Johnson & Johnson Stock

Good morning, and welcome to Johnson & Johnson's Third Quarter 2026 Earnings Conference Call. This call is being recorded. I will now turn the conference call over to Johnson & Johnson. You may begin.

Hello, everyone. This is Ryan Koors, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the third quarter of 2026 and our financial outlook for the full year. First, a few logistics. As a reminder, today's presentation and associated schedules are available on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com.

Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements which are based on the current expectations of future events using the information available as of the date of this recording. They are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. The description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2025 Form 10-K, which is available at investor.jnj.com and on the SEC's website. 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 Duato, our Chairman and CEO, will discuss our business performance and growth drivers. I will then review the third quarter sales and P&L results. Joe Wolk, our CFO, will then close by sharing an overview of our capital allocation priorities and updated guidance for 2026.

Tom Cavanaugh, Executive Vice President, Worldwide Chairman, Innovative Medicine, John Reed, Executive Vice President, Innovative Medicine Research and Development; and Tim Schmid, Executive Vice President, Worldwide Chairman, MedTech will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes.

With that, I will now turn the call over to Joaquin.

Thank you, Ryan, and good morning, everyone. Our strong performance in the third quarter reinforces our confidence in 2026 as a year of accelerated growth and impact for Johnson & Johnson. In Q3, we reported operational sales growth of 6% ahead of analyst consensus and increased sequential growth compared to the second quarter. With 6 strategic focus areas: oncology, immunology, neuroscience, cardiovascular surgery ambition, we are leading in areas of high unmet need where innovation can make the greatest difference for patients. Our powerful combination of innovative medicine and med tech expertise strengthens our competitiveness.

Our products and platforms now generate at least $1 billion in annual sales. Our marketed portfolio continued to perform. Our launches are gaining significant traction, and we are advancing our new product pipeline that will sustain our growth into the next decade with sales in the quarter of more than $25 billion we are on track to meet our guidance and exceed $100 billion in annual revenue for the first time in our company's 140-year history. As we advance our differentiated portfolio and pipeline, we have a clear path to double-digit growth by the end of the decade.

In innovative medicine, we delivered operational sales growth of 7.9%, with 8 brands growing double digits. Let's start with oncology. We are making progress to redefine cancer care from treatment to cure. In the third quarter, our oncology business grew approximately 17%. Our multiple myeloma portfolio and pipeline are a match with 80% of patients receiving a Johnson & Johnson therapy as part of their treatment journey. And we continue to strengthen the body of evidence supporting our recently launched multiple myeloma therapies and combination regimens.

New Phase III results announced in July demonstrated that the combination of the bile plus tale reduced the risk of disease progression or death by 89% as early as the second line of treatment. In solid tumors, sales of REMBRANDT increased by 64%, reflecting its strength in lung cancer. And by the end of the year, we expect to receive U.S. FDA approval for RYBREVANT Faspro in advanced head and neck cancer, a disease with significant unmet needs.

In bladder cancer, Inlexzo has rapidly emerged as a market leader for new patient share, just 1 year after its launch. Nearly 1 in 3 eligible patients started on an elector regimen in the third quarter, demonstrating its growing role in transforming care in high-risk non-muscle invasive disease. During the quarter, we also invested to bolster our oncology pipeline. We completed our acquisition of [ Fire Flavio ] adding a promising new degraded antibody conjugate platform that targets drivers of difficult-to-treat cancers, including KRAS. Our ambition is to become the #1 oncology company by 2030, with sales projected to exceed $50 billion.

Turning to immunology. We are building on our 25-year legacy to drive industry-leading innovation for patients. TREMFYA delivered exceptional sales growth of 68% in the quarter, reflecting strong momentum across its indications. In the U.S., it is now brand share in colon disease, alterative colitis and psoriatic arthritis. And we continue to generate evidence that reinforces TREMFYA's clinical differentiation based on the landmark STAR study, TREMFYA is the first and only IL-23 inhibitor to demonstrate positive outcomes in axial disease clinical trials including significant improvement in spinal pain, steepness and inflammation in patients with psoriatic arthritis. This momentum reinforces our conviction in TREMFYA as a foundational medicine in inflammatory bowel and psoriatic diseases and our belief that it can grow into a $10 billion-plus franchise.

ICO Tide, our first-in-class targeted oral peptide for plaque psoriasis continues to outpace the recent competitors' launches. More than 20,000 patients have initiated therapy through nearly 9,000 prescribers since ICO tides launched in the U.S. We continue to make strong progress on commercial access with ICO Tide now broadly covered across all national plans. Also this quarter, IMAVIO was approved as the first advanced treatment specifically for warm autoimmune hemolytic anemia, a rare life-threatening disease that causes severe and EMEA and fatigue. This new indication builds on Mavi's momentum in generalized myasthenia gravis and reflects its broad potential across auto antibody diseases. And we continue to pursue next-generation therapies.

In July, we announced a collaboration with sale biomedicines to advance in vivo carte approaches for immune-mediated diseases. Next, in neuroscience, we aim to transform the future of brain health by addressing complex nervous system disorders. Today, we are the definitive leader in neuropsychiatry. [ CAPLYTA ] reached $1 billion in year-to-date sales, making it our $29 billion platform driven by strong uptake as an adjunctive treatment for major depressive disorder, CAPLYTA is now the fastest-growing oral branded therapy in this space. And last month, we presented pivotal Phase III data that show CAPLYTA significantly and rapidly improve symptoms of bipolar mania. SPRAVATO also delivered impressive growth of 36% this quarter, reflecting strong demand in treatment-resistant depression.

Now let's turn to Medtech, where we delivered Q3 operational sales growth of 2.5%. While we fell short of our expectations for this segment our conviction in our future direction has not changed. Starting with cardiovascular, we continue to invest in hard recovery, circulatory restoration and have written disorders to address the leading global cause of death. This was another strong quarter for Shockwave, our circulatory restoration business, which grew 17% and the ongoing global launch of Software C2 Aero continues to broaden the reach of our intravascular lists platforms.

Varipulse, our post-field ablation platform reached a major milestone this quarter with more than 100,000 AV patients treated worldwide. Varipulse Pro, which delivers 5x faster ablation speed has been very well received in Europe where it is driving double-digit growth. And just last week, we received approval for Varipulse Pro in Japan. With increasing clinical experience, we are seeing differentiated benefits from Varipulse in a recent retrospective analysis various demonstrated a 68% lower risk of adverse cardiac events compared to a competing post-field ablation platform. and in hard recovery, while physician selectivity continued to affect the biomed performance. We remain confident in the technology and focus on supporting appropriate patient selection.

In surgery, we are poised to shape the next era of care through robotics digital innovation and advanced instrumentation. In July, the U.S. FDA granted the novo authorization for Ottava, the world's first table integrated soft tissue robotic system. This is one of the most significant metric innovations we will bring to market this decade, Ottava's unique architecture, automated features and next-generation robotic instruments help address surgeon needs for operating room space and better surgical workflows, its connection to our open digital ecosystem polyphonic turns procedure data into actionable insights for clinicians.

We already signed our first commercial customer for Ottava, and we are progressing our development program. our investigational device exemption trial is already underway in ininal hernia repair with future plans for indication expansion into urology and gynecology. Finally, in vision, we are advancing life long eye health to bring better site to more than 40 million people each year. the recent U.S. launch of TECNIS PRC further strengthened our portfolio of intraocular lenses. During the quarter, TECNIS PureSee and TECNIS Odyssey surpassed 1 million implants worldwide, reflecting continued surgeon adoption and our leadership in personalized vision solutions. We also received CE marking for ACUVUE ASYS MAX 2-week reusable lenses, expanding our ACUVUE portfolio in Europe.

Overall, this quarter's strong results demonstrate the impact of the choices we have made to build a foundation for durable growth. We sharpened our portfolio to focus on innovation with the greatest potential to change lives. We proved our ability to grow through a significant loss of exclusivity. Our strategic investments in high-growth areas are delivering results, and our innovation engine continues to drive breakthroughs for patients. That is why we have the confidence to say that we will finish 2026 strong and that 2027 will be an even better year for Johnson & Johnson.

I will now turn the call back over to Ryan.

Thank you, akin. Moving to our financial results. Unless otherwise stated, the percentages quoted represent operational results. and therefore, exclude the impact of currency translation. Starting with Q3 2026 sales results. Worldwide sales were $25.4 billion for the quarter, increasing 6%. Growth in the U.S. was 9.1% and 1.8% outside the U.S. Acquisitions and divestitures had a net negative impact on worldwide growth of 10 basis points.

Now turning to earnings. For the quarter, net earnings were $210 million and diluted earnings per share were $0.09 versus $2.12 a year ago. Results in the quarter were impacted by the proposed talk litigation resolution as well as expenses associated with the Firefly Bio transaction and sale and biomedicines collaboration amounting to approximately $7 billion. Adjusted net earnings for the quarter were $6.3 billion, and adjusted diluted earnings per share were $2.59, representing a decrease of 6.8% and 7.5%, respectively, compared to the third quarter of 2025. Adjusted earnings in the quarter were also impacted by expenses associated with the Firefly Bio transaction and sale biomedicines collaboration.

I will now comment on business sales results in the quarter, focusing on the 6 key areas where meaningful innovation and strong commercial execution are driving our performance and fueling long-term growth. Beginning with innovative medicine, where our financial results reflect the depth of our expertise in innovation in areas of high unmet need across oncology, immunology and neuroscience. Worldwide sales of $16.8 billion increased 7.9%, which underscores the continued strength of our key brands and new launches. Growth in the U.S. was 11.1% and 3% outside the U.S. Divestitures had a negative impact of 10 basis points on worldwide growth. In oncology, starting with multiple myeloma.

DARZALEX growth was 15.6% and primarily driven by strong share gains of 5 points across all lines of therapy with 10 points in the frontline setting as well as continued market growth, partially offset by OUS pricing headwinds. TREVICTA achieved growth of 35.2% driven by share gains across earlier lines of therapy and continued site expansion. [ Sigvaily ] growth was 77.3% and driven by launch uptake and share gains across earlier lines of therapy following last quarter's approval in the U.S., PROTECT Vale press DARZALEX Faspro with U.S. growth greater than 100%. Tale growth was 42.1%, driven by share gains due to increased depth of prescribing in the community setting.

In lung cancer, RYBREVANT plus LAZCLUZE delivered growth of 63.5% and with strong share gains in the first and second lines driven by continued launch uptake in all regions, along with rapid uptake in RYBREVANT Fastpro. In prostate cancer, ERLEADA delivered growth of 9.4% and with continued share gains and market growth, partially offset by unfavorable patient mix. Within immunology, TREMFYA delivered impressive growth of 68.2% driven by continued momentum from the IBD launch with 4 points of share growth in both ulcerative colitis and Crohn's disease alongside continued market growth.

STELARA declined 54%, which reflects continued competitive pressures from biosimilars and the ongoing shift towards novel classes. Growth in other immunology is driven by move and ICO Tide launch uptake in the U.S. In neuroscience, SPRAVATO grew 36% driven by continued share gains, reflecting strong physician adoption and increased patient demand. CAPLYTA showed significant growth of 66.1% and driven by strong continued launch momentum in adjunctive major depressive disorder and continued demand increases across bipolar disorder and schizophrenia.

Now moving to med tech. Worldwide sales of $8.6 billion increased 2.5% with growth of 4.8% in the U.S. and 0.1% outside the U.S. overall cardiovascular grew 4.1%, including 20 basis points related to acquisitions. Electrophysiology delivered growth of 4.4%, driven by procedure expansion, commercial execution and new product performance partially offset by competitive PFA pressures, which were more pronounced in AsPac this quarter as well as the lapping of prior year OUS inventory dynamics. Abiomed saw a decline of 1.5% due to lower patient volume. There are encouraging signals in the U.S. performance with improvement in the quarter, supported by acute myocardial infarction cardiogenic shock and Impella 5.5 continuing to gain adoption.

Shockwave grew double digits at 17.2%, driven by continued adoption of coronary and peripheral products as well as new product launches and the reimbursement in the office-based lab setting within the U.S. Surgery saw a decline of 1%, including a negative impact of approximately 30 basis points from divestitures. The decline is more notably driven by ongoing expansion of VBP in China, surgery transformation program outcomes across the portfolio and Middle East disruption, which impacted tender timing and ordering patterns. The decline was partially offset by portfolio strength, driven by recent innovations such as Ethicon 4000 and DUALTO as well as commercial execution in biosurgery.

Envision growth was 5.1%, driven by premium innovation, strong execution and global reach. Contact lenses and other products grew 4.3% and driven by strong performance in the ACUVUE OASYS 1-day family of products, further solidifying our leadership position, partially offset by U.S. inventory dynamics. Surgical vision delivered growth of 7.1%, driven by new product innovations, robust demand for premium IOLs and strong commercial execution, partially offset by market-specific factors such as disruptions in the Middle East. Orthopaedics growth for the quarter was 3.4%, primarily driven by new product launches such as volt and trauma and emphasis and hips, including strong commercial execution and velis pull-through in knees.

Now turning to our consolidated statement of earnings for the third quarter of 2026. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of goods sold deleveraged by 150 basis points, driven by unfavorable product sales mix and increased intangible asset amortization expense in the Innovative Medicine segment for intracellular partially offset by the impact of tariff recoveries in the med tech business.

Selling, marketing and administrative expenses were flat as a percent of sales, reflecting consistent commercial investments in the innovative medicine business. We continue to invest strategically in research and development, deploying approximately $4.7 billion or 18.3% of sales, which includes $1 billion related to the acquisition of Firefly Bio. In process, research and development impairment costs of $339 million in the quarter is related to the write-off of Pre-cardia, a noncore asset acquired as part of the broader Abiomed transaction.

Other income and expense was a net expense of $5.8 billion as compared to $478 million of income in the third quarter of 2025 with the change primarily driven by the proposed talk litigation resolution in orthopedic separation-related costs. The tax rate was a small net benefit in the quarter, primarily related to the positive tax effect associated with the accrual for the proposed talc litigation resolution. More information can be found in our upcoming 10-Q for changes in taxes.

Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at the adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 44.3% to 35.4%, primarily due to acquired in-process research and development expense of approximately $1 billion related to the acquisition of Firefly Bio transaction costs for sale of biomedicine and unfavorable product sales mix and cost of products sold.

Medtech margin increased from 21% to 22.9%, driven by the impact of tariff recoveries partially offset by increased strategic investments in commercial capabilities. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 35.2% to 30.2%.

This concludes the sales and earnings portion of the call, and I will now turn the call over to Joe.

Thanks, Ryan. Hello, everyone, and thank you for joining us today. As you heard from Joaquin and Ryan, our third quarter results were driven by the strength of our innovative medicine business. This performance more than offset headwinds in certain areas of med tech, enabling us to exceed expectations on both the top and bottom line. while continuing to invest in our pipeline and future growth. We are clear on where med tech performance needs to improve, specifically cardiovascular and surgery outside the U.S. and are taking action to strengthen results. while disappointing, the underlying fundamentals of the med tech business remains strong, supporting our confidence in the long term for that business.

Across Johnson & Johnson, the drivers underpinning our outlook remain firmly in place. As a result, we are raising our guidance for 2026 versus our most recent update in July. The depth of our portfolio, momentum from new product launches and upcoming pipeline catalysts further reinforce our conviction in achieving double-digit growth by the end of this decade with sustainable growth beyond.

Turning to financial metrics and our cash position. We ended the third quarter with approximately $17 billion of cash and marketable securities and approximately $45 billion of debt for a net debt position of approximately $28 billion. Generating more than $6 billion in free cash flow in the third quarter. We remain confident in our full year free cash flow guidance of approximately $21 billion.

During the quarter, we completed the $1 billion acquisition of Firefly Bio, deepening capabilities in oncology with next-generation antibody engineering to address complex tumor biology. As Joaquin referenced earlier, we also entered into a collaboration with sale Biomedicines to advance in vivo CAR T therapies for immune-mediated diseases. Our disciplined approach to capital allocation is principled on prioritizing investments that support key commercial launches, accelerating future innovation, increasing our annual dividend and strengthening our pipeline through strategic value-creating inorganic opportunities.

In July, we announced an agreement for a resolution of the ovarian talc litigation for $5.5 billion, which is reflected in our third quarter GAAP results. The agreement is conditioned upon the express participation of at least 95% of the remaining ovarian claims. We are trending to meet the 95% threshold.

Let me now turn to full year 2026 guidance. As always, our outlook reflects what we know today regarding foreign exchange rates, the broader macroeconomic environment and other external factors. Based on our year-to-date performance and expectations for the fourth quarter, we are raising the midpoint and tightening the range of our operational sales guidance. We now expect full year operational sales growth in the range of 6.7% to 7.1%, which represents operational sales of $100.7 billion at the midpoint or growth of 6.9%. We do not speculate on future currency movements.

As of last week, the euro spot rate to the U.S. dollar was 1.12. However, the average rate for the fiscal year stands at 1.15. Based on that average rate, we estimate reported sales growth of 7.2% to 7.6%, with a midpoint of $101.2 billion or 7.4%. Assuming the current spot rate holds into next year, you could expect currency to be a headwind.

Turning now to other items of the P&L. Regarding operating margin, we now expect a decline of approximately 60 basis points. This is an improvement from the 75 basis points decline reflected in our updated July guidance that included the impact of the Firefly Bio and sale Biomedicines transactions, which had an unfavorable impact of 150 basis points. Absent those deals, we continue to deliver base margin improvement. As a reminder, our pretax adjusted operating margin outlook also reflects the costs associated with the 53rd week of operations and our previously announced agreement with the U.S. government to improve access to medicines.

For net interest expense, we are lowering our guidance to $150 million to $200 million. We are also tightening the range of our effective tax rate guidance. Based on our year-to-date results, we now expect a full year effective tax rate of 17.0% to 17.5%. Given those updates, we now expect adjusted operational earnings per share in the range of $10.95 to $11.05 or 2% at the midpoint. We expect reported adjusted earnings per share of $11.05 to $11.15 with a midpoint of $11.10 or growth of 2.9%. Excluding the impact of Firefly Bio and sale biomedicines transactions of $0.64, reported EPS growth would approach 9%.

As a reminder, for your 2027 modeling, we expect Firefly Bio and sale Biomedicines to have a combined dilutive impact of $1.36 per share on a full year adjusted earnings per share next year. We will provide more details on our 2027 outlook later this year at our enterprise business review. Let me now highlight several upcoming developments that reinforce our growth outlook and performance for the remainder of the year.

In oncology, we expect several important data readouts in the fourth quarter. These include data for pasritamig, a first-in-class bispecific antibody in patients with advanced prostate cancer who have progressed after multiple lines of therapy. We also expect data for J&J-6143, an investigational first-in-class once-daily oral therapy for metastatic castration-resistant prostate cancer. We continue to see strong adoption for with year-to-date sales of approximately $200 million and expect to build on that momentum with a data readout in high-risk non-muscle invasive bladder cancer later this year. We also expect U.S. approval of RYBREVANT Faspro in advanced head and neck cancer.

In immunology, as Joaquin referenced earlier, it is off to a strong start, and we look forward to presenting data in psoriatic arthritis later this year. In medtech, we expect U.S. approval of Varapulse Pro in the fourth quarter, further complementing last week's approval in Japan. In heart recovery, we are taking corrective action to improve Abiomed's performance. We continue to invest in clinical evidence and expect results from the HRPCI PROTECT IV trial in 2027. The trial will have 1,252 patients, 4x more than the CHIP BSIS 3 study. This large-scale study will evaluate the safety and efficacy of Abiomed's Impella CP pump during high-risk percutaneous coronary intervention.

In surgery, we are focused on commercializing Ottava following its recent FDA de novo authorization. We expect adoption and revenue contribution to build over time with the goal of establishing Ottava as a significant pillar of our surgery portfolio by the end of the decade. Regarding orthopedics, we remain on track for the planned separation of the P Synthes by mid-2027. I'm really proud of the team working to evaluate all separation vehicles and all options are better positioned today than when we announced our intentions with this business. Given the way depute Synthes is performing and the momentum [ Namal Noona ] and his team are generating, we are leaning towards a spin as being the best option to create long-term value for Johnson & Johnson shareholders. That has always been our base plan, and we are confident that it can be successfully executed. We will provide additional updates as appropriate and when there is more information to share.

Finally, I am really looking forward to and hope you join us for the Enterprise business review on December 8. At that event, we will provide additional perspective on our 2027 outlook and the key drivers that reinforce our conviction in achieving double-digit growth by the end of the decade. Perhaps more importantly, we will highlight our earlier-stage pipeline and how it represents the next wave of growth into the next decade. Attendees will also have the opportunity to experience firsthand some of our latest innovations such as Ottava. 2026 is on track for another successful year, exceeding expectations set at the beginning of the year. We look forward to closing out 2026 strong and setting up 2027 for continued success.

Thank you to our colleagues whose dedication and commitment continue to advance innovation, improve patient outcomes and create long-term value for shareholders. With that, we are ready to answer your questions. Kevin, can you please open the call for Q&A?

[Operator Instructions]. Our first question today is coming from Asad Haider from Goldman Sachs.

At the progress. Just 1 point of clarification. On the double-digit growth by the end of the decade, the [ Pocari ] in the press release references the progress in the underlying business quote together with strategic investments. Just want to be clear that, that refers to internal investments and not M&A, if that's a question we're getting this morning. And then, Joe, on your comments that you aren't satisfied with med tech performance and our taking action to strengthen that growth. Is the implication there that you now feel more urgency to add to higher-growth areas via M&A and medtech or do you think that you have the product portfolio today to drive the improved performance you're looking for?

Yes, Asad. On the first aspect, that is correct. Your interpretation of that being internal strategic investments is what will us to double-digit growth by the end of this decade in the coming years with increasing performance. So is the correct interpretation. It does not assume any inorganic additions at this moment in time. we always are on lookout for strategic drivers that could complement our business. makes sense to be in our hands versus where the asset would currently reside, but also creates value for the risk we're bearing on behalf of shareholders. With respect to the urgency, it's an urgency to fix what we currently have. We like the the construct that currently exists with the 3 focus areas of Vision Care of surgery as well as cardiovascular.

I think you're very familiar, and maybe I'll even hand it over to Tim to talk about some of the things we're doing in heart recovery specifically to address that I would say is now a stable business, but we want to catalyze back to double-digit growth. We're very excited what's on the horizon for surgery with the addition of Ottava over time. That will be significant contributor to growth by the end of the decade. And then as I mentioned earlier, vision seems to be functioning well both on the surgery side as well as the contact lens side, where we are the market leader.

But Tim, maybe you want to offer a comment or 2 around Abiomed.

Sure, Joe. So sad ultimately, Abiomed remained a temporary headwind as you saw our conviction in the long-term opportunity has not changed at all. The slowdown we're seeing continues to be the same issue we highlighted in the quarter before, which is this study outside of the U.S. focused on high-risk PCI and importantly, we do not view these challenges as structural in nature and ones that will drive a long-term impact on the business. We're not seeing any changes in the patient need not to reimbursement or any meaningful competitive pressures. We also have highlighted some questions we have around the study as to whether best practice would practices were used in the study. And so our focus today is really on education and advancing the clinical evidence base to show the incredible impact that Impella has in both saving and improving lives. And so we believe it's a short-term headwind.

It's important to recognize that in any emerging area of science, there's always going to be a debate and discussion. And our responsibility is to continue to advance the evidence base to support within the best interest of patients and in the case of Abiomed we're doing exactly that. And so a short-term headwind, but we are very confident this is going to be a strong platform for growth for Johnson & Johnson for the future.

Questions coming from Larry Biegelsen from Wells Fargo.

Joe, I wanted to ask about the 2027 comments you made at Deutsche Bank. On the top line, you said you expect reported sales growth to be similar to 2026 after adjusting 100 basis points for the extra week in both years, which I think would mean about 5.4% reported growth next year. And on EPS, how should we think about your ability to grow earnings, excluding IP R&D? And just remind us of how much the Firefly and sale dilution is IP R&D this year and next year?

So for this year, the IPR&D dilution is $0.64. And for next year, the combination of those deals is $1.36. And the way I would think about that, Larry, and you've covered us long enough where you know that typically, our income growth or EPS growth will be a little bit better than our sales growth. That's how you can think about that next year adjusting for the $1.36 adjustment. So we'll continue to look at margin improvement as part orthopedic separation, looking more holistically at our business, some of the advances we're getting with technology and getting us more efficient across all parts of our business, but that's probably a good way to kind of frame in your now for 2027, but we'll be a little bit more explicit on December 8 at our Investor Day. Outline specifically kind of the components to that and then even probably provide a pro forma with respect to the orthopedic separation should that occur at some point next year as well as a longer-term outlook.

Our next question is coming from Chris Schott from JPMorgan Chase.

I just wanted to touch base on ICO Tide. So just a 2-part question here. First, can you just give us an update in terms of what you're seeing in terms of patient uptake as we think about new to biologic versus oral switches versus injectable switches? And then bigger picture for the drug. Are you talking about this as a $10 billion-plus asset. But when you think about this very strong launch we've seen so far in psoriasis, you got a number of additional indications pending I guess how do you think about -- could this be a much larger asset than $10 billion as you think about the peak sales opportunity for icotide?

Great. Chris, it's Tom. Good to hear from you. First, I do want to start by recognizing Jennifer Taubert and thanking her for her tremendous leadership and partnership. Jennifer leaves Innovative Medicine incredibly well positioned, as you see from our quarterly earnings. With strong momentum, outstanding portfolio and pipeline, and most importantly, a great team. We're fortunate to build on that foundation. She established, and I'm excited about what's ahead. And really, what I'm excited about is what you're touching on right now is icotide, we do foresee icotide to be one of our biggest assets in innovative medicine, and it is off to an incredibly great start as you highlighted and as Joaquin highlighted on the call this morning, I think getting into some of the launch performance, you heard from Joaquin.

Already to date, we've seen over 20,000 patients initiated on therapy. With over 8,000 prescribers or nearly 9,000 prescribers, I would say. So absolutely tracking better than some of most all launches in psoriatic diseases. I think early prescribing trends is what you wanted to get at kind of as we think about -- and we are expanding the systemic marketplace. Approximately 60% of the patients are systemic naive, so they haven't received any systemic therapy. And roughly the 40 remaining 20% are sourced from orals and 20% are sourced from other treatments, most likely biologics as we dig into the data.

So I can say, as you're seeing with regards to the launch performance, earlier a bit expansion of the marketplace and absolutely an opportunity to continue to drive that. Highlighted as well, as Joaquin highlighted earlier, I think it's important to point out, we do have broad commercial access now and preferred access in place on all national commercial plans or are actively engaged to expand that to the Medicare population. So I would say we're fairly very excited about the launch to date as equally as excited about the future. And we do foresee this to be one of our largest assets, as I pointed out. We're excited about the upcoming data readouts both with a PSA and Phase III data as well as the head-to-head STELARA data for ASCEND that we should be releasing in the coming months. And as we look to expand beyond that and we'll get into more of this at the EDR at IBD and expansions into UC and CD, expecting similar results with regards to launch performance as we go into those other indications.

Next question is coming from Joanne Wuensch from Citi.

I want to focus a little bit on that tech here. When you use the phrase underlying fundamentals in med tech are solid. I want to confirm that you're thinking about all the good stuff, the patient volumes, the CapEx spending from the hospitals and then what you're seeing in terms of just general flows. And then as a sister question to that, how do you -- or what do you think needs to be done to improve the J&J franchise?

Joanne, it's Tim. Thank you very much for the question. Let me start by really putting the overall med tech Q3 results in context for you and all on the call. And to be clear, our performance is below the standard. We have said internally and below the expectations we previously communicated to investors. Simply put, we can do better, and we absolutely will. And right now, we are focused solely on the actions needed to deliver stronger results in the fourth quarter and beyond. And that said, when to your question. When we break down our results, you will see that the pressure was primarily concentrated actually in 2 very distinct areas.

Firstly, our performance outside of the U.S. And secondly, Abiomed globally, which we already touched on. And to put it in perspective, growth in the U.S., which, as you know, is the most important market wasn't fact robust in the quarter and accelerated to almost 5%. Our performance outside of the U.S. was a challenge, and that reflected a combination of mostly known headwinds and which we have discussed previously. For example, in surgery, the expected impact of the transformation program and the ongoing expansion of volume-based procurement in China. And electrophysiology, competitive intensity, especially in Asia Pacific, which is a region that you know is still relatively early in the adoption of did introduce a new headwind, which is really the incremental pressure that we're seeing on the business due to the conflict in the Middle East.

But when you actually step back and you look deeper into these results, we're seeing several encouraging indicators, which give us confidence in a stronger Q4 and outlook beyond that. For example, in electrophysiology in markets like Europe, where we've already launched Varapulse Pro, which, by the way, is a faster and easier to use catheter, we're back to double-digit growth. And we will launch Varapulse Pro in Japan shortly after receiving regulatory approval last week. You can also anticipate a U.S. launch by the end of this year.

I think at Abiomed, we've already touched on the study in IRIS-PCI, a study where we actually believe that the methodology employed did not follow well-established is an issue which we're addressing through education. We think we're going to get through that because the evidence base is so solid, especially in areas like AMI cardiogenic shock, and we're still seeing tremendous performance of we did, by the way, already see some improvement sequentially throughout the quarter, and we do believe that, that business will be back to growth in short order.

While Q3 for med tech was not a strong quarter, this should not distort the whole picture. As mentioned, the issues are primarily concentrated in the 2 areas I mentioned. It's also worth reinforcing to your question that the underlying procedure environment stable across our key markets. I know there's been a lot of debate about that. Our job now is to make sure that we convert that demand into more consistent performance. And so we remain confident in the combination of the momentum we're seeing in the U.S. and the moderation of these near-term headwinds, which will support improved performance in Q4, while positioning us for stronger performances in 2027 and beyond. And as you've already heard from Joaquin and Joe will share more detail around what that looks like for '27 and beyond, specifically with a focus on new innovations like Ottava when we come together on December 8.

Next question today is coming from Jason Gerberry from Bank of America.

Hello. This is Richard Wagner for Jason. I had a question regarding the icotide psoriasis launch. Are there lessons that can be learned that would be useful when icotide launches in specifically in IBD, competitors are developing high-efficacy combination programs and wondering how that could affect the efficacy perception by physicians of icotide.

Richard, it's Tom addressing your question. A couple of things I'd point out, and I'd obviously turn it over to Sean, if he has any further remarks with regards. So I'll say a couple of things. absolutely know the space very well, whether it be in psoriasis or IBD. And you could tell by the launch that we had with TREMFYA and IBD, it's off to an incredibly great start. As you can see, over 70% growth year-over-year and heavily penetrated in becoming the -- actually the fastest-growing biologic across all indications, in particular, in IBD, new patient starts. So we know the space very well.

With that said, I will say there's still significant unmet need in a large amount of patients that are untreated or not treated, earlier in the course of their diseases. And we do see that to be a great opportunity for not only market expansion as we're seeing in psoriatic disease or psoriasis with icotide, but the profile of the product fits beautifully and I would say. Obviously, the data will be depend on how we look at it in the positioning once it becomes on the marketplace. But I will tell you, we'll have early access as one of the other keys and we'll see rapid uptake once we get those data results.

Yes, maybe just to build on that a little bit. I think the reason that we've had such a great start in psoriasis is because of that trifecta biologics like efficacy coupled with placebo-like safety combined with the convenience of a once-a-day pill, and we think that will play very well across all indications, including IBD, where as Tom reference still a large percentage of patients are not on an advanced therapy.

The data in our Phase II study were quite encouraging and look like coal can deliver on par with the current monotherapies. Of course, we're very aware that some patients need something more that they need a combination therapy, and that's why we're developing [ 480 ] which pairs are guselkumab, our IL-23 inhibitor with golimumab, our TNF inhibitor and that is in Phase III studies now after a really compelling Phase II data that show that in that refractory population that have failed 2 or more prior advanced therapies. This really delivers superior efficacy to the monotherapy. So we're actively pursuing that for those patients where monotherapy is not enough and could see then that opportunity to migrate patients if needed, beyond the monotherapies to the dual therapies with our coantibody therapeutic [ 4804 ].

Our next question is coming from Vamil Divan from Guggenheim Securities.

Great. Maybe one just follow-up and then one actual question. Following up on the icotide. I appreciate the comments you've made so far. Just curious if you would be willing to provide any commentary on the actual net sales in the quarter or kind of how it compares to where consensus was. We're just getting some questions from investors on that specifically? And then my other question is just around -- so I appreciate the comments there you made around the sales so far. I'm wondering if you can just quantify, I know you have the data coming up later this year as well. how you see the market opportunity for an expanding based on the current indication? And then what sort of the SunRISe-5 data, what's the size of that opportunity relative to what you have currently?

Yes. Obviously, we haven't disclosed any sales for IcoType, but I'm confident we're going to be doing that next year just based on the momentum and the progress that we're seeing with the launch of code. Turning it over to Enlexo, also another exciting product that we have or even a platform as we think about TAR210 as well. and the opportunity that exists for us. We're off to an incredibly great start. Joe disclosed that we're nearly $200 million in net trade sales for year-to-date. And quite honestly, we haven't reported quarterly sales, but I could say at Q3 was north of $90 million. So we're seeing great sequential growth. This quarter, we saw new patient inserts grow 45% versus the previous quarter. And I wanted to point out that this is any population in non-muscle invasive bladder kids or high risk with carcinoma in situ, it represents roughly 4,000 patients in totality. So relatively small in nature. And we're still seeing patients being put on Enlexo in this patient population.

You touched on SunRISe-5, which is a broader patient population, roughly 15,000 patients and what we call SunRISe-3, which is the BCG naive population, roughly 50,000. This is where we absolutely see a greater opportunity for us to live into the number of $5 billion plus for the platform, and I do believe we will do just that and above that, given the unmet medical need. The simplicity of Alexa delivers and high response high durable complete remission rates that we are delivering within Leo as we look to expand in the population.

Maybe I'll turn it to John to on a little bit of the clinical development program.

Indeed, the -- as you know, the approval currently is for the CIS type of nonmuscle-invasive bladder cancer, which spreads laterally. But the more common is the papillary and in our so-called SunRISe-1 study, we had a cohort devoted to patients with papillary cancers where those leases, which project out word from the bladder wall are excised by the urologist. And then Enlexo is applied and one tries to prevent recurrence. And we show nearly 75% of patients had no recurrence after 1 year and that over 95% had no progression of their disease. In other words, they did not progress to more invasive types of disease. So based on that, the use of Enlexo in that papillary form of disease, which is by far, the more common and is already in the NCCN guidelines and the FDA has invited us to submit for an expansion of our label into that population.

Both icotide and enlexo are going to be together with RYBREVANT key drivers of our growth acceleration driving to double-digit growth. So they will become one of our largest products, both of them.

Our next question is coming from Michael Yee from UBS Securities.

Maybe 2 pipeline science questions. On icotide, obviously, you have great data in psoriasis a little bit lower than biologics, but great data. In IBD, the UC data was quite strong. I'm just wondering if you think that would be replicated to biologic like efficacy as an oral and that differentiation there due to the release in the gut is the reason for the potentially stronger data in IBD, which could be a bigger driver? Second part question is on Milvexian. I know you share in that partnership but SSP data is coming up, and I just wanted to check in on your confidence that, that should be similar to Milvexian, and that should be a fairly derisked indication as a Factor XI.

John Reed here. Thanks for your questions. I'll start off and then maybe Tom will want to supplement. But on icotide and IBD, we get that question all the time asking might we see even greater efficacy with an oral because of the gut absorption. All I can say is to be determined. We were quite pleased with the Phase II data in ulcerative colitis.

I would also tell you the Phase III studies, as we saw with our psoriasis and psoriatic arthritis, studies are enrolling briskly in the prior studies. They enrolled in about 1/3 of the time that it normally takes us to enroll in those indications reflecting, I think, the real enthusiasm that both physicians and patients have for this oral option. So that theory about oral absorption and improved efficacy to be determined by the data.

Moving to Milvexian and we remain confident in the studies underway, particularly with the secondary stroke because of the [ Asondexian ] data. As we know in vitro, Milvexian is a more potent inhibitor of Factor XI. We also have been able to have a safety margin that allows us to push that dose to ranges that we're confident are quite effective. So we remain confident in the results and expect that perhaps the secondary stroke data will be available even this year. It's been driven the study. The atrial fibrillation, the larger population will be next year. It will be exciting for us if we can prevail in both those indications because about 25% of patients who are candidates for secondary stroke have atrial fibrillation. That's probably why they had the stroke in the first place. And so if we can benefit both of those populations that will be exciting. We are confident in the atrial fibrillations study as well there, we were able to push the dose 4x higher, given our safety margin in the drug NPL from monitoring of the anticoagulation status of the blood with laboratories that we're in the right range to benefit patients and prevent thrombosis. So thank you for the question.

Yes, I'll just reinforce what John has said there's an absolute need for highly effective oral anticoagulation therapy with a reduced bleeding risk. In Afib alone, approximately 40% of the patients eligible for oral anticolagants are not receiving oral anorectypically due to the concerns on potential safety and the bleeding risk associated with the current...

Our next question is coming from Jayson Bedford from Raymond James.

Just I wanted to go back to the international med tech business. Is there any way to quantify the impact of the dynamics in the Mid-East and VBP? And then Tim, I wanted to ask about international surgery. First, just to confirm your view is that there's been no change to the underlying demand profile internationally? And then second, I think Joe mentioned taking actions internationally for surgery. What are those actions?

Let me try to get to all of those. Let me start with the Middle East. And clearly, we've highlighted that as a new risk has broadened over time. And really, the effect is no longer limited to a handful of markets as we initially thought we've seen increased disruption to ordering patterns tender timing and hospital spending decisions across a wider group of countries, unfortunately. And we've also seen governments and health care systems become more cautious in their spending priorities with some funding and procurement decisions taking longer than what we normally would expect.

That has created a more meaningful impact on purchasing behavior than we saw earlier in the year. That said, I think it's important that we see this really as a short-term factor. I mean the underlying issues have not changed. The clinical need remains intact, and we would expect many of these opportunities to be deferred rather than permanently lost. I think that's an important factor as it relates to any form of conflict and certainly what we're seeing in the Middle East.

On surgery, as I mentioned, we're actually really excited about the performance in the U.S. Our issue really was outside of the U.S. And as you know, primarily driven by factors we discussed for such as the transformation program and volume-based procurement. And then, of course, the incremental pressure that we've just mentioned around the Middle East. I will say that despite those headwinds, we're focused on where we can have an impact we have a lot of opportunities. Wound closure growth continue to benefit. This is a category where we absolutely dominate. And that growth has been driven by innovation such as Stratificas sutures, biosurgery and other billion platform delivered solid growth, driven by key brands like SURGIFLO, SURGICEL and VISTASEAL and we continue to see good traction with our in the mechanical innovations such as Ethicon 4000 and Dualto. And so we are confident that we will see continued growth in the U.S. And to your question, we will see acceleration in EMEA and return to growth overall in the fourth quarter. I do think it's also worth mentioning our confidence in this business going forward. This was core to how we started Johnson & Johnson Medtech, and we are absolutely committed to it for the long term. I'd say the biggest reason for confidence is the fact that we will be entering the surgical robotic space. And combined with our leadership positions across wound closure, biosurgery and advance instrumentation, we believe that Ottava gives us an opportunity to participate more fully in one of the most attractive and underpenetrated areas of surgery. And so as we continue to execute our portfolio transformation, advanced innovation across the existing business and prepare for the launch of Ottava, we remain confident in the long-term trajectory of the surgery franchise.

We do get a lot of questions on Ottava and rest assured that when you come together for the meeting on December 8. We will provide perspective on the outlook for that innovation and further build your confidence in what we believe will be a material contributor to Johnson & Johnson's growth over the long term.

Thank you, Jason. We have time for 1 last question.

Certainly, our final question today is coming from Alex Hammond from Wolfe Research.

So I guess as the CARTITUDE-5 and 6 trials of advance and newly-diagnosed multi myeloma, how is J&J preparing to educate physicians and treatment centers for the potential shift to use it earlier into the treatment journey. And I guess how should investors think about potential to capture share from these existing frontline regimens?

Alex, it's Tom. Thanks for the question. I think first and foremost, yes, we're anxiously awaiting for those trials to read out. I would say we're already doing that right now with CARTITUDE-4 across the globe. CARTITUDE is available in over 20 markets, and we're seeing substantial share growth in the earlier-line settings. And I would say roughly in the U.S. of the utilization of parity lies in lines 2 and 3. So there's becoming more familiarity with the product and access to the product and excitement about it predominantly due to the unmatched overall survival as early as Line 2 of therapy that we've seen versus standard of care. So we're already educating health care providers on the product and how they can utilize it earlier. Some of the education that is centered around is appropriate patient selection and the earlier, the better as well as proper bridging, getting the patients to the highest level MRD negativity to be effectively treated with CARVYKTI.

Just to remind on top of that, that at the recent myeloma meetings, we showed 5-year follow-up data from the card study that's in second line showing that about half of those patients enjoyed complete remission out to 5 years with no further treatment. So a one and done in 5 years of continued disease-free survival. So very exciting data.

Great. Thank you, John, and thank you, Alex, for the question. And thanks to everyone for your questions and continued interest in our company. I will now turn the call over to Joaquin for some brief closing remarks.

Thank you for your questions and your engagement in today's call. As you can see, we continue to build momentum growth improved sequentially in the third quarter, and we expect further acceleration in 2027 with a clear path to double-digit growth by the end of the decade. In innovative medicine growth will come from both our existing portfolio, including DARZALEX and TREMFYA and newer products such as icotide, RYBREVANT and enlexo as they begin to contribute more meaningfully. We see similar opportunities in medtech the potential from our cardiovascular launches, including next-generation and IVL catheters, additional data supporting Impella and Ottava and robotic surgery are not yet fully reflected in our growth.

Taken together, these drivers position Johnson & Johnson as one of the cleanest growth stories in health care. We will provide more details about our portfolio and late-stage pipeline at our enterprise business review later in December. Thank you very much, and enjoy the rest of your day.

Thank you. This concludes today's Johnson & Johnson's Third Quarter 2026 Earnings Conference Call. You may now disconnect.

Good afternoon, everybody. My name is Andrew Callaway. I'm responsible for healthcare investment banking here at Deutsche Bank. I'm joined by my partner, Jonathan Guskind, who's responsible for our MedTech effort. And we are so pleased to have our good friend, Joe Wolk here today. For those who don't know Joe, he's the Executive Vice President and CFO at Johnson & Johnson. So really excited to have this fireside with him.

Today, we're going to start with some high-level questions. Then we're going to jump into MedTech. Then we'll do a bit of a deep dive on pharma, and then we'll close with some capital allocation questions. So let's jump in, Joe.

You guys had a great Q2. You've been able to indicate that you're going to generate sales north of $100 billion this year, which is exciting. Innovative Medicine represents about 2/3 of that and MedTech, the remaining 1/3. How do you see the balance potentially changing over time? Do you feel like you got the right balance between the 2 businesses? Or do you think as you look forward, that could change?

Yes. First off, thank you, Cal and Jon, for your interest as well as all of you for your interest in Johnson & Johnson. It certainly is a pleasure to be here today. And it's, I think, a really good story that we have to talk about at these conferences nowadays. I got to say the Board, the executive committee, we don't really wake up to a formula that says it's got to be 2/3 pharmaceuticals and 1/3 MedTech. We want to make sure, and I think Joaquin has done an excellent job in this regard, in making sure we're playing in higher-growth markets where we have a right to win.

I think our business has got a better level of clarity now to investors like all of you with respect to where we think those areas that we can win are in pharmaceuticals, oncology, immunology, neuroscience. In MedTech, it's surgery, where we've had a long-standing presence, vision. And then finally, it's cardiovascular, where we beefed up our presence there. So I would say it does provide some advantages to think about our business where you have some overlap when regulatory policy is being made and they think about a cancer patient, it's good to know that Johnson & Johnson can be there if that cancer patient needs a surgical procedure or a therapeutic because Johnson & Johnson has expert voices in the room.

And often an oncology patient does need that overlap. Cardiovascular, we've got a partnership with Bristol Myers for milvexian. It's a promising drug potentially to treat AFib that complements our cardiovascular business very nicely. So those are just some examples. But I wouldn't want anyone to leave here under the premise that Johnson & Johnson is about those convergences. If those convergences happen, it's nice. But each business, we hold accountable to competing against its peer set. It has to stand on its own and making sure we've got a right to win, either #1 or #2 in that respective marketplace.

So from a CFO perspective, I like the diversification it offers, right? So as we approached a few years ago, the STELARA loss of exclusivity, even with an okay MedTech business back then, we were still able to invest in our R&D pipeline on pharmaceuticals because we had that balance, right? And so I think it provides a lot of flexibility, not just for the company, but for how investors can look at us.

Let's talk for 1 minute about growth. You guys announced a great Q2. Revenue was up 6.6%. You raised your outlook for 2026. You've talked about the ability to maintain a 5% to 7% growth rate over the long term. What gives you confidence that you're able to generate that durable growth as we look into the future?

Yes. So it's been a good year so far, I would say, that 5% to 7% range is something that we committed to you back at our Investor Day in 2023. We have, and hopefully, many of you will be able to attend another Investor Day coming up on December 8. You're going to see growth rates that are better than that. Okay?

You've heard Joaquin, you've heard myself say publicly, we see double digits, a clear line of sight to double digits for the enterprise over the next few years by the end of the decade. Let's get into that a little bit. So '27, you've got a weird dynamic in 2026, where we have an extra week of sales. So think about 1.5 to 2 points worth of growth. When you normalize for that, we'll be up next year over that if you adjust for each period. And then after that, it's really unencumbered.

What's amazing about next year is, let's say, you're going to have equivalent reported growth, but actually operational growth a little bit better when you account for that 53rd week. There's about $4 billion to $4.5 billion of products that are losing exclusivity, right? That's more than what we experienced STELARA's loss of exclusivity impact in year 1 of that biosimilar coming out. So it truly is amazing. You think about XARELTO, loss of exclusivity, I don't think it's really appreciated, about $2 billion. The PAH franchise, about $1.5 billion. SIMPONI and STELARA combined, another $1 billion. Yet nobody is focusing on that, right? And that's the amazing part of our portfolio.

So what gives me confidence? One, you've got largely a derisked portfolio. Things that are on the market today or close to approval don't have a lot of risk left in them. We maybe have indication risk or things like that. But these are things that are pretty well known, markets that are continuing to grow that are underpenetrated. You think about ICOTYDE , which we just launched for psoriasis, fantastic start. Maybe we'll talk about it a little bit later. But that's going to get likely indications in IBD somewhere down the road. You think about we're moving beyond multiple myeloma, where we've had a presence for probably the last decade and prostate cancer into different types of cancer like bladder cancer, lung cancer, head and neck, colorectal cancer and then more therapies for multiple myeloma on the horizon.

In MedTech, we continue to have strong presence in wound closure and biosurgery, vision care. Contact lens is a good, steady business that's highly profitable within our portfolio. And now surgical vision is starting to emerge with some of their TECNIS platforms. OTTAVA was just recently approved. We will go slow there to go fast later on, but that's an exciting new development that won't really have a material financial contribution for the balance of this decade relative to the scope of Johnson & Johnson, but really promises to be something big to support the next decade. So we're thinking 2031 and beyond at this point, placing those bets to make sure it's solidified.

But we feel very comfortable with not just 5% to 7% growth, but as you've heard us say publicly, we've got line of sight to double-digit growth over the next few years. The one thing, I think, we've always thought about how do we replenish the portfolio when you have these loss of exclusivity events, right? A number of our peers are facing that now in the pharmaceutical industry. And it's nothing new to have that skill set. A matter of fact, there's been one other company that's been able to grow through a period where they've had a significant biosimilar enter the market or a significant loss of exclusivity. That other company was Johnson & Johnson back in 2018 with REMICADE. We've done it now with STELARA. We're going to do it again whenever the next big LOE hits, and we think about it that way. We probably need to get a little bit more forthcoming with how we're positioned for that, so investors can appreciate that. But there's a really good stable that John Reed and his team are working on that promise well for a good long time. But we feel really good about the balance of this decade.

How do you think about the relative growth between the pharma and the MedTech businesses? And if you want to drill down a little bit further into that, thinking about pricing, market share gains, potential acquisitions going forward?

Yes. So that's a great question, Jon. I think the markets, if I look at it, a top-tier pharmaceutical market growing in it today is going to have a higher growth profile than what you'll see for a top-tier MedTech company. But what I can say really with a lot of confidence is both our MedTech segment and our Innovative Medicine segment are positioned to have higher growth rates than where they are today. That growth rate is not going to come from price. We just simply don't play in markets that allow for price.

As a matter of fact, the growth in pharmaceuticals for us has probably overcome 3% to 4% price erosion on an annual basis for at least the last 7 to 8 years, okay? MedTech has never really had a lot of price flexibility. Maybe you see a little bit of that in contact lenses, more of a consumer-facing product, but that's even few and far between in terms of the years that, that occurs. Our estimates are not really bolstered by or assuming any acquisitions. We'll continue to do acquisitions to fortify the portfolio, but we're making these comments based on the portfolio or the pipeline that's in place today. So it would be additive. The good news is that should something go wrong, we've got the firepower to be able to do a smart acquisition. But it's got to make strategic sense. It's got to make financial sense.

Great. And then in terms of just the geographic split of the business today, do you see any shifts to be more U.S.-focused, [ OUS focused? ]

For as long as I've been with the company, I think it's always kind of been a 50-50 split, 48-52. It's a little ambiguous now with some of the MFN deals in pharmaceuticals and how that may play out. We certainly do need to see particularly Europe, I think, step into reimbursing for, quite frankly, innovations that are highly valued that extend and improve lives significantly. So it's hard to say that, but I wouldn't see a dramatic shift from the roughly 50-50 split that exists today.

That's great. Thank you. So we've got an ever-shifting U.S. health care policy landscape right now, whether that's Medicare drug price negotiations, shifting insurance coverage, payer mix, evolving tariffs, an ever-evolving FDA environment. What do you see as the net impact of more of the macro situation you see here in the U.S.?

Yes. I mean that's a good question. I think the way I think I'd like to answer that question, there's a lot of topics in there is that Johnson & Johnson as well as the industry has been at the forefront of having constructive dialogue with the administration for better business here in the U.S. What does that mean? Well, with respect to pricing, we did step into MFN. Certainly, we've participated in IRA. As a matter of fact, one of the things that commentators -- news broadcast often comment too is the only thing that hasn't been inflationary is drug pricing. And I think we need to refocus the discussion.

If you think about health care costs overall, right, in the U.S., it's about 19% of GDP, $5 trillion. Pharmaceutical spending is only about 9% of that. So the savings that we're talking about already where there's been cost containment, the savings are to be had in other parts of the health care system. And I think we need to take a focus on that. As a matter of fact, on prescription drugs, 90% of them, not in terms of dollar value, but in terms of quantity are actually generic prescriptions, right? So the system kind of works. And if you think what therapeutics do, they keep people out of the more highly costly hospital stays.

You think about, boy, I'm old enough to remember when Magic Johnson declared, he had HIV and we thought that's a right? Here he is 40 years later, thriving, right? The same is happening in cancer. We started our journey with multiple myeloma about 7 or 8 years ago. It was 1- to 2-year life expectancies. Now we have people who started on that original therapy of DARZALEX still living today and not just living and getting by, but living healthy, high-quality living. So I think there needs to be that focus.

The other thing is from a U.S. perspective is it provides really good jobs to the economy, right? China is closing the gap pretty quickly, where probably 15 years ago, they had maybe 9% of investments in the R&D pipeline globally, up to 30% now, right? U.S. is #1 with that sizable lead. We want to maintain that lead, one for the economic benefits, some for national security, but because that's where cutting-edge innovation occurs. That's why we were so pleased to advocate for and then see the passage of the tax bill, right? Because it provides some permanency where we were able to make a declaration that beginning about 1.5 years ago, we were going to invest $55 billion in U.S. capabilities over the next 4 years. And we're well on our way to doing that because we now have a tax system we can rely on, tap into the venture capital nature of the U.S., the ecosystem, whether that be just innovation, workforce or the university system, which we think really leads to some of the things that we're seeing today in terms of not just treating people, but potentially curing them.

