Johnson & Johnson (NYSE:JNJ) Q4 2023 Earnings Call Transcript

Johnson & Johnson (NYSE:JNJ) Q4 2023 Earnings Call Transcript January 23, 2024

Johnson & Johnson beats earnings expectations. Reported EPS is $2.29, expectations were $2.27. Johnson & Johnson isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: 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. [Operator Instructions] I would now like to 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 business results for the fourth quarter and full year 2023 and our financial outlook for 2024. Joining me on today’s call are Joaquin Duato, Chairman and Chief Executive Officer; and Joe Wolk, Executive Vice President, Chief Financial Officer. As a remainder, 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 risk 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 SECs 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 the 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’m now pleased to turn the call over to Joaquin.

Joaquin Duato: 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 at MedTech, we strengthened our position as an innovation powerhouse. We breakthrough 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 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% at 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 delivered 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 CARVYKTI, TECVAYLI and TALVEY. Turning to clinical trials. Key results from the year included positive Phase III readout for more than 10 of our in-line and pipeline medicines, including CARVYKTI, in one to three prior lines of therapy in multiple myeloma. DARZALEX in front-line multi myeloma transplant eligible patients. RYBREVANT, in combination with chemotherapy and RYBREVANT plus lazertinib in non-small cell lung cancer. And finally TREMFYA monotherapy in Ulcerative Colitis. In addition, we saw positive Phase 1 and Phase 2 readout for nipocalimab and TAR-200 and TAR-210 and we initiated our Phase 3 clinical development programs for Milvexian and our targeted oral peptide JNJ-2113.

Beyond that, we received FDA breakthrough designation for TAR-200 for the treatment of bladder cancer and fast track designations for Milvexian in Atrial Fibrillation, Stroke, and Acute Coronary Syndrome. And with 19 U.S. 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 Ambrx 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 Ottava surgical robot, MONARCH approval in China for bronchoscopy and continued market expansion for VELYS, our robotic assisted solution for total knee replacement with CE Mark approval in 2023. In electrophysiology, we have a lot of momentum in our post-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 true pulse 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-FFICIENCY Study showed that very high power, short duration ablations improved quality of life and reduced health care utilization for atrial fibrillation patients. In Vision, we are driving strong performance across our TECNIS IOLs and OASYS 1-day family of contact lenses, including our most premium lens, ACUVUE OASYS MAX 1-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 RECOVER IV 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 shared 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 billion to $5 billion in peak year sales. In 2024, we expect data readouts for many of these assets, including Phase 3 trials for TREMFYA in IBD, ERLEADA in heavy (ph) stage prostate cancer, our targeted oral peptide JNJ-2113 in psoriasis, Nipocalimab in Myasthenia Gravis as well as aticaprant and seltorexant in major depressive disorder.

We also expect Phase 2 readouts for our combination therapy, guselkumab and golimumab, JNJ-4804 in psoriatic arthritis, nipocalimab in Sjogren’s Disease and TAR-200 in non-muscle invasive bladder cancer. In MedTech, we shared 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 see strong progress towards these goals. In electrophysiology that includes the full U.S. market release of QDOT MICRO Catheter and we are expecting CE Mark approval for our post-field ablation catheter VARIPULSE in Europe in the first half of 2024. We plan to submit an investigational device exemption to the FDA for Ottava in the second half of 2024.

And in Abiomed, 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 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.

Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally.

Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally.

Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%.

Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from 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 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth.

Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I’ll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%.

MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China’s VBP price concessions in Spine.

Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth 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 margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine.

We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022.

This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will 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 fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I’m now pleased to turn it over to Joe.

Joseph Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As Joaquin and Jessica commented, 2023 was a strong year for Johnson & Johnson evidenced by notable top and bottom line performance beats relative to what we guided to 2023 at this time last year. We are particularly proud of the innovation we advanced to strengthen our development pipelines, the continued expansion of our portfolio and investments made for future success. All of this provides us with a strong foundation as we enter 2024. Thus far during the call, you’ve heard about sales and income performance in 2023. So now let’s dive into some detail on capital allocation highlights. We generated free cash flow of more than $18 billion in 2023. At the end of the year, we had approximately $23 billion of cash and marketable securities and approximately $29 billion of debt for a net debt position of $6 billion.

We maintained a healthy balance sheet and robust credit rating, underscoring the strength of Johnson & Johnson’s financial position, which enables us to strategically invest and deploy capital to unlock value. To that end, we executed against all of our capital allocation priorities in 2023. For starters, we invested more than $15 billion in research and development or 17.7% of sales, an all-time high for the company as we remain one of the top investors in R&D across all industries. Jessica provided R&D investment by business segment, information we will continue to provide on a quarterly basis moving forward. As far as dividends, 2023 marked the 61st consecutive year in which we increased our dividend. We know this use of capital is a priority for our investors, and we plan to continue to increase our dividend annually.

