Johnson & Johnson : JNJ USQ Transcript 2023 09 13

REFINITIV STREETEVENTS

EDITED TRANSCRIPT

JNJ.N - Johnson & Johnson at Morgan Stanley Global Healthcare Conference

EVENT DATE/TIME: SEPTEMBER 13, 2023 / 2:10PM GMT

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

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

SEPTEMBER 13, 2023 / 2:10PM, JNJ.N - Johnson & Johnson at Morgan Stanley Global Healthcare Conference

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

Joaquin Duato Johnson & Johnson - CEO & Chairman

John C. Reed Johnson & Johnson - Executive VP of Pharmaceuticals R&D

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

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

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

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

Thanks for joining us, everybody. I'm Terence Flynn, the U.S. biopharma analyst here at Morgan Stanley. And this morning, I'm very pleased to be hosting Johnson & Johnson. Today from the company, we have Joaquin Duato, who is the company's Chairman and CEO; and John Reed, who is Executive Vice President of Pharma, R&D. Thank you both so much for joining us. Really appreciate the time today.

Before we get started, for important disclosures, please see the Morgan Stanley Research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

Q U E S T I O N S A N D A N S W E R S

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

Well, maybe I thought we'd get started, Joaquin, you've been in the role as CEO now for almost a year. And so maybe you could provide us an update kind of first on your strategic priorities and capital allocation strategy. And the other big change of the company is the consumer separation. So now J&J is a Pharma Medtech company following the separation of Kenvue a few weeks ago.

Joaquin Duato - Johnson & Johnson - CEO & Chairman

Thank you, and thank you for joining this fireside chat. The -- we are very pleased of having completed the consumer separation. It was a 2.5-year process. And at this point, the consumer company, Kenvue, is an independent company. And we are enthusiastic about the Johnson & Johnson that has come out of that, exclusively focused on R&D and innovation, on Medtech and Pharmaceuticals. This increased focus is going to help us be more productive and, at the same time, have higher margins, higher growth rates because consumer had lower margins and lower growth rates compared to Medtech and Pharma.

So I firmly believe that this positions us especially well to be a multi-decade company and to bring success not only in the coming couple of years, but into the future. When I think about Johnson & Johnson, there are things that remain the same. It's our mission around healthcare and difficult-to-treat diseases with medical technology or with pharmaceuticals. It's our principles of our credo. This is the 80th anniversary of our credo. It was written in 1943, and those are things that are not going to change.

Looking at the priorities for this decade. I have stated two when I started to be a CEO. One is to drive our MedTech group to be a best-in-class group, a top-tier grower. And we are clearly moving into that direction. Our first half of the year growth for MedTech was 8%. And the second one is to continue to deliver growth, competitive growth in our Pharmaceutical side, not only in the short term of '24, '25 period overcoming the STELARA patent expiration, but also in the second half of the decade and to continue to deliver significant growth during that period. So I'm sure we will discuss about these two aspects later, but those are the two goals: top-tier growth in Medtech, increased profile of our growth in the second half of the decade in the Pharmaceutical group.

2

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

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

SEPTEMBER 13, 2023 / 2:10PM, JNJ.N - Johnson & Johnson at Morgan Stanley Global Healthcare Conference

When I think about Johnson & Johnson now and in the future and when I think about where medicine is going, I firmly believe that having a company -- the only company that has MedTech and Pharmaceutical capabilities, it's going to be important for us to be successful where medicine is going. Most of the diseases do have a component of treatment of surgery and pharmaceutical, and we are going to be the only company that we have both capabilities so we can do things that no other company can do.

Now the proof it's going to be in our results. And when I look at the first half of the year, I think we are delivering on that promise. Our total Johnson

• Johnson growth in the first half of the year was 8%. We have provided updated guidance post the consumer separation for full year 2023. And the midpoint of our guidance for the combined company is $84 billion, 8% operational growth and north of 12% of EPS increase. So I'm pleased with that trajectory that we're having in 2023, and it delivers on the promise of being a top-tier company.

When I think about capital allocation priorities, which is your second question, we aim to be a very disciplined financial company. We have an excellent credit profile, we have a very robust free cash flow generation, and we want to maintain that solid financial profile for Johnson & Johnson. Our priorities are clear and have not changed. The first thing is to continue to invest in our business in -- especially in R&D, and I'm sure you'll have opportunities to discuss with John how we are doing that. Second one is to continue to pay a competitive dividend. We have had 61 consecutive years of dividend increases, and we don't plan to change that.

