Johnson & Johnson held a conference call for their second quarter 2023 earnings and provided a presentation for investors. Jessica Moore, Vice President of Investor Relations, welcomed participants and 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, were also present. The company cautioned investors not to rely on the forward-looking statements as they are subject to certain risks and uncertainties. The products and compounds discussed were developed in collaboration with strategic partners or licensed from other companies.

Johnson & Johnson had a successful second quarter of 2023, with strong sales and earnings growth, resulting in the company's confidence to raise expectations for the year. Joaquin Duato will open the webcast with a few comments on the quarter and outlook, followed by Jess reviewing sales and P&L results, Joe providing business and financial commentary, and Erik providing comments on talc litigation. The webcast is expected to last 75 minutes and will include the announcement of the split off of Kenvue shares through an exchange offer.

In the second quarter of 2023, MedTech saw 14.7% operational and 9.9% adjusted operational growth, excluding the Abiomed acquisition. Highlights include the publication of clinical data supporting the safety and effectiveness of QDOT, a new ablation catheter for atrial fibrillation, and the completion of enrollment in the third clinical study evaluating pulsed field ablation solutions. The Abiomed integration is on track and saw 20% growth compared to the same period last year as a standalone company. Johnson & Johnson anticipates heart recovery to become a significant multiyear growth platform.

Johnson & Johnson has seen success in orthopedics, surgery, vision, and pharmaceuticals in the second quarter of the year. In orthopedics, the VELYS robotic assisted solution has received CE and CA Mark international approvals. In Surgery, they have made progress on Ottava, their next generation soft tissue surgical robotic system. In Vision, they have launched products such as ACUVUE OASYS MAX and TECNIS Eyhance. In pharmaceuticals, they have delivered above market operational growth of 6.2%, excluding the COVID-19 vaccine. They have achieved important regulatory and operational milestones, including fast track designation from the U.S. FDA for Milvexian, a Factor XI oral anticoagulant, and a supplemental BLA for CARVYKTI. They have also presented initial TAR-200 data from the SunRISe-1 study in bladder cancer.

Johnson & Johnson 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. They have also presented Phase 2 study data at the World Congress of Dermatology for JNJ-2113, an oral IL23 Receptor Antagonist Peptide in Psoriasis. They have reached settlements with Amgen and Alvotech regarding their STELARA IP and expect Amgen to launch in the U.S. on January 1, 2025 and Alvotech to launch in the U.S. on February 21, 2025. Johnson & Johnson are confident in meeting their 2025 sales target of $57 billion and are excited to enter the back half of the year from a position of strength.

In the second quarter of 2023, Johnson & Johnson reported worldwide sales of $25.5 billion, a 6.3% increase from the same quarter the previous year. Operational sales growth, excluding currency effects, was 7.5%. In the US, sales increased 10.2%, while outside the US sales increased 2.2%. Net earnings were $5.1 billion and diluted earnings per share was $1.96, an 8.1% increase from the same quarter the previous year. Adjusted net earnings increased 6.5% and adjusted diluted earnings per share increased 9.7%.

The Pharmaceuticals segment saw a 3.1% increase in worldwide sales of $13.7 billion, with 9.2% growth in the U.S. and a 4% decrease outside the U.S. Excluding COVID-19 vaccine sales, operational sales grew 6.2%, with 9.9% growth in the U.S. and 1.5% growth outside the U.S. Growth was driven by key brands and recently launched products, with DARZALEX, ERLEADA, STELARA, TREMFYA, and pulmonary hypertension all showing double-digit growth. This increase was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, as well as competitive pressures on IMBRUVICA. The MedTech segment was not discussed.

MedTech sales worldwide increased 12.9%, with 14.6% growth in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7%, with Interventional Solutions and Electrophysiology delivering strong growth. Orthopedics experienced a 5.7% operational growth, while Surgery and Vision saw 8.4% and 6.9% growth respectively. This growth was driven by procedure recovery, success of recently launched products, global expansion of digital solutions, and price actions. However, this growth was partially offset by the impact of volume-based procurement in China and supply constraints.

In the second quarter of 2023, Kenvue reported a 5.4% increase in worldwide Consumer Health sales of $4 billion, with growth of 6% in the U.S. and 5% outside the U.S. Cost of products sold leveraged by 80 basis points, while selling, marketing and administrative margins deleveraged 20 basis points. Research and development was 15% of sales and increased by 3.4% compared to the prior year, while other income and expense was income of $60 million.

In the second quarter of 2023, Johnson & Johnson saw an increase in their adjusted income before tax for the enterprise as a percentage of sales from 34% to 34.6%. This was attributed to favorable product and patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by unfavorable segment mix, commodity inflation, and higher milestone payments. Additionally, the effective tax rate was 23.9%, and the company also provided an adjusted income before tax by segment.