It was exciting to hear you say earlier that you think you can do better than the 5% to 7% over the course of the near to medium term. As you think about it from an investor perspective, what 2 or 3 KPIs should they be focused on that would indicate you're able to deliver that growth and continue to generate phenomenal shareholder returns?

Yes. I don't think it's anything that's going to be groundbreaking here. So I would point investors to make sure that we're meeting the success of these new product launches. So whether it's ICOTYDE, whether it's TREMFYA in inflammatory bowel disease that received indications early last year. It's just getting started. But here's a product that's been on the market for about 5 years, maybe 6, and we had 80% growth in the second quarter, right? These are big, big markets.

OTTAVA, while the early days, are we placing -- are we getting good feedback from physicians. We've seen some of our peers that if you have a failed launch, those are hard to recover from. We're going to do this, like I said, we're going to go slow to go fast. That means white glove service, getting feedback from the operating rooms to make sure we've got a high-quality product that people can rely upon. I would say if we have that growth, and again, I am confident we will have that growth, investors should expect some margin improvement along the way, right?

We're going through a pretty deep exercise right now with the separation of our Orthopedics unit to really look at our company and making sure the infrastructure is appropriate. We've got the benefit maybe of technology and AI. We'll see how all that plays out. But we did the same thing when we separated our Consumer Health business. Let's take not just stranded costs not being part of the conversation, but something that improves margin, which could help EPS growth, but then also be redeployed in R&D to really fund the future because when a $100 billion company becomes a $125 billion company, you're going to need to place more bets along the way. We're well positioned to do that. And then I would say, as the CFO, cash conversion is pretty important. This year, I think we've targeted and are on track to hit $21 billion, which would be a high watermark. I expect that to grow substantially, and we'll have some more information at our Investor Day on December 8 in the coming years. It will be meaningful, which will provide us even more flexibility to deploy capital in a number of areas.

Maybe one more question before we bounce to MedTech. You mentioned the consumer separation in 2023. You mentioned the orthopedic separation that's ongoing. In both cases, you elected, as you've said publicly, to get out of those businesses to move into higher growth, higher-margin areas. Do you think the work is done now? Or do you expect to continue to monitor the portfolio and clean those types of assets on a go-forward basis?

Yes. That's a good question, Cal. I'll say this right upfront that we love our portfolio. We love the 6 areas that we are in today. Make no mistake about that. And I may even repeat that in this answer, just -- no ambiguity. But part of our remit as an executive committee is to continue to look at our portfolio. Are we in those areas that are making a difference for patients, elevating the standard of care? Is there innovation to be had? And are we the right stewards to make sure that, that innovation gets done.

If you think about oncology, immunology, neuroscience, surgery, vision and cardiovascular, we believe we've got the right portfolio now to make that work. So you never say never, but I think part of the remit of any management team is to continue to look at those areas where you're going to be really good at. And it's important to know what you're good in, right? So we did an acquisition back in 2017, Actelion. It was a good business. It was a value-creating acquisition, put us in pulmonary hypertension. But here we are, the products are losing exclusivity and there's really no carry through, right? So that -- it was good to do at the time.

REMICADE was an unknown in terms of how that was going to react to a biosimilar competitor. So it made a ton of sense. But it wasn't an area we knew particularly well. We'll often get asked, hey, are you going to get into GLPs? But you've got really good companies that know that space pretty well, and they're ahead of us. Let's still make a difference where we can actually make a difference for patients, and that usually translates into a pretty good business model. So again, we love our portfolio where it stands today.

That's great. Why don't we spend some time on MedTech before we switch back to the pharma side of things. I really want to start around the acquisition strategy. If you look back a few years ago, you did some really sizable transactions with Abiomed and Shockwave. It's been relatively quiet over the last 18 months on that front. Any commentary around new areas you want to go into in MedTech or areas you want to beef up?

We're always looking for, again, those areas that we think we know well that we've got some expertise that will include adjacencies. I don't have a list to pull out of my pocket and say these are the companies we're interested in, even though that's probably the list everybody wants. But what I would say is it doesn't matter that valuations are depressed. And when we did those deals, the M&A markets were kind of quiet. J&J moved ahead and did things. So it's going to be situational.

Again, when we talk to our Board, 75% to 80% of the discussion is what is that strategic fit? What's the scientific expertise, what's the commercial capability, maybe sometimes it's global reach that Johnson & Johnson brings to the table that's going to make that asset more valuable in our hands than where it currently resides. And then the other 20% of the conversation is about, okay, how does it compare to other investment alternatives? Does it make financial sense for Johnson & Johnson? And that's really the discussion. It's not overly sophisticated. And if you can answer that first 80%, you're well on your way to doing something that's going to be instrumental in the portfolio, not just for the near term. It is a luxury that I believe I have as a CFO in that because of our broad-based portfolio, I never feel like I've got to plug a 1- or 2-year gap, right? I never have to go out and do a bad deal just to plug a gap. And so it truly is a luxury that I have in my position that we don't have that pressure.

Great. I want to spend some time on some specific products and end markets that are in the portfolio, starting first with pulsed field ablation. There's been a lot of commentary from some of the competitors in the market, whether that's Boston Scientific or Medtronic with their products and the growth rates that they're seeing in those end markets. Any commentary you could provide around FARAPULSE, both here in the U.S. and then VARIPULSE Pro in Europe and plans to ultimately bring that to the U.S.

Yes, yes. So listen, EP is certainly a market we know well. We help build with the RF technology. PFA has come out. And it's really translated into EP becoming one of the most, I'd say, fastest-growing markets within MedTech, but also one of the most competitive, right? In terms of -- we've got a nice installed base with our CARTO mapping system. I think there's 6,300 systems that we're in because of that. It is advantaged versus the competitors. And we've also have the benefit, I'd say, of integration with our CAS or our clinical account specialists who are often there during the procedure driving physicians and the relationship that's been built there, there's stickiness to that.

VARIPULSE has treated now more than 100,000 patients worldwide. The feedback in terms of usability, workflow, safety is getting stronger and stronger. VARIPULSE Pro, which was launched in Europe, we hope to launch soon here in the United States, has received really good feedback. We've got faster ablation times. They are complementary of the workflow. So we think that bodes well when we bring that to the U.S. market. The team is focused on innovation. You're going to compete here. You're going to have to continually innovate, making the systems, the catheters better. The team is committed to -- I believe it's a new therapeutic invention with -- per year over the next 3 years being introduced to the market. So OMNYPULSE, [indiscernible], we'll continue to make upgrades to our CARTO mapping system, which is already, I think, the premier mapping system out there. So we should be well positioned. And we'll continue to look at how do we support that business with maybe inventions that aren't part of Johnson & Johnson's portfolio right now. We'll have the capability to do that.

Great. And then moving to the IVL market. You've got Boston launching their Seismiq products here in 2027. Any notes that you could say around potential market share changes or impacts on the broader market because of that launch?

Yes. Listen, I think competition is a sign of a good market, right? And we always expected when we acquired Shockwave that there would be competition. Here, too, you've got physician familiarity. We've got physician relationships. We've got a generator that's distinguished. That team is on their fifth generation. The -- it's probably in all my visits across the company, one of the management teams that is -- that's mostly what they talk about. How are they going to continue to innovate, go into new areas. So in terms of circulatory restoration, it's been a great acquisition. We feel really good despite competition coming in, that we will have the preeminent leadership position in that space going forward.

Great. And something I think everyone has been really focused on and you spoke at length about and mentioned earlier in this chat is around the robotics and OTTAVA. Obviously, everyone is really excited to see what that looks like in the years to come. Any commentary around the acceleration in the commercial launch as that's been obviously brought to market and how you view that relative to the rest of the MedTech portfolio in terms of is that where the growth for the broader group of products you have is going to come from?

Yes. It's not primarily the growth when you have a again, a company that has 28 platforms that generate more than $1 billion in revenue, a lot of those growing double digits. It's hard to -- the good news is we don't have to hang our hat on just 1. But we are extremely excited about what this could mean for hospital systems and for patients overall. There's about 300 million surgical procedures today, 50 million here in the U.S. Depending on what source you use, anywhere from 15% to 25% are subject to some post-op complication. There's room for improvement. There's room to elevate the standard of care.

Now we make -- we're not misguided in terms of -- we know there's a very strong competitor out there. But we think our offering is differentiated. It's got integrated architecture. So that helps with workflow. There's no booms. It allows for a better workflow amongst the participants in the operating room. We've got Twin Motion, so the patient doesn't need to be re-docked. You don't have to delay procedures. You've got Ethicon instruments, right? Even today, without our robotic system, a high percentage of procedures are using our sealing and stapling capabilities. And then you've got what we were calling an open network or Polyphonic, which allows the operating room to almost have a suite of surgeons in the presence of that surgical procedure as well as building a database to make that surgery inform the next for a better outcome.

So we think these are all different -- again, we're going to go slow. We're going to -- I want -- we're not reliant. This is the luxury of maybe the position of where our portfolio is today. We're not reliant on this being successful for success in '28 or '29. This is really about a next decade play. But getting these first couple of launches, first 10, 20, 30 launches exactly right. That means a white glove service around those is really what we're focused on. We were pleased to announce the first account sign-on, Memorial Hermann down in Texas. We think there's going to be a couple -- a number of other announcements in the coming months. And so we feel really good about where that positions, and we think it is differentiated. But by no means that we don't think the competition is just going to lay down for us. We've got to prove our value case, and we think we're in a position to do that.

Yes. We're all really excited to see how that evolves over time. Just going back to the big picture for MedTech. Historically, the margin profile for that part of the business has been lower than what you've seen from pharma. How do you see those margins evolving over time? And do you think there's an opportunity to get that up to the level where the rest of the business has historically performed?

Yes. I would say investors are right to acknowledge there's a different profile in the margins on those businesses. And again, when I look at it and when the management team and Joaquin look at it, how we compare to our peers within the MedTech space. We've got work to do. There are some businesses that are very good. Surgery is a very good business in terms of margin performance. Vision, another one that's very good, particularly on the contact lens side. We've made improvements on the surgical side in recent years. And even though surgery is good, we continue to make improvements there and rationalizing the portfolio, making sure the footprint is right for manufacturing. Cardiovascular, both Abiomed and Shockwave acquisitions with pretty good margins to begin with. So living into Joaquin's stated goal when he assumed the role back in '22 is, hey, higher growth, higher margins. But I don't think people should expect us to be at pharmaceutical level margins. But to improve where we are today, absolutely, particularly when the growth on the top line is a little bit more healthy.

You mentioned Abiomed there. And we've seen some headwinds in that market in that business of late. We've seen some field actions as well as some recent studies on physician utilization patterns. Any commentary on resolving some of those issues and seeing the business continue to outperform and take market share?

Yes. So thank you for the question, Jon. I think there has been some headwinds in that particular business. I think we've had some field actions. We're working actively with the FDA to make sure those are resolved and patient safety remains a priority. This is a highly underpenetrated market. There's no competition currently that exists. So we feel good about the long-term prospects of this business. We're relying on it going forward. In terms of utilization, you had a study that was done in the U.K. based on about 300 patients. That is kind of getting a little bit more press than what we think over a decade of data set suggests, we are thrilled that we'll be able to come out with what's known as the PROTECT IV study, which will have 4x the number of patients sometime next year, which we think will fortify the use case. But it is about patient selection. I think when you look at the U.K. study, was the right patient selected are some of the questions we have. But we're going to let the data speak and making sure that patient safety remains a priority. But we think this is still a good acquisition despite this little pause period here. But we think that this time next year, we're in a much better position back to those double-digit growth rates that we were experiencing prior to that report.

Great. I want to make sure we save some time for pharma. So Cal, do you want to jump in?

Sure. Let's start with oncology. You've been very clear that J&J's goal is to be #1 overall in oncology, which translates to about $50 billion of sales as a target, pretty lofty goal given that you're just shy of $30 billion today. What gives you confidence that you can deliver on this goal? And is M&A going to be a part of that solution?

Yes. So let me answer the last question first. M&A is not part of that $50 billion target that we have. So if we happen to do something there, great, but that would be additive to what you can expect from us. Let's start with multiple myeloma, where I think it's over 85% of the patients who are suffering from multiple myeloma are on a Johnson & Johnson drug. We are now -- we have DARZALEX, the CAR-T therapy, we've got TECVAYLI, TALVEY. These are now starting to be combined for even better efficacy. These are early in their life cycle, I would say. The FASPRO designation made it very easy to administer for patients. So you went from a 3- to 4-hour infusion time, sometimes as long as 5 to about 15 minutes, and that includes making your next appointment, right? So these are the kind of innovations that Johnson & Johnson is focused on.

And again, if you go back to when we got into the market with DARZALEX, there wasn't a very healthy outlook for patients who are diagnosed with it. Here they are living longer, healthier lives. But we've got other things that are in place. So Ramantamig is a trispecific that could actually turn this conversation from treating multiple myeloma to curing multiple myeloma, right? Very exciting stuff. Prostate cancer, it's really where we kind of had our entry into oncology back with the acquisition of, I believe it was called Cougar Pharmaceuticals back then, ZYTIGA. But we continue to build on that. We're currently enjoying ERLEADA, but there's other new modalities coming up. There's studies in ERLEADA to go earlier with localized prostate cancer, but you have some acquisitions we recently did that are going after the ALK2 antigen. There's the Halda platform, which not only attacks the protein causing the cancer, but addresses the protein that helps cell preservation, which could really negate what we see in terms of drug resistance or therapeutic resistance. So there's -- we continue to innovate there.

But what's really exciting is we're moving out of those areas that we've been pretty good at for better than a decade and now moving into new areas. So we've got RYBREVANT, LAZCLUZE combination, which is out there for lung cancer right now. That is being studied in both head and neck and colorectal cancer. We are in bladder cancer now with INLEXZO, a very small population, maybe about 10% of the population is what's currently indicated, but we look to expand that out further. And right now, the treatments that are available for people who suffer from bladder cancer trying to save the bladder are pretty egregious on the patient. It's not a very comfortable process. This is a very easy in partnership with our surgery team, insertion of a catheter into the bladder, releasing of a drug really limits, I would say, side effect profile. Where else are we going? So that has potential to go in other parts and other cancers, too. So we continue to make really good strides on the oncology portfolio. Here, too, I would say, $50 billion, that should be the floor for us. We think bigger than that, and we'll see what we have to say at our Investor Day later this year.

Amazing. Let's switch to I&I for a second. It looks like you have a mega blockbuster, ICOTYDE, which you mentioned earlier, approved so far in psoriasis, but you're going after IBD indications as well. Given the impressive launch to date, it looks to us like perhaps this could be far bigger than perhaps the analysts project today. Is that the right read from our seats?

Yes. I mean I'll say that with some certainty on December 8, but I would say that's a really good take. That's my take, if that helps you at all. It's been on the market for 5 months. There's 17,000 patients. We've got coverage by all the big 3 providers now. What's interesting about this is a couple of things. I just had a review yesterday with the team. So we're seeing a lot of naive systemic. So what does that mean? That means we're actually expanding the market. So the psoriasis market is still, I would probably say, 50% penetrated.

We're able to expand the market because folks had, for one reason or another, an aversion to getting stuck with the needle, right? The once daily pill option is something that appeals to folks. The other thing that's pretty neat of a dynamic here is who's prescribing this. So clearly, you would expect dermatologists. But we're also seeing prescriptions from general practitioners as well as advanced practitioners. So nurse practitioners, physician assistants. This has broad appeal. And the fact that we now have coverage out there, CVS, I believe, started 2 days ago. That was the last one to bring in. So we're in a good position. And I would think that where the analysts are, we should see a number north of that. We'll give you more details on December 8, but I'll let the team comment.

Sounds like we should all be there on December 8?

I think that's a good idea.

Investors are really focused on some of your large high-growth commercial assets, whether it's DARZALEX or TREMFYA or CARVYKTI. What should investors be thinking about? What are you thinking about as we look forward to 2030? Give us a sense as to some of the pipeline assets that are coming down the pipe that could really continue to be that next gen.

Yes. So I would say one that doesn't get a lot of play, but it has a potential to be big is IMAAVY, nipocalimab. So it's currently has approval for myasthenia gravis as well as it just recently received approval for warm autoimmune hemolytic anemia. I got to pause with I'm an accountant, not a scientist, right? But it has even larger potential in Sjogren's disease as well as lupus, right? So that's an exciting one.

I would say the Ramantamig one that I spoke about earlier, trispecific that would be off-the-shelf, easier to use for multiple myeloma has a lot of promise. I would say pasritamig in prostate cancer as well as the RIPTAC technology that we acquired with Halda. Those all provide platforms within areas we know well and other areas. So those are some of the things that I think would be pretty interesting. There's a combination. I think it's JNJ-4804, which is looking at refractory IBD that holds a lot of promise. So there's a lot of colts in the stable to take over in 2030 and beyond.

Exciting. You mentioned obesity earlier. It's an area that you guys have been very public about not intending to enter despite being an enormous TAM that certainly is playing out as many had projected. Do you see this potentially changing? If so, what could alter your decision to sit still in this market?

It comes back to what I said earlier, Cal. It's really about the scientific expertise we do or we don't have, right? And when you go up against competition, you want to make sure that you're in a position to win. The companies that are out there right now to their credit are very respectable. They're deep. They're studying things. And to be fourth or fifth to market probably isn't very good for our business, but it also really doesn't advance anything for patients. And so from that perspective, it doesn't make a ton of sense given that we don't have maybe an acute insight that would prevent some of the things that maybe GLPs are trying to correct for now. So I can't -- you never say never.

You never know what's going to come across our desk. But right now, again, the areas that we're in, there's a lot of disease that still needs to be tackled in those spaces. You just asked me about what to look forward to. Atopic dermatitis, we've purchased some assets. We've got some early-stage assets. That is, I think, 4x the market than psoriasis is. So we're playing in there. It's a nice adjacency. We don't have anything there yet on the market, but we're positioned to do there. And we think we can do something there because of our expertise in immunology.

Maybe one last question, and then we'll go to capital allocation. It strikes us that valuations in biotech have gotten a little frothy at the moment. Do you agree? And if so, does that change your appetite for M&A?

I think we do ourselves a disservice when we characterize something that's frothy or not frothy. It has to be, at least in my experience, the right opportunity at the right time at the right value. And so we don't get overly hung up. I mean, Jon stated earlier, we did some acquisitions in a time where the M&A market was dead, but we have the flexibility, the power and the strategic purpose to do it. I do think maybe valuations are a tad high simply because you do have some of our competitors in the pharmaceutical space that are facing significant LOEs, and they don't quite have the stockpile of assets in their pipeline to make up for that in short order. So there's may be a tilt to that. It doesn't mean we can't find value out there.

Great. Why don't we spend a few minutes -- or last few minutes on capital allocation. J&J will generate roughly $20 billion of free cash flow in 2026. How do you think about the trade-off between the capital allocation with that kind of cash flow between the existing business, investing, M&A, buybacks, dividends, what's some general commentary you can provide in terms of how you think about those proceeds?

Yes. Hopefully, what all of you see is that we're disciplined in our capital allocation, and you kind of know who we are at this point. So the dividend, we've got dividend paying status. I don't think Joaquin nor I want to be the one to break that streak to be quite frank. But we've got investors who invest in Johnson & Johnson for that reason. But that won't prevent us from doing smart acquisitions that go into our portfolio that provide value for the long term. One of the areas maybe we get a little bit knocked around for is why not more share repurchase. But I would point shareholders back to 2023 when we did not only the largest share repurchase in our history, but by 3x -- fold with the Consumer Health separation and how we separated that business. It was a $33 billion share repurchase, right?

So again, we're not averse to share repurchases. But if we can put our capital to work at [ 4 to 5s ] 2030 through 2040, that seems like a smarter play for us, and it seems to be working. The good news is, though, as I said earlier, I like the fact that we're going to potentially hit a high watermark, and we're on track to hit that high watermark this year with $21 billion of free cash flow. And I see that number going up substantially over the next few years.

That's great. And then a final question as it relates to the talc settlement. Any further financial uncertainty around that situation going forward once the settlement is finalized?

No, I think it kind of ties into your earlier question about capital allocation. We've been dealing with this for better than a decade now, this matter. And it hasn't stopped us from doing what we think are important for the long-term health of this business, right, continuing to pay dividends, continuing to add to our portfolio where it makes sense. The $5.5 billion settlement is far below what the bankruptcy settlement was. So we thought that was smart. But we did, in a very profound way, I think, and this is good for American businesses, kind of uncover some of the tactics that are used by plaintiffs attorneys in these class action lawsuits.

We've had witnesses discredited because they lie on the stand. We saw Photoshopped evidence that was brought in and accepted. So once you get the jury trials, it gets a little bit squirrely. It's maybe a blemish on an otherwise really solid legal system. But I do think it's a threat to American business and the fact that the lead plaintiff attorney was actually disqualified for actions of misconduct and being unethical, I think, is also noteworthy. So other businesses are starting to figure this out and join us in this fight. People on Capitol Hill are starting to recognize this with some legislation. So I think that's a win. It's a shame we had to go through it, but we think this is behind us now, and that just depends, again, for us to use cash where it matters most for not only our business results, but for society.

Well, Joe, on behalf of everybody here at DB, thank you so much for coming. Congrats on all the success. We're certainly looking forward to December 8 and what you're going to unveil there. But thanks again.

Thank you, Joe.

Thanks, everyone.

Great. Thanks so much, everybody. Good afternoon. I'm Terence Flynn, Morgan Stanley's U.S. biopharma analyst. For important disclosures, please see Morgan Stanley's research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

So I'm very pleased to be hosting Johnson & Johnson this afternoon. Joining us from the company, we have Joaquin Duato, the company's CEO and Chairman; and John Reed, Executive Vice President, Innovative Medicine, R&D. But thank you both so much for taking time out of your busy schedules to join us. Really appreciate it.

Maybe we'd start, I thought high level, Joaquin. The company laid out some long-term growth targets at the December 2023 Enterprise Business Review meeting. So maybe you could just level set us in terms of the progress you've made there, but also the rationale for providing those targets when you did?

Yes. Thank you. So there's been a lot of progress in Johnson & Johnson since 2023. First, we have a more focused portfolio today. We have three focus areas in innovative medicine, oncology, immunology and neuroscience, and then three focus areas, also medical technology, vision, surgery and cardiovascular. So I think we have a very well-balanced portfolio that has a mix of innovation and growth that is driving a new cycle of accelerated growth for Johnson & Johnson.

Since 2023, we have done what we said we were going to do. We said we were going to be able to grow through the STELARA biosimilar entry, and that's what we are doing, we did in 2025, and we are also doing it in '26. In both quarters in Q1 and Q2, we were able to beat analyst expectations in top and bottom line and also to raise our guidance. Our guidance today for '26 is 6.5% adjusted operational sales growth and 7.3% adjusted EPS growth. And for the first time for the company, we're going to be ahead of $100 billion in total revenue.

We also have said, and we said that in '23 that this was going to be the beginning of a cycle of growth. And we see 2027 being a better year than 2026, and we have line of sight to double-digit growth by the end of the decade for total Johnson & Johnson. So together combined, due to our existing portfolio, the new product launches, our pipeline, I believe today, Johnson & Johnson has one of the cleanest growth stories in our sector.

Great. Perfect place to start the conversation. You're hosting another Enterprise Business Review Day here in early December. And so I know you're not going to get into a lot of the specifics because you want to save that for the day, but maybe just a high-level preview of some of the themes that you guys are focused on as we look ahead to December?

Thank you. So we're looking forward to that. We do it every 3 years, so it's an important event. And there's two main topics that we plan to cover there. One is providing more granularity to double-digit growth by the end of the decade, which is a frequent question that we get from investors. And we'll provide more granularity on the state of our portfolio, our new product launches and also our pipeline.

And the second one, it's going to be -- give you more confidence on the durability of our growth beyond 2030. So we'll provide more information on our earlier-stage pipeline in order to be able to give you more confidence that this cycle of growth is going to continue, it's going to be durable into the next decade.

Okay.

Looking at -- maybe a preview on that, if you just look at our pipeline with molecules that have achieved POC, they're now in Phase III, derisked. And moving forward, there are 12 molecules that have those criteria in the pipeline today. So we'll give some insights into what we see as the opportunities there. On top of right now, in addition to DARZALEX, our top medicine right now, we have 10 in-market medicines that are still pretty early in their life cycle journeys and growing robustly.

Okay. Great. Looking forward to it. The other area I wanted to talk about at a high level is the policy front. Just -- anything that's on your radar as we head into the midterms here, Joaquin? I know you guys are very plugged in to DC.

Yes. So compared to 2025, 2026 has been a more stable year from a policy perspective. I think we will agree all in that. It's likely that things may up before or after the midterms, although I don't see pharmaceutical pricing as the core theme of this election. I mean, I think all of you know that there are other topics that are more discussed than pharmaceutical pricing. I believe the things connected with affordability of medicines have been well addressed with some of the changes that have been done in Medicare Part D that have addressed some of the tension that existed before. So I don't anticipate that the midterms are going to create significant noise from a policy perspective.

Although there's always something going on in this space, but I don't think there's going to be anything that is going to constitute a major change. Things may change again into 2028 as we may have different changes there. But as far as the midterms go, I think that you may see some different ideas, but I don't believe that pharmaceutical pricing and affordability is going to be one of the main topics going into this election.

Okay. Great. The other one I want to touch on is just capital allocation, business development. And so I think high level, again, the company has become more streamlined. You spun off the consumer business several years ago. Orthopedics, we saw some headlines over the weekend there.

So maybe just talk to us about the shape of the business? And as you think about divesting assets, but also layering in additional assets, where we are in that journey on that front?

So a number of factors there. First, we have a strong balance sheet. We are only of 1 or 2 companies that have AAA credit rating. And we are proud of that because it's a reflection of our financial discipline. We are not married to that, but it's a reflection of the strength of our balance sheet and our financial discipline.

Our cash flow generation is strong, and we foresee that cash flow generation even becoming stronger as we accelerate growth into the rest of the decade because that will come with also improved margins. So we are optimistic about our cash flow generation, which is at the basis of us being able to do M&A.

When it comes to our capital allocation priorities, number one now is to fund our new product launches. We are at the early innings of a number of new product launches, both in MedTech and in Innovative Medicine. Some of them, I'm sure we will discuss. Some of them are ICOTYDE, our oral IL-23 peptide. We are launching also INLEXZO, our intravesical drug release system for bladder cancer.

We are launching RYBREVANT in lung cancer and pretty soon in head and neck cancer. We are planning to launch IMAAVY, our FcRn inhibitor also in some rheumatological indications. We just had the approval of our soft tissue robotic system, OTTAVA. We have a number of new catheters in electrophysiology that we plan to launch in the U.S. and globally.

So number one goal is to actually resource our new product launches which are core to the cycle of growth that we want to deliver. Number two is to resource our pipeline. John will talk about our pipeline, but we have a number -- a large number of assets in Phase III. And as you know, most of the expense in R&D is when you get into late stage. So we have a number of things that we have to fund in our pipeline. And we are trying to do also parallel development, multiple indications at the same time, multiple Phase IIIs so we are in the better position when we launch the product to maximize that opportunity.

So the second one is to identify opportunities in -- external opportunities. The sweet spot for us is to identify opportunities that are earlier on so we can create significant value using our scale in R&D, in manufacturing and in commercialization. Best examples of that are ICOTYDE or INLEXZO, which were opportunities that we identified earlier on that were very capital-sparing, if you want, right? So we continue to look into these opportunities.

And the priority there in BD is to fortify our position vis-a-vis the next decade. We can achieve double-digit growth this decade without M&A. So our goal with M&A is to fortify our position to provide you the confidence that our growth is durable into the next decade. So that's the second priority, and that's what guides our M&A approach.

And then finally, return cash to our shareholders via dividends. And that's our goal, too, to continue to deliver a strong dividend to our shareholders. And we have been, I think, decades of continuous dividend growth. We are a dividend aristocrat, and we plan to continue to give that to our shareholders.

We've done a number of transactions this year, which some of them are very, very promising. We acquired Halda Therapeutics with a new platform called RIPTAC that I would like John to talk about it. We acquired Firefly Bio, which an antibody degrader conjugate, which is a platform that we think has a lot of legs. And we also did a deal with Sail in nonintegrated in vivo CAR-T, which is a platform that we think that could have a lot of expansion into autoimmune diseases. But I will let John talk about these new ideas that we have in our pipeline.

Yes. The -- maybe starting with the RIPTAC. So these are oral drugs that -- they stimulate what's called induced proximity where you bring 2 proteins together, where one face of the molecule binds a target of interest. And then in this configuration, the other binds to an essential protein that the cell must have to survive. And the compound then sequesters that protein in this complex. And as a result of it, the cell perishes because it doesn't have access.

So the first iteration of this is a molecule targeting the androgen receptor in prostate cancer. Prostate cancers have very high levels of androgen receptors. So with these compounds, you're able to sequester, to scarp up this essential protein, and it happens to be an epigenetic protein called BRD4. And as a result of it, the cell dies.

And what we've seen in the early going is that the molecules are extremely active and selective at killing prostate cancer cells regardless of what their genomic profile is, if they have [ TP3 ] mutations, RB mutations, even mutations in the androgen receptor, it doesn't matter. And with this efficacy, including visceral lesions, which are sometimes hard to treat in prostate cancer, very well tolerated. So extremely well tolerated. So that's moving into Phase III. We think it could be a real practice-changing new mechanism for prostate cancer.

Early in clinical development, we have the same thing with the estrogen receptor, trying to do the same thing for breast cancer. And then behind that, a pipeline of 14 more projects at various stages of lead optimization. We're starting in oncology, we hope to tackle a number of ways of a new approach to how you can selectively kill cancer cells. But then moving from there into certain immunological applications, too, where that might make sense. So that's a great new platform, both a product and a platform for us.

With the Firefly acquisition, that's a new concept, degrader-antibody conjugates. So you've all heard of ADCs where you put a chemotherapy drug conjugated onto an antibody. In this case, it's a targeted therapy that is brought into the cancer cells by the antibody-sparing normal cells.

And our lead program there is a pan-KRAS degrader. Everyone's been hearing a lot about KRAS these days. That's the most common genetic mutation in all of human cancers are KRAS mutations that activate that oncogenic driver. So with the small molecule delivered through the antibody selectively in the cancer cells, we hope we'll get a much better therapeutic index. So that's the first iterations, but there are lots of other things we can do with that platform down the road.

And is that in the clinic already?

That one is not in the clinic yet. That one is preclinical, should be in the clinic early next year. And then another preclinical one was as we're getting into in vivo CAR-T, we were interested in both viral and nonviral approaches.

So we have a collaboration with Kelonia in viral lentivirus, but then since then have created our own lentivirus platform, kind of leveraging our know-how from the CARVYKTI days where we make the lentivirus for CARVYKTI. And in that case, we're infecting the cells ex vivo in the factory. But now we've engineered that so we can infect them in vivo and have selective infection of T cells. So that will be in the clinic early next year. And then with Sail, where we have an option -- we have a collaboration with an option to buy at a prenegotiated rate, that's an mRNA platform using an engineered lipid nanoparticle that only enters into T cells. And that will be in the clinic later this year.

Great. And just to clarify, the in vivo, that was the Kelonia approach you were talking about?

Yes. Well, that and Sail, they're both -- there are different ways to do it, one viral, one nonviral. And we're biasing viral towards oncology and nonviral towards immunology. But we have to generate clinical data, and then we'll end up seeing whether both of those platforms work or do we end up pivoting and using one of the platforms for both applications, to be determined.

Great. I want to focus on your myeloma franchise. I feel like every year I host you, Joaquin and you guys have some new data that's very exciting to talk about. And I know you guys have been focused on kind of the functional cure for some time now in myeloma, and congratulations on all the progress here.

Before we talk about some of the newer targets, maybe just one question I had is just on DARZALEX FASPRO. I know you guys have had a lot of success with that launch and converting people over to the new subcutaneous formulation. How should we think about the shape of that business when you have IV biosimilars coming in? Because that's a question we get from investors sometimes. And then we'll talk about some of the newer drugs that you're bringing to market too.

Absolutely. So I mean, DARZALEX is now standard of care and a backbone in first-line therapy. And it's the #1 drug use in any clinical trial, you always have DARZALEX as the backbone. So we continue to see DARZALEX as a backbone of multiple myeloma. And as John will explain later, I'm sure it's been also combined with our bispecifics and multispecifics in order to remain a backbone of therapy. The results with DARZALEX are spectacular. I mean, when you look at progression-free survival in treatment in transplant-eligible patients, it's17 years. So it's a fantastic medicine.

90% of the patients today are already in DARZALEX FASPRO. And it's simple because you go from hours of infusion to minutes. You have less infusion-related reactions. Less time, it's much easier for the patient and ultimately save resources of the healthcare system because you don't have to go there and spend 6 hours in the hospital, right? So we anticipate that by the time the IV biosimilars will come, close to 100% of the patients would be already in DARZALEX FASPRO. So we don't see that as a real challenge. It's very difficult to tell a patient who are going from a subcu to a 6-hour infusion. So I think that, that's going to be something that would be clearly not an issue for us down the road.

As far as our multiple myeloma franchise and the different combinations and permutations that we are going, our goal now is to be able to bring our advanced therapies earlier on. And perhaps the area which is more important for us today that is already coming into fruition is second line. About half of the patients in multiple myeloma are in second line. And we are bringing our multi-specifics and cell therapy, CARVYKTI, into second line. We have great data in second line, both with CARVYKTI and the bispecifics, and that's the strategy that we have today.

We are not going to stop there, and we plan to bring advanced therapies to first line, but we already have approval to go into second line with both therapies. So John can talk about the data we have generated and how impressive that data is. And we are close to be able to achieve in multiple myeloma, what you would call a functional cure.

Yes. So the recent data in second line were -- first of all, about when patients begin to progress from the first-line regimen, about 70% have either -- in the current market have either not had dara, or they've had it, but they're still sensitive to it. So in that population, we showed in our MajesTEC-3 study that if you have dara plus TEC -- TECVAYLI, that's our BCMA, first-in-class BCMA bispecific -- that compared to standard of care, which was often dara plus other things, that we had unprecedented efficacy, progression-free survival. Hazard ratio, I think, was 0.11. So it's like a 90% reduction in progression.

And so impressive were the data that when we published our abstract for the ASH meeting, the FDA called us and said, can we please give you a national priority review voucher so we can get this new regimen to American patients as fast as possible? And from submission to approval was 56 days. So the FDA did a great job with that.

Now for the patient, the roughly 30% that are truly dara refractory, we showed in our MajesTEC-6 study that if you have TECVAYLI combined with TALVEY, that's our other first-in-class T cell engager, that one targeting GPRC5D, a target that was discovered in our own labs. That, again, led to hazard ratios like 0.1 in this second-line setting, showing that we have incredible solutions there for patients.

Now thinking ahead to frontline, where we're going there is with our trispecific, ramantamig, so that has got the features of TEC and TAL in one molecule, both BCMA and GPRC5D, plus a third arm that binds the T cell, the CD3 to get the T cell to attack. And what we've seen in the early going there in newly diagnosed patients, if you combine ramantamig, our trispecific, with dara, 100% MRD negativity, so minimal residual disease negativity. And MRD is even recognized by the FDA as a valid surrogate myeloma because it correlates so well with progression-free survival and overall survival.

So we feel that, that's where the front line will go. It will be ramantamig plus dara. And expect that with that -- and that's a steroid-free regimen, 2 drugs that you're going to get very high levels of progression-free survival that will last for 5 years plus, probably. And then if the patient does relapse at that point, this is where then we have a CAR-T solution for them. And we've got in hand, CARVYKTI, obviously. But down the road, probably if things go well, some in vivo CAR-T solutions as well.

So I mean, even today, physicians have the option in second line to go an interval-free treatment like CARVYKTI with exceptional data in second line or going into one of our bispecifics, TECVAYLI or TALVEY, with great data so -- in order to have an off-the-shelf option. So I think that's great for the patients, and it's great for doctors that have this optionality today.

Yes. And CARVYKTI is the only CAR-T that has overall survival data. So really strong data, showing about half the patients many years out, alive, well. No further treatment, right? So one and done. So some patients opt for that, right? So they're, okay, I can be several years on therapies or I can do a one and done, and it's been very effective.

So -- and now we are trying to bring CARVYKTI into the front line, too, in replacing bone marrow transplant. So those data will start to flow next year, I think, if I'm not mistaken, that -- or maybe the year after, my colleagues are guiding me. But that's after patients that have had the traditional induction and maintenance, and then rather than going on to an autologous stem cell transplant, seeing if CARVYKTI could be the solution for them.

Just one question on the positioning. So you mentioned TECVAYLI and TALVEY moving into second line, but it sounds like the plan is the trispecific is going to kind of leapfrog those and go to first line. What's the reason for that? Does that have to do with the ability to kind of dose TECVAYLI and TALVEY where there's CRS, and this trispecific has a cleaner safety profile? Does it make it easier and more amenable to first line?

Yes. It turns out that trispecific is better tolerated. We didn't necessarily expect this, but the observation has been that the side effects associated with those 2 targets are actually reduced. And we think it may be because you're just getting maybe a different biodistribution where because the trispecific has 2 binders that latch very tightly on to the myeloma cell, you're maybe getting less distribution to other types of cells. But that's been the observation. It's got the efficacy of as if you combine TEC and TAL, but with a better tolerability profile and the convenience that it's in a single molecule. So, yes.

And when will we see the next update for the trispecifics, just remind us, please?

In late line, we're doing a head-to-head against our own TECVAYLI. And I think we're still a couple of years off of those data.

Okay. Great. One more just before we go to immunology is just on the -- you mentioned CARVYKTI, and this is an ex vivo approach. There are some in vivo approaches. So how do you think about the competitive dynamics? Is this years in the future, but of an in vivo CAR-T in that space versus...

Yes. Well, that's why we've also been investing and participating in that space. To be determined, how well it works, right? There's some tantalizing data from a couple of companies. But handfuls of patients and the durability, to be determined.

We know the ex vivo approach can be highly successful, and we've seen that -- we've demonstrated that with CARVYKTI. But we're going to try with in vivo, and we'll see how it goes. And as I said, we've established in-house, a lentivirus platform so we can do that approach. And then through the recent deal and the option to acquire Sail, we'll have an mRNA platform.

And we think both of these are probably going to require some trial and error. And there will be a journey to optimize, and they're both -- all these platforms are very quintessential examples of the process is the product. So the manufacturing piece of this will be critical to success. Not just the design, but then the actual manufacturing, and that's a journey in and of itself. But we're going to be playing in that space, too, and seeing where it leads.

Okay. Great. Maybe just pivoting over to immunology. Obviously, another long, rich history at the company here. I mean, going back to REMICADE and again, now STELARA, TREMFYA, ICOTYDE. So maybe just in the interest of time, we'll focus on ICOTYDE here in terms of the launch.

So Joaquin, maybe just frame for us kind of how -- your view of how the launch is going and how to think about the forward opportunity here in psoriasis? And then also, would just be curious kind of the IBD opportunity, how you guys are thinking about that? Because that's probably the next wave of growth for that asset potentially.

Thank you. So with TREMFYA, 74% growth in the second quarter, leading shares in initiation in IBD, both in ulcerative colitis and in Crohn's disease versus the other IL-23. So ICOTYDE, the launch is doing really well. The latest numbers are about 17,000 patients treated and about 7,000 writers. 60% of the patients were systemic-naive, so that's where the majority of patients are coming. And the prescriber base is varied. We have dermatologists, obviously, but also APPs and primary care physicians showing that this is a medicine that is perceived having a great safety profile, easy to use.

Importantly, we have now full commercial coverage in the U.S. So you should expect our sales to continue to improve as we go through the next quarters as the coverage materialize into paid product. Before the end of the year, we'll show some data on psoriatic arthritis that could be the basis for a filing. So we should expect having data in psoriatic arthritis and a filing that would have an impact into 2027. And our studies in IBD, both in ulcerative colitis and in Crohn's disease, are progressing well. We are in Phase III. And John can tell you that they are recruiting at a good pace, right?

Yes. And we noticed this with all the studies, psoriasis, psoriatic arthritis as well now, IBD, that the recruitment rates exceeded our expectations. And while some of that, we'd like to think is because we're good at clinical operations, more likely is the patients really are hungry for an oral option. And so we've had no trouble getting -- with the psoriasis studies, the studies recruited at about 1/3 the pace that it normally takes us to do those studies. So an indication that there's demand out there.

And we anticipate that in IBD, which is the largest indication, as you know, the entrance of an effective oral medicine will also expand the market as it is doing in psoriasis.

Yes. Okay. Great. And anything -- any early comments on like persistence adherence that you can say on ICOTYDE yet, or still too early?

It's too early. We don't hear anything. One way or another, everything seems to be going in the right direction.

Okay. The other thing on immunology -- and again, you guys have been a leader here -- is combination approaches. So that's something the company has worked on a long time. And I know you had the DUET data recently.

But maybe just stepping back more broadly, like how are you thinking about other novel combinations? Because I think that's a question we get a lot from investors is there seems like there's more and more targets out there that are available now. So what's the comment, the latest on the combination strategy?

So I would tell you that the market for combinations, which is the refractory patients, which is very common in IBD, is one of the most attractive markets today because there's a real patient need there. And we have the one and only combination, which is our co-antibody therapeutic that combines TNF and IL-23 with an unprecedented efficacy there. And we continue to progress there in Phase III, both in ulcerative colitis and Crohn's disease and also in psoriatic arthritis that we plan to develop. But there's other combinations that we can think about.

Yes. I think this is becoming -- frankly, I think thanks to the trailblazing work that our colleagues at J&J did, where we were the first to demonstrate that bringing 2 biologics together could break through the efficacy ceilings. And just to remind people, in inflammatory bowel disease, even with the best therapies, often, only about 1/3 of patients really get a sustained complete remission. So there was room for improvement.

And what we saw with bringing golimumab and guselkumab, TNF and IL-23 together was we were able to break through that efficacy ceiling in the Phase II studies. And then the Phase II studies also show this, that really, the sweet spot for this is patients that are in that refractory bucket who failed 2 or more prior lines. So that's where we're really targeting it. Those are the patients for whom monotherapy is just not getting the job done.

And so we're marching on with that. But down the road, we see opportunities for other combo partners. Starting with the biologics, but then now that we have ICOTYDE as another anchor, we're working on orals that could complement that. And you'll start to see coming in our pipeline, examples of that where we're starting to crack some of the well-known targets that had previously been the domain of biologics now with orals. So we see the opportunity down the road for those refractory patients to have oral-oral combinations. And so we're very much in the thick of that as we speak.

Great. Maybe just one minute on MedTech and how to think about the outlook for back half of the year?

Yes. So back half of the year, we continue to see our MedTech growing at a similar clip than in the first half. We are very focused now in two areas. One is the launch of our OTTAVA surgical soft tissue robotic system. We are going to start with a limited market release. Investors shouldn't be focused initially on placements, but more on how the system is working, how the customer experience is, how we continue to develop evidence and expand the number of indications. But this is going to be a major growth driver for Johnson & Johnson, and we are fully committed to compete and to lead in surgical robotics.

The other area of focus for us there is electrophysiology. We have the best ecosystem in electrophysiology with our mapping system, our clinical support specialists. And we plan to continue to launch new therapeutic catheters with a good pace. We just had the approval of -- in the U.S. of a dual energy catheter. And we plan to have the approval of VARIPULSE Pro, which is the short sequence therapeutic catheter PFA, by the end of the year here in the U.S. And we have a number of catheters in our pipeline that we plan to launch in the coming years. So that's in our cardiovascular space.

And then on vision, we continue to gain market share in contact lenses and also in intraocular lenses with the launch of our premium intraocular lenses here in the U.S. with POC. So we see a good outlook for our MedTech business, not only for the end of the year, but also to be a double-digit grower by the end of the decade when our soft tissue robotical surgical system sales start to kick in and create a significant contribution to our revenue in MedTech.

Great. Well, thank you so much, gentlemen. Really appreciate the time.

Thanks, Terry.

Thank you.

Okay. I think it's still morning. Welcome back, and good morning. I'm Larry Biegelsen, the MedTech analyst at Wells Fargo. It's my pleasure to host the next fireside chat with the management team from Johnson & Johnson.

With us, we have Tim Schmid, Executive Vice President and Worldwide Chairman, MedTech. It's, as I said, fireside chat. Tim, thanks for being here again.

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

So let's start with a couple of big-picture questions. At your last Investor Day, I think it was December 2023, you had a goal to grow at the high end of MedTech, which you pegged at 5% to 7%. How has the market performed relative to your expectations? And how are you doing?

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% to 7% on an operational basis over the entire period of 2022 to 2027, not within quarters or individual years. And when we actually now track our progress from 2022 to the midpoint of 2026, we are confident that we're delivering at that high end of the 5% to 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. And what gives us confidence is a couple of moves. Number one, our shift into higher-growth markets, which we've talked a lot about, especially in CV, but also doubling down on truly differentiated innovation in the 3 areas that we've prioritized in CV, in Surgery and in Vision.

Number two, we've 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. And so 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 clear, and we're already seeing the benefits of that.

And 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're focused on the areas where we can make the biggest difference for patients and for investors. And so you'll know that we announced the separation of Orthopaedics 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 3 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're always going to see some form of headwinds. It could be procedure related, it could be competitive, it could be VBP, use an example today. But long-term durability of performance, we believe, trumps everything, and we're very confident that we're building and have built a MedTech business that is more durable in terms of long-term growth.

That's helpful. So you're approaching your next Investor Day in December. I'd love to get a sneak preview. How -- any changes to how you're thinking about the next 5 years for the MedTech market and Johnson & Johnson?

Yes, Larry, we're excited. December 8 of this year will be our next Investor Day, and I don't want to steal too much thunder. But 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 increasingly aging populations, a greater demand for health care, increasing access to health care.

And 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. And so the underlying fundamentals of MedTech are solid. And then 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. Five years ago, of the 4 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. But once again, it also focuses us on those areas where we can make the biggest impact. And so 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. And we remain very, very confident in the future.

Good to hear. So let's bring it closer to near term, 2026. Excluding the extra week, I think you expect MedTech for Johnson & Johnson in the second half to grow faster than the first half. The comps are a little bit tougher in the second half of the year. So what's giving you the confidence? And what are the drivers?

Yes, Larry, it's a great question. And 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 and 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 sort of 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.

And I think it really talks to the strength and breadth of our portfolio across Innovative Medicine and MedTech that we can do exactly that. And so 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, and I'll double down even further. You've heard our CEO and our CFO talk about '27 being stronger than '26. We're confident that '27 will be a stronger year for Johnson & Johnson than '26.

That's helpful. So a couple of follow-ups. But I think we probably have a lot of people on the line and a lot of people in this room who want to hear your view just on the procedure environment. You said on the Q2 call that it was stable, but you're watching the impact of the ACA subsidies expiring. Anything new you can share with regard to procedure volumes?

Sure, Larry. And obviously, this is the topic of the month right now, and we certainly were following the commentary of many of our competitors on this stage yesterday. Right now, I'm not able to share anything new and different from what I shared at our last earnings call. We still see robustness in our markets when we look at the totality of the businesses that we operate in. Underlying unmet needs remain. Health care systems are well positioned to address the disease burden.

And then specific to Johnson & Johnson, as I compare ourselves against some of our competitors, we offer treatments in areas that are not always elective. In fact, our Surgery business and our Cardiovascular business is less exposed to the elective nature of some other parts of our portfolio and our competitors. And so once again, we feel that we operate in robust markets and have no evidence to suggest any slowdown.

I think the concern is probably more around Orthopaedics. Obviously, you still have a large Orthopaedics business. Does your commentary on this stable procedure environment apply to Orthopaedics as well?

Thank you for the follow-up. And I had a conversation with our Head of Orthopaedics as recently as yesterday. And once again, even there, while we know other competitors have signaled -- in fact, we've had a bit of a yin and yang, some have signaled, some have remained consistent. We do not have any evidence to suggest a slowdown in that business. And as you've seen, we've actually seen an improvement in our performance even since we announced the divestiture of that business, which I think really is a testament to the leadership and the team that we have in place.

So just a couple of follow-ups on your earlier comments on the lingering competitive intensity and the geopolitical headwinds that you mentioned. The geopolitical headwinds are primarily Middle East. Is that what you're talking about? And what kind of exposure do you have?

I'm not going to provide guidance on specifics there, but we do have a fairly sizable business in that part of the world, which has periodically been impacted over the last couple of months. It's just hard to predict, Larry, to what extent that is going to continue. And it's not just the impact of the war on the provision of health care, but also the investment in health care as investment in that part of the world goes to defense and other areas, it's likely to cause pressures in that part of the world over the -- at least the foreseeable future. So that's the specific example I was citing and mentioning earlier.

And the lingering competitive intensity, I guess, A, which areas? Is it EP? Is it Vision?

It is EP. No surprise to you.

Okay. And I just want to clarify that the lingering competitive intensity, what you're trying to communicate today is it's lingering longer than you might have expected. Is that...

Correct.

Okay. Just to be clear. Okay. Fair enough. So maybe just turning back to EP. How are you thinking about what's the outlook for your EP business and the market? I mean, Biosense Webster, it's like the crown jewel of the Johnson & Johnson MedTech franchise, but you've been growing under market. So what's the plan to turn that around?

Yes. And Larry, I think I can bring a little more context to my earlier comment on competitive intensity. When we look at our EP business, rest assured that we are not going away. We are absolutely committed to remaining relevant and to continuing to lead in this particular area. And it is very personal. We built the electrophysiology market with Biosense Webster and still believe that we have a strong right to win.

Where we are seeing competitive intensity a little broader than we initially expected, Larry, is actually outside of the U.S. And it shouldn't come as a surprise to you that outside of the U.S., the shift from RF to PFA hasn't been as rapid as the U.S., especially in markets like Asia Pacific. And so we are seeing some headwinds there. And that is exacerbated by the fact that you have competition from multinationals as well as local competitors, especially in a market like China. We do also expect that VBP, so volume-based procurement, which is really a cost containment effort within China, is going to come to the EP space. And while we cannot predict the exact timing, we expect that, that will hit that market at some point later on this year and bleed into 2027.

And so those are some of the headwinds. I mean, the reasons to believe are profound. And number one, they really start with our belief in our portfolio. And that starts with the importance of CARTO and mapping. We have an established position with CARTO, with CARTO units established in 6,300 cath labs across the world manned by highly trained mappers, and we are the only company that brings a fully integrated offering of mapping, navigation and ablation catheters. That is actually what has kept us in the room, even though we've had some other gaps in the portfolio. That's number one.

Number two, VARIPULSE. VARIPULSE continues to go from strength to strength. We've done more than 100,000 cases. We've just launched VARIPULSE Pro, which is an easier-to-use and faster catheter in Europe, and that's driving significant growth, and we are expecting approval and launch of VARIPULSE Pro in the U.S. later on this year. We're not then stopping there. We're building out a full portfolio of PFA catheters, moving from VARIPULSE Pro to a large-tip focal catheter called OMNYPULSE and then followed by ISOPULSE, which is a single-shot catheter. And our commitment is that you will see one meaningful catheter addition to our portfolio every year for the next 3 to 5 years.

Thirdly, I would mention the importance of evidence. And this really matters in all spaces, but especially in the cardiovascular space, given the nature of the patients that we're serving. We have growing evidence in that VARIPULSE is one of the best-performing catheters and one of the safest on the market. In fact, we shared real-world evidence at the KC Heart Rhythm Society (sic) [ KC Heart Rhythm Symposium ], which is one of the biggest regional societies in the space. And we were able to demonstrate a 60% less likelihood of an adverse cardiac event with the use of VARIPULSE versus FARAWAVE, which further reinforces the fact that we've got a product that is safe and performs well. And so for those reasons alone, Larry, we are absolutely committed to the space. We believe that we will remain relevant and that we will maintain our overarching long-term leadership position over time.

That's helpful. On OMNYPULSE, any update on when we could see approval in Europe and the United States?

So thank you for the question, Larry. The -- obviously, that's the next big addition to our catheter portfolio, which is a large tip focal catheter. We have communicated that we've completed the clinical study. We haven't provided guidance yet on regulatory filings. And so I wouldn't want to pontificate too much on timings at this point in time. We will provide that in due course.

