JNJ | Q4 2012

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Louise Mehrotra: Good morning, and welcome. I’m Louise Mehrotra, Vice President of Investor Relations for Johnson & Johnson, and it is my pleasure this morning to review our business results for the fourth quarter and full year of 2012. Joining me on the podium today are Alex Gorsky, Chairman of the Board and Chief Executive Officer and Dominic Caruso, Vice President, Finance and Chief Financial Officer. A few logistics before we get into the details. This meeting is being made available to a broader audience via a webcast accessible through the Investor Relations’ section of the Johnson & Johnson website. I’ll begin by briefly reviewing highlights of the fourth quarter and full year of 2012 for the corporation and highlights for our three business segments. ] Following my remarks, Alex will comment on the 2012 results and provide a strategic outlook for the company. At the completion of Alex’s remarks Dominic will provide some additional commentary on the third quarter results and discuss guidance for 2013. We will then open the call to your questions. We will conclude our formal presentations at approximately 9

Alex Gorsky: We also generated significant free cash flow of approximately $12.5 billion. Importantly, we continued our track record of delivering consistent performance, with 29 straight years of adjusted earnings increases, and 50 consecutive years of dividend increases, making us only one of six companies in the S&P 100 to achieve that record. You can see our products are making a difference in the care of people around the world, as approximately 70% of our sales come from the number one or number two global market share position. And our commitment to investing in R&D is also paying off, with about a quarter of our sales being generated from products that have been introduced in just the last five years. The solid shareholder returns are a hallmark of Johnson & Johnson. Founded in 1886 and listed on the New York Stock Exchange since 1944, our commitment to managing for the long term has made Johnson & Johnson a solid investment choice for decades. In 2012, a total shareholder return of just under 11% exceeded the Dow Jones Index. And although a nice return, it trailed the other indices we compare to, and as we move forward, we’re focused on decisively shaping our portfolio to deliver even more meaningful innovations to patients and customers. Here are results by segment, reflecting our broad base of leadership in healthcare. Pharmaceuticals generated $25.4 billion, or 38%, of our total sales. It had a strong operational growth rate of 6.8%. Medical devices and diagnostics, our largest segment, generated $27.4 billion, or 41%, of our total. Operational growth was 8.7%. Excluding the net impact of the acquisition of Synthes in June, operational growth was about 1%. Overall growth in this segment was impacted by our decision to exit the drug eluting stent market and the continued economic pricing and austerity measures within these markets. And our consumer segment generated $14.4 billion in revenue, or 21% of our total. Sales grew about 0.5% operationally, reflecting our efforts to address the issues in the OTC consumer business, targeted portfolio decisions we made over the year, and continued pressures in the marketplace. In 2012, we generated $19.1 billion in segment pretax profit, and the margin expanded to 28.5%. We also continued to invest for sustainable growth and absorbed additional amortization related to Synthes. And even with that, we leveraged our segment pretax margin. This is a great tribute to our business leaders. So in summary, Johnson & Johnson delivered solid results in 2012, with momentum continuing to build as sales growth accelerated. Now, let’s move to the segment highlights, and I’d like to start with our pharmaceutical group. By any measure, we have transformed our pharmaceutical business, demonstrated first by the impact we’re having on addressing unmet medical needs of patients and by our strong growth with sales results of $25.4 billion. Recently approved products are accelerating our growth through the strong launch execution programs we’ve implemented to ensure access and reimbursement. In Europe, the Middle East, and Africa, ZYTIGA, INCIVO, and [zeplion] transformed our product portfolio. And the most recent IMS data positions Janssen as the fastest-growing among the top 20 companies in Europe. And in Japan, we are the fastest-growing pharmaceutical company among the top 25, having launched seven new products in the last two years. In the U.S., we hold the leadership position in total sales of new products launched since 2009. And at the same time, while focusing on that kind of execution, we made significant pipeline advancements and received FDA approval for SIRTURO at the end of December, the first therapy with a novel mechanism of action against tuberculosis that the agency has approved in more than 40 years.Now, given the growing concern and the increasing prevalence of resistant strains of TB, I’m particularly proud the impact that this product is going to have on patients around the globe.And we’re leading the industry with FDA approvals since 2009. Now, great example of the quality of the work that our team is doing is with ZYTIGA, which I was going to discuss with you in just a few minutes. Another is XARELTO.But before I begin talking and discussing individual products, let me share with you another indication of the transformation that our pharmaceutical teams have produced.This graph illustrates our accelerated growth rate in pharmaceuticals over the past 11 quarters. And I want to take a moment to comment (Paul Stopples) and (Wakim Duradco), our worldwide chairmen for the pharmaceuticals and their teams for their vision and leadership in fundamentally transforming our business.XARELTO, it has the broadest profile of any of the novel, oral anticoagulants in the market with six distinct uses and we hope to expand this profile further with a pending indication in acute coronary syndrome.And we are seeing XARELTO capture significant share in the US. There were more than 1 million prescriptions written last year and, according to recent IMS data, XARELTO is capturing 30% of new to brand share in its category and is up more than 8% since the DBTPE approvals in November.We’re also starting to see it cut into the use of Warfarin as well, which is down nearly 8% during the same period.Now XARELTO is also more than double our closest competitor in new to brand share among cardiologists, treating patients with non-valvular afib and is just three percentage points behind Warfarin in the setting.Furthermore, the brand continues to make strong gains with 75% of patients on Medicare Part D and 85% of commercialize now having Tier II access, the preferred co-pay position, of course, for branded products.We have an exciting and late-stage pipeline of differentiated medicines. (Canagiclosin), which has the trade name in (Vocana), is already filed for the treatment of Type II diabetes.And (Simepravere), a TMC 435, is a potential best-in-class protease inhibitor for Hepatitis C that we’re co-developing with (Medavere) and anticipates submitting for regulatory authorization Japan, the US and the EU in the first half of this year.So with our very focused end-to-end strategy in R&D, we’re investing in earlier-stage programs across our five therapeutic areas with the aim to reach leadership positions in each of these categories.This focused approach allows us to position and invest in building leadership capabilities that are very specific to these disease areas. It also helps us attract the best scientists, researchers and collaborators and creates, frankly, a more efficient market approach by optimizing our sales force’s ability to sell more than one product to the same physician.Now let’s talk about our MD&D business. It is the largest medical technology business in the world with sales of $27.4 billion. Sales grew 8.7% operationally with the inclusion of Synthes. And while overall market growth has slowed somewhat, we’ve been focusing on building our market leadership position and has sustained or grown share in the majority of our key platforms holding number one or number two positions in over 80% of them.With Synthes, we’re further expanding our global presence with strong double-digit growth in emerging markets. And as we look to the future, we’re advancing innovative new products in our pipeline, continuing to take a disciplined approach to managing our portfolio and by adapting our businesses to the changing marketplace.We continue to invest for long-term sustainable growth and completed the largest acquisition in our history with Synthes.Now back in June, the (pew) in Synthes joined to form the world’s largest, most comprehensive orthopedics and neurologics organization. The leadership team is a strong combination of talent from the two companies.As all of you know, joining two companies of this size and scale is no easy task. Yet, customer and sales integration has proceeded as planned and there are future synergy opportunities ahead, fully integrating, manufacturing R&D.It’s going to take some time, but in the end we are confident that this endeavor is going to be good for patients, customers and for our business. I’d like to particularly recognize Michel Orsinger and his leadership team at DePuy Synthes, who have done a great job on this integration so far. In addition to Michel, we have an experienced and talented leadership team in Gary Pruden, who leads our global surgery business and Karen Licitra in global medical solutions. These three seasoned leaders are really shaping the industry’s future by making smart, disciplined portfolio and investment decisions to even further increase our competitiveness in bringing innovative new products and solutions to patients and healthcare providers around the world. You’re going to hear from each of them later today. Now, in the past year our consumer business generated sales of $14.4 billion, representing operational growth of 0.5%. And we are the sixth largest consumer healthcare company in the world. And as I said earlier today, we are absolutely committed to returning the consumer business to growth, and we’re starting by restoring a reliable supply of our McNeil OTC products to the market. And as with all of our business segments, our investments in growth and consumer will be predicated on a very focused portfolio approach to deliver science-based products with local market insights, professional endorsements, and commercial excellence. We’ve taken steps to reshape our portfolio, and have divested certain products or brands, and we’re also investing in growth and expansion in emerging markets with market specific brands like Dr. Mom Cough and Cold products in Russia and by leveraging our strong iconic brands like Johnson’s Baby. Now, regarding McNeil, we’re continuing to operate in accordance with the consent decree, and we’ve achieved our commitments to date under our work plan, which has been agreed to with the FDA. The work to bring our plants fully online is progressing, and so we continue to take a prudent approach to production volumes. We will return a consistent supply of key products to the market over the course of 2013, and we will make targeted investments in marketing and commercial support to ensure they regain their leadership positions over that time. Sandy Peterson, who brings 25 years of diverse global healthcare experience to Johnson & Johnson, assumed her role last month, and is focusing on returning our consumer segment to growth together with Jesse Wu, our worldwide chairman of the consumer group and his leadership team. So now let’s take a few moments to talk about the global market dynamics that are driving so much of this change. I think we all know, and would all agree, that there are enormous challenges and uncertainty in the global economy, and frankly in the global healthcare environment overall. But we’ve got to break with zero sum thinking, so let’s envision for just a moment a world where creativity and innovation help remake our options. For a better tomorrow, we don’t need just new medicines and new products, we need new philosophies, new approaches, and frankly, a new mindset. We’ve simply got to reinvent the way we think about healthcare, and patient needs must be first and foremost in this discussion. Now, traditionally, we’ve recognized that in any country, economic growth creates the demand for greater access to better quality healthcare. And what’s also true is that better quality healthcare leads to economic growth. So, finding a clear path forward and reforming healthcare is critical to addressing the rising demands on the system, as the population ages, and requires even more healthcare than they do today. We ultimately cannot allow the uncertainties before us to impact the care of patients, and we’re eager to work with others to try to find solutions, and frankly not just with other healthcare companies, but universities, governments, NGOs, communities. Beyond the legislative front, healthcare is an industry that is changing rapidly. It’s one of the most important and emotionally rewarding industries in the world. The healthcare market is large, it’s growing. In developed markets, approximately $5.5 trillion were spent last year. And even though compounded average growth rates as a percentage have slowed in these nations, estimates suggest that it will reach $8 trillion by 2022. So it’s unquestionably essential that we remain focused on sustaining and expanding our leadership positions in these important markets. Meanwhile, the emerging markets present significant growth opportunities by growing at CAGR rates double that of the developed world. So we are increasingly allocating resources there to establish leadership positions in all of our segments.Rapid expansion of the middle class is increasing demand for better healthcare in places like Brazil, India, China and Southeast Asia.On the other dynamic is people are living longer and they’re more likely to be managing chronic healthcare conditions than ever before. A recently published report in (Lancet) on the global burden of disease showed that for the first time in history soon after 2015 there will be more individuals over the age of 65 than people younger than the age of five.Now, this is really important because people over 65 use an average of seven times more healthcare than younger people. We’re also seeing a decrease in the ratio of economically active people to retired people in many developed and even in some of the developing countries, shrinking the revenue base for health and other public spending and this is an increasingly important issue for healthcare systems that must meet the demand to provide even more quality healthcare.