Johnson & Johnson reported strong sales and earnings for the second quarter of 2023, with pharmaceuticals and MedTech sales increasing sequentially. They also made progress towards the separation of Kenvue, with Kenvue paying $13.2 billion to Johnson & Johnson as partial consideration. However, due to different costs associated with running Kenvue as an independent company, there are differences in the reported income before tax and after tax for the consumer health business.

Johnson & Johnson announced an update on their plans to separate Kenvue through an exchange offer, which would allow Johnson & Johnson to acquire a large number of outstanding shares of Johnson & Johnson common stock at one time in a tax free manner. The exact timing of the exchange offer will depend on market conditions, and offer terms including discounts and duration will be set upon launch. Johnson & Johnson ended the second quarter with $29 billion of cash and marketable securities and $46 billion of debt, resulting in a net debt position of $17 billion. They also had $5.4 billion of free cash flow through the second quarter, compared to $8.1 billion in the prior year.

Johnson & Johnson has continued to prioritize investment in their business, with $7.4 billion being spent on R&D in the first half of 2023. They have also returned $8.5 billion to shareholders in the first half of 2023 through dividends and share repurchases. Johnson & Johnson provided updated guidance for the full year of 2023 that includes results from the Consumer Health Business, and when Johnson & Johnson is no longer the majority shareholder of Kenvue, new guidance will be provided that reflects the removal of Consumer Health's contribution.

Johnson & Johnson has raised their full-year operational sales and EPS guidance, despite some strategic items not accretive to EPS. They expect operational sales growth to be in the range of 7-8%, or up $1.4 billion in the range of $99.3 billion to $100.3 billion. They anticipate a slight improvement to their adjusted pretax operating margin, a reduction of net interest expense to the range of $150 million to $250 million, and an effective tax rate estimate in the range of 15.5-16.5%.

This paragraph outlines the updated guidance for adjusted operational earnings per share for the year on a constant currency basis, increasing by $0.10 per share to a range of $10.70 to $10.80 or $10.75 at the midpoint. It also provides qualitative considerations for modeling in MedTech and Pharmaceuticals, including stable procedure volumes and healthcare staffing levels in MedTech, and strong growth in Pharmaceuticals. Finally, it states confidence in meeting the 2025 pharmaceutical sales target of $57 billion.

Johnson & Johnson has many catalysts that can drive near and long-term value throughout the year. The MedTech business is being driven by commercial execution and recently launched innovative products. In electrophysiology, the QDOT MICRO Catheter will be launched in the U.S. in the second-half of the year. In Orthopaedics, the VELYS robotic assisted solution has been approved in Europe and will be launched by the end of the year. In Vision, ACUVUE OASYS 1-Day multifocal is driving market share growth. In pharmaceuticals, daratumumab is expected to be approved in relapsed or refractory multiple myeloma and Phase 3 data is expected for TREMFYA for Crohn's disease and ulcerative colitis. Phase 1 data is expected for TAR-210 in non-muscle invasive bladder cancer and Phase 2 data is expected for Nipocalimab in rheumatoid arthritis.

Joe concluded his remarks by reiterating the company's successful first-half of the year and announced that Erik Haas would take over the call. Erik then discussed the case of Valadez v Johnson & Johnson, in which the jury ruled in favor of the plaintiff on a talc product liability claims. Johnson & Johnson intends to appeal the decision, as they believe the jury was not given critical evidence that would prove the plaintiff's mesothelioma was not caused by their baby powder. The company is also focused on compensating claimants in a timely and efficient manner through a bankruptcy process.

Erik Haas is expecting the bankruptcy judge to rule on the motion to dismiss hearing by August 2nd, and a hearing on the motion for LTL's proposed reorganization plan and voting procedures process is scheduled for August 22nd. In response to a question from Larry Biegelsen from Wells Fargo, Erik Haas stated that if the judge dismisses the bankruptcy proposal, J&J intends to fight the claims aggressively outside of bankruptcy.

Joaquin Duato and Joe Wolk from Johnson & Johnson discussed the company’s performance in the first half of 2023, which was north of 8%, and they attributed this to the recovery in the overall market procedures, their improved commercial execution, and the cadence and flow of new product launches. They expect a similar trajectory for MedTech in the second half of the year, but the only thing that might limit growth is China volume-based pricing and international sanctions in Russia, which are already incorporated into their outlook.

Joe Wolk and Erik Haas of Johnson & Johnson discuss the expectations for biosimilar entry into the STELARA market before Amgen and Alvotech. They do not anticipate any other biosimilar being able to enter the market before those two and do not expect any material impact this year. Joaquin Duato then addresses questions about the MARIPOSA study, which was expected to end next year but may now have data available sooner.