When you say completed the pivotal trial, that Europe and U.S.?

We have -- I will double check that, I believe...

Europe, I think. But that's okay. We can follow up.

We can follow up.

And I guess one more question on the PFA catheter portfolio. You mentioned ISOPULSE, that's the single shot. Are you satisfied with your internal PFA catheter program? There are a lot of public and private companies developing PFA technology. Do you feel like you could augment the PFA catheter portfolio?

Larry, if I'm perfectly honest with you, I think that's one of the key learnings for us in this entire experience. We perhaps were maybe a little too internally focused with the proliferation of PFA. What I can tell you is that we are absolutely agnostic to where innovation comes from. And this is where I think the strength of the balance sheet of J&J really puts us in a good position. We will clearly invest in the internal programs that I mentioned, but we will also be very aggressive when we think it's appropriate to look at some of those next-generation PFA technologies that you and I know are out there and certainly going to play an impact or play a big role in the future.

Okay. That's helpful. Just switching gears, Abiomed slowed in the second quarter. I think you attributed that to a clinical trial called BCIS3.

We call it BCIS.

BCIS. Okay. That was in the first quarter. I think that was American College of Cardiology, if I'm not mistaken. And -- but you expect that business to improve. So my question is, what are you doing to turn that business around?

Yes, it's a really good question. And Larry, firstly, we believe strongly in the future of heart recovery and hemodynamic support as a major opportunity for patients who, in many cases, don't have any options. And we believe it's going to be a significant growth driver for J&J MedTech and Johnson & Johnson. As you mentioned, a study came out a study out of the U.S. -- sorry, out of the U.K., and it resulted in a number of significant conversations within the interventional community about appropriate patient selection, especially as it relates to complex or high-risk patients.

And without a doubt, it has had an impact on some of the treatment choices that our customers, both here in the U.S. but also internationally have had relative to that patient pool. Now we believe strongly that hemodynamic support is an absolutely critical option for those high-risk complex patients. And what we're doing about it is, number one, we are looking at the totality of evidence, not just the BCIS3 trial, but the totality of evidence available across the world focused on that patient pool. We're also investing more than any other company in additional data, and I'm sure we'll talk in a second about PROTECT IV, which is a specific study focused on this particular pool of patients. We're focusing also a lot on educating people around appropriate patient selection, which we think is at the heart of one of the challenges with that study.

And we're also doubling down on education to ensure that our physicians are best positioned to make the appropriate treatment options. And we're already starting to see some green shoots. And what I would say, Larry, is that this should not be a major surprise. There's a reason why we are the only company in the heart recovery space with Impella today. It's because it's hard. And it's also because it is an increasingly -- it's a growing area of science and medicine. And we've seen this in the past. As evidence continues to grow, we've seen this in the past, and we have no doubt that we will demonstrate the benefits of these technologies, specifically to those high-risk complex patients.

PROTECT IV, a big study, important study. You talked about it on the Q2 call, I think, coming out in 2027. Maybe just at a high level, what are the differences between -- it is a similar population, high-risk PCI. But what are the differences in the studies that could lead to a more favorable outcome in PROTECT IV?

Yes, Larry, I think there's a couple of things. And the first thing I would reiterate is the importance of not drawing a straight line between the BCIS3 study and PROTECT IV. There are some significant differences that need to be understood. Now we don't want to take away from the learnings from BCIS. But when we look at PROTECT IV, to your point, yes, it is focused on a similar cohort of patients. But BCIS3 was a 300-patient study. PROTECT IV will be just over 1,250. So 4x the sample size, which we think is a more highly powered trial, which should deliver better outcomes given the nature of how it's powered.

The other consideration is really around patient selection. And in the -- with the investigators we've spoken to, we believe that there's a different interpretation of patient selection as it relates to the full cohort of complex high-risk PCI patients in PROTECT IV relative to BCIS. And the final one is really around best practices. We've learned, especially in high-usage markets like the U.S., that best practice really matters. And what I mean by that is around pre-call planning, the appropriate time for how much you keep the device in, et cetera, et cetera. And so we have embedded those best practices into our PROTECT IV study and can confidently say that they were not considered in the BCIS study, which we think calls out some of the variability we experienced there.

And so we're working hard within the community. We once again remain very committed to this business. We've seen these ups and downs before and believe that Impella is an absolutely critical offering for these patients and will continue to be a strong driver of growth for J&J and J&J MedTech.

That's helpful. Let's switch gears, Tim. Anyone who knows you knows you're excited about OTTAVA. So I guess my question is, what's been the early feedback? I know you were at Society of Robotic Surgery. What's the early feedback? And when can this start to be a growth accelerator for J&J's surgical business?

Larry, I am super excited about OTTAVA. I spent more than 33 years at Johnson & Johnson, a lot of that time within our Surgery business. And I do think that we are on the precipice of an absolute breakthrough. And you mentioned that we received FDA approval while we were at the SRS conference. And for those of you who don't know, SRS is the largest gathering of roboticists and physicians focused on surgical robotics. And it was a particularly proud moment for us to show our confidence and the confidence with the FDA with the approval at that event.

I think the feedback, firstly, has been resoundingly positive. There is no doubt that it is time for competition, and there's a recognition that we have something that is truly differentiated from the other competitors who have entered this market. I'd say the 2 insights that are resonating the most, specifically with surgeons who, by the way, many of those surgeons at SRS participated in helping us design and bring OTTAVA to market. The piece that they're really hitching on to is the benefits of our differentiation, which are the unique architecture, the fact that it drives automation from day 1, the advanced instruments as well as the digital infrastructure, what it really calls upon and does is create a more seamless workflow.

Collaboration within the operating room is absolutely critical. It isn't just about the surgeon. It's about the anesthetist. It's about the nursing staff. And those benefits of OTTAVA really allow for a more collaborative workflow in the operating room, both in terms of during clinical practice as well as shift over between procedures. And so that is really resonating workflow with physicians. With the health system community who, as I mentioned earlier, cannot wait for the entrance of a new competitor and are especially excited about it being J&J, given that we have presence in almost every single operating room around the world, given our global leadership in both open and laparoscopic procedures.

And with that community, what's really resonating is the architecture. And why it's important for a hospital system is that because OTTAVA is a different format and considerably smaller than the incumbent system, it can be placed naturally in any operating room today and doesn't require an entirely new investment in capital to fit out an operating room with the size to accommodate the incumbents' robot. And so that is really, really resonating. And so we look forward to providing more feedback in short order. Right now, our focus is on a careful selection of our pilot launch sites, making sure that they have a positive experience. And what you can expect to see is a constant drumbeat of increased indications, new products as we continue to scale that portfolio.

I know your next question at some point is going to be, well, when exactly will we see that material impact? We will share more details about that at the EBR on the 8th of December, but we remain very confident that OTTAVA will be a significant growth contributor to Surgery. In fact, our Surgery business is the largest today. It is the most profitable. And we believe with the investments in OTTAVA and our fleet of surgical robots, which is inclusive of MONARCH, which will be the first system used for -- in the urology space for the treatment of kidney stones. We believe that those innovations alone will be a significant contributor to J&J's performance, in fact, a material contributor by the end of the decade.

December 8?

December 8.

We have to wait?

You got to wait, Larry, sorry.

Okay. We'll be there. All right, Vision. Let me just ask, I'll ask about contact lenses first. Q2 was actually -- was strong, especially outside the U.S. There's been concerns that Asia Pac has been weak. Have you seen kind of a turnaround? And what's the outlook for contact lenses?

Yes, we hope so. And certainly, we've seen that continue throughout the quarter. And to build on your point, Larry, we've seen a really nice inflection within our contact lens business. We did have some supply issues a couple of years ago, which we've addressed. We're back to actually gaining share. We are by far and away the market leader with our ACUVUE premium portfolio.

To your point, outside of the U.S. and specifically, Asia Pac was a bit soft for a number of quarters, and we've seen that turn around nicely. And we expect that to continue on the back of an incredible unmet need, aging population, which is going through the roof, greater awareness of health care needs and the demand for some of the premium innovations that we have. And so our expectation is that will continue, and we're confident that our contact lens business will be a strong contributor to Vision growth for the foreseeable future.

Within Vision, the one area I was actually surprised about was the U.S. surgical business was a little soft, and I was surprised because you're launching PureSee. Feedback is good on PureSee, a new premium IOL. So how should we think about the Surgical business -- Vision, Surgical and U.S. in particular, going forward?

Yes. And Larry, just to call it as it is, that was a dark mark on our Vision, Surgery performance in the last quarter, tremendous performance outside of the U.S., but lackluster performance here in the U.S. Now we had just started the launch of PureSee. And to put this in context, this is the only FDA-approved premium IOL with extended depth of focus. And what that actually means it makes this premium IOL more applicable to more patients.

The reason why we've enjoyed such success outside of the U.S. is we've implanted that device in 0.5 million eyes over the last couple of years. We're now complementing our portfolio with Odyssey in the U.S. with PureSee, and I can confidently communicate that we are seeing a tremendous pickup. And so I look forward to providing the results of that acceleration when we come together for Q3 earnings. And I can also confidently say that the second quarter performance here in the U.S. and globally for our Surgical, Vision business will be significantly better.

Got it. That's helpful. I guess just one on Orthopaedics. How are you thinking about the pros and cons of a sale versus spin?

Yes, it's a question we get all of the time. This was a notable decision we took for J&J. It's one of the largest divestitures. Now keep in mind, divestitures are not a new sport for J&J. We believe it's a part of just strong portfolio management. In fact, prior to the decision to separate our Ortho business, we generated about $5 billion of cash over the last 7 years through moving businesses, whether it be LifeScan, Cordis more recently, our ENT business, and so on. And so we will continue to do it where it makes sense.

But to answer your question deliberately, we are not looking to optimize for structure in that decision to separate Ortho. We're optimizing for value creation. And so we are prepared to entertain a multitude of options to separate that business, which we're still considering. And in due course, we will share the chosen course of action. But once again, it is all about maximizing for value creation.

The last thing I'll say is I would not look into this as the beginning of a program of divestitures at J&J. It's a big one. It's one of the market-leading businesses in Orthopaedics. It just comes down to the fact that we believe both the DePuy Synthes, which it will be called, and J&J will perform better once we separate. It is not the beginning of a program to divest of any other significant businesses within Innovative Medicine or within MedTech.

Remind me of the time line you guys laid out for Orthopaedics, the spin?

We expect that to happen sometime in '27, most likely around the midpoint.

Okay. Of '27. So any milestones between now and then?

I suspect that we will have line of sight to the mode of separation before the end of the year, and we'll share that as soon as we have it.

Got it. So I guess you answered my next question, which was last year at this conference, I asked if we could see more divestitures and shortly thereafter, you announced the spin of Orthopaedics. How are you feeling about the portfolio today? It sounds like no more big divestitures. What about additions?

Well, we have been very deliberate. And what gives us confidence in what I shared earlier about delivering against our 2026 commitments for J&J as well as a faster '27 is we believe that by deliberately focusing on the 6 areas of focus we've chosen in our Innovative Medicine business, it is the neuroscience business, it's immunology and oncology. And in MedTech, it is CV, Cardiovascular, Surgery and Vision.

We believe that focus is really what is setting ourselves up for success. Of course, I think -- and we do not mean this arrogantly at all, but what does set us apart is the strength of our balance sheet and it allows us to be in a position to go after truly meaningful innovation that will deliver returns. We're more able to do that than many of our competitors. And so we are right now focusing on how we really build out the portfolios that we have today.

When we think about M&A, we take a very disciplined process. We look at number one, is there a scientific reason, a real unmet need that we're looking to address and a technology that truly addresses it? That's number two -- that's number one. Number two, it's strategic. Do we have a right to win? Is it adjacent to one of our businesses? Do we have established presence or scale that we can bring to bear to make that business perform better in J&J versus the outside? And then finally, no surprise to all of you, it's going to be financial. Does it meet the commitments of our P&L and our responsibility to all of you as shareholders?

And that's the philosophy we will continue to focus on, Larry. And I think Shockwave is a wonderful example of that, right? Going after a space where there's a significant unmet need for people with cardiovascular disease, IVL technology that makes it so much easier for physicians to treat and better outcomes for patients. It was very strategic because it allowed us to build our initial presence in interventional cardiology with the acquisition of Abiomed, moving deeper into coronary artery disease and peripheral artery disease with Shockwave. And of course, from a financial position, Shockwave was accretive to both our top and bottom line performance from day 1. And so it's a wonderful example and a great way of how we think about innovation.

I heard your earlier comments at the beginning of our conversation about cardiovascular devices, largest, fastest-growing. You're a leader in 3 different areas. Do you see building that portfolio out further? Because there's a lot of other areas that you could be in.

Yes. And you know them as well as we do, Larry, we'll certainly keep our eyes open. But I think what really stands out -- not I think, I know, what really stands out relative to other players in the Cardiovascular space is that we are only participating in truly high-growth areas, both in electrophysiology, heart failure and IVL with truly differentiated innovation. And so that always will be, in our view, a recipe for success. We're not looking at any of those commodity businesses. We are looking for truly differentiated innovation, which makes a big difference for patients and delivers the returns that we owe you as shareholders.

All right. That's great. So we've got about a minute left. Tim, if you want to make any closing remarks or any -- touch on any areas we didn't, please feel free.

Yes. I'll just close out with a couple of comments. Firstly, we're confident with the progress we've made. This is a time of significant transformation for Johnson & Johnson, especially on our portfolio as we shift our business into higher-growth markets like Cardiovascular, as we move out slower-growing market businesses like Orthopaedics. And so very confident in the ongoing transformation of the portfolio. And that's a good reason for why we feel so confident in what we're going to share at the EBR later in the year and what we expect to be the contribution that MedTech makes to Johnson & Johnson more broadly over the next 5 to 7 years.

We're happy with the ongoing changes in our operating model. And while I haven't talked a lot about that, that is foundational to winning in MedTech, being highly specialized, highly focused, able to move with speed and intensity with the market. And finally, we just feel really confident in the future. And I'll end with the point I made earlier. We are very confident in Johnson & Johnson's ability to deliver on our 2026 commitments and the guidance we raised in July, and we believe that '27 will be stronger than '26.

Perfect. Thanks so much for being here.

Thank you.

Good morning, and welcome to Johnson & Johnson's OTTAVA Investor Conference Call. [Operator Instructions] This call is being recorded. If anyone has any objections, you may disconnect at this time. [Operator Instructions] I would now like to turn the conference call over to Johnson & Johnson. You may begin.

Good morning, and thank you for joining us. This is Ryan Koors, Vice President of Investor Relations for Johnson & Johnson. Welcome to our OTTAVA investor call following the recent FDA approval.

Following prepared remarks, we will have time for open Q&A. We anticipate this webcast will last approximately 45 minutes. Please note that we will only be taking questions on OTTAVA during today's call.

Please be advised that this presentation contains forward-looking statements related to the OTTAVA Robotic Surgical System. The viewer is cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using information as of the date of this recording. They are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. The description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2025 Form 10-K, which is available at investor.jnj.com and on the SEC's website.

Today's call is intended to provide additional insights on the OTTAVA platform and the long-term opportunity we see ahead. With that, I will turn over to Rocco and Neda.

Good morning, everyone. My name is Rocco De Bernardis, and I'm the President of the OTTAVA program at Johnson & Johnson. Thank you for joining us today to talk about our most recent milestone with OTTAVA, receiving De Novo authorization in the U.S. We announced this news at the Society of Robotic Surgery Annual Meeting, and it was an incredible opportunity to celebrate with the many surgeons who have been instrumental to the OTTAVA program and who are leading experts and practitioners in robotic surgery.

OTTAVA is not simply a new system. It is something we have built with purpose, persistence and in partnership with surgeons and hospitals. With this launch, we are bringing hospitals and surgical teams a competitive system designed to adapt to their clinical approach while unlocking new potential in operating rooms starting in the U.S. and then around the world. I've been leading the OTTAVA program for nearly 5 years. And during this time, the program has truly accelerated, meeting each of its clinical and regulatory milestones to bring us to this first market approval.

Today, I will share more about what makes OTTAVA truly differentiated and why this is a purpose-built foundation to open new possibilities in surgery. Before we get into the details, I also want to introduce my colleague, Neda Cvijetic, Head of R&D for Robotics and Digital, who will provide more context today on engineering and design of OTTAVA. But first, I would like to share a short video that introduces OTTAVA.

[Presentation]

As you could see right away in the video, OTTAVA is the first of its kind in soft tissue robotics. And as Neda will explain, we engineer it that way from the ground up. Today, we will highlight a few key elements that differentiate OTTAVA. Our novel architecture, twin motion, which is a synchronized motion of the table and arms, automation from day 1, our next-generation instruments and Polyphonic, our open and secure digital ecosystem. Let's look at each one of these in detail.

First of all, our novel architecture. While you might have heard us talk about this before, I hope that today, it is clear just how different this is and how this can open capacity, workflow, collaboration and innovation for our clinical teams and hospitals. The regulatory pathway we took for OTTAVA is further evidence of the system's unique design. We could not take a 510(k) pathway because there is a predicate device like OTTAVA.

We like to say that with OTTAVA, we are breaking the mold. There are no booms and no carts. Instead, intelligent surgical arms are integrated into a standard sized operating table. Because of this, OTTAVA occupies 30% to 50% less space than leading boom and cart-mounted systems. This can fundamentally change how we -- the operating room works and allows OTTAVA to fit seamlessly into almost any operating room. This design opens possibilities like improved patient access and open flexible environment, better visibility across the room and more space for staff to move and work. This also means opening capacity for hospitals.

Let me explain what we mean by that. Today, hospitals want to build the robotics programs to meet surgeons and patient demand, offering a multi-quadrant system with demonstrated reach and access for complex procedures, but in a significant reduced footprint offers hospitals the potential to grow the capacity of their programs without updating infrastructure because there is no need for sizable dedicated operating rooms with OTTAVA.

Feedback from our clinical trials has validated why this matters. In our first clinical trials, in 5 of the 6 trial sites, OTTAVA was used in operating rooms that previously could not accommodate a robot, including a room that was only 243 square feet in size. We heard from hospital leaders, we couldn't fit another robot in that room. We heard from anesthesiologist how pleased they were with their ability to access the patient. We heard from nursing staff who commented several times when getting to the OR to set up for a case, when does the robot arrive? And we heard from surgeons that increased line of sight around the OR made communication with bedside staff easier for how the team functioned.

Now let me turn it over to Neda to tell you more about the impact of our other unique features.

Thank you, Rocco. As Rocco mentioned, I lead the R&D teams across our robotics and digital programs within our surgery business. This is a group of fantastically talented individuals across engineering disciplines, including hardware and software development, human factors and design, systems integration and deep expertise in the science and technology behind our surgical instrumentation. These teams have created OTTAVA as a completely integrated hardware and software architecture. This architecture has unlocked a lot of potential. It is a great example of how engineering and human-centered technology design can remove friction.

I'd like to say that our design quite literally means that the patient is at the center. We heard from experienced surgeons that when moving from handheld laparoscopic to robotic surgery, they have gained a lot, but also lost some things. One of the things that they had lost is the ability to move the operating table seamlessly during surgery using gravity to shift organs naturally instead of using retraction. With OTTAVA, the integrated table and arms can move together. This feature, twin motion, is the synchronized motion of the table and the arms and it's activated by the push of a button. The table and bed move together and maintain the remote center of motion fixed, which means the instruments can remain unaffected and the procedure can go on uninterrupted.

This capability is about uninterrupted workflows for clinical teams. Surgeons have told us that they have had to adapt the way they operate to a robotic system, and it should be the other way around. Twin motion means no interrupting the procedure. There is no stopping, undocking and repositioning. With OTTAVA, movement is continuous and native to the system because that's how we created it.

Next, I'd like to talk about the automation capabilities on OTTAVA. OTTAVA will deliver automation from day 1, starting with what we call automated procedure poses. With the push of a button, the system automatically deploys the arms from beneath the table into procedure position. This is possible because of our intelligent surgical arms. With OTTAVA, every joint on every arm is motorized and software controlled. Precise spatial awareness allows highly precise information about where each arm joint is in space, both relative to each other, relative to the table and relative to the patient.

Today, this engineering unlocks automation for setup and tear down, but we also know that surgeons are looking for automation to play a role in other tasks in surgery, always with surgeons and clinical staff in control. We will continue to listen to where these capabilities can provide the greatest clinical and economic value. And because of how we built the system, we believe OTTAVA is uniquely able to deliver on this future.

Thank you, Neda. I think we'll continue to see demand for these kinds of features because of the potential benefits before, during and after surgery. We believe automated procedure poses offer potential for improved workflow, benefiting clinical teams and hospitals. We hear from surgeons today that setup of robotic procedures can be cumbersome and requires movement of large equipment. Also in any OR setting, pressures on surgical staffing and scheduling mean that predictable, repeatable setup requirements can ease a real burden. This is what OTTAVA offers.

Again, because the intelligent arms are fully integrated and motorized and because we have trained the system to deploy to the optimal position, bedside staff select the pose and deploy the arms with a push of a button. And that also works in reverse, one button to stow the arms out of the way for patient prep or transfer. One of the surgeons in our clinical trial mentioned not just the potential to streamline this part of surgery for improved capacity and easier workflow, but he also said that they changed the way the team worked together.

Previously, they would send staff to set up and then he would come in a later to begin. With OTTAVA, they had this new experience of all coming together to start the procedure. Here, I also want to highlight the role that surgeon hospital feedback plays in our flywheel of innovation. During the clinical trial, our team gave feedback that it would prefer for the arms to be positioned a certain way around the table during part of the setup. We took that feedback, created the solution and now that automated pose will be available to our first commercial users to further streamline and improve the setup experience.

I would also like to share some of our early data, which reflects how OTTAVA is designed to meet the needs of surgeons and their teams. In our FORTE trial, we demonstrated that the OTTAVA system, one, met its primary safety and effectiveness points; two, achieved 100% procedural completion without conversion to a non-robotic approach across all 30 patients. And three, 5 of the 6 sites used operating rooms that previously were not robotic ORs, including rooms considered unsuitable for robotic surgery due to space constraints. And a survey of early experience conducted among surgeons and surgical staff revealed that 100% agree that OTTAVA unlocks opportunities to free up space or convert ORs into robotic ORs.

95% agree that OTTAVA creates efficiencies and 90% (sic) [ 95% ] agree that OTTAVA increases visibility in the OR. These findings are promising and point to real benefits and solutions OTTAVA can provide for hospitals and surgical teams. Given J&J's long-standing leadership in surgical instruments, we are looking forward to launching OTTAVA with next-generation instrumentation purpose-built for robotics.

With these instruments, we listen to surgeons and the most common challenges they have with instruments today. One of those challenges is unintended cutting of sutures. 83% of surgeons experienced at least 1 inadvertent suture cut per month in their robotic surgeries. This can interrupt procedure flow and means starting that portion of the procedure over again. Another is dulling scissors. 98% of surgeons have experienced dull or poorly cutting monopolar scissors, with 30% experiencing these all or most of the time. Scissors are one of the most commonly used surgical instruments. So imagine the impact this can have on experience.

That is where our worlds intersect Rocco. Because we design for what surgeons need, we are addressing these issues with OTTAVA. Our 2-in-1 needle driver has discrete surgeon-activated cutting and suturing-only modes, and we engineered our monopolar curb scissors for consistent and complete cuts.

That's right. Beyond the initial release, it is also our intention to offer a portfolio of advanced surgical instruments exclusively on OTTAVA. This is something surgeons are asking for, a consistent, trusted experience across open, laparoscopic and robotic surgery. We've been working on the science of tissue management for many years with decades of clinical evidence behind our technology. And it is our goal to bring the same level of science to OTTAVA. So you can expect the cadence of 510(k) submissions to advance the portfolio of instruments on OTTAVA. This will be a key element of our commercial expansion.

Let's talk about digital. OTTAVA is a digitally enabled system connected to our open digital ecosystem for surgery. Polyphonic for OTTAVA is a secure digital solution designed to support surgical teams throughout the OTTAVA experience. Through Polyphonic, we are bringing learning, media and data-driven insights to OTTAVA users and their teams. And as we continue to advance our open digital ecosystem, this will bring even more value back to OTTAVA with greater insights and applications. Polyphonic for OTTAVA empowers the surgical robotics program to securely capture data that can fuel research and innovation with privacy by design and security at its core.

Surgeons want data to play a more significant role in surgery. As I mentioned, we were most recently at the Society of Robotic Surgery Annual Meeting, and the topic of data insights has made its way into every part of this event. At the end of the day, surgeons are asking for access to data and insights from it. They want data to fuel research and innovate, and they want data to drive a more collective intelligence across surgery so that in the future, every [indiscernible] surgery informs the next. Our approach to digital takes into account that unmet need and will support surgeons as they shape this future. With all this, I hope you can see why we're so excited to have reached this milestone and can begin to bring OTTAVA to surgical teams and hospitals.

OTTAVA is more than just a new surgical system. It represents a new approach to robotic surgery with the potential to create meaningful advances in capacity, workflow, collaboration and innovation across the operating room. As we look ahead to what's next, from a launch perspective, we're entering one of the most mature robotic surgery markets in the world, alongside surgeons and teams with deep experience in robotics. And frankly, that's a reflection of our confidence in OTTAVA. We'll take a thoughtful approach, starting with innovative early adopters, learning quickly, generating clinical evidence, listening closely to feedback and providing the level of partnership and support expected from Johnson & Johnson.

As we learn, we will move with speed, expanding capabilities, expanding indications and bringing OTTAVA to more surgeons and more markets around the world. Our second IDE study in inguinal hernia repair is ongoing, and we're planning a regular cadence of evidence generation, innovation and indication expansion. Make no mistake, OTTAVA is designed to be a global multi-specialty system. Today, we have a strong starting point and a purpose-built foundation for the future. To close, a quick thank you for joining and for your interest in OTTAVA. We believe OTTAVA represents the start of a new chapter in robotic surgery, and we're excited about the opportunities ahead. We look forward to updating you on our continued progress, innovation and expansion in the months to come.

As you heard today, we believe OTTAVA represents much more than a new surgical robot. It's a platform that we expect to build on for years to come. With that, we are pleased to now open the line for Q&A. Tim Schmid, Executive Vice President, Worldwide Chairman, MedTech; Hani Abouhalka, Company Group Chair of Surgery; Neda Cvijetic, Global Head of R&D, Robotics and Digital; and Dr. Dominic Papandria, Global Head of Medical Affairs for OTTAVA will be joining us for Q&A.

[Operator Instructions] Our first question today is coming from Larry Biegelsen from Wells Fargo.

Congrats again on the approval. So you're starting with the U.S. soft tissue robotic market, which, as you mentioned earlier, is more penetrated and more mature than the U.S. and the international market. My question for you is, do you think OTTAVA will expand the market to new robotic users, new settings, new procedures? Or do you think it will take share from existing robotic users? I'm trying to understand if this is more of a zero-sum game or a rising tide that will lift all boats.

Hani, maybe if you could take a start at that one.

[indiscernible] in Miami. Larry, as you can tell when you saw each other, our excitement is about today and the future, and it's really driven by a few things. First, the U.S. is the largest market, and that's also a sign of confidence in our program. But the penetration in the U.S. is still in the high 20s. So we believe OTTAVA is going to be incredibly important to expand the market in the U.S. But also, as we mentioned earlier, we plan to have subsequent indications and geographic expansion to take this global. I do believe competition is great and healthy for everyone, for patients, for surgeons, but our aim is to bring a new category-defining robot to the market. And we know surgical robotics isn't new. But as you've seen us and heard from us, we believe OTTAVA is.

Our next question today is coming from Joanne Wuensch from Citibank.

I'm curious if you can outline your commercial plans and how to think about pricing, things like placement versus sale of the robot and then how you think about wrapping the J&J Ethicon tools around it.

Thank you for the question. A couple of things you've covered there. First, in terms of our pricing philosophy, -- when it comes to innovation, it's always pricing it based on the value it brings to hospitals, to surgical teams, and we'll do this here. In terms of also our commercial approach, we also understand and based on our experience in surgery and ORs across the world, we need to also be collaborative and work with different systems to offer different commercial options to really make sure that it's frictionless and we can work together with hospitals to do that.

In terms of our intent, as I mentioned earlier, our intent is to lead surgical robotics and when we're launching a big program like this, a thoughtful launch at the beginning is important. So as Rocco mentioned, we'll work with early adopters, big academic centers, develop the data, make sure we get the feedback and experiences together. And after that, we plan to rapidly expand indications. And after the U.S., we're planning to go to key markets in Europe and Japan.

Our next question today is coming from Rick Wise with Stifel.

Maybe talk about your manufacturing and go-to-market capabilities here. Clearly, OTTAVA is highly sophisticated system. Talk about your capability to build and manufacture to meet demand. I know that the bed is OEM by another company. But how ready are you to sell this in volume? And maybe as part of that, talk about the need, Hani, to build out a specialist robotic sales team? Or is this going to be through the Ethicon rep structure that exists today?

Refer to the question asked. A few things you covered. First, you heard from Neda how incredibly proud we are of the engineering and R&D teams that we have who are best-in-class in the world. But I can tell you, leading the largest surgery company in the world, our supply chain organization is one of the most resilient, incredible folks in any company, in my opinion. And they've been brought in early to make sure that we're ready at the scale when we're ready to scale. But as I said, the first phase will be this thoughtful launch. As you know, from the robotic system, there's a robot, but there's also the instruments. Today, we are the global leader in things like stapling. So we have deep expertise in manufacturing, and we have incredible partnerships with our suppliers.

In terms of the commercial model, as we [indiscernible] to use our experience. We're in every OR in the world. Our teams are incredibly experienced in surgery. At the same time, we understand we need to build some differentiated capacities in service and capital selling. But I would be remiss not to remind everyone that we are already selling in robotics, in J&J, in MONARCH. We have some capital experiences in cardiovascular and surgery, and we'll bring all these expertise to make sure that we deploy the best teams to support OTTAVA. And also one more thing I'll add is our global education capabilities. We train more surgeons than anybody in the world, and that will be a key factor in also scaling our program.

Next question is coming from Jayson Bedford from Raymond James.

You talked about the benefit of twin motion just removing the need to reposition the patient. Just curious, how often is a patient repositioned during procedure? And can you just frame what you think the potential time savings are on a procedure basis?

I can take that. This is Dominic Papandria. It really depends quite a bit on the procedure. Colorectal procedures [indiscernible] involve quite a bit more patient repositioning. If you're moving through multiple quadrants through multiple anatomic regions of the abdomen, the need for repositioning is much greater.

Our next question today is coming from Terence Flynn from Morgan Stanley.

Congrats for the approval. I was just wondering if you can comment at all about what's embedded in your long-term guidance for OTTAVA relative to consensus. If you can give us any insight there ahead of the, obviously, enterprise business review meeting you're hosting later this year.

Thank you very much for the question. I would like to maybe just step back very briefly. And for us, just to be very clear, OTTAVA is not just a new robotic system that's entering the market. It is a long-term strategic platform for J&J in one of the most attractive areas of MedTech. And I know while Hani mentioned our focus is on the U.S. to start. We have conviction because we see this as a global program. In fact, fewer than 8% of relevant soft tissue procedures around the world have performed robotically today. And at the same time, hospitals are under increasing pressure to improve operating room efficiency, manage capacity constraints and make better use of technology and data.

And so we believe that this combination that we have creates a substantial opportunity for continued growth and innovation. And very specifically to your question, as we think about the launches, you already heard from Hani, we're going to take a very disciplined approach to commercialization with OTTAVA. We're going to begin with a select group of hospitals. We're going to learn quickly, support them. And in tandem, we will expand capabilities, instruments, indications and geographies as we scale. We already mentioned that, we are parallel passing registrations in markets like Japan and Western Europe. And so over time, we see this definitely being a global program.

To answer your question specifically, we are absolutely adamant that this will be a financially material program for Johnson & Johnson by the end of the decade. While we're not providing specific details on placements and targets today, investors should expect more detail on our expectations for OTTAVA and our broader robotic strategy at our already organized Johnson & Johnson Enterprise Business Review on December 8. Thank you.

Our next question today is coming from Josh Jennings from TD Cowen.

Congratulations on all the progress. I was hoping to just ask about the instrument portfolio. I know that Ethicon's instruments could provide a competitive advantage at some point. But can you help us think about where the instrument portfolio for OTTAVA sits today that's approved and when you expect that full breadth to be in hand and approved as you move forward and expand indications?

Thank you for the question. A couple of things. When you heard from Rocco and Neda, we wanted to build a robot with surgeons for surgeons, and that's what we set to do. Second, we do not want to just do an evolution in the robotic segment. We believe that surgery is changing considerably and what is available today will not be -- what's going to take surgery next, and we wanted to do something different, and that's what we do what that is. A big part of that is instruments. I've worked with J&J for 25 years. And in many parts of the world when it's time to make a choice around a stapler, surgeons choose Ethicon instruments because of the trust and the experience. And even when they're doing robotic procedure in some cases, they would still walk to the table and do a manual firing because of that.

So we wanted from the beginning to bring Ethicon instruments only on top. [indiscernible] the first launch will come with some differentiated instruments that will allow the surgeon to complete the cases as needed. And then in every cadence, we'll bring up immediately after that set of advanced instrumentation both in -- from stapling and energy, but also will have software upgrades. So expect a cadence of continuous innovation to bring this experience trusted across open lab and robotics across our portfolio from medical.

Our next question today is coming from Travis Steed from Bank of America.

Congrats on the approval. Maybe first, just why could you start with some of the general surgery indications? And how do you think about indications and timing for future indications? And then are there any design trade-offs of OTTAVA being a bed integrated robot? Are there certain surgeries or a certain percentage of surgeries that maybe don't get the same reach or where you need 3 arms on one side of the bed as you kind of thought about the market and if there's any design trade-offs with the bed integrated robot design.

Dominic again. We started out with Roux-en-Y gastric bypass as a challenging procedure to unlock multiple general surgery indications. It's a multistep procedure that involves manipulation of both the stomach and small intestine and requires operation in multiple quadrants. Again, we did this not only to strengthen our hand with FDA in terms of unlocking multiple simultaneous indications. But also, there was a real desire to make sure that we could demonstrate performance, demonstrate safety in a complex general surgical procedure.

I can add to that, Travis. Clearly, our expectation is that we will add additional indications. As you heard from Dr. Papandria, the focus on the areas we've decided to initiate our efforts here are already gateway procedures, which give us access to 10 procedures today. As you know, we already have in clinical trials a focus on inguinal hernia, which also is a very expensive procedure. And shortly thereafter, we will move into other areas like urology and gynecology. So certainly, our expectation is that our robot will be available for use in the majority of surgical procedures.

Our next question today is coming from Robbie Marcus from JPMorgan.

Congrats as well on the approval. I wanted to ask, you clearly have excellent relationships with hospitals and surgeons. As you think about the initial launch strategy where you won't have the full indication set, how are you thinking about driving adoption here? And I know you've touched on it in different ways, but is it trying to leverage first the surgeons that you have relationships with and get them to advocate for it? Are you going to maybe argue to the hospital CFOs about some of the cost benefits and operational benefits and cost savings that could bring to the hospital? I guess the question is really where do you see the champion from this just given you are growing up against a very large established competitor that has a lot of -- in the area of surgical robotics already?

Robert, thank you. Great question. I'll start by taking you to 2 weeks ago roughly when we announced the news in Miami at the Society of Robotic Surgery. And I can tell you it was the proudest moment in my career. And it wasn't just because we're bringing an incredible category defining innovation, but just seeing the response from surgeons and surgical teams on sharing this innovation over the line, I can tell you it just gave me goosebumps. And that tells you the excitement that we're seeing and getting from surgical teams.

But if you double-click on why the excitement, there are 2 things that I can tell you that will help us in the early launches, but also when we go to scale. First and foremost, this is -- this wasn't something that we're going to add to an OR. This is not technology we're dumping in an OR. This was built in how ORs work. That's like the first thing.

The second thing is everyone we talk to, they felt from a surgical team perspective, they told us they felt that the robot is part of the surgical team. This friction or tension that usually feel between humans and technology, they didn't feel it. We've heard Rocco mentioned they were asking where was the robot even. From a hospital administrative lens, I've heard when people talk to me about this, [indiscernible] in the hospital, they have to dedicate ORs to the robotic ORs. And in the best of cases, these robotic ORs don't work as efficiently as normal ORs. And if a case was canceled or a surgeon didn't show up, there's idle time and we know what the workflow happens. They're super excited about being able to have every OR be a robotic OR and every robotic OR be an OR, that's very powerful.

The other thing they tell us on that space, 50% is not small numbers. It's not marginal. and not only to space where it fits and where some other robots might not fit, it's also the investments in making sure that the room is fit to take on bigger robots and heavier robots. That's an investment and time that, in some cases, will not work. I worked with J&J also in countries outside the U.S. and there are some ORs and hospitals are not as big as in the same place. So we believe that there's going to be a push for us from nurses, from surgeons and from hospital administrators. And in the end, I think that's going to make a difference for us. And that's why you can see we're clearly excited about this.

Robbie, maybe just adding to Hani's point, I think it's important to just to reaffirm that we are going to establish robotics programs. We're not looking to go where the current incumbent isn't. And so we will be looking at a combination of both academic and nonacademic centers where high-volume surgical procedures are currently done robotically. We think those are going to be the best environment to continue to learn as we scale the program.

Our next question today is coming from Morten Herholdt HSBC.

Could you elaborate a bit on how you see the hurdles in Europe and Japan differing to the U.S. What would hinder uptake or what would maybe aid it and in conclusion, how do you see sort of in the medium term, what is the size of the market outside the U.S. relative to the U.S.?

Thank you for the question. Again, we're the global leader in surgery. We intend to be a global leader in surgical robotics, which means we need, as Tim mentioned, to have expansion in procedures and indications, but also a geographic expansion. Our teams, I believe we have some of the best, most talented regulatory teams in the industry, and they've done incredible work with the great professionals in the FDA to get us to where we are in the U.S. But we're working in parallel with authorities in Europe and in Japan to make sure that we bring this incredible platform to those markets.

And as you hope, if you've seen one thing from us over the last couple of years, we've promised milestones. We delivered the milestones. and we will continue doing so because we understand this is an incredible platform that we need to bring to patients across the world.

Great. And thank you, Morten. We did have a couple of online pre-submitted questions, which I'll share for the team. Neda, I think this one is probably best suited for you. The question is, will the level of automation capability allow OTTAVA to be operated remotely or even autonomously in the future?

Thank you. Thank you so much, and thank you for the question. What I'm incredibly excited about with OTTAVA is that we're bringing automation from day 1, but we've also built a foundation for continuous innovation. And so with the technologies that we have built into the system, including the intelligent arms, the high spatial awareness, the precision, the compute, what this gives us the opportunity to do is to really listen to the care teams, listen to the surgeon, listen to the hospitals and create that cadence of innovation that is geared to solving the challenges that are most pressing to them, including the areas that you mentioned, but really, really focusing on what matters to them. And for us, whatever kind of technology it is, whether it's digital, software, AI, automation, it is always about empowering that human clinical expert in the OR, always. So they will continue to inform where we go next.

Great. Thank you, Neda. Dr. Papandria, this one is probably best suited for you. When you were conducting the FORTE study, how did the physicians find the learning curve? Did it take them a long time to get comfortable operating on OTTAVA?

Well, I can say that in my own personal experience and in speaking with both the FORTE investigators and the multiple surgeons who come to visit us in Santa Clara that the adaptation that's required for the surgeon console is quite swift. The experience there is quite natural. And therefore, the -- in terms of the actual the actual operating that has a very shallow learning curve. There is a bit more that's involved with the table since it has a new architecture. We are doing a fantastic work through our professional education teams and ultimately through our Johnson & Johnson Institutes to provide quality training so that teams can rapidly adapt to this platform.

Great. Thank you. And thanks to everyone for joining us today and for your interest in OTTAVA. FDA authorization is an important milestone, and our focus now shifts to execution. We're excited to begin working with customers, continue building evidence and bring OTTAVA to market in a thoughtful and disciplined way. We appreciate your support and look forward to sharing our progress in the months ahead.

Thank you. This concludes today's Johnson & Johnson's OTTAVA Investor Conference Call. You may now disconnect.

Good morning and welcome to Johnson & Johnson's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded. [Operator Instructions] I will now turn the conference call over to Johnson & Johnson. You may begin.

Hello, everyone. This is Ryan Koors, Vice President of Investor Relations for Johnson & Johnson, I'm excited to be here today and to lead the Investor Relations team moving forward. Welcome to our company's review of business results for the second quarter of 2026 and our financial outlook for the full year.

First, a few logistics. As a reminder, today's presentation and associated schedules are available on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording. They are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. The description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2025 Form 10-K which is available at investor.jnj.com and on the SEC's website. 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 Duato, our Chairman and CEO, will discuss our business performance and growth drivers. I will then review the second quarter sales and P&L results. Joe Wolk, our CFO, will then close by sharing an overview of our capital allocation priorities and updated guidance for 2026. Jennifer Taubert, Executive Vice President, Worldwide Chairman, Innovative Medicine; John Reed, Executive Vice President, Innovative Medicine Research and Development; and Tim Schmid, Executive Vice President, Worldwide Chairman, Medtech, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes.

With that, I will now turn the call over to Joaquin.

Thank you, Ryan, and welcome to your new role. I'm pleased to share the top line results from our strong second quarter. We said 2026 would be a year of accelerated growth and impact for Johnson & Johnson and with our Q2 beat on the top and bottom line and raised guidance we are delivering across oncology, immunology, neuroscience, cardiovascular surgeon ambition. The strength of our business is built on our unique combination of scientific expertise, scale and disciplined execution.

We have the strongest portfolio and pipeline in our 140-year history with 28 products and platforms that each delivered more than $1 billion in annual sales. In Q2, we reported operational sales growth of 5.6%. Excluding STELARA, we grew double digits in the quarter. With sales in the quarter of more than $25 billion, we are on track to meet our 2026 target of more than $100 billion in annual revenue for the first time in our company's 140-year history. We are pleased with the progress of our new launches including ICOTYDE, INLEXZO and RYBREVANT instilling confidence that momentum will accelerate into 2027 and beyond with line of sight to double-digit growth by the end of the decade. ICOTYDE, in particular, has significant early launch momentum with uptake accelerating and performance outpacing competitors at comparable points in the launches.

Since launch, more than 10,000 patients have initiated therapy on ICOTYDE, underscoring the unmet need for patients seeking first-line systemic treatment with a unique combination of efficacy, safety and the simplicity of our once-daily pill. In innovative medicine, we delivered operational sales growth of 6.8% in the quarter, with 8 brands growing double digits. In oncology, our commitment to transform patient outcomes has never been stronger. We are on track to be the #1 oncology company by 2030, with sales projected to exceed $50 billion. Leading the way in Q2 is DARZALEX, the foundational treatment for multiple myeloma, which continues to be our largest product. Once again, DARZALEX delivered sales of more than $4 billion, growing close to 18%.

When we talk about the depth of our portfolio, nowhere is that more evident than in multiple myeloma. We have treatments in every line of therapy with 80% of patients receiving one or more of our medicines during the treatment journey. CARVYKTI, TECVAYLI and TALVEY continue to deliver high double-digit growth. And we are not standing still with the new data this quarter showing the combination of TALVEY and DARZALEX delivered deep and durable responses with more than 80% of patients progression-free at 2 years, and overall survival up to 89%.

In solid tumors, we continue to see strong performance from ERLEADA and RYBREVANT, and we shared important new data for both at ASCO that could change clinical practice. For ERLEADA, we opened the ASCO plenary with our Phase III PROTEUS study showing that treatment before and after surgery significantly reduces the risk of metastasis or death in high-risk localized prostate cancer. And with RYBREVANT, we demonstrated durable responses in head and neck cancer, an area with limited options and have submitted a filing to the FDA to build on existing lung cancer indications. While we are not yet reporting quarterly sales for INLEXZO in bladder cancer we are encouraged by the early momentum during the second quarter, nearly 1 in 3 eligible patients started on an INLEXZO regimen. And new patient insertions grew approximately 75% versus prior quarter. And building on our recent acquisition of Halda Therapeutics, we also announced plans to acquire FireFly Bio, adding another antibody platform that strengthens our leadership in next-generation oncology innovation. We expect the transaction to close during the third quarter.

In immunology, we have built one of the deepest and most differentiated portfolios in the industry. TREMFYA remains the fastest-growing advanced therapy in both Crohn's disease and ulcerative colitis, delivering exceptional overall sales growth of 71% in the quarter. With the dual powerhouse of TREMFYA and ICOTYDE in psoriasis, we now have a complementary portfolio of both first-line biologic and first-line systemic treatments. We continue to see strong uptake of IMAAVY in generalized myasthenia gravis and recently received FDA priority review status in warm autoimmune hemolytic anemia.

In neuroscience, we are developing treatments to transform care for complex brain and nervous system disorders. SPRAVATO and CAPLYTA both performed strongly in the quarter. CAPLYTA new patient starts were up 122% versus prior year, significantly outpacing the market leader and with FDA approval for the prevention of relapse in schizophrenia, we have continued momentum.

Now let's turn to MedTech, where we delivered Q2 operational sales growth of 3.6%. In cardiovascular, we are the global leaders in electrophysiology, circulatory restoration and hard recovery. VARIPULSE, our post-field ablation platform for at fibrillation continues to build momentum with more than 85,000 Afib patients now treated worldwide. In Q2, our position was further strengthened with the debut of CARTO Sound Sonata bringing new AI-powered imaging and mapping capabilities to electrophysiology.

We also received FDA authorization for our dual energy THERMALCOOL SMARTTOUCH SF platform which intakes pulse field and radio frequency energy in a single system to give physicians greater flexibility in tailoring ablation treatments for patients. In circulatory restoration, the Q2 global launch of Shockwave C2 AERO expanded our ability to treat more complex coronary disease and broadens the reach of our intravascular lithotripsy platform. And in a recovery, while Abiomed growth slowed in Q2 as a result of increased decision selectivity weighing on procedural volumes, we are working to strengthen the confidence in our extensive clinical evidence and real-world experience.

In surgery, we are unlocking a new era powered by robotics and digital innovation. We are progressing towards potential FDA authorization of a the world's first stable integrated robotic surgical system. This is one of the most significant MedTech innovation we will bring to market this decade. OTTAVA's unique architecture automated features and next-generation robotic instruments help address surgeons unmet needs, while integration with our polyphonic open digital ecosystem provides data-driven insights and analytics to better support surgical teams.

This quarter, we also received CE Mark approval for the Ethicon 4000 Stapler the latest advancement in our line of surgical technologies. In vision, we have a bold ambition to make vision possible for more than 40 million people each year. In Q2, we announced the expanded U.S. availability of TECNIS PureSee as we accelerate the rollout of this extended depth of focus intraocular lens. Our ACUVUE portfolio delivered strong quarterly growth across all regions. And as a part of our $55 billion U.S. commitment we recently announced an investment of more than $1 billion to scale our U.S. vision manufacturing packaging and distribution capabilities as we expand capacity to meet growing demand for these products.

Our progress in Q2 reflects what makes Johnson & Johnson unique, a company innovating across the full spectrum of health care delivering strong performance today while building a pipeline that will transform care for patients tomorrow. As we look ahead, our confidence is rooted in the breadth of our innovation from transformational medicines to next-generation medical technologies. That combination of science, scale and disciplined execution is what uniquely positions Johnson & Johnson to lead the next wave of health care innovation.

I will now turn the call back over to Ryan.

Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q2 2026 sales results. Worldwide sales were $25.3 billion for the quarter. Sales increased 5.6% despite an approximate 460 basis point headwind from STELARA. Excluding STELARA, Johnson & Johnson grew double digits for the quarter. Growth in the U.S. was 7.3% and 3.4% outside of the U.S. Acquisitions and divestitures had a net negative impact on worldwide growth of 10 basis points.

Now turning to earnings. For the quarter, net earnings were $5.5 billion and diluted earnings per share were $2.27 versus $2.29 a year ago. Adjusted net earnings for the quarter were $7.1 billion, adjusted diluted earnings per share were $2.90, representing an increase of 5.7% and 4.7%, respectively, compared to the second quarter of 2025.

I will now comment on business sales results in the quarter. focusing on the 6 key areas where meaningful innovation and strong commercial execution are driving our performance and fueling long-term growth. Beginning with innovative medicine, where our financial results reflect the depth of our expertise and innovation in areas of high unmet need across oncology, immunology and neuroscience. Worldwide sales of $16.4 billion increased 6.8% despite an approximate 760 basis point headwind from STELARA, which underscores the continued strength of our key brands and new launches. Growth in the U.S. was 8.9% and 3.6% outside of the U.S. divestitures had a negative impact of 10 basis points on worldwide growth.

In oncology, starting with multiple myeloma. DARZALEX growth was 17.6%, primarily driven by strong share gains of 5 points across all lines of therapy with nearly 11 points in the frontline setting as well as continued market growth. CARVYKTI achieved growth of 47.7% driven by share gains and continued site expansion. TECVAYLI growth was 56.1% with worldwide sequential growth of 29.2% and an impressive U.S. sequential growth of 46.2% driven by launch uptake and share gains across earlier lines of therapy following last quarter's approval in the U.S. for TECVAYLI plus DARZALEX FASPRO and from expansion in the community setting. TALVEY growth was 62.6%, driven by share gains due to increased depth of prescribing in the community setting. In lung cancer, RYBREVANT plus LAZCLUZE delivered growth of 61.6%, driven by continued launch uptake in all regions, share gains in the first and second lines with rapid uptake in RYBREVANT FASPRO.

In prostate cancer, ERLEADA delivered growth of 7.6%, with continued share gains and market growth, partially offset by unfavorable patient mix and inventory dynamics. Within immunology, TREMFYA delivered impressive growth of 71% as the IBD launch is driving significant momentum and we continue to see share gains across all indications as well as continued market growth. STELARA declined 55.7%, driven by share loss due to biosimilar competition, increasing adoption of novel classes and unfavorable patient mix. Growth in other immunology is driven by U.S. new product launches, IMAAVY and ICOTYDE.

In neuroscience, SPRAVATO grew 40%, driven by continued strong demand from physicians and patients and strong sequential growth of 24.8%. CAPLYTA showed significant growth of 70.9%, driven by strong continued launch momentum in adjunctive major depressive disorder.

Now moving to MedTech, where we delivered growth across each of our key focus areas, cardiovascular surgery and vision. Worldwide sales of $8.9 billion increased 3.6% with growth of 3.9% in the U.S. and 3.2% outside the U.S. Acquisitions and divestitures had a net negative impact of 10 basis points on worldwide growth. Overall, cardiovascular grew 3.1%, which is lower than our recent trend primarily due to headwinds in electrophysiology and Abiomed.

In electrophysiology, growth of 3.1% was driven by procedure growth, commercial execution, and new product performance, partially offset by competitive PFA pressures. There was also a negative impact from China inventory, which we estimate to be 400 basis points. Abiomed saw a decline of 2% due to pressures on U.S. procedures driven by usage patterns. The downturn came as physicians evaluated the results of a recent external clinical trial, which increased selectivity within the quarter, particularly in the U.S. The decline was partially offset by continued OUS growth, including sustained adoption of Impella 5.5. Shockwave grew double digits at 14.7%, driven by continued adoption of coronary and peripheral products as well as new product launches.

Surgery grew 2.3%, including a negative impact of approximately 40 basis points from divestitures. Growth was driven by strength of the portfolio and commercial execution in biosurgery and enclosure, partially offset by VBP in China and surgery transformation across the portfolio as well as competitive pressures in energy and endocutters. Envision growth was 5.6%, driven by premium innovation, strong execution and global reach. Contact lenses and other products had a strong quarter with 6% growth, driven by strong performance in the ACUVUE OASYS 1-Day family of products, further solidifying our leadership position. Surgical vision grew 4.7%, driven by new product innovations robust demand for premium IOLs and strong commercial execution, partially offset by competitive pressures in the U.S. Orthopaedics growth for the quarter was 4.2%, primarily driven by new product launches such as Volt and Trauma and strong commercial execution across the portfolio.