(Inaudible) cancers, mental health disorders, diabetes will grow at the fastest rates. And we’ve aligned our businesses, our scientists, to focus on meeting the needs of these patients and markets.And the future will require new approaches to science and technology, new and more innovative ways of delivering healthcare and new approaches to partnerships, collaborations. These types of innovations are essential to enhancing outcomes for patients and potentially bending the healthcare cost curve.And our strategic framework focuses on us being leaders in this evolving healthcare market. You might recall that I introduced this strategic framework in July. It starts, as always, with our credo, which is the very foundation of our business.It defines our values and drives everything we do as a business from day-to-day decisions to long-term planning. It is our aspiration that by caring, one person at a time, we will help billions of people around the world live longer, healthier and happier lives.Now this is an important source of inspiration for our scientists, our business people and all of our employees worldwide. And our four strategic principles are as relevant today as they have ever been.And so here is how we’re putting our strategic framework into action. We’ve identified four growth drivers. And the first I’d like to discuss with you is innovation.Now realizing advancements in healthcare must start with identifying the unmet needs of patients; the patients have got to be at the center. And we believe in creating value in three core ways.First, through our distinct model of innovation; next, by taking a lifecycle approach to building market leading platforms, brands and products; and third, by engaging in broad partnerships with patients, customers, payers to provide solutions and unique offerings that improve access and outcomes. I’m going to explain each of these.Our distinct model of innovation has two key elements. It begins with accessing the very best science and then leveraging our own specialized capabilities to ultimately develop differentiated products.We’re really agnostic as to where the ideas may emanate from and we’ll access the science internally or externally. With skilled, smart scientists in our labs, we’re leveraging our internal capabilities and exploring new approaches that will potentially lead to innovative treatments for things like infectious diseases, more effective skin care products, new ways to restore mobility.And by capitalizing on new technologies like predictive modeling tools, bioinformatics and biomarkers, we are able to select compounds that will ultimately have a greater probability of success and development.Now consistent with our approach of sourcing the best science from anywhere in the world, we’ve executed roughly 100 alliances, licensing and acquisitions, collaborations, strategic partnerships across the enterprise last year.And we’ve also established four regional innovation centers as part of a very focused approach to accessing early resource programs. Now, these centers will help us transform our pipelines and will be instrumental in unearthing future products and solutions that are going to drive future growth. The field of oncology is a particularly good example of our innovation model in action. Consider for just a moment the unmet medical need here. While cancers today are detected earlier and treated with less toxic, more targeted therapeutics, the case for developing new oncologic drugs is painfully obvious. It is the fastest-growing disease category. As I showed earlier, it will continue to increase, unfortunately at alarming rates. That is driving this segment to a $65 billion global market and the category is forecasted to grow at a CAGR of 8%, reaching $111 billion by 2018. In 2008, there were $12.7 million new cases of cancer diagnosed, with 7.6 million deaths. By 2030, an estimated 22.2 million people will be diagnosed with cancer, leading to 13.2 million deaths. But as we better understand how cancer cells work, how to interrupt their processes with better and more innovative medicines, diagnostics, and biomarkers, they will improve outcomes for these patients. And ZYTIGA is a great example of identifying the best science. As many of you are aware, we acquired Cougar Biotechnology in July, 2009, when the Phase III trials had really just begun. We then executed a comprehensive, full development plan to ensure the clinical studies would fully support the potential of this product and make a meaningful difference to prostate cancer patients. Now, the good news is ZYTIGA has helped to expand the market, and now in the U.S. approximately 80% of chemo refractory patients seek treatment, which is up from about 40% at the time of launch. ZYTIGA is now approved in more than 65 countries for post-chemo metastatic [unintelligible] resistant prostate cancer, and generated $960 million in sales last year, making it the most successful oral oncology launch in history. And, the drug is broadly accessible. Here in the U.S., it holds 100% Medicare Part D coverage and coverage in 98% of commercial lives. We’re very excited. Last month we received an approval on expanded label from both the FDA and EMA, and that will allow ZYTIGA to be used even in the earlier pre-chemotherapy setting, and we are looking forward to continuing to optimizing its lifecycle, developing it in other metastatic prostate cancer settings and for potential use in breast cancer. Ibrutnib, an oral anticancer compound that we are developing in collaboration with Pharmacyclics for B cell malignancies, is another instance of accessing the best science to serve an unmet need. We’ve seen compelling early efficacy and safety data in multiple B cell malignancies, and have initiated a comprehensive global development program. Now in addition to the U.S. and E.U., this includes parallel development in China and Japan, and over the last 12 months, we’ve initiated three chronic lymphocytic leukemia Phase III studies and one Phase III in mantle cell lymphoma that is also ongoing, as well as a number of other earlier studies in B cell malignancies. The EVARREST fibrin patch exemplifies how we’re leveraging opportunities across our enterprise to create value through innovation for patients within our model of innovation. As all of you know, bleeding is a potential complication of really any surgical procedure, and can pose as a significant challenge to surgeons. Severe, uncontrollable bleeding can raise mortality rates from less than 1% to 20%. In clinical studies, EVARREST was 98% effective in stopping bleeding and maintaining hemostasis compared to the current standard of care. Gary Pruden will tell you more about this innovation in the surgical technology breakout later today. So our lifecycle approach considers the needs of the patient. And as we build out platform approaches with brands that endure, and products that can grow and ultimately lead in the marketplace, our immunology franchise is another strong example. The worldwide immunology market is estimated to reach $50 billion by 2018. One in six people in the United States suffers from an immune mediated disease such as rheumatoid arthritis, Crohn’s disease, psoriasis, or asthma. People of all ages are affected by these very debilitating, serious diseases that present systemic co-morbidities which impact the ability to function day-to-day, week-to-week.Now, these diseases collectively have a multibillion dollar impact on the entire healthcare system. And while REMICADE and other anti T&F agents have clearly transformed the treatment of many of these diseases, we are aiming to still improve efficacy response rates for these patients.Our leadership platform in immunology begins with the three currently marketed biologics and have achieved nearly $8 billion in sales in 2012. Each of these addresses significant conditions.Now, of course, REMICADE is our foundational pipeline in a product, having received 16 FDA approvals. And we’re also developing (Symphony) and STELARA for expanded uses. (Symphony) is filed in the US and Europe for approval of subcutaneous treatment for ulcerative colitis, in the US as an intravenous therapy for rheumatoid arthritis.We’ve also filed applications in the US and in Europe for STELARA for the treatment of psoriatic arthritis and we are running a Phase III trial in (Crone)’s disease.So to sustain our long-term leadership position in immunology, we’ve built a robust, late-stage development pipeline of differentiated biologics that include (Sarucamab) and (Gluselcamab), formerly (inaudible) 1959.And we’re also excited about the novel oral therapies in our pipeline and if this science and immunology evolves, we’re well positioned to continue global growth in this category.So diabetes is another example of how we’re building platform approaches to combat a disease area. Diabetes is a global crisis that no population or country can ignore and the unmet needs are considerable.It’s one of the most common non-communicable diseases globally and chronically affects the body’s ability to metabolize glucose. According to the International Diabetes Federation, an estimated 366 million people live with the disease, 90% of which are Type II. And the estimates grow to over 550 million by 2030.So with our breadth of offerings, we are making a difference and helping people better manage their diabetes from wellness and prevention programs offered by the Human Performance Institute to a no-calorie sweetener in Splenda and with insulin pumps from (inaudible) as well as the new one-touch (inaudible) blood glucose meter from (Life Scan) which, when approved in the United States, will be the first meter to transmit blood glucose results to an Apple iPhone using our one-touch reveal app enabling patients to review and share their results remotely with their caregiver, a real breakthrough.And as you can see, we’re in the process of building a comprehensive platform for the management of diabetes with these products and we’re very much looking forward to adding (Invocana), an innovative example of how we’re approaching the treatment of diabetes pharmaceutically.Now, this is an investigational, oral, one-daily medication offering a unique insulin-independent mechanism of action that actually lowers glucose levels by directly blocking reabsorption by the kidneys.Now studies have shown that (Invocana) is effective across the treatment paradigm. At the highest dose, it provides a statistically superior glucose lowering relative to (Amoril) and (Genuvea) with a low incidence of hypoglycemia. It also contributes to reductions in blood pressure and body weight.Now, given its benefits, its efficacy, its safety profile, (Invocana) has the potential to be the first choice for add-on therapy to (Met Forman). And on January 10th, an FDA advisory committee voted 10 to five in support of the approval and based on the results of our 10,000 patient clinical program.When approved by the FDA, (Invocana) will be the first in its new class of diabetes therapies available in the United States and we anticipate a decision from the agency later this quarter and from EMA in the third quarter.So shifting from diabetes, let’s talk for a few moments about oral care. Now Listerine is truly a flagship brand and a great example of how, with our science, deep insights in the consumer needs around the world, we continue to expand the market with new products by adding claims and professional recommendations.Last year in Asia, we launched Listerine Green Tea, tailored to local tastes, which follows by a year the successful introduce of Listerine Essencial, developed for emerging middle class customers in Latin America. Formulas launched initially in the U.S. like alcohol-free Listerine Zero are now driving market expansion in Europe and the Middle East. And the cycle continues with the recent launch of Listerine Ultra Clean in the United States. Now, the best innovations in healthcare technology mean nothing if people can’t get them, or caregivers don’t know how to use them, and we want to be part of the solution. And across Johnson & Johnson, we’re establishing broad partnerships that provide unique offerings to patients, insurers, providers, to ensure access to our products and also increase capacity in the overall healthcare system. Many of you are familiar with the VELCADE program in the U.K., and we’re very proud that thousands of multiple myeloma patients there have accessed this much-needed treatment since the program’s inception. In response to the most acute nursing shortage in the history of the United States, we launched the campaign for nursing’s future, to help recruit new nurses and nurse faculty, and we’ve seen enrollment at entry level baccalaureate nursing programs nearly double and the number of young nurses has increased 62%. And in France, prior to agreeing to reimbursement, the payers wanted to validate that RISPERDAL CONSTA would actually reduce the risk of hospitalization for patients with schizophrenia compared to other available antipsychotics. So we worked them and we initiated a one-year comparative effectiveness study that showed RISPERDAL CONSTA reduced the risk of hospitalization by 34%. This is a win for everyone. Patients are able to be treated with a very effective medication that improves their quality of life. We are fully reimbursed. And this has had a neutral impact on the French healthcare system due to the actual savings that they get by reducing hospitalizations. And just in December, we expanded ZYTIGA-1 support, a multichannel adherence program with an award-winning educational component that has already helped improve access and compliance for thousands of prostate cancer patients in the United States. You’re going to hear more about this program as well as other innovative partnership programs Janssen has been involved with around the world during our pharmaceuticals review that will take place in May of this year. And later today, you’ll see how LifeScan and Animas are working with Aetna and Kaiser to help drive value and outcomes in diabetes, and how in orthopedics we’re partnering with the AO Foundation to increase access to training programs for surgeons around the world. And you’ll also have the chance to learn more about other programs when you visit the technical displays outside in the ballroom during the breaks later today. Now, I’ve talked some already about the importance of emerging markets. Here’s a closer look at our global reach and local focus approach. As the world has changed, so has the geographical distribution of our businesses, employees, products, and sales. Today, 56% of Johnson & Johnson’s revenues come from outside the United States compared to about 40% just a decade ago. Now, we traditionally talk with you about BRIC markets, which comprised nearly 10% of Johnson & Johnson’s total revenue in 2012. Yet the broader, emerging markets are increasingly important, approaching a quarter of our sales today, reflecting double digit growth in 2012 on an operational basis inclusive of Synthes. Now to meet the demands of the emerging markets, the ability to capitalize on our broad base of product offerings and critical mass, it really positions us well with customers and with governments. And we’ve established and expanded our presence in global markets. We’ve leveraged our global portfolio, we’ve selectively acquired new products that are really tailored to meet the needs of specific populations. And I’ll show you how we’re doing that in China in just a minute. To support our business approach, our regional companies have also optimized their infrastructure, and we’re continuing to invest and support dozens of institutes around the world, designed to train healthcare providers on the effective use of our products. For instance, our San Paolo Institute in Brazil trains nearly 3,000 healthcare providers annually. An example of our commitment to offer localized healthcare solutions is also evident in India, where we’ve opened a DePuy Institute. Approximately 1,000 physicians a year are trained there in the latest orthopedics techniques and technologies to help ensure that patients get the quality care that they need and that they deserve. Now, the work that we’re doing in China really illustrates how we’re building our businesses in important emerging markets. There are about 1.4 billion people in China and the majority are covered by some form of insurance but increases in healthcare expenditures are estimated to run to a 20% plus CAGR through 2016.As their economy grows and more people enter the middle class, there’s a rising demand for a broader array of better healthcare solutions. And while many companies are talking about expanding their businesses in China, at Johnson & Johnson, we’ve been there for 27 years and we employ about 9000 people.Our China business generated nearly $2.5 billion in sales last year, driven by diverse and expanding portfolio of brands that Johnson & Johnson is known for globally as well as those that we’ve acquired to meet specific local need and demand.We have seven major manufacturing facilities in China. Our (inaudible) plant is equipped with world-class capabilities and produces over 240 million packaging units of high-quality pharmaceutical products that supply 26 countries with benchmark cost efficiency.Our sutures plant in Shanghai provides raw materials in semi-finished silk to the US, Europe and South America where we then complete production.We have a major new innovation center in (Sujo) and I had the pleasure of attending that opening myself. The center is supply medical device and diagnostics products specifically for the S2 market in both India and China.And these products are targeted at specific disease space that are more prevalent in the region and they include simplified or smaller devices that are better suited for use outside the major cities in the top tier hospitals as well as multiuse products or even disposable products that are more economical.We already have a number of these products on the market