The other one is to use part of that for M&A, for value-creating acquisitions, expanding into markets that we are today or adjacencies and, if appropriate, for share repurchases. If I tell you the numbers in the last 5 years, we invested $64 billion in R&D in the last 5 years. We used $60 billion for dividends and share repurchases, so about 60% of our free cash flow and $33 billion for M&A. So that gives you a picture of what are our capital allocation priorities. And this is something that we don't plan to change. We want to maintain our robust financial position.

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

Okay. Great. Well, it sets the stage perfectly. The one, I guess, segue question just relates to M&A. I know you and I have talked in the past, and you've been very proud of some of the deals you've done on the pharma side where you guys have gone very early stage. When I think of the IMBRUVICA deal, DARZALEX deals, those are kind of early-stage assets and you've generated a great return on those given the success of those assets.

And so my question is, I guess, is that your preference on the pharma side? And then in MedTech, should we think about more of kind of Abiomed-type deal is kind of the preference? How do you think about just kind of stage of deal in Pharma and MedTech?

Joaquin Duato - Johnson & Johnson - CEO & Chairman

Yes. So I know there's a lot of focus on M&A, but I also would like to underline that the majority of the growth of Johnson & Johnson, the overwhelming majority of the growth is going to come from our existing R&D and our existing portfolio. So M&A thus is important, it's important in creating future growth. But the majority of the growth, if you look at the 5-year period, it's going to come from our existing portfolio and our R&D efforts. So our preferred way, and that reads both for MedTech and for Pharma, is to be able to go earlier on in order to do deals that can be licenses, partnerships or acquisitions, to be able to leverage our scale in development, in manufacturing, in commercialization and to capture the most value we can.

So clearly, if we could, it would be all these type of deals. And we have a great track record in Pharma in being able to do that. You mentioned some of them. And we also have a good track record in MedTech to do that. It does take longer to maturate these deals in MedTech. That's clear. So with that differentiation, our preferred way in Pharma remains the same. We have a tried and true formula. We have not departed from that formula. And in MedTech, we want to be able to go earlier on too and to increase the number of shots on goals that we have there. And sometimes if we see the right opportunity, expand into markets that are faster growing that are adjacency where we are. For example, what we did with Abiomed. That would be an example of that.

How is Abiomed is doing? Abiomed is doing really well. I mean it's growing around 20%. And we think that the Abiomed deal is very prototypical of what Johnson & Johnson should do, which is platforms that are going to have a multi-decade growth profile. And that's what we are trying to

3

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

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

SEPTEMBER 13, 2023 / 2:10PM, JNJ.N - Johnson & Johnson at Morgan Stanley Global Healthcare Conference

do. And Abiomed has a number of opportunities in different products and indication expansions that are going to make it a core part of our cardiovascular business there.

But I want to underline that we remain disciplined, and the same way that I was describing our capital allocation priorities, that plays in our M&A strategy. And that while we are open for M&A as we have deal with Abiomed, we remain focused on making sure that we do very well with our existing business because that's the core of the growth that we'll deliver to investors in the coming years.

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

Okay. Great. So maybe just moving on to the Pharma business. Obviously, this is going to be on a percentage basis, a much higher percentage of the company now post the consumer separation. The company has provided 2025 pharma guidance of $57 billion on an FX-adjusted basis. I think consensus stands around $55 billion despite the recent STELARA settlement. So maybe just walk us through what you see as the biggest disconnect, and this goes back to some of your earlier point on just the underlying franchises driving that of your growth.

Joaquin Duato - Johnson & Johnson - CEO & Chairman

Absolutely. I have to tell you that the consensus is moving closer to the $57 billion now.

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

I didn't look this morning.

Joaquin Duato - Johnson & Johnson - CEO & Chairman

Yes. So the consensus has moved closer to the $57 billion. And I see in the investor side an increased confidence on the $57 billion, and I will explain to you that. We have always been confident on getting into $57 billion in 2025, and we are very confident that we are going to be able to do that, just to be clear. So why are we confident of the $57 billion? There's a number of factors that I'll go one by one, and then I will go at the end to the disconnects, which are not as wide as we had before.

So what are the factors? First, we have a very strong marketed portfolio of products that are growing well, TREMFYA, our IL-23; ERLEADA, our prostate cancer medication; our long-acting therapy, our long-acting antipsychotic franchise with INVEGA SUSTENNA; our pulmonary arterial hypertension franchise; and our biggest asset today, which is DARZALEX, which is doing really well being standard of care, now in first-line in newly diagnosed multiple myeloma patients. So those ones that we have identified as core products of our existing portfolio, that do have legs during the second half of the decade, are doing really well, all of them growing north of double digit.

