Johnson & Johnson : JNJ-USQ_Transcript_FINAL 2023-01-24

REFINITIV STREETEVENTS

EDITED TRANSCRIPT

JNJ.N - Q4 2022 Johnson & Johnson Earnings Call

EVENT DATE/TIME: JANUARY 24, 2023 / 1:30PM GMT

OVERVIEW:

JNJ reported 2022 consolidated sales of $94.9b, net earnings of $17.9b and diluted EPS of $6.73. Co. expects 2023 operational sales to be $96.9-97.9b and adjusted reported EPS to be $10.45-10.65.

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

JANUARY 24, 2023 / 1:30PM, JNJ.N - Q4 2022 Johnson & Johnson Earnings Call

C O R P O R A T E P A R T I C I P A N T S

Jessica Moore Johnson & Johnson - VP of IR

Joaquin Duato Johnson & Johnson - CEO & Chairman

Joseph J. Wolk Johnson & Johnson - Executive VP & CFO

C O N F E R E N C E C A L L P A R T I C I P A N T S

Chris Shibutani Goldman Sachs Group, Inc., Research Division - Research Analyst

Christopher Thomas Schott JPMorgan Chase & Co, Research Division - Senior Analyst

David Reed Risinger SVB Securities LLC, Research Division - Senior MD

Lawrence H. Biegelsen Wells Fargo Securities, LLC, Research Division - Senior Medical Device Equity Research Analyst Louise Alesandra Chen Cantor Fitzgerald & Co., Research Division - Senior Research Analyst & MD

Matthew Stephan Miksic Barclays Bank PLC, Research Division - Research Analyst

Terence C. Flynn Morgan Stanley, Research Division - Equity Analyst

Trung Chuong Huynh Crédit Suisse AG, Research Division - Research Analyst

P R E S E N T A T I O N

Operator

Good morning, and welcome to Johnson & Johnson's Fourth Quarter 2022 Earnings Conference Call. (Operator Instructions) This call is being recorded. (Operator Instructions)

I would now like to turn the conference call over to Johnson & Johnson. You may begin.

Jessica Moore - Johnson & Johnson - VP of IR

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 of 2022 and our financial outlook for 2023.

Joining me on today's call are Joaquin Duato, Chairman of the Board and Chief Executive Officer; and Joe Wolk, Executive Vice President, Chief Financial Officer.

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 may include forward-looking statements related to, among other things, the company's future financial performance, product development, market position and business strategy and the anticipated separation of the company's consumer health business. You're cautioned not to rely on these 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.

In particular, there is significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic. A further description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2021 Form 10-K, which is available at investor.jnj.com and on the SEC's website.

2

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

JANUARY 24, 2023 / 1:30PM, JNJ.N - Q4 2022 Johnson & Johnson Earnings Call

Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships.

Moving to today's agenda. Joaquin will open with a few comments highlighting his first year as CEO and his priorities for 2023. I will then review the fourth quarter sales and P&L results for the corporation and highlights related to the 3 segments as well as full year 2022 results for the enterprise. Joe will then close with additional business commentary before sharing an overview of our cash position, our capital allocation priorities and our guidance for 2023. The remaining time will be available for your questions. We anticipate the webcast will last approximately 75 minutes.

I am now pleased to turn the call over to Joaquin.

Joaquin Duato - Johnson & Johnson - CEO & Chairman

Thanks, Jess. Good morning, everyone. I'm pleased to be here today to review our 2022 results and highlight my priorities for the business.

I'm excited for the future of Johnson & Johnson. For over 135 years, people have counted on Johnson & Johnson to be at the forefront of health care innovation. This remains as true today as the day we were founded, and I'm honored to continue this legacy.

In 2022, despite macroeconomic challenges, we delivered full year operational growth of over 6%. This is the result of the dedication and focus of our employees around the world as well as the breadth and diversification of our business.

There were many business achievements last year. Let me share some highlights. Our pharmaceutical team achieved its 11th consecutive year of above-market adjusted operational sales growth, excluding the COVID-19 vaccine, delivering nearly 7% growth as we continue to advance our innovation pipeline.

I'm particularly excited about the progress made across our multiple myeloma portfolio. This includes the launches of CARVYKTI, our first cell therapy, and TECVAYLI, our BCMA CD3 bispecific antibody, along with the recent filing of talquetamab, our GPRC5D CD3 bispecific.