Dominic Caruso: Thank you Alex, and good morning everyone. I’d like to provide some comments on our 2012 fourth quarter and full year results, as well as provide guidance for you to consider as you update your models for 2013. It is a great pleasure to report solid financial results for 2012, a year where we also saw many successes that positioned us very well in the marketplace. At the beginning of 2012, I provided you with an outlook of our financial performance for the year. Specifically, we guided to net income margin that would remain at approximately the same level as in 2011, but that operating margins would improve over 2011 by 100 to 150 basis points due primarily to improved leverage across all operating expenses.As a reminder, we updated our original guidance in July 2012 to include the impact of the Synthes acquisition, including the incremental amortization expense and we forecasted that with good expense management we could still achieve that same 100 to 150 basis point improvement in operating margins.With the completion of the divestiture of our (Varicose) business late in the fourth quarter, the other income and expense line resulted in a higher net gain for 2012 than the guidance we had provided in October.As has been our practice, we take the opportunity to redeploy those types of gains in higher growth areas with additional investments in the business. This additional gain was offset by additional R&D expenses related to the licensing and collaboration deals we entered into in the fourth quarter, such as the collaboration with (Astellas) for the development of a new (jack) inhibitor and milestone payments to other collaborations that have advanced in our pipeline.Even with these additional investments and the incremental amortization expense associated with Synthes, I am pleased to report that we did improve operating margins by 100 basis points.Also, although we are pleased with the passage of the legislation to renew the R&D tax credit retroactively for 2012 and prospectively for 2013 under the American Tax Hire Relief Act, the credit is not included in 2012 results since the legislation was not passed until 2013.Therefore, our effective tax rate for 2012 did not benefit from this credit as we had assumed, yet I am pleased to report that we were able to implement other tax planning strategies that resulted in our effective tax rate coming within the guidance we had provided.Now, during the fourth quarter, we recorded several special items. These special items amounted to approximately $1 billion on a pre-tax basis and consists of the following.We increased our reserves for litigation and program costs associated with the (Depew) ASR (HIP). As we disclosed previously, changes to the accrual would be required as additional information became available.We have taken an impairment charge for in-process research and development in the quarter related to a smaller acquisition we did several years ago where we have terminated one of the development programs.And finally, we continue to record costs associated with the Synthes acquisition which are consistent with what we expected would be incurred as special items throughout 2012 and which we expect will continue although at a lower level in 2013 as we continue to integrate that business.Together, these special items impacted our fourth quarter results by $0.28 per share. Excluding these special items, our adjusted earnings per share of $1.19 for the fourth quarter exceeded the mean of the (inaudible) estimates as published by first call.To wrap up our formal presentation this morning, I would like to provide some guidance for your to consider as you update your models for 2013.Let me begin with a discussion of cash and interest income and expense. At the end of 2012, we had approximately $5 billion of net cash. This consists of approximately $21 billion of cash and marketable securities and $16 billion of debt.For purposes of your models, assuming no major acquisitions, I suggest you consider modeling net interest expense of between $450 million and $500 million.Turning to other income and expenses, as a reminder, this is the account where we record royalty income as well as gains and losses arising from such items as litigation, investments by our development corporation and divestitures, asset sales or write-offs.This account is difficult to forecast but we would be comfortable with your models for 2013 reflecting other income and expense as a net gain ranging from approximately $750 million to $850 million, a substantially lower level than what we saw in 2012.And now a word on taxes. For 2012, the company’s effective tax rate, excluding special items, was 21.2%. We suggest that you model our effective tax rate for 2013 at approximately 20%. This effective tax rate for 2013 includes the federal R&D tax credit renewed by Congress under the American Taxpayer Relief Act for both 2012 and 2013. As always, we will continue to pursue opportunities in this area to improve upon the rate throughout the year. Now turning to sales and earnings, our sales guidance for 2013 takes into account several assumptions and key factors that I would like to highlight, which may not be fully reflected yet in your models. Those key assumptions and factors are