We also deployed, announced or committed over $3 billion in strategic value creating inorganic growth opportunities in the last 12 months. This amount includes the recent Ambrx and Laminar transactions as well as more than 50 smaller early-stage licensing deals and partnerships that complement our current Innovative Medicine and MedTech pipelines. Finally, share repurchases. In early 2023, we completed the $5 billion share repurchase program initiated in late 2022 and in combination with our dividend, returned over $14 billion to shareholders last year. Through the Kenvue separation, we further reduced the Johnson & Johnson’s outstanding share count by 191 million shares or approximately 7% without the use of cash and in a tax-free manner. Looking ahead to 2024, Johnson & Johnson’s robust free cash flow generation should continue to solidify our already strong financial foundation and fuel further investment leading to growth for our business or returns to shareholders.

Now turning to our full year 2024 guidance. Today, we are confirming the 2024 guidance for those items previewed at our enterprise business review in early December by filling in some of the details. We expect operational sales growth for the full year to be in the range of 5% to 6% or $88.2 billion to $89 billion. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales. In Innovative Medicine, we expect 2024 to deliver a 13th consecutive year of above market growth, driven by market share gains from key brands such as DARZALEX, TREMFYA and ERLEADA as well as continued adoption of recently launched newer products such as CARVYKTI, TECVAYLI, TALVEY and SPRAVATO. In MedTech, we remain focused on executing our key value drivers: first, advancing our differentiated pipeline such as programs in pulse field ablation, Abiomed and surgical robotics, further shifting our portfolio into high-growth markets; second, expanding our reach and scale around the world; and third, building operational resilience across our portfolio.

We don’t speculate on future currency movements, but utilizing the euro spot rate relative to the U.S. dollar as of last week at $1.09 as well as other major currencies, we estimate there would be a slight unfavorable impact of $400 million or a negative 0.5% on reported sales growth for the year. Turning to other items on our P&L. We expect our 2024 adjusted pretax operating margin to improve by approximately 50 basis points driven primarily by a continuation of efficiency programs across the organization. We expect this to be partially offset by anticipated STELARA biosimilar entrants in Europe in the second half of this year and some lingering inflation impact in MedTech inventory that will flow through 2024’s P&L. This margin improvement encompasses dilution of additional investment associated with our planned acquisition of Ambrx, which will be treated as a business combination.

Now we do acknowledge that this 50 basis point improvement simply gets us back to what your models expected, given the elevated Q4 2023 R&D investment for new pipeline assets. Regarding other income and expense, we anticipate income to be $1.2 billion to $1.4 billion for 2024. This is less than the 2023 amount driven by the impact of actuarial assumptions on certain employee benefit programs such as lower discount rates. We are comfortable with you modeling net interest income between $450 million and $550 million, consistent with 2023 levels. Finally, we are projecting an effective tax rate for 2024 in the range of 16% to 17% based on current tax laws and anticipated geographic income mix across our businesses. This tax rate takes into account an increase of approximately 1.5% or 150 basis points relative to the recently enacted Pillar 2 legislation.

We continue to believe the U.S. Treasury’s current perspective on Pillar 2 is harmful, reducing U.S. incentives for innovation and resulting in U.S. based multinational companies paying more tax revenue to foreign governments. Our full year share count calculation for adjusted earnings per share in 2024 will include the remaining benefit equal to approximately 120 million shares from the approximately 191 million net share reduction in outstanding J&J shares following the Kenvue exchange offer. Given all these factors, we expect adjusted operational earnings per share to grow 7.4% at the midpoint for a range of $10.55 to $10.75. Based on the euro spot rate of 1.09 from last week, we do not estimate any currency impact on earnings per share.

I’ll now provide some qualitative considerations on quarterly phasing for your models. We expect Innovative Medicine sales growth to be slightly stronger in the first half of the year compared to the second half, given the anticipated entry of STELARA biosimilars in Europe towards the middle of the year. This headwind will be partially offset by continued uptake from our recently launched products. We project MedTech operational sales growth to be relatively consistent throughout the year, expecting procedures in 2024 to remain above pre-COVID levels. The first half of the year will continue to have modest impact from Russia sanctions as our licenses are approved. We anticipate China VBP pricing for surgical IOLs and orthopedic sports to begin in 2024 with impacts from 2023 VBP in electrophysiology, Endocutters, Energy, Spine and Trauma to begin to anniversary throughout 2024.

Regarding EPS phasing, it is important to highlight that the first half of the year will benefit from the full 191 million net share reduction following the Kenvue exchange offer with only a partial comparative benefit in the third quarter versus Q3 2023 and the fourth quarter being neutral versus Q4 2023. So based on the foundation strengthened in 2023 and numerous catalysts that Joaquin outlined across our business in 2024, we are confident in our ability to achieve both near and long-term financial targets. I’d like to close by thanking our colleagues for their dedication and commitment to benefit patients around the world. It is their effort that enables Johnson & Johnson to deliver innovative therapies and solutions that address serious unmet medical needs and creates long-term sustainable value for shareholders.

