The operator welcomes participants to Johnson & Johnson's Second Quarter 2024 Earnings Conference Call and reminds them that the call is being recorded. Jessica Moore, Vice President of Investor Relations, introduces the agenda and cautions listeners about forward-looking statements. She also mentions the company's SEC filings and collaborations with partners. The agenda includes a review of the second quarter sales and P&L results for the corporation and highlights from the two businesses.

In the second quarter of 2024, Johnson & Johnson held a webcast to discuss their financial results and guidance for the future. CFO Joe Wolk provided business and financial commentary, followed by Chairman and CEO Joaquin Duato's closing remarks. The webcast lasted approximately 60 minutes and included Q&A with leaders from the company's innovative medicine and MedTech divisions. Worldwide sales for the quarter were $22.4 billion, with growth of 6.6%. Excluding the impact of the COVID-19 vaccine, sales growth was 7.2%. Net earnings were $4.7 billion and diluted earnings per share was $1.93. Adjusted net earnings were $6.8 billion and adjusted diluted earnings per share was $2.82. Sales for Innovative Medicine were $14.5 billion, with growth of 7.8%. Excluding the COVID-19 vaccine, operational sales growth was 8.8%.

Innovative Medicine experienced strong growth in sales, driven by key brands and recently launched products. The multiple myeloma portfolio saw strong growth, with DARZALEX gaining market share and CARVYKTI and TECVAYLI achieving significant sales. ERLEADA also saw strong growth in the prostate cancer market. Other areas of growth were seen in oncology and immunology, with TREMFYA and STELARA driving sales. In neuroscience, SPRAVATO saw significant growth, while OPSUMIT and UPTRAVI saw growth in the pulmonary hypertension market.

The fourth paragraph discusses the sales growth and performance of MedTech products in the quarter. Overall, there was a 4.4% increase in sales, driven by strong commercial execution and new product introductions. However, there were some challenges, such as competitive pressures and unfavorable patient mix in certain products. In cardiovascular, electrophysiology and Abiomed had double-digit growth, while contact lenses and surgical vision had more moderate growth. The divestitures of Blink and Acclarent had a negative impact on growth.

In the second quarter of 2024, the company's performance was impacted by various factors, including competitive pressures, tender timing, and supply constraints. The Acclarent divestiture had a negative impact on growth, while the orthopedics sector saw growth driven by strong performance in hips and knees. Cost of product sold margin decreased due to product mix and macroeconomic factors, and the company continued to invest in research and development. Other income and expenses were higher compared to the same quarter last year, primarily due to costs related to acquisitions and a loss on a debt exchange.

In the second quarter, Johnson & Johnson's effective tax rate increased due to unfavorable one-time settlements and continued impact from Pillar 2. The company's income before tax, net earnings, and earnings per share were adjusted to exclude intangible amortization expense and special items. The adjusted income before tax for the enterprise increased from 37.2% to 37.4%, with the Innovative Medicine segment showing significant improvement. Johnson & Johnson also made progress with key products and advancements in their pipeline in the quarter.

The MedTech business of the company saw lower than expected growth in 2024, with growth projected to be closer to 6%. However, the company's diverse portfolio allowed them to offset this with overperformance in other areas. In the quarter, the company achieved key milestones in oncology and immunology, including FDA approvals and positive study results. They also made acquisitions to strengthen their portfolio in addressing unmet needs in atopic dermatitis.

In the second quarter, the company had positive results for nipocalimab in Sjogren's disease and myasthenia gravis. They are anticipating the approval and launch of RYBREVANT plus Lazertinib for lung cancer and TREMFYA for IBD in the second half of the year. They also expect data from other treatments in various diseases. In the MedTech sector, they are advancing their pipeline, launching new products, and integrating acquisitions. They have made strategic acquisitions in the cardiovascular market and launched a new version of their 3D heart mapping system. They also initiated the commercial launch of their pulsed field ablation platform and received FDA clearance for a robotic-assisted solution in knee arthroplasty.

The company has launched new products for surgical procedures, including the ECHELON 3000 and TECNIS Odyssey, and is working on advancing their electrophysiology and cardiovascular pipelines. They are also preparing for the submission of Impella ECP and OTTAVA to the FDA. The company has committed to paying ovarian claimants a present value of $6.5 billion over 25 years to settle talc lawsuits, with a voting period currently in progress. The company is confident in reaching the necessary vote and has received support from prominent plaintiff law firms.

In the second quarter, Johnson & Johnson finalized agreements with all states regarding talc claims and made progress with mesothelioma claimants. They ended the quarter with $25 billion in cash and $41 billion in debt. Their capital allocation priorities remain the same, with a focus on innovation and strategic acquisitions. They have invested $3.4 billion in research and development and $17 billion in inorganic growth opportunities in the first half of 2024. They anticipate modest tuck-in deals in the near future. Their full-year 2024 guidance is affected by recent acquisitions and they will provide more information on earnings per share.

The company's outlook for adjusted operational EPS performance has increased due to recent acquisitions. The adjusted operational EPS guidance now includes dilution from these acquisitions and is expected to be in the range of $10 to $10.10 per share. The company is also increasing its operational sales guidance and expects reported sales growth between 4.7% to 5.2%. The rest of the P&L guidance is not affected by the acquisitions.

The company has revised its 2024 adjusted pre-tax operating margin to decline by 120 basis points due to dilution from recent transactions. Net interest income is projected to be lower than previous guidance due to interest expenses from acquisitions. Other income is expected to increase, while the effective tax rate for the full year is anticipated to be higher due to OECD Pillar 2 and non-deductible expenses. Innovative Medicine sales growth will be lower in the second half of the year due to anticipated competition, but offset by uptake of new products. COVID-19 vaccine sales are not expected in the future, and distribution rights for two products will be returned in the fourth quarter. MedTech growth is expected to accelerate in the second half of the year, driven by recovery in contact lenses.

The company is focused on expanding into high-growth segments and expects adjusted operating margin to be higher in the first half of the year. They also anticipate a partial benefit in the third quarter from a share count reduction. The company remains confident in their ability to deliver sustained growth and long-term value. The Innovative Medicine business is on track for another year of above-market growth, driven by a portfolio of innovative medicines. The company has made significant progress in their pipeline and is anticipating two major milestones that will drive growth in the future, including the approval and launch of a new treatment for lung cancer.

The paragraph discusses two major developments for the company, the approval and launch of TREMFYA for Inflammatory Bowel Disease (IBD) and the expectation for accelerated growth in the MedTech sector. The company also expresses confidence in their portfolio and pipeline, citing upcoming regulatory and data milestones and partnerships. They emphasize their focus on medical innovation and their strong financial position. The question from an analyst is about RYBREVANT, a new product.

Jennifer Taubert, an executive at Johnson & Johnson, responds to a question about the company's product RYBREVANT and its potential in the market. She mentions the high unmet need for lung cancer treatments and the positive data on RYBREVANT's efficacy. She also gives a shout-out to the company's successful quarter. The next question is about the company's MedTech division.

In response to a question about the reduction in expected growth for MedTech in 2024, Tim Schmid reaffirms J&J's commitment to delivering solid growth for the full year. He explains that the second quarter was tougher due to the opening up of the China market last year, and two areas of the business – Vision and China – have underperformed. However, there has been sequential improvement in Vision and they expect to bring the business back to historical levels in the second half of the year, driven by innovation.

The company is confident in their ACUVUE OASYS 1-Day MAX portfolio and the global launch, as well as the addition of premium IOLs in Asia-Pacific and EMEA. They expect normalized growth in Vision and surgery, with strong results in ortho and cardiovascular portfolios. The addition of Abiomed and Shockwave will also contribute to growth.

The company recently closed a transaction in record time and is excited to announce that they will soon have their 13th business with sales over $1 billion. Despite a tough second quarter due to comparisons, the company remains confident in a solid 2024. During a Q&A session, the company was asked about their Phase III nipocalimab data and how it compares to other FcRns and mechanisms of action on the market. The company's CEO, John Reed, responded by stating that they are excited about the data and the sustained disease control and consistent efficacy seen in Sjogren's. They believe they may be the first to offer an advanced therapy for the disorder, which affects 4 million people worldwide. The company's CFO, Jessica Moore, also added that they are excited about all the data coming out.

The company has shown clinical success in four different auto-antibody driven diseases over the past 18 months and is the only FcRn blocker with proof-of-concept in all three segments of auto-antibody driven diseases. They are confident that this will be a $5 billion asset for them. The company believes that the launch of a competitive PFA system will be good for the electrophysiology market and patients, and they expect to bring their own PFA technology to market by the end of the year or early next year.

The company has a strong global presence in EP and is confident in the future of both their PFA and RF technologies. They have a strong portfolio of PFA offerings and are working towards a dual energy catheter. They also have a large installed base of CARTO systems, with the latest version being best-in-class.

The speaker discusses the positive impact of highly trained clinical specialists in cath labs around the world, and how this, along with other factors, is driving growth in the marketplace. They also address concerns about the impact of IRA negotiations and Part D redesign in 2025, stating that while there may be a net unfavorable impact, the company is still anticipating overall growth in the coming years. They also mention that the government price setting process is ongoing and will be disclosed in September.

The speaker mentions that they are not in agreement with IRA and the price setting process, but the numbers have been included in the guidance provided last year. They also mention the success of their product DARZALEX, with four additional positive Phase III studies and 21% growth. The next question asks about the outlook for procedure volume trends and the pricing environment in MedTech. The speaker responds that volumes have normalized and they expect growth within their markets. They also mention that they expect some tailwinds to normalize in the back half and maintain their belief in 5-7% growth.

The speaker discusses the challenges of pricing in the pharmaceutical industry due to inflation and efforts to secure preferential pricing globally. They also mention the potential for increased rebates from payers in 2025, but express confidence in their guidance for growth in the coming years.

Joe Wolk and Joaquin Duato discuss the success of J&J's Innovative Medicines business, which has seen quarter in, quarter out performance over the last six years. They highlight the increasing importance of discounts and rebates, which now make up around 60% of list price in the industry. The operator then asks a question about J&J's strategy in China, to which Joaquin Duato responds that they have a history of constructive engagement in the country and have robust business continuity planning in place. They see China as an important growth driver for both their Innovative Medicine and MedTech businesses.

Tim Schmid discusses the challenges and opportunities facing Johnson & Johnson's MedTech business in China. He mentions the impact of government initiatives such as VBP and an anticorruption campaign, which have had a short-term negative effect on revenue but are ultimately beneficial for the industry and align with the company's values. Despite these challenges, J&J remains committed to the Chinese market.

The speaker discusses how the company will continue to face challenges with pricing and geopolitics, but remains committed to serving their large customer base. The next question asks about the dynamics and outlook of the MedTech market, specifically regarding inventory destocking and the company's expectation for demand. The speaker clarifies that the only area where they have seen destocking is in their contact lens business, but they remain confident in their market leadership and see this as a temporary issue.

During a conference call, Joanne Wuensch from Citibank asks a question about the growth of orthopedics, specifically hips and knees. Tim Schmid, the speaker, explains that the growth is due to innovation, such as the VELYS Hip Navigation and Kenzie, which has led to a 6% growth in hips and almost 10% growth in knees. He also mentions the recent 510(k) approval for the VELYS Uniknee and hints at future plans to bring robotics to other parts of the orthopedic portfolio. Overall, the resurgence of orthopedics is attributed to the success of these innovations.

The speaker, Joaquin Duato, thanks the audience for their questions and interest in the company. He mentions that the company's success is driven by innovation and expects this trend to continue. The call is then turned over to Joaquin for closing remarks, where he expresses pride in the company's progress and excitement for the future. He emphasizes the company's unique position in the healthcare industry and their commitment to bringing innovation to patients. The call is then concluded.

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