Louise Mehrotra: We also look, obviously, at the future pipeline. Could we, in fact, and did we see a path forward to be able to be in a more competitive position. And three, how did we see it fitting in a more complementary way with some of our other businesses. And while we certainly believe in the future of diagnostics, we think that that will more likely be in an area outside of clinical diagnostics such as molecular diagnostics, biomarkers, some of the other things that we’re already working on with some of our oncology programs. So when we looked at that in total, we felt that stepping back and looking at broader strategic options for that business was, in fact, the best thing to do for that business longer term, as well as for more broadly across Johnson & Johnson. And I also just think it’s indicative of the need for us to continue to look for ways, again, to make a better difference for patients and to drive growth in our organization. Now, to your second question, if I look more broadly across consumer, I’d start by saying that we remain very committed and excited about the future of our consumer group. It’s been essential to J&J for many, many years, and as we look to the future, there’s a couple of aspects that I think are very important. One, and something that we’ve been extremely consistent about over the past several years, is returning and repairing some of the quality and supply issues that we’ve had in our OTC, particularly in the McNeil U.S. division. I’m very pleased with the progress that we’re making in that. We mentioned to you that the consent decree that we had designed in conjunction with the FDA was approved and reviewed in October, with very few comments. And given the breadth and scale of that agreement, we felt very good about that. We’ve had teams working hard since then. We’ve achieved all of our major milestones since we’ve submitted that agreement. And very importantly, we’re starting to see some of that pay off in the marketplace. So over the past six months, we’ve seen the reentry of things like Children’s Tylenol, Children’s Motrin. And what we’re particularly pleased about is that if you look at some of the consumer ratings, the quality of those brands, we’ve seen them be remarkably resilient through this period. And when we get them back to the market, we see an uptake occur. So we’re cautiously optimistic. Our plan through 2013 continues with this driving performance, consistent with the consent decree. We would expect that over the course of 2013 to return about 75% of the brands to the marketplace. And of course as we do that, we will also begin shifting our focus, not only from making sure that we can have a consistent and reliable supply of that product, but also that we can truly relaunch, working with our trade partners, working with our great marketing teams, to reestablish those brands and their leadership positions in the market. And we’ll do that as the brands reenter over the course of 2013. And let me just make one other comment. We are also very pleased to see, particularly in the fourth quarter, the upper respiratory strong performance of our consumer brands. So we believe that we continue to have a lot of skills and capabilities that are going to be important for us to continue to build on going forward. Now, outside of the OTC business, I think there’s a lot of other reasons to be optimistic. And granted, as we looked at the results, we’d be the first ones to say while we’re pleased in some areas, we’re not satisfied, and we know we need to do a better job across the portfolio. Also, some of the results were impacted by the divestitures and portfolio decisions that we made in our consumer group. But when we look at some of the core areas, such as skincare, our Neutrogena business, and some of the things that they have in cytomimic, wrinkle reduction, other technologies, really science-based technologies, and what we think we can do there. If you take a look at things like oral care, where we’ve driven strong growth, great opportunity to build on that brand Listerine in a global fashion. When we look to an opportunity to expand and grow our business globally, particularly in emerging market - and we admit we’ve seen some setbacks in China due to some of the ingredient issues - but our teams have addressed that of the past year, and we’re confident that we have a path forward. And finally, and last but certainly not least, our Johnson’s Baby line, which is really an iconic brand, that we still know has a lot of potential. We see it as an important driver of growth in the future. And I think for 2013, to be clear, our projections are very consistent with many of yours. But beyond that, our consumer group remains a very important strategic driver at Johnson & Johnson.

