Louise Mehrotra – VP, IR
Dominic Caruso – VP, Finance and CFO
Joaquin Duato – Worldwide Chairman, Pharmaceuticals Group
Paul Stoffels – Chief Scientific Officer and Worldwide Chairman, Pharmaceuticals Group
Matthew Dodds – Citi
Mike Weinstein – JP Morgan
Catherine Arnold – Credit Suisse
Larry Biegelsen – Wells Fargo
Rajeev Jashnani – UBS
Jamie Ruben – Goldman Sachs
Derrick Sung – Sanford Bernstein
Danielle Telsey – Leerink Swann
Glen Novarro – RBC Capital Markets
Matt Miksic – Piper Jaffray
Johnson & Johnson Services, Inc. (JNJ) Q3 2012 Earnings Call October 16, 2012 8:30 AM ET
Good morning, and welcome to the Johnson & Johnson Third Quarter 2012 Earnings Conference Call. (Operator Instructions) This call is being recorded. (Operator Instructions) I would now like to turn the conference over to Johnson & Johnson. You may begin.
Good morning, and welcome. I’m Louise Mehrotra, Vice President of Investor Relations for Johnson & Johnson. This is my pleasure this morning to review our business results for the third quarter of 2012. Joining me on the call today are Dominic Caruso, Vice President Finance and Chief Financial Officer; Joaquin Duato, Worldwide Chairman, Pharmaceuticals Group; and Dr. Paul Stoffels, Chief Scientific Officer and Worldwide Chairman, Pharmaceuticals Group. A few logistics before we get into the details.
This call is being made available to a broader audience via webcast accessible through the Investor Relations’ section of the Johnson & Johnson website. I’ll begin by briefly reviewing highlights of the third quarter for the corporation and highlights for our three business segments. Then Dominic will provide some additional commentary on the third quarter results and discuss guidance for the full year of 2012. Following Dominic’s remarks, Joaquin and Paul will provide a brief update on the pharmaceuticals business. We will then open the call to your questions. We expect the call to last approximately an hour and a half.
Included with the press release that was sent to the investment community earlier this morning is a schedule showing sales for key products and/or businesses to facilitate updating your models. These are also available on the Johnson & Johnson website as is the press release. Please note this webcast includes slides. The slides are available on the website.
Before I get into the results, let me remind you that some of the statements made during this review may be considered forward-looking statements. The 10-K for the fiscal year 2011 identifies certain factors that could cause the company’s actual results to differ materially from those projected in any forward-looking statements made this morning. The 10-K is available through the company or online.
During the review, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. These non-GAAP financial measures should not be considered replacements for GAAP results. Tables reconciling these measures to the most comparable GAAP measures are available in the press release and on the Investor Relations’ section of the Johnson & Johnson website at investor.jnj.com.
Lastly, today we will be discussing new molecular entities or NMEs and line extensions based on the company’s current knowledge of the status of development. NMEs and line extensions are subject to the challenges and difficulties inherent in product development. The company does not undertake to update any forward-looking statements as a result of new information or future events or developments. A number of the compounds and products discussed today are being developed in collaboration with strategic partners or licensed from other companies. These slides list the acknowledgment of those relationships.
Now I would like to review our results for the third quarter of 2012. If you would refer to your copy of the press release, let’s begin with the schedule titled Supplementary Sales Data by Geographic Area. Worldwide sales to customers were $17.1 billion for the third quarter of 2012, up 6.5% as compared to the third quarter of 2011. On an operational basis, sales were up 10.8% and currency had a negative impact of 4.3%.
The acquisition of Synthes was completed in the second quarter this year. In the third quarter, the acquisition net of the impact of the divestiture of the legacy DePuy trauma business contributed 5.8% to the worldwide operational sales growth. The impact to the U.S. and outside the U.S. growth was 7.2 points, and 4.8 points respectively. In the U.S., sales were up 13.4%. In regions outside the U.S., our operational growth was 8.9% while the effect of currency exchange rates negatively impacted our reported results by 7.5 points.
The western hemisphere excluding the U.S. grew by 12.8% operationally while the Asia Pacific Africa region grew 9% on an operational basis. Europe grew 7.1% operationally. The success of new product launches and Synthes sales made strong contributions to the results in all regions.
If you’ll now turn to the consolidated statement of earnings, net earnings attributable to Johnson & Johnson were $3 billion compared to 3.2 billion dollars in the same period of 2011. Earnings per share were $1.05 versus $1.15 a year ago. Please direct your attention to the box section of the schedule where we have provided earnings adjusted to exclude special items. As referenced in the accompanying table on non-GAAP measures, 2012 third quarter net earnings were adjusted to exclude the after tax impact of noncash net charges related to in-process research and development due to the discontinuation of the Phase III clinical development of Bapineuzumab IV, transaction and integration costs related to the acquisition of Synthes, Inc., and a few ASR hip replacement costs.
Third quarter 2011 net earnings were adjusted to exclude the after tax impact of a mark-to-market adjustment to the value of the currency option and deal costs related to the acquisition of Synthes, Inc. Excluding these special items, net earnings for the current quarter were $3.5 billion and diluted earnings per share were $1.25 representing increases of 2.3% and 0.8% respectively as compared to the same period in 2011.
I would now like to make some additional comments relative to the components leading to earnings before we move on to the segment highlights. For the third quarter of 2012, cost of goods sold at 32.8% was up 110 basis points from the same period last year primarily due to an inventory step-up charge related to the Synthes acquisition. Excluding the inventory step-up charge, which has been treated as a special item, cost of goods sold increased 20 basis points versus the same period last year, primarily due to ongoing remediation costs in our consumer business.
Third quarter selling, marketing and administrative expenses at 30.6% of sales were down 210 basis points due to cost containment initiatives across many of our businesses. Our investment in research and development as a percent to sales was 11.3%, 20 basis points higher than the third quarter of 2011 primarily due to the timing of milestone payments in our pharmaceutical business. Interest expense net of interest income of $120 million was up $3 million for just the third quarter of 2011. Other income net of other expense was $90 million in the third quarter of 2012 compared to $308 million in the same period last year.
Excluding special items, other income net of other expense of $175 million was $449 million less than 2011 due to lower gains on divestitures. Excluding special items, the effective tax rate was 22.2% in the third quarter of 2012, in line with 2011.
Turning now to business segment highlights, please refer to the supplementary sales schedule highlighting key products or businesses for the third quarter of 2012. I’ll begin with the consumer segment. Worldwide consumer segment sales for the third quarter of 2012 of $3.6 billion decreased 4.3% compared to the same period last year. On an operational basis, sales increased 1% while the impact of currency was negative 5.3%.
U.S. sales were down 0.4% while international sales grew 1.8% on an operational basis. Baby care products decreased on an operational basis by 1.9% when compared to the third quarter of 2011, primarily due to lower international sales of lotions and creams, partially offset by strong growth of hair care products. Sales in the oral care business increased 3% operationally due to strong sales outside the U.S. from newly launched Listerine products.
For the third quarter of 2012, sales for OTC pharmaceuticals and nutritionals increased 5.9% on an operational basis compared to the same period in 2011 with U.S. sales up 5.7% and sales outside the U.S. up 6% on an operational basis. Sales in the U.S. increased primarily due to the relaunch of selected key products and the impact of the acquisition of full ownership rights to certain digestive health products partially offset by supply constraints on other products.
McNeil PPC is operating under a consent decree covering the manufacturing facilities in Las Piedras, Puerto Rico, and Fort Washington and Lancaster, Pennsylvania. McNeil continues to operate the manufacturing facilities in Las Piedras and Lancaster. As previously discussed, production volumes from these facilities continued to be impacted by additional review and approval processes. We expect this to continue throughout 2012 and most of 2013. Plants operating under the consent decree are producing a simplified portfolio focused on key brands.
Our Skin Care business grew 0.2% on an operational basis in the third quarter of 2012 with the U.S. up 3.7% due to strong performance of Neutrogena. Sales outside the U.S. were down 2.2% due to competitive and marketplace pressures.
Women’s Health declined 3.2% on an operational basis. Sales in the U.S. were down 22.1% while sales outside the U.S. were up 2.3% on an operational basis. The sales decline this quarter was primarily due to the divestiture of Monistat in August last year. Excluding the impact of the divestiture, sales were flat. Wound Care Other sales decreased 3.6% on an operational basis compared to the same period last year due to competitive pressures.
That completes our review of the consumer segment and I’ll now review highlights for the pharmaceutical segment. Worldwide net sales for the third quarter of $6.4 billion increased 7% versus same period last year. An on operational basis, sales increased 11.3% with a negative currency impact of 4.3 points. Sales in the U.S. increased 14.6% while sales outside the U.S. increased on an operational basis by 8.2%.
Now reviewing sales for the major therapeutic areas. Immunology products achieved strong double-digit operational sales growth of 19.8%. Sales in the U.S. increased 15.1% while sales outside the U.S. increased 37.1% operationally. On operational basis, STELARA was up 56.4% with the U.S. up 57.9% and sales outside the U.S. up 39.5% operationally. The strong results were due primarily to market share gains complemented by strong market growth in all major regions.
SIMPONI was up 47.9% operationally with U.S. sales up 57.6%. Strong market growth and increased market share accounted for approximately half of the U.S. growth with timing for certain items accounting for the balance. In the quarter, sales outside the U.S. were up 39.7% on an operational basis primarily due to the continued success of the launch in Japan.