In MedTech, we generated above 6% full year operational growth, anticipating our second consecutive year, outperforming our competitive composite. In terms of innovation, we accelerated the cadence of new product launches and significantly enhanced the quality of our MedTech pipeline, including more than doubling the number of programs with over $100 million of net present value potential.

Notably, we completed the acquisition of Abiomed, which positions us as the global leader in heart recovery and immediately enhances MedTech revenue growth. This transaction will become accretive to earnings in 2024.

Finally, we made significant progress towards the separation of Kenvue. We have begun operating our consumer business as a company within a company, and we filed our Form S-1 with the SEC, giving us the option to pursue an IPO as a potential step in the separation.

Looking ahead, while we expect some of the headwinds that impacted 2022 to continue, we have proven that Johnson & Johnson is resilient in times of macroeconomic challenges. In this environment, our approach to 2023 can be best described as prudent, and our priorities for the year are clear and remain consistent.

First, we are finalizing our plans for Johnson & Johnson to operate as a 2-sector company, dedicated to competitive performance, both in Pharmaceutical and MedTech. This change will enable us to become simpler, faster and more focused.

In Pharmaceutical, we will continue delivering top line growth annually, while driving towards $60 billion in revenue by 2025. We believe we will be able to achieve above market growth in 2023 for the 12th consecutive year, even in the face of the STELARA loss of exclusivity and macroeconomic challenges.

3

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

JANUARY 24, 2023 / 1:30PM, JNJ.N - Q4 2022 Johnson & Johnson Earnings Call

Growth will be driven primarily by our existing portfolio, including DARZALEX, TREMFYA, ERLEADA, INVEGA SUSTENNA and UPTRAVI and also continued uptake from new launches, including SPRAVATO, CARVYKTI and TECVAYLI.

In MedTech, with the acquisition of Abiomed, we now have 12 platforms with over $1 billion in annual sales. We expect to continue to build on 2022's momentum. We will do this by maximizing the commercial opportunity for recently launched innovations, continuing to advance the Abiomed pipeline and prioritizing investment in higher growth segments of our markets.

This will be a transformational year for Johnson & Johnson, which brings me to my next priority, completing the successful creation of a new consumer health company, Kenvue. We remain on track to complete the separation in 2023, as indicated in our initial announcement in November of 2021.

As we look forward, our track record gives us the confidence that we can grow ahead of our peers and cement the foundation for long-term success. Following 2021, a year where we substantially increased R&D investment, we continue our commitment to organic innovation. We invested nearly $15 billion in R&D during 2022.

Also we increased our dividend for the 60th consecutive year. We instituted a share repurchase, and we deployed over $17 billion in M&A, including the acquisition of Abiomed. Very few companies have the capability and the balance sheet to take such significant actions concurrently, especially in a year like 2022. I'm confident that we are well positioned for 2023 and beyond.

In closing, I am energized about what is to come. As the largest and most diversified health care products company in the world, we will continue to use our scale and breadth to drive innovations, deliver for patients and shape the future of health care around the world.

Now let me turn it back to Jess.

Jessica Moore - Johnson & Johnson - VP of IR

Thanks, Joaquin.

Starting with Q4 2022 sales results. Worldwide sales were $23.7 billion for the fourth quarter of 2022, a decrease of 4.4% versus the fourth quarter of 2021. Operational sales growth, which excludes the effect of translational currency, increased 0.9%, as currency had a negative impact of 5.3 points.

In the U.S., sales increased 2.9%. In regions outside the U.S., our reported sales declined 11.5%. Operational sales outside the U.S. declined 1.1%, with currency negatively impacting our reported OUS results by 10.4 points.

Excluding sales from the COVID-19 vaccine, operational sales growth was 4.6% worldwide, 4.7% in the U.S. and 4.4% outside the U.S. As you will find in our supplemental sales schedule, acquisitions and divestitures had an immaterial impact on our results in the quarter.

Turning now to earnings. For the quarter, net earnings were $3.5 billion, and diluted earnings per share was $1.33 versus diluted earnings per share of $1.77 one year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.2 billion, and adjusted diluted earnings per share was $2.35, representing increases of 9.5% and 10.3%, respectively, compared to the fourth quarter of 2021. On an operational basis, adjusted diluted earnings per share increased 15.5%.

For the full year 2022, consolidated sales were $94.9 billion, an increase of 1.3% compared to the full year of 2021. Operationally, full year sales grew 6.1%, with currency having a negative impact of 4.8 points. Sales growth in the U.S. was 3%.