Mike Weinstein – JPMorgan: We also look, obviously, at the future pipeline. Could we, in fact, and did we see a path forward to be able to be in a more competitive position. And three, how did we see it fitting in a more complementary way with some of our other businesses. And while we certainly believe in the future of diagnostics, we think that that will more likely be in an area outside of clinical diagnostics such as molecular diagnostics, biomarkers, some of the other things that we’re already working on with some of our oncology programs. So when we looked at that in total, we felt that stepping back and looking at broader strategic options for that business was, in fact, the best thing to do for that business longer term, as well as for more broadly across Johnson & Johnson. And I also just think it’s indicative of the need for us to continue to look for ways, again, to make a better difference for patients and to drive growth in our organization. Now, to your second question, if I look more broadly across consumer, I’d start by saying that we remain very committed and excited about the future of our consumer group. It’s been essential to J&J for many, many years, and as we look to the future, there’s a couple of aspects that I think are very important. One, and something that we’ve been extremely consistent about over the past several years, is returning and repairing some of the quality and supply issues that we’ve had in our OTC, particularly in the McNeil U.S. division. I’m very pleased with the progress that we’re making in that. We mentioned to you that the consent decree that we had designed in conjunction with the FDA was approved and reviewed in October, with very few comments. And given the breadth and scale of that agreement, we felt very good about that. We’ve had teams working hard since then. We’ve achieved all of our major milestones since we’ve submitted that agreement. And very importantly, we’re starting to see some of that pay off in the marketplace. So over the past six months, we’ve seen the reentry of things like Children’s Tylenol, Children’s Motrin. And what we’re particularly pleased about is that if you look at some of the consumer ratings, the quality of those brands, we’ve seen them be remarkably resilient through this period. And when we get them back to the market, we see an uptake occur. So we’re cautiously optimistic. Our plan through 2013 continues with this driving performance, consistent with the consent decree. We would expect that over the course of 2013 to return about 75% of the brands to the marketplace. And of course as we do that, we will also begin shifting our focus, not only from making sure that we can have a consistent and reliable supply of that product, but also that we can truly relaunch, working with our trade partners, working with our great marketing teams, to reestablish those brands and their leadership positions in the market. And we’ll do that as the brands reenter over the course of 2013. And let me just make one other comment. We are also very pleased to see, particularly in the fourth quarter, the upper respiratory strong performance of our consumer brands. So we believe that we continue to have a lot of skills and capabilities that are going to be important for us to continue to build on going forward. Now, outside of the OTC business, I think there’s a lot of other reasons to be optimistic. And granted, as we looked at the results, we’d be the first ones to say while we’re pleased in some areas, we’re not satisfied, and we know we need to do a better job across the portfolio. Also, some of the results were impacted by the divestitures and portfolio decisions that we made in our consumer group. But when we look at some of the core areas, such as skincare, our Neutrogena business, and some of the things that they have in cytomimic, wrinkle reduction, other technologies, really science-based technologies, and what we think we can do there. If you take a look at things like oral care, where we’ve driven strong growth, great opportunity to build on that brand Listerine in a global fashion. When we look to an opportunity to expand and grow our business globally, particularly in emerging market - and we admit we’ve seen some setbacks in China due to some of the ingredient issues - but our teams have addressed that of the past year, and we’re confident that we have a path forward. And finally, and last but certainly not least, our Johnson’s Baby line, which is really an iconic brand, that we still know has a lot of potential. We see it as an important driver of growth in the future. And I think for 2013, to be clear, our projections are very consistent with many of yours. But beyond that, our consumer group remains a very important strategic driver at Johnson & Johnson.