REMICADE grew 14.3% on an operational basis. The U.S. was up 7.3% with approximately half the growth due to changes in wholesaler inventory levels and the remainder due to a strong double-digit market growth partially offset by lower market share. Combined export and international sales grew approximately 25% on an operational basis with customer inventory planning contributing approximately 60% of the operational growth in the quarter.
With the strength of our portfolio, we continue to be the U.S. market leader in immunology. Sales of infectious disease products increased 18.6% on an operational basis. Continued momentum in market share growth of PREZISTA and insulins for HIV was partially offset by lower sales of vaccines.
INCIVO, a treatment for hepatitis C, contributed approximately half of the infectious disease worldwide operational growth in the quarter. On a sequential basis, INCIVO sale were down primarily due to seasonality in treatment patterns in Europe, impacting new patient starts in the summer months. Sales accelerated significantly in September.
Neuroscience product sales increased 3.3% on an operational basis. Growth was impacted by generic competition for CONCERTA, Rasadyne, RISPERDAL and DURAGESIC. The long acting injectable antipsychotics RISPERDAL CONSTA and INVEGA SUSTENNA, or Zeplion, achieved operational growth of nearly 20% due to an increase in combined market share. INVEGA sales outside the U.S. achieved operational growth of 26.9% primarily due to the strong growth in Japan.
Sales of oncology products increased 36.2% on an operational basis due to the very strong results for Zytiga and VELCADE partially offset by lower sales for Doxil/Caelyx related to manufacturing issues at a third-party supplier. Zytiga is currently approved to treat chemo refractory methastoic castration resistant prostate cancer. In the quarter, Zytiga achieved sales of $265 million. On a sequential basis, reported sales increased just under 15%. Velcade is a treatment for multiple myeloma. Operational sales increased 20.7% on an operational basis due to continued strong performance in patient share in the frontline setting.
Doxil/Caelyx declined 80.4% on an operational basis in the quarter. We have been working diligently to restore a reliable supply of Doxil, and as announced yesterday, full access in the U.S. has commenced. In the E.U., we expect Caelyx to be available in the fourth quarter of 2012 and in non-E.U. countries the timing is projected to be the first quarter of 2013.
Other pharmaceutical products declined 3.3% on an operational basis due to divestitures and lower sales of EPREX, ands osofectperrett due primarily to the impact of generic competition. Positively impacting results XARELTO sales grew 40% on a sequential basis contributing over two points to the U.S. pharmaceutical growth rate.
On the pipeline front, during the quarter Zytiga was granted priority review by the FDA for the chemo naive filing, petaqualine to treat pulmonary multi drug resistance tuberculosis was filed in Europe and granted priority review by the FDA. The FDA approved new Synthes ER for the management of neuropathic pain associated with diabetic peripheral neuropathy. Dockogen was approved in the European union for the treatment of acute myeloid leukemia, SIMPONI IV was submitted to the FDA for treatment of moderately to severely active rheumatoid arthritis and subcutaneous Velcade was approved in the U.E. for the treatment of multiple myeloma.
That completes a review of the Pharmaceutical segment. I’ll now review the Medical Devices and Diagnostic segment results. Worldwide Medical Devices and Diagnostic segment sales of $7.1 billion grew 16.1% operationally as compared to the same period in 2011. Currency had a negative impact of 3.6 points resulting in a total sales increase of 12.5%. Sales excluding the net impact of Synthes were up 1.4% on an operational basis with U.S. sales up 0.4% and sales outside the U.S. up 2.2% on an operational basis.
Now turning to the MD&D business starting with the Cardiovascular Care. Cardiovascular Care sales were down 2.7% operationally with the U.S. down 1.5% and sales outside the U.S. down 3.3% operationally. Excluding the impact of drug-eluting stents, worldwide sales were up approximately 3.5% operationally due to strong results for Biosense Webster, partially offset by lower sales of endovascular products due to the impact of a supply disruption that was a result late in the third as well as competitive launches.
Biosense Webster achieved worldwide operational growth of over 20% in the quarter driven by strong market share growth. The success of the new thermaco catheter launches made strong contributions to the results.
The Diabetes Care business operational sales declined 1.1% in the third quarter of 2012 with the U.S. business down 3% due to a decline in both mail order and hospital sales. The business outside the U.S. grew 0.8% operationally with strong sales in emerging markets partially offset by lower sales in some of the developed markets.
The Diagnostics business declined 1.9% on an operational basis with the U.S. down 3.4% and sales outside the U.S. down 0.5% operationally in the third quarter. Sales were impacted by lower donor screening sales due to competitive pressures, and the divestiture of the Rogaine business during the third quarter.
Infection prevention grew 9% on an operational basis with similar results both in and outside the U.S.: The breadth of the install base strong consumables growth.
Orthopedic sales were up 68.6% on an operational basis when compared to the same period in 2011. Excluding the impact of Synthes and the divestiture in December 2011 of certain neurosurgical instruments, sales grew approximately 2.5% on operational basis with similar results both in and outside the U.S. Operationally, hips were up 3% worldwide driven by 6% growth in the U.S. due to strong results in primary stem platform sales partially offset by continued pricing pressure. Hips outside the U.S. were flat with soft sales in Europe offsetting gains in other regions. Competitive pressures and the softer market impacted growth in Europe.
Knees worldwide increased 3% on an operational basis with the U.S. up 6% driven by fixed bearing and revision platforms. Sales outside the U.S. were flat due to softer sales primarily in Europe due to competitive pressure. Including the Synthes business in both periods and excluding the divested DePuy trauma business in both periods, trauma grew approximately 4% on an operational basis with the U.S. up 1% and sales outside the U.S. up 7% on an operational basis. U.S. growth was impacted by shipping patterns.
Including the Synthes business in both periods, worldwide spine was down 3% on an operational basis with the U.S. down approximately 6% with continued pressure on price. Outside the U.S., sales grew approximately 1% operationally. Specialty surgery achieved operational growth of 7.2% in the third quarter of 2012 with the U.S. sales up 5.5% and sales outside the U.S. up 9.1% on an operational basis.
Sales from the acquisition of SterilMed and strong biosurgery products and international sales of energy products were the major drivers of growth this quarter. Surgical care worldwide sales grew operationally by 0.1% with the U.S. down 1.1% and sales outside the U.S. up 0.9% operationally. The success of new product launches, SECURESTRAP, PHYSIOMESH, and the ECHELON FLEX Powered ENDOPATH Stapler were offset by lower sales of mechanical products and pelvic floor repair products.
On September 28th, Ethicon received a complete response letter from the FDA on the biologics license application for the Fibrin Pad with questions specific to product labeling. On October 5th, final labeling was agreed to with the FDA and the response was submitted. We expect to hear from the FDA in the near future.
Rounding out the review of the medical devices and diagnostic segment our Vision Care business achieved operational sales growth of 4.4% in the third quarter compared to the same period last year. Sales in the U.S. increased 3.6% while sales outside the U.S. increased 4.8% on an operational basis. Growth was driven by daily lenses and astigmatism lenses partially offset by lower sales of reusable lenses. That completes highlights for the medical devices and diagnostic segment and concludes the segment highlights for Johnson & Johnson’s third quarter of 2012.
It is now my pleasure to turn the call over to Dominic Caruso. Dominic?
Thank you, Louise, and good morning, everyone. I would like to provide some additional comments about our third quarter results, highlight a few recent business and pipeline developments, and then provide guidance for you to consider in refining your models for the remainder of 2012. Then I will turn over the call to Joaquin Duato and Dr. Paul Stoffels who will provide an update on the pharmaceutical business and pipeline.
Let me first begin by sharing my view of Johnson & Johnson’s third quarter results, which Louise has reviewed for you. Despite continuing marketplace and economic pressures, we reported solid sales growth in the third quarter of 6.5%, which was slightly higher than analyst estimates as published by first call. Foreign currency, in particular the weak euro, continues to negatively impact sales results. Third quarter sales on an operational basis excluding the impact of unfavorable currency grew 10.8%. Currency translation negatively impacted sales by 4.3%.
Sales included the impact of the recently completed acquisition of Synthes, which contributed 5.8% to worldwide operational growth net of the divestiture of the DePuy trauma business. Excluding the impact of the acquisition of Synthes, the underlying global business grew by approximately 5% on an operational basis. Also, excluding special items this quarter, we delivered solid earnings per share of $1.25, which exceeded analyst estimates.
Turning to market conditions, in the U.S., healthcare utilization rates, primarily hospital admissions and surgeries, show early signs of stabilization, and U.S. joint reconstruction volumes appear to have improved in the latest data that we have. While some positive signs can be seen, these signs are still too early to signal any meaningful recovery. Adapting to this change in environment is important and our leaders continue to apply financial discipline to our operations while investing in key growth opportunities.
Let me take a moment to provide some detail on special items in the third quarter. We recorded several special items totaling approximately $550 million after tax that reduced reported net earnings for the quarter. In August, we announced that we would be taking a charge in the third quarter for the discontinuation of the Phase III clinical development of Bapineuzumab IV in mild to moderate Alzheimer’s disease.