Now turning to our consolidated statement of earnings for the second quarter of 2026. The I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of goods sold leveraged by 30 basis points, driven by favorable operational drivers in currency, partially offset by unfavorable product mix in the Innovative Medicine business as well as the impact of tariffs in the MedTech business. Selling, marketing and administrative expenses deleveraged by 60 basis points, driven by increased investments in our new product launches. Research and development leveraged by 40 basis points, primarily driven by expense phasing in the innovative medicine business, partially offset by increased investment in med tech. Interest income and expense was a net expense of $62 million as compared to $48 million of expense in the second quarter of 2025. Other income and expense was a net expense of $331 million as compared to $107 million of expense in the second quarter of 2025 with the change primarily driven by higher litigation expense, restructuring related asset impairments and orthopedic separation-related costs partially offset by higher gains on securities.

For taxes, on a GAAP basis, the effective rate in the second quarter of 2026 was 18% compared to 14.7% in the second quarter of 2025. More information can be found in our upcoming 10-Q for changes in taxes. Lastly, I'll direct your attention to the box section of the slide where we also have provided our income before tax net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items.

Now let's look at adjusted income before tax by cement for the quarter. Innovative Medicine margin declined from 42.7% to 42.5%, primarily driven by unfavorable mix and heavier investments in new product launches, partially offset by expense phasing in research and development. MedTech margin declined from 22.2% to 22%, primarily driven by commercial investments, increased research and development and the increased impact of tariffs, partially offset by favorable operational drivers in currency and cost of products sold. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 34.5% to 34.2%.

This concludes the sales and earnings portion of the call, and I will now turn the call over to Joe.

Thank you, Ryan, and congratulations on your first earnings call. Your experience across all parts of Johnson & Johnson's business will be a real asset to our company as well as the investment community. We're glad you're in the role. .

Hello, everyone, and thank you for joining us today. As Joaquin highlighted earlier, we delivered a solid quarter, supported by the depth of our in-market portfolio and strong execution across our new product launches with particularly good growth in innovative medicine. In MedTech, results were not to our standards in cardiovascular, primarily heart recovery However, we remain confident in our long-term projections for the med tech business. A quarter like this, I believe, underscores the strength of Johnson & Johnson. Even with a notable headwind, we still delivered performance that exceeded your expectations and enabled us to confidently raise our full year 2026 financial outlook. We are not dependent on 1 or 2 products. We have a broad durable portfolio that has 28 platforms, each generating more than $1 billion in annual revenue that we are intent on adding to in the coming years. It is that foundation that gives us clear line of sight to double-digit growth by the end of the decade.

Turning to results with our cash position. We ended the second quarter with approximately $21 billion of cash and marketable securities and approximately $49 billion of debt for a net debt position of approximately $28 billion. You may recall in Q1 that free cash flow is light, but as expected, we had significant improvement in the second quarter year-to-date totaling approximately $8.7 billion and are on track for our full year free cash flow outlook approaching $21 billion. Our capital allocation priorities remain unchanged. We continue to prioritize investments with a focus on supporting our commercial launches and advancing future innovation. As stated previously, acquisitions are an enabler of growth, but they are not a requirement to deliver on our near- and long-term objectives.

Our financial strength allows us to continue investing in R&D while pursuing opportunities where our scientific and commercial capabilities can accelerate innovation and create differentiated value. A good example of that is the recently announced agreement to acquire Firefly Bio. The planned acquisition expected to close in the third quarter of 2026, will add a proprietary platform designed to target KRAS driven solid tumors, which are typically more difficult to treat and further diversifies our oncology pipeline. We also remain committed to returning capital directly to shareholders primarily through our dividend.

Turning to full year guidance for 2026. As always, our outlook reflects what we know today regarding foreign exchange rates, tariffs, the broader macroeconomic environment and other external factors. Driven by second quarter performance and uptake of new product launches we are increasing operational sales growth by $400 million, now expecting operational sales growth for the full year to be in the range of 6.5% to 7.1%, with a midpoint of $100.6 billion. As a reminder, our financial calendar in 2026 includes a 53rd week, which provides a benefit of approximately 100 basis points in 2026. We do not speculate on future currency movements. Last quarter, we utilized a euro spot rate to the U.S. dollar of $1.17. As of last week, the euro spot rate to the U.S. dollar was $1.14. Based on all major currency movements, we estimate a negative total foreign currency impact of $100 million versus prior guidance. As a result, we now expect reported sales growth of 7.0% to 7.6%, with a midpoint of $101.1 billion or 7.3%. As we look at the remainder of the year, based on year-to-date performance and updated guidance, we anticipate operational sales growth to improve in the second half of the year. As a reminder, fourth quarter growth should be higher due to the benefit from the 53rd week.

Turning to other notable items on the P&L. At the beginning of the year, we guided to more than a 50 basis point improvement in adjusted pretax operating margin. We now expect approximately a 75 basis point improvement supported by continuing operating efficiencies and anticipated reduction and recoupment of certain tariff rated costs based on the latest rulings. This pretax operating margin improvement also considers the expected cost from the 53rd week of operations and the previously announced agreement with the U.S. government to improve access to medicines and lower costs to the U.S. patients. For net interest expense, we now project $250 million to $300 million, slightly lower than previous guidance. Our effective tax rate is now expected to be lower in a range of 17.0% to 18.0% for the full year based on year-to-date results.

Turning to earnings per share. We are pleased to increase our adjusted operational earnings per share range to $11.50 to $11.65, which equates to an increase of $0.18 at the midpoint. This represents a year-on-year adjusted operational EPS growth of 7.3%. Reported earnings per share is projected to be $11.60 to $11.75 or $11.68 at the midpoint, which represents an 8.2% increase over the prior year. The updated earnings per share guidance range includes a $0.05 reduction of favorable currency when compared to prior guidance. Our current outlook does not include the impact of any pending acquisitions such as Firefly Bio. We have several meaningful pipeline catalysts in the second half of the year. We anticipate FDA regulatory approval for main as the first-ever treatment for patients with warm autoimmune hemolytic anemia, a rare and serious auto antibody disease.

We also have important data readouts across our innovative medicine pipeline, including Tech Valley in combination with TECVAYLI for patients with relapsed/refractory multiple myeloma who have received 1 to 4 prior lines of therapy. Pasritamig, a first-in-class bispecific antibody in patients with advanced prostate cancer who have progressed after multiple lines of therapy and J&J-6143, an investigational first-in-class once-daily oral therapy for metastatic castration-resistant prostate cancer. This will be the first clinical readout from an ongoing study from our recent Halda acquisition. We are also expecting data readouts for Eleo in high-risk non-muscle invasive bladder cancer ice in psoriatic arthritis and CAPLYTA in bipolar mania.

Turning to MedTech. There are several important catalysts that we expect to generate momentum. In cardiovascular, we expect launches for the dual energy THERMOCOOL SMARTTOUCH SF platform as well as the Shockwave C2 AERO and Aerofly-IVL catheters. In electrophysiology, we expect continued adoption of Carto Sound Sonata cardiomapping in the U.S. and VARIPULSE Pro in EMEA with anticipated approval of VARIPULSE Pro in the U.S. later this year. In surgery, we anticipate FDA approval for the OTTAVA robotic surgical system and the EMEA launch of ETHICON 4000 and envision we continue to expand availability of TECNIS PureSee intraocular lens for cataract and presbyopia while driving adoption of ACUVUE OASYS Max lenses.

Finally, the Orthopedics business under Namal Nawana's leadership had another quarter of improvement. We continue to evaluate all separation options that create shareholder value and set the DePuy Synthes business up for success long term. We are pleased with the progress made are on track for a mid-2027 separation and look forward to sharing updates later this year. So to wrap up before we take your questions, our first half performance illustrates the strength and resilience of our portfolio. The momentum we are building behind our new products and the steady progress we are making across our pipeline.

Strategic focus, scale and financial flexibility to invest in opportunities we believe will create the greatest value for patients should translate into meaningful value for shareholders. We look forward to sharing more on strategy, growth catalysts and a longer-term outlook at our Enterprise business review on December 8. To our colleagues around the world, thank you. Your dedication and disciplined execution are what make our performance possible, and you continue to deliver meaningful innovation to more patients, improve outcomes and raise the standard of care.

With that, we are pleased to take your questions. Kevin, can you please open the call for Q&A?

[Operator Instructions] Our first question is coming from Chris Schott from JPMorgan.

Great. And congrats on all the progress. Maybe just, Joe, if you could dive a little bit more into the $400 million increase in operational sales guidance. I was just interested for a little bit more color of the balance of pharma versus the med tech components to this. I guess just bigger picture, is it fair to think about pharma moving higher here, maybe partially offset by a bit lower med tech growth assumptions? Or just any directional color there would be helpful.

Yes, thank you for the question. I would say that's probably a fair characterization. As you know, we always had a little bit better revenue growth projected in the second half of the year, irrespective of the extra week of sales that will occur in the fourth quarter when you think about products that are really in their infancy with respect to ICOTYDE, INLEXCO and just the emergence of TREMFYA continuing to do well with the IBD indications that were received over the last 18 months. It was always that projection. .

I think really maybe to the heart of your question is we do expect MedTech to grow better in the second half than the first half as well. We have tempered expectations around the Abiomed business. with respect to that. So we see that recovery happening, but probably as we leave this year into next year. So not declines, but more modest growth until our PROTECT 4 data comes out, which I'm sure Tim will have an answer to in a future question to expand upon. Hopefully, that helps, Chris.

Our next question today is coming from Massad Haider from Goldman Sachs.

Maybe for Jennifer, John on ICOTYDE, just the launch seems to be progressing well. You noted 10,000 patients have now initiated therapy. Just wondering if you can provide any update on prescriber accounts relative to the last update of 4,500 prescribers that you called out in June. What can you tell us about sampling and free drug that you're providing and where you are with formulary negotiations? And when can we expect to see you break out sales? And then maybe just a second part on that. How are you positioning Tremfya and ICOTYDE together to the dermatologist community and psoriasis? Are there any synergies or advantages that you're seeing emerge from having both options?

Great. Well, thanks, [indiscernible]. This is Jennifer, and good morning, everybody. And I really want to start with a big thank you to all of our innovative medicine colleagues around the world for an outstanding quarter of delivering for patients. So over $16 billion in sales first $1 billion quarter, 6.8% operational growth, and it's also worth noting STELARA was only 4% of our innovative medicine business in the second quarter. And if you exclude that, the 96% of our business, 96% actually grew over 14%. And this is really based on the strong growth across our main key brands as well as our must-win launches, and the team has really done an outstanding job around the world on that. So glad to have the opportunity to talk about ICOTYDE because we are really thrilled the launch and how it's progressing.

I think as we noted last time, we feel real good about the differentiated label that we got. ICOTYDE is the first and only targeted oral peptide that precisely block IL-23 inhibitor. If we talk about the U.S. launch and get into some details that you asked, it's really off to a strong start. As a reminder, ready day 1. And in fact, the first patient prescribed received ICOTYDE on that launch day and early physician and patient enthusiasm has been really great.

If we get into numbers on it, to date, over 18,000 prescriptions have been written for a total of now 11,000 patients. So that's an update from the 10 just shortly. There are 6,000 unique prescribers. And if you take a look at those, over 50% are actually advanced practice providers, about 40% are dermatologists and the rest are primary care physicians. And so that tells us that there's really good confidence in the product in both the efficacy and safety profile as well as the simplicity of the simple once daily pill.

We're already seeing a number of writers who are repeat. We're seeing patients getting repeat prescriptions. Can we take a look at the payer coverage? Within 90 days, we already have over 50% of commercial coverage. And we think that's great. That's actually a little bit ahead of our projections. So team is making really great progress on the payer average there. And so in total, we think the launch is going very well. You asked about ICOTYDE and TREMFYA. And I think really, really important to note, we've got this great uptick in ICOTYDE. This has not slowed down in psoriatic disease at all. So TREMFYA in psoriatic disease, psoriasis and PSA, that growth and market share gains has actually continued well above the market. And notable in the second quarter that we got approval for inhibition of structural damage for TREMFYA in PSA.

And then in terms of really copositioning, ICOTYDE is the first choice systemic treatment. All of those patients who've been sickling on topicals who really need to have advanced, we think ICOTYDE sits right in that sweet spot as that first choice systemic. For TREMFYA, we think it's the first choice biologic, particularly for patients that have potential for or have any psoriatic arthritis involvement and many, many patients, a significant percentage with psoriasis actually progress the psoriatic arthritis as well. So we think really distinct and unique positions for both and well reflected in the results that we saw in the quarter with both products doing really well. Additionally, we are investing to win on ICOTYDE. This is one of our must-win launches in addition to what you've seen, we actually also started our direct-to-consumer advertising yesterday. Those of you who are watching World Cup or baseball had a chance to see that. And so we think this is even going to further bring more patients in to talk to their providers about new options for psoriasis.

Maybe one quick addition, John Reed here. We do expect to have pivotal data later this year. for ICOTYDE in psoriatic arthritis. And as Jennifer pointed out, there's overlap in the psoriasis and psoriatic arthritis populations psoriasis, the skin manifestations are often a comorbidity for patients with psoriatic arthritis. And our Phase III studies in ulcerative colitis and Crohn's are in full steam now. So we're moving ICOTYDE forward as a possible frontline therapy there as well.

Our next question is coming from Larry BIegelsen from Wells Fargo.

Tim, I'm sure you know there continue to be concerns about procedure growth in the U.S. What did you see in Q2? And how are you thinking about procedure growth the rest of the year? And regarding J&J, I heard Joe say the second half J&J MedTech growth would be better than the first half, which was 4.2%, I believe. Do you still expect MedTech to grow faster in '26, excluding the extra week?

Larry, thank you so much for the question, and let me before I get into procedure volume. And certainly, given the news that we've heard from hospital providers this week. I know it's a hot topic, but I'd like to put our second quarter performance in context for you and for others. When we step back and we look across the full portfolio, the underlying picture remains solid. Procedure volumes continue to be stable, and we're not seeing evidence of a broad-based slowdown in demand. And to be clear, Larry, 3 of our 4 businesses, Surgery, Vision and Orthopedics all accelerated in the quarter and performed above expectations. Surgery growth was driven by continued strong performance in we closure and almost double-digit growth in BioSurgery.

Vision you would have noticed delivered meaningful acceleration in contact lens and continued momentum in IOLs. And in orthopedics, as you've heard already from Joe, we continue to see that business go from strength to strength electing stronger execution and the impact of multiple new products. I would like to turn quickly to CV. And let me first acknowledge that our Q2 growth is not where you wanted it. And frankly, it's the way we wanted it. That said, we know what happened and we know exactly what we're doing about it. In full transparency, CV growth was more muted this quarter in both EP and heart recovery partially offset by continued double-digit growth in Shockwave.

In EP, as you already heard, we continue to see strong underlying demand. However, we did have an inventory dynamic in China, which impacted our growth by about 400 basis points that would have taken global growth up to north of 7%. And then heart recovery due to a recent neutral clinical trial in the U.K., Impella usage has slowed. We see this as a near-term dynamic, and we're actively engaging physicians and their teams to reinforce appropriate patient selection, leveraging significant depth of our clinical evidence base. So again, to put it all in context, 3 out of our 4 businesses performed well, and we're confidently addressing the fourth and nothing we see changes our conviction in the long-term growth thesis for both our CV business as well as J&J MedTech at large.

To your question about procedure volumes. From our perspective, when we look across the breadth of our portfolio, we see that volumes are generally in line with market trends, and we're not currently seeing any evidence of a broad-based slowdown in activity. Demand remains consistent what we would expect given the fundamentals of these markets, which, as you know, continue to be driven by themes such as aging populations increasing disease [indiscernible] and ongoing innovation that is expanding our access more patients. We are acutely aware of the recent data that has been provided by a number of large U.S. hospital operators highlighting pressure on certain procedure volumes, particularly in more elective areas of care.

And while we're monitoring these trends very closely, they are not reflected in what we're seeing across our portfolio today. As you know, our business is diversified across a broad range of categories, many of which are less dependent on discretionary elective procedures and our perspective, overall procedure trends remain consistent in the quarter with our expectations I will also point to, there has been a bunch of chatter about the potential impact of the ACA subsidy removals based on what we're seeing we're not -- we haven't observed any meaningful impact on procedure volumes across our portfolio related to the ACA. And while we expect that the expiration of -- the Affordable Care Act subsidies may create some affordability pressures for a small cohort of patients, we do not expect this to translate into a material impact on demand for med tech and procedures. And so to be clear, we would not attribute our med tech performance in Q2 to a systemic slowdown in procedures. As already mentioned, we do expect an acceleration of our performance in the second half driven by continued performance of our businesses in Vision in orthopedics and in surgery and certainly improvement on the back of our efforts to drive greater performance within cardiovascular.

Our next question today is coming from Terence Flynn from Morgan Stanley.

Great. Congrats on the quarter. I was just wondering, Jennifer, if you could expand on what you're seeing with TECVAYLI. Obviously, important new data that's been added to the label recently. So just wondering how that's impacting the growth dynamics. And then maybe you could expand on what you're seeing in terms of academic versus community use.

We had a great quarter for TECVAYLI with sales of $260 million, versus prior year. And really, that was driven by significant launch uptake and share gains across the earlier lines of therapy based on the approval that we got in the U.S. for TECVAYLI plus DARZALEX and also continued expansion in setting. So we're real excited about the approval of the combination regimen there. It's the first and only steroid-free, readily available immediate immunotherapy option that really has that best-in-class efficacy and the potential for cure for patients in that second-line setting.

As a reminder on that data because we think it's truly extraordinary. It's 3 years, 83% of patients remained alive and progression free. And so this is really resonating with physicians. In terms of U.S. uptake, we're seeing really strong early U.S. demand following the rapid approval that we have for TECVAYLI plus DARZALEX. And so if you take a look quarter-to-quarter like quarter to second quarter, we saw a 29% increase in sequential growth there. And that's in terms of patients that were initiated in tech, and this is really due to new account adoption and increasing depth of prescribing.

Furthermore, the vast majority of patients now with TECDERA are starting in the second to third line setting. And we continue to see increases in community site really set up an expansion in the U.S., they had a 25% quarter-over-quarter increase in community sites expanding there. And so we're feeling really good about what we're seeing in terms of TECVAYLI and TECVAYLI growth along with DARZALEX in that second and third line setting.

Next question today is coming from Joanne Wuensch from Citibank.

You have a fairly robust robotics portfolio that should be rolling out over the next couple of quarters and you did mention SRS. Could you please sort of give us an update on the lay of the land and what we might expect next week?

Joanne, thank you for the question and certainly your interest in robotics program. As you know, we have been worldwide leaders in open and laparoscopic surgery. And certainly, we are excited and very much committed to being a major player in the area of surgical robotics. I think you know that we are eagerly awaiting approval of OTTAVA. We submitted late last year. We are actively working on our second clinical trial, specifically focused on inguinal hernia, and we will provide much more detail around our exciting launch plans once approvals have been secured. That said, we are committed to the launch of 2, assuming approvals come our way, which we're very confident about. We are committed to 2 large robotic launches this year, both the launch of a which we believe is truly differentiated against the existing incumbent and of course, the launch of Monarch for urology, which will be a first-of-kind opportunity in that particular area. And so we will provide more information about those 2 launches at some more information next week.

We'll also provide some update certainly on the FORTE trial our clinical trial, which was actually presented at the ASMBS conference about 1.5 months ago, and I actually had the opportunity to attend a meeting out in California with about 70 world -- actually would renowned robotic surgeons and got to see firsthand our surgeons not only listen to the discretion about the trial, but also to actually drive the robot and frankly, just seeing the looks on their faces, the feedback we received gives me even more confidence that we have a device that will absolutely compete against the current incumbent and so more to come on that.

And to be clear, Joanne, this is Joaquin. We see our robotics platform both OTTAVA and Monarch being a meaningful contributor to MedTech growth by the end of the decade.

Our next question today is coming from Vamil Divan from Guggenheim Securities.

Great. Maybe following up on similar to the question on ICOTYDE. I was hoping to get a little more color on [indiscernible] and the progress you're making there? I know you said sort of 1 in 3 eligible patients now receiving it in inflation up. I think said 75%. Maybe you can give a little more color on sort of where you're seeing utilization to differentiate between the communities setting academics and what sorts of patients are getting the product in the we can share anything around patient numbers or prescriber numbers? And then the other part was just around you gave the Sunrise 5 data coming out, you said a little later this year, maybe you can just sort of set an expectation on what you're hoping to see from that data.

Great. Thanks for the question on INLEXCO. As a reminder, bladder cancer is the sixth most common type of cancer. There's over 600,000 new patients that are diagnosed globally each year and another 400,000 that are recurrent, so for a total of 1 million patients. And so this really helps us have great confidence this is an extraordinary opportunity for us with INLEXZO, and then ultimately with our erdafitinib device as well. So the launch of INLEXZO is going really well in the U.S. We have got the J code now. And so I think that's probably what you're interested in hearing how it's going post J code. In the U.S., INLEXZO is outperforming all of the recent competitive launches. And as you noted, 1 in 3 eligible patients are now starting on annex regimen. And this is an uptick versus first quarter where it was 1 in 4 last quarter. It's now 1 in 3, and it's leading all of the novel agents in terms of new patient share.

In terms of new patients and new patient insertions, those grew 75% quarter-over-quarter, and this was post the permanent J-code, so giving a lot of confidence to providers in terms of that reimbursement. Importantly, INLEXZO included in the NCCN guidelines, category 2A designation and they've been updated to expand the opportunity to include the capillary population, which represents about 80% of the BCG unresponsive patients. While we don't report sales on this yet, please know that we confidently beat consensus for the quarter, and we more than doubled sales in second quarter versus first quarter. So we believe that we're really on a very, very good track.

With this, you mentioned, I'll turn it to John in a second. We do have our Sunrise program right now and INLEXZO is based on the SUNRISE 1 population and BCG unresponsive patients that's about 3,000 patients in the U.S. Sunrise 5 is the BCG experienced patients, largely iris papillary, that's about 10,000 to 15,000 patients. And then the big opportunity is the Sunrise 3 population, that's the BCG naive. That's about 40,000 to 50,000 patients in the U.S. So that's our program, and that's before we even get to the erdafitinib piece. So John?

Yes. And I think Jennifer covered the Sunrise program well recognized that the approval in this so-called or carcinoma in situ population that's only about 5% of the eligible population. So we really see a lot of growth potential ahead as we round out to the papillary cancers and then move from the second line BCG experienced into the front line with our ambitious head-to-head program. I would just remind again that INLEXZO delivered the highest complete response rates that had ever been seen in this population, the second line B nonresponsive population with high-risk muscle, non-muscle invasive bladder cancer. So really a lot of excitement around it. And right on the heels of that is coming our erdafitinib targeted therapy in a novel device that offers not 3 weeks like in like with 3 months of sustained delivery of the medicine that's being positioned for the intermediate risk non-muscle invasive bladder cancer, which is a very large population and is targeted at the FGF receptor mutant cancers, which is the most common genetic lesion in bladder cancer. So really excited about where the portfolio is going in the near term. And then beyond that, we expect to have other payloads and other devices that we'll continue to elevate the standard care for patients struggling with bladder cancer to keep their bladder. So very excited for that 1 million patients a year that are diagnosed with non-muscle invasive bladder cancer.

Our next question today is coming from Alex Hammond from Wolfe Research.

A few on milvexian. So can you remind us of your confidence level in AFib. I guess given the size and breadth of the Lubraxae program, it seems like there's potentially a wide set of outcomes between a clean win and miss. And is the trial still on track for later this year? I do not see it on the slide deck.

Yes. Okay. Sorry, I misunderstood part of the question, but on milvexian, this is -- these are event-driven studies. They're fully recruited. So we really can't give you very much insight into when they might read out. It could be towards the end of this year, beginning of next year, but because they're event-driven, we'll just have to wait for the events we remain confident that for the atrial fibrillation indication which is the largest of those opportunities that we have the right dosing schedule based on the careful work done in Phase II based on the biomarker we're following the TPP that gives us confidence that we've achieved a healthy level of anticoagulation. Our data monitoring committee continues to look at the data, they keep saying, go full steam ahead. So we're cautiously optimistic but are waiting for the endpoints to the events to occur so that we can read out the full study results.

Alex, we're really excited about the milvexian opportunity. We think there is significant opportunity in the market for a product that's got the better bleeding profile than the current anticoagulants that are out there today. So maybe as a reminder, about 40% of Afib patients who are eligible are currently not receiving oral anticoagulants as they should or at the right level there's concerns about potential bleeding. And so we think that a product that represents the potential of the milvexian profile, what we're hoping to demonstrate really could be a game changer for patients significant opportunity in the market. So we're really excited to see the results of the study when they come. And as John noted, it's event-driven study. So we're going to have to wait and see what they are. But once we know, you guys will know too, right, the right time, you'll know.

Yes, maybe feeling quickly on that. It's estimated that there are 8 million people in this country alone who are taking an oral anticoagulant, but it's thought that there may be as many as 18 who should be taking -- 18 million who should be taking one but because of the bleeding risk of the current agents are enabled. So we're really excited about the possibility to offer this, both the efficacy, along with the safety profile of milvexian promises.

In reaction to the data presented at ACC, I'm still just a little unclear as to what you're doing to reverse the 2Q softness outside of just waiting for PROTECT 4. And I think prior view was this was a mid-teens grower. What is the new growth expectation for the Abiomed business?

Jason, thank you. And you're right, we believe that the slowdown is in relation to specifically a neutral study published out of the U.K. focused on the area of high-risk PCI. And I think it's important, firstly, really reinforce that the impact is behavioral. It's really driven by physician caution as they really interpret this new data rather than anything structural? And there's no change in the underlying need, access or reimbursement. These are the sickest patients, many of whom have very few choices.

And so we clearly see this as a near-term dynamic. We've seen this before. And we are actively engaging with physicians and their teams to really reinforce appropriate patient selection, leveraging both our capabilities, but most importantly, the depth of our clinical evidence base. And I think it's important to put this in context and recognize that area of heart pumps is a category that Abiomed pioneered. And we are the only player today, and it remains a relatively evolving area of medicine. And with an emerging field, you know that scientific perspectives will continue to evolve and why we remain committed to really investing in robust clinical research, including the study you just referenced, which is PROTECT 4, which is a highly powered study, almost 1,300 patients focused specifically on high-risk PCI, which we expect to read out in 2027. I do think it's also worth mentioning that Impella has supported more than 400,000 patients and appears in almost 2,600 peer review publications and also, I think specific to the study in the U.K., which covered only 300 patients, we have studied more than 40,000 high-risk PCI patients and that evidence base with our 2 decades of clinical experience continue to support the role of Impella in appropriately selected patients. So we remain very confident in the long-term potential role of Impella supported by the significant runway for growth, no current commercialized competitors, which is a key point, opportunities for further geographic expansion and the large and growing global burden of heart disease.

To your question around recovery, as already mentioned by Joe, we do expect this to take some time, but we absolutely expect that our performance in the back half will be stronger than the first. And we see gradual improvements in performance back to double-digit growth over the coming quarters.

Thank you, team. It's also important this into context, recovery is 1 of 28 platforms of more than $1 billion that we have within Johnson & Johnson. And while we see this situation that Tim described as temporary and fully addressable have to be clear, it does not affect in any shape or fashion our growth trajectory, as we have described. So as I said at the beginning, we see the second half of the year stronger that momentum carry into 2027, and we see -- we continue to see double-digit growth by the end of the decade.

Thank you, Jason. We have time for one last question.

Our final question today is coming from Mike Nedelcovych from TD Cowen.

My question is on TREMFYA. In GI, TREMFYA seems to have an edge over SKYRIZI yet SKYRIZI is holding its own. So my question is to what do you attribute SKYRIZI's ability to hold share?

Thanks so much for the question. I'm thrilled to have the opportunity to talk about TREMFYA. So TREMFYA sales for the quarter were $2 billion, our first $2 billion quarter and over 70% growth which we're really proud of. I mentioned before that we continue to see growth and share gains in psoriatic disease. But I've got to tell you, the major driver here is really our performance in ulcerative colitis and in Crohn's disease. And so if you take a look at new patient starts or induction share in both ulcerative colitis and Crohn's disease, we currently are the share leader in both. So for example, in ulcerative colitis, 58% share of induction share for the IL-23s, that includes the other competitive IL-23s.

For Crohn's disease, we've got over 50% share of those inductions. So again, market leadership. So physicians are really seeing the profile as differentiated for versus the other competitive set. I'll say that is even further scored by the new data that we just released our Fusion data that was presented at DDW, which is the first study in over 20 years and adults with active perianal fistulizing Crohn's. This is one of the most severe and understored forms of IBD. And TREMFYA is the only IL-23 to demonstrate efficacy in this setting, and that affects about 1/4 of patients and so really underscores very, very strong effectiveness in this agent is the only dual-acting IL-2 inhibitor. So we're seeing very, very strong physician receptivity uptake. We're seeing leadership in new patient starts and believe that we have got an awful lot of growth ahead for TREMFYA and IBD. And as a reminder, back when we had really STELARA here over 7 of STELARA sales were actually in IBD. There is absolutely no reason why TREMFYA can't do that or even more.

We're also hearing more and more about how the subcu induction that we can offer is really a great traction for the patients and for the health care providers. They don't have to get 2 different prior authorizations, for example, and our subcu presentation is a simple at-home auto-injector a pen, so very convenient for the patients to get started.

Thank you, Mike, and thanks to everyone for your questions and continued interest in our company. I will now turn the call over to Joaquin for some brief closing remarks.

Thank you for joining us. Johnson & Johnson today is a medical innovation powerhouse uniquely positioned to translate breakthrough science into consistent long-term growth. When I look at our top line growth, the momentum that we are going to carry into the second half of the year into 2027, our ambition to have double-digit growth by the end of the decade, the operating leverage that sustained top line growth is going to create. I see Johnson & Johnson when I consider those factors as one of the most compelling and transparent growth stories in health care today. You will hear more about that in our enterprise which we'll review later in the year. Thank you for your continued interest in Johnson & Johnson and enjoy the rest of your day. .

Thank you. This concludes today's Johnson & Johnson Second Quarter 2026 Earnings Conference Call. You may now disconnect.

All right. We are just about time, so we can get started with our next session. My name is Asad Haider. I'm the Co-Head of the Healthcare business unit here at Goldman Sachs and the U.S. pharma analyst. I'm very excited to be joined by Tom Cavanaugh, Group Company Chairman of North American Innovative Medicine over at J&J. Tom, thank you for being with us.

Thank you. Thanks for having me again.

Say again. So just maybe just to kick off, very exciting times for J&J. You have multiple new products sprouting across the Innovative Medicines business. Joaquin made some comments last week saying again that The Street is continuing to underappreciate a number of these new products, both on the immunology side as well as in oncology.

So before we start to unpack some of the specific products on which I have a number of questions I'm going to hit you with, maybe just make some high-level comments on what you've been most excited about.

Absolutely. Look, first and foremost, as we said last year and over the last year, STELARA was a thing of the past. We're going to grow through the loss of exclusivity of STELARA, something that many companies have not been able to do, their biggest asset and really look at that 5% to 7% compound annual growth rate over the next 5 years.

And we're well on track to really go for that upper end of that, I would say. Just looking at our Q1 results, we delivered $15.4 billion. It's our fourth quarter in a row, delivering over $15 billion. We had 7% growth. In the U.S., we had roughly 10% growth, and exclude STELARA, 17% growth operationally and in the U.S., 22%.

So we're really excited about the momentum that we have coming into 2026. It was described as last year as a catapult year, but this year, we said '26 is going to be better than '25 and '27 is going to be better than '26. And we're well on the way to do just that. I think, first and foremost, we had 10 products over double-digit growth in Q1. And some exciting product launches, which I know we'll get into.

So I'll maybe leave it to you to ask some questions, and we can go from there.

Well, let's go right into some of the exciting product launches. Starting with TREMFYA, it grew 64% in Q1 with leadership in new patient starts in IBD. We look at weekly scripts, the momentum seems to be continuing. So just give us an update on what you're seeing broadly speaking in terms of overall market dynamics and really where the share gains are coming from.

Yes, yes. So first and foremost, with TREMFYA. It's the only dual-acting IL-23. So it hits CD64 and IL-23. CD64 is the source of inflammation. Why I say it's very important. We like to say tissue is the issue. If you can penetrate that tissue and hit at that target, you're going to see differentiated results, and we are seeing that.

But if we just take a step back and we just think about IBD, we're just in the early phases of that launch. In IBD, the IL-23 class is the fastest-growing class in IBD, both in UC and CD. And I would say barely penetrated. So it's about 20% to 25% penetration.

So significant opportunity ahead of us in IBD and in psoriatic diseases, whether it be psoriasis, psoriatic arthritis, a little bit more penetration, but still the fastest-growing class. In IBD, we're the fastest-growing product in IBD. We are now the -- what we call the induction share leader in IBD with TREMFYA.

And we're just about a year into launch, full launch with both CD and UC. And I can tell you the excitement is really profound, and the team is executing across all measures. But I would say we're seeing the differentiation from our customers and from the uptake. A lot of it that we talked about in the highlight, a little bit of the molecular structure showing that results. It's the only with subcutaneous induction, both in UC and CD.

Highest endoscopic remissions in UC. And then just recently coming out of DDW, we're really excited about this new data with the FUZION trial. It's basically perianal fistulizing Crohn's disease, represents around 25% of the population. And it's a population that really is not getting treated by IL-23.

It's typically being treated by REMICADE because REMICADE is the only product 20 years ago that was demonstrated success in this population. So this is the first time product TREMFYA has shown to differentiate in this population, similar to the way REMICADE did, which we're quite familiar with. So we're really excited about that opportunity.

It really can untap there. It also leads to the differentiation why we're so excited and feel confident we're going to be over $10 billion. And the last thing I would just say is, as we think about psoriatic diseases, we'll get to it, I'm sure, with ICOTYDE, but I said tides rise, and we're seeing significant growth also now in acceleration in psoriasis and psoriatic arthritis.

And a lot of it is off the APEX data showing that TREMFYA is the only IL-23 that shows inhibit structural damage that 30% of the population in psoriasis that have underlying joint disease.

Before we get into ICOTYDE because that is my next question, maybe just -- you talked about the subcu. AbbVie is going to be on the market at some point in the next several months with the subcu version. Just how do you think sort of from a competitive dynamic perspective, things could change there?

Yes. I think we need to understand both in UC and CD, if there's any differences there with dose and efficacy and, I would say, longer-term results. But look, they're a formidable competitor. We feel very confident. We have broad access. We have significant momentum. We have a molecular differentiated product, and we're here to compete to win for patients.

Fantastic. All right. Well, let's go right to the ICOTYDE launch. This is obviously something that's very much in focus. It's probably one of your most in focused new launches. And on the mid-April earnings call, you provided some really helpful early metrics on the launch.

I think you said 1,500 patients with prescriptions have been written, over 1,000 unique prescribers shortly after the approval. So I guess any updated thoughts on how the launch is tracking? It seems like IQVIA may not be capturing all the channels right now. So any new metrics to share in terms of how things are going would be helpful.

I would say some of the new metrics we're going to have to wait for the earnings call to release those. But I will share with you some qualitative and some early insights that we have in the launch. I think it's important because I do think we are, one, incredibly excited about the launch of ICOTYDE.

You heard from the earnings call, some of the early indicators. I can tell you we have roughly 4,500 prescribers now. And the data that you quoted is our hub services. So we have a fully dedicated hub services that we're able to get this information in. And quite honestly, if the patient has commercial insurance, some sort of commercial insurance is diagnosed with it and is of age, they can get the product in 24 hours.

So they can get it through our hub services and there's samples obviously available as well. I bring this up because ease of access is very important, and that's where they're getting the trial and able to understand is this product what's right for them. And it is really the sweet spot.

ICOTYDE, and we're hearing it from our customers. I've been able to engage with many of the providers at either AAD or a conference, CCD that was done in Florida just recently. And the insights, what we're hearing, intent to prescribe and awareness in just 2 months has jumped 20 points.

So you're seeing intent to prescribe and unaided awareness similar to what you see with current market products. We're fully focused from a commercial perspective, obviously, from a sales and marketing perspective. That's without even a DTC campaign. So there's still huge opportunities ahead of us once we engage the patient and create awareness there.

The provider base is typically, what we're seeing is some of those that are treating in the earlier diseases. First-line systemic is where it's beautifully positioned, but advanced practitioner providers, some primary care. And I would say, obviously, dermatologists. And a lot of that is because, one, there's the ease of access, complete skin clearance. Safety is fundamental when they're looking to switch from, say, a topical to a systemic treatment. Placebo-like AEs. And then last but not least, that became quite exciting for many of the providers, no mandatory TB testing.

When does the DTC campaign stop?

Soon.

Okay. And what can you tell us about the patient profile? I mean, treatment naive versus existing oral TYK2s? Is there any sort of impact on the current injectable biologics? Like where are the patients coming from?

Yes. I would say roughly, I would say, 60-40. 60%, predominantly what we call systemic naive and about 25% of that sourcing probably from -- 25% sourcing from the Orals.

And I guess how should we think about ICOTYDE's opportunity in IBD in the context of rapidly involving market combinations, emerging orals, Abivax, et cetera? Like how are you thinking about that?

Yes. So we're obviously aggressively looking to accrue the trials in both UC and Crohn's disease. Coming off of our Phase II data, we feel very confident about the target, the product as well as the dose that we're going to be delivering and see truly being a unique opportunity for us, the first really targeted oral therapy that has the trifecta efficacy, safety and convenience that I do believe is going to hit an untapped marketplace right now for those that are moderate to severe that may not be receiving treatment or subtherapeutic treatment, again, similar to psoriasis is an opportunity.

And in future, there's definitely combinations. I mean we are the first ones to look at combinations in IBD with 4804. I'm sure you probably have some questions around that. But I'd say that absolutely in select populations, the ultimate goal here is remission. And that is truly what we need to do in IBD is really get to the highest levels of remission.

And most of that will be in combinations in the future. ICOTYDE is a wonderful product to be able to combine with because of everything I just said.

And I guess when you make the statement and Joaquin made the statement that this could be one of your biggest drugs ever, any high-level quantitative framing on either the math on how to get there? Or is that purely based on PsO and PsA? Does it require additional indication expansion into the IBD indications?

Yes. I think our current development plan will get us there. And a lot of it is kind of I alluded to, if you think about a population, let's take psoriasis, you have roughly 3 million to 5 million patients suffering from moderate to severe psoriasis.

75% of them are cycling through therapies or not on advanced systemic treatment, 25% are. So if you just think about the total size of the marketplace, that 25% is the ones that we're competing in today with TREMFYA and the likes. This true untapped marketplace is that first-line systemic treatment. So that just opens up a large opportunity. And you take that same mentality or approach in IBD.

In IBD, they're a little bit more aggressive. They are really trying to treat and really hit that underlying disease. But I do think the systemic treatment of an IL-23 such as ICOTYDE truly will unlock that opportunity. So sky is the limit.

And when can we expect to see the data for ICOTYDE head-to-head versus STELARA.

It should be getting the data in this year and then reading out at an upcoming congress.

Okay. Let's move to 4804. You set me up for that. So you had the results of these recently presented DUET trials. I guess they fell short in the overall treatment population, but there was a pronounced effect in the subpopulation of highly refractory patients who cycled through treatment.

So how should we be thinking about this program and the size of the opportunity in the context of -- I think Joaquin framed this as a third blockbuster in your immunology stack on top of the dual powerhouse of TREMFYA and ICOTYDE. So maybe just with that framing, talk to us about this program.

Yes, absolutely. We're very excited about 4804, really co-antibody targeted both IL-23 and TNF. And you mentioned the data, like it's really important to do this trial so that we can understand the data in the population by which it is the most effective. And this is what we found. I think if you think about it, the population, let's call it refractory IBD -- this is a patient population that roughly at this time, there's roughly 20% of the patients have seen 2 lines of therapy already, if you just take the market today.

So right there, it's close to 1 million patients of an opportunity. If you think about a truly high unmet need where they really need to have high endoscopic remissions or high response rates, that's patient population, high unmet need and then the data supports really that market opportunity.

And that allows us also as we think about the marketplace. Typically, eventually, longer term, I do believe it's going to be like oncology, use the best first and get the highest remission. But in these chronic diseases, I do think you're going to start with a product, see if that product works, they're going to cycle through it.

And if they're not getting the treatment they want, they might move on to another one and then probably go more aggressive. And that's where a lot of the KOLs are doing it. Sometimes, I would say, off-label. They're looking at combination therapies already in the clinic. I think that's where 4804 is beautifully positioned, looking at as co-antibody therapy in that line 2 plus in a heavily refractory population. I do think that value recognition will be there globally as well.

So let's unpack that a little bit first, just in terms of just the long-term coexistence of this compound with TREMFYA and ICOTYDE, where does this live?

Yes. I think if you just think kind of how I describe like the patient journey, patients diagnosed with IBD, CD or UC, they're coming in, they're probably going to get depending on what -- when they get diagnosed, it could be ICOTYDE, it could be TREMFYA. If they're not getting the results they need, they might cycle to another alternative mechanism of action. And then maybe then -- or not maybe that is beautifully positioned than where 4804 will be.

Let's, Tom, talk about nipocalimab. That's another potential new product cycle that we certainly are very excited about. You've had the launch in gMG. You had a priority review in wAIHA. You recently presented very good data in lupus, numerous readouts in 2027.

So help us frame the opportunity for this compound unfolding and from which indications you see the largest contributions.

Yes. I think ICOTYDE, as we've highlighted before, we do believe it to be molecularly different. We do have the fastest and the deepest IgG, IgA reduction. And why I bring that up is that's why I do think it's translating into many of these other diseases that we're looking at, whether it be, as you just highlighted, warm hemolytic anemia, Sjogren's disease, Lupus, gMG, and then if you look at maternal fetal, highly differentiated -- especially from a safety perspective. So if you think about gMG, we're well on the way to launch. We just received full J-code at the beginning of the year.

We're seeing definitely uptake, the fastest-growing biologic in gMG. So we're well on the way there. wAIHA is a unique opportunity. Nothing has been proven or approved in that population. It's roughly 7,000 patients in the U.S. It's a highly unique population, and we're quite excited about the priority review and the recognition from the agency on just the high unmet medical need also shows differentiation.

I do believe really some of these rheum diseases where it's going to really unlock the potential and why we do believe it's a $5 billion-plus asset. If you think about lupus, lupus, roughly 500,000 patients in the U.S., really nothing is available there. It could be the first FcRn antibody to show -- demonstrate an effect in lupus and the data

that you just saw at EULAR is pretty amazing. You take that as an opportunity. We have -- I believe we have Fast Track designation for lupus. We did look at Sjogren's disease as well, the most prevalent. And if you think about that, that's breakthrough therapy designation that we have already. So the excitement is there.

We do believe the data will play out, that just on tops a huge opportunity for us as we think about just in those diseases. Highly prevalent diseases of women of child. That's why I brought up the female or the, I would say, maternal fetal approaches that we have in HDFN and it just truly differentiates the product and the safety side of things as well as the efficacy across the other indications.

Okay. Terrific. Looking forward to seeing that program progress. I want to move to oncology. But before we do that, I just want to take a pause and see if there are any questions on the immunology side.

All right. Let's keep moving. So oncology. I guess, first, just starting with RYBREVANT, Joaquin called this out is one of the products that still remains underappreciated. You had some good data at ASCO recently. Consensus numbers still have this regimen, RYBREVANT and LAZCLUZE doing about $4.4 billion in 2030, peaking at about [$5 billion] and change. So where do you see the disconnect there?

Yes. I think a couple of things. I think, first, if we just think about lung cancer, we're still in the early phases of the launch. And in the U.S., I mean, we're literally -- we received approval for FASPRO, our subcutaneous formulation at the end of last year.

So we should receive permanent J-code July 1. So if you think through that from a reimbursement perspective, -- and as well as we've come to understand and have the data now to support and ASCO was part of that is really looking at the long-term survival that we see in Exon 20, really differentiating RYBREVANT in a population that's undertreated and really there's not much for those patients. And then in a common EGFR, we're looking at significant uptake in share growth that we're seeing already globally and then in the U.S. as well. 1 in 4 patients are seeing a RYBREVANT/LAZCLUZE in that setting.

So really now, we're anticipating the 5-year survival next year. That will be differentiated as well, we do believe to support where we're seeing it. But also the absolute necessity of using RYBREVANT. I think that is actually coming across with our provider base, especially, and I'll get to it some of these follow-on indications, really looking at changing the underlying biology of the disease.

And that is something that I think is differentiated. We can't just say use chemo or not. It's RYBREVANT should be essential for the treatment of EGFR non-small cell lung cancer. And it's in combination with LAZCLUZE in the frontline setting because you have to use your most effective and really look at change the course of the disease.

And that's when you can look at it as a RYBREVANT /LAZCLUZE combination in that frontline setting. Now I bring up just recently, we presented the data for head and neck and have submitted already and received priority review from the agency for L 2+ for head and neck cancer. I'll tell you the feedback that we have from the providers, especially, I mean, they have not seen anything like this as a single agent showing a 42% response rate, 1/3 of them being complete remission.

So I do believe -- and if you talk to some of them, they see the tumor essentially melts very quickly. So highly effective in head and neck as well as in colorectal cancer, 2 high unmet medical needs from an oncology perspective and cancer perspective. And then we have already started and are well underway to the frontline trials on both of those and are aggressively pursuing those and accruing to those. So I do believe the totality of all that combined, $5 billion plus easily.

Okay. Let's maybe talk about ERLEADA. That had another very promising plenary session at ASCO, the discussion call, the data practice changing. Congratulations on another successful trial there. So I guess what does this mean in terms of the revenue opportunity for ERLEADA? Like -- and how do you see the ramp from here? How can J&J make the most of the opportunity given the composition of [indiscernible] 2030?

Yes. So a couple of things. I think, first and foremost, we'll take the PROTEUS data that you're highlighting aside currently with ERLEADA, we're showing double-digit growth already. And some of it is based on most recent real-world data that we have, showing that ERLEADA, either combined to the other ARPI showing overall survival, irrespective of which ARPI that you're comparing to.

And I do think that is really resonating in the community and with the practitioners saying, all right, this is different, and I need to use ERLEADA. So we're seeing an uptake there in the current indications.

Then you now have PROTEUS, which was in high-risk localized disease, those are looking to intending to receive radical prostatectomy. So before and after surgery. And this is where it's shown. It was a plenary session highlighted at ASCO, the #1 abstract. And they do believe there will be practice changes. The first time in an earlier line setting, if you use ERLEADA 12 months before surgery and then 12 months after, you're showing a magnitude of effect of a 20% risk reduction, which has not been shown to date.

I do believe that will have a halo approach across the brand overall. But also really change practice, and that's what -- why we do these studies. And it was -- a lot of the feedback, it was a bell on the ball. It was great to see. It was a long time coming, and we're quite excited that we're able to demonstrate that. I don't allude to loss of exclusivity assumptions, but we do foresee there's still a lot of runway left with ERLEADA.

Okay. Let's move to INLEXZO. This is another product that is getting a lot of attention. It's a very in-focused product launch in oncology. It was highlighted on the sell-side call that was done last week. I'm not going to press you on quantitative metrics because I know the answer to that.

But qualitatively, give us some sense of how the trajectory is going on the back of the April 1 J-code. You provided some metrics on the first quarter call. But just high level, how are things progressing in terms of the overall launch and the feedback?

Yes, very nicely. Just to remind everybody, launched INLEXZO, it truly is transformative. 82% complete remission rates. Half of those patients still out after a year on therapy in a very high-risk population, fairly niche population, non-muscle -- high-risk non-muscle invasive bladder cancer with carcinoma in situ.

It's roughly 3,000 patients in the U.S. So if you just think about it, that smaller niche introducing to the marketplace and the receptivity has been pretty profound. The intent to prescribe, unaided awareness, highest ever in bladder cancer. The other thing I would say is there was -- I would say, especially with the urology provider base, they're waiting for the J-code, a lot of them were.

Post J-code, you saw a 50% increase in providers utilizing it. It's almost like a 90% increase in insertions. So there is a little bit of a wait for it. And there's -- it's still a smaller niche population. We just recently received NCCN guidelines, Category 2A for papillary disease.

Papillary disease, just to remind you, we have a robust program for INLEXZO, and we can get to Erda-iDRS, which is our Erdafitinib Intravesical drug release system. But with INLEXZO, you have SR-5, which is the papillary SunRISe-5 trial, which is the papillary, so BCG exposed, roughly 15,000 patients in that population, so much greater opportunity there.

That's that NCCN guideline. So that will be spontaneous until we get the approval for SunRISe-5 or the data readout. Then you have SunRISe-3, which is a much broader population. This is the first time anybody has ever gone head-to-head against BCG in bladder cancer. And this is a population around 40,000 to 50,000. So those are 2 step change.

I think there is a disconnect with The Street with regards to the greater opportunity for INLEXZO being $5 billion plus. And then you add in Erda-iDRS, which is Erdafitinib in this drug release system. And that is looking at it in non-muscle invasive bladder cancer for intermediate risk with the FGFR expression.

So roughly 70% of the population has FGFR. So targeted using FGFR. So I can say -- I can tell you there's significant opportunities ahead there and co-positioned quite nicely that the totality of that is going to be well above $5 billion plus.

So I guess it sounds like, Tom, as we think about how quickly this product can scale, these additional population expansions from the SunRISe trials that you mentioned, but also the MoonRISe trials, maybe give us a quick update on that.

Yes. So they're fully accrued, and we're just awaiting the results on 2 of them, I think. But I do believe that's the intermediate risk population, 2 of them, different types of intermediate risk and then one that goes a little bit over into the high-risk population, but targeted to FGFR alterations. So that's where you'll see the differentiation. So Erda-iDRS is also every 3 months. So it's 4 times a year. So a little less frequent insertions.

Okay. All right. Let's talk about TECVAYLI. You had some data at ASCO, just showing continued support to use as early second line. Maybe just zooming out from a big picture perspective, can you just frame how J&J is thinking about the broader treatment paradigm in multiple myeloma and specifically the coexistence of your BCMA targeting agents, CARVYKTI and TECVAYLI?

Yes. I think we remain committed to search for the cure. And our development program, our investment will always be put around that. And I do think the patients will ultimately win with regards to that. I think first and foremost is what you're seeing and even with the TECVAYLI data, DARZALEX is absolutely the foundational treatment and backbone therapy throughout the continuum from the very beginning all the way through the end.

It's one of the best combination immunotherapies on the marketplace in multiple myeloma. And what you saw in the combination with TECVAYLI, truly unprecedented results. I mean I've been in myeloma for quite some time. I've never seen anything with a hazard ratio of 0.17 and the flatlining of the Kaplan-Meier curve.

And that's what we're hearing back from the feedback from our providers. What I also said is that data is in earlier lines of BCMA absolutely need to bring BCMA earlier in the treatment, whether it be CARVYKTI or TECVAYLI. And that is the mindset. Right now, where the setting is Line 2 is available. So you do the quad in line 1, you might have transplant or non-transplant. And then if they're progressing, then either based on patient preference, site of care, availability, things like that, you either go to a CARVYKTI or TECVAYLI-dara.

And that sometimes becomes that, I would say, that shared decision-making with the patient and the provider. But right in and there, you have 2 incredible choices. And then post that, you'll see at EHA, we have the TALVEY data that will be presented at the plenary session at EHA.

So that's TALVEY in combination with Daratumumab, DARZALEX. So that allows us then you have that position to bring in BCMA upfront, hit the best immunotherapy. If once they progress or if they progress, then you can go on to additional therapies. And that's our whole commitment. In each line of therapy, we want to be along the step of the way.

What about your trispecific program? Maybe give us an update on how that's going and then also your involvement in in vivo CAR-T for the topic.

Yes, yes. So trispecific, Ramantamig, we're very excited about, different molecule, engineered by our scientists. I'll tell you, it's one of the benefits of being in myeloma so long with the team. We have the insights, we have the science, we have the expertise and the external engagement to help shape this.

