investor.jnj.com and on the SEC's 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 on our 2023 performance and key milestones. as well as highlights from our enterprise business review. I will then review the fourth quarter sales and P&L results, as well as full year 2023 results for the enterprise. Joe will then close by sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. The remaining time will be available for your questions. To ensure we provide enough time to address your questions, we anticipate the webcast will last a little over 60 minutes. I am now pleased to turn the call over to Joaquin.

Thank you, Jess, and good morning, everyone. 2023 was a remarkable year for Johnson & Johnson. In becoming a two-sector company focused on innovative medicine and medtech, we strengthen our position as an innovation powerhouse. We break through science and transformative technology. We innovate across the entire patient pathway in ways no other company can. And as we share at our enterprise business review, we have a stronger growth and margin profile and are more focused and agile than ever before, which is what you see with today's results. I'm particularly proud of our Q4 results with innovative medicine operational sales, excluding the COVID-19 vaccine, growing by 9.5%, and medtech-adjusted operational sales growing by an impressive 9.1%. For the full year, we delivered strong and sustained performance with 9% operational sales growth excluding the COVID-19 vaccine and 10.8% adjusted operational earnings per share growth. These results reflect the breadth and competitiveness of our portfolio. And when I look at the milestones we achieved in 2023 and the promise of our pipeline, I have confidence in our guidance for 2024 and beyond. So, let's take a deeper look at the business and what we achieved last year. Starting with innovative medicine for the full year, we deliver above-market operational sales growth of 7.2%, excluding the COVID-19 vaccine. Our innovative medicine business continues to be fueled by growth from key brands and the acceleration of sales of new products. Our multiple myeloma portfolio is a good example, with significant contribution from recently launched products, including CARVICTI, TEKVAILI, and TALVEY. Turning to clinical trials, key results from the year included positive Phase III readouts for more than 10 of our inline and pipeline medicines, including CARVICTI in one to three prior lines of therapy in multiple myeloma, DARS-ALEX in frontline multiple myeloma transplant eligible patients, RIBREBAND in combination with chemotherapy, and RIBREBAND plus lacertinib in non-small cell lung cancer. And finally, TRENFAYA monotherapy in ulcerative colitis. In addition, we saw positive phase 1 and phase 2 readouts for nipocalimab and TAR200 and TAR210, and we initiated our phase 3 clinical development programs for milvexian and our targeted oral peptide JNJ2113. Beyond that, we received FDA breakthrough designation for TAR200 and for the treatment of bladder cancer and fast track designations for milvexian in atrial fibrillation, stroke, and acute coronary syndrome. And with 19 US and EU filings across our innovative medicine business in 2023, we have high expectations for the year ahead. Our recent announcement of a definitive agreement to acquire Ambrix to develop next-generation antibody drug conjugates further strengthens our oncology pipeline. Now, moving to MedTech. In 2023, we delivered full-year operational sales growth of 12.4% and full-year adjusted operational sales growth of 7.8%. For the first time, our MedTech team delivered more than $30 billion in sales as we continue to build a best-in-class business. We are accelerating growth through commercial execution, differentiated innovation, and moving into higher growth markets, as you saw with our successful integration of AbioMed and our recent acquisition of Laminar, which focused on eliminating the left atrial appendage in patients with non-valvular atrial fibrillation. And at the same time, we are making strong progress in our pipeline, including advancing our Tava surgical robot, Monarch approval in China for bronchoscopy, and continuing market expansion for Bellis, our robotic-assisted solution for total knee replacement with CE Mark approval in 2023. In electrophysiology, we have a lot of momentum in our pulsed field ablation portfolio. We announced regulatory approval a few weeks ago for the VariPulse PFA platform in Japan and have submitted for CE mark approval in the EU. The TruePulse generator has received approval in the EU. And we received first and only approval from the U.S. FDA for a zero fluoroscopy workflow for cardiac ablation. And in the fourth quarter, findings from our QDOT micro catheter Q efficiency study showed that very high power, short duration ablations improved quality of life and reduced healthcare utilization for atrial fibrillation patients. In vision, we are driving strong performance across our Technis IOLs and Oasis One Day family of contact lenses, including our most premium lens, Acuvue Oasis Max One Day, which has proven superiority in comfort and clarity versus the competition. Turning to AbioMed, we recently completed our Impella ECP pivotal clinical trial. In Q4, we also enrolled our first patient in the AbioMed Recover4 randomized controlled trial. As we look ahead, I have never been more excited about the future of our business. At our Enterprise Business Review, we share that we expect our innovative medicine business to grow 5% to 7% from 2025 to 2030, with our industry-leading pipeline and portfolio delivering more than 10 assets that have the potential to generate over $5 billion in peak year sales by 2030. We also expect a further 15 assets to have the potential for $1 to $5 billion in peak year sales. In 2024, we expect data readouts for many of these assets, including phase three trials for Trenfaya in IBD, Erleada in early stage prostate cancer, our targeted oral peptide, JNJ2113 in psoriasis, nipocallimab in myasthenia gravis, as well as aticapran and celtorexant in major depressive disorder. We also expect phase II readouts for our combination therapy, guselkumab and golinumab, GnJ4804 in psoriatic arthritis, nipocallimab in Sjogren's disease, and TAR200 in non-muscle-invasive bladder cancer. In MedTech, we share that we expect to grow at the upper range of our markets, which are anticipated to grow by 5% to 7% between 2022 and 2027, and that by 2027, we expect one-third of our revenue to be generated by new products. In 2024, we'll see strong progress towards these goals. In electrophysiology, that includes the full U.S. market release of QDOT microcatheter, and we are expecting C-mark approval for our pulse field ablation catheter, BariPulse, in Europe in the first half of 2024. We plan to submit an investigational device exemption to the FDA for Otava in the second half of 2024. And in a biomed, we expect U.S. commercial launch of Impella RP Flex with Smart Assist and an Impella ECP submission in 2024. As you can see, our pipeline is advancing. Our business is transforming. Before I turn the call to Jess and Joe, I want to thank our teams around the world for everything they do to help our patients. We have entered 2024 from a position of strength, and I'm confident in our ability to lead the next wave of health innovation. With that, I'll turn the call over to Jess.