That amounted to a net charge of $340 million, consisting of a $679 million charge for the write-off of in-process research and development, offset by the approximately 50% share of that cost, which is attributable to our partner in the program. As we described during the announcement of the closing of the Synthes acquisition, we expected to incur additional special charges throughout 2012. And in the third quarter, we recorded an after-tax charge of $135 million consisting of transaction and integration costs.
And finally, we also recorded a $94 million after tax increase in the accrual for DePuy ASR hip related costs, based on updated international registry information.
Louise has already updated you on developments in the consumer business, and I would just note a few business milestones for the medical device and diagnostic business for the quarter and I’ll leave the pharmaceutical highlights to Paul and Joaquin.
In MD&D this quarter, we launched several new products with significant benefits most notably in areas of energy and orthopedics. The new 45-millimeter version of the Echelon Flex Power ENDOPATH Stapler was launched. This new 45-millimeter design allows surgeons to have more control near vital structures such as in the thorax. The new Endura tip solutions, a new system of instruments and devices, marks our entry into the rapidly growing field of hip arthroscopy.
These are a few recent highlights, and on November 1 we will provide a more in-depth review of our medical devices and diagnostics businesses as part of our annual business review with the investment community. At that meeting, the three heads of our MD&D business groups, Global Surgery, Global Medical Solutions, and Global Orthopedics, will update you on our exciting product offerings and the strategic direction of their respective businesses. I certainly hope you can join us for that meeting.
Let me now provide some guidance for you to consider as you refine your models for the rest of 2012. Let me begin with a discussion of cash and interest income and expense. At the end of the third quarter, we had approximately $2.9 billion of net cash. This consists of approximately $19.8 billion of cash and investments and approximately $16.9 billion of debt. And we continue to generate strong cash flows. For purposes of your models, assuming no additional major acquisitions during 2012, I suggest you consider modeling net interest expense of between $500 million and $550 million, consistent with our previous guidance.
Turning to other income and expense, as a reminder, this is the account where we record royalty income as well as gains and losses arising from such items as litigation, investments by our development corporation, divestitures, asset sales, or write-offs. This account is difficult to forecast due to the nature of some of these items. Assuming no major additional items of this nature, I would recommend that you consider modeling other income and expense for 2012 as a net gain excluding special items ranging from approximately $1 billion to $1.1 billion, slightly higher than our previous guidance.
And now a word on taxes. On a year-to-date basis through the third quarter of 2012, the company’s effective tax rate excluding special items was 22.2%. We suggest that you model our effective tax rate for 2012 in the range of 21% to 22%, consistent with our previous guidance, and this assumes the extension of the research and development tax credit later in the year.
Now turning to sales and earnings guidance. Our guidance continues to be based first on a constant currency basis, reflecting our results from operations, assuming that average currency rates for 2012 will be the same as they were for 2011. This is the way we manage our business, and we believe this operational view provides a good understanding of the underlying performance of our business. We will also continue to provide an estimate of our sales and EPS results for 2012 with the impact that current exchange rates could have, and we’ll use the euro as an example.
So turning to sales, we would be comfortable with your models reflecting an operational sales increase on a constant currency basis of between approximately 5.5% to 6.5% for the year. This is consistent with our previous guidance as our business continues to build the momentum we had expected. This would result in estimated sales for 2012 on a constant currency basis of between approximately $68.6 billion and $69.3 billion. While we are not predicting the impact of currency movements to give you an idea of the potential impact of currency exchange rates for the remainder of 2012 were to say where they were as of last week, as an example with the Euro at approximately $1.29, then our sales growth rate would be negatively impacted by approximately 2.5% for the year. Thus, under this scenario, we would expect reported sales growth to be between approximately 3% and 4% for the year for a total expected level of reported sales between approximately $67 million and 67.6 billion dollars.
And now turning to earnings, I suggest that you consider full-year 2012 operational EPS estimates of between $5.27 and $5.32 per share which excludes the impact of special items and assumes the same average exchange rates for 2012 as we saw in 2011. While we’re not predicting the impact of currency movements, to give you an idea of the potential impact on EPS, if currency exchange rates for the balance of 2012 were to remain where they were as of last week, then the impact of currency movements, primarily the Euro would be unfavorable by approximately $0.22 per share.
Therefore our reported EPS excluding special items would be between $5.05 and $5.10 per share. This is slightly higher than our previous guidance, assuming that the recent strengthening of the Euro holds up, and reflects tightening of the range at this late stage in the year.
On a final note, I’d like to point out that as you update your models for the guidance we provided, you should see pre-tax operating margins for 2012 improve between 100 and 150 basis points, even with the incremental amortization expense related to Synthes. Operating margin expansion can certainly vary from year to year, but we are certainly pleased with our progress this year. That concludes my comments on our operational performance this quarter and our guidance with respect to your models.
In summary we are very pleased with the third quarter results, and we expect to continue on our core strengths, recent launches, and ongoing investments to build for future growth. I remain confident in our prospects for the remainder of this year and beyond, thanks to the dedication and focus and integrity of the people at Johnson & Johnson.
And now I’d like to take a few minutes to introduce the two leaders of our Pharmaceuticals Group Joaquin Duato, Worldwide Chairman of the Pharmaceutical Groups; and Dr. Paul Stoffels, Worldwide Chairman of the Pharmaceuticals Group and recently appointed to the role of Chief Scientific Officer for Johnson & Johnson. These two leaders long with the many talented and dedicated people in our pharmaceuticals group have made our business one of the fastest growing in the pharmaceutical industry. They have been instrumental in selecting and developing great compounds and have launched them in a challenging marketplace with excellence. They have also positioned the business very well for continued growth.
It is now my pleasure to turn the discussion over to Joaquin.
Thanks, Dominic, and good morning, everyone. My name is Joaquin Duato and I am the Worldwide Chairman of the Pharmaceuticals Group at Johnson & Johnson, a responsibility I share with Paul Stoffels. This is an exciting time for Johnson, a time of transformation for our business, a time of impacting the lives of patients with an unprecedented number of innovative medicines. Pharmaceuticals is a dynamic global market valued at $950 billion and expected to grow to more than $1.2 trillion by 2016. This growth is driven by volume increases in emerging markets and a spending uptick in developed nations. Our focus and efforts are paying off as we continue to build momentum with an industry-leading portfolio.
Across our core therapeutic areas we are delivering robust growth and outpacing the markets where we compete. We have launched eight new products since 2009, achieving a strong track record of success and generating excellent results through best in class commercial capabilities. We are also expanding our global presence by broadening our geographic reach to include emerging markets and Japan. At the core of our success are the people of Johnson, committed to the values of Our Credo and caring for the world one person at a time.
Our momentum is driven by disciplined decision-making and an aligned strategy around four areas: creating value through innovation, global reach with local focus, excellence in execution, and leading with purpose. We will use this framework to update you on the progress of our Johnson business. So let’s begin with creating value through innovation.
With 11.3% operational growth in Q3, we have changed the trajectory of our business achieving ten quarters of consecutive growth. We are transforming our pro portfolio. Our new products are projected to comprise 40% of our sales by 2016. You’ll note a healthy balance of mature brands, core growth products, and new launches.
As you can see, we are driving growth across all of our key therapeutic areas, reflecting our underlying strength. Our Immunology franchise, our largest, is growing operationally at 19%. After acquiring the rights of REMICADE and SIMPONI in 150 territories, we are expanding our worldwide leadership in immunogly. We now manage two-thirds of REMICADE and SIMPONI global sales. And in the U.S., we are the market leaders with approximately 33% share.
Our long-acting antipsychotic franchise including INVEGA SUSTENNA known as Sepion in many markets outside of the U.S. and RISPERDAL CONSTA is growing 18%, exceeding category growth in the broad antipsychotics market. In Oncology, continuous growth of bellkad and the very rapid uptick of Zytiga have helped us realize 29% growth. In addition, we are restoring full access to Doxil and working to
reestablish its reliable supply.
Our global HIV business is up 28%, thanks to the continued growth of PREZISTA INTELENCE, EDURANT and the combination product complata. Currently one in three U.S. patients were treated with a new HIV regimen as prescribed at Johnson’s therapeutic medication. Let’s now briefly review some of our leading products.
With 16 regulatory approvals, REMICADE is our largest brand, and we continue to expand its indications. Earlier this year, we received approval in the E.U. for pediatric ulcerative colitis. 1.7 million patients have been treated with REMICADE worldwide, and in October, we marked a U.S. milestone, having treated one million patients. Our marketplace position remains solid, with more than 75% share of the U.S. infusible market for immunology products. With sales of 4.6 billion year-to-date, REMICADE is sustaining growth at 15.1% globally with 8.5% in the U.S. and 25% quarter-to-date in the reacquired territories.
Our exclusivity runs until 2018 in the U.S. and in the majority of the E.U. countries, we recently filed for an additional six-month extension of our patent turn related to pediatric studies. If granted this would extend our patent exclusivity of REMICADE to mid February of 2015 from August 2014.
At the end of 2009, we launch Estalada for the treatment of moderate to severe psoriasis. Reducing therapy from 28 a week to 4 injections a year. We are very proud that this game changing therapy was awarded the International (inaudible) earlier this month.
Year-to-date STELARA sales were $756 million, growing at 46%. Physician acceptance is increasing as STELARA has 25.4% share in the U.S. dermatology market, up three points from a year ago. Uniquely our five-year efficacy and safety data represents the longest continuous study of a psoriasis biologic treatment. And we continue to invest in STELARA with Phase III programs underway in psoriatic arthritis and Crohn’s disease.