We -- you guys have followed up us as well. You know all along, step-up dosing, which required for co-administration with either TECVAYLI or TALVEY needs some education and I would say, practice. What we understood also from a community to get expanded and really get the patient population, how do you make a community-friendly targeted treatment that can be administered in the community by the community with less AEs.

And that's what we did when we engineered, Ramantamig. And also, as we think about either antigen expression or release, the availability of having this trispecific targeting both GPRC5D and BCMA could prevent even further relapses and really looking at that curative intent. It's a different CD3 binder also so CRS is looking a little different as well as the GPRC toxicities. We're

being able to dial those down. So really taking it and saying, all right, we've built very incredible combinations, but how do we improve it even more so. And that's the ability that we're able to do with Ramantamig. So we're going to be looking aggressively in Line 2+ and Erdafitinib in the front line as well.

So obviously, in vivo CAR-Ts, were already have some programs in-house, and we have a partner products with [indiscernible] but we haven't disclosed any of the targets. So I'll just leave it at that. But we're quite excited about following that science as well. And we're looking across all modalities anywhere we can look for cure in cancer to become the #1 oncology company.

Okay. Looking forward to that. I'm going to take another pause there. Any questions on oncology before we pivot? Okay. Tom, let's pivot to Milvexian that's -- you've got this AF trial coming up from the LIBREXIA program at the end of the year. You guys are running that trial along with your partners, Bristol Myers.

So just maybe give us your latest update and framing of your level of confidence on the success of that trial? And is it still expected at the end of the year, I believe.

It's an event-driven time, but we're anticipating around that time. It could be before or after, but it's on an event-driven time line. But I would tell you, we're very excited. And we do believe Milvexian will be another $5 billion-plus asset for us and working with our partner, BMS on this one.

I do believe there's a significant unmet need still and you think about claudication being not treated or undertreated. So I do believe AFib, obviously, a significant opportunity ahead of us. We do believe the molecule and the dose we got right. We had modeled it appropriately. We've taken the data from the Phase II and really helped us inform on Phase III is where we feel confident.

Really looking at similar efficacy to, say, an Eliquis or Apixaban, but superior safety profile. And if you can reduce the risk of bleeding, we do believe that's going to untap a significant opportunity, both in AFib and obviously secondary stroke, which actually from a proof of concept have already been established.

What -- on the bleeding side, what's the expected magnitude of bleeding superiority that you think would be needed to drive a meaningful displacement of Eliquis?

I think from the research that we have from our providers, 30% to 40% risk reduction is absolutely significant.

And how should we think about addressable sub-populations, elderly, renal, et cetera?

Yes. I think because -- when we get the data, we're going to need to identify that and see if there's enrichment strategies or subpopulations that might benefit versus others.

Okay. And then maybe just on launch and access and pricing, anything you can share in terms of just color on how you're thinking about those metrics, the commercial opportunity really in the world of generic Apixaban?

Yes. So I'd say, obviously, we're going to be working in close partnership with BMS. We won't disclose our strategies. But I would tell you, if you think about both ourselves, Xarelto as well as our partner, Eliquis, when those products came into the marketplace, you were dealing with generic warfarin. And we found a significant unmet need, and we're able to identify the value and ensure access and success.

Okay. Terrific. Let's move to neuroscience. This is an area that Joaquin has talked about an ambition to be #1 in that segment. Do you feel that J&J is positioned to achieve that with the current portfolio?

Absolutely. I think what helped us reinforce that was the acquisition for CAPLYTA, intracellular. And I do think it's not only for CAPLYTA, actually intracellular in totality. I think CAPLYTA, obviously, we're well underway of the biggest indication for adjunctive major depressive disorder.

We're seeing significant uptake already. New-to-brand shares surpassed REXULTI. We're well on the way to look to become the #1 typical antipsychotic for branded. We just recently have data 2 studies, network meta-analysis that shows CAPLYTA is the most effective treatment across all branded atypical antipsychotics. So you have CAPLYTA, the momentum that we have there. We also got 1284 through the acquisition, we're looking at general anxiety disorder as well as agitation with dementia.

1284.

It's another compound. It's a deuterated CAPLYTA essentially. It's unique. And then coming back to our current portfolio, SPRAVATO, we're seeing significant growth, over 45% growth, still very little penetration in treatment-resistant depression, significant unmet need, open up treatment centers and having utilization productivity in treatment centers.

So we still see significant runway with SPRAVATO, our INVEGA baseline business as well as what I would say Seltorexant that we are looking to have readout this year, looking at major depressive disorder with those with underlying insomnia. So I think in totality of that, we are and will be the #1 neuropsychiatry company. And then we're going to continue to look as we think about neurodegeneration. Obviously, we have [indiscernible] but we'll continue to look there in other spaces.

On the Exon 2 agonist that you mentioned, that you said it's going to have Phase III data later this year, I believe. What level set us on what we should be looking for there?

Positive trial.

Any -- what would define the positive?

Significant improvement in MADRS, of course. And then some of the endpoints that we're looking at with regards to insomnia.

Questions? Maybe just in the last couple of minutes, Tom, we've covered a lot across the enterprise, across your portfolio. Like what haven't we talked about? Anything else you want us to be double-clicking on?

Yes. I think a couple I would say, you touched on ERLEADA, but I would say our prostate cancer pipeline, we just recently did the acquisition of Halda at the end of last year with RIPTAC. We have a portfolio of products. I'd like to compare it now to our myeloma portfolio and how we're looking at myeloma.

I think we have the ability with the science and the expertise. We have the only KLK CD3 redirector targeting KLK. We have the ADC KLK. We have costim. So there will be data that's going to be presented at ESMO that's looking at our KLK-CD3 plus costim in prostate cancer. So we have the ability to really target prostate cancer across all lines of therapy in different modalities, really looking at curative intent. And I do believe what you're hearing like the KLK2 data is pretty remarkable.

I mean, think about it, it fits right nicely with the urology practice, oncology practice. You don't necessarily have the step-up dosing and things that you have from bispecifics. -- that if you can bring costim into there and really showing even greater efficacy.

And forget about it when you bring in RIPTAC, we do believe that's really going to transform the treatment of prostate cancer. So I do believe as we think about our prostate cancer portfolio, we have significant opportunities to really help the curative intent there. And then that RIPTAC technology is not just prostate cancer, it's a platform that we can look across all other tumor types as well.

And at the end of this year, you guys are going to be hosting an Enterprise Business Review Day after a few years. Maybe in the last 30 seconds, give us a little bit of a preview on what we should be looking for from your enterprise.

Significant growth.

Okay. Well, I think that's a great place to leave it. Thank you very much. We covered a lot. Appreciate it.

All right. Thanks, everyone. I'm Lee Hambright, U.S. MedTech analyst at Bernstein. Thanks, everyone, for being here. We are delighted to host Johnson & Johnson, Chairman and CEO, Joaquin Duato. Thank you so much for being here.

Thank you, Lee.

We are scheduled for a 50-minute fireside chat here. Just a reminder that investors in the room can submit questions at any time through Pigeonhole and we'll try to work in as many as we can here.

Joaquin, you've described 2025 as a catapult year, and J&J is now entering what you call a powerful new era of growth. Maybe you could kick us off with some opening remarks on the state of the business, particularly as you look toward crossing the $100 billion revenue milestone this year.

Thank you, and glad to be here with you. Why was 2025 important? Because that was the year in which we were getting the biosimilars of STELARA into the U.S. market. So all investors were thinking, is John & Johnson going to be able to grow through the STELARA biosimilars, and we did. We grew mid-single digit. We exceeded expectations. And I believe we are the only company ever that has been able to grow the year in which the biosimilars to our largest products came. So why were we able to do that?

We were able to do that because we have a strong portfolio of existing products that we can discuss both in MedTech and Innovative Medicine and because we have a very strong pipeline, too. So that's the reason behind. And in 2025, we said we are going to be able to grow faster in 2026 than in 2025, in 2027 than in 2026, and we have line of sight to double-digit growth by the end of the decade. So from the point of view of today into the second quarter of 2026, I can tell you that, that's still the position we are in.

Coming from the first quarter, we upped our guidance, both in top and bottom line. And our guidance for total year 2026 is 6.1% adjusted operational growth, and we are going to surpass $100 billion as a company. So why -- what are the drivers of those growth? On the Innovative Medicine side, our strong portfolio of 60 medicines with DARZALEX, ERLEADA, CARVYKTI, SPRAVATO and the new product launches that we are now in the middle of like CAPLYTA, ICOTYDE, INLEXZO and RYBREVANT, all of these having a significant impact this decade.

In MedTech, the drivers are the growth in our cardiovascular franchise, which is one of the largest in the industry in three of the fastest growing markets like electrophysiology, calcified arterial disease or heart failure and the upcoming launch of our OTTAVA robotical surgical system that we hope to have an approval by the end of this year, beginning of next year that will drive growth in our surgical franchise. So when I look at our position today, we have a strong portfolio. We have a strong pipeline. All of this underpinned by strong cash generation and a strong balance sheet. We are still a AAA-rated company and that gives me confidence of our performance in the second half of the decade.

Excellent. Excellent. Thank you for that. Okay. Let's talk a little bit about the macro environment. Lots of moving pieces over the past 18 months, including shifting trade policies, geopolitical tensions, regulatory changes. Can you put all of that into perspective for us in terms of key risks for J&J?

Yes. So our size and scope makes us very well equipped to navigate all type of scenarios. I would say that Johnson & Johnson is built for times like this. So in these situations is when we thrive and hence, my confidence on the second half of the decade. We have multiple options. We have a strong track record of being able to navigate multiple geopolitical situations. And while -- I mean there's always puts and takes that we have to navigate but I'm still very confident that we're going to be able to deliver in our growth objectives.

When I look into the elements that are out there for an innovation-based company like Johnson & Johnson, which is what we are, we have tried to focus our portfolio in areas of unmet medical need where there's breakthrough innovations such as oncology, immunology and neuroscience, in Innovative Medicine and cardiovascular, vision and surgery. In MedTech, for us, there's always going to be some tension between breakthrough innovation and issues of pricing, access and affordability. And that's always a constant. That's not going to change.

So at the end of the day, the companies that are going to make the difference are going to be the ones that are able to bring breakthrough innovation. If you are able to bring breakthrough innovation, then everything will come together, and you will be able to have a good business. Now we also have another advantage is that we have more options than other companies. So we have a number of platforms that helps us navigate all the different scenarios. And it's good for us not to have impending big loss of exclusivity in front of us. we are not dependent of a single platform neither.

So that gives us much more flexibility to navigate multiple scenarios. And while we'll have to work through that, I'm very confident that this is the space where Johnson & Johnson thrives.

Great. Okay. You talked about that tension between breakthrough innovation and price. You've had a productive dialogue with the U.S. administration, including recent agreement to improve access to medicines. How did Trump RX and new price parity models impact your long-term pricing strategy and thoughts about R&D return on investment?

Yes, overall, we have said before that while we think it's important to be able to improve access for patients in the U.S. and make it easier for patients to get the therapy they need based on medical decisions. We don't think that the way of achieving that is importing foreign price controls through the so-called MFN. So on one hand, we think it's good to be able to make it, so that all patients in this country are able to access the best therapies, and that's something that is not only something that we can achieve alone. We have to work with insurance companies, with the hospital industry in order to be able to achieve that.

But I don't think the way to do that is to hamper investment in innovation by importing foreign price controls. So what type of things can we do in order to be able to maintain an environment where innovation can thrive in this country, which I think it's important in multiple fronts, and I'm sure we can discuss before. I think there are things that we can do in order to improve affordability. I mean two ones that are -- the ones that are top of mind are one is work on the middle man side, on the intermediaries that, as you know, capture more than 50% of the value and also try to maintain the 340B hospital pricing system for its original intent without the excesses that are today.

So I think that by working on the middle man and by working also on the 340B pricing system, we can create savings that can be then plowed into the patient to improve affordability and to diminish their out-of-pocket expense. That's the way for us to go, and that will continue to enable us to invest in innovation, especially at a moment in which we have two factors converging. One is more opportunities than ever to be able to address difficult complex diseases as we are seeing in cancer, for example, and then on the other hand, more competition by other countries that are trying to take or participate in the leadership position that the U.S. has.

So I don't think this is the moment for us to shortcut in innovation, is to double down on that because we have this opportunity to bring more breakthroughs and at the same time, we're having competition that is challenging our status.

Great. Okay. FDA is part of the equation here. We've seen significant changes and leadership turnover at FDA. You're obviously engaged very closely with the agency. What are you seeing on the front lines? Any changes or risks to approval timelines?

Having a strong regulatory agency is a key component of the innovation ecosystem. I mean you need to have the basic research, you need the capital, you need the companies like us, but a central piece of that is have a strong regulatory agency because the regulatory agency is a needed linchpin of being able to develop medical technologies and medicines in a safe and effective way. And innovation in regulatory processes also drives medical innovation. So the FDA has and it still is the best regulatory agency in the world.

If I leave aside the turnover in leadership and in personnel, our relationship with the industry during this period has been functional. So I cannot really point to any area in which we have had a delay or a situation in which the professionals of the FDA have not acted according to the standards that we were used to. So our working relationship with the agency, it's been positive, and it's to the credit of the people working at the FDA that have maintained a high standard of performance.

Great. As you mentioned, you now see a path to double-digit growth by the end of the decade, which is striking for a company of J&J's scale. You continue to grow through STELARA LOE. As you look toward 2030, what are the key levers required to bridge from your current 5% to 7% CAGR target to that double-digit profile?

Yes. Great question. So the ambition of being able to grow double-digit growth by the end of the decade is based on the portfolio and pipeline, late-stage pipeline that we have today. So just to be clear, this is not an ambition based on predicated on anything else, not on M&A. It is based on our existing portfolio and our late-stage pipeline. So our existing portfolio and our late-stage pipeline are largely derisked. So just to put that aside.

So what are the areas in which we believe there's still a disconnect between our own internal expectations and the Street expectations? That would be the -- to focus your question. So there's three products in our Innovative Medicine side where the expectations of the Street are still lower than our own internal expectations, and I will go into them in a second. And then in the medical technology side, our expectation in our cardiology group is higher than the Street. And I still think that the Street is not taking enough consideration to our launch in robotic surgery, which is going to accelerate our surgical franchise growth.

So let me go one by one and we can dig later more into everyone. The three products that are still underestimated by the Street in the Innovative Medicine side are RYBREVANT, which is our EGFR/c-MET bispecific, which is now approved for lung cancer. We have breakthrough designation in head and neck, and we are going to be presenting data at this ASCO, which is this weekend. And also, we are developing it in colorectal cancer where EGFR and c-MET are important oncogenic drivers. So that one is underestimated.

The second one is INLEXZO, which is our intravesical drug releasing system for non-muscle invasive bladder cancer. Non-muscle invasive bladder cancer is a highly prevalent condition, more than a million patients, 600 patients diagnosed every year, 400,000 patients relapse. So it's a large patient population, and we have shown durable and sustained results superior to any other therapy that I have seen. And we are in the middle of the launch of INLEXZO. The initial indication was in patients that do not -- that have failed BCG. We are working now in two other indications, BCG exposed and BCG naive, and that's going to expand the patient population.

And then the third product there is ICOTYDE, which is our oral peptide blocking IL-23. That is the first oral medication, once a day, 1 pill that has similar efficacy and safety to a biologic. And that's going to change the market because the arrival of an oral therapy that is comparable to an injectable biologic is going to change the market. It's going to expand the market, and it's going to actually compete with the injectable biologics, as some patients may prefer an oral therapy to an injectable one. So ICOTYDE is the other one that we believe is underestimated.

On the MedTech side, we are in three very fast-growing markets. Electrophysiology is a fast-growing market with the advent of PFA, and we can discuss that later. Calcified arterial disease with our acquisition of Shockwave, we're in the middle of the launch of a new catheter, C2 AERO for coronary calcified arterial disease, which is doing really well. And then heart failure with Abiomed, both in high-risk PCI, in cardiogenic shock, we are seeing significant improvements there too.

So that is still underestimated versus -- what the Street has underestimated versus our own projections. And then finally, I think that nobody is really factoring in a serious way our efforts in robotic surgery with the upcoming launch of OTTAVA, and that would be another element that would help us fortify this double-digit growth in MedTech and in total Johnson & Johnson.

Excellent. Okay. You've given us a meaty agenda there of things to dig into. Excellent. So let's start with oncology. You've set a goal to be the #1 oncology company by 2030 with over $50 billion in sales. As you mentioned, consensus is still a couple of billion short of that $50 billion target. You talked about RYBREVANT, and INLEXZO. Maybe can you just talk a little bit more about maybe those two and particularly what to look out for on those two, particularly maybe the data at ASCO on RYBREVANT? And then just what are the key drivers more broadly that gets you to that oncology objective?

So oncology includes oncology and hematology, it's all together, right? We've said that we plan to be the #1 oncology company by 2030, and we have even put a number out there of $50 billion by 2030. So let me break it down. An important part of that is our hematology franchise, in particular, our multiple myeloma franchise. We aim to have a therapy for every line of therapy for every patient. We have the backbone therapy, which is DARZALEX, which is growing double digit today. It is our largest product and is the backbone of therapy in any multiple myeloma therapy.

And today, in most of the clinical trials in multiple myeloma, they are using DARZALEX as part of the standard of care. So that's a backbone of the standard of care that is going to remain and we see that in a continual growth. Together with DARZALEX, we have two biospecifics, one targeting BCMA, another one, GPRC5D. We have already presented data with our BCMA bispecific in second line in combination with DARZALEX that received an unsolicited commissioner national priority review voucher, it is already approved that in patients in second line, we have external responses like they have never been seen.

So I am assuming that you are going to see an uptake of biospecifics, TECVAYLI, our BCMA bispecific and down the road, TALVEY, our talquetamab, our GPRC5D bispecific in second line. Today, only 5% of the patients in second line are using a biospecific. And then we have CARVYKTI, our cell therapy, in which we have had external results in later lines and in second line, and we are developing in first line that has about 10,000 patients already treated, that continues to gain adoption. We're seeing very strong growth on CARVYKTI and at this point, we don't have any constraints from a manufacturing perspective.

So the combination of our cell therapy, DARZALEX and our bispecific portfolio makes it a very strong multiple myeloma franchise, which is going to be a very important part of our growth moving forward. We are also into later stage development of trispecific, which would combine in a single drug, both GPRC5D and also BCMA, and you are going to see data really soon about our trispecific. It will most likely launch in this decade and will be another contributor to our multiple myeloma franchise.

Bispecifics on cell therapy could -- can coexist together. It depends on the site of care, and it depends also on patient preference. It depends also on what therapies that patient has received before. But clearly, bispecific and cell therapy can coexist and are coexisting as we speak now. That's in the hematology side.

On the solid tumor side, the first one is RYBREVANT. I discussed that before. Today, with RYBREVANT in combination with LAZCLUZE in EGFR-mutated non-small cell lung cancer in all lines of therapy already, 1 out of 4 patients is treated with RYBREVANT. We see a continuous expansion of RYBREVANT in non-small cell lung cancer because it's the only regimen that has demonstrated overall survival with a chemo-free regimen in first line, the only one. We think it addresses the mechanism of resistance of the tumor and that going slow to go fast, you're going to see a constant progression of RYBREVANT, and we see every quarter of RYBREVANT plus LAZCLUZE in non-small cell lung cancer.

We'll add to that our head and neck indication, the data that you're going to see at ASCO. It is going to be in second line, but we plan to go into Phase III in first line, and that would create another leg of growth for RYBREVANT and then later, but also in this decade, we'll continue our development in colorectal cancer, in which EGFR and c-MET are also oncogenic drivers, and that's going to create a larger product for RYBREVANT, which I think it's still underestimated.

Of note, in January this year, we had the approval of RYBREVANT FASPRO, which gives a subcu formulation of RYBREVANT, which makes administration easier and also an approval for a once-a-month dosing regimen, which makes it more consistent with what the oncologists are expecting. So the combination of the additional indications, the subcu formulation, the once-a-month regimen is going to create continual growth of RYBREVANT.

INLEXZO, now at this point, we have the indication only in patients that have failed, not responded to BCG and that have carcinoma in situ. We just got the J Code for INLEXZO in April which is going to open the path for less complex reimbursement. And we have seen a very significant uptick of INLEXZO since April in getting the J Code. And in the period of '26-'27, you are going to see data of two additional studies of INLEXZO, SunRISe-3 and SunRISe-5. SunRISe-5 is in patients that have been exposed to BCG and SunRISe-3 in patients that are BCG-naive.

So the combination of these three indications plus the J Code, it's going to make INLEXZO a standard of care in the treatment of non-muscle invasive bladder cancer. It is a therapy, which combines a device and a drug, it's perfectly fit in the urologist's practice. It's an easy implantation and we see that being a platform that is going to expand beyond INLEXZO. We have already presented data of a next-generation platform, which we call TAR-210 that has erdafitinib, an FGFR inhibitor in the platform, and that has shown very significant response rates with less frequent dosing schedule. So for us, this platform of intravesical drug release system, it's going to have multiple iterations that are going to drive growth particularly in this area.

And then finally, ICOTYDE. It's an area we know really well. We are leaders in immunology and we are developing ICOTYDE not only in psoriasis, which is the first launch, but also in psoriatic arthritis, and you're going to see Phase III data this year. And in IBD, both in Crohn's and in ulcerative colitis. So the combination of that and the fact that physicians now are going to have an oral once-a-day pill with efficacy, which is comparable to an injectable biologic and safety comparable than the biologic is going to expand the market in a significant way. And there is patients that may prefer to have an oral product than an injectable.

So that's going to be, and I have said that, and it's been many times quoted, one of our biggest products ever and is still being estimated by the Street. I have to tell you that we have bookings. We have people that have gone really, really very far and people that are very, very, very much on the low end, right? So truth may be in the middle, but it's going to be a very large product there.

On our cardiovascular franchise, on EP, we are the leaders in electrophysiology today. We are not the leaders in PFA but we are the leaders overall because electrophysiology is not only about the therapeutic catheter, it's about an entire ecosystem of mapping, diagnosing, having the best clinical mapper as a service for the electrophysiologist and then therapeutic catheters too. So we have the best combination and ecosystem, and we can discuss that later. We plan to continually launch new therapeutic catheters every year to make fix simple for the electrophysiologist and safer.

Calcified arterial disease still is a market that has potential for continual penetration as it is high risk PCI and cardiogenic shock, and we see more opportunities there to continually penetrate. And I think we have an opinion which is higher than what the Street has as far as the potential of our cardiovascular franchise.

And finally, again, robotics that I'm sure we can discuss later. For us, everything in robotic is additive to what we have. It's additive to what we have because we are not there and it's not a space where we are new. We have been in surgery, in these operating rooms for decades and the same people that are using the robots right now are using our sutures, are using our hemostats and oftentimes are using our staplers too, are using our instruments overall. So for us, surgical robotics is our territory. It is a place where we have all the right to become a leading company, and we plan to be a leading company.

Excellent. Excellent. Okay. Before we get into some of those MedTech platforms, just a question from the audience on AI in research. Can you give us some examples of how you're thinking about using AI in research for the Innovative Medicines business and will that be material to the [indiscernible]?

So I mean the -- every company including us is using AI in two areas, one in molecular design and discovery, another one in optimizing clinical operations. So in molecular design and discovery, it's shortening the time from hit to lead. So we can do things faster. And at the same time, if you have the right models, you can better predict some of the preclinical aspects in toxicology and efficacy that would be predictors of success once it goes to humans. So we have a number of examples of oral medicines that we are getting into humans much faster than we were able to do pre utilizing AI.

So I think it's safe to say that the use of AI, it's going to enable us to get things from hit to lead to humans faster than before and the probability of success once it goes to humans is going to increase. Look, we have a number of examples. I mean I don't want to disclose which ones because some of these targets are confidential, but we are clearly using it, and it's already ongoing. The other area in which companies, including us, are using AI and we were using that even before generative AI, it's in the area of clinical operations. Why?

In protocol design, patient selection and also in selecting the centers that are more likely to recruit and to have quality in the way they conduct the clinical trials. So those are two areas in which you are going to see AI having a positive impact in drug development. And I think that for companies like us, AI is a force for good because it's going to help us being able to develop medicines which are better and get faster to patients and it's going to help medical devices being smarter and improve the outcomes of surgery and any procedure.

So when I think about AI, when it comes to the health care industry to Johnson & Johnson and to other companies, I see that as a force for good and as a positive thing. I don't see that as with fear. I think it's something the companies like us need to fully embrace because it's going to make us better in doing what we do best, which is bringing medicines and medical technologies to patients.

Very good. Excellent. So let's touch on drug device synergies. INLEXZO, as you mentioned, is off to a great start, projected to reach $5 billion in peak sales. Are you looking to apply that kind of targeted release platform to other therapeutic areas?

Yes. I mean, I already commented that we are already using the concept for another drug device combination, which incorporates erdafitinib on it, and we are thinking about all the areas of the kidney, in the upper kidney, in cancer that we can use that drug device combination. So we see multiple opportunities of utilizing the technology behind INLEXZO in different instances in contained spaces like the kidney or the bladder. So you will see more of that, and that's an area that we are investing and we plan to expand.

Another exciting area for us in which we are using our drug device expertise is a relatively unknown one, which is our radio enhancer. So we are already in Phase III and in Phase II with a radio enhancer is an element that, let's say, amplifies the effects of radiotherapy. We have already presented some data in this recent ESTRO that occurred recently and the community in radiology, in radiotherapy is very excited about having the opportunity to have an inert substance that is going to amplify the effects of radiotherapy.

In this case, in order to do the procedure, you need the support of our medical device clinical specialists because this is injected directly into the tumor, and you need to have the right way of injecting and delivering the drug and delivering the right amount. So that's another area given that radiotherapy is the most frequent treatment modality in cancer that if we are able to find a radio enhancer that could amplify the effects of radiotherapy or help using less radiotherapy to optimize the effect of radiotherapy and minimize the side effects could be quite transformational.

Yes, nanobiotics.

And our Nanobiotics collaboration.

Yes. Excellent. Okay. Let's talk about MedTech. Valuations for MedTech have been slashed by 40% over the past 6 months. Have you seen any material changes in the underlying fundamental outlook for MedTech markets?

I think you have to separate valuations from underlying trends. So I don't see other than healthy trends when it comes to demand for medical devices because the number of procedures expanding, the capacity of the hospitals is expanding, and the quality of those procedures is improving, too. So the underlying trends that I see in the areas that we participate that is very broad, orthopedics, cardiovascular, vision, surgery.

I don't see anything but continuous progressive growth there, I think, which is helped by the normal aging of the population and the fact that the procedures get better, get faster and you have better outcomes and results out of this. Now the valuation is a different story. And look, I think there's, I would call it, a recalibration, let's say, rather than a reset. I think that there's a recalibration and as you know, you've been here for a long time, that is a normal ebb and flow that, of course, with the valuations. There's always recalibrations. But clearly, the underlying fundamentals of the MedTech business, I see them as healthy as ever.

Great. Okay. Let's talk about surgery. You mentioned OTTAVA a couple of times, of course, you submitted to the FDA earlier this year. What unmet need will OTTAVA address? And how are you measuring success in the surgery business over the next couple years?

I mean, first of all, as I said before, we have been in surgery for a long time. So we are not entering a new space. The same customers that are customers of the robotic systems now are customers that are using our sutures, our hemostats and oftentimes even our own instruments. We are leaders in open laparoscopic surgery. So it's a space that we know globally. And as a consequence, I think we have all the right to be an important player in robotic surgery, which is where surgery is going, right? So there's no question about that. And it's still largely a space which is underpenetrated.

Most of the procedures are still open laparoscopic, I still see that down the road, every procedure will incorporate some robotic component. So we are in the first inning, in the first cycle of robotic penetration, and that's going to continue to grow. So why do we think that our system could carve out a space? A number of things. First, we have what we believe is a differentiated system. The architecture is different. It does fit in standard operating rooms. The arms are tucked below the bed and the bed is like a normal hospital bed. So that makes it more efficient to be able to be used in normal standard operating rooms.

As an anecdote, I was talking to a surgeon, and he was telling me one of our nurses came into the operating room and the nurse asked him where is the robot because she was not seeing the robot because the arms are tucked below, and it's just a normal operating room. So you can do open surgery or laparoscopic surgery in that bed. So that makes it more efficient and makes the hospital being able to utilize the space and turn around the operating room faster.

The other element that I have heard from surgeons that they really appreciate is what we call twin motion because of the arms being attached to the bed, when you move at the same time, the bed and the arms. So that avoids that you have to constantly reposition the patient. And depending on the BMI of the patient, that could be a difficult task. So they like this feature that we call twin motion in which the arms and the beds are moving at the same time.

The third element is that it's going to mount our instruments. It's going to mount our staplers. It's going to mount our energy devices, and they like our instruments. You can ask now which ones do you like the most. In some countries, they even stop the robot and they use our instrument for certain tasks. So they are going to have the superior Johnson & Johnson instruments mounted in the robot, and that's going to be ultimately making a big difference because ultimately, those instruments as the ones touching the patients.

And then finally, look, I mean, surgeons, series of hospitals, they want to have more options, and we are going to be there to provide those options. So I think that's why we are going to have a space in the robotic surgery space. And we are a company that has the muscle and the resilience in order to be able to take the time to build a leadership position there.

Amazing. Great. Just a question from the crowd about just how much of your double-digit growth by the end of the decade expectation is predicated on OTTAVA successor? Is there any kind of metrics you can give us related to that?

Yes. I mean, I appreciate the question. What I can tell you is that the double-digit growth is the totality. I gave you I think, 7 different elements why I think we are underestimated. I talk about RYBREVANT, INLEXZO, ICOTYDE, electrophysiology, calcified arterial disease, heart failure, OTTAVA is one of the elements there. I mean the good thing about Johnson & Johnson is that we don't depend on one element. We are not a one-trip pony company.

Yes.

I know investors sometimes like one-trip pony companies because they are easy to understand, but they have an expiration date, right? So I mean, it's good to have the number of options that we have. And in every single area that we are in, we are #1 in most of them or #2, with the ambition to become #1. So it's not -- we are deep in every single area. We're deep in oncology. We're deep in immunology, we're deep in surgery. We are deep in cardiovascular, deep in neuroscience so that gives us the opportunity and the optionality to be able to be a company that will be more than $100 billion and still is telling you credibly that we have line of sight to double-digit growth. I cannot think about any other company of our size that can talk about that.

Incredible. Good. Okay. In Electrophysiology, you've lost share, of course, as the market has shifted rapidly to PFA. Is it realistic to think that you can catch up with surging PFA competitors and hold on to that #1 position in the EP market?

We are #1 today, as I said before, electrophysiology is not about the therapeutic catheter only. It's about the entire ecosystem, even in the value of the procedure, it's not about the therapeutic catheter only. It's about being able to have a system like CARTO to map, it's about to have the diagnostic catheters, it is about to have the service level that our unmatched clinical mapper network provides. It's about having Ultrasound too, which improves the quality of the procedure and enables you to do it without fluoroscopy. So it's about an entire ecosystem.

And that's what we are providing today to the electrophysiologist is because, as you know, oftentimes when they are using competitive therapeutic PFA catheters, they're still using our mapping system. So why we believe we are going to remain leaders and gain back a position of leadership in PFA? A, because we are going to continue to upgrade constantly our mapping system, which is foundational for us. B, because we plan to constantly improve our therapeutic catheter portfolio.

Now we are launching in Europe VARIPULSE Pro. VARIPULSE Pro has a shorter sequence than VARIPULSE, and VARIPULSE Pro is 5x shorter than VARIPULSE. We plan to have VARIPULSE Pro also in the U.S. that's going to make the procedure shorter and easier for the electrophysiologists. And we have already presented significant data in HRS with rates of stroke that are 0.2%, the lowest in the category. So clearly, VARIPULSE is a safe catheter as compared to the competitive catheters.

So from there on, we are going to be launching a dual energy catheter that would be the STSF catheter that will combine electrophysiology and PFA. We are working on a large deep focal catheter and we'll continue to innovate our therapeutic catheters in order to remain leaders in total electrophysiology and also in PFA. So our aspiration is to get back to be leaders in PFA. It may take us some time, but we're going to continue to invest to be there.

Great. Okay. You mentioned the other two big assets in cardiovascular, Abiomed and Shockwave. Business is performing well ahead of deal models, but competition is coming in both markets. How do you plan to maintain your lead in both of those places?

Two avenues. One is continue to improve our catheters when it comes to Shockwave and we are launching a catheter every year. Last year, we launched Javelin for difficult to cross classified lesions. And this year, we're launching C2 AERO which improves the leverability and maneuverability of the catheter in coronary, which is the largest market. And we continue to innovate in our pump. I mean, part of the growth in Abiomed is the 5.5 pump, which is implanted through the axillary by the surgeons. So we are always a step ahead of the competition, and we will be in having new catheters or improvement in the existing pump. So that's one avenue.

We plan always to be a step ahead of the competition. And on the other hand, we plan to continue to generate data to substantiate why the use of our catheters or pumps is beneficial for the patients. So both in the new product side and in the data generation, we will push forward to be always a step ahead of the competition.

Great. Volume-based procurement in China continues to be a headwind. It's a headwind in surgery, likely is going to hit EP in the second half of this year. When do you expect China to return to becoming kind of a more meaningful growth driver for MedTech?

Yes. Volume procurement is a pricing mechanism. And I was referring before to this tension between innovation and affordability that goes always through cycles. I think we are now in the cycle of constrained prices in China, but the market will continue to come back. And what matters is that the underlying demand in China is significant, and it's an important driver of growth longer term for us. So I'm optimistic about the China market. While we will have to navigate the short-term pricing pressures, the underlying demand for our medical devices and medicines is still strong, and it's an area where Johnson & Johnson will continue to be.

Great. I hate to ask a question from the audience on talc, just a quick update on how to think about where we are on that one.

On talc?

On talc.

Yes. So look, I mean, we are working now through the Daubert proceedings. And we are focused on litigating every single case. We have a strong track record of litigating every single case. Of 17 cases that have been gone into appeal, we have won 16, so we plan to continue to fight every single case because the evidence and the regulatory agencies are on our side. So we plan to continue to fight for what we think is fair. And our approach is we're going to litigate every single one.

Yes. Great. Okay. All right. Maybe zooming out to talk about portfolio. From the start of your tenure, you've talked about getting more acquisitive, particularly in MedTech. With the ortho separation in process and valuation is looking pretty attractive across the health care space, how do you think about opportunities to continue to reshape J&J's portfolio?

So from -- I mean, I think we have gone through a significant reshaping of our portfolio. I mean, on one hand, we separated our consumer business, and now we are separating our orthopedics business. So we are clearly focused, as we say, in three areas in Innovative Medicine and in three areas in MedTech. And all the six areas are areas where we have a strong position and depth and there's medical need and also science is advancing to bring medical innovation. I think from that perspective, we are what I would call using pharmacological terms at a steady state.

Look, as far as M&A has to be clear, when I'm talking about double-digit growth, it's not because of M&A. It's based on the existing largely derisked portfolio and pipeline that we have today that I have just described. When I think about M&A, look, we have the cash generation, we have the balance sheet to be able to have optionality in M&A. If there are opportunities that fit our areas of expertise, that do have a significant improved membership in standard of care and that are financially attractive, we'll think about it.

Our sweet spot, however, is earlier stage acquisitions in which we can use the scale of Johnson & Johnson in order to expand their clinical development under commercialization. One good example of that is the acquisition of Halda Therapeutics that we did at the beginning of the year. It's a new platform called RIPTAC. They have an asset in Phase II in prostate cancer. We can use the RIPTAC platform in other solid tumors. And our goal is to expand it into multiple areas and to create significant value there.

The Halda Therapeutics acquisition doesn't make the headlines because it's a relatively small one, but we have demonstrated over and over again that we have a good ability to identify small acquisitions that become big products. ICOTYDE is one and INLEXZO is another one. So Halda, our prediction is that it's going to become a big platform for us. So M&A, it's an important component of our overall portfolio growth but our bias is clearly for earlier stage acquisitions.

Got it. Great. I think of your 6 big focus areas, maybe the ones we didn't touch on as much were neuroscience in the Innovative Medicine business and then Vision in the MedTech business. Maybe just 30 seconds on what's interesting in those two?

30 seconds, Vision. Look, this is a good market for us. Overall market in Vision grows 4% to 6%, but we have a very strong position in contact lenses, where we are the market leader, and we continue to innovate there with multiple generations of contact lenses. We are in the middle of launching next-generation intraocular lenses, and we are gaining share overall in intraocular lenses, which are our two areas of focus. We see Vision as a good space for Johnson & Johnson and one in which you are seeing improvements both in medical devices and in therapeutics. So it's a good space for Johnson & Johnson.

Then when it comes to neuroscience, it's an area that we have clearly signaled as a priority where we have a strong track record there. Our two growing assets are SPRAVATO in treatment-resistant depression, which is growing very healthily, close to 50%. It's a multibillion-dollar product, and we are now in the middle of the launch of adjunctive treatment of major depressive disorder for CAPLYTA, which is doing really well. And we are seeing a very significant increase in the prescriptions for CAPLYTA since we have the major depressive disorder indication.

Plus we continue to grow in the other two indications of CAPLYTA, which are schizophrenia and bipolar. So we think that CAPLYTA is going to be a leading antipsychotic in these three areas, and we feel very confident that as we communicated when we acquired Intra-Cellular, this is going to be another $5 billion asset. We are continuing our investments in our pipeline in depression, and we have an orexin-2 antagonist, seltorexant, which it's going to have a read in Phase III pretty soon that we are developing also in depressive disorder with a prevalence of insomnia and that could be another addition to our depression portfolio.

So we feel confident in the continual growth of our Neuroscience franchise. And we keep on trying in the area of neurodegeneration, which is a bet for the next decade, but we think that a company like Johnson & Johnson has to be in these major decisions like neurogeneration, that, in my view, is the next frontier for Innovative Medicine companies in order to be able to conquer. There is still a lot of room for improvement in neurodegeneration and it's an area where as population ages will become more and more prevalent, it will become more of a social problem overall.

Amazing. All right. We covered a lot of territory there in 50 minutes. Thank you so much for being here.

Thank you. Thank you very much.

Thanks, everybody.

To have here Michael Bodner, Company Group Chair, EP and Neurovascular from J&J MedTech as well as Ryan and Lauren from Investor Relations. So thank you so much for being here. Just a quick background. Michael has been with J&J for almost 10 years, previously served as Worldwide President of Biosense Webster. He also led the integrations of Abiomed and Shockwave, and he now oversees 2 high-growth, high-innovation franchises within J&J's cardiovascular portfolio. So Michael, thank you so much for being here today.

Thank you for inviting me.

Okay. Great. So maybe we'll dive into the EP market because that's definitely the hot topic here. I think you've described the global market as a $16 billion opportunity, growing about 12%, 13%, and it is still highly underpenetrated. Maybe you can talk to us about where you see the opportunity for growth? Is it geographic expansion, procedure expansion beyond AFib or a function of improvement in diagnosis that's going to drive growth here?

So as you were doing the intro, I was reflecting on my time at Biosense back in 2022. And back then, it was an $8 billion market. So 4 years later, it's doubled. It's now $16 billion. And as you stated, it's growing 12% to 13% procedurally. The biggest segment of that growth is AFib. AFib is at least 60% of the mix. And that AFib market is most likely growing north of 15%. The driver of that is all of us. 1 in 4 people over the age of 40 will develop atrial fibrillation. And it's still significantly underdiagnosed, it's undertreated.

We estimate that of the patients that could benefit from a catheter ablation, it's still in the single digits that are getting access to care. So still extremely underpenetrated. Growth in this segment will continue to be driven by 2 major factors: market development, and I'll get into that detail, as well as innovation. From a market development perspective, that's patient awareness. 10 years ago, nobody knew what AFib was. Now that's more of a household name. So truly understanding whether a patient has AFib or not is becoming easier to understand, particularly with smart watches and everybody measuring everything they possibly can.

That is also spreading globally outside the United States into Europe and in Asia. But there are more to arrhythmias beyond AFib. That's just one of them, right? There's SVTs, there's flutters, there's VTs. And those are also significantly underpenetrated. So the opportunity for growth is on geographic expansion in Europe and in Asia, patient awareness, but also the referring physicians truly understanding that there are treatment options beyond a pill in the pocket and that those treatment options are getting better and better and those outcomes are improving.

We also have opportunities to introduce innovation to these physicians and to do clinical evidence generation that proves out the safety and efficacy of these new modalities. But the innovation curve right now is steep. There is extremely -- there's an extreme acceleration of innovation and helping guide physicians on what to use when, to best serve patient outcomes. So AFib is the driver, innovation that brings technologies that help physicians to know where to ablate and how to do that in a safer and more effective way will continue with driving that growth.

Got it. Just as a follow-up there, you were talking about the growth rates. So 12% to 13% is global, and you said it's a procedure number. And then AFib is north of 15%. Is that a procedure number as well?

Correct.

Okay. Got it. And then I believe about 75% plus of the U.S. market has already converted to AFib. So I guess...

PFA.

Sorry, to PFA. And so in terms of the pricing premium going forward, adding to that revenue growth is going to be a smaller percentage. So how -- can you parse out the wide U.S. growth?

That's why I quote procedural versus revenue growth because the revenue growth is harder to size because, yes, there is price premium of the conversion from RF to PF. Some of that's going to be unpredictable. As you stated in the U.S., PFA penetration is probably north of 75%, lower in Europe, and just starting in Asia. So there is going to be a price premium that will be layered on top beyond the 12% to 13%.

Okay. That's really helpful. The market has definitely gotten very competitive. And I think recently noted for the U.S. trends that you are gaining some unit market leadership in the U.S. Can you maybe elaborate on that? What is driving it and how sustainable that is?

Yes. So when we talk about therapeutic unit leadership, that is across all arrhythmia types, all ablation types. So that's RF and PF. So we're the clear leader in electrophysiology, and we're the leader in mapping and diagnostic and imaging and RF catheters, and we are now building momentum with PFA. So when we look at total unit leadership, we are now there, and that happened late last year in the United States. And then week over week over week, we're seeing significant momentum building, particularly with our VARIPULSE Plus platform in the United States. So that's where we've had catheter enhancements to VARIPULSE, where we have automated the irrigation rate. Physician feedback has been very positive and the momentum is significantly building. And that anchors to our full ecosystem of CARTO, where everything is fully integrated.

Can you maybe elaborate on that just as a follow-up. So you have indicated that you would be launching a new catheter every year through 2030 and at least 2 CARTO updates each year. Where is J&J driving the differentiation given that it's so competitive? And you mentioned that the innovation curve is pretty steep right now. And what gives you the confidence that you can execute on that pipeline?

We expect to have the most comprehensive and complete PFA portfolio in the market. And that portfolio will be multimodal. And what I mean by that is there will be a small focal, a large focal, there will be a catheter for regional ablation and for single shot. So when we think about the workflow of the EP community, it really depends on physician preference, but also where that patient is in disease progression and the continuum of care. Is this their first procedure or have they had multiple procedures. And so when we look at the strength that we have with, again, the full ecosystem, given that our catheters are integrated into CARTO, we're able to provide physicians with real-time procedural feedback.

Are they touching tissue? Have they provided the right amount of dosing to the vein, to the posterior wall? And do they have contact and how many grams of contact and then the dosing again with a PF index, we used to have an RF index, but now we have a PF index that guides them to how much pulse field they've actually delivered into that tissue itself. And that will drive outcomes. So when I look at the cadence of innovation that we're bringing and I look at the depth of our team globally, we actually have a surge of innovation coming, and we're accelerating. We're not slowing down. We're actually speeding up. And when we look at how we've structured our organization with R&D, advanced R&D, our incubator group and how everything work seamlessly with CARTO, we're well positioned to continue this momentum.

That's really helpful. Maybe we can talk a little bit more about CARTO. So I think you have indicated some of the differences there with tissue proximity indicators, contact force management that you just mentioned, ablation indexes, is there anything else we are missing? Or what feedback you're getting from physicians, which they really appreciate? Because as we know, the market is getting competitive. Abbott has their own mapping system. Boston and Medtronic are launching theirs as well. So where do you think that differentiation lies?

So those intraprocedural cues really make a difference in patient outcomes. Earlier this year, we had a data readout that showed that CARTO, particularly because of the TPI, the tissue proximity indicators, which tells the physician that they're truly delivering the energy into the tissue, not into the blood, showed a 61% reduction in rehospitalization rates at 30 days, 61% reduction. Said differently, patients that were treated with CARTO were 2.5x less likely to go back to the hospital within 30 days because of an arrhythmia-driven rehospitalization. So it matters. And with the introduction of PFA, the traditional cues that they used to see with RF are now missing.

With RF, they would see signal attenuation in real time. They would see the amplitude of that signal getting smaller and smaller until it disappeared. They would be able to see changes to the tissue itself with impedance drops. With PFA, they don't have that. And so giving them those intraprocedural cues that help guide them on therapy delivery significantly improves outcomes. And we're starting to see that in our real-world evidence with our VARIPULSE data in Europe and in the United States. And pleasingly, that data is matching.

That's really helpful. And my guess is that you are in the field with that data showing to physicians.

Yes.

Okay. Perfect. I guess on CARTO Edge, how would you differentiate that versus CARTO 3? And then also at HRS, you launched the CARTOSOUND, the SONATA Module. And so can you walk us through those modalities? What's different here?

So I'll take SONATA first because it's what we're launching now. SONATA is our next-gen imaging modality. It is AI-enabled, and it can take ultrasound images from our ICE catheter. So ICE is intracardiac echo and automatically build high-quality, accurate maps of the heart. Now it used to be that we could do this with the left atrium only. We can now do this also with the left ventricle, which is important for VT, ventricular tachycardias, but we can build an even more detailed map of the left atrium with the new SONATA Module that is CT-like. And as a result, we don't need to use fluoroscopy. We have a 0 fluoro indication. And physicians like the speed, the accuracy and they rely on that and enables them to see things they couldn't see before.

It also auto labels different structures. It tells them what they're looking at on the image, but it also tells them tissue thickness. So by knowing the thickness of the tissue, they can tailor their ablation strategy to those patients. Some areas that are thin may not need as many ablations, whereas others that are thick may need more, and they want to ensure that they're creating effective lesion sets so those patients don't have recurrences.

Got it. That's helpful.

You want to know about CARTO Edge, though. So on CARTO Edge, CARTO is now best-in-class in terms of mapping and the total tech stack is leading edge. but we don't want to rest on our laurels. We want to take it to the next level. In order to do so, we want to bring in more artificial intelligence and machine learning into our software modules. And we have a cadence of about 2 major mapping releases per year, but we're getting to the limits of what we can do with our current platform. And so CARTO Edge is a play on the word edge, meaning it's cutting edge, but it's also bringing in edge computing. And by bringing in edge computing, we bring in much more powerful computing power so that we can have better insights. And so what it will be enabling is tissue characterization.

We're able to understand the underlying tissue. Is it calcified? Is it scarred? Is there fat? And based on that, how would you address your ablation strategy. We're also able to see deeper into the tissue. And sometimes the arrhythmia is not on the surface. It can dive deep into the tissue. And knowing that helps physicians with their guidance in more complex patient sets. And then with CARTO Edge and the tech stack that we've got coming, we're also able to have insights into the quality of the lesions. With PFA, there is this period of time where it can be reversible or irreversible, and we're able to implement multi-frequency impedance mapping where we can guide the physician, is that lesion actually effective or not? And is there more ablation to do.

Got it. Just moving to -- actually, what about the timing on CARTO?

On CARTO Edge, we haven't guided to that timing yet, but more to come.

Okay. Understood. Just shifting gears to VARIPULSE Pro that you launched in Europe in March of this year. I think you've indicated that it delivers 5x faster ablation times. Can you maybe elaborate on that product? When do we see it come to the U.S.? And then you're also doing a head-to-head study with Farawave on persistent AFib. Maybe you can talk about that study.

Okay. So VARIPULSE is our commitment to delivering not just multiple form factors, but multigenerational catheters with pulse sequence innovation. So we're on Plus in the United States, which is the bump in the irrigation rate at 30 mL. And then Pro is a further build with second-generation pulse sequence. That second-generation pulse sequence is 3.8 seconds versus 21 seconds, and we only do 4 per vein. So it's an extremely fast, efficient and easy workflow. The physician feedback has been extremely positive. It's a workflow they already know, but it just works better and it's smoother.

The data that's building is significant. So we have data sets in the real world from VARIPURE and from REAL AF that is showing extremely safe profiles with very good efficacy. So we're seeing acute performance, acute success, and we're seeing greater than 90% freedom from AFib at 1 year. And our event rates are extremely low. So with PFA, we can see hemolysis, ours is extremely low. We can see with other modalities, coronary spasm. We haven't seen that with this platform in over 70,000 cases. And there are other adverse events like groin complications and others. Now given our experience base with VARIPULSE, we have confidence to do a head-to-head. Now PERSIGMA is an indication expansion study for persistent indication in the United States. We could have made this a single-arm study just for indication expansion. But given the confidence that we have in this platform, the data that we're seeing from a safety and efficacy perspective gave us confidence to go head-to-head to guide physicians on platform choice to enable them to have better treatment options as they look through the data.

That's great. When can we expect Pro in the U.S.?

We are actively working with the FDA on that as we speak. But PERSIGMA is not linked to Pro coming to the U.S.

Okay. Got it. That's helpful. I wanted to touch on dual-energy catheters. I think what we've heard from our checks is that it's used in about 20%, 30% of the cases. I think you've indicated in 20%, 30% of simple cases and slightly higher in the more complex cases. And our KOL checks were indicating that it could help you regain more share in the complicated end of the procedure spectrum. So can you just maybe talk about the opportunity with the dual-energy catheter?

So dual-energy STSF is our small focal ablation catheter. It's based on the STSF platform, which is the most widely used RF catheter globally. It's what physicians train on. It's what they're most used to. So it has like muscle memory for them, and there's a lot of comfort to that catheter for them. And now it has dual energy. So we can seamlessly toggle between RF and PF. It has contact force. It has a PF index. So it is a workflow that they're most comfortable with. And the ability to toggle gives them a lot of versatility, depending on the complexity of the patient. There are clinical situations where RF may be more suitable than PF. For instance, if there's an ablation needed near the conduction zone like the AV node, PF may not be suitable or if there's an ablation near the coronary arteries where coronary spasm may be something to be avoided, an RF approach may be more suitable.

Understood. With respect to OMNYPULSE, I think you've indicated that it could potentially redefine PFA. What did you mean?

So with OMNYPULSE, it is a map and ablate catheter with contact force and a PF index. So the contact force tells them how much they're touching tissue and how many grams of force that they're pushing. The PF index indicates have they delivered the therapeutic dosing or not. This is novel to us. And the fact that it's a 12-millimeter basket creates a lot of efficiency. So with STSF, this is a 3.5-millimeter tip, to upgrade that to 12 millimeters enables the physician to have a very efficient workflow. If it is a patient that's having an index procedure, but they're complex, the physician can rapidly map with a high-density mapper, they can quickly isolate the veins. And then based on what's happening in the substrate because it's a single catheter, they're then able to decide where else to ablate with that catheter. So it creates a significant efficiency in that more complex patient population.

Actually, just a follow-up to what you said earlier. I think there are different form factors. You've talked about VARIPULSE, small focal, large focal, single shot. How do you think the market is going to be split between those modalities?

It's going to be reliant on 2 things: physician preference, just what they like to use as well as where the patient is in their continuum of disease progression and the continuum of care. So if the patient is a young patient, and this is their first procedure and all that's needed is to isolate the veins, our large basket, which is referred to as ISOPULSE. Actually, I think we've just named it today for you. ISOPULSE. We didn't disclose it before. ISOPULSE would be a great option. ISOPULSE can map and ablate. It could very safely and effectively take out the veins. If the patient needs beyond the veins, then it would be VARIPULSE Pro where we can segmentally isolate the veins with 4 ablations and then potentially go beyond the veins to the posterior wall. If that patient is even more complex and work needs to be done ablations beyond the posterior wall, then an OMNYPULSE could be suitable. And then finally, if the patient is extremely complex and you need the ability to toggle between RF and PF and you need that smaller tip to get into hard-to-reach areas of the atrium, then dual-energy STSF might be most suitable.

That's really helpful. So J&J really will have the entire toolkit with refreshed...