Alex Gorsky: We also look, obviously, at the future pipeline. Could we, in fact, and did we see a path forward to be able to be in a more competitive position. And three, how did we see it fitting in a more complementary way with some of our other businesses. And while we certainly believe in the future of diagnostics, we think that that will more likely be in an area outside of clinical diagnostics such as molecular diagnostics, biomarkers, some of the other things that we’re already working on with some of our oncology programs. So when we looked at that in total, we felt that stepping back and looking at broader strategic options for that business was, in fact, the best thing to do for that business longer term, as well as for more broadly across Johnson & Johnson. And I also just think it’s indicative of the need for us to continue to look for ways, again, to make a better difference for patients and to drive growth in our organization. Now, to your second question, if I look more broadly across consumer, I’d start by saying that we remain very committed and excited about the future of our consumer group. It’s been essential to J&J for many, many years, and as we look to the future, there’s a couple of aspects that I think are very important. One, and something that we’ve been extremely consistent about over the past several years, is returning and repairing some of the quality and supply issues that we’ve had in our OTC, particularly in the McNeil U.S. division. I’m very pleased with the progress that we’re making in that. We mentioned to you that the consent decree that we had designed in conjunction with the FDA was approved and reviewed in October, with very few comments. And given the breadth and scale of that agreement, we felt very good about that. We’ve had teams working hard since then. We’ve achieved all of our major milestones since we’ve submitted that agreement. And very importantly, we’re starting to see some of that pay off in the marketplace. So over the past six months, we’ve seen the reentry of things like Children’s Tylenol, Children’s Motrin. And what we’re particularly pleased about is that if you look at some of the consumer ratings, the quality of those brands, we’ve seen them be remarkably resilient through this period. And when we get them back to the market, we see an uptake occur. So we’re cautiously optimistic. Our plan through 2013 continues with this driving performance, consistent with the consent decree. We would expect that over the course of 2013 to return about 75% of the brands to the marketplace. And of course as we do that, we will also begin shifting our focus, not only from making sure that we can have a consistent and reliable supply of that product, but also that we can truly relaunch, working with our trade partners, working with our great marketing teams, to reestablish those brands and their leadership positions in the market. And we’ll do that as the brands reenter over the course of 2013. And let me just make one other comment. We are also very pleased to see, particularly in the fourth quarter, the upper respiratory strong performance of our consumer brands. So we believe that we continue to have a lot of skills and capabilities that are going to be important for us to continue to build on going forward. Now, outside of the OTC business, I think there’s a lot of other reasons to be optimistic. And granted, as we looked at the results, we’d be the first ones to say while we’re pleased in some areas, we’re not satisfied, and we know we need to do a better job across the portfolio. Also, some of the results were impacted by the divestitures and portfolio decisions that we made in our consumer group. But when we look at some of the core areas, such as skincare, our Neutrogena business, and some of the things that they have in cytomimic, wrinkle reduction, other technologies, really science-based technologies, and what we think we can do there. If you take a look at things like oral care, where we’ve driven strong growth, great opportunity to build on that brand Listerine in a global fashion. When we look to an opportunity to expand and grow our business globally, particularly in emerging market - and we admit we’ve seen some setbacks in China due to some of the ingredient issues - but our teams have addressed that of the past year, and we’re confident that we have a path forward. And finally, and last but certainly not least, our Johnson’s Baby line, which is really an iconic brand, that we still know has a lot of potential. We see it as an important driver of growth in the future. And I think for 2013, to be clear, our projections are very consistent with many of yours. But beyond that, our consumer group remains a very important strategic driver at Johnson & Johnson.