And now a brief update about SIMPONI. With 50% operational growth and sales of $452 million, SIMPONI is building momentum with expanded indications and a new formulation on the horizon. It is currently approved in 57 countries for rheumatic diseases and we recently launched in Japan with a strong uptake. We are excited about this product’s potential. We have submitted applications in the U.S. and Europe for ulcerative colitis via subcutaneous injection and for the approval of an intravenous formulation for the treatment of rheumatoid arthritis, if approved, SIMPONI will be the only entity available in both subcutaneous and intravenous formulation.
Let’s move into our reinvigorated long-acting injectable franchise. We launched INVEGA SUSTENNA in the U.S. in 2009, and it is now approved in 37 countries outside of the U.S. In many markets, under the name Sepion. The successful launch of INVEGA SUSTENNA has accelerated the growth of our long-acting antipsychotic franchise from mid single digits to 18% year to date. We have seen significant expansion of our prescriber and patient base, many of whom are new to the long-acting antipsychotics category. Based on the success of our once-a-month injection, clinical development of a three-month formulation of INVEGA SUSTENNA is currently underway.
We are very pleased with the performance of ZYTIGA. With sales of $697 million year-to-date, ZYTIGA is the most successful global oral oncology launch ever. Since its first approval in the U.S. for metastatic prostate cancer in April 2011, ZYTIGA is now approved in more than 50 countries around the world. Physician uptake has been remarkable. The number of post chemo patients treated has grown to 75% from 40% at the time of launch. More than 30,000 patients have received treatments since 2011. Our estimated patient share in the U.S. chemo refractory market is approximately 67% and in the G5, it’s approximately 81%. We are now expecting responses from the FDA and EMEA on our pre-chemo indication, which will triple the eligible patient population.
Now on to VELCADE. This first in class treatment for multiple myeloma has approximately 36% share outside the U.S. and is growing 16% with almost $1 billion in sales year-to-date. VELCADE was recently approved for subcutaneous administration in Europe and Canada. We also have ongoing clinical studies in other hematological cancers such as Mantle Cell Lyphoma.
Let’s review infectious diseases and virology. PREZISTA is now approved in more than 100 countries worldwide with robust 24% operational growth. It is the leading protease inhibitor in Europe and is ranked number two in the U.S. We are now awaiting the approval of our single 800-milligram tablet.
Moving from PREZISTA to INCIVO, our hepatitis C treatment approved in Europe in 2011. INCIVO achieved reimbursement more than 100 days faster than the European benchmark. Following strong initial uptake, we experienced a slow-down in sales during the summer season. Now we are regaining traction as market activities stabilizes. We have already seen a pickup in September. INCIVO has achieved 67% market share and continues to maintain a strong lead over Procepravil across Europe.
Finally let’s talk about XARELTO. First approved in 2011, XARELTO has the broadest indication profile of any of the newer oral anticoagulants with additional indication spending regulatory approval for the treatment and long-term prevention of deep vein thrombosis pulmonary embolism and to reduce the risk of secondary cardiovascular events in patients with acute coronary syndrome in combination with the standard and the platelet therapy. According to IMS, XARELTO has overtaken prevaksa and is now capturing 53% of new-to-brand share of the NEVO oral anticoagulants in patients with nonvalvular atrial fibrillation.
Additionally, based on our profitability, attitudes and use of September survey, XARELTO is the number one brand preferred by cardiologists. Ahead not only of prevaksa but also of Warfarin. XARELTO continues to make positive gains in access with 93% commercial formularies and 90% of lives in Medicare party. I hope this brief summary of our key products reinforces the strong performance of our portfolio.
Now let’s move on to how we are extending our global reach with local focus. Our global presence is broadening. In 2006, sales outside of the U.S. accounted for 35% of our worldwide revenue. By 2011, they comprised 51% of our total sales. Emerging markets are playing an important role in our global growth. With a five-year growth of 15%, markets such as China, Brazil, Russia, India, and others now comprise 14% of our worldwide sales. In China, we expect strong growth due to a number of factors. These include our leadership position in over-the-counter products, the expected growth of CNS oncology and immunology franchises, and the expansion of China-based manufacturing and R&D capabilities. For example, we have had the first NME declaration by a China based team.
We are also making inroads in Brazil. Strong performances from REMICADE and VELCADE are helping to drive double digit growth, twice that of the market. We will have launched five new products in Brazil between 2011 and 2012. And in Russia, we are ranked number two in the reimburse market. In addition to broadening our base of new products, we are forging innovative partnerships with local companies such as the full cycle technology transfer product for VELCADE.
Now let’s talk about excellence in execution. Matching superior science with industry leading commercial capabilities is at the core of our success. Our results reflect our expertise in market access, launch readiness, care integration, and customer engagement. In the U.S. we hold the leadership position in total sales of new products launched during the last three years. In 2012, eight out of 12 of our euro sales forces were voted best in class by our physician customers while payers selected us as department of choice in specialty pharmaceuticals.
In EMEA Europe, the Middle East and Africa, Johnson is the fastest growing among the top 20 companies in the first half of 2012. Consistent with this performance, net promoted course for Johnson in Europe grew seven points and we are the preferred company among our competitive set with investigators, payers, and physicians.
Japan is a priority market for Johnson. We have launched six new products in Japan in the past two years with very good results. And we are the fastest growing company in Japan among the top 25.
So before I hand it over to Paul, I want to quickly summarize a few points about our strategy and results. We have changed the trajectory of our business with ten consecutive quarters of growth, the latest rate at 11.3%. We continue to build momentum across our core franchises, outpacing many of the markets where we compete. We are leading in the industry in sales of new products, and we are broadening our global reach in key geographies beyond the U.S. and Europe. It’s the people of Johnson around the world who are critical to our success. They make a meaningful difference in patients’ lives every day.
Thank you, Joaquin, and good morning, everyone. It is my pleasure today to discuss with you our pipeline and R&D strategy, and give you an overview of our enterprise approach to innovation. As leading healthcare company in the world, we believe that innovation is a critical driver for future growth. A key mandate in my new role will be to further develop the innovation agenda for Johnson & Johnson.
Our enterprise approach will focus on several key elements: An end-to-end R&D strategy focused on the highest needs and leverage deep medical expertise and scientific know how to select winners. Accessing the best science and technology through internal research or external innovation. By being agnostic to where the innovation comes from, we will access a diversity of innovation and meet a high threshold with products that exceeds market expectations. We will leverage our global development operations to increase efficiency, cost effectiveness and flexibility and ensure quality.
As a broadly-based healthcare company focused on three different sectors, we have world class talent and expertise and capabilities in multiple areas of science and technology. One of my key mandates will be to leverage those capabilities across the three sectors for maximum impact on healthcare.
In pharmaceuticals, we take a therapeutic area end-to-end approach for all compounds in our pipeline. We focus on five therapeutic areas: Neuroscience, Cardiovascular Metabolism, Immunology and Oncology, and Infectious Diseases. Within that’s therapeutic areas we focus on specific diseases with the most important and highest unmet needs.
Our vision is to transform patients’ lives by discovering and developing innovative solutions in each of these disease areas. We do this by identifying the medical needs, accessing the best science internal or external, and combining this with operational excellence. In 2011, we advanced our portfolio in a significant way with approval and launch of five new different shades of drugs. Zytiga for chemo refractory prostate cancer, INCIVO, once daily treatment for HIV, INCIVO, a novel treatment for hepatitis C, Xarelto for prophylaxis and for stroke prevention in atrial fibrillation and Synthes ER for chronic pain.
With these new medicines and our strong existing brands, we have built an industry leading portfolio of new and differentiated medicines. We also have worked to build an exciting and robust late stage pipeline of new and differentiated medicines. It features a healthy mix of NMEs with differentiated profiles and several major line extensions of drugs we launched in the past two years. I’ll highlight a few of these in more detail.
Chemically frozen for Type 2 diabetes, seen a preview of TMC 435 for chronic hepatitis C and PCI 32765 for approved for P-cell malignancies. Chemically frozen is a novel SGLT-2 inhibitor. It has an attractive clinical profile, has a potential convenient oral once daily agent. It acts uniquely on the kidney and has shown in studies to lower glucose by inhibiting glucose reabsorption in the kidneys and contribute to weight loss through secretion of glucose. It is a potential first choice for add-on therapy to metformin.
Our Phase III program forcana is designed to assess the safety and efficacy of chemically frozen across the spectrum of beta cell function and in broad patient types. To support this, we are fully enrolled nine Phase III pivotal clinical studies encompassing more than 10,300 patients. This includes the cardiovascular study canvass.
Canvass is a large prospective study enrolling more than 4,400 patients to assess the glycemic efficacy and safety of chemically frozen in Type 2 diabetes patients, who are also at high risk or have a history
of cardiovascular disease. We recently presented results from this trial, which showed that chemically frozen lowered blood sugar levels when used as an add-on therapy in patients with Type 2 diabetes who were treated with insulin and who had a greater risk for cardiovascular disease.
Chemically frozen was also effective and well tolerated in patients with Type 2 diabetes age 55 to 80 in a separate Phase III studies. These data were represented at the European Association for the Study of Diabetes Meeting in Berlin earlier this month. We filed an MDA in the U.S. in May, and an MAA in Europe in June, and also filed a multiple additional countries simultaneously following these submissions. We look forward to working with the regulatory authorities on approval for these indications.