Not just the toolkit. We will have the most comprehensive therapeutic and mapping tech stack in the market.

That's really helpful. I wanted to touch on the neurovascular franchise. Maybe can you talk to us about the strategic importance of this franchise? And what are the greatest growth opportunities here?

Well, this is a high-impact area, particularly stroke. And you've heard the saying time is brain. So the devices and how they perform really matters. How can we can get that patient to the right interventions quickly, but then how do we get deeper into the brain to remove that clot safely and effectively. So the performance of those devices matter, how they track, how they aspirate and that they're predictable and reliable. So our focus is on ischemic stroke with aspiration and aspiration catheters, but also going after new use cases for our TRUFILL Liquid Embolic for chronic subdermal hematoma.

And so those are patients that are elderly, that can slip and bump and have a bleed. Those bleeds can be difficult to resolve and they're hard to dry out. The traditional approach is surgical. So you can imagine a patient that's over 80, having a surgical approach to help deal with the hematoma doesn't have a great recovery and the recurrence rates can be quite high. By taking a percutaneous approach with TRUFILL, we can improve the patient experience and the physician experience by embolizing the middle meningeal artery to help dry out that chronic subdermal hematoma and reduce the recurrence rate.

Got it. I guess as we think about this franchise, where do you see portfolio gaps? Is it even on the peripheral side? And I don't know any thoughts on the Boston Penumbra acquisition?

I won't comment on competitive activity, but we do have a lot of interest in continuing to expand into high-growth, high-unmet need areas like we've done previously with our acquisitions in the past with Shockwave and Abiomed into heart failure, into complex PCI.

Got it. That's helpful. I guess just -- there's a big focus on innovation on the EP side. It sounds like you'll continue to be looking at -- you'll be looking at expansion opportunities on the neurovascular or vascular side. Where else should investors be focused? What is underappreciated about the 2 franchises that you're running right now?

Yes. So on the EP side, I think what's underappreciated, this isn't about a single catheter. It's about a full ecosystem from imaging to mapping to diagnostic to therapeutic and how it all works together in the ecosystem with the clinical mappers, the R&D strength, the know-how and that commitment to an accelerated launch of innovation, multigenerational catheters, pulse sequence innovation, and it is an exciting time in EP. On the neurovascular front, this is about having consistent performance of our products that enable the interventionalists to quickly and effectively get to the clot and remove it in a predictable way that is -- that tracks well.

These are little small catheters and how they push along that wire and then as they connect it to an aspiration system that the columnar strength stays there, that it doesn't collapse and that they're truly able to remove that clot safely and effectively, and it doesn't break off and go distally. And so having technology that is safe and effective, but also predictable in their hands and gets them to that clot quickly because, again, time is brain, and we want to remove those clots as quickly as we can.

Got it. I know we're out of time. Just one last question, maybe rapid fire here. Just any impact on the macro front? Anything you're worried about?

In terms of EP, the market situation is very favorable. lots of unmet need, very underpenetrated. Innovation is coming rapidly and there's economic value because the innovation that's coming is driving safety, it's driving efficacy and it's driving efficiency.

Okay. Very helpful. Thank you very much. Thanks for being here.

Thank you.

[Audio Gap] to the next company presentation at the BofA Annual Healthcare Conference. My name is Jason Gerberry. I cover pharma and biotech at BofA, and I'm pleased to be moderating our next fireside discussion with Johnson & Johnson, and John Reed, Executive Vice President, Pharma R&D. So John, thanks so much for joining us.

It's great to be here. Looking forward to the chat.

Well, look, you -- as a company, have had a lot of momentum, I think, in the R&D organization. So looking forward to just maybe at a high-level framing first. Where you're at in terms of the pipeline and BD consideration versus in-house developed. You guys have shown a propensity obviously to have success on both fronts. And I imagine you're always opportunistically looking for best science, right? So we get that dynamic. But are the priority areas within the portfolio that from your seat, you're looking at and saying, hey, we maybe want to address and augment through external innovation. I know you probably don't want to tell your hand too much to the external community, but maybe if you could just frame that dynamic first because there's been so much activity with your pharma peers on the M&A front that it's topical.

Yes. No, we're -- first, I would say that we really have become a more focused company in the last few years. Oncology, immunology and neuroscience are really the foundational elements. We do a little bit here and there in some other areas, but those are the key areas. And our strategy for some time has really been one of trying to roughly half of our product mix come from internal discovery and internal invention and half through BD M&A. And we tend to track pretty closely. I think right now, about 60% of the development stage portfolio actually happens to be internally derived, but even many of those started with some collaboration or something.

So it's a mixed picture like that. And we're both interested in products and sometimes platforms. And maybe a good example of a recent one that kind of checked both those boxes was towards the end of last year, we acquired a small company called Halda that had a lead candidate, an oral for prostate cancer. J&J is #1 in prostate cancer. So that's a good fit for us. That is based on a technology called RIPTAC that use these cleverly designed bidentate oral small molecules that will grab on to a target of interest. In this case, it was the androgen receptor, and then also grab some essential protein and sequester it so the cell can't have it. And without it, the cell dies. So it's a holding kill mechanism.

So we're able to bring in essentially a Phase III ready asset. But on top of that, we got this Nifty chemistry platform with several other projects in various stages of progression, that we're excited about taking across a number of areas in oncology, but also in some other therapeutic areas, too. So it's a nice example, I think.

Okay. So it wouldn't be -- I feel like every year at our conference, there's a little bit of drama with FDA, and there's been some recent headlines. I'm not sure the net outcome, what that's going to look like. But if you can maybe frame how productive the interactions have been with the agency with a lot of change and potentially more change coming.

Yes. I've had the opportunity to interact quite a bit with McGarry and his -- and the leadership there at the agency. They recognize that it's become progressively more difficult to do clinical development in this country compared to some other locations and that we need to speed some elements of that and rethink some elements of that and with a mindset to what would it take to make America a more attractive place to see studies conducted. So I certainly applaud the agency for many things they're trying to do to rethink the requirements for INDs, the pace with which INDs can be approved in this country and a number of other dimensions, too.

I mean, you saw that they also now provided some fresh thinking about how many clinical trials do you actually need to get an approval and some other things, too. So I think there's a lot of good opportunity there and good intention. And the commissioner has invited members of the pharma company, company's community from time to time to even submit white papers with our suggestions so that he's not trying to read our minds but trying to understand what are the things that might make it easier for us to do manufacturing in this country or do new studies in this country, et cetera. And then he and his team can take it under advisement.

So I feel there's a bit a good will there to work collaboratively. Obviously, there were big impacts on the agency with the Dodge effort, et cetera, that has created, I think, some workload issues for the agency. I certainly -- the more I interact with the staff there, the more I appreciate just how hard working they are. They turn these applications around, and they've got a big full plate. So appreciative for their service.

Got it. Okay. Well, maybe we'll switch gears to some of the therapeutic areas and immunology is one of the core TAs for you guys as a company. And let's start with ICOTYDE, which the company, I would argue maybe a more bullish tone coming out of 1Q just on the revenue opportunity and we have validated set of indications where ICOTYDE will have an opportunity in psoriasis is the near-term opportunity. But I guess I wonder, first, it's a drug with lower bioavailability. And so as we think about in UC, it is still approximating the efficacy of the biologics, right? And so there's perhaps some underpinnings there in terms of receptors in the gut that might make it feasible for you to achieve that level of efficacy.

Is it realistic to think that you could push dose in psoriasis to narrow that efficacy gap that you see with IL-23 biologics, I guess that's one question. And then how confident are you in kind of your dosing strategy broadly in IBD?

Right, right. Yes. So several dimensions to the question. But First, just to remind the audience, if you don't know that ICOTYDE was just approved this year for psoriasis. It's an oral therapy that targets the IL-23 receptor, a targeted oral peptide. And what we've been seeing is biologics like efficacy, combined with a very pristine safety profile in the convenience of a once a day. The reason that we're excited about it is because if you look at the patient populations in this country and elsewhere that are -- have an autoimmune disease, they're eligible for biologic only 20% to 30% of them are actually taking one.

Many people just do not want to commit to a lifelong of injections with a biologic. So this offers an oral option with efficacy on par with biologics. And in psoriasis, for example, if you look at the data that we generated, we have 5 out of 5 positive Phase III studies published in the New England Journal Publishing Lancet head-to-head against the leading TYK2 inhibitor. But is psoriasis 1 out of every 2 patients had completely clear skin. That's the IgA 0. That's right on par with the best biologics.

So we were able to get that done with a 200-milligram dose. As you know, the health authorities make us do dose ranging because they want us to use the minimally effective dose. They don't want us to push doses anymore than we have to, in order to reduce risks of some safety event. And so we do dose ranging in all our indications. We'll see where we land in the end with the inflammatory bowel disease, as you said, because it's orally absorbed maybe you'll get higher local concentrations in the gut, but we'll do the studies and we'll land on whatever the minimally effective dose is for those indications.

I feel quite confident because the IL-23 class is validated there. So -- but we'll just -- we'll have to see if we get that kind of on par with biologics type of efficacy. I'd say one other thing, too, that we're really happy since you mentioned the FDA is with the adjudication of the label with them, we were able to get a very clean label. So there's no laboratory monitoring required. There's not a requirement to do TB testing upfront, unlike many other biologics. So it's really easy for the dermatologist to write the script and feel confident around the safety of ICOTYDE.

How quickly do you think old ways change, right? These doctors are almost preconditioned to look for these things, right? And so what some doctors have said to us is, well, maybe there's a psychological predisposition to doing these things still, right? Is that at all a factor when you guys think about how these dynamics change with Otezla, right, which was the last successful oral therapy in psoriasis, commercially speaking, it was kind of an easy right, right, for community dermatologists. And it seems like at least in psoriasis, right, the idea is to kind of expand the category.

Yes. I think the clean label really helps in that regard so that you don't have to do a bunch of laboratory testing or wait for a TB test to come back or things like that. As we know, in medical practice in the community, it does take some time for patient education, et cetera. But the interactions we've had, and that's with the KOLs, which maybe are not always representative of our your average dermatologists, but they're really excited because what they talk about is they have patients with psoriasis, they're trying to manage it with topicals, but it's a systemic disease really.

So at some point, they realize this is just not cutting it. And then historically, the dermatologists would say, okay, I think it's time for you to go on an injectable. And what they would describe to us as the patients would go, let me think about that. I'll get back to you and then they don't come back. So with this way, you write a script, they start taking a pill once a day. It's just an easy transition from the patient to get from trying to manage their disease with topicals to now on a systemic therapy. So we're excited. We think it's going to be a real market expander.

Yes. Okay. Now with IBD, this is a big component, I think, of the peak sales outlook for ICOTYDE. So I guess what I wonder is, we haven't seen a really great commercially successful oral outside of maybe mesalamine, which had a lot of volume utilization. If you listen to how AbbVie frames it and they're looking at I&I combinations, you had the recent DUET data. You want to go with your biggest gun early, avoid things like fistulas later downstream in the patient. So I guess I wonder where ICOTYDE fits in all that, right, where you and competitors are looking at these combination products. You've got biologics that work really well there. So how do you think about the oral opportunity in IBD?

Yes. I think, again, there are a lot of -- a large percentage of patients that are eligible for a biologic but not taking one in IBD as well. So I think there must be a -- there's clearly a large patient population there that would like an alternative. The -- I think the key for us will be the efficacy data that we deliver in the studies. Is it right there on par with the biologics and then that gives patients and health care providers another option to consider.

You mentioned DUET. For those who don't know, that's some studies we did with patients who are on the more severe refractory end of the scale where a monotherapy is not getting the job done for them. So they're -- we've created a co-formulation of our TNF inhibitor and our IL-23 inhibitor, 2 antibodies co-formulated at the right doses so that a single injection, the patient gets both of those and had seen that in patients who have failed or more prior lines that this really then started to get into a range of efficacy is essentially double what you saw with the monotherapies in that patient population where monotherapy is just not getting the job done for them.

So it won't be a one size fits all, I think, with these patients, some will gravitate to an oral, others injectables. Some may need more than one drug depending on their disease. Unfortunately, with IBD, as you know, fewer than half of patients achieve and sustain a complete remission. So it is one of those diseases despite even our best medicines. There's room for improvement, and we're going to keep pushing at it.

Okay. Well, maybe that's a segue for DUET, which was recent data that you presented and AbbVie a week or 2 earlier had interim data for its IL-23 integrin. And so I'm just curious the strategy and why prioritization of, say, TNF versus, say, other combination partners that you could have paired with your IL-23?

Right. Well, to some extent, it was logical for us at J&J because we had -- we brought the first TNF inhibitor to market with REMICADE and golimumab, which is the product of Symphony was in our portfolio and then guselkumab, TREMFYA. And so it made sense for us to do exploratory work with those combos. And -- what we did first, though, was pilot studies where they were biomarker-driven, where we put patients on one or both and then take biopsies from the intestine and do deep molecular profiling, single-cell transcriptomics. And that taught us that the 2 together really had a synergistic suppression of inflammatory pathways. So we thought, okay, this could really make sense.

And then as we got in the clinic, we were, of course, watching safety because when you start taking out a couple of these cytokines, what's going to happen to safety. But there, we found that the safety was consistent with each of the underlying components. We did not see incremental adverse events. So we were good on those. And then when we did the studies, we started to see these really promising data. So that's how we started in this journey. It's not to say that other combos wouldn't be logical to also give a try.

And we'll probably do some of that ourselves down the road, but this was a good entry point for us to bring together 2 mechanisms. And we're poised to be the company that delivers the first of a dual mechanism with these co-antibody therapeutic. So we're trailblazing with this and really excited to be able to offer more hope to these patients who are really tough to treat.

So your just general thoughts on having TNF-based combinations and potential with the black box warning, others in this space would say, hey, we want to like combine 2 really safe MOAs orthogonal that lack the black box warning. Maybe the counterargument to that is when you start to deal with settings like IBD or RA, you need big guns and that risk-benefit-wise, a black box warning in the grand scheme may be an acceptable trade-off.

Yes. I mean the black box in this case goes with the TNF class. And because that class has been around so long, we find patients are very comfortable managing those risk profiles. So it's something that they're very familiar with. IL-23 doesn't really have the black box issues. So that pair -- but I mean, if you compare it, some patients who end up on a JAK inhibitor, right? Talk about your black box warning. They have the infection risk warning, they have the cancer risk warning, they have cardiovascular event warnings, they have thrombosis warnings.

So I think when patients are desperate enough and physicians are desperate enough, sometimes they'll even put up with that. But compared to a JAK inhibitor, this is far more benign. And yet we see people reaching for JAK inhibitors with some of these refractory patient populations. So I think the risk benefit it's very attractive, I think, for many physicians and patients.

Okay. And so with -- following the DUET data, what are next steps with that? I -- would the plan be to go directly to Phase III? Are you happy with what you saw? If you can kind of outline that?

Yes, we're going straight to Phase III in ulcerative colitis because we already did a dose-ranging Phase II. We have defined what the dose will be. In Crohn's, we're doing a seamless Phase IIb Phase III. So we'll do some dose ranging and then start the Phase III component. I don't think we've revealed all the details of that, but that's the plan there. We're also going to do a study in psoriatic arthritis, which is another one of the autoimmune diseases where there are a significant percentage of patients where monotherapy is just not enough. So we're going to study there as well.

And we'll go head-to-head against -- in the case of the inflammatory bowel disease, we're going head-to-head against guselkumab, TREMFYA. The regulators agreed that we did not need to do also the TNF single therapy. So it's just -- it's basically guselkumab versus the co-antibody therapeutic, those 2 arms basically.

Okay. And then any efforts, it sounds like to interrogate different orthogonal mechanistic combinations either with a coformulation or bispecifics. Is that something that J&J can do internally, does it need to go out externally to find assets that can facilitate that strategy?

I think it's some of both. So in some cases, we certainly, from a technology standpoint, we have a very robust bispecific platform. We have the ability to do the co-antibody therapeutics. And as we bring more and more orals, there could be oral combinations and sometimes those could be co-formulated a fixed-dose combo. But because there are different targets that you might want to pair in different ways. In some cases, we might have both targets in hands. In other cases, we might want to go externally and grab one from another partner. So it will be some of each, I think, as we get into this sort of commentatorial aspect of on immune diseases.

Okay. Maybe we'll shift to neuroscience, an area that you guys have been acquisitive in. But my question was around SPRAVATO just given the surprising commercial success that you guys have had. I think it speaks to just the unmet need in MDD. I feel like every time there's a new category, it's not zero-sum game, it's expanding the market. And so when we talk to physicians who treat patients either with like [indiscernible] or with SPRAVATO. It seems like it's a very unique segment of the market relative to typical SSRIs or even atypical antipsychotics.

So there's some changing going on in the landscape to around psychodelic therapies, that there could be potentially, at least if you listen to how some of them portray their therapies as more of a durable benefit. You don't need to have as many follow-up treatments as SPRAVATO, which can be time-consuming. So as you look at like what's going on in psychedelic therapy pipeline competitively? Is that a risk to SPRAVATO? Or is that something that's like an opportunity for you to augment SPRAVATO in the portfolio down the line potentially.

I think we're waiting for data to come in on this psychedelics to really understand it all. But just to back up a little bit on SPRAVATO. So it's a particular [indiscernible] esketamine that's formulated for delivery to the intranasal route with a device. So it's another good collaboration between med tech and pharma at J&J. And it was the first example of an antidepressant that had rapid actions. So in other words, within minutes to hours, patients could see their depression symptoms relieved was approved for treatment-resistant depression, which is patients who failed to prior antidepressants at least as well as for really urgent situation of depression with suicidal ideation.

Altogether, we've taken it through 36 clinical trials, a 1/4 of 1 billion people have been treated with SPRAVATO, it is approved in multiple countries. And it really added a new weapon to the battle against chronic depression, which affects 1/4 of 1 billion people around the world and it's a heterogeneous disease, right? It's not a one size fits all. So we need different mechanisms. And SPRAVATO was the only depressant ever awarded breakthrough designation by the FDA. Twice, we got priority review too. So it's really a new step forward.

Now, how does it work? It's thought to work by affecting neuroplasticity, which is what the psychedelics are thought to do, right? Different mechanisms, SPRAVATO works through a thing called NMDA receptors. The psychedelics is not entirely clear, but there's theories that it might be a certain type of serotonin receptor. But the idea is you're affecting this phenomenon called neuroplasticity, and that's where this may be then giving this real breakthrough in terms of getting at that really treatment-resistant depression as well as maybe the more durability because you're actually changing the connections of the neurons.

In the case of SPRAVATO, we have data showing that 50% of patients stay at remission for 5 years on SPRAVATO. They need to take it a different schedules, some are once a week, some are twice a week, different schedules for different people, but great durability for an antidepressant, if you think about it. So real breakthrough. I decided to have that in our armamentarium with other mechanisms now to try to help patients battling with depression.

This just occurred to me, but is there the possibility that over time, as the drug gets better characterized to lessen the need to do the inhalation -- the nose inhalation at home potentially for patients?

Yes. I think we could see it moving that way. The issue was that sometimes when patients initially take SPRAVATO, they have these dissociative out-of-body like sensations. They typically last only minutes. And some patients don't even get them at all or they only get them on the first few doses. So I think it's something that we will be continuing to have conversations with the regulatory authorities around, is there opportunity to start bringing this more into the home as opposed to having to go to the clinic and sit in a quiet room while you wait for 2 hours for your post years SPRAVATO [ snorch ] so to speak to see how you're faring.

Okay. Maybe we'll pivot to multiple myeloma. You've got arguably an embarrassment of rich with assets here, right? I guess the one thing that I really struggle with -- on the one hand, BCMA-directed therapies, the book says, go with the CAR T first because you'll have lessened efficacy if you use a BCMA-directed bispecific in advance of that, right? But you have data now for both modalities that look pretty competitive, right? And I think you guys have said we're just going to get patients choices and providers choices, right? If you want a one and done, we've got the option for you. And if you want as a community oncologist, not that this is what you all per se, but like community oncologists don't want to give up their patient, right? That's just a practical reality of that, right? So how do you see this playing out?

Well, as you said, we have a lot of tools to work with 5 approved therapies, more in the pipeline. And it is becoming a very dynamic space in terms of how the therapies can come together. That's what we've been doing now is to bring them together in combinations in different lines of therapy. We started the journey with VELCADE, the world's first proteasome inhibitor. And then behind that, [ daratumumab ], DARZALEX, the first biologic for myeloma, the CD38.

And even with those 2 combined with other medicines, when we started this journey at J&J, the average life expectancy of a myeloma patient was 2 years. Now with DARZALEX, VELCADE plus other meds the life expectancy for the transplant eligible is almost 2 decades. And for the transplant ineligible almost a decade, so even there, we have achieved enormous benefits for patients. But we're not stopping there, bringing now the T cell engagers TECVAYLI, our first-in-class BCMA. TALVEY, our first-in-class GPRC5D.

These, together with DARZALEX in earlier lines or giving miraculous data, the most recent approval was for TECVAYLI, where in second line, the data were so impressive that the FDA called us and said, may we offer you a commissioners priority review voucher because we'd like to get this to the American people as fast as possible, 55 days from submission to approval and just unprecedented progression for an overall survival data is seen, now we want to move into frontline, where we've been doing pilot studies and seeing that if we can combine a T cell engager, which could be [ TECVAYLI, TALVEY ] or now we have a trispecific Ramantamig that does both [ TECVAYLI, TALVEY ] in a single molecule with Dara we can get 100% MRD negativity. So minimal residual disease negativity, which that was recognized as a valid surrogate endpoint by the FDA last year for progression-free survival.

So really excited about involving these paradigms, T cell engagers, [ Dara ] in the frontline, CARVYKTI, CAR T cells probably for second line, but even there, who knows one of our investigators at [ Dana Farber ] took patients with smoldering myeloma, gave them CARVYKTI 20 out of 20 have minimal residual disease negativity, no evidence of disease, one-and-done treatment, nipping it in the bud. So there's so many opportunities now to offer patients different ways to try to tackle these.

So as you say, you're testing a lot of permutations in frontline. And if we think about the frontline strategy, do you think MRD would be enough to both enable accelerated approval, but ultimately, be practice changing for physicians to want to adopt. There are certain settings, right, of oncology, right, where you could get by on PFS, but if you don't have a OS data, you're not getting used or you're not getting used at a high rate. So when you think about the maybe the commercial bar, right, for frontline, is MRD enough?

We would always do PFS and OS as well, although it would be nice if the FDA would allow us to have an accelerated approval based on MRD, but we would continue to follow patients. The rest of the world hasn't adopted that standard of MRD might be sufficient. So since we try to bring our patients -- we try to bring our product globally to the patients around the world. We know that we're going to be held to more of the traditional endpoints, but it is exciting to think that, particularly in front line where the current standard of care is so good that you would have to wait a long time to find out.

It is exciting to think that perhaps FDA would allow us to have an accelerated approval so we can bring these innovations to patients faster because we really say we are in the cusp of curing myeloma. And so that would be so exciting if we could use that as a way to just get these new combinations to the patients even faster.

Yes. Well, we've got less than 2 minutes here. So maybe ahead of ASCO RYBREVANT you've got some data in head and neck -- what is the OrigAMI-4 trial Cohort 1, right? That's described in the title as pivotal data. So maybe if you can just set the table because as we think about sort of the opportunities beyond lung cancer, head and neck and CRC have been flagged as big opportunities. And just trying to think through your second-line monotherapy strategy and if these data are filable?

Yes. No, we think they could be. So RYBREVANT just contextualized as a bispecific antibody that neutralizes the 2 growth factor receptors approved in lung cancer for EGF receptor mutant. It was the first bispecific ever approved for a solid tumor indication incidentally. In head and neck, which is the eighth most common cancer, we saw really promising data. KOLs just tell us they've never seen a more active agent in head and neck. So the first entry is in patients who failed frontline so that they're in second line. The bar gets where going, typically, those patients have been treated with either cetuximab or taxanes and overall response rates 10% to 20% on a good day. So that's the bar. And that's why I think the FDA is open even a single mono study, which is where we have breakthrough designation.

So at ASCO, you'll be able to see what kind of responses and durability of responses we're able to bring there. We also, I think, are going to show some of our pilot data in frontline where we're doing combo pembro and Oxaliplatin in frontline and then going against the standard of care regimen, the chemo immunotherapeutic standard of care there, too. That regimen only has overall response rates of about 30 to 35 and the durability of less than 7 months.

So we'll see what RYBREVANT brings. You'll get a little hint of he data, but super excited about RYBREVANT possibility to really create the next standard of care in head and neck. And then we're also pursuing in colorectal. We've got 2 big Phase III studies going there, one in frontline, one in second line. So RYBREVANT is just getting started,.

Awesome. Well, thank you so much. We're out of time, but I appreciate the conversation.

Right, Jason. Thank you.

Good morning, and welcome to Johnson & Johnson's First Quarter 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded. [Operator Instructions]

I will now turn the call over to Johnson & Johnson. You may begin.

Hello, everyone. This is Darren Snellgrove, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the first quarter of 2026, and our financial outlook for the full year.

First, a few logistics. As a reminder, today's presentation and associated schedules are available on the Investor Relations section of the Johnson & Johnson website. at investor.jnj.com.

Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. The description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2025 Form 10-K, which is available at investor.jnj.com and on the SEC's website.

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 Duato, our Chairman and CEO, will discuss our business performance and growth drivers. I will then review the first quarter sales and P&L results. Joe Wolk, our CFO, will then close by sharing an overview of our capital allocation priorities and updated guidance for 2026. Jennifer Taubert, Executive Vice President, Worldwide Chairman, Innovative Medicine. John Reed, Executive Vice President, Innovative Medicine Research and Development; and Tim Schmid, Executive Vice President, Worldwide Chairman, MedTech, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes.

With that, I will now turn the call over to Joaquin.

Good morning, everyone, and thank you for joining us. We said 2026 would be a year of accelerated growth and impact for Johnson & Johnson and with our strong Q1 performance, including our bid on consensus and raised guidance, you can see we are delivering on that promise.

In the first three months of the year, we delivered operational sales growth of 6.4%. Our focus on areas of high innovation, high unmet need and high growth is delivering results today and for the future. Across each of our 6 key businesses: Oncology, Immunology, Neuroscience, Cardiovascular, Surgery and Vision, we have multiple differentiated assets to drive sustained growth and a strong competitive advantage. Our success is fueled by the strongest portfolio pipeline in the history of Johnson & Johnson. We currently have 28 platforms or products that generate at least $1 billion in annual revenue and we are aiming to add even more. Our unique combination of innovative medicine and MedTech, together with strong execution and industry-leading investment in innovation is delivering resilient growth. We are on track to meet our 2026 target of $100 billion in annual revenue for the first time and we are confident our progress will continue to improve into 2027 with line of sight to double-digit growth by the end of the decade.

Let's start with Innovative Medicine where we delivered operational sales growth of 7.4% in the quarter with 10 brands growing double digits. In Oncology, we are aiming to cure and treat more cancers with the world's leading portfolio and pipeline. DARZALEX remains the gold standard in multiple myeloma and our #1 product with sales of $4 billion and operational sales growth of 18%. CARVYKTI, TECVAYLI and TALVEY also continued to deliver high double-digit growth reflecting the importance of our multiple myeloma portfolio across the full treatment journey. Progress in our pipeline accelerated in Q1 with the FDA approval of TECVAYLI plus DARZALEX FASPRO for relapsed or refractory multiple myeloma. That positions the regimen as a potential new standard of care as early as second line.

In soli tumors, RYBREVANT FASPRO received FDA approval for subcutaneous monthly dosing for patients with EGFR mutated non-small cell lung cancer. RYBREVANT also received FDA breakthrough therapy designation in advanced head and neck cancer with new data showing overall response rate in first-line recurrent or metastatic head and neck cancer when combined with immunotherapy. The treatment is being further evaluated in the ongoing Phase III OrigAMI-5 study.

And in high-risk non-muscle invasive bladder cancer, INLEXZO is outperforming all recent launches based on unique patients treated in the first 6 months post approval.

In immunology, we continue to raise the bar in a category we have built for more than 3 decades from single innovations like REMICADE and STELARA to now a dual powerhouse of ICOTYDE and TREMFYA. TREMFYA had another very strong quarter with sales up 64%. It continues to be the fastest-growing IL-23 therapy in the U.S. and is now the share leader new patient starts in inflammatory bowel disease.

And with last month's FDA approval of ICOTYDE for the first-line treatment of plaque psoriasis, we are once again transforming the standard of care for immunology patients. ICOTYDE is the first and only IL-23 targeted oral peptide and has the potential to fundamentally change how psoriatic disease is treated by offering a convenient once-daily pill. The full launch of ICOTYDE took place the same day as approval with the first patient receiving treatment that very day. While it is just the beginning, we're already seeing strong demand through our patient hub. Together, ICOTYDE and TREMFYA create a complementary category shaping portfolio. ICOTYDE is the first choice systemic treatment and TREMFYA is the first choice biologic treatment for patients with moderate to severe plaque psoriasis. ICOTYDE has the potential to be one of our largest products ever. TREMFYA is projected to deliver more than $10 billion in peak year sales.

In neuroscience, we are focused on meaningfully improving outcomes in mental health. The U.S. launch of CAPLYTA in adjunctive major depressive disorder is building momentum and SPRAVATO continues its strong growth trajectory.

Now let's turn to Medtech, where we reported Q1 operational sales growth of 4.6% with growth across all of our key focus areas. In cardiovascular, we are investing in the growing need for complex interventions. Johnson & Johnson is the market leader in heart recovery circulatory restoration and electrophysiology and we continue to deliver sustained growth. In heart recovery, Abiomed had another strong quarter as this shows with in circulatory restoration. And in electrophysiology, VARIPULSE our post-field ablation platform for atrial fibrillation keeps building momentum. Our confidence of continued leadership in electrophysiology was further strengthened by our recent launch of VARIPULSE Pro in Europe with 5x faster ablation, which helps streamline procedures and improve efficiency as well as our recent [ VARIPULSE ] 12 months data presented just a few days ago, we show a strong safety profile with zero reported strokes.

We also continue to receive strong feedback in Europe for our Dual Energy THERMOCOOL SMARTTOUCH SF Catheter which we expect to launch in the U.S. later this year, having recently submitted a complete platform to FDA. And finally, we recently announced 12-month data for OMNYPULSE, our large focal tip PFA catheter, showing positive outcomes, no safety events and 100% procedural success rate.

In surgery, our strong performance reflects the deep levels of trust and our expanding presence in the operating room. In Q1, we made progress on our OTTAVA robotic surgical system, and we are building on our recent de novo filing for approval with a second investigational device exemption trial now underway for inguinal hernia repair.

In Vision, we are restoring sight to its healthiest state with expanding access globally for our ACUVUE OASYS MAX disposable lenses for presbyopia and astigmatism and our TECNIS intraocular lenses. Most significantly, we received FDA approval of TECNIS PureSee, the first and only extended depth of focus intraocular lens in the U.S. to maintain contract sensitivity comparable to a monofocal lens. 97% of patients reported no very bothersome visual disturbances like halos or glare.

As you can see, we are off to a fast start in 2026, building momentum that will accelerate our impact and growth throughout the year and for the balance of the decade. The depth of our portfolio and pipeline has never been stronger, and I'm confident we'll continue to deliver on our commitments for 2026 and beyond.

And with that, I will turn the call back over to Darren.

Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the percentages quoted represent operational results and therefore, exclude the impact of currency translation.

Starting with Q1 2026 sales results. Worldwide sales were $24.1 billion for the quarter. Sales increased 6.4% despite an approximate 540 basis point headwind from STELARA. Excluding STELARA, Johnson & Johnson grew double digits for the quarter. Growth in the U.S. was 8.3% and 3.9% outside of the U.S. Acquisitions and divestitures had a net positive impact on worldwide growth of 110 basis points primarily driven by the Intra-Cellular acquisition.

Now turning to earnings. For the quarter, net earnings were $5.2 billion and diluted earnings per share were $2.14 versus $4.54 a year ago. Adjusted net earnings for the quarter were $6.6 billion, and adjusted diluted earnings per share were $2.70 representing a decrease of 1.4% and 2.5%, respectively, compared to the first quarter of 2025. I will now comment on business sales performance in the quarter focusing on the 6 key areas where meaningful innovation is driving our performance and fueling long-term growth.

Beginning with innovative medicine where our financial results reflect the depth of our expertise and innovation in areas of high unmet need across oncology, immunology and neuroscience. Worldwide sales of $15.4 billion increased 7.4% despite an approximate 920 basis point headwind from STELARA which underscores the continued strength of our key brands and new launches. Growth in the U.S. was 9.6% and 4.3% outside of the U.S. Acquisitions and divestitures had a net positive impact of 180 basis points on worldwide growth primarily due to the Intra-Cellular acquisition.

In oncology, starting with multiple myeloma, DARZALEX growth was 17.8%, primarily driven by strong share gains of 5.9 points across all lines of therapy with nearly 12 points in the frontline setting as well as market growth. CARVYKTI achieved sales of approximately $600 million with growth of 57.4%, driven by share gains and continued site expansion. TECVAYLI growth was 30.1% with sequential growth of 14.2%, driven by launch uptake and share gains from expansion in the community setting as well as the U.S. approval of TECVAYLI plus DARZALEX FASPRO. TALVEY growth was 72.8%, driven by share gains through expansion in the community setting.

In Lung Cancer, RYBREVANT plus LAZCLUZE delivered sales of $257 million and growth of 80.5% driven by continued launch uptake in all regions, share gains and rapid uptake in RYBREVANT FASPRO. Share gains in both the first and second lines continue to drive strong sequential growth of 18.8%.

In prostate cancer, ERLEADA delivered strong growth of 16.2% due to continued share gains and market growth.

Within immunology, TREMFYA delivered impressive growth of 63.8%. Our IBD launch is driving significant momentum, and we continue to see share gains across all indications as well as market growth. STELARA declined 61.7% driven by share loss due to biosimilar competition, increasing adoption of novel classes and unfavorable patient mix.

In neuroscience, SPRAVATO grew 44.5% and driven by continued strong demand from physicians and patients. CAPLYTA, which was acquired in Q2 of 2025 as part of the Intra-Cellular acquisition, delivered sales of $270 million for the quarter with continued strong momentum in our aMDD launch. Since aMDD approval in the U.S., CAPLYTA has had its highest ever new patient start volumes across all indications.

Now moving to MedTech, where we delivered growth across each of our key focus areas, cardiovascular, surgery and vision. Worldwide sales of $8.6 billion increased 4.6% with a growth of 5.9% in the U.S. and 3.2% outside of the U.S. Divestitures had a net negative impact of 10 basis points on worldwide growth.

In Cardiovascular, electrophysiology delivered growth of 9.5%, driven by our newly launched products, including VARIPULSE and commercial execution. Abiomed delivered growth of 14.4%, with continued strong adoption of the Impella technology. Shockwave delivered strong double-digit growth of 18.1% driven by continued adoption of coronary and peripheral products.

Surgery grew 1.2% despite a negative impact of approximately 30 basis points from divestitures. Growth was driven by strength of the portfolio and commercial execution in biosurgery and wound closure, partially offset by planned surgery transformation impacts and competitive pressures in energy and endocutters as well as VBP in China across the portfolio.

In Vision, contact lenses and other products grew 2.7%, driven by strong performance in the ACUVUE OASYS 1-Day family of products, as well as strategic price actions, further solidifying our leadership position. Surgical Vision grew 6%, driven by new product innovations, robust demand for premium IOLs and strong commercial execution, partially offset by competitive pressures in the U.S.

Orthopaedics growth this quarter was 3.2% primarily driven by new product launches and strong commercial execution.

Now turning to our consolidated statement of earnings for the first quarter of 2026. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of goods sold deleveraged by 10 basis points, driven by the impact of tariffs and other operational drivers in the MedTech business, an unfavorable mix in the Innovative Medicine business. This was partially offset by favorable translational currency in the Innovative Medicine business. Selling, marketing and administrative expense deleveraged by 180 basis points, driven by heavier investment in new launches early in the year and increased investment related to the acquisition of Intra-Cellular in the Innovative Medicine business. Research and development remained flat at 14.7% of sales. Interest income and expense was a net expense of $43 million as compared to $128 million of income in the first quarter of 2025. The decrease in income was driven by a lower average cash balance and a higher average debt balance. Other income and expense was a net expense of $294 million as compared to $7.3 billion of income in the first quarter of 2025 with the change primarily driven by the approximate $7 billion talc reserve reversal in the first quarter of 2025. Tax rate on a GAAP basis in the first quarter of 2026 was 12.6% compared to 19.3% in the first quarter of 2025. This was primarily driven by the reversal of the talc settlement accrual in the first quarter of 2025, which did not reoccur and discrete tax benefits associated with employee equity programs in the first quarter of 2026.

Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items.

Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 42.5% to 39.7%, primarily driven by heavier investment in new launches early in the year. Unfavorable product mix and certain favorable onetime items recorded in 2025, partially offset by favorable translational currency. MedTech margin declined from 25.9% to 22.3% primarily driven by the impact of tariffs in cost of products sold and certain favorable onetime items recorded in 2025. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 36.6% to 32.5%.

This concludes the sales and earnings portion of the call, and I will now turn the call over to Joe.

Thanks, Darren. Hello, everyone. We appreciate you joining us today. As Joaquin noted, we are seeing good momentum across our business, powered by our industry-leading portfolio, sustained investment in innovation and disciplined execution. We continue to advance our pipeline by bringing innovative new treatments to patients, which will meaningfully improve patient outcomes and fortify future performance, giving us a clear line of sight to double-digit growth by the end of the decade.

Turning to cash and capital allocation. We ended the first quarter with approximately $22 billion of cash and marketable securities and $55 billion of debt for a net debt of approximately $33 billion. Free cash flow in the first quarter was approximately $1.5 billion. Clearly, this suggests a run rate below our full year projection as Q1 reflects payment timing changes on certain U.S. rebate programs and increased U.S. capital expenditures. However, these were expected, and we remain confident in our full year free cash flow outlook of approximately $21 billion. Our strong financial position and cash flow generation provides a competitive advantage, enabling us to maintain a consistent approach to capital allocation and investment in future innovation.

Since announcing our plans to invest $55 billion in U.S.-based manufacturing technology and research and development through early 2029, we are well on our way to reaching that target. Through the end of 2025, we invested roughly $12 billion or 22% of the $55 billion with significant investment already underway in 2026. Our manufacturing investments include facilities in North Carolina and Pennsylvania, and we will have more announcements to come in upcoming quarters.

Lastly, we recognize our shareholders value a growing dividend. Today, we were pleased to announce the Board of Directors' authorization for a 3.1% increase to an annual rate of $5.36 per share, our 64th consecutive year of dividend growth.

Turning now to full year 2026 guidance. We are increasing our operational sales guidance to be in the range of 5.9% to 6.9%, with a midpoint of $100.2 billion or 6.4%. As noted last quarter, our financial calendar in 2026 includes a 53rd week, which provides a benefit of approximately 100 basis points. We do not speculate on future currency movements and last quarter, we utilized the euro spot rate relative to the U.S. dollar of $1.17. As of last week, the euro spot rate to the U.S. dollar has stayed relatively flat, with modest benefit from other major currencies. As a result, we estimate reported sales growth between 6.5% to 7.5% with a midpoint of $100.8 billion or 7%.

Turning to other notable items on the P&L. We are maintaining our guidance for adjusted pretax operating margin to improve by at least 50 basis points in 2026. This will be driven by continued operating efficiencies with a portion reinvested to support new product launches and further strengthen the pipeline. As today's Q1 results reflect heavier investment is planned to occur in the first half of the year. As a reminder, our pretax operating margin guidance takes into account the costs from the 53rd week of operations and the announced voluntary agreement with the U.S. government to improve access to medicines and lower cost to U.S. patients. We are maintaining our guidance for net interest expense, net other income and the effective tax rate for the full year.

Turning to adjusted operational earnings per share. We are increasing our guidance by $0.02 to a range of $11.30 to $11.50, representing 5.7% growth at the midpoint. As such, we now expect reported adjusted earnings per share of $11.55 at the midpoint or a growth of 7.1%.

I'll now shift to some qualitative considerations on phasing for your models. As noted last quarter, we anticipate fairly consistent operational sales growth throughout the year with a higher fourth quarter due to the benefit from the 53rd week referenced earlier. In Innovative Medicine, the depth and strength of our portfolio will continue to drive accelerating growth this year. We expect contributions from our newly launched products across oncology, immunology and neuroscience to increase throughout the year. As Joaquin mentioned, we are excited by the launch of ICOTYDE as well as that of INLEXZO, our innovative new therapy for certain types of bladder cancer, which had sales slightly above $30 million in the quarter. On April 1, we received a permanent J-code for INLEXZO reimbursement, which will enable broader patient access and serve as an important catalyst for growth.

In neuroscience, CAPLYTA continued to build momentum following its FDA approval in adjunctive major depressive disorder with new patient starts and total continuing patient growth outpacing the market. We believe this performance supports CAPLYTA's peak annual sales potential of greater than $5 billion, and we look forward to sharing additional data in bipolar mania later this year.

In MedTech, our focus this year is on accelerating the adoption of our recently launched products. ETHICON 4000, our next-generation surgical stapler launched in the U.S. in 2025 is expected to launch in Europe shortly.

In Vision, we continue to expand the TECNIS platform globally and look forward to the U.S. launch of TECNIS PureSee intraocular lens, which enables surgeons to address cataract-related vision loss and presbyopia in a single procedure.

In electrophysiology, VARIPULSE Pro is an innovative step forward, introducing a new faster pulse sequence that reduces ablation time by 85%. We do anticipate some second half impact from volume-based procurement in China for electrophysiology products, which has been factored into our full year guidance.

The Orthopedics business under the leadership of Namal Nawana, delivered a strong first quarter with encouraging momentum across key platforms. We are continuing to make targeted investments in the business and working towards a mid-2027 separation. We look forward to sharing further updates later this year. And as stated last October, we are evaluating all separation vehicles that create shareholder value and set up the DePuy Synthes business for long-term success.

Turning to our pipeline. We have many important catalysts that we are looking forward to in 2026. In Innovative Medicine, we expect regulatory approval for TREMFYA for the inhibition of structural joint damage for patients with psoriatic arthritis. As this chart indicates, we also have many important upcoming data presentations across oncology, immunology and neuroscience including ERLEADA in localized and locally advanced high-risk prostate cancer, INLEXZO in high-risk non-muscle invasive bladder cancer; JNJ-4804 in ulcerative colitis and Crohn's disease and CAPLYTA in Bipolar mania.

In MedTech, we anticipate the following approvals and regulatory submissions: OTTAVA Robotic Surgical System, VARIPULSE Pro in the U.S.; ETHIZIA in biosurgery and the Dual Energy THERMOCOOL SMARTTOUCH SF catheter in the U.S.

Before we move to Q&A, we'd like to thank our colleagues around the world for delivering another solid quarter. Their execution continues to optimize our portfolio, advance our pipeline and deliver on our mission of improving and saving lives. Our diversified portfolio, robust pipeline and strong financial foundation position us to drive accelerating and sustainable growth while creating near- and long-term value for shareholders. Speaking of long term, we look forward to providing an in-depth look at our long-term strategy and the driving forces behind our path to double-digit growth. Please mark your calendars for December 8, the date of our Enterprise business review.

With that, we are happy to take your questions. Kevin, can you please open the call for Q&A?

[Operator Instructions] Our first question today is coming from Terence Flynn from Morgan Stanley.

Great. Congrats on all the progress. I had a 2-part one on ICOTYDE. I was just wondering if you can remind us of how you're positioning that drug in the market now that have full details on the label and pricing? And also, how should we think about the ramp of reimbursement coverage there and any sampling plans?

Thanks. Well Good morning, Terence. Hello, everyone. And I just wanted to start with a big thanks to the entire innovative medicine team throughout the world, really strong results in the first quarter with over $15 billion in net sales 7.4% operational growth really importantly, [ 11k ] brands delivering double-digit growth. And if you take a look at what is now 96% of our business that is not including STELARA, we actually grew at 16.6%. So really nice accelerating growth across the portfolio.

So I'm thrilled to talk about ICOTYDE, really one of our outstanding products. And I've got to tell you it's off to a very fast start. The product was approved in March. And we're really, really happy with what we believe is a very differentiated label for the product is the first and only targeted oral peptide that precisely blocks the IL-23 receptor. ICOTYDE, maybe as a reminder, delivers complete skin clearance, favorable safety and the simplicity of a once-daily pill, and we think it's got the potential to become one of our biggest products. So we were day one launch ready for the product. And in fact, first patient was actually on medication within 24 hours of approval.

We're seeing very strong early enthusiasm from both physicians and patients that reinforce our confidence in the potential for this product. A number of us were out at the AAD meeting as well. And the KOL receptivity to the strength and the simplicity of the label has been really encouraging things like no lab monitoring, the TV language that reflects the physician clinical judgment, no black box or drug interactions, really is giving us good confidence that this is going to be really the preferred choice and first choice for systemic therapy.

In terms of early uptake, we're seeing so far about 1,500 patients already that prescriptions have been written for that are going into access and patient support service center, so already 1,500 and already over 1,000 unique customers that are writing. In terms of payers, our goal is to have both early and broad access. And we're in the middle of a very, very positive conversations with them to try to drive that early and very broad access. So more to come on that.

In terms of the positioning. I can't think of a better portfolio than being able to have both ICOTYDE and TREMFYA for our folks and really for patients with ICOTYDE being the first and only targeted oral peptide is really going to become the preferred first-line systemic therapy. We know there are so many patients that keep cycling and cycling on topical therapies. Now the international psoriasis Foundation guidelines have changed so that patients after 2 topicals and trials of 4 weeks each really become eligible for systemic and advanced therapies. And so we think ICOTYDE fits right in this sweetspot as that first choice systemic.

Likewise, TREMFYA holds a really unique and distinct position as well. And that really is the first choice biologic. And so TREMFYA is both structurally and functionally different from the other IL-23s. We've been able to demonstrate really durable complete skin clearance and in our case here, it's the first and only IL-23 that's got significant inhibition of structural damage. So we think it's really the first choice biologic, especially in patients that have active or suspected PSA or psoriatic arthritis. So we think that with that 1-2 punch, we have got the portfolio for psoriatic disease in patients and are really excited about both agents going forward.

Maybe I would just add one other thing, John Reed here, our study of ICOTYDE in psoriatic arthritis, should read out later this year. That's important given that about 1/3 of patients with psoriasis also develop psoriatic arthritis. And the studies in inflammatory bile diseases, Crohn's and colitis are often rolling that Phase III program.

Our next question is coming from Larry Biegelsen from Wells Fargo.

Congrats on a nice start to the year here. Tim, sentiment in the medical device space is relatively low right now because of a number of headwinds and concerns. You posted a respectable growth rate this quarter, but it was slightly below the Q4 growth rate and the comp in Q1 was relatively easy. So my question is, what are you seeing in your end markets? And how are you thinking about the remainder of the year?

Let me jump right in and say that, as you know, we've been very clear, Larry, in articulating our strategy, which is focused on higher growth and higher innovation markets, and that includes our deliberate choice to prioritize our 3 focus areas of Cardiovascular, Vision and Surgery as we separate Ortho. And I can confidently say that, that strategy is working. And in short, while we're navigating a dynamic world and market like everybody else for us, Q1 unfolded as we expected the year to start seasonally quieter but operationally solid, and this was also not a one business or one region quarter, as you've seen by the results, we saw growth across the board. And overall, we're pleased with the 4.6% operational growth, especially given that Q1 is typically our most seasonally subdued quarter.

And I think it's also worth noting, Larry, that while there were some easier year-over-year comparisons this by no means throughout the quarter. Specifically, the 210 basis points of onetime impact we referenced in Q1 of last year, which you will recall was a bit of a noisy quarter were almost entirely related to the items that occurred in 2024. And so those prior year events temporarily depressed the year-over-year growth rate, creating a [ lighter comparator ] but they did not affect on the underlying dollar sales. And so onetime items from 2024 fully lapped last year, and our Q1 performance reflects underlying operational execution and normal seasonality rather than any benefit from prior one-timers.

So I'd say in summary, Larry, overall, Q1 played out largely as we anticipated, balancing normal seasonality with solid execution. And most importantly, nothing in the quarter changes our confidence in further acceleration as we look towards Q2 and the remainder of 2026. And we've got a lot of growth catalysts to be proud of.

What I will say in terms of the underlying market is that it's solid and underlying demand is what we expected. Now we did see some procedural softness early in the quarter, but nothing that we would define really as material while certain regions, particularly here in the U.S., you will recall, we experienced some periods of severe weather in late January and early February. That was largely consistent with normal seasonal patterns and while there was some localized impact on procedure volumes due to poor weather in parts of the business, we would not categorize them as material or meaningful at an overall level. And so what I'm proud of is our teams are highly experienced in managing these types of short-term disruptions and our supply chain, our clinical support and commercial teams work closely with health care providers to maintain continuity of service and support patient care.

And so in short, Larry, a strong quarter for us, consistent with our expectations, and we believe strongly in the robustness of our end markets. Thank you.

The next question today is coming from Asad Haider from Goldman Sachs.

Great. Congrats on yet another solid quarter. For Joaquin, just going back to the goal of double-digit top line growth towards the end of the decade, that's still not something that's getting reflected in consensus models. And in light of your comment earlier that ICOTYDE could be one of your largest products ever, that would suggest an opportunity of at least $10 billion. So any updated views on what you see as the key product variances versus the Street looking towards the end of the decade? And related, how important is the BD lever in that growth algorithm?

Thank you very much. And look, again, as you can see, we are off to a fast start with momentum that will accelerate throughout the year in 2027. And as you mentioned, with line of sight to double-digit growth by the end of the decade. And I think it's a fair question. How is that possible for a company that this year in 2026 is going to deliver more than $100 billion. This is grounded in reality, as a matter of fact, it's already happening today. If you look at the first quarter of 2026, we are already delivering double-digit growth as total Johnson & Johnson when you exclude the STELARA. So it's already happening today. And it's based on our Pro portfolio and pipeline, the strongest in our history. And also, as the decade progresses we are going to see increasing impact in our revenue of our new product launches that are largely derisked in particular, as you mentioned, there's still an underestimation of the potential of ICOTYDE, in psoriatic arthritis and IBD, the potential of RYBREVANT in non-small cell lung cancer, head and neck, where we got breakthrough resignation on colorectal cancer and finally, the potential of INLEXZO in high-risk non-muscle invasive bladder cancer. By the way, INLEXZO got the J-code earlier in April. So I believe those are 3 particular products that remain underestimated that are already marketed.

The same is true in MedTech where launches, especially in cardiovascular, including our next-generation PFA catheters and Impella ECP, along with OTTAVA in robotic surgery are not yet fully reflected as well as the fact that the separation of orthopedics will further lift our growth rates. So I think you -- when you take into consideration all those factors, you are going to get into a similar conclusion of double-digit growth by the end of the decade.

Further, I would say that the strong sales growth will also drive operating leverage that will be further amplified when the U.S. DARZALEX royalties roll off in 2029. So taken together, this creates what some of you have called the cleanest growth story in health care. And we are going to be providing additional details in our enterprise review that will take place in December as we have announced today.

Regarding BD, let me be clear, all these numbers do not include business development. This is based in the strong portfolio pipeline that we have today that is largely the risk, which increases the confidence in our ability to get there. When it comes to business development, I mean, that remains an important part of our capital allocation. As a matter of fact, I would say we have been ahead of the curve in our investments in M&A with the acquisitions during the last 2.5 years of Abiomed, Shockwave and intracellular. As I have commented in multiple times, our sweetspot remains early-stage deals like the one we did earlier this year with Halda Therapeutics, which brings a new platform in our oncology business. And at the same, I have to say that given the situation that I just described, our priority from a capital allocation perspective, our priority is to invest behind our portfolio of new product launches and our promising pipeline programs. So that's our priority today. We remain opportunistic from a business development standpoint but we do not depend on M&A to be able to deliver on that promise.

So in summary, we see both revenue growth and operating margins improving and we reaffirm that we have line of sight to double-digit growth by the end of the decade.

Our next question today is coming from Chris Schott from JPMorgan.

