Johnson & Johnson (NYSE:JNJ) Q2 2023 Earnings Call Transcript

Johnson & Johnson (NYSE:JNJ) Q2 2023 Earnings Call Transcript July 20, 2023

Johnson & Johnson beats earnings expectations. Reported EPS is $2.8, expectations were $2.62.

Operator: Good morning, and welcome to Johnson & Johnson’s Second 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. [Operator Instructions] I will now turn the conference call over to Johnson & Johnson. You may begin.

Jessica Moore: 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 Wolk, Executive Vice President, Chief Financial Officer; and Erik 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.j&j.com and on the SEC website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or license 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, Erik 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.

Joaquin Duato: 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, our MedTech pipelines and a successful initial public offering of Kenvue. 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 off Kenvue shares through an exchange offer as the next step in the separation of Kenvue. 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 Abiomed acquisition.

On a pro forma basis using sales publicly reported by Abiomed 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 radio frequency or pulsed field based on patient needs.

The Abiomed integration continued 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 Abiomed’s public 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 multiyear growth platform for Johnson & Johnson. In orthopedics, the VELYS robotic assisted solution is poised for further acceleration, having recently received CE and CA Mark international approvals.

In Surgery, we are pleased with our progression on Ottava, 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 OASYS MAX and TECNIS Eyhance 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 CARVYKTI and TECVAYLI. 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 U.S. FDA for all three prospective indications for Milvexian, our Factor XI oral anticoagulant in partnership with Bristol Myers 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. Second, the recent submission of a supplemental BLA for CARVYKTI 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 3 PAPILLON study evaluating RYBREVANT 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 3 studies to read out for RYBREVANT based regimens in EGFR mutated lung cancer. In addition, I want to highlight the Phase 2 study data that we presented earlier this month at the World Congress of Dermatology for JNJ-2113, our Novel Oral IL23 Receptor Antagonist Peptide in Psoriasis. The finding suggests that JNJ-2113 has broad potential across the spectrum of IL23 mediated diseases, including inflammatory bowel disease. We are already advancing into Phase 3 in moderate to severe plaque psoriasis and initiating a Phase 2b in ulcerative colitis and will continue to assess additional opportunities.

We are very excited about the potential of this asset and believe it represents $1 billion plus commercial opportunity. We also continue to defend the intellectual property associated with our medicines, including STELARA. In fact, we have reached settlements regarding our STELARA IP with both Amgen and Alvotech. We expect Amgen to launch in the U.S. on January 1, 2025 and Alvotech 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 back half 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. Jess?

Jessica Moore: Thanks, Joaquin. As a reminder on May 8, 2023, Kenvue, Inc., closed its initial public offering. Johnson & Johnson continues to own 89.6% of total outstanding shares of Kenvue’s common stock and remains the majority shareholder. Therefore, the following financial results continue to include the consumer health business with the 10.4% of consumer health’s net earnings no longer attributed to Johnson & Johnson being adjusted for in other income and expense from the date of the IPO through the end of the quarter. Starting with Q2 2023 sales results. Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5%, as currency had a negative impact of 1.2 points.

In the U.S., sales increased 10.2%. In regions outside the U.S., our reported growth was 2.2%. Operational sales growth outside the U.S. was 4.7% with currency negatively impacting our reported OUS results by 2.5 points. Operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth with 6.2% worldwide, 8% in the U.S. and 4.4% outside the U.S. Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1%, respectively, compared to the second quarter of 2022.

On an operational basis, adjusted diluted earnings per share increased 9.7%. I will now comment on business segment sales performance highlights. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the second quarter of 2022, and therefore, exclude the impact of currency translation. Beginning with the Pharmaceuticals segment. Worldwide Pharmaceutical sales of $13.7 billion increased 3.1%, with growth of 9.2% in the U.S. and a decline of 4% outside the U.S. Operational sales growth increased 3.8% as currency had a negative impact of 0.7 points. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe.

Pharmaceutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 23.4% and 26.9%, respectively. STELARA grew 8%, driven by market growth and IBD share gains in the U.S., partially offset by unfavorable patient mix and increased rebates. TREMFYA grew 18.9%, driven by market growth and share gains in the U.S., partially offset by unfavorable patient mix. Growth of 16.5% in pulmonary hypertension was driven by favorable patient mix, share gains in the U.S. and market growth. Turning to newly launched products. We continue to make progress on our launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO.