Let me now turn to SIMEPRAVIVE, or TMC 435, which is a potential best in class protease inhibitor for chronic hepatitis C. The compound, which we are codeveloping with Medaviv, is suitable for one pill once a day administration. It significantly improved viral cure rates in Phase IIb studies in both treatment naive and treatment failure patients.
Earlier this year we presented final results from our Phase IIb ASPIRE study in which we evaluated 435 as an additional to pegalated Interferon and Ribfarin in patients with genotype I chronic hepatitis C. These patients had failed prior treatment with pegalated Interferon and Ribfarin either because they had relapsed, had a partial response, or had no response. TMC 435 based therapy significantly improved viral cure rates in each of these patient subgroups.
Our global Phase III trials for TMC 435 are currently ongoing. We have two Phase III trials in naive patients and one in relapsing patients. In addition, we have a Phase III study ongoing in non-responders and studies ongoing in Japan. While protease inhibitors are an important milestone in hepatitis C treatment, the ultimate goal is the development of Interferon free regimens. We have several programs under development to explore Interferon free regimens, including two Phase II studies exploring combination regimens of SIMEPRAVIVE with 7977 from Killiat and an NS5a from BMS.
Needless to say, we are excited about SIMEPRAVIVE for which we have worldwide marketing rights with the exception of the Nordic countries. We are targeting filing in the first half of 2013 in the U.S. and Europe and Japan.
Finally, let me spend a few minutes on Eguitamib, or PCI 32765, an anticancer compound that we are jointly developing with Pharmacyclics. It is a potentially new form of oral therapy for P-cell malignancies and we will be pursuing multiple indications across a panel of P-cell malignancies. Pharmacyclics and Johnson initiated several studies which are enrolling now: a Phase II study in Mantle Cell leukemia, and two Phase III studies for relapsed and refractory chronic lymphocitic leukemia. In addition, a number of Phase I and II studies with Eguitamib are ongoing across a panel of indications.
With the introduction of several new drugs over the past two years, we also have significant major line extensions that we are pursuing. We are following on our success with REMICADE, which grew from an orphan indication to 16 different indications, and taking a similar approach to many of our products in other therapeutic areas. These products begin with targeted therapies in small indications and grow over time with expanding indications to be pipelines within a product.
Let me highlight a few here on the slide. We are excited by the three-month formulation of INVEGA SUSTENNA for schizophrenia, which has the potential to keep symptoms under control with only four injections per year. We anticipate filing in 2014 in the U.S. and in 2015 in Europe.
With XARELTO we are pursuing multiple additional indications including VTE treatment in acute coronary syndrome, both delivering important advances to large populations. XARELTO has the broadest profile of the new oral anticoagulants in the U.S.
With SIMPONI, we are pursuing IV formulation for rheumatoid arthritis and additional indications in ulcerative colitis and juvenile ideopathic arthritis.
With STELARA, we expect to file for additional indications including psoriatic arthritis, Crohn’s disease, and rheumatoid arthritis. We anticipate filing for psoriatic arthritis in the fourth quarter of 2012 for both U.S. and Europe and for Crohn’s disease in 2015 in the U.S. and Europe.
Finally, with ZYTIGA, we are pursuing broader indications in chemo naive metastatic castrate resistant prostate cancer and metastatic breast cancer. We are excited about all of these indications and their potential to address large unmet needs in patients worldwide.
A key part of our strategy is to access the best science through internal research or external innovation. In the first half of this year, we have established more than 30 different collaborations. Let me highlight three new deals that we announced recently.
In June, we acquired Core-Immune and gained access to a compound in early clinical development for heart failure. In August we signed an exclusive worldwide licensing and development agreement with GenMap for their Atunomap, a human CD38 monoclonal antibody currently in development for multiple myeloma. And earlier this month, we also signed an agreement with Astellas Pharmaceuticals to gain exclusive worldwide right, except Japan, to develop and commercialize a novel JAK inhibitor, ASP015K. The compound is currently in Phase IIb for rheumatoid arthritis.
At Johnson & Johnson, sustaining our position as a leading global healthcare company requires continuous access to the best science and technology in the world. Last month we announced plans to establish regional innovation centers as part of a novel approach to accelerate early innovation in all three sectors of Johnson & Johnson. Each innovation center will house science and technology experts focused on identifying early stage innovation academia and small biotech and have local deal-making capabilities with flexibility to adapt deal structures to match the early stage opportunity.
Our J&J innovation centers will be located in the world’s leading innovation hot spots so that we can become an active part of these ecosystems. We have flourished with four innovation centers in California, Massachusetts, London, and China, and we look to set up additional satellite locations as driven by business needs. Operational excellence is critical to our strategy. We have built an R&D network with world-class clinical, partnering, manufacturing, and regulatory capabilities. Over the past few years, this has helped us successfully execute massive clinical programs such as the 10,000 patient canagliflozin program and set new industry benchmarks in patient recruitment, data collection, and timelines for regulatory filings and submissions.
We have the ability to develop, file, and launch drugs simultaneously across the globe with the highest degree of quality, and we are accelerating our pipeline in China and Japan. We have excellence in safety surveillance with around the clock pharmaco vigilance capabilities and pan life cycle safety risk management for every product. Our global development organizations have helped us to significantly increase our productivity. Over the recent three-year period when looking at Phase III development and registration success, our latest development success rate continues to be at the top third for the industry and well above industry median. We are currently No. 1 in development cycle time.
We have also dramatically improved our submission cycle times while maintaining quality, resulting in a cost per NME approved which remains well below industry median. We are fortunate to be in an industry where human health is the basis of our business. In particular, at Johnson & Johnson, the benefit we generate to patients and consumers is at our core. We’ve measured our success by the years of life saved and the quality of life improved. Our pipeline, products, and people are impacting human health and making a big difference for patients worldwide. We continue to enhance broad and global access to medicines through a variety of programs.
We continue our efforts to facilitate developing world access to HIV therapies and we also take pride in the fact that we are bringing the power of science for global health. We discovered, developed, and filed TMC207 at the B-drug with the first new mechanism of action in more than 40 years and have multiple efforts ongoing in HIV and vaccines for global health.
In closing our strategy is delivering. We have an industry-leading drug portfolio. We are driving growth from core brands and achieving strong growth from new products. By identifying the highest medical need and matching it with the best science, internal or external, we are delivering differentiated medicines bringing life and quality of life for patients and value for society and for our business. We execute with operational excellence to deliver products globally and competitively and with industry-leading benchmarks in efficiency, productivity, quality, and timelines. The approach has brought us back to growth in the pharmaceutical sector, and our goal is to maintain the momentum and continue delivering growth for Johnson & Johnson.
Thank you. And let me now turn it back to Louise.
Thanks, Paul. Stephanie, could you please provide the instructions for the Q&A session?
Thank you ladies and gentlemen. (Operator Instructions) Your first question comes from the line of Matthew Dodds with Citi.
Good Morning, Matt.
Matthew Dodds – Citi
Morning. Quickly just for you, Dominic, then I’ll go to pharma. When you look at the gross margin, it was flat year-over-year, down a little bit quarter over quarter and you had a big performance in U.S. pharma. So I was just wondering why we didn’t see a little more there.
Right, so as Louise pointed out, Matt, the quarter includes this inventory step-up, from the acquisition of Synthes, which we’ve excluded in our earnings. And so what you saw when you exclude that for the quarter – I don’t know if you did that for the year-to-date basis – was just a slight uptick year-over-year of 20 basis points I think it was, Louise. And that’s related to the continued remediation efforts in the Consumer business. So I don’t think that gross margin excluding this impact from Synthes which will of course, you know, rotate off after all that inventory is sold, I don’t think that will be a big driver one way or the other to our earnings.
Matthew Dodds – Citi
I must have missed that. I will look at that again. Thanks, guys. And Joaquin, quickly for you, can you give some comments on what you’re seeing in Western Europe? You talked a lot about emerging markets, Japan, and you showed EMEA. What are you seeing in Western Europe in terms of the volumes today and where you might be seeing some pressure?
For us, Matt, as I described in Western Europe, we are having a very positive evolution in the first half of the year. We had double-digit growth, and we are leading the industry in growth. And it’s based on the strength of our launched new products in particular, INCIVO, Zytiga, and Sepion, which is the name that INVEGA SUSTENNA has outside of the U.S.
Having said that, we continue to see headwinds in most of the European countries and particularly Southern Europe, but also in Central Europe. The headwinds are in different areas. We see continued pressure on price on one side, and at the same time, we see stricter guidelines in the use of generics too, and also we see in many different countries HTA agencies coming up which are going to make access more complex and difficult.
Overall, a complex situation, very fluid, and our view is that we have to take a long-term view on that. We are pleased with our results to date, and we are confident that our portfolio is the right one for this market environment
Matthew Dodds – Citi
Thanks, Joaquin. Thanks, Dominic.
Next question, please.
Your next question is from Mike Weinstein with JP Morgan.