Then at the same time, I think we have provided increased visibility to our new product launches, four: one is CARVYKTI, our BCMA cell therapy, which has had best-in-class results, and I'm sure John will talk about CARTITUDE-4 later and what it means to be able to go to earlier lines; TECVAYLI, which is teclistamab, our BCMA CD3 bispecific; and then our recent approval of talquetamab, TALVEY, our GPRC5D CD3 bispecific, which was approved a couple of weeks ago. So those are 3 new products, with the addition also of SPRAVATO, which is our medication for treatment-resistant depression, which we are now disclosing in our sales tables. And you're going to be able to see the progression of these 4 new drugs.

So all these new products are going to be substantial contributors. And then on top of that, because those products are marketed, I think there's more visibility to some of the late-stage products in our pipeline that will have some important role in this coming couple of years. One, you have more visibility on amivantamab and the combination of amivantamab plus lazertinib with the PAPILLON data and the MARIPOSA-2 data that I'm sure we're going to get a question, and I'll let John talk about that. You have more visibility on nipocalimab, in which we are going to have upcoming data. We also have presented data on our oral IL-23 receptor antagonist peptide, which creates an additional avenue for growth. And we also have

4

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

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

SEPTEMBER 13, 2023 / 2:10PM, JNJ.N - Johnson & Johnson at Morgan Stanley Global Healthcare Conference

presented data on our drug-eluting device, TARIS, that is implanted in the bladder for earlier-stage bladder cancer which was very promising. So I think there's more visibility into some of the key assets of our pipeline. And I think that gives enhanced confidence to the investor.

There are other elements of our pipeline that we have more visibility, for example, milvexian, that we have started all the 3 Phase III studies. So we are executing well on our pipeline, and that gives increased visibility. So I think that is -- the combination of our existing products, our new product launches, the visibility in our pipeline has increased the confidence on the $57 billion.

What are the disconnects that still exist? One is with TREMFYA. I think that TREMFYA and the impact that the IBD indications are going to have in TREMFYA is not yet well recognized, right? And we are going to present data on the studies both in UC and in CD very soon. And that's going to be a new leg of growth in TREMFYA, which is not yet well recognized. For background, on STELARA, that could be a good proxy, 75% of the sales of STELARA are in IBD. So when you look at TREMFYA today, you have to think about the potential because 75% of the sales of STELARA are in IBD. TREMFYA, it's only in psoriasis and in psoriatic arthritis. So I don't think that's well captured yet.

ERLEADA is not yet well captured because we are in the process also of having results of a study on highly localized -- in localized prostate cancer, high-risk localized prostate cancer, 2 studies there. And that would be a new level of growth for ERLEADA, our prostate cancer medication. And then finally, I don't think that SPRAVATO, our treatment-resistant medication rapid-acting antidepressant is still well captured in its potential. SPRAVATO was the first medication with a different mechanism of action in treatment-resistant depression. It got 2 breakthrough designations by the FDA. And while it takes longer to introduce new antidepressants because the psychiatry group is more conservative, it's building up very well, and you're going to see strong progression quarter-over-quarter.

So these 3 products, I believe, are the ones that may have more of a disconnect versus what The Street is projecting in $57 billion. But again, I believe that the confidence of the $57 billion has increased. Now our goal is to provide more reasons to believe in our growth profile in the second half of the decade.

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

Yes. So does that mean we should expect 2030 guidance at the R&D Day that's coming up later?

Joaquin Duato - Johnson & Johnson - CEO & Chairman

I mean, we have an upcoming enterprise business review at the end of this year. And what we -- our goal there would be to provide more conviction around the next couple of years both in MedTech and in Pharmaceuticals and at the same time, give you more visibility, both in MedTech and Pharmaceuticals to our pipeline so as to be able to have a better view of the growth profile in the second half of the decade. The same way that it took some time to get into the $57 billion, I think that we have some work to do in showing investors what is our growth profile in the second half of the decade. So our main goal in that reading would be to give you more visibility so you are in a better position to model and to profile what is going to be our growth in the second half of the decade.

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

Okay. Understood. I want to get to myeloma because that's one of the important franchises. But first, I just thought I'd ask one on RYBREVANT and lazertinib. You mentioned this, Joaquin, MARIPOSA-2, but also we're waiting on the MARIPOSA-1 study which again would open up the frontline opportunity. So maybe, John, this is more for you, in terms of weighing the importance of efficacy versus tolerability here in that first-line setting, because I think that's one of the debates is we get physician feedback as it's an IV plus an oral. But where does efficacy -- how do you weigh efficacy versus the tolerability of the infusion reactions, et cetera, as you think about first-line setting?

5

REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us

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