We are also encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. Total pharmaceutical sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I will now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points. Abiomed contributed 4.8% to operational growth. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.9%.

Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued uptake of recently launched products and commercial execution, partially offsetting growth in the quarter was the impact of volume based procurement in China, as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 56.9%, which includes $331 million related to Abiomed. Electrophysiology is a major contributor to the growth with a double-digit increase of 25.9%. This reflects strong growth in all regions, including Europe, driven by our comprehensive portfolio, including the most recently launched QDOT RS catheter. Orthopedics operational growth of 5.7%, reflects strong procedure recovery, success of recently launched products, such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELYS Robotic assisted solution.

Growth was partially offset by the impact of volume-based procurement in China and continued supply challenges primarily in hips. Operational growth of 8.4% and surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses and other, as well as strength of new products, including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges. Although these continue to improve.

Moving to the Consumer Health segment. Worldwide Consumer Health sales of $4 billion increased 5.4% with growth of 6% in the U.S. and 5% outside the U.S. Operational sales growth increased 7.7% as currency had a negative impact of 2.3 points. Sales in the second quarter accelerated sequentially from Q1 for all consumer health franchises, primarily driven by strategic price increases and growth in OTC globally, due to strong pain performance, and cold, cough and flu season. Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.kenvue.com. Now turning to our consolidated statement of earnings for second quarter of 2023, I’d like to highlight a few noteworthy items that have changed compared to the same quarter of last year.

Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix and lower COVID-19 vaccine supply network related costs in the pharmaceutical business, partially offset by commodity inflation in the consumer and MedTech businesses. Selling, marketing and administrative margins deleveraged 20 basis points, driven by incremental costs to support the standalone consumer health business, partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter. The $3.8 billion invested was a 3.4% increase versus the prior year. The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022.

This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related cost. And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson & Johnson, which resulted in a $37 million reduction in consolidated earnings. Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax cost incurred as part of the planned separation of the consumer health business, due to the internal reorganization of certain international subsidiaries. Excluding special items the effective tax rate was 16.6% versus 15.4% in the same period last year.

I encourage you to review our upcoming second quarter 10-Q filing 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. Now let’s look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%, primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by higher milestone payments.

MedTech margins improved from 26.5% to 28.6%, driven by favorable intellectual property related litigation settlements and cost management initiatives, partially offset by commodity inflation. Finally, consumer health margins declined from 25.9% to 23.5%, due to incremental costs to support the standalone consumer health business, foreign exchange impacts, and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson & Johnson defers from the financial results reported by Kenvue Inc. this morning. The difference is primarily driven by incremental costs required to run Kenvue as an independent company. Additional differences also exist on an after tax basis, due to the application of different tax rates.

This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I’m now pleased to turn the call over to Joe Wolk. Joe?

Photo by Myriam Zilles on Unsplash

Joe Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As previously shared, we reported particularly strong results across all segments for the second quarter and the first-half of 2023. During the second quarter, adjusted operational sales growth by pharmaceuticals excluding COVID-19 revenue accelerated 6.2% over the first quarter of 2023. Similarly, on a sequential basis, MedTech operational sales increased to 4.5% over an already strong first quarter. During the first-half of the year we executed against our long-term business strategy and achieved key clinical and regulatory milestones. These advancements provide a strong foundation for long-term growth and are a testament to the hard work and dedication of our talented colleagues around the world.

We also made considerable progress toward the separation of Kenvue. On May 8th, as partial consideration for the transfer of the Consumer Health business, Kenvue paid $13.2 billion to Johnson & Johnson from the net proceeds of the initial public offering and debt financing transactions in connection with the separation. Today, we were pleased to announce an update on our next step toward the separation of Kenvue, subject to market conditions, our intention is to split off Kenvue shares through an exchange offer as our next step in the separation. As part of the proposed exchange offer, Johnson & Johnson’s shareholders will have the choice to exchange all some or none of their shares of Johnson & Johnson common stock for shares of Kenvue common stock subject to the terms of an offer.

