Johnson & Johnson Wells Fargo 21st Annual Healthcare Conference

Oh, my pleasure, Larry, and thank you for the opportunity to represent J&J.

Sure, Larry, and firstly, thank you again for the opportunity. We're proud of the progress we've made, and just to remind everyone, in December of 2023, we forecasted that our markets would grow at roughly 5%-7% on an operational basis over the entire period of 2022 to 2027, not within quarters or individual years. When we actually now track our progress from 2022 through the midpoint of 2026, we are confident that we're delivering at that high end of the 5%-7% range. I think more importantly, beyond the results, it's the progress we've made against our business and the confidence we have in building a stronger and more durable MedTech for Johnson & Johnson. What gives us confidence is a couple moves.

Number one, our shift into higher growth markets, which we have talked a lot about, especially in CV, but also doubling down on truly differentiated innovation in the three areas that we have prioritized, in CV, in surgery, and in vision. Number two, we have made a significant change in our operating model. We have roughly 75,000 people across MedTech. We used to operate as a highly centralized organization, which does bring some benefits, economies of scale. One of the downsides is speed of execution, and you lose some of the specialization that we believe is just so important to MedTech. We have actually shifted our operating model in MedTech to move towards a business unit structure, which creates greater specialization, much faster decision making closer to customers, and it makes accountability clearer, and we are already seeing the benefits of that.

Then finally, it is the continued shift in our portfolio, not only to add assets, specifically in areas like cardiovascular, but also to make some difficult but really necessary decisions to shift our portfolio and make sure that we are focused on the areas where we can make the biggest difference for patients and for investors. You will know that we announced separation of orthopedics last year, which we believe will set that business up for better success, but also, most importantly, allows us to focus in Johnson & Johnson, our capital and our resources, on the three areas that I mentioned earlier, which we believe will offer the greatest return. Now, when we look at projections over that period of time, you are always going to see some form of headwinds. It could be procedure related, could be competitive, it could be VBP, to use an example today.

But long-term durability of performance, we believe trumps everything, and we are very confident that we are building and have built a MedTech business that is more durable in terms of long-term growth.

Larry, we're excited. December 8th of this year will be our next Investor Day, and I don't want to steal too much thunder. What you are going to hear is an increasing conviction in the role that MedTech will play in Johnson & Johnson's growth profile going forward. We're going to spend some time talking about the underlying health of the businesses in which we operate. Certainly, there are increasing the aging populations, a greater demand for healthcare, increasing access to healthcare. What we find so exciting is with some of the new technologies that we're bringing to market, it's making procedures and treatment options less invasive, more personalized, and more connected, which allows us to touch more patients than we have in the past. The underlying fundamentals of MedTech are solid.

It's the big moves that we've made, specifically to build out a strong position within cardiovascular. Cardiovascular today is the largest and fastest-growing market within MedTech. 5 years ago, of the four businesses we operate today in MedTech, it was our smallest. By the first quarter of next year, it will be our largest and fastest-growing business, and that's come with the acquisitions of Abiomed and Shockwave and of course, the increasingly exciting aspects around the EP market. The second one is really about our decision to separate Ortho, which really changes the makeup of our business. Immediately, we're going to get a bump in top-line growth as well as margin expansion on the back of that move. Once again, it also focuses us on those areas where we can make the biggest impact.

If I was to give you, maybe characterize what you can hear, what you're going to hear is certainly that move into higher growth markets, doubling down on truly differentiated innovation, and we'll bring that to life for you, especially as we think about OTTAVA, which we believe will be a material contributor to our performance through the back half of the decade. We remain very, very confident in the future.

Yeah, Larry, it's a great question. Just to acknowledge, yes, you're absolutely right. The comps were a little easier in the first half of the year, and they will get tougher to lap as we look to the third and fourth quarter. As we've thought about the back half of this year, what we've really taken into consideration in thinking about our models are procedure, underlying procedural performance, competitive dynamics, and then of course, larger macroeconomic and geopolitical considerations. In all transparency, as we look at our business today, we are seeing lingering challenges around competitive intensity, and you will note that the larger geopolitical environment is more uncertain. Certainly, we're seeing the impact of the ongoing conflict in the Middle East, which is one that is truly hard to predict. That said, and that's just for MedTech.

When I look at Johnson & Johnson's performance overall, inclusive of MedTech and our Innovative Medicine business, I can confidently share today that we remain very confident that we will deliver against the advanced guidance that we provided in July, which, as you know, we took up our forecast. I think it really talks to the strength and breadth of our portfolio across Innovative Medicine and MedTech that we can do exactly that. Let me reiterate that point again. We are very confident for Johnson & Johnson that we will deliver against the advanced commitments we highlighted in the second quarter earnings. I'll double down even further. You've heard our CEO and our CFO talk about 2027 being stronger than 2026. We're confident that 2027 will be a stronger year for Johnson & Johnson than 2026.