In the first half of the year, MedTech has seen 8% growth due to market growth, improved commercial execution, and the introduction of new products. All of the $12 billion platforms have grown, with electrophysiology growing 25%. MARIPOSA has not changed, and RYBREVANT has the potential to become a new standard-of-care in non-small cell lung cancer with EGFR mutations. The company is looking forward to presenting these results in a medical meeting potentially this year.

Johnson & Johnson has introduced two new mapping and treatment catheters, OCTARAY and QDOT, and their results have been promising in terms of efficacy and procedure efficiency. They have also launched ACUVUE OASYS MAX, TECNIS Eyhance, and VELYS, a robotic-assisted system. Additionally, they have enhanced their portfolio of knees and hips, as well as their endocutter and energy portfolio with the launch of ENSEAL jaw curved and ECHELON 3000. Lastly, they have completed the enrollment of their dual energy catheter and have started the first patient treatment with Monarch system for kidney stone removal. Overall, their MedTech business is delivering competitive growth.

Joaquin Duato answers Chris Schott's question about the company's $57 billion pharma target by 2025. He states that their confidence in achieving the target has increased due to the positive updates they have seen this year, such as pipeline progress and STELARA settlements. Erik then provides an update on talc settlements, stating where they stand in terms of the number of plaintiffs and the 75% threshold they need to reach.

Janssen is confident that they will reach their $57 billion target by 2025, as seen in their strong performance in their pharmaceutical portfolio with DARZALEX, TREMFYA, ERLEADA, CARVYKTI, TECVAYLI, and SPRAVATO. They are also expecting positive results from their pipeline products, such as talquetamab, RYBREVANT, Lazertinib, milvexian, TAR-200, and CARTITUDE-4.

Johnson & Johnson is confident in its product portfolio for 2025 and beyond. They have presented data for nipocalimab in rheumatoid arthritis, a new wall in hemolytic disease, and an oral IL-23 receptor antagonist peptide in psoriasis. Recently, they announced plans to continue developing the peptide in psoriasis and ulcerative colitis. At a recent hearing on motions to dismiss, it was determined that 60,000 claimants support the proposed plan, while 40,000 oppose it.

Joaquin Duato and Erik Haas answered questions regarding talc suits and MARIPOSA. Duato discussed MARIPOSA and Haas stated that they do not anticipate any other cases to go forward in advance of a ruling on the motion to dismiss. Terence Flynn asked Duato what prevents J&J from capturing a majority share of the $20 billion myeloma market, and Joe was asked a question about margins post Kenvue.

Joaquin Duato explains how Janssen is aiming to have three out of four myeloma patients on Janssen regimens by the end of the decade. The goal is to sequence medicines and combine them in a way that changes the treatment paradigm from treating to progression to treating to cure. Janssen is optimistic about the growth potential of this area, as the treatment duration will be significantly increased. Joe Wolk adds a comment regarding margins.

Joe Wolk states that the company's appetite for larger deals in the medical device and MedTech industry is "voracious" at the moment, and Joaquin can provide more information regarding the size of the deals. He also mentions that the company has integrated Abiomed and is seeing success, and is interested in cardiology and other areas of medical devices.

Joaquin Duato commented on the progress of the Abiomed integration and how it is a key component of J&J's MedTech strategy. He also stated that when looking for M&A opportunities, the company looks for medical innovation that will improve patient care. They are open to MedTech and Pharmaceuticals and are looking for opportunities in Vision, Cardiovascular, Surgery, and Orthopaedics. In terms of Pharma, they have had success with tuck-ins, licenses, and collaborations, and external innovation makes up 50% of their pipeline.

Johnson & Johnson has filed a lawsuit against the International Reference Pricing (IRP) system due to their concern that it creates a disincentive to innovation without addressing the core problem of patient access. They are still unable to calculate the business impact of the system as many of the rules and procedures remain in flux. They also discussed their agreement with Cellular Biomedicines and the CAR-T agreement, and that M&A and licensing acquisition collaborations remain a key factor in their growth moving forward.

Johnson & Johnson is confident in their competitive position in the industry and are working to increase the supply of their drug CARVYKTI. They have internalized the production of lentivirus and are increasing the number of slots internally, as well as reaching agreements with other companies to increase capacity. They are also working to move CARVYKTI into earlier lines of therapy with CARTITUDE-4, CARTITUDE-5, and CARTITUDE-6 and are confident it will become one of their more than $5 billion assets. Jessica Moore thanked everyone for their questions and encouraged them to reach out to the Investor Relations team with any further questions.

Joaquin Duato thanked everyone for joining the call and expressed pride in Johnson & Johnson's performance in the first half of 2023. He noted that they will be a two-sector company focused on Pharmaceutical and MedTech and looked forward to future engagements with the audience. The call was concluded with the Operator thanking everyone for joining and encouraging them to disconnect.

This summary was generated with AI and may contain some inaccuracies.