Mike Weinstein – JP Morgan
Good morning. Maybe Dominic, let me start with the big picture question before I go to pharma as well. Dominic, if we look at it from a top line perspective, the 5% organic growth this quarter is your best quarter in five years. Could you just give us your big picture thoughts on sustainability with JNJ’s stock going through a difficult period going through RISPERDAL and Siplomax and some of the challenges ACTO 798 so it’s been a long time coming. Can you just talk about your thoughts on NAPS or fact that this 5% level whether this is reasonable or sustainable range for the company? Thanks
Right. Good morning, Mike. Well you’re right we have been through some tough times which of course some of those are expected because of patent expirations and the like, but nonetheless, I think the focus that we had during those times to continue to invest particularly in our pharmaceutical pipeline has paid off for us. So if you look at the three businesses in particular, pharma of course is now as Joaquin said ten quarters of growth and accelerating that growth, and we’re excited about the way the products are performing in the marketplace. And as Paul mentioned, we have new products coming that we’re also very excited about.
MD&D of course is challenged by the lower procedure volumes that continue, but offsetting that of course, we now have Synthes as a member of the Johnson & Johnson family of companies. And having a large presence in orthopedics, which we think will be in fact a growth area within Medical Devices given demographics and emerging market trends. So that should help us continue growth in that business along with new product innovation throughout all of MD&D. And the Consumer business is holding up well, you know, in a tough consumer environment generally.
But of course we’re looking forward to the return of the OTC products, and we know that we’re delayed in that return. We want to do this right. But of course we see those returning over the near term horizon in 2013. And so all in all I think the business is on sound footing, Mike. I think the investments we made were the appropriate ones. They’re paying off. And the execution of the talented people of Johnson & Johnson is paying off. So I feel pretty good about where the business is right now, and obviously I can’t give you a forecast or guidance for next year. We’ll talk to you about that in January. But overall I feel pretty good that we’re on solid footing here.
Mike Weinstein – JP Morgan
Okay. Let me switch to pharma. Paul, can you just cover two items for me? One is The Street’s been a bit cautious on canagliflozin and given the challenges in diabetes and getting products, not only through the FDA, but having successful commercial launches post-approval. Can you just talk about your confidence in the safety profile and the degree to which you’ve had discussions with the FDA on that? And then second, can you talk about in Hep C your strategy for an all oral regimen and where you think you take 435 from here? Thanks.
Okay. Thank you. The first, we’re pretty constant in canagliflozin and first the basics. If you look at the cancer, there was no evidence of any clinical meaningful imbalance in the incidence of cancer including breast and bladder in clinical trials with canagliflozin. I think we are pretty confident from that side that we have a safe compound. The urinary tract infections, if you look at our studies then, there was also in the pooled analysis is the incidence of UDI was a placebo for 100 milligrams 5.9, for 300 milligram 4.3. No real dose-related increase, and it’s known for this type of compound. And typically these products are all managed with OTC medication.
So from a long-term safety perspective, we, as you know, we are doing the CANVAS study with a first part of the data which went to the FDA. We’ll have a second interim analyst in 2013, and then later on, when the study is finished, it’s an event driven trial, so we’ll see when the study will be finished. But we are pretty confident that in those data, the support is there for a filing and an approval. The data show – we think the data shows solid cardiovascular safety in the balance between the LDL increase if you look at the overall ratios LDL, HDL, sorry, they were absolutely okay. If you look at the combine that with the blood pressure decrease, the reduction in triglycerides, the weight loss, and the improved glycemic control, we think that the balance between efficacy and safety is very solid for canagliflozin.
On 435, with 435 we have a best-in-class protease inhibitor, which we are – which we’ll submit in the first half of next year. Drugs are developed one by one, so the first indication will be in the combination with interferon and ribavirin. We are doing additional early studies on testing the combination with 7977 from Gilead as well as with NS5a from BMS. And in addition to that, we have our internal drugs, which we are developing for our combination. I think as you – I think it’s now absolutely clear that it’s going to go to interferon-free regimens. The task will be combining safe and effective drugs together to make sure that we have the efficacy and the safety.
And as I said, drugs will be developed one by one. You have to show the efficacy and the safety of each of the drugs. And we’ll participate significantly in that field.
Thank you. Next question, please.
Your next question comes from Catherine Arnold with Credit Suisse. I think your line is open.
Catherine Arnold – Credit Suisse
Hello, can you hear me?
Yes, we can. Hi, Catherine.
Catherine Arnold – Credit Suisse
Okay. Hi. Good morning. First question’s for Dominic. I was wondering if you could clarify the relative intensity you might be considering as far as looking for franchises that maybe the company should exit that are weighing on businesses. Obviously I know that you have been very clear that you’re not planning on doing any significant restructuring and spin off type plan; however, as you exited stents and there may be other opportunities where your growth profile could further increase by you exiting certain businesses. I guess I’m wondering to what extent that is a conversation at the board table.
And then a question for Paul. I just wondered, Paul, if you could give your commentary on the arthritis market and what you see as being most impactful, whether it’s oral agents entering the marketplace. You’ve obviously committed to that yourself and or bio similar entries into the marketplace. Thanks.
Okay. Thanks for the question, Catherine. Well, as far as exiting certain businesses, we consistently discuss portfolio choices. So our executive team along with all of our business leaders are consistently reviewing each of the businesses and trying to determine the ones that are performing well versus the competition, those that require more investment, those that require some more investment but we might not see the return, like in the case of drug-eluting stents.
So we’re constantly reviewing that. We periodically have divestitures as you know in our results, and we typically use those gains as quite frankly a switch in portfolio emphasis by then reinvesting, you know, those gains in other parts of the business. So we continuously do that. And I think we’ll continue to do that. I think we can do some more pruning of the businesses as we look to the future and determine where to best place our bets. So suffice it to say, it’s a conversation that’s always ongoing and top of mind, and I think we’ll continue to do that going forward.
Yeah, let me address your question on first of all with SIMPONI, Celerra, and REMICADE. I think we have a leading franchise, and we are continuing to work with antibodies on new mechanism of actions here with ALV-3, L-6 we have additional new products coming there. At the same time, we are having a significant research activity internally on getting oral immunological agents. And while we didn’t have an advanced JAK, that’s why we made the deal on getting also a JAK inhibitor in our pipeline.
It’s a selective JAK 3, and we think it has the potential to in preclinical showing safety and selectivity, so have a significant differentiation with the existing product. It’s also a once-a -day product which we think compares favorably with the Pfizer compound twice a day, and this field is still to play out about selectivity, and we have to learn about the longer term safety and efficacy of these products. So we continue to bet on the two ways: It’s the antibody space for new targets as well as the oral active agents. And Joaquin, if you can answer on the biosimilars.
Biosimilars, Catherine, we described before our exclusivity situation in the U.S. and Europe in the U.S. in 2018 and in Europe with our pediatric extension is accepted would be until February 2015. So those are our core markets with REMICADE. Certainly we continue to work to shape our policy around guidelines and product development and approval of biosimilars, particular around the interchangeability and extrapolation of indications. So it’s an area which we are working hard in order to try to protect patient safety as far as using biosimilars.
For us it’s also very meaningful in this context, the fact that we file SIMPONI IV in rheumatoid arthritis and we file it in September, and we believe that SIMPONI IV, it’s going to be a very good option for patients. It has a 30-minute infusion time which compares favorably with REMICADE. It has a low rate of infusion reactions, and it has a patent life until 2024. So we are confident that SIMPONI IV it’s going to become an important option for patients, and it’s going to make SIMPONI the only anti-T and F, which is going to be available at this point in subcutaneous and intravenous formulation.
Next question, please.
Your next question comes from the line of Larry Biegelsen, Wells Fargo.
Larry Biegelsen – Wells Fargo
Morning, Louise and everyone. Thanks for taking the question. The 14.6% U.S. pharma growth was obviously very strong. Dominic, could you parse out some of the timing related items and give us what you think the underlying growth was there of the U.S. pharma business in the quarter?
Yeah, hi, Larry. I think there was some. As Louise mentioned earlier in her script, there was some inventory build in the quarter, not overall significant to the entire growth in the quarter. So we’re pleased with the quarterly results, and I would say although somewhat impacted by these pipeline builds, I wouldn’t consider them significant as a significant impact at all.
Larry Biegelsen – Wells Fargo
And then one more for you, Dominic. Just the healthcare utilization trends in the U.S. and Europe for the med tech markets, maybe if you could, you know, give us just an update on what you saw. I know the data you typically use is based on the second quarter, but how do you – what was your sense of how things trended in the third quarter? You’ve said that future growth is a good proxy for procedure growth. What did you see there? And what are you hearing from the field? Just any color you can give us on procedure trends. Thank you.
Sure, Larry. So let me deal with the U.S. first. So the statistics we have again are one quarter back so I don’t want to project for the third quarter until we actually see the data. So with respect to second quarter, we saw overall utilization trends continuing to increase in both hospital admissions, hospital surgeries, physician office visits. They were all single digit increases, however. I don’t want to overstate the increase.
We did see orthopedic procedures grow at around the mid single digit range, and that of course did translate into third quarter results for us as you saw with our orthopedics business and the joint reconstruction results. So that seems to be stabilizing because we’ve now seen a couple quarters of these low rates of growth, and of course they’re not exciting low rates of growth but they’re not declines which is what we saw for the previous nine quarters, and more growth in orthopedic procedures in particular.