We believe a split off is the most advantageous form of separation for Johnson & Johnson, Kenvue and our shareholders, specifically an exchange offer provides Johnson & Johnson the potential opportunity to acquire a large number of outstanding shares of Johnson & Johnson common stock at one time in a tax free manner for U.S. federal income tax purposes without reducing overall cash or future financial flexibility. Further, following the completion of the exchange offer, Kenvue would most likely have a shareholder base that would have made the election to own its shares. The exact timing of our decision to launch an exchange offer will, as stated earlier, depend on market conditions, but the launch of the tender could occur as early as the coming days.

Offer terms for the exchange inclusive of applicable discounts, as well as the duration of the exchange tender period would be set upon launch. We understand that you may have questions on this process. At this point, there are no additional details about the contemplated split off to share, but we are committed to providing timely updates as appropriate. Let’s now turn to cash and capital allocation. We ended the second quarter with approximately $29 billion of cash and marketable securities and approximately $46 billion of debt for a net debt position of $17 billion, inclusive of approximately $7 billion of 10 Kenvue net debt. Free cash flow through the second quarter was approximately $5.4 billion, compared to $8.1 billion in the prior year.

The second quarter reflects elevated tax payments of approximately $2 billion related to TCJA and past audit related matters. Our capital allocation priorities remain unchanged with continued investment in our business being the highest priority to drive new and better solutions for patients, followed by dividends, increasing on an annual basis, adding strategic opportunities for inorganic growth, and share repurchases when attractive. Our R&D investment in the first-half of 2023 was $7.4 billion or approximately 15% of sales. This includes external investments such as our recently announced partnership with Cellular Biomedicine Group on two next generation CAR-Ts for the treatment of B-cell malignancies further broadening our cell therapy portfolio.

In April, we announced our 61st consecutive year of dividend increases and in combination with the completion of our $5 billion share repurchase program authorized by the Board in September of 2022, and completed earlier this year, we returned $8.5 billion to shareholders in the first-half of 2023. Let’s discuss our outlook for the balance of 2023. Before I get into the specifics of guidance, in light of the potential Kenvue split off transaction I will remind you that our updated full-year guidance today continues to include results from the Consumer Health Business given Johnson & Johnson remains the majority shareholder of Kenvue. I suspect you already know this, but it would not be accurate to subtract any guidance provided separately by Kenvue from total Johnson & Johnson guidance and assume that the resulting total reflects guidance for the new Johnson & Johnson.

When Johnson & Johnson is no longer the majority shareholder of Kenvue, we will provide timely updated new Johnson & Johnson guidance that will reflect among other things the removal of Consumer Health’s current contribution to Johnson & Johnson’s performance, as well as any updates to Johnson & Johnson’s outstanding share count. So with that context, moving on to our full-year guidance. Based on the strong results delivered in the quarter, like we did in April, we are again raising full-year operational sales and EPS guidance, despite some strategic items not accretive to EPS as detailed on this schedule. Specifically the lost income related to the approximate 10% non-controlling interest in Kenvue and the acquired in process research and development cost related to our investment in Cellular Biomedicine Group.

We now expect operational sales growth for the full-year 2023 to be in the range of 7% to 8% or up $1.4 billion in the range of $99.3 billion to $100.3 billion on a constant currency basis and adjusted operational sales growth in the range of 6% to 7%. As you know, we don’t speculate on future currency movements. Last quarter, we noted that we utilized the Euro spot rate relative to the U.S. dollar at $1.10. The Euro spot rate as of mid-last week remains at $1.10. However, the U.S. dollar has strengthened versus other select currencies such as the Won and the Yen. As such, we now estimate a negative impact of foreign currency translation of approximately 500 basis points resulting in estimated reported sales growth between 6.5% to 7.5%, compared to 2022 with a midpoint of $99.3 billion.

Regarding other lines on the P&L, we now anticipate a slight improvement to our adjusted pretax operating margin driven by expense management. We have reduced our other income estimate to be in the range of $1.6 billion to $1.8 billion, primarily related to the company’s 10.4% non-controlling interest in Kenvue. Regarding interest income and expense, we now anticipate a reduction of net interest expense to the range of a $150 million to $250 million, due to interest income on the net proceeds linked to the Kenvue separation. And finally, based on current tax law, we are maintaining our effective tax rate estimate in the range of 15.5% to 16.5%. These changes result in us increasing our adjusted operational earnings per share guidance by $0.10 per share to a range of $10.60 to $10.70 or $10.65 at the midpoint on a constant currency basis.