Louise Mehrotra: By the time all those products get back on the shelf, the MD&D business will do better in 2013 than in ’12. And the growth rate in the pharma business, of course in ’12, was dramatically fueled by the launch of the new products that came into the market, so the growth rate in ’12 versus ’11 is impacted by that, and we don’t have that same phenomenon in ’13 over ’12. Those products continue to do well, but relatively speaking, compared to the two years, the growth rate in pharma would be not as dramatic as the growth rate we saw in ’12 over ’11. You asked about why the conservatism, and look, it’s early. You know, it’s January 22. So we’ll keep you posted throughout the year.

Matt Dodds – Citigroup: By the time all those products get back on the shelf, the MD&D business will do better in 2013 than in ’12. And the growth rate in the pharma business, of course in ’12, was dramatically fueled by the launch of the new products that came into the market, so the growth rate in ’12 versus ’11 is impacted by that, and we don’t have that same phenomenon in ’13 over ’12. Those products continue to do well, but relatively speaking, compared to the two years, the growth rate in pharma would be not as dramatic as the growth rate we saw in ’12 over ’11. You asked about why the conservatism, and look, it’s early. You know, it’s January 22. So we’ll keep you posted throughout the year.

Dominic Caruso: By the time all those products get back on the shelf, the MD&D business will do better in 2013 than in ’12. And the growth rate in the pharma business, of course in ’12, was dramatically fueled by the launch of the new products that came into the market, so the growth rate in ’12 versus ’11 is impacted by that, and we don’t have that same phenomenon in ’13 over ’12. Those products continue to do well, but relatively speaking, compared to the two years, the growth rate in pharma would be not as dramatic as the growth rate we saw in ’12 over ’11. You asked about why the conservatism, and look, it’s early. You know, it’s January 22. So we’ll keep you posted throughout the year.

Alex Grosky: By the time all those products get back on the shelf, the MD&D business will do better in 2013 than in ’12. And the growth rate in the pharma business, of course in ’12, was dramatically fueled by the launch of the new products that came into the market, so the growth rate in ’12 versus ’11 is impacted by that, and we don’t have that same phenomenon in ’13 over ’12. Those products continue to do well, but relatively speaking, compared to the two years, the growth rate in pharma would be not as dramatic as the growth rate we saw in ’12 over ’11. You asked about why the conservatism, and look, it’s early. You know, it’s January 22. So we’ll keep you posted throughout the year.

Larry Biegelsen – Wells Fargo: By the time all those products get back on the shelf, the MD&D business will do better in 2013 than in ’12. And the growth rate in the pharma business, of course in ’12, was dramatically fueled by the launch of the new products that came into the market, so the growth rate in ’12 versus ’11 is impacted by that, and we don’t have that same phenomenon in ’13 over ’12. Those products continue to do well, but relatively speaking, compared to the two years, the growth rate in pharma would be not as dramatic as the growth rate we saw in ’12 over ’11. You asked about why the conservatism, and look, it’s early. You know, it’s January 22. So we’ll keep you posted throughout the year.