In Europe, we do see in the MD&D businesses some volume pressures particularly in Greece, Spain, Portugal, and early signs also in Italy. And just to give you a sense, the Europe business for Johnson & Johnson we reported 7% operational growth excluding Synthes that’s about 2% operational growth, and within the MD&D business, excluding Synthes, it was marginally declined in the quarter but only slightly. So we are seeing some pressure as we expected to see early in the year in procedure volumes in Europe as well.
Larry Biegelsen – Wells Fargo
Thank you very much.
Next question, please.
Your next question is from Rajeev Jashnani with UBS.
Rajeev Jashnani – UBS
Rajeev Jashnani – UBS
Hello. My question was on canagliflozin also and following up on the response to a previous question, I was wondering if you can talk about cardiovascular safety and a little bit more detail given the LDL signal. It seems possible the FDA could look fairly closely at the interim look from the canvass trial or perhaps a composite of the CV data across the Phase III. Maybe you could talk about that and whether that data might actually show a cardiovascular benefit. And if not, just from a regulatory perspective, would it make sense to approve a drug at this time without showing that cardiovascular benefit? Thanks.
Well, it’s difficult for me to judge on what the regulators will do. But based on the information and what we have submitted, I think all the information is in favor of a good safety profile and a balanced cardiovascular risk. The benefits we think significantly balance the cardiovascular risk, and therefore I think we’ll have to see. We anticipate we’ll have an advisory panel before the approval so more debate will happen there and I think our people are very well prepared to address this question. And so I think it’s not appropriate for me to further go into this at this point.
Rajeev Jashnani – UBS
Okay. I did have a couple of other form of follow-ups if I could. One on SIMPONI IV, I was wondering if you would comment on whether there might be any proactive switch strategy with REMICADE that the company could take on and also with respect to ZYTIGA and the rollout of chemo naive, I think you gave a sense for what the market opportunity may be there relative to chemo experience, maybe to talk a little bit about what the existing use of ZYTIGA is in chemo naive patients, and maybe some of the constraints that will get lifted from a payer perspective once you have formal approval. Thanks.
Thanks for the question. Regarding the ZYTIGA, as I said, we are waiting to see the FDA response in December. Certainly we are very hopeful about that indication. It’s going to significantly expand the patient population that is eligible for ZYTIGA treatment. And today our estimates of use in the chemoknife population are about 30% in the U.S., very low, very low in Europe. We are very pleased with the progress that ZYTIGA is having on the market.
We are seeing very strong demand trends through September, and we continue to hear about the positive impact that it’s having in patients and the positive attitudes that physicians are having about ZYTIGA. So we are very confident that if granted, the approval in the pre-chemo population is going to further enhance the progression of ZYTIGA. Which, as I have said before, it’s been the most successful oral oncology launch ever. The other question, can you repeat it, Rajeev, the first one that you were asking?
Rajeev Jashnani – UBS
Oh, it’s with respect to SIMPONI and the IV formulation and whether there might be a strategy to switch patients from REMICADE I guess both in sort of on a global basis.
Thanks. It’s a very good question. It’s certainly for us to tell you what is going to be the strategy with SIMPONI, particularly with regards to REMICADE. REMICADE, it’s a great option for patients. Physicians are very satisfied with the use of REMICADE. Today REMICADE, as I mentioned, has about 75% of the U.S. infusible market, so that reflects how satisfied physicians are with REMICADE. At the same time, we do believe that SIMPONI IV, it’s going to offer some advantages, like the reduced infusion time. And when you are looking at the clinical data, it’s going be a very strong clinical data package that we’re going to be able to present. So we are confident that we’re going to have a great option there. Now, how they are going to be positioned vis-à-vis each other, it’s certainly for us to speculate. We are pleased that we’re going to have two options, that’s what I can tell you.
Rajeev Jashnani – UBS
Next question, please.
Your next question comes from Jamie Ruben, Goldman Sachs.
Jamie Ruben – Goldman Sachs
To follow up on an earlier question regarding the company reshaping its portfolio. I think I heard you say you would consider pruning businesses, and would that include pruning entire divisions such as pharma or consumer? And then just a follow-up question on the pharma side. With INCIVO, I think, Louise, I heard you say that INCIVO represented about half the growth of I think the operational growth of infectious – of the infectious category. If you can just confirm that. And also, what types of patients are coming into treatment, and are you seeing warehousing of patients in Europe?
And just as a bigger sort of strategy follow-up, just to follow-up on what you’re doing to leverage TMZ 435. Clearly, you have partnerships in place with Gilead and Bristol-Myers, but you don’t own the other regimens, and your competitors, Gilead, Abbott and Bristol, own the all-oral regimens. I’m just wondering if you can pontificate a bit on whether it’s important. Do you think, can you achieve success in Hep C through partnerships or do you feel you have to own all the regimens? Thanks.
Okay. Hi, Jamie. Let me take the first question about the portfolio and then turn it over of course to Paul on the Hep C question and other questions in the pharma business. When I referred to pruning our portfolio for businesses that might not fit or require more investment than we think would justify based on the return, I don’t view shifting out of pharma MD&D or consumer as pruning. That would be a pretty major decision. And I could tell you we’re not considering that now, and we feel very good about having a broad-based business in healthcare.
We think that’s the way to be best positioned for where healthcare is going globally, and we believe having a broad portfolio is in fact the strongest set of cards we can have. So I would say the pruning refers to businesses that are not contributing to growth or for which investments are not worthy. And we always do that. We have done it over our history, and I would think we would continue to do it in the future as well. But not a wholesale reshaping of Johnson & Johnson. That’s not under consideration now. Paul? Or Joaquin.
I was going to address the question, Jamie, about the patients that are coming to therapy in Europe. So the patients that are coming to therapy come from two sources: One, patients that have advanced liver disease, and the other one, patients that have failed previous therapies. So that contributed to have an initial bolus of patients that was conducive to the strong start that we had in INCIVO in Europe. Are we seeing warehousing? Not at this point. I mean, at this point what we are seeing is what I would call a reduced urgency to treat based on the fact that this initial bonus of patients has already been treated. But we are not seeing warehousing at this point.
As I described in my presentation, we had some seasonality patterns, and now we are starting to see a pickup in September and in October that we think is going to continue
With regard to 435, I don’t have the holy grail answer, but on every drug you develop one by one, every drug needs preclinical safety and preclinical safety needs safety and efficacy. And if you combine three drugs, you need to have a massive amount of information and also luck to make sure the three drugs are both all safe and effective. And I think at this moment drugs are developed one by one, showing efficacy and safety, getting approved by the FDA. We’ll see a change probably in having combinations approved. But I think we have a very solid foundation with a very well tolerated PI, best in class PI, once a day combinable with other drugs. There is very limited limitation. It’s a low dose. And we have shown very strong efficacy data in Phase II and now Phase III of all enrolled.
So I think we are in a strong position to partner. We have our own internal compounds which we are doing combination studies with that also. We look for combinations with external partners. And the future will tell.
And just to confirm, I said it’s half the infectious disease worldwide operational growth that contributed. Okay? Next question, please.
Your next question comes from Derrick Sung, Sanford Bernstein.
Derrick Sung – Sanford Bernstein
Hi. Good morning. Thanks for taking my question. I wanted to start out with a question on Consumer and then I’ll turn to pharma. On Consumer, I think I heard you mention that you’ve begun re-launching a number of products in OTC and that contributed to growth as well as some acquisition. And I was wondering if you could separate out the two for this quarter. But then just more broadly speaking, if you could also give us a sense for where you are in that re-launch of your OTC resupply. Are you a quarter of the way there? Halfway there? Kind of give us a sense for the progress.
Sure, Derrick. Thanks for the question. So Louise talked about the fact that we re-launched some products this quarter, and we acquired the rights for some Digestive Health products. So generally speaking, the growth is attributed about half to each. Okay? So about half of the growth came from the re-launch of some products, and half from the year-over-year comparison because of the new products we acquired in the Digestive Health space.
As far as our progress, we continue to make progress with the consent decree requirements. We have actually met all of the milestones that we’re required to meet at the end of each quarter so far. We look forward to discussing with the FDA our progress in the near future. And we still are moving forward with completing all the remediation efforts. And as I said in previous discussions, it’s just difficult to predict the speed and ramp at which the products can leave the plant until we complete the steps required and get the review and approvals required under the consent decrees. But overall we’re making good progress and I’m pleased to say that some products have come back to the market already and more are planned in the month ahead and obviously throughout 2013.
Derrick Sung – Sanford Bernstein
Okay. Thank you. And then for Joaquin and Paul, a number of your recently launched products are going to be facing some significant competition quite shortly, the ones that come to mind are ZYTIGA facing competition from innovation, you’ve got Tovacivativ the oral RA agent launching and potentially competing with your Immunology franchise and then while XARELTO looks to have picked up, it’s going to be facing competition from Eloqueez shortly. So I was wondering if you can kind of go through each of those products and talk about how you expect the competitive threat to impact your business and how you plan to respond to those competitive threats?
Thanks for the question. Let me start with ZYTIGA. So ZYTIGA as I said before, it’s been the most successful global oral oncology launch ever. It’s really transformed the post-chemo patients. When ZYTIGA was launched, 40% of the post-chemo patients were treated, now 75% of the post-chemo patients are treated. That’s the reflection of the positive benefit that it has for the patients and the very positive efficient experience so far. All our service indicate very high satisfaction with Zytiga by physicians and patients. As I said before, we have had a strong demand trends through October, and certainly we have seen the launch of Extendi there it’s very early on. Some of you have shown some data, IMS prescription data for the first four weeks, and it’s still very preliminary.