Constant currency growth of 5% at the midpoint. While not predicting the impact of currency movements, assuming recent exchange rates I previously referenced our reported adjusted earnings per share for the year assumes no additional foreign exchange impact. As such, our reported adjusted earnings per share for the year increases by $0.10 per share to a range of $10.70 to $10.80 or $10.75 at the midpoint, reflecting growth of 6% at the midpoint. While we do not provide guidance by segment or on a quarterly basis, let me offer some qualitative considerations to support your modeling. In MedTech, we continue to anticipate stable procedure volumes and healthcare staffing levels in the back half of the year with normal seasonality. We expect continued competitive performance attributable to commercial execution recently launched products and improvement in supply.

Headwinds from volume based procurement in China, as well as potential impacts from international sanctions in Russia are expected to be higher in the second-half than the first-half of the year. In Pharmaceuticals, we continue to expect to deliver our 12th consecutive year of above market growth in 2023, driven by key assets and continued uptake of our newly launched products. We expect continued strong growth in the back half of the year slightly higher than the first-half. When modeling consumer health growth rates in 2023, it’s important to take into consideration prior year comparisons with lapping price increases in the back half of the year. Given the strong momentum in our pharmaceutical business and the upcoming clinical milestones mentioned earlier we remain very confident in our ability to meet our 2025 pharmaceutical sales target of $57 billion.

Looking ahead, we have many important catalysts for the remainder of the year that can drive meaningful near and long-term value. Beyond the separation, in the near-term, we are continuing to drive performance in MedTech with better commercial execution and recently launched innovative products being a significant factor in driving the continued higher growth trajectory across the MedTech business. Many of the solutions mentioned are early in their commercialization, which means there are still significant opportunity ahead. For example, in electrophysiology we are excited to begin the commercialization of the QDOT MICRO Catheter in the U.S. during the second-half of this year. In Orthopaedics, the VELYS robotic assisted solution, recently received regulatory approvals in Europe, and we plan to launch it in key European countries by the end of this year.

And in Vision, we are seeing the benefits of our recently launched innovations such as ACUVUE OASYS 1-Day multifocal, which is driving Johnson & Johnson’s market share growth in the large and growing presbyopia market. We look forward to continued growth from this and other recent Vision launches. Related to our pharmaceutical business, we are excited about upcoming advancements in our pipeline with a number of important regulatory and clinical milestones for our key future assets, including on the regulatory front there is expected approval of [daratumumab] (ph) in relapsed or refractory multiple myeloma. Clinically, we expect a Phase 3 data for TREMFYA for Crohn’s disease and ulcerative colitis. The results of the MARIPOSA study of RYBREVANT plus lazertinib in front line non-small cell lung cancer with the opportunity to potentially present that data at an upcoming major medical meeting.

Phase 1 data for TAR-210 in non-muscle invasive bladder cancer, and Phase 2 data for Nipocalimab in rheumatoid arthritis. A couple of other items to highlight. In case you missed them, we recently published our Health For Humanity report our U.S. Pharmaceutical pricing transparency report and our U.S. patent table, all of which can be found on our website. Also, a reminder that we will be hosting an enterprise business review featuring both Pharmaceutical and MedTech at the New York Stock Exchange on December 5th. I’ll conclude my prepared remarks by reiterating that we have had a strong first-half of the year both financially and operationally and we expect to continue to build upon that momentum in the second-half of this year. With that, I will now turn the call over to Erik Haas.

Erik Haas: Thank you, Joe. On Tuesday, July 18th in the case of Valadez v Johnson & Johnson, a jury in Alameda County, California ruled in favor of the plaintiff on this talc product liability claims. We intend to pursue an appeal based on the erroneous rulings by the trial judge that prevented us from sharing with the jury critical facts that demonstrate that plaintiff’s exceedingly rare form of mesothelioma was not caused by baby powder. Without the benefit of that evidence, the jury rendered a verdict that is irreconcilable with a decades of independent scientific evaluations confirming Johnson’s baby powder is safe, does not contain asbestos and does not cause cancer. The research, clinical evidence in over 40-years of studies by independent medical experts around the world continue to support the safety of our cosmetic talc.