Congrats on the progress. I just had a two-parter coming back to ICOTYDE. Maybe the first one, you mentioned 1,500 prescriptions so far. Is there any color on where those customers are coming from as we think about new patients versus those switching off orals versus those switching off injectables? And then just on the bigger picture view of ICOTYDE, as you mentioned, potential for the drug to become one of the company's largest ever. The pathway to get there, should we think about this as a similar dynamic to TREMFYA that skews more towards IBD versus psoriasis or is this one that could have more balanced sales by indication given, as you mentioned, the frontline potential of the drug in the psoriasis setting?

Chris, thanks so much for the question. So in terms of the early information on ICOTYDE. Obviously, it is really early. So we're still getting information and I can tell you that there's a broad range of prescribers for ICOTYDE as we look across the medical community. We don't yet have data that is specific to exactly where that's coming from, what is exactly new, what they're switching off of, et cetera. So hopefully, we'll have greater granularity on that at our next call, next quarter. So obviously, it's pretty new and hot off the press.

I think as we take a look at ICOTYDE, ICOTYDE is going to fit in psoriasis really firmly in that systemic first-line therapy area. And that is also a great opportunity there for market expansion. If you think there are so many patients that are cycling on topicals, they are resistant to moving into biologics for a number of reasons, whether it's needle phobia, perceptions around safety profile and things. We think not only given the size of the current systemic market and having significant impact there, but really being able to expand that broader is going to be key for ICOTYDE's success.

I also think when you think about IBD and having an oral agent, we've got to see the studies pan out. But based on our goals there, we think that, that's going to be a similar very, very large opportunity. I think here, we're going to see maybe more of a balanced scenario given the strength that we really anticipate having in psoriasis, but I think both segments, both psoriatic disease and inflammatory bowel diseases are going to be very big offer a lot of potential and promise for ICOTYDE.

Yes, Chris, maybe just one other comment on that is that across most autoimmune diseases, about 70% to 80% of patients who are eligible for our biologics are not taking one. And so that's why we really think about this market expansion opportunity to offer patients the convenience of a highly effective very safe once a day pill.

Our next question today is coming from Shagun Singh from RBC Capital Markets.

I wanted to touch on some of your growth drivers within the Medical Device business. Abiomed post-ACC, some of our checks are suggesting that within the high-risk population, we could see up to a 30% reduction. How does that compare with your expectation? And it looks like the IDL space is looking to get increasingly more competitive. So how do you manage your market leadership position in that space? And then overall, as I think about all the drivers that you mentioned within medical devices, should we think about MedTech as a high single-digit growth contributor towards the double-digit growth that you've called out for total company by the end of the decade?

Shagun, thank you for the question. And there's a lot in there. Let me try and unpack it. Firstly, we are really excited to be now significantly embedded in the cardiovascular space beyond the leadership position we hold in electrophysiology and with the acquisitions of both Abiomed and Shockwave, we've added to high-growth, high-margin businesses with tremendous trajectory for the future. And, as you know, grew 14%, almost 15% in the first quarter, and this is really driven by rapid adoption of Impella 5.5 and CP and what excites me most going forward is Abiomed's robust pipeline of not only technologies, but ongoing clinical studies showing the benefits of this technology. And you will know that in August of last year, we saw a new data from the DanGer Shock shop randomized controlled trial published in the New England Journal of Medicine, and this really confirmed the long-term survival benefit of Impella. These results found that up to 10 years when compared to the standard of care, routine use of Impella in patients who had a STEMI heart attack with cardiogenic shock lead to an absolute mortality reduction of 16.3%. And to put this in context, when compared with the control arm of 10 years, Impella CP patients gained an average of 600 additional days alive. I mean that is compelling. And so while you're always going to see new data and new studies come about, we believe that our evidence base for the products we have and the indications we have today are absolutely solid and will continue to drive performance in a category where we don't have line of sight to any significant competitor for the foreseeable future.

I'll turn to Shockwave, 18.1% in the first quarter, and we're very pleased with that performance. The IVL market is one we completely have created ourselves through the acquisition of Shockwave and we continue to advance our leadership position. Now clearly, competition is coming. Competition is going to come to any space that is attractive and certainly one as attractive as IVL. But there's 3 reasons that we have confidence in our portfolio and our future. And the first thing really is our portfolio. The second is evidence, and it's our presence. And over the past 7 years, we've had -- we've earned the reputation of an innovative disruptor, launching 9 -- yes, 9 new coronary and peripheral catheters that have introduced a new standard of care when it comes to safely and effectively treating calcified lesions. And as a result, Shockwave IVL has become the preferred treatment strategy in most calcium cases worldwide where it has been used in now more than 1 million cases around the world, and global expansion has also increased since the acquisition as we had transitioned 10 markets to direct sales forces. We've expanded our presence to now cover 17 markets globally with J&J representatives where we can leverage our scale and the broader J&J organization to drive government relations and address any legal and market access opportunities. And while we will never take any competitor for granted, new competitive entrants into the IVL market, validate really Shockwave's robust portfolio in leading specific solutions. And while competitors are introducing some of the versions to our first-generation products from 2017, we're introducing our fifth generation coronary peripheral devices in 2026 and a single catheter offering will be difficult to compete against Shockwave's portfolio strategy and the improvements we've made over the years to reset the standard of IVL. And while new competitors are completing their first regulatory required clinical studies, we're continuing to invest millions in robust real-world clinical evidence with nearly 25,000 patient outcomes published across 600 journals to date, demonstrating our unique safety profile exclusively associated with Shockwave's ultrasonic acoustic platform and what physicians also appreciate is our contact easy-to-use and rechargeable generators, which require minimal capital expenditure. And back to the point of presence, these generators provide widespread access to Shockwave's IVL technology and they're available in almost every cath lab across the United States, and we actually have more than two generators in over 1,700 U.S. hospitals, and so very difficult for competitors to unseat us.

Most importantly, I'd say is we remain hyper-focused on continuing to earn our innovative disruptor reputation with plans to launch at least one new IVL catheter per year that we expect will redefine the future of IVL in new indications and new disease states. And this year, we will launch our C2 Aero new coronary catheter, which from the early feedback we've got from physicians is going to be another standout product.

I think to your final point around long-term prospects. We're excited about our growth profile and the catalysts we have to continue to accelerate MedTech from a mid-single-digit player into a higher single-digit player as we move towards the end of the decade. I will point to some big catalysts, especially in our surgery business. Surgery is one of our larger portfolios. We are a dominant leader, both in the open and laparoscopic space. And we have an expectation to play a big role in the robotics space. As you know, we've submitted OTTAVA for approval. And assuming everything plays out, we expect that by the end of this year, we will be launching not one but two new surgical robotic programs, both with OTTAVA and MONARCH for urology.

Now what we don't expect those programs to be significantly accretive to growth in the short term, they certainly will be accretive as we move to the back half of the decade. So another good example of an important catalyst that will take us from a mid-single-digit player into a higher single-digit player as we look to the back half of the decade.

Your next question is coming from Alexandria Hammond from Wolfe Search.

A few more on ICOTYDE. Can you walk us through the investments you guys are making on prescriber and patient education? And how important do you think advertising will be to kind of engage those new patients who might be nervous to start on a systemic therapy? And then just as a follow-up as well, with ICONIC-ASCEND trial set to read out imminently, how important could this result be those ongoing commercial discussions?

The study you mentioned in the head-to-head against the TYK2 inhibitor is, I think, just illustrates the best-in-disease profile for ICOTYDE in terms of having both that high-level efficacy combined with safety in the once-a-day pill. How much the direct-to-consumer is going to matter, I'm going to let Jennifer answer that question.

Alex, it's safe to say that we are investing big in ICOTYDE to make sure that this brand can do all that it can do for patients. I think that the ease and the simplicity when you combine the clinical profile, the safety, the efficacy and then the ease of the product, we really believe that we've got a winner. And so we're investing to really get off to a very strong launch, that's with all of the appropriate field teams. Additionally, we've invested and built out what we believe are really best-in-class patient access and support services to help patients get on the medicine both get on and be able to stay on. And then we're continuing to evaluate the best way to make sure that both the clinicians, all the appropriate health care providers patients are aware of this important offering. So probably more to come on that, but please know that we're investing what we believe we're investing to win in this area.

Our next question is coming from Joanne Wuensch from Citibank.

Very nice start to the year. I'm going to pause for a moment on the ophthalmology franchise, in particular, your views on the U.S. surgical and U.S. contact lens market. I'm curious in particular about the almost 3% decline in the U.S. Surgical in the quarter and how to think about that recovery throughout the remainder of the year?

Joanne, thank you for the question. Vision overall, delivered a solid first quarter with sales growth of 3.6%, which is really consistent with our expectations. You will recall that business tends to be slower in the first couple of quarters and then accelerate throughout the year. We've seen that over the last couple and certainly, 2025 was no exception. Keep in mind that Q1 is typically our lowest quarter, and we're confident that we will see acceleration through the remainder of the year.

If you break it down into the two component businesses, contact lens grew 2.7%, driven by the ACUVUE OASYS 1-day family. And especially, as you heard earlier from Joaquin, the MAX multifocal products, and these latest launches really complete our family of daily disposables and are solidifying our leadership in the category with exceptional comfort, clarity and stability. And when I look to surgical vision, we grew 6%, driven by normal seasonality. We continue to see strong global momentum in premium IOLs led by TECNIS Odyssey and PureSee where we're outpacing the market globally, and this premium segment remains a key driver of value and differentiation.

I think to your pointed question on U.S. performance, if we look at Surgical Vision growth in the quarter, it was offset in the U.S. due to competitive pressures as new entrants came into the market, which is not unexpected given the fierce stature of this portfolio. We also continue to expect some seasonality in our business as growth won't always be linear. That said, we remain confident in our clinical position with TECNIS Odyssey. And as we prepare for the launch of TECNIS PureSee in the U.S. later this year. And we have seen extremely strong uptake of TECNIS PureSee globally, nearly half -- it's actually almost 0.5 million eyes worldwide have already experienced a clearer uninterrupted vision with this premium IOL and TECNIS PureSee, which received FDA approval, this quarter is the first and only U.S. FDA-approved extended depth of focus IOL with no warning on loss of contrast sensitivity, which is a huge game changer for physicians and the comfort they have in recommending an IOL. In fact, 97% of patients reported no bothersome visual disturbances like halos or glares, which can often occur with other IOLs and we're really excited about the launch of PureSee here in the U.S., which will give surgeons an important new lens option for their patients. And as we continue to focus on the premiumization of our portfolio, we firmly believe that the combination of TECNIS Odyssey, which is in the market and now TECNIS PureSee will be a key driver of value and differentiation. On the back of this, we can confidently say that we expect accelerated growth in the back half of the year for our Surgical Vision business and Vision overall, including here in the U.S. So thank you again for the question.

The next question today is coming from David Risinger from Leerink Partners.

So my question is on JNJ-4804 the coantibody. Could you talk about your vision for its role in IBD treatment paradigms and the readouts that we should be focused on? And then since others have asked multiple questions. Joe, could you just share the [ MFA ] sales like you did in the first quarter for INLEXZO?

Yes. Thanks for the question about 4804. So just to remind the audience, this is our coantibody therapeutic that combines guselkumab, our IL-23 inhibitor, also known as TREMFYA together with our TNF inhibitor, golimumab and we are in a position to potentially be the first with a coantibody therapeutic in the IBD space. Now even with the best of therapies, more than half of patients with IBD do not achieve a complete remission, and so we see for patients where monotherapy is not getting the job done to then offer this dual therapy, the combined therapy is a fixed dose combination. So the Phase II data on that in both Crohn's and Colitis, there were two separate studies will be presented in the coming year at a medical conference. So you'll have an opportunity to see the details of the data there, and that will provide more insights into the specifics around the most ideal patient populations for this kind of co antibody therapeutic. But we're really excited to move this forward now with pace. The Phase III programs are underway and really excited to then try to break through these efficacy ceilings that have limited how many of these patients who battle with inflammatory bowel disease are able to achieve a complete remission and really get that mucosal healing from their therapy.

David, thanks for the extra question there. We actually don't disclose the [ MFA ] sales at this point in time. So more to come on that. We actually have time for one last question.

Certainly, our final question today is coming from Matt Miksic from Barclays.

Great. And congrats again on a really impressive quarter and start to the year. So you mentioned INLEXZO a couple of times, and I know you've talked at length about it in the past. Just wondering if you could give us a sense of what the commercialization plan and rollout looks like for that, given it's a slightly different delivery mechanism than many of your other therapeutics and kind of where you are with that? Any metrics you can provide would be great. And thanks again.

Sure. So maybe as a reminder, despite recent advances in bladder cancer, unmet need in that area really remains significant and this is for bladder sparing options. There's almost 600,000 new patients diagnosed each year and another 400,000 that are recurring. So really, really big market opportunity. We've launched INLEXZO into the BCG unresponsive population and are really excited to be able to move forward in the coming years and to be able to broaden that population. As a reminder, we really designed the product to fit seamlessly into urology practice so that, relatively speaking, easy to insert and to retrieve and fits very, very nicely into practice. So how is the product doing? So INLEXZO's outperforming all the recent launches in the non-muscle invasive bladder cancer space. And that's based on kind of the unique patients that were treated in our first 6 months post approval. 1 in 5 eligible patients are starting on an INLEXZO regimen during the first quarter. And then what I think you really want to know is following our J-code approval which came at the beginning of April. What we saw in the first week was actually a over 50% increase in new patient insertions and the second week we that we have under our belt, we actually saw that jump up to almost 90% increase in new patient insertion. So consistent with what we've articulated on our expectations for this product once there's certainty reimbursement following the J-code, we're seeing play out in practice so far in the first couple of weeks. So very, very excited in that -- in the BCG unresponsive space and look to broaden that into broader populations

Yes. Just to remind with INLEXZO, we achieved the highest complete response rates ever seen for a therapy for non-muscle invasive bladder cancer achieved breakthrough designation from the FDA as well as the rapid review from FDA and in Japan, the PDMA accepted our submission based on the single-arm data, they've never previously accepted a submission based on single arm data just showing how exciting these data are and how much unmet need there is.

I would also draw your attention to INLEXZO is just the beginning. Right behind that, we have the IRDA, intravascular drug-releasing system, this has erdafitinib, that is a small molecule targeted therapy that addresses the intermediate risk non-muscle invasive bladder cancer population. There, we achieved in the biomarker-defined population, complete response rates north of 90%. And that device also custom designed to deliver that payload delivers medicine for 3 months compared to INLEXZO, which is 3 weeks. So we just keep getting better and better as we do the next iteration, the next iteration around this intravascular drug-releasing system.

And then in terms of our go-to-market model, this really represents the best of Johnson & Johnson and something that only a company like Johnson & Johnson with both an innovative medicine and a MedTech business. can do and bring to market. So in addition to the product that we've developed and the reimbursement and access support and that the sort of excellence that's coming out of the innovative medicine business, we've really been able to tap into MedTech and their world-class training institutes, their modular training that can literally go to the site of care. And so we're deploying that throughout the United States to make sure that urologists and their practices are up to speed on INLEXZO and fully trained to begin insertion for their patients as they deem fit. So really bringing the best of Johnson & Johnson to bear for this product.

Great. Okay. Thanks, Matt, and thanks to everyone for your questions and your continued interest in our company. I'll now turn the call over to Joaquin for some brief closing remarks.

Thank you, everybody, for joining us today. As you have heard, Johnson & Johnson has the strongest portfolio pipeline in our history, and we are relentlessly focused on innovation that is delivering real impact for patients. With our Q1 performance, we are off to a strong start, reinforcing our confidence in the year ahead and our ability to raise the standard of care in our 6 key focus areas. Thank you for your interest in Johnson & Johnson. We'll see you at our late December, too, to give you more details on these new products that you were asking and enjoy the rest of your day.

Thank you. This concludes today's Johnson & Johnson's First Quarter 2026 Earnings Conference Call. You may now disconnect.

Still morning. So good morning, everybody. Very happy to have with us this year from J&J, Hani Abouhalka, Group Chairman of Surgery, otherwise known as the man behind the robot. And my name is Matt Miksic. I cover medtech here at Barclays.

So exciting times at Johnson & Johnson in surgery after a bunch of years, we won't go backwards. We'll go forwards, but a long path with lots of twists and turns, but now kind of a final stretch of potentially getting this robot to market.

So maybe with that kind of perspective, we get a lot of questions sometimes on why does J&J want to have a robot, why do they need to have a robot? What can the robot add? Maybe -- so I know that not everything you put together was in response to the marketplace. But at a high level, maybe frame the sort of objectives of the project and the strategy behind the project as you're currently executing it.

Well, good morning, everyone. Thank you, Matt, for the invite. I'm incredibly honored to be here representing J&J and the many thousands of people working on surgery. It's an incredible conference, and we're glad to be part of it. So thank you.

For people that don't know, maybe I'll spend a few minutes about talking about J&J MedTech surgery. Our company was founded actually in surgery more than 140 years ago. I'll -- it's an anecdote that actually will resonate here. Our founder, Robert Wood Johnson, was attending a Centennial Expo to celebrate the 100th anniversary of the independence of the U.S., which is this year is 250 years. He walked in and Sir Joseph Lister was talking about antiseptic techniques for surgery.

And our founder found an incredible opportunity to go back to New Jersey and years later, found J&J with incredible technologies that changed surgeries since then. Our first catalog had antiseptic gargles, had antiseptic style sutures, which back then, if you walked into OR, it was 50-50 if you survive. And that was the first moment where actually surgery changed.

And we've been at the forefront of surgery changing ever since, whether it's open laparoscopic -- whether open safe surgery across the world, whether it's laparoscopic surgery in the '80s and '90s. And today, we're super excited to be working on bringing robotic surgery to the market.

Why the excitement? It starts off by taking a step back and looking at the last 25-plus years, incredible progress has happened in robotic surgery. But when we talk to surgeons, surgical teams, hospital CEOs, they tell us a lot still needs to happen. There's still a lot of unmet needs. And it starts off really a basic premise from a design perspective.

The world of robotics globally across all companies is stuck in 2 worlds, either booms or cards. And we think there is a different approach to this. We believe there is a unique approach to this. And that's why one of our big bets and choices have been around design. And that's why when we look at Ottava, we're bringing a robot that is actually the table.

The arms are integrated. We believe that design other than -- and if you remember, Matt, you saw it, it's beautiful. But other than it's being beautiful, it also have incredible implications on workflow, on reducing the tension and friction between the surgical team and the robot.

And we believe we've addressed that with our design philosophy and principles. Other than that, we're also excited to be the leaders to really take this forward from here around across all surgery. And that's why this means instruments. It means our digital ecosystem with Polyphonic. We were the company that disrupted and changed surgery over the last 140 years, we believe we're at the moment where we will take this forward from here also.

Okay. So a couple of follow-ups. There's been kind of an evolution of thought in the last 10 years about what the next robot should look like with Intuitive in the marketplace. It's big. Maybe there was a time when maybe there still is a time when folks will say, well, robot should be smaller, maybe smaller for an ASC. There's a number of those filtering through different levels of commercial strategy now from other competitors like separate arms and single arms or more limited footprint. You took the strategy of retractable arms and essentially a bed that can be used for laparoscopy or for robotics. So maybe talk a little bit about why that was important.

Yes. And first, I have to tell you, the physics and engineering behind it is incredible. Our people worked really hard to solve for something that we felt is important other than the design principles that I do believe is important. We felt that having an ability to create space and give back to hospitals and the surgical teams is incredibly powerful.

Think about it this way. Right now, if you go to a hospital, robotic ORs have to be dedicated to robotics. We believe that OR should be ORs to serve all surgery, whether it's open lab and robotics. Our solution, Ottava, the arms are integrated on the table. When you don't need them, they're stored invisibly, you don't see them. When you need them, you can deploy one or multiple arms based on the need of the surgery.

We think that's very powerful choice, and that's incredibly powerful for surgeons to be able to do that. But we didn't stop there. We believe that the ability to have the arms integrated also allows surgeon to use gravity to do manipulation of organs. That's something that's native with our design. You don't need to unlock or relock, you don't need software. The architecture of it allows using gravity, which is something surgeons use comfortably in the laparoscopic minimally invasive setting.

But the other things also we're excited about from Ottava, and that's why we're excited about going forward is also we're bringing our instruments, our technologies that are trusted across open and lab exclusively on Ottava. Recently, we launched in the U.S. last year and this year across the world, our ETHICON 4000. It's our most secure staple line ever. That is important from surgeons and their teams because think about it.

There are surgeons today, 25 years into robotic surgery that they choose to go to the table and do a manual firing using one of our instruments because they trust that staple line. We believe having that consistency of experience across open lab and robotics is very powerful from a surgeon, surgical team perspective, but also from a hospital perspective, you know when complications happen in surgery, and unfortunately, still 25% of surgeries come with post-surgery complications, having a trusted staple, secure staple line is something that will be different and important, not clinically but also economically. We believe that's something that Ottava will also bring.

Last but not least, we also believe that an area of where we looked at where it is today and what needs to go is digital surgery. And we believe that by creating polyphonic from the ground up, it's something that allows us to connect surgery across agnostic from the technologies, our technologies. It's what hospitals and surgeons need and expect, and we can talk about that a bit later also.

Sure. And then maybe you mentioned the ability to keep the OR flexible. From a hospital's perspective, they're performing a certain number of laparoscopy procedures and a certain number of robotic procedures, they're already using your instruments in laparoscopy and elsewhere. What does the introduction of the robot into that platform, let's say, a typical platform that has a mixture of those technologies. What's the value add for a hospital?

Yes. So if you look at the instrument side, I think having that consistency and experience across all modalities, we believe and we know it will be differentiated for surgical teams and hospital administrators from outcomes and procurement, all of that. So that's one lens.

The second lens, if you think about how important a minute in OR is having your ORs work efficiently across all modalities is important. So there is the lens of -- we believe that the table being the robot gives flexibility to ORs across the world where our robot can work natively, if you want. But the second piece in many hospitals, what we hear is that robotic ORs don't work as efficiently as open or lap ORs.

So we believe instead of "having ORs that are dedicated to robotics" and if a case is canceled or postponed, that OR is idle. We believe having that OR being an OR for all surgery is quite powerful. Then the third pillar of this is also this also gives the surgeons flexibility to deploy different arms at different times based on the needs they need.

So not only we're bringing robotic arms, robotic ORs to be in ORs, which is something we believe will work to improve workflow, will improve efficiencies. And that's something surgeons and their teams tell us is important. But most definitely, hospital administrators and CEOs, this is an incredibly important asset for them and have it be working efficiently with less friction, with less special cases is quite powerful.

Okay. That makes sense. And then the natural question, any time someone comes out with a less obstructive, smaller footprint robot, everyone looks at that and says, well, that's got to be great for the ASC because it's smaller. So I'm assuming there's some amount of ASC benefit that you're thinking about and maybe clinicians are thinking about with Ottava.

One of the other elements, of course, is what it's going to take to get this in the door. And so maybe that's changed. The market leader has changed the way they bring their products to their additional systems to hospitals, more leasing, more contracting. Maybe talk a little bit about what you're anticipating that way.

Matt, we're not -- as you would expect, we're not going to share specifics around our commercial launch. There'll be more to share as we come, but I'll say a few things. If you look at our history, when we bring innovation and technology, we bring it with the sole purpose as an Arcredo to serve patients and nurses and surgeons. And we do it across the world. We do it everywhere we are. We're present in more ORs than any other surgery company out there. So that's something that's deeply rooted in who we are and what we do.

So our intention, like we've done in our past, is to be there to serve surgeons and patients where they are across surgery across the globe. We intend to win in surgical robotics, which means we need to be everywhere. Now the design choices we've made gives us some benefits, but not only in site of care, but even I can tell you, I've worked with Genome [indiscernible] across the world, the certain OR designs across different geographies, different regions are different.

So even in hospitals that are entrenched and tertiary centers, ORs don't look the same everywhere. We believe the flexibility of our design and how it fits will be a benefit regardless. But our intention is to serve and be where surgeons are everywhere and be leaders in that space everywhere.

Okay. So to drive utilization and benefit to the clinical team and the patient and so on. That makes sense. So other folks have -- we'll come back to the ecosystem in a second, but other folks have looked at this market and said, well, we don't want to go head-to-head against this market leader in maybe their power alleys or ways in which we think it's hard for us to make an argument that you should be using our technology.

You mentioned a couple in terms of the usability, flexibility, OR commitment. What in terms of the types of procedures again, this is a -- different companies are coming at this differently. Let's go where the most procedures are done in robotics or maybe let's go to a place in robotic surgery, where our design is particularly well suited to perform this procedure, maybe as well or better than the leader. Talk about your procedure strategy.

Yes. And I'd love to talk about that because we're very confident and excited about our strategy from an expansion and geographic indications. I'll talk about that. But also, I think it's important just to take a step back and understand what a defining moment this is because we believe this is the right time based on where we are to bring something that's unique, differentiated and innovative in the U.S. and globally going forward.

And I say that because a lot has changed and improved and good progress over the last 25 years, and we're thankful for that. And any progress in health care is something we cheer on. But also, we believe that listening and talking to surgeons, surgical teams and hospital in sellers, there's still unmet needs we need to solve for.

And we believe bringing this forward, we'll do that. I've been in medtech for 26 years. It's incredibly inspiring to see on the market, cheering from more competition to cheering for you to come in. I think that's something we cherish. And it's a responsibility and accountability we take seriously and doing it right will be something of the utmost importance. Takes me to our choices around expansion geographically and procedures.

I'll start in geography. We chose to come to the U.S. first. That was by design as you know, the U.S. is the largest market. It's a very sophisticated market. And that's a sign of confidence in our program, but also a sign of excitement to bring an incredibly innovative technology to the U.S. market. But also our approach there is to follow it as a close second in key robotic markets like Japan, like countries in Europe, Middle East and Africa.

So that's our lens from a geographic perspective. And what excites me there is being the leader in surgery across the world, we have incredible teams in commercial and education across the world today, and that's something that will help us do that with precision, with incredible partnerships with our partners across the world.

For the procedure expansion, we also -- what we did share is, first, we're going in first for an umbrella indication, and that's what our submission was for upper GI. And that's an umbrella procedure that covers key procedure in upper abdomen. That's exciting and different. And the second -- we also announced earlier this year that we got our IDE to go for inguinal hernia, which is one of the largest procedures in the U.S. and globally. We're not going to stop there, clearly. We have an incredibly strong regulatory team with our clinical team that's working on a rapid expansion from a procedure perspective after that.

Our intent is to be a surgical leader in robotics, which means we need a platform that works across different specialties, and that's what we believe we have with Ottava. And I don't want to miss also the fact that this is a double exciting year because we took robotics, specialty expansion, and this is with the lens of soft tissue robotics, but I don't want to miss also something really exciting happening for us in endoluminal percutaneous robotics, which is Monarch.

It was the first robot in the market for robotic endoscopy. And this year, we shared that we're also on plan to launch it in urology for kidney stones, talking about a new specialty new indication. This will be the first and only robotic endoluminal and percutaneous access for treating something that all of us know someone, friends or family, who have dealt with kidney stones. We think we're bringing meaningful innovation from a specialty procedure. So we're in it for the long term. We're in it to be leaders in a very exciting space for the future.

Okay. So maybe back to the ecosystem. So Intuitive has been building case history, put out case insights a couple of years ago. I think we're still -- as much as we hear about AI, I think we're still in the kind of like loading up Google Earth with data to figure out, okay, how are we going to use those, which I think for Google Maps was a bit more obvious, right?

But where are you in terms of aggregating your data, which is considerable on the laparoscopy side and then thinking about where the combination of that, as you described, and robotic will help starting building a -- I don't know, if it's the best route to -- for the patient or other kinds of features and data-driven value that you can give to clinicians and hospitals.

And this is an area that excites us, inspires us because, first, we're building it from scratch. Two, we have access and reach, and we know surgery across the world better than anyone, and that's incredibly powerful.

We have the trust of our partners and our surgeons to work with them on solving for this. And third and not least by margin, we also have the humility to understand that this is not a problem for one company to solve for. This is going to require a coalition of the willing, if you like, to come in and do something that's incredibly meaningful for surgeons, for patients for outcomes.

And we're building it from the ground up. And we made some choices that are very different than what's available today most solutions today are either siloed or directly linked to certain technologies or certain robots. I'll give you an example. In ORs on average, there's 7-plus software solutions. There's 5-plus data streams. There's 97% of surgeons that tell you they don't have and their teams, they don't have the right data at the right time to make meaningful difference, whether it's for workflows or for clinical decision support. And they say something needs to be better and have to be better, and we believe that.

So we made a bet on building Polyphonic. We created it with this approach of being open, secure, agnostic to whatever the data came from. Yes, clearly, it works seamlessly more with our products and technologies, but it's open to data from whatever it comes. And we're working with incredible tech partners, work with academia, working with hospitals to create the foundations, whether on building the data sets that need to be de-identified, structured in a manner that allows companies, academia, hospital, surgeons to build AI algorithms and automation to bring value that we have not seen yet in this industry.

I can tell you, everyone we talk to, they tell us is what is needed. And we believe what's available right now does not fall for this. We believe this is the right approach.

And everyone I talk to, whether it's CEOs of hospitals, nurses or surgeons, whether it's our tech partners, whether it's academic hospitals, whether it's 2 or 3 company setups, start-ups, this is what is needed. And I urge and ask everybody to come work with us on this journey. It's incredibly rewarding.

Okay. Well, that's exciting. And I mean, the first -- I know it's hard to pin down exactly where and when the benefit is going to come from sort of this seemingly obvious collection of all this historical wisdom and data and doing something with it. But what do you think will be some of the first?

Yes. I mean I'll give you a couple of examples. There are very "basic chapters" that are unfolding as we speak that are big unmet needs today, whether it's in education, whether it's using some of the capabilities to dynamically collaborate across centers, across hospitals. It's around integrating what's hours and hours of surgical video to use them in ways that they can train, whether it's performance analytics. These are very powerful use cases today that makes a difference.

But where the future is headed and what's needed, there's a lot of similarities will happen in other industries. Take, for example, the automotive industry. We understand that to get on a journey where whether it's decision support, whether it's intelligence-guided support, whether it's orchestration, you need to create data sets that are structured, that are identified, that are built on very secure privacy standard regulatory enterprise level, where you can make them available to bring the best of the minds of whether it's AI engineers, whether it's software engineers across the world to build something that not only will help that hospital that OR, but they can actually -- because it's built with scale in mind, that can actually be shared globally.

And the first use cases are exciting. What's possible from surgical video and data science and data engineering and data surgery of this HORIZON 2 and 3, I can tell you in the next 5, 10 years, we'll see stuff we've never seen possible. We've seen it happen in our industry. I go back, this is the right time to do it in surgery again. And I don't know, any better company to do it than us with the help and support of our partners.

Okay. So maybe if we roll forward a year or 2, what do you think investors will see from the surgical business? What will be the signs of success for Ottava as you get to the market and start rolling it out?

Yes. I mean I start by our credo saying when we serve our patients and our surgeons and our surgical teams, it's -- we take it very personal. We're very proud and inspired by that. We never lose sight of that.

Two, we talk about J&J being an innovation powerhouse. Some of the most exciting innovation is in surgery is in J&J, and I think that's something to be really proud of. And we have the [indiscernible] to bring it forward. But also, I start where it matters most, which is if you think about it, we have incredible businesses today that's making a difference in bleeding, in leaks, and solving big issues.

25% of surgeries have complications today. We have a long way to solve for this. What I want to make everyone know is when we bring all our technologies across all of surgery, we will partner with surgeons, hospitals and CEOs to make sure that we're the company that will take it from here and solve for what's next. And the biggest intent starts in robotics specifically you asked about that is to lead in that space.

And the best measure of success other than serving patients, bringing incredible innovation, how competitive we are in our placements going forward. And when we do all of this, we feel incredibly proud and the people are working on something that, once again, like we've done in our past, will change surgery once again.

Okay. So we're down to just about at the bottom here, but I'd say automation, just I'll leave it on this sort of this is a future topic. It's been -- it feels like a future topic, but I think we've been talking to surgeons about it for 10 years, like when does surgery start to take some element of automation. And so you're just about to begin to launch your robotic platform. Is that 3 years away? Is it 5 years away? And what do you think the demand is for that kind of?

Yes. And I'll end what I started. It's super important to realize when you're in a moment of history where you really believe it's a defining moment. We've seen in other industries. I think the acceleration and the intersection of science and technology. Health care will always be driven by incredible science, will always be driven with incredible surgeons and nurses who are dedicated to make a difference for patients.

I think we're entering this moment where bringing the best of both worlds. We're going to see innovation in the next 5 years like we've never seen in the last 50 years. And someone with the resources we have, the talent that we have, the engineers that we have, the scientists we have, the educators that we have, the commercial folks that we have, we just want to partner with our surgeons and our -- whoever is interested in this journey to create what's next. And that's why the future is super exciting. And I can't wait to share with you more and with everyone here what's coming in the coming weeks and months.

All right. Well, I look forward to hearing about it.

Matt, thank you so much for the time. Thank you, for your time.

Good morning. I'm Josh Jennings from the TD Cowen Medical Devices Research Team, and we are thrilled to have Executive Vice President and CFO, Johnson & Johnson, Joe Wolk, joining us. Joe, it's great to see you in person. Thank you for participating this year. It's been a little while since I've seen you in person. So great to see you.

It's nice to see you, Josh, and thank you for your interest in Johnson & Johnson. Certainly do appreciate it.

Absolutely. We're going to focus a little bit on the high-level strategy and the MedTech franchise. That's our wheelhouse. I know you guys have a much bigger wheelhouse with the pharma unit. It's been an incredible stock performance year in 2025 for Johnson & Johnson, and a lot of that was driven by both MedTech and Innovative Medicines, but Innovative Medicines is kind of battling through. The STELARA LOE headwind was quite impressive, and you guys had laid that out that, that was probable and you executed and delivered. So that's been a fantastic run, and there's more to go. I don't know if there's any high-level thoughts that you want to share on the Innovative Medicines franchise or we can just dive into...

No, Josh. Thanks for the kind words. I do think it has been a nice run for Johnson & Johnson stock. If you think about the STELARA loss of exclusivity, some questions in our MedTech business, how would the pipeline in pharmaceuticals emerge. Those cards kind of flipped over about this time last year, and they've all been flipping over with some face cards and some ACEs, as I like to say, in there. So if I think about our pharmaceutical competitive set, the LOE event is still in front of a lot of folks, where for us, it's a rearview mirror event.

It just speaks to the breadth and depth of our pharmaceutical team in terms of the products that they have, the products that are emerging. If you take out the STELARA loss of exclusivity impact, that business grew close to 15% last year, right? And we're still only the second company -- we're still the only company, quite frankly, and we've done it twice now to overcome a loss of exclusivity of that size, the first time in 2018 with REMICADE and now last year with STELARA.

The MedTech story is also a good one, though. I think if -- we would -- a couple of years ago, we probably had some spotty performance. We made some really nice acquisitions with Abiomed and Shockwave to bolster our cardiovascular franchise. The growth is much more predictable now. We've got strong holds, obviously, in cardiovascular, in surgery and vision. And then we announced late last year that we would be separating our Orthopedics business. That's still a very good business. It just doesn't fit into what Joaquin and the Board desire to have in terms of our portfolio for higher growth, higher-margin businesses going forward.

In terms of share performance, we've been pleased. I've personally been pleased for the organization because there's been a lot of effort that's gone on over the years in advance of the STELARA loss of exclusivity and some of these other events. But make no mistake, we still have work to do, right? So it was a great 1-year return. But if you look in 3 and 5 years, we still have some ground to make up. And so we like to say, as Joaquin likes to say, 2025 was a catapult year. We think it was a catapult to really have a nice series of years here ahead of us with a line of sight towards double-digit growth as an enterprise.

And that's an intriguing and compelling metric, the double-digit growth target you guys put on the tape, and we'll dig a little bit into it. But I think we want to also venture into the discussion on the MedTech unit and Joaquin Duato has stated that -- I think in early days of his tenure as CEO that the turnaround of the MedTech unit would be a part of his legacy as CEO. I mean, you mentioned some of the M&A initiatives and you're building out that cardiovascular business, some high-growth assets, separating lower growth DePuy Synthes ortho business. And overall, that should drive the weighted average market growth rate of the MedTech portfolio higher, both of those initiatives. And I mean, how does the strategy evolve from here? You mentioned the focus on cardiovascular, surgery and vision subsectors? I mean, do you double down on the cardiovascular build-out or consider additional silos outside of those 3? Any just -- I mean, I'm sure there's multiple strategies that are being tossed around and discussed, but any help just thinking through as you talk about moving to that double-digit growth trajectory for you?

Yes. Listen, I think we feel really good. Let's stick with MedTech about the portfolio that we have in MedTech. If you think about Vision, in the end of '23 and '24, that business was lagging. We have market leadership in contact lenses, but we didn't have a lot of new innovation coming out. Last year, we were able to build upon the ACUVUE brand with our OASYS 1-Day MAX multifocal and then multifocal for stigmatism. That is kind of how people live. It's still a very underpenetrated market with only 10% of people needing corrective lenses using contact lenses. So we think there's still a big opportunity. We are significantly the market share leaders, but that market share is going to depend on the innovation that we continue to bring forward. We saw some of those results last year.

On the surgery side in Vision, I would say we had a really nice year, approached double-digit growth with TECNIS, again, another traditional brand, but launching Odyssey and PureSee overseas and then PureSee will come a bit later this year for people who suffer from cataracts, the most prevalent surgery of all surgeries out there. Again, a very underpenetrated market. So we think we've got the right cadence in Vision.

With Cardiovascular, Abiomed and Shockwave, I think, were very strategic acquisitions. They did bolster our position, I think, in a responsible way with respect to adding to the Cardiovascular portfolio, adding to our success in EP at the time and acquiring businesses that, quite frankly, were clinically differentiated and had nice competitive moats around them, right? What we like about those 2 units is they continually are looking to innovate. Probably the best example I've seen of innovation and just having that constant mindset has been Isaac out at Shockwave. They're always thinking about how can they make that outcome better.

With respect to Electrophysiology, I think it was -- after Q1 results last year, I think people were writing off our EP business for fourth or fifth place. You saw how Tim and Michael Bodner -- Tim Schmidt and Michael Bodner kind of focused the team to make sure that we found our footing within the fastest-growing segment of pulsed-field ablation to complement our leading position in RF that is tied to our CARTO system as well as some ultrasound capabilities, and we are vying for. We're still #1 today, and we have every intention to maintain that position.

And then with Surgery, I think you've seen kind of -- the business has done well on the wound closure side, the biosurgery side. Maybe where we've lacked a little bit in recent years is the instrument side of the business, and that's been impacted by robotics. We were proud to announce the filing of a de novo submission to the FDA for OTTAVA, our soft tissue surgical robot, which we hope will get approved later this year, certainly no later than early next. We were late to the game on that one. We should have -- given the presence that the Ethicon brand had in the OR, we should have been there sooner. But it's a very complex machinery to develop. We've now developed the expertise, really a tremendous credit to Tim, focusing the organization to make sure we set a time line, we hit it. And we think we're going to come out with a differentiated product. If you think about what that's set up to do, there's integrated architecture. So the arms are part of the table. That reduces the overall footprint in the OR. There's no carts. There's no boom. So we think that's an advantage. It's got twin motion. So the arms and the table move together. That means there's no repositioning or stoppage. The patient is kind of positioned as they need to be, making surgeries more efficient.

We do have that instrumentation that I spoke about in Ethicon. It's still highly revered in the operating room. As matter of fact, most robotic procedures today still utilize some form of Ethicon, Johnson & Johnson instrument.

And then lastly, we're going to surround it with some digital capabilities and digital ecosystem, we like to call it with POLYPHONIC, where we collect not just value from the hardware, but also the data and the insights that come from these procedures, making the next procedure better than the last. So we feel pretty good about where that all stands. And while it's important to have the OTTAVA robot approved later this year, we're not overly hyped up or overly counting on it from a financial performance point of view. We think it's much more important to get the launch right, get the feedback from 10 to 25 accounts, whatever we place in early on to create that buzz in the market as opposed to have a failed launch. So we're going to go slow to go fast. And I think that's critically important when you think only 8% today of surgeries are done with some robotic capability. So there's a lot of room to run yet. These are early days. That will be -- we're aiming to make sure that, that's a significant pillar of growth for the next decade.

No, it's been a nice turnaround, and there's clearly some momentum in play as we're moving here or already in 2026, credit to your team and Tim's leadership. And then just getting back to the out-year corporate-wide double-digit performance level that you guys cited is attainable. I mean, is it -- by our math, you guys have kind of laid out the current 5% to 7% growth rate for that MedTech unit ex ortho that could move to the high end of the range. But then potentially it seems like it may need to accelerate to contribute at the level to get the entire franchise to doublt digits. But I mean, is that the right assumption that potentially you guys can get north of 7% for MedTech and does that include any external business initiatives and assets that you guys are bringing into the M&A channel?

So at the risk of not getting Tim mad at me, I won't sign them up for any numbers. We're going to have an Investor Day in December of this year. The Orthopedics separation does add about 75 basis points of growth, about 75 basis points of margin to the overall outlook, as you mentioned. That's still a very, very good business, I will say. It just doesn't fit into the portfolio that Joaquin and the Board are desiring to have with higher growth, higher-margin businesses. But you think about what they were able to do just in the fourth quarter alone, right? I think a lot of people are probably expecting some distraction at the announcement. They were able to post 4% growth. I think with the right focus, and believe me, Namal Nawana is a really good leader for this space. He's already demonstrated that. He has the organization energized and focused. I think with the right focus, they could be 6%. And they won't battle against the rest of J&J for capital deployment, right? So this is a strong business, profitable. It's got good cash flow. It's going to do probably better on its own than it would under the guys of Johnson & Johnson.

And I realize I didn't answer one of your questions about M&A and broader. The way I'd like to answer that, there's -- for us, it's more opportunistic than it is a particular time in the market, macro, right? So a lot of times, we'll hear, well, it's a bad environment for M&A. It's a good environment for M&A. We kind of look at it very simplistically, and 80% of the discussion with our Board of Directors is about what's the strategic fit. Why does Johnson & Johnson have some unique scientific expertise, scientific capability, maybe it's a commercial capability or global reach that makes that asset better in our hands than where it currently resides. And then if that kind of box is checked, then we'll go to the financial discussion, making sure that we reward shareholders for the risk that we're bearing on their behalf.

But the great advantage I have, Josh, in my role is we have a lot of conviction and confidence in the assets that we have to be #1 or #2 in the market, but we're very disciplined in the pursuit of new assets, right? So we consider ourselves portfolio managers. That's a key responsibility for the executive committee, but we don't do things out of desperation. And that's a really nice place to be, especially when you have a AAA rating, you're generating more than $20 billion of free cash flow. We have license to do just about anything we want. We want to make sure that we do that in a way that people can look back a few years later like we are doing with Abiomed, Shockwave and although it's early days, intracellular and saying, boy, they made the right move and that asset is performing better.

Great. And just on the opposite side of M&A, just portfolio optimization, some pruning. You guys have been doing that annually, I know, in some bigger moves than others, including the separation of ortho that's not necessarily a pruning as you just described, right, what I wouldn't label pruning, but I mean, is that part of the portfolio, being active portfolio managers. I mean could other lower growth units find a new home or...

I guess over time, right now, we really like the construct of the 3 franchises, if you will, in Innovative Medicine, Pharmaceuticals and then the 3 franchises in MedTech. And all of them right now represent really solid growth with really strong margin performance. So we like the construct of our portfolio today. Will we always look to add? Yes. I mean if you just look back over the last 3 years or so, we deployed about $56 billion in capital on acquisitions, 3 of them made up $45 billion. We did 20-plus acquisitions with the remaining $8 billion to $9 billion. Those are the ones that really drive value. And those are earlier stage. They don't get headlines when we do the deal. But they often make headlines when the product launches or when we have success with the product. So we're going to look to continue to do that balance of earlier, smaller stage deals to tuck into our business, but could become very, very big platforms.

Maybe we could hone in a little bit on the near term. At your fourth quarter call, you issued 2026 guidance. I think for the MedTech unit, the message, and you don't guide specifically to Innovative Medicines and MedTech. But 2026 could be better than 2025 for the MedTech. And you already kind of described some of the drivers within cardiovascular, vision and surgery. But maybe just review some of the fundamental assumptions on the macro side, procedure volume growth. It seems -- I think your message is that there should be sustainable kind of momentum, maybe not a surge in '26, but maybe not a real decel CapEx environment, purchase environment in the United States by hospitals. Anything else you can just review and share any updates to the macro thinking?

Yes. I think in terms of our business, I would say we do benefit from just an accounting calendar phenomenon with a 53rd week. So we've got almost a point of growth there. But even when we subtract that out, it still portends to be -- we expect a better year out of MedTech. One, I would go to the cardiovascular platform, specifically in electrophysiology, right? It took us a couple of quarters to find our way in pulsed-field ablation. Despite all the mapping capabilities that we have, despite our leadership in RF, we were slower to the market with PFA. And then we had a little bit of a misstep with a pause at that point in time.

Just to speak about that pause, that was the responsible thing to do. And as it turned out, there was nothing malfunctioning with the unit itself. It was a matter of updating the IFUs, the instructions for use. And I think that built credibility, not just for the platform, but for Johnson & Johnson with electrophysiologists. So that was a smart move. We continue to innovate on that platform. But we will do better than what we did the first half of last year in EP, specifically in PFA.

With respect to Vision, I think you're going to continue to see the growth, the market leadership. I know on the contact lens side, we're looking to parlay some of that innovation we launched last year into better market share even though we already are the market leaders. And that's where I would point to in terms of our improved performance.

That makes sense. And...

Listen, I shortchanged orthopedics there, but orthopedics was flat last year for our business. They will be part of our '26 results. We expect something better than that out of them.

And there is, unfortunately, a conflict in the Middle East ongoing. I know it's very, very early days, but is there anything to share just in terms of Johnson & Johnson's business over there? We hope and -- everyone is safe from the J&J franchise and others, but...

Yes, that was really -- it is early days, Josh. I can't comment really with respect to the impact on the business. Some of the -- being so geographically diverse, having 28 platforms or products that generate more than $1 billion in revenue. We're not subject to any one dynamic per se. But our priority since Saturday night has really been the safety of our employees and people in the region, and that's really where we're still focused at this point in time. I wouldn't anticipate material impacts to our financial performance.

Okay. Okay. Maybe just circle back on some of your comments on your PFA franchise and the Biosense Webster franchise as a whole doing better than last year. I mean, as you described, there were some pauses in the PFA launch and you guys made some corrections. I guess my follow-up question is really is on the pipeline. I think you have dual-energy STSF and OMNYPULSE in development and coming on board in the coming quarters and even next year. Is that enough to build out your portfolio? And I'm sure there's other pipeline initiatives ongoing, maybe new waveforms, new modes of energy delivery. But is the message that you guys are comfortable with your current arsenal of ablation catheters? Clearly, you guys are still #1 and super strong on the mapping side and some of the ancillary technologies like intracardiac ultrasound, but focusing on the ablation catheter side of the portfolio, is that -- do you guys have what you need for the next 2 years to maintain that market leadership?

Yes, I do think. So you mentioned STSF dual energy that's already launched in Europe. We're getting some really good feedback in terms of the familiarity with how it's handled. Certainly, it's important for extending our leadership in point-to-point ablation, giving the users that dual modality for energy selection. So we expect in the first half of this year that we would be able to launch that. And then with OMNYPULSE, the IDE trial will be completed likely again in the first half of this year. You might have seen in recent weeks up here in Boston at an Afib conference some really compelling safety data, no safety events whatsoever. So there was no MRI detection of cerebral lesions or emboli, no worsening, no new neuro events. So we feel pretty good about the next 2-year to 3-year time frame that you mentioned.

I do appreciate you mentioning CARTO too. We do think that is the gold standard in terms of mapping. We think that it is important with all the catheters we've launched that there is -- it's easily integrated into what that mapping system does. And because it's so important, we call it the backbone of our electrophysiology franchise. We continue to innovate there as well. So we've got SONATA coming out, CARTO [indiscernible], likely over the coming quarters. That will add additional computing power. It will provide AI enhancements, better visualization, and it all leads to better outcomes. Some of the data that was recently shared in a publication was that they took 2,900 procedures that utilize CARTO, 2,000 that utilized our competitors' mapping, and there was a 61% reduction in terms of readmission for arrhythmia events just post 30 days after the initial procedure. We think that really speaks to just the outcomes that the CARTO mapping system drives. And it goes with something that's probably understated from us, and that's really the mappers and the clinicians that support these systems. So we've got 5,000 mappers. They are part and parcel to the success of all these procedures, and they're highly respected in those settings. And that is a great advantage for Johnson & Johnson.

And I think your team made the decision to open CARTO to integrate the competitors' ablation catheter technologies, I think maybe in 2025. I think by the time of HRS, you guys have made that move. And with your installed base, that's been a nice win, I think, is our understanding. I mean, is that the expectation going forward that the CARTO mapping revenues will be able to also be enhanced by when other competitors' ablation catheter technology is used.

Yes. I mean, hopefully, it's with our catheters, right? To be candid with you, that's kind of the goal here. But yes, I think that's one way to benefit. But there is just a nice seamless interchangeability, integrate it with our CARTO platform with all of our catheters. But yes, we thought it was the right thing to do to open that up.

Understood. I wanted to circle back to some of your comments on OTTAVA and the overall robotics effort or initiatives by Johnson & Johnson. And you have MONARCH as well. You have VELYS and VELYS will go with the orthopedic separation. And I think on -- earlier this year, Joaquin relayed that in terms of revenue contributions from OTTAVA and MONARCH, I know you have MONARCH in a pulmonary indication already, but becoming more meaningful, maybe kicking off in 2028. Is that the right way to think about? Maybe just walk us through, you submitted, you get approval, you need to have the launch, but maybe 2028 is the year where you start to see impactful contributions for [indiscernible].

That's what makes Joaquin so good because he's pushing the team. From a financial perspective, that line of sight to double-digit growth is not heavily dependent on OTTAVA, right? And I know Joaquin is thinking this way, too, as is Tim Schmidt and the leadership team. We want to make sure those early launches are done extremely well. That will create the buzz in the market. Given there's only 8% penetration today, we're thinking about this as a pillar of growth for the next decade. So when you hear a line of sight to double-digit growth, you don't have to be overly concerned about that coming from OTTAVA. We've got so many other platforms in both the pharmaceutical and MedTech side that's going to drive that growth. It will be a contributor. Don't get me wrong because you're going from 0 to something. But getting it right out of the gate, I think, is much more important in terms of creating longer-term buzz, longer-term value for the franchise overall.

And in the recent past, I think over the last couple of years, you and your team have called out some assets in the Innovative Medicines business that were underappreciated by the Street as you guys peruse the out-year estimates that were in play. I was hoping you'd be willing to maybe do that same exercise for the MedTech franchise. Is there any product lines or pipeline products that are underappreciated and just not be incorporated into the revenue growth trajectory of this MedTech franchise?

So I'll partially answer that. So I'll do a little bit of an advertisement for December 8. We'll have an Investor Day as long as I get license from the Investor Relations team to show a chart like that. I will certainly do that on the pharmaceutical side, and I plan to do it for the MedTech side as well. I would say it's a different equation because hundreds of millions of matter on the MedTech side where it's difference of billions on the pharmaceutical side. But in looking at that in advance and some of the preparation that Darren and I have done for that Investor Day, I would say consensus is a little bit shy on the cardiovascular side. And then I would also say probably a little bit shy on the surgery side. So we'll give you some specifics. At least we're planning to give you some specifics in December, but that should give you some appetite as to where there may be a disconnect in '28, '29.

Okay. I appreciate those early clues. With the MedTech unit fully stabilizing and gaining momentum over these last couple of years. I was wondering if you could just talk about the commercial organization. I know it's big. There's a number of -- the 3 MedTech silos and then business units within. But maybe just talk about the stability. Are you seeing any lower attrition rates from sales reps, general managers of businesses. I mean, I think with success, you typically get more stability. And then had that been an issue in years past 2, 3 -- I mean more like 3, 4 years ago? And has that stabilized and have contributed to some of this momentum that's being generated?