With that, I’m now pleased to turn the call over to Kevin to begin the Q&A portion of the call.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question today is coming from Joanne Wuensch from Citi. Your line is now live.

Joanne Wuensch: Good morning, and thank you for taking the questions. With my one question, I’m curious why you’re looking for 2024 procedure volumes to remain above pre-COVID levels and your expectations for how long that will last? Thank you.

Joaquin Duato: Thank you, Joanne, and good morning, everyone. First, let me remark the strong close of our MedTech business in 2023. We delivered annually more than $30 billion in sales, which is — were all-time high in our company history with operational — adjusted operational growth in the fourth quarter of 9.1. So very strong results across the board in electrophysiology, in heart (ph) recovery, in surgery, in orthopedics and in Vision. So when we think about our results in 2023, we think it’s going to be aligned with our competitor composite for the year, but ahead of our competitor composite in the fourth quarter. Now, certainly, COVID-19 impacts have stabilized globally and while we continue to see some challenges, macro challenges from the point of view of inflation, hospital staffing and the like, there is a bolus of patients coming out into the market after COVID-19, which has made 2023 market growth faster than historical averages.

And we see that trend continuing into a good part of 2024 and therefore, being a tailwind into 2024. There’s a lot of factors playing into that. But overall, we see the amended procedures continuing into at least the first half of 2024. Now we also have a number of tailwinds on our side other than the procedures that make me optimistic about 2024. We have the trajectory of Abiomed in heart recovery, which is very strong with the adoption of Impella 5.5. We file already for our Impella ECP, which is the smaller version of Impella CP. In orthopedics, we continue to move into higher growth markets with the expansion of our VELYS Robotic-Assisted Solution. We obtained CE Mark in Europe. In surgery, we continue to launch innovations across our surgery business with the [indiscernible], in Energy and ECHELON 3000 as a stapler.

And we continue to see good expansion of our Plus Sutures too. In our Vision business, we are expanding our TECNIS family into the premium segment of IOLs. And finally, and I know this is an area of interest to you in electrophysiology, we continue to expand our PFA portfolio of catheters. We obtained approval for our VARIPULSE, loop catheter, PFA loop catheter in Japan at the beginning of this year. And we continue to roll out the global launch of QDOT MICRO, our newest radio frequency ablation catheter. So overall, a number of catalysts and tailwinds into our MedTech business into 2024. As we discussed in our Enterprise Business Review, we continue to see our MedTech business growing at the upper end of our markets and becoming a best-in-class competitor in MedTech.

Operator: Thank you. Next question is coming from Terence Flynn from Morgan Stanley. Your line is now live.

Terence Flynn: Great. Thanks so much for taking the question. Maybe two-part for me on CARVYKTI. I noticed an ODAC panel was just announced to review the CARTITUDE-4 data. I was just wondering if you can talk about the focus of that upcoming meeting and your confidence in an on-time label expansion for CARTITUDE-4? And then the second part of the question is I know in manufacturing, you’ve been ramping up in Belgium, and I believe that facility is now up and running. So how should we think about supply for 2024 broadly for CARVYKTI? Thank you.

Joaquin Duato: Thank you, Terence. So with more than 2,000 patients treated CARVYKTI, it’s already the fastest launch CAR-T in the market overall and we are pleased to continue to see quarter-over-quarter sequential growth in CARVYKTI. And overall, we remain confident in two things, both the risk benefit of CARVYKTI in the indication that is being studied and at the same on the potential of CARVYKTI to be $5 billion plus asset at peak year sales. Regarding the ODAC that you commented, we are very confident on the data of our Phase 3 CARTITUDE-4 study that as a reminder, support the efficacy and safety of CARVYKTI in one to three prior lines in treatment of patients with relapsed/refractory multiple myeloma. We presented the results at ASCO, as you know.

And we also published those results in the New England Journal of Medicine. And we very much look forward to review the updated survival and safety data with the FDA ODAC in the future. We are committed to work with the FDA in the continued development of CARVYKTI. And we continue to have the focus on bringing this in immunotherapy to multiple myeloma patients in earlier lines of therapy. We are working with the FDA towards a PDUFA date for our CARTITUDE-4 indication in April 5, and with EMEA towards an anticipated CHMP opinion in the first quarter of 2024. So overall, we feel confident about the risk benefit profile in this indication and about the future of CARVYKTI. Regarding your manufacturing question, we’ve done a significant progress in our manufacturing capacity, which is a major driver in the continuous growth of CARVYKTI.