The verdict award will not be paid, while the bankruptcy proceeding continues, and this decision has absolutely no impact on that process, which has the support of lawyers representing the majority of claimants. We remain focused on all claimants having the opportunity to vote and decide for themselves on a — our plan to compensate them in a timely and efficient manner. Looking ahead with respect to the bankruptcy re-filing by LTL, the bankruptcy judge is expected to rule by August 2nd the motion to dismiss hearing that took place in the last week of June. In addition, a hearing on the motion for LTL’s proposed, reorganization plan and voting procedures process, and the path forward is scheduled for August 22nd. As we previously stated, Johnson & Johnson stands by its physician that is talcum powder products are safe as confirmed through decades of numerous independent scientific tests and studies.

I would now like to hand the call back over to Jess.

Jessica Moore: Thanks, Erik. This concludes the prepared remarks section of our call. I will now turn the discussion over to the Q&A portion of the call. Kevin, can you please provide instructions for those wishing to ask a question.

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Q&A Session

Operator: [Operator Instructions] Our first question is coming from Larry Biegelsen from Wells Fargo. Your line is now live.

Larry Biegelsen: Good morning. Thanks for taking the question and congratulations on another strong quarter here. For Erik, if Judge Kaplan dismisses the bankruptcy proposal, what’s the backup settlement in mind that would proceed outside of bankruptcy that could ring fence the cost? And Joe or Joaquin, in MedTech, how are you thinking about the sustainability of the first half strength where you grew 8% organic? Do you still expect the MedTech market to grow 5% to 7% this year with J&J in that range, it seems conservative? Thanks for taking the question.

Erik Haas: Larry, hi it’s Erik. Thanks for the question. If Judge Kaplan dismisses the bankruptcy, we will be back in the tort system, and in that scenario we intend to fight the claims aggressively. And indeed, based upon the indicated decades of scientific support for the safety of our talc products, the fact that our talc products do not contain asbestos and the fact that our talc products do not cause cancer, we feel very confident in our ability to continue to prevail in the vast majority of claims as we have done in the past in the tort system.

Joaquin Duato: Thank you, Larry, and thank you for complimenting us on the results on the first quarter and also on the MedTech ones. When it comes to the MedTech results, the growth in the first-half of the year was north of 8%. So this is a continuation of the sustained improvement in our performance that we have had in the last couple of years in which we have grown at or above our competitive composite. When we think about the dynamics that are driving our growth, which are multiple. One is the recovery in the overall market procedures, which is helping our improved commercial execution and very especially the cadence and flow of new product launches that we are having in the market. We see our trajectory in MedTech in the first-half of the year continuing in the second-half of the year. So we expect a similar trajectory for MedTech in the second-half of the year.

Joe Wolk: Yes, Larry, maybe I might just add to Joaquin’s comments. The only thing that is limiting the growth, I would say, in the back half of the year is China volume-based pricing, as well as some international sanctions in Russia, but those are already incorporated into our outlook for the balance of 2023. So we feel we have those well in hand. If there’s a little bit of abatement on either of those fronts, it portends well for the future.

Operator: Thank you. Our next question is coming from Vamil Divan from Guggenheim Securities. Your line is now live.

Vamil Divan: Great. Thank you so much for taking my questions. So maybe just one on the guidance commentary. So appreciate what you said around the Kenvue and Cellular Biomedicine dynamics. But I’m curious about STELARA, because you have the two settlements now. I don’t think there’s any chance for having a biosimilar enter this year. And I think before, you had expected that. So I’m curious what your expectations are now in terms of biosimilar entry before Amgen? And how does that impact sort of your guidance expectation for this year, and if you want to comment on sort of next year or sort of how it might impact 2025 with the $57 billion there? And then one also, other one if I could just on MARIPOSA, we’ve been getting a lot of questions just sort of what’s changed there?

I know before, the study is supposed to end next year. We obviously heard about the interim on your last earnings call. But then in the last few weeks, it sounds like there’s a chance we’ll get the data sooner this year than you may be able to present it. So kind of what’s changed from April to now to give you a sense that the data may come a little bit earlier and give you a chance to present it this year? Thank you.