Yes. I think the simplest way I could put that is Tim Schmidt is doing a great job with his leadership team, right? You've got the right folks running our vision, our cardiovascular and our surgery units. I will say that because of the orthopedic separation, we're very cognizant and mindful just as we were with the consumer health separation of stranded costs. So we are taking an opportunity to look at the organization, are we rightsized for what the organization will be in the future. You may recall, we were pretty aggressive with the consumer health separation in terms of -- we didn't even have a chance to talk about stranded costs after the separation because we had gotten rid of them.

It was a different, and I would say, even easier separation because we were taking a segment out of Johnson & Johnson and a segment that really didn't have a lot of interdependencies with the other 2 segments. Here, we're taking certainly a business out of MedTech and then taking that business out of Johnson & Johnson. So there's a lot more operational dynamics with that, but it also gives us the opportunity to look at our cost structure and make sure we're utilizing new capabilities, whether they be AI or just advancements in terms of the information that we receive to get a little bit leaner in terms of supporting the R&D budget as well as improving EPS down the road.

Appreciate that. Just a couple of minutes left here, but I wanted to touch on operating margin guidance for 2026 here. You're calling for, I think, at least 50 basis improvement in that pretax margin. Maybe just walk through the major drivers of margin improvement. And just this pre and post ortho separate for MedTech, I mean, there seems to be some outsized margin expansion potential from the MedTech business, especially as you get some benefits from stronger revenue growth, volume contributions, et cetera. But maybe overall corporate-wide and then maybe hone in on the MedTech business.

Yes. I think some of it relates to my prior answer with respect to getting a jump start on some of these stranded costs. So we'll be able to take some of those out this year that will help improve margins. I had higher hopes, I got to be honest with you, in October for maybe something better on the margin profile. We, quite frankly, owed you guys 50 points from last year. We said it was going to be around 300 basis points. We came in about 250. We just had so many good opportunities to invest in some newer launches on the pharmaceutical side, specifically INLEXZO for bladder cancer, ICOTIDE for psoriasis, RYBREVANT LAZCLUZE for lung cancer as well as getting a commercially ready organization for the launch of OTTAVA sometime in the near future, right?

So we wanted to make sure we weren't being penny-wise and pound-foolish and for -- because we were meeting the other metrics, we said, let's make that decision to still meet targets that the Street expected from us, but have the opportunity to invest for the long term. We did that.

I did have higher aspirations, I would say, in October, November. But you've got to remember, we came out with 50 basis points of improvement. We still, I think, exceeded what consensus was for EPS for 2026 in our guidance. And that was digesting probably higher tariff costs than what the analysts were assuming. It certainly didn't have any estimates for the MFN deal, and that's all price. That's all margin that's gone away, and that was not trivial. So we felt pretty good about coming out with the guidance we did, although I'd hoped it was going to be higher at one point to be able. To digest it really speaks to the strength, the breadth and depth of Johnson & Johnson these days.

Well, that's about to wrap it up there, Joe, but thank you so much for the discussion, taking my questions, delivering on these answers and helping us think about 2026 and beyond for Johnson & Johnson and specifically the MedTech franchise.

It's always a pleasure, Josh. Thank you very much for your interest.

Good morning, and welcome to Johnson & Johnson's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

This call is being recorded. [Operator Instructions]

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

Hello, everyone. This is Darren Snellgrove, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the fourth quarter and full year 2025 and our financial outlook for 2026.

First, a few logistics. As a reminder, today's presentation and associated schedules are available on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com.

Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. We're cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. The description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2024 Form 10-K, which is available at investor.jnj.com and on the SEC's website.

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 Duato, our Chairman and CEO, will discuss our business performance and growth drivers. I will then review the fourth quarter sales and P&L results as well as full year 2025 results for the enterprise. Joe Wolk, our CFO, will then close by sharing an overview of our cash position, capital allocation priorities and guidance for 2026 as well as key milestones and qualitative considerations for 2026.

Jennifer Taubert, Executive Vice President, Worldwide Chairman, Innovative Medicine; John Reed, Executive Vice President, Innovative Medicine, Research and Development; and Tim Schmid, Executive Vice President, Worldwide Chairman, MedTech, will be joining us for Q&A.

To ensure we provide enough time to address your questions, we anticipate the webcast will last up to 75 minutes. With that, I will now turn the call over to Joaquin.

Good morning, everyone, and thank you for joining us. I'm excited to discuss our very strong full year results. We said 2025 would be a catapult year for Johnson & Johnson, and that's exactly what it was. It was a year that launched us into a new era of accelerated growth, fueled by the strongest portfolio and pipeline in our history, Johnson & Johnson today has a leading and expanding position in each of our 6 key businesses: oncology, immunology, neuroscience, cardiovascular, surgery and vision. In each of these areas, we have multiple differentiated assets to drive growth and a strong competitive advantage, which you can see in the success of our recent launches.

In recent years, we have increased our focus on areas of high growth and high unmet need, and we will continue this transformation with the planned separation of our orthopedics business.

In 2025, we invested over $32 billion in R&D and M&A, including the acquisitions of Intra-Cellular Therapies and Halda Therapeutics. We also initiated billions of dollars in new, state-of-the-art manufacturing facilities in the U.S., which will accelerate delivery of our next wave of innovation. These moves fuel our confidence that growth in 2026 will be faster than in 2025, and we have line of sight to double-digit growth by the end of the decade, which is notable as Johnson & Johnson is the only health care company that will soon deliver more than $100 billion in annual revenue.

How is that possible? It's possible because we have tremendous strength and depth, both in Innovative Medicine and in MedTech. We are different from other companies. We are not focused on 1 or 2 growth drivers. In fact, we now have 28 platforms or products that generate at least $1 billion of revenue annually, and that makes our growth more sustainable. This, together with our strong balance sheet and free cash flow, creates the resilience and durability that will power our future.

Turning to our results. Over the full year, we delivered 5.3% operational sales growth. The strength of our commercial execution and relentless focus on innovation drove strong momentum throughout the year, firmly placing the STELARA LOE in the rearview mirror. In Innovative Medicine, we reported operational sales growth for the year of 5.3%. Full year sales for our pharmaceutical business exceeded $60 billion for the first time with 13 brands growing double digits.

The foundation for these results and for the acceleration we see ahead is our unrivaled portfolio and pipeline. In 2025 alone, we secured 51 approvals and filed 32 submissions across major markets. We delivered positive readouts from 17 key studies and initiated 11 new Phase III programs. These milestones are not just numbers. They are the seeds of our best-in-class medicines that are improving and extending lives.

Let me now talk about our key areas of focus. In oncology, we are working to cure cancer, and our depth of expertise is unmatched. In 2025, we delivered 21% operational sales growth, and we expect to exceed $50 billion in annual sales by 2030. We are the #1 company in multiple myeloma where 80% of patients are treated with at least 1 of our 4 medicines over their treatment journey.

DARZALEX is the largest medicine by sales in our pharmaceutical portfolio and is considered the foundational gold standard treatment in multiple myeloma. With annual sales over $14 billion, DARZALEX grew an impressive 22% across the full year.

CARVYKTI is the leading CAR T cell therapy in multiple myeloma with more than 10,000 patients now treated across 14 markets. And we are not stopping there. Last month, we published and presented results for TECVAYLI plus DARZALEX that show reduced risk of progression or death by 83% in relapsed refractory multiple myeloma as early as the second line. We also recently announced top line findings from a second Phase III study, MajesTEC-9, which showed TECVAYLI monotherapy reduce the risk of disease progression or death as early as first relapse in patients with multiple myeloma. We are predominantly refractory to anti-CD38 and lenalinomide therapies.

We are also seeing significant momentum in our solid tumor portfolio. In Q4, we received FDA approval for RYBREVANT FASPRO as the first subcutaneous therapy for EGFR-mutated non-small cell lung cancer, reducing administration time from hours to minutes and improving patient experience.

We are making strong progress in bladder cancer with the introduction of INLEXZO for novel drug releasing system, which received its initial FDA approval in September. This is a revolutionary treatment that offers a life change in alternative for patients who otherwise would have lost their bladders to radical surgery. Future approvals addressing larger patient populations are anticipated. And our Q4 acquisition of Halda Therapeutics added a promising clinical stage treatment for prostate cancer with potential across multiple tumor types.

In immunology, we are focused on transforming the standard of care by increasing remission rates in immune-mediated disease. In 2025, TREMFYA became the first and only IL-23 inhibitor with a fully subcutaneous treatment regimen for both ulcerative colitis and Crohn's disease. It is now the fastest-growing IL-23 therapy in the U.S. delivering Q4 operational sales growth of 75% and 65% worldwide. And with [ global ] full year sales of TREMFYA accelerating to more than $5 billion for the first time, we are increasingly confident that TREMFYA will exceed $10 billion in peak year sales.

But in health care, leadership means continually raising the bar, which is why we are focused on what's next in immunology. In the coming months, we look forward to the anticipated U.S. approval of icotrokinra, to be marketed as ICOTIDE, which will expand our immunology innovation -- for psoriasis and inflammatory bowel disease.

Turning to neuroscience, where 2025 operational sales grew [ 10% and ] more than 200,000 patients now treated worldwide. In November, we solidified our leadership with the U.S. launch of CAPLYTA for adjunctive major depressive disorder, further strengthening our confidence in its $5 billion peak year sales potential.

Now turning to MedTech where operational sales for the year grew 5.4%. In 2025, we delivered nearly $34 billion in sales with strong performance in cardiovascular and accelerating momentum across surgery and vision. Our success over the last year was supported by 15 major launches and more than 40 regulatory approvals in major markets. And with more than 60 active clinical trials, we have significant momentum going into 2026.

Johnson & Johnson today is a leader in 3 cardiovascular segments with the portfolio delivering 15% operational sales growth in the year. Abiomed and Shockwave performed particularly well, delivering operational growth of approximately 18% and 23% in the quarter. We remain the market leader in electrophysiology, and we plan to expand our position in [ pulsed field ] ablation. VARIPULSE has now been used to treat nearly 40,000 atrial fibrillation patients globally, and we look forward to submitting our dual energy [ Thermocool SmartTouch SF ] catheter for use in the U.S. market in 2026. We are also seeing positive data for our [ OmniPulse ] catheter, which has the potential to further redefine post-field ablation. In fact, we anticipate launching a new catheter every year through the end of the decade as we build an industry-leading portfolio in PFA complemented by at least 2 CARTO updates each year.

In surgery, we are reinventing procedures through robotics and digital. This year, we will launch a first-of-its-kind robotics platform for urology with MONARCH. The technology was first to market in bronchoscopy, helping diagnose and treat lung cancer. And this year, we will create another first with MONARCH, becoming the only robotic endoluminal and percutaneous platform for the treatment of kidney stones and other renal conditions.

We also recently announced the FDA de novo submission of our OTTAVA robotic surgery system. With continued innovation in surgical instrumentation, including our recent launch of the ETHICON 4000 stapler, we anticipate continued growth as we reduce complications and elevate the surgical experience across specialties.

And finally, vision, which delivered robust annual operational sales growth of 5.3%, with particular strong momentum in surgical vision. In 2025, we launched ACUVUE OASYS MAX disposable lenses for astigmatism and [ presbyopia ] and completed the full market release of TECHNIS ODC IOL, which is the fastest-growing intraocular lens in the U.S. Looking ahead, we are planning to launch TECHNIS PureSee in the U.S. later this year.

As you can tell, we are starting the year from a position of strength. You have heard me talk about the unmatched depth and strength of our business. In 2026, that will translate into accelerated growth and impact with game-changing innovation, reaching more [ patients ] more quickly than ever before.

I will now turn the call back over to Darren.

Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the percentages quoted represent operational results and therefore, exclude the impact of currency translation.

Starting with Q4 2025 sales results. Worldwide sales were $24.6 billion for the quarter. Sales increased 7.1%, despite an approximate 650 basis point headwind from STELARA. Growth in the U.S. was 7.5% and 6.6% outside of the U.S. Acquisitions and divestitures had a net positive impact on worldwide growth of 100 basis points, primarily driven by the Intra-Cellular acquisition.

Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $2.10 versus $1.41 a year ago. Adjusted net earnings for the quarter was $6 billion and adjusted diluted earnings per share of $2.46, representing an increase of 21.5% and 20.6%, respectively, compared to the fourth quarter of 2024. Items of note include a $0.22 IP R&D charge associated with the [ V-Wave ] acquisition in 2024 and $0.10 of dilution due to the acquisition of Halda Therapeutics in 2025.

For the full year 2025, worldwide sales were $94.2 billion. Sales increased 5.3% despite an approximate 620 basis point headwind from STELARA. And if you do the math, Johnson & Johnson grew double digits for the full year excluding STELARA. Growth in the U.S. was 6.9% and 3.4% outside the U.S. Acquisitions and divestitures had a net positive impact on worldwide growth of 110 basis points, primarily driven by the intraCellular and Shockwave acquisitions.

Turning now to earnings. Net earnings for full year 2025 were $26.8 billion and diluted earnings per share was $11.03, including the $7 billion talc reserve reversal from Q1. This compares to diluted earnings per share of $5.79 a year ago, which included $0.67 of dilution due to acquired IP R&D charges on various transactions. Full year 2025 adjusted net earnings were $26.2 billion and adjusted diluted earnings per share was $10.79, both representing an increase of 8.1% compared to full year 2024.

I will now comment on business sales performance in the quarter, focusing on the 6 key areas where meaningful innovation is driving our performance and fueling our long-term growth.

Beginning with Innovative Medicine. Worldwide sales of $15.8 billion increased 7.9% despite an approximate 1,110 basis point headwind from STELARA, illustrating the continued strength of our key brands and new launches. Growth both in the U.S. and outside of the U.S. was 7.9%. Acquisitions and divestitures had a net positive impact of 170 basis points on worldwide growth, primarily due to the Intra-Cellular acquisition.

In oncology, starting with multiple myeloma, DARZALEX growth was 24.1%, primarily driven by strong share gains of 6.5 points across all lines of therapy and nearly 12 points in the frontline setting as well as inventory dynamics and market growth. CARVYKTI achieved sales of $555 million with growth of 63.2%, driven by share gains and slight expansion. TECVAYLI and TALVEY growth was 18.9% and 73.1%, respectively, driven by continued expansion in the community setting.

In prostate cancer, ERLEADA delivered strong growth of 18% due to market growth and continued share gains, partially offset by the impact of Part D redesign. In lung cancer, RYBREVANT plus LAZCLUZE delivered sales of $216 million, a growth of 76.5%, driven by continued launch uptake in all regions. We continue to see share gains in both first and second lines of therapy.

Within immunology, TREMFYA delivered remarkable growth of 65.4%. We continue to see share gains across all indications with particularly strong momentum from our IBD launch as well as market growth. STELARA declined 48.6%, driven by share loss due to biosimilar competition and Part D redesign.

In neuroscience, SPRAVATO grew an impressive 67.8%, driven by continued strong demand from physicians and patients. CAPLYTA, which was acquired in Q2 as part of the intraCellular acquisition, delivered sales of $249 million for the quarter. Since AMDD approval in the U.S., CAPLYTA has had its highest ever new patient start volumes across all indications.

Now moving to MedTech. Worldwide sales of $8.8 billion increased 5.8%, with a growth of 6.6% in the U.S. and 4.9% outside of the U.S., driven by strong performance in our 3 focus areas: cardiovascular, surgery and vision. Acquisitions and divestitures had a net negative impact of 10 basis points on worldwide growth.

In cardiovascular, electrophysiology delivered growth of 6.5%, driven by procedure growth within our comprehensive portfolio, commercial execution as well as VARIPULSE and other new products. partially offset by competitive pressures in PFA.

Abiomed delivered growth of 18.3% with continued strong adoption of Impella technology. Shockwave delivered strong double-digit growth of 22.9%, driven by continued adoption of coronary and peripheral products, becoming our 13th billion MedTech platform.

Surgery grew 3.7% despite divestitures negatively impacting results by approximately 60 basis points. Growth was driven by accelerated launches of new products in biosurgery, technology penetration in wound closure and strong commercial execution, partially offset by competitive pressures in energy and endocutters as well as VBP in China across the portfolio.

In vision, contact lenses and other products grew 5.3%, driven by category growth, strong performance in the ACUVUE OASYS 1-Day family of products and continued strategic price actions, further solidifying our leadership position. Surgical vision grew 10.8%, driven by new product innovations, robust demand for premium IOLs and strong commercial execution.

Orthopedics growth this quarter continued to gain momentum and increased to 3.5%, primarily driven by new product launches and strong commercial execution, partially offset by the orthopedics transformation and VBP in China.

Now turning to our consolidated statement of earnings for the fourth quarter of 2025. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of goods sold deleveraged by 80 basis points, driven by unfavorable product mix and Innovative Medicine and the impact of tariffs in MedTech. This was partially offset by the onetime prior year fair value inventory step-up associated with the Shockwave acquisition.

Selling, marketing and administrative expense leveraged by 110 basis points, driven by lower administrative expense across the enterprise. Research and development leveraged by 620 basis points, primarily driven by prior year acquired IP R&D expense from the [ V-Wave ] acquisition in MedTech as well as pipeline investment timing and Innovative Medicine.

Interest income and expense was a net income of $23 million, as compared to $144 million of income in the fourth quarter of 2024. The decrease in income was primarily driven by a higher average debt balance. Other income and expense was a net expense of $483 million, as compared to $161 million of income in the fourth quarter of 2024. This increase in net expense was driven by higher litigation costs of $0.9 billion primarily related to the [ Auris ] shareholder resolution and a $0.2 billion nonrecurring charge related to Halda employee equity awards. This was partially offset by a $0.3 billion contingent value rate reduction associated with the Abiomed acquisition.

Tax rate on a GAAP basis in the fourth quarter of 2025 was a benefit of 3%, compared to an 11.7% cost in the fourth quarter of 2024. The decrease in the effective tax rate is primarily driven by a nonrecurring tax benefit related to a loss on certain international subsidiaries. More information can be found in the company's forthcoming Form 10-K.

Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items.

Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin improved from 32.5% to 36.3%, primarily driven by administrative expense leveraging and phasing of R&D expense, partially offset by unfavorable mix in the cost of products sold. MedTech margin improved from 10.8% to 17.4%, primarily driven by prior year acquired IP R&D expense from the V-Wave acquisition, partially offset by the impact of tariffs in cost of products sold. As a result, adjusted income before tax for the enterprise as a percentage of sales increased from 24.1% to 28.7%.

This concludes the sales and earnings portion of the call and I will now turn the call over to Joe.

Thanks, Darren. Hello, everyone. We appreciate you joining us today. As you've heard from Joaquin and Darren, the employees of Johnson & Johnson delivered impressive results in 2025 driven by strong execution, important new launches and significant pipeline progress that launched a new era of accelerated growth. Our performance demonstrates the depth and strength of Johnson & Johnson's business centered on 6 core areas: oncology, immunology and neuroscience in Innovative Medicine; and cardiovascular, surgery and vision in MedTech. This has enabled us to exceed financial expectations that existed at the beginning of 2025 on both the top and bottom line. We entered 2026 with powerful momentum and anticipate another solid year ahead.

Let me briefly address yesterday's Daubert rulings in the talc MDL. The Special Master correctly decided to exclude the opinions of certain plaintiffs experts who preponded junk science. In other parts of the ruling, the court did not uphold its proper gatekeeping duty with respect to the reliability of plaintiffs experts' opinions, and we will appeal.

The decision only serves to bolster our overall litigation strategy. We will continue to defend against these meritless claims at trial and through the appeals courts where we've largely prevailed.

Before we move into 2026 guidance, let's address cash and capital allocation. We ended 2025 with approximately $20 billion of cash and marketable securities and $48 billion of debt, for a net debt position of approximately $28 billion. The company generated $19.7 billion of free cash flow during 2025, on par with 2024 despite increased capital investment in the U.S. and the impact of tariffs. Our financial strength is a competitive advantage that allows us to both invest in our future and return value to our shareholders. As we move forward in 2026, we expect to elevate free cash flow generation to approximately $21 billion.

As it relates to the separation of our orthopedics business, we are making good progress towards a mid-2027 separation and look forward to providing updates later this year.

Turning now to guidance for the full year 2026. We anticipate operational sales growth in the range of 5.7% to 6.7%, with a midpoint of $100 billion or 6.2%. Acquisitions and divestitures are expected to favorably impact operational growth by approximately 30 basis points, resulting in an adjusted operational sales growth midpoint of 5.9%. We do benefit in 2026 as our financial calendar includes a 53rd week, which is worth approximately 100 basis points.

As you know, we do not speculate on future currency movements. And last quarter, we utilized the euro spot rate relative to the U.S. dollar of $1.17. As of last week, the U.S. dollar has stayed relatively flat to the euro spot rate. And as a result, we expect reported sales growth between 6.2% to 7.2%, with a midpoint of $100.5 billion or 6.7%.

2026 sales growth across our Innovative Medicine business will be driven by TREMFYA, DARZALEX, CARVYKTI, ERLEADA and SPRAVATO as well as new launches of RYBREVANT plus LAZCLUZE in lung cancer and CAPLYTA as adjunctive therapy for major depressive disorder. In MedTech, we expect growth to be driven by continued uptake and market expansion of new product launches across our cardiovascular, surgery and vision portfolios, including VARIPULSE in electrophysiology, ETHICON 4000 in surgery and the OASYS MAX family in vision.

Turning next to other items on the P&L. In 2026, we expect to drive continued operating efficiencies, the majority of which we plan to invest in our business to power our new product launches and pipeline with heavier investment at the outset of the year. Despite that increased investment, we are planning for our 2026 adjusted pretax operating margin to improve by at least 50 basis points.

Our pretax operating margin guidance takes into account the costs from the 53rd week of operations and full year MedTech tariffs of approximately $500 million, which is significantly above the 2025 amount. It also includes the impact of the recently announced voluntary agreement with the U.S. government to improve access to medicines and lower costs to U.S. patients.

We expect net interest expense between $300 million and $400 million. We anticipate net other income to be $1 billion to $1.2 billion for 2026, relatively flat to last year. Finally, we are projecting an effective tax rate in the range of 17.5% to 18.5%, with the increase largely due to a mix change with income in higher tax jurisdictions.

Turning to adjusted operational earnings per share. We expect growth of 5.5% at the midpoint, for a range of $11.20 to $11.48. By utilizing the exchange rate we mentioned earlier for our adjusted earnings per share for the year, we estimate a positive impact of $0.15. As such, we expect reported adjusted earnings per share of $11.53 at the midpoint.

Regarding our share count, due to the rapid share price appreciation in the second half of 2025 into early 2026, our diluted share count is increasing to approximately 2.44 billion shares based on U.S. GAAP accounting rules for the diluted share count calculation, in line with how the fourth quarter of 2025 landed. The incremental dilutive shares for next year are worth slightly more than $0.05 headwind versus 2025.

Relative to current analyst expectations, our EPS and margin outlooks absorb the previously referenced incremental tariffs, the impact of the voluntary U.S. government agreement and a higher share count.

We will now shift to some 2026 phasing considerations to help inform your modeling. We are well positioned to build upon our accomplishments in 2025, continuing to make advancements across our Innovative Medicine and MedTech portfolio and pipeline. We anticipate fairly consistent operational sales growth throughout the year, with a higher fourth quarter due to the benefit from the 53rd week referenced earlier.

Regarding Innovative Medicine, we expect a more pronounced impact from newly launched products throughout the year. We anticipate STELARA to continue to follow the HUMIRA erosion curve, which accelerated as we moved to the second half of 2025 compared to the start. While not nearly as impactful as STELARA, we do anticipate generic impact for both SIMPONI and OPSUMIT to begin in 2026, both of which are contemplated in our full year guidance.

In MedTech, we will continue to accelerate our newly launched products and expect normalized to seasonality. The surgery transformation progress will accelerate throughout the year, and we anticipate some additional rounds of volume-based procurement in China, all of which has been incorporated into our 2026 guidance.

Regarding the P&L, it is important to consider onetime items that impacted our EPS results in 2025. Specifically, in Q1 2025, the impact from STELARA biosimilars was pronounced given that the erosion accelerated starting in Q2. The Intra-Cellular acquisition anniversaries in Q2. And tariffs will be relatively linear in 2026, unlike last year where the P&L cost was largely recorded in Q4 2025. Given these factors, we expect higher earnings per share growth in the second half of the year versus the first half.

We are excited about how our pipeline is anticipated to advance in 2026. For example, in Innovative Medicine, we expect regulatory approvals for ICOTIDE in psoriasis, TECVAYLI in combination with DARZALEX in relapsed refractory multiple myeloma as early as second line, and TREMFYA for the innovation of structural joint damage for patients with psoriatic arthritis. As this chart indicates, we also have many important regulatory submissions and data presentations across oncology, immunology and neuroscience.

In MedTech, we anticipate the following approvals and regulatory submissions: OTTAVA robotic surgical system, ETHIZIA in biosurgery and the Dual Energy Thermocool SmartTouch SF catheter in the U.S. Here too, we are also excited for new launches and continued expansion of new products as seen in the chart.

To close the prepared remarks, I hope it's evident that Johnson & Johnson is entering 2026 with significant momentum. We are positioned to lead where health care is going to tackle areas of critical unmet need. Our strong financial position enables us to invest in our business and the next generation of scientific breakthroughs that will help improve patient outcomes while simultaneously delivering value for our shareholders.

None of this would be possible without the hard work and dedication of our incredible colleagues worldwide who always keep patients at the center of everything they do.

With that, we are happy to take your questions. So I will now turn it to Kevin to provide instructions for those seeking to participate in the Q&A.

[Operator Instructions] Our first question is coming from Asad Haider from Goldman Sachs.

Great. Congrats on the quarter. Joaquin, maybe just a big picture question for you. You're entering this year in a clear position of strength, following what's been one of the best performance years for the stock in about 20 years. You've had momentum in both business segments, you're generating tremendous free cash flow and that you're saying is going to continue to elevate. And you've now started to talk more about double-digit revenue growth by the latter part of the decade, although Street consensus is currently modeling something in the 6% range.

So if you could just maybe double click a little bit more on what the key levers are to bridge to that double-digit growth profile from where we sit today, particularly in the context of the current revenue base that's now approaching $100 billion and remains sizable through the end of the decade even with the ortho spin? And I guess what we're really trying to understand is how much of the acceleration comes from the organic pipeline versus acquisitions versus portfolio pruning? And I guess related, what innings are we in of the strategic repositioning away from lower-growth segments like you're doing with ortho towards higher-growth segments?

Great question. Sure. I mean we came out of a really successful 2025, leaving the STELARA biosimilars in the rearview mirror and initiating a cycle of accelerated growth for Johnson & Johnson. And you have seen that we have provided a guideline -- guidance for 2026 which is strong and ahead of expectations. And as I said before, we have line of sight to double-digit growth in the later part of the decade, which is especially remarkable for a company that, according to our guidance, would be $100 billion in sales in 2026.

So what are the reasons to believe? The reasons to believe are focused on the strength of our portfolio and pipeline. And let me now take you through the 6 areas of focus that we are investing into the future.

Let me start with oncology. Our ambition with oncology is to become the #1 oncology company, reaching $50 billion by the end of the decade, sustained by our success in multiple myeloma and also in solid tumors with lung cancer, prostate cancer and bladder cancer. We are very confident on our progress there in our pipeline, and I'm sure we'll have some time to discuss that later in the call.

In our second area in Innovative Medicine, which is immunology, we are focusing on 3 major blockbusters. One is TREMFYA, which has been very successful in IBD. You have seen the growth in the fourth quarter, really spectacular 65%. TREMFYA in IBD launch is doing really well. And as a reminder, in the case of STELARA, IBD was 75% of the sales. So there is significant growth for TREMFYA ahead of us. We see TREMFYA more than a $10 billion asset.

The second one is ICOTIDE. ICOTIDE is the trademark of icotrokinra, our oral IL-23 blocker. We see IL-23 blocker expanding the market, becoming a new blockbuster for us. We expect to have the launch of ICOTIDE in 2026, initially in psoriasis. This is going to be a transformational change for the treatment of these diseases. And we plan to continue to develop ICOTIDE too in IBD, in inflammatory bowel disease.

And finally, the third blockbuster in which we will see data this year is our co-antibody therapeutic for patients that are refractory to biologics. I think that's a great solution for these patients; many of them relapse. So 3 major blockbusters in immunology, which are largely derisked, some of them are approved, filed or you're going to see data very, very soon.

To end in Innovative Medicine, we are very encouraged by the progress of SPRAVATO, more than 60% growth, and also the very successful launch of CAPLYTA in adjunctive treatment of major depressive disorder. We're seeing the first data coming in very, very encouraging. We see CAPLYTA, as we discussed, as additive to our growth and more than a $5 billion business. So all positives in our Innovative Medicine group clearly driving this line of sight to double-digit growth by the end of the decade.

If I move to our MedTech business, our cardiovascular sector, very strong growth in 2025, a double-digit growth, is reaching $9 billion, is one of the largest cardiovascular franchises in the industry. We are in 3 major markets, which are specialty markets with high growth, cardiac ablation where we are the leaders and we plan to expand our leadership in PFA with the launch of a new catheter every year and new CARTO versions, Tim will explain later, our strong position both in -- with Abiomed and Shockwave in heart recovery and in calcified arterial disease. So that's going to be a growth driver for us into the rest of the decade.

In surgery, we have had strong results both in wound closure and in biosurgery, which are high single digit in both areas. We just filed for OTTAVA, which is going to make us a relevant player in the surgery robotics market, which is an area in which we have all the right to compete. Let me remind all of you that we are in all hospitals in the world and we already participate in all surgeries, and we plan to be a relevant player in robotic surgery with OTTAVA and also with the launch of MONARCH in urology in which we are going to have a unique position.

Then finally, in vision, you see our results in vision. It's a market with growth. We're gaining share. And it's an area of innovation in which we plan to invest.

So we have about that dozen new product launches for the company. Some of them are already approved, most of them submitted. So I would say that in that sense, it's essentially what I would call derisked. And some of you have called our story of growth in the second half of the decade as one of the cleanest stories of growth for the health care sector, for the health care entire sector overall. So we feel very confident about our outlook is reflected in our guidance for 2026. And I can assure you that everybody here at Johnson & Johnson is focused on doing exactly what we do best, which is looking for innovation in medicines and medical technologies to improve the standard of care of the millions of patients that we serve. And we are convinced that that will translate in strong business results.

Our next question is coming from Larry Biegelsen from Wells Fargo.

I'll echo my congratulations on a nice end to the year here. So Tim, there's some dynamics in the MedTech that you called out in the slides as well as the loss of coverage in the U.S. from the enhanced subsidies expiring. How are you thinking about the MedTech market in 2026 relative to 2025? And how are you thinking about J&J's adjusted operational growth in '26 versus '25. Do you expect an acceleration? And it would be helpful if you could touch upon the outlook for your EP business, which is growing below market.

Let me touch quickly on the first question around ACA subsidies and put that one to bed. Firstly, based on what we know today, we do not expect the loss of ACA subsidies or any potential policy changes under the Big -- The One Big Beautiful Bill to have a material impact on our MedTech performance. And we'll continue to monitor how coverage dynamics evolve. At this stage, we see no indication of an impact on our growth trajectory. The primary constraint as you know, Larry, in our business is really more about clinical capacity, not coverage levels, and procedure demand remained very robust across our portfolio, which I think really speak to the resilience of the businesses that we decided to participate in.

Turning to your question about the year, we do expect to see accelerate -- we expect the year to be better in 2026 than it was in '25. And I think it's important to maybe hedge this question on really our strategy. And I think you know for the last couple of years, we've been very clear in articulating our strategy focused on shifting our portfolio into higher innovation, higher growth and higher margin markets. And you just heard from Joaquin, we have deliberately chosen to focus on our 3 focus areas of CV, surgery and vision.

And I think our results, Larry, speak for themselves. Our strategy is working. We said we would accelerate our performance in the back half '25, and we did exactly that, beating consensus for the third consecutive quarter. And what we're most proud of, Larry, is that we saw acceleration across the board. As you heard from Joaquin, cardiovascular, now one of our largest businesses at $9 billion, grew 15.2% operationally in 2025, driven by success of Abiomed and Shockwave, both double-digit growers, and increasing performance in [ EP ], which I'll touch on a little later.

Vision, strong high -- mid- to high single-digit performer. Double-digit growth in surgical vision. And of course, we couldn't be more excited by the growth opportunity that will come with OTTAVA as we look to commercialize that first in the U.S., hopefully this year.

We've also seen continued improvement of ortho. You would have expected maybe some distraction as a result of the announcement we made. We've seen exactly the opposite with sequential growth during the quarter and 3.5% in Q4.

And so I'll finally reinforce, Larry, that [indiscernible] business today, we have roughly half of our assets participating in higher-growth markets growing north of 5%. That's compared to about 20% in 2018. And this will catapult to north of 70% following the ortho separation.

So as a result, we believe, frankly, that our best days are ahead. And we remain very confident in our ability to drive accelerated operational growth as we further push into higher areas of innovation, growth and margins.

Let me touch quickly on EP because I think that was another part of your question. The results speak for themselves, and they're speaking loud and clear. We're seeing continued acceleration in the markets that matter most, especially here in the U.S. and in Europe. You will have seen that in the fourth quarter, our growth accelerated to 9.5%. We're on the cusp of once again double-digit growth here in the United States, which is by far away the most important market. We're seeing this driven by success of VARIPULSE, more than 40,000 cases today, Larry, with a benchmark safety profile, that you heard from Joaquin, we made a commitment to an additional catheter each year for the foreseeable future, starting with Dual Energy as TSF, followed by OmniPulse, which is a large [indiscernible] catheter.

And we're also doubling down on our leadership position in mapping. And we now see really customers shifting back to CARTO based on the integration we have across our portfolio. And just to put this -- put a point on this, Larry, for example, our CARTO 3 system is widely recognized as the industry benchmark in mapping, in fact, in a recent study, it found that patients treated with PFA devices, whether that be ours or the competition's, using CARTO, was 61%, once again, 61% less likely to experience afib-related readmissions, which I think further reinforces the competitive advantage we have in this portfolio.

So I've said this before, Larry, and I'll end by saying that we are not rolling over. J&J's strength lies in our comprehensive portfolio of integrated EP solutions, mapping, ablation and cardiac imaging technologies, combined with our best-in-class mappers. And we remain resolute and confident that our deep EP expertise earned over 30 years and our robust pipeline position us well to continue to drive global leadership in this important space.

Next question today is coming from Chris Schott from JPMorgan Chase & Company.

Congrats on the results. Joe, can you just elaborate a little bit more on how to think about margin progression over time at J&J. You've obviously highlighted the potential for accelerating top line growth over the next several years. Should we think about that higher level of top line growth being associated with greater margin expansion or is this kind of 50 basis point year type improvement that you're seeing this year a reasonable proxy to think about margin expansion for J&J over time?

Chris, thanks for the question. Yes, it's a great question. As we look at the margin expansion, the idea would be to continue to improve our infrastructure. What gives me confidence with respect to 2026 outlook of at least 50 basis points is, as you know, with the orthopedic separation, much like we did with the consumer health separation, we're going to take this opportunity to look and see where there's areas of opportunity and efficiency to eliminate [ stranded ] costs. While that will probably need to be in place for 2027, we're going to get a jump start on that in 2026.

There's also, as you know from recent calls, efforts underway to improve our operating margins, our gross margins specifically, in our manufacturing footprint, largely in the MedTech space.

And then lastly, while we will have continued STELARA erosion, it will be off a smaller base, so that will have less of an impact going forward. And so I wouldn't want to give you a longer-term outlook. What I can say is I'll harken back to our last Investor Day where we said that earnings would be commensurate with sales growth. So you can expect that the margin profile will improve in conjunction with the sales growth profile as we move out to the next couple of years into the back half of this decade.

Next question today is coming from Joanne Wuensch from Citibank.

I'll add my congrats on a good quarter. I just want to spend a minute or 2 talking about vision care. You highlighted that as 1 of the 3 growth areas in Medical Technology. It looks like in your surgical business, it was a little bit slower during the quarter versus what we saw -- in the United States versus what we saw outside the United States. I mean if you could tease that apart a little bit and your views on the health of the contact lens market would be really welcome.

Joanne, thank you for your note. Once again, we have doubled down and really focused on vision as 1 of our 3 priority areas within MedTech. And as you highlighted, a strong fourth quarter at growth of just under 7%. Strong underlying performance within our contact lens category. While we did see a little softness, Joanne, in Asia Pacific, underlying demand is robust and we saw a tremendous growth at roughly 5.3% with share gains driven by the continued rollout of our ACUVUE OASYS 1-Day family, which I think you probably know that we've added to with the addition a product focused on multifocal astigmatism, the only product or only daily disposable available for patients suffering with both presbyopia and astigmatism. So we believe that's going to be a nice growth driver for the future.

Turning to surgical vision, growth of close to 11% in the quarter and all driven by our doubling down of our focus on premium intraocular lenses, both TECHNIS Odyssey launch here in the U.S. last year and PureSee more broadly globally. As you look to 2026, we're going to be further enhancing that performance building out the portfolio, specifically with the launch of PureSee here in the United States.

You touched on our fourth quarter performance. Underlying performance of our premium IOLs here in was outstanding. We did see that offset somewhat by some ongoing market declines in some of the legacy categories, which we're working to address. But we're confident that our surgical vision business can continue to be a strong double-digit growth for the foreseeable future.

A couple of other areas I'll focus on here is that we are expanding global market share, both in contact lens and surgical vision, not just winning here in the United States, but, more important, globally. We're focusing very much on portfolio optimization, and I do think the ortho separation enables greater capital allocation to vision, supporting both R&D, commercial execution and digital transformation. And so we're thrilled with the continued improvement in surgical vision and have great confidence in that continuing.

Next question is coming from Terence Flynn from Morgan Stanley.

Congrats on the quarter. Obviously, multiple myeloma is another one of your key growth drivers here. I was wondering, post a lot of the earlier stage data -- earlier line data we've seen for TECVAYLI, if you could speak to how you're thinking about positioning here of that franchise relative CARVYKTI. And then the related question is, I know FDA published some final guidance regarding MRD negativity and CR's endpoint. So just thinking about how you might implement that across your development portfolio and what that could mean for time lines.

Thanks for the question, Terence. Yes, for multiple myeloma, we were absolutely thrilled with the data that we saw for TECVAYLI plus DARZALEX in the second line plus setting as well as most recently the TECVAYLI data in patients who are refractory to anti-CD38 lenalidomide therapy. And maybe if I take a step back, over the past 20 years, J&J therapies have dramatically improved survival for people with multiple myeloma from 3- to 5-year survival rates to 10 to 15 years now or more.

Yet despite these advances, multiple myeloma is still -- it's a complex disease, a heterogeneous disease. And about 40% of patients are currently in the second-line and third-line settings. So how do all of these agents fit? And why do we say that this is such an extraordinary opportunity?

Well, first, if we start off with the [ TEC DARA ] information, plus TEC-9 and CARVYKTI, together, they really provide highly effective agents that allow treatment that's tailored to the treatment goals the patient setting, access, the patient status and the prior therapy. So there's a number of things that get taken into account. So if we start off with TEC plus DARA, this is really community ready therapy that's proven an unprecedented efficacy rate in the second-line plus setting. The hazard ratio was 0.17. And so this is for patients who are CD38 naive or are CD38 experienced. And this is about 70% of the population in that second line and third-line setting.

You take a look at TEC-DARA, data, again, extraordinarily impressive, 71% reduction in the risk of disease progression, 40% reduction in overall survival. And this is for patients who are refractory to anti-CD38 therapy and ledalidomide therapies. And so you can see the 70% TEC-DARA and then the 30% for the TEC-9 data.

And then when you bring CARVYKTI in, CARVYKTI is really the most successful CAR T therapy. We just announced we're 10,000 patients who've been infused with this. And this is a single-dose therapy with a tremendous shot at what we would count as cure. And we're the only CAR T therapy that's got that superior overall survival versus the standard of care.

And so really when you take a look at what the goals are for that patient, what their prior lines of therapy would be and what the practice setting is, J&J now has an option for every one of those patients in that second line, third line setting. So we see a lot of growth potential ahead for these agents, as well as DARZALEX in the frontline setting.

Yes, maybe to get into your MRD, but first, just to supplement a little bit. I'd also note that the TECVAYLI regimens, whether it's monotherapy in CD38 refractory patients or the combo with DARZALEX in patients who are CD38-naive or have been exposed but still remains sensitive, these are dexamethasone-free regimens, which means that patients aren't on high-dose steroids, which really is an improvement on quality of life.

The other thing I wanted to note is that the FDA, in fact, was so impressed with our MajesTEC-3 data that, unsolicited, they contacted us and offered a priority review voucher to accelerate bringing this new regimen to patients. So really excited with that recent interaction with the FDA.

Indeed, on MRD, that is exciting for us. Last year there was an ODAC that endorsed that concept of using this biomarker, if you will, approach to finding those rare residual malignant cells. Much of the evidence behind that, frankly, was pioneered by J&J over the year. So we're excited that that is an option. We are mindful, however, that it's only an option in the United States, so we, at this point, we'll still have to deliver progression-free and overall survival data for other territories. So I suspect that will continue to be an element of our protocols. But indeed, we will be speaking with the agents we had opportunities to accelerate some of our development. And in that regard, I think, a place where this could be particularly apropos is with our new trispecific antibody for myeloma, [ Romantimig ], which brings the features of both TEC and TAL into a single molecule with unprecedented efficacy, improved tolerability as well, fewer, for example, of the taste effects that you might see with TALVEY, less weight loss, et cetera. Really improved tolerability. And then great convenience that makes it [ apropos ] for the community setting with only 1 step-up dose and Q4 week dosing for monthly dosing. Really excited about the pilot data we're seeing in newly diagnosed myeloma in combination with DARA with that trispecific. And that could be a really apropos place to discuss with the FDA using MRD negativity.

Next question today is coming from Danielle Antalffy from UBS.

I'll echo everyone's [indiscernible] strong into the year, and happy new year. Just a question on this move to higher growth end markets. Appreciate that you've done a lot of and are doing a lot of portfolio pruning now. You mentioned the 70% in a few years here. I mean, ultimately, I guess it's too [indiscernible] do you see that 70% moving higher? Or do you think that's like sort of the aspirational peak? That's the first part.

And the second part is, what are some other growth markets, whether it's in Innovative Medicines or MedTech where you guys are participating today that you see [indiscernible] to participate over that time frame, whether it's via organic or inorganic moves?

Danielle, thank you. I mean our aspiration is not to put a limit on the high-growth markets in which we participate. And I think we can conservatively say that, once we separate ortho, we'll be at least at 70%. And there is tremendous opportunity even just focused within the 3 business units we've decided to focus on within MedTech, both in cardiovascular, in surgery and in vision. I think we build your confidence around cardiovascular continuing to be a strong double-digit grower. Surgery, one of our profitable businesses where we maintain leadership positions, both in contact lens and surgical vision, we believe it's going to be a strong middle to high single-digit grower.

And then surgery is the major opportunity really to catapult our growth. And that comes down to our belief in OTTAVA. As you heard from Joaquin, we are absolutely resolute in our commitment to play a bigger role beyond open and laparoscopic surgery in robotics with OTTAVA. And what we are most confident about is that we have something that is unique and different and something that surgeons and health system CEOs tell us every day that they need.

And so while we're excited by the recent milestone and the submission for approval, we're just getting started. And what really highlights the fact that this is different is you'll recall that this is a very different regulatory pathway we chose. This is a de novo pathway. And the reason we chose that pathway is that there is no predicate device, nothing that can be compared against. And so this is a novel platform where there's no reference or predicate device. And so that, coupled with the fact that we're going after the U.S., should further reinforce our confidence in the fact that we believe we have something that is really different.

Now we're not stopping in the U.S. We're building our submissions in a parallel path fashion outside of the U.S. with a focus on Japan and some select U.S. markets. And you will have recalled from the announced we made 2 weeks ago, we're also already expanding into our next IDE clinical study in the lower abdomen. And so make no mistake that we believe that we can and will be a formidable player in surgical robotics. We don't take the current incumbent for granted by any means, but we do think that presence we have in open, laparoscopic and soon-to-be robotic surgery give us a right to play and a tremendous opportunity to drive to those high levels of growth that we've committed in the back half of the decade.

And then in Innovative Medicine, we are looking to expand in a number of really exciting areas, right now where we've got clinical work already underway. And so to give maybe a few examples, RYBREVANT in head and neck cancer and colorectal cancer, which is clinical trials underway. IMAAVY, which we haven't spoken about yet today, but areas such as Sjogren's disease and SLE, lupus, areas of really high unmet medical need, atopic dermatitis, of which we made a number of key acquisitions and licensing at the end of 2024, that give us a stable of assets there that we're working towards B cell malignancies with our [ BICARD ] that's in development. And even Milvexian that we're developing in partnership with Bristol-Myers Squibb and that we're very, very excited about for atrial fibrillation and secondary stroke prevention.

So a number of additional really key diseases that could be growth drivers for us in the future.

Next question today is coming from Vamil Divan from Guggenheim Securities.

Great. I just want to ask on INLEXZO, it's a couple of questions here. But just one, any sort of initial feedback you can share with us in terms of the initial launch and kind of what doctors and patients are saying, if there's any update on when you expect the government J-code? And then finally, just I see you listed SunRISe V data and potential submission on your events list for 2026. So that's good to see. I'm curious if you can just talk about how that data and how that might impact the addressable population for the product? And then tied to that SunRISe-3, I thought might come this year. You didn't include that one on the list. So just curious if you have any update on timing on when we might see data from SunRISe-3.

Great. Thanks so much for the question on INLEXZO. So we are really pleased with the launch and what we're seeing in terms of interest and receptivity by both urologists as well as the patients who had application of the device. As you recall, we've really launched into the BCG unresponsive population. And as you noted, we're actually looking to further expand that through SunRISe-5, the BCG experienced, and then SunRISe-3 population, the BCG-naive population. So so far, the interest and enthusiasm on this has been really, really robust.

We are anticipating the permanent J code at the beginning of the second quarter, sort of in that April time frame, which we think is going to be a really nice catalyst for utilization. And so we do continue to believe strongly that this is one of our $5 billion plus assets and really look forward to getting that permanent J code in the second quarter. John, do you want to talk about -- yes.

Yes. Just we're making great progress with this sleep product, INLEXZO. But I would also remind that we see a whole series of innovative products where we use these devices in the bladder to deliver different payloads. The next one on deck is containing erdafitinib that's the same targeted therapy that is currently marketed as BALVERSA for metastatic bladder cancer, but here delivered through a unique device, a customized device. It's not the same one as INLEXZO, but works in much the same way to deliver that targeted therapy. There, we are focusing on the so-called intermediate risk population, whereas INLEXZO is targeted for the high-risk population. So this broadens our coverage of patients with bladder cancer.

And just to remind people that localized bladder cancer is -- represents about 600,000 new cases per year and another 400,000 cases annually of patients who've relapsed and are looking for a solution that would allow them to save their bladder. So it's about 1 million patients a year. Between INLEXZO and now TAR-210, the erdafitinib carrying device, we'll be able to really address a very large percentage of these patients with these bladder sparing technologies. With TAR-210, the success rate we've been seeing with complete responses have been north of 90%. And so we're super excited about that, and there will be other devices with different payloads to come over time.

So we see this as a platform that will address this incredible unmet need and that will be a big growth driver for J&J. I would finally close by just giving a shout out to our colleagues in MedTech because this is just a wonderful example of how Innovative Medicines and MedTech can come together, bringing devices and drugs together in an unprecedented way, and we're looking for more ways to do that in the future.

The next question is coming from Shagun Singh from RBC Capital Markets.

Joaquin and Joe, could you spend some time and elaborate on your next steps with respect to the talc litigation, implications of the initial Daubert decision? I know you indicated it will be appealed, if the reserves need to be stepped up? And then most importantly, what are your plans for an eventual resolution and risk mitigation here? I think this may be contributing to the modest [ drop down ] today, even though you reported strong results and you have a very strong outlook through the end of the decade.

Yes, I'll start, Shagun, and then, Joaquin, I'll turn it over to you. So thank you very much for the question. And I want to thank you for acknowledging the strong results and outlook of the business, which is really what is at the heart of Johnson & Johnson. .

So last night, the Special Master reviewing the Daubert motions in the talc MDL issued what is known as a report and recommendation. So that really has no legal import until the judge actually accepts this recommendation. The recommendation itself excluded certain aspects of the plaintiffs expert witnesses and their opinions. And simultaneously, the recommendation also endorsed virtually all of our opinions of our experts.

However, there were other parts of the recommendation where the Special Master clearly failed to apply the new federal rules of evidence, known as Rule 702, which really reinforced, starting in December of 2023, the gatekeeping responsibilities that the Special Master should have had. We will certainly appeal those erroneous parts of the recommendation to the district court. Again, this recommendation from the Special Master has no legal consequence until the appeal is resolved.

The bottom line is this is not going to change our strategy. We will continue to aggressively fight in the court system each and every one of these meritless claims. We will do so whether it's at original trial or through appeal. And we will continue to really bring to light the actions of the plaintiffs as far the tactics that they use, the third-party litigation financing, all of which is really undermining U.S. business and U.S. competitiveness overall. Joaquin?

Thank you, Joe. Shagun, I would tell you and I would tell investors we have been navigating this talc issue already for a decade. And we have been able to continue to deliver excellent results, invest in our business and continue to return value to shareholders. So let's focus on the real story here. The real story is our successful 2025, the strong guidance for 2026 and, what you said before, our line of sight for double-digit growth in the later part of the decade. This is a clean story for us, one of the cleanest stories in the entire health care sector, and we're in a position of strength today.

And as Joe said, we are continue to fight these meritless claims and we're going to continue with our strategy of litigating every single one. What I can assure you and all investors is that every single employee of Johnson & Johnson does not get distracted. They wake up every day with the intent to bring new medicines and medical technologies that improve the standard of care of the millions of patients that we serve every day, and that's really our goal. Let's focus on what really matters. Let's don't get distracted.

I think we probably have time for one more question.

Our final question today is coming from Alexandria Hammond from Wolfe Research.

On your vaccine, can you talk a little bit about your confidence in this asset? What do you think you'll need to show to be competitive in what's already a pretty crowded space with another potential next-generation Factor XI from Bayer? And I guess as a quick follow-up, how can you leverage your past experience of commercializing Xarelto to make another multibillion-dollar opportunity for J&J?

So on Milvexian, we're expecting data readouts later this year for both secondary stroke as well as atrial fibrillation. We often get asked about atrial fibrillation because the competitor molecule had failed in that indication. And we cite a couple of things. One is that Milvexian, at least in vitro, is about 10x more potent than the other molecule that is being developed by another company. And we know from monitoring the APTT biomarker, the [ thromboplastin ] time, that we have very effective reductions in clotting at the dose that we have selected for atrial fibrillation, which is 100 milligrams twice a day. So we feel that we've got the right dose and the right study design. So we'll be looking forward to those data later this year.

We're really excited about the opportunity with Milvexian. And what we're really looking to show there is clear superiority in terms of safety and bleeding risk. We know from all of our experience in the market with Xarelto that there are a lot of patients that are not treated or are undertreated because of fear of safety risk. And so we think there's extraordinary need for highly efficacious and highly safe with low bleeding risk product in the market, both for atrial fibrillation and then we're very excited about the possibilities in secondary stroke as well.

So we're looking forward to this product that we're developing in collaboration with Bristol-Myers Squibb. It is absolutely one of our $5 billion plus assets on our list.

Okay. Thanks, Alex, and thanks to everyone for your questions and your continued interest in our company. I will now turn the call over to Joaquin for some brief closing remarks.

Thank you to all of you for joining the call today. As we have commented in the call, we are starting the year from a position of strength. We have the strongest portfolio and pipeline in our history, and we have a leading and expanding position in our 6 key business areas of focus. 2026 will be a year of accelerated growth and expanded impact and I look forward to sharing our progress with you in the remaining of the year. Thank you very much, and this finalizes the call.

Thank you. This concludes today's Johnson & Johnson's Fourth Quarter 2025 Earnings Conference Call. You may now disconnect.