What that data shows is that it is 10% below launch align Zytiga. Our service indicate that most of the use of Extendi it’s been used in patients that have progressed from Zytiga. So I think that that makes sense. And at the end of the day, it’s good for patients to have more options in these circumstances. We feel very confident of the trajectory that Zytiga is having. We also feel very good about the coverage and patients programs that Zytiga has. And I think that’s going to even play out more with the price that Ensaluata might have which is 28% higher than Zytiga. We are very much looking forward to the approval on the pre-chemo population that would significantly expand the eligible patient pool. So we feel good about how Zytiga is tracking and certainly looking forward to that approval.
Moving to Xarelto, Xarelto has the broadest indication profile of the new oral anticoagulants, and it’s the fastest growing new oral anticoagulant. As I commented, it has overtaken Pradaxa in new to brand sales in patients in all novel new to brand patients in atrial fibrillation. It has also overtaken Pradaxa in new to brand share in cardiology, and it’s approaching Warfarin in that context. As a matter of fact, our attitudes and usage survey of September shows that Xarelto is the preferred brand by cardiologists ahead of Pradaxa and Warfarin. In other categories like in orthopods, it has garnered very strong acceptance, so we feel again very confident on the trajectory of Xarelto. Obviously we are awaiting two important decisions from the FDA.
One is in deep vein thrombosis in pulmonary embolism but we are looking forward to the decision in November. And then in March in ACS. So with all that and supported by the strong access that Xarelto has, as I mentioned, 90% both in commercial and in life, 70% of that is preferred. We think that we are going to have a very good 2013 and on and that we are confident that Xarelto is going to perform good in the face of the competition. Again, I think it’s important that it’s going to be the one with the broadest indication profile.
Orals, I think we discussed it before. Look, we need to see how the label for the orals play out on one side, and also we need to see how the risk benefit profile of the orals also comes to fruition when it’s used in the practice. It’s an interesting market. We recognize that, and as a matter of fact, we have done the deal as we described before. We believe that at this point, the anti nifs will remain the standard of therapy.
Next question, please.
Derrick Sung – Sanford Bernstein
Great. Thank you very much.
Your next yes comes from Danielle Telsey with Leerink Swann.
Danielle Telsey – Leerink Swann
Thank so much for taking the question. Quick question, Dominic, for you on capital allocation. Can you just give me a sense of what your strategy is going forward? Obviously on the dividend, one of – another large cap med tech company increased their dividend by about 30%, the stock reacted very favorably. Just curious as to whether that could be in the cards for J&J going forward and how you’re thinking about capital allocation. Thanks.
Yeah, sure, Danielle. Thanks for the question. Well as we have said before, the – our priority on capital allocation are first, you know, generate significant cash flows, which we do. And then use those cash flows appropriately, and we generally view the use of the cash flow to towards the dividend as the first priority.
And with respect to that, I know others in med tech have increased their dividend significantly, but you probably know that med tech companies generally have been low dividend payers and pharma and consumer companies have been higher dividend payers. So just to give you some perspective on that, our blended competitive set, so if you took a company that had the same kinds of businesses as J&J has based on revenues, the competitive set blended dividend payout ratio is around 34%, and for Johnson & Johnson, our dividend payout ratio is 45%.
So we’re already at a healthy dividend payout ratio compared to our competitive set. We then want to use the remaining cash that we generate to build our businesses, and we will look for value-creating opportunities to do that. Synthes is a good example of that. And then of course, as we’ve done in the past, we would then allocate any remaining capital back to shareholders in the form of share repurchases as we’ve done in the past, but we do view that as the third priority. So that’s the way we think about it, and I think the reference to the med tech sector is a good one, but of course our business competes in three sectors. So I think – just make sure you take a look at that when you compare our dividend payout ratio to those of others that we compete with.
Danielle Telsey – Leerink Swann
Okay. Great. That’s totally fair. And then on operating leverage going forward, you came in – you showed a little bit more operating leverage on the SG&A side than we were looking for this quarter. Just curious how much of that might be attributable to more Synthes synergies than maybe folks have been looking for. Any way to quantify that impact? Thanks so much, guys
Sure. Well, Danielle, I don’t think that this particular quarter there’s much impact of Synthes synergies. We just began the integration process. We’re going to do that over some period of time. Our priority will be first, you know, no disruption to our customers, and then of course, as we move forward with the integration, we will take appropriate actions to create the synergies that are available to us. But in this quarter, no contribution really from that particular acquisition. I think just good cost management, and as I said in my comments, operating – pre-tax operating margins can vary from year to year and quarter to quarter depending on stages of development in the R&D cycle, launches of products, milestone payments in R&D collaborations, etcetera. So we’ll certainly give you a good indication of what you can expect for 2013 when we meet then.
Danielle Telsey – Leerink Swann
Okay. Great. Thanks.
With respect to everybody’s time, we’ll take two more questions. Next question, please.
Your next question comes from Glen Novarro with RBC Capital Markets.
Glen Novarro – RBC Capital Markets
First question is on orthopedics. Louise, I think you mentioned that orthopedic pricing was down. I wonder if you can clarify those comments and tell us what knee and hip pricing was down on both U.S. and worldwide basis. And then sticking on knees and hips, one of the smaller players reported last week and kind of talked about excessive or more enhanced seasonality. I wonder if you saw that in the U.S. and Europe. Then I had one follow-up on spine.
Okay. So in terms of worldwide price, we don’t do price and mix on a worldwide basis, but worldwide price, the U.S. was down about 1%, international was flat, which left the worldwide down about 1%. In terms of the U.S., I can give you price and mix. So in the U.S., the hip price was down about 4%, which is very similar to what we saw in the second quarter. But we did see a nice positive tailwind from mix, which actually brought us to about, net-net, about 2.5% negative price mix in the U.S. In terms of knees in the U.S., it’s down about 1% in price, but we did see a nice tailwind again in terms of mix, and net-net we’re up about 1% price mix in the U.S., and that’s similar.
Glen Novarro – RBC Capital Markets
And then just on spine, one of the smaller spine players reported earlier, pre-announced earlier, and highlighted more payer pushback. And so we’ve been hearing about payer pushback for years. But I’m wondering in the quarter if you saw enhanced or increased payer pushback. Thanks
We did not see that in our business, though the payers have been asking for evidence in the spine world for many, many years. And I think that that’s just a continued trend.
Glen Novarro – RBC Capital Markets
Okay. Thank you.
And Glenn, this is Dominic, I think pricing in the U.S. for spine where you see that did not accelerate in the third quarter. It’s been about the same as it was, negative mid-single-digit price in spine in the U.S., which is what we saw in previous quarters.
Glen Novarro – RBC Capital Markets
So the takeaway is pricing is still down but stable, and payer pushback, no big change that we’ve seen recently?
No, I mean, you’re continuing to get pushback on it, but that’s a continuing trend. Okay?
Glen Novarro – RBC Capital Markets
Okay. Thank you.
Next question, please.
Your next question comes with Matt Miksic with Piper Jaffray.
Matt Miksic – Piper Jaffray
That’s me, actually. Sorry. Can you hear me okay?
Yes, we can.
Matt Miksic – Piper Jaffray
I just want to be clear. That last comment was not me. Thank you so much for squeezing me in. One follow-up on pharma. I appreciate all the color on the call. I guess this is for Joaquin and Paul, I don’t know, Dominic if you may want to weigh in on this. Just taking a step back, you made some great progress on the pharma pipeline as you talked about. Looking at the R&D investments as you continue to expand indications for many of your key franchises, how should we think about the leverage and margin trends there for your pharma business as you roll these things out? It is sort of an intermediate long-term question, but would love to get your sense and any color on how we should think about operating margin trends for that division maybe as they compare to historical trends. And then I have one follow-up.
Okay. Matt, good question. One thing I’ll say about pharma R&D investment is it as you probably know at the higher end of the industry range for R&D investment. You know, obviously when I’m talking about a medians or above the median. The more successful companies do invest more in R&D, and from my perspective as a CFO, if our internal development and the licensing strategy that the pharmaceutical team continues to do well with continues into the future, we’re happy to be spending above-industry norms for R&D investment because that is, unlike many of our competitors, this is a very capital efficient way of developing the pharma business, right? Rather than a large capital infusion in the business.
We’re talking about a continual level of R&D investment that has proven, as Paul has pointed out, to have a success rate that is above the industry norm. So I think that that should continue, and we’ve been the beneficiaries of it so far, and I think as long as we continue to see that as worthwhile investment and a strategy that will continue into the future, we should continue to see it be above industry norms.
As far as the overall operating margins for the second sector, I’m not going to comment on specific operating margins overall for one sector, because as you know, and we have talked about this many times, we manage the business of Johnson & Johnson holistically, and we make decisions across each business depending on the needs and the
opportunities of each business. So we’ll provide more color commentary on the overall operating margins when we next meet in January.
Matt Miksic – Piper Jaffray
Fair enough. And then just one follow-up on the device side. It would be helpful if you can expand as you get through the Synthes integration, maybe how your efforts there are trending relative to your expectations in terms of – in terms of maintaining the continuity of that business, your efforts to retain elements of that business both on the trauma