Alex Gorsky: Larry, thanks for the question. What I would say is if we look at the U.S. business, particularly in the back end of the year, as you noted I think it started strong with our pharmaceutical business. We saw very strong performance, and particularly in our launch brands

Louise Mehrotra: Okay. Rick?

Rick Wise - Stifel Nicolaus: First, for Dominic, and then for Alex, Dominic, both you and Alex have mentioned the seemingly better performance for ortho. Just can you help us understand, is it product driven? Is it comps? Was there any difference in selling days? It seemed like a nice step up versus the the quarter. Alex, a broader, bigger question for you. I’m always fascinated by leadership and change in leadership. Every leader brings a special passion and differentiates themselves versus their predecessors, no matter how excellent. Today, you’re talking about decisiveness, many opportunities to manage the portfolio, technology. Can you help us understand how we should be holding you accountable, or thinking about your plans, or what’s truly a special sauce, if you will, you’re going to bring to the job?

Dominic Caruso:

Alex Grosky:

Louise Mehrotra:

Kristen Stewart – Deutsche Bank:

Alex Gorsky: Thank you for the thoughtful question. I think we’ve been fairly consistent in the way we’ve articulated our strategy around M&A. You know, first really starting with where is there unmet need where we feel we should or can be a part of the solution. And that can start with great technologies, that can start with great companies, and there are examples of both that we’ve had historically, that resulted in us going out and acquiring something new. I think more and more we’re looking at the second aspect, of how does it fit in a complementary way with our other businesses, as part of making a broader offering, similar to what we’re seeing now in Synthes, and our vision. And so we’re always looking for businesses that can complement, just don’t replicate, but truly complement and synergize, with some of our existing businesses or some of our platforms. I think the other area that we’re also acutely aware of is how do we drive additional growth globally, particularly in emerging markets. And we’ve done that, I believe, in a disciplined and selective way so far. And I mentioned the recent acquisition we did in China to expand our biologics platform. But here we’re very excited about the patient and the business opportunity represented by our biosurgical franchise. And it’s another example of where we started with a product, a technology, and we’re building an entire platform to reshape the way that the bleeding is controlled. And an important component of that is not only to do that in developed markets, but how do we do that in developing markets? How do we source the right kind of capabilities? So by doing this in China, we think that’s going to give us a great opportunity. We’ve done it in our consumer group, with some of the products I mentioned in Russia, Dr. Mom. So that’s an area where we realize that if we only rely on endogenous growth in some of those markets, we won’t accelerate at the rate that we’re hoping for. That being said, we need to be very thoughtful about which companies, and how we go about it, in some of those markets. Those are a few examples of, I think, areas of interest for us.

Louise Mehrotra: Tony?

Tony Butler - Barclays Capital : Alex, one for you and then two quick ones for Dominic please. Alex, I’m just curious if we could just go back to comments you made earlier about Washington, and not knowing which way the wind blows there. And I think we all would agree, but what is your view of the dual eligibles? And do you think there’s a resolution in the near term? And then Dominic, just two brief questions. One on VELCADE. Could you discuss the tenders, and what happened in this particular quarter, Q4, and also comments around the flatness sequentially in ZYTIGA?

Alex Gorsky: Look, our approach all along has been that it’s very important to make sure that as we work our way through healthcare reform, that we stay focused on solutions that do improve or provide access for people who are either un- or under-insured in this country. And we think it’s unacceptable there’s such a high number, and so we’ve tried to work very closely with our trade organizations, with governments, to make sure that patients can get access. So we think that’s important, number one. Number two, specifically as it relates to dual eligibles, we try to work with our trade partners at pharma, with the government, in good faith, toward the additional ACA, and we think that by and large, that program run, Medicare Part D, has been very successful. And we just need to be aware that as we make commitments, as we create programs, that we do so in a way that leads to a consistent approach, and number two, that ensures we continue to reward innovation. Because if we don’t reward innovation, we’re not going to have the next ZYTIGA, we’re not going to have the next ibrutnib, and some of these wonderful compounds. And by only focusing on costs, we will not cure Alzheimer’s, we will not take care of diabetes in the way that we should. And so that’s why we’re very anxious to work with a lot of other partners on coming up with the way that we’re preserving this underlying encouragement and motivator for innovation, and that’s something that we’re working on.

Dominic Caruso: And this year we’ll continue delivering innovative new products and solutions for consumers, for patients around the world, by implementing the long term priorities that we outlined, as well as our short term priorities. And I look forward to updating you on our progress against them as we move through the year. So I’d like to say, thank you again, and turn it back over to Louise.

, : And this year we’ll continue delivering innovative new products and solutions for consumers, for patients around the world, by implementing the long term priorities that we outlined, as well as our short term priorities. And I look forward to updating you on our progress against them as we move through the year. So I’d like to say, thank you again, and turn it back over to Louise.

Louise Mehrotra: And this year we’ll continue delivering innovative new products and solutions for consumers, for patients around the world, by implementing the long term priorities that we outlined, as well as our short term priorities. And I look forward to updating you on our progress against them as we move through the year. So I’d like to say, thank you again, and turn it back over to Louise.

David Lewis – Morgan Stanley: And this year we’ll continue delivering innovative new products and solutions for consumers, for patients around the world, by implementing the long term priorities that we outlined, as well as our short term priorities. And I look forward to updating you on our progress against them as we move through the year. So I’d like to say, thank you again, and turn it back over to Louise.

Alex Grosky: And this year we’ll continue delivering innovative new products and solutions for consumers, for patients around the world, by implementing the long term priorities that we outlined, as well as our short term priorities. And I look forward to updating you on our progress against them as we move through the year. So I’d like to say, thank you again, and turn it back over to Louise.

Louise Mehrotra: Thank you Alex and Dominic, and we will now take a short break and resume at 11 o’clock. Thank you.