In regions outside the U.S., our reported year-over-year sales declined 0.6%. Operational sales growth outside the U.S. grew by 9.1%, with currency negatively impacting our reported OUS results by 9.7 points. As you will find in our supplemental sales schedules, acquisition and divestitures as well as sales from our COVID-19 vaccine had an immaterial impact on our results for the full year.

4

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

JANUARY 24, 2023 / 1:30PM, JNJ.N - Q4 2022 Johnson & Johnson Earnings Call

Net earnings for the full year 2022 were $17.9 billion, and diluted earnings per share was $6.73 versus diluted earnings per share of $7.81 a year ago. 2022 adjusted net earnings were $27 billion, and adjusted diluted earnings per share was $10.15, representing increases of 3.2% and 3.6%, respectively, versus full year 2021. On an operational basis, adjusted diluted earnings per share increased by 9.2%.

While not part of our prepared remarks for today's call, we have provided additional information and backup for our full year 2022 sales by segment, consolidated statement of earnings and adjusted income before tax by segment, which can be downloaded from our website.

I will now comment on business segment sales performance highlights for the quarter. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the fourth quarter of 2021 and, therefore, exclude the impact of currency translation.

Beginning with Consumer Health. Worldwide Consumer Health sales of $3.8 billion increased 1%, with an increase of 10.9% in the U.S. and a decline of 5.8% outside the U.S. Excluding translational currency, worldwide operational sales growth increased 6.4%, and outside the U.S., operational sales growth increased 3.2%.

Results were primarily driven by strategic price increases, growth in OTC due to a strong cough, cold and flu season and growth in NEUTROGENA as well as strong new product introductions in Asia Pacific and Latin America. NEUTROGENA growth contributed to the second consecutive quarter of 5% operational growth for Skin Health Beauty. Growth across the portfolio was partially offset by continued, although reduced, supply constraints in the U.S., COVID-19 impacts in China, portfolio simplification and the suspension of personal care product sales in Russia.

Moving on to our Pharmaceutical segment. Worldwide Pharmaceutical sales of $13.2 billion decreased 7.4%, with declines of 0.6% in the U.S. and 14.9% outside of the U.S. Excluding translational currency, worldwide operational sales declined 2.5%, and outside the U.S. operational sales declined 4.5%.

Excluding the COVID-19 vaccine sales, worldwide operational sales growth increased 3.9%, U.S. operational sales growth increased 2.4%, and outside the U.S. operational sales growth increased 6%. Pharmaceutical growth, excluding the COVID-19 vaccine, was driven by our key brands and continued uptake in our recently launched products, enabling us to continue to deliver above-market adjusted operational sales growth for the 11th consecutive year, including 7 assets with double-digit growth.

Growth was driven by DARZALEX, ERLEADA, STELARA and TREMFYA and was partially offset by REMICADE and ZYTIGA due to loss of exclusivity, along with a decrease in IMBRUVICA sales.

Within our Oncology business, DARZALEX and ERLEADA continue to drive strong sales growth, with increases of 33.9% and 48.6%, respectively. ZYTIGA sales declined 43.6% worldwide predominantly due to loss of exclusivity in Europe in September. IMBRUVICA sales declined 12.3% worldwide due to competitive pressures and a suppressed CLL market due to COVID-19. Despite competitive pressures, IMBRUVICA maintains its market leadership position worldwide.

In our immunology business, STELARA grew 6.2% driven by market growth and share gains in Crohn's disease and ulcerative colitis, with gains of 4 points and 5.4 points in the U.S., respectively, as well as a favorable prior period adjustment, impacting worldwide results by approximately 460 basis points. Results in the quarter were partially offset by unfavorable patient mix and rebating in the U.S. as well as austerity measures in Europe and shipment timing in Asia Pacific.

TREMFYA grew 12.5% driven by share gains in psoriasis and psoriatic arthritis, with gains of 1.4 points and 2.9 points in the U.S., respectively, along with market growth. Q4 growth was partially offset by a net unfavorable prior period adjustment impacting worldwide results by approximately 1,150 basis points, unfavorable patient mix and a challenging prior year comparison.

Beginning in Q1 2023, we anticipate that CARVYKTI, currently reported in other oncology, and SPRAVATO, currently reported in other neuroscience, will meet the threshold to be separately disclosed.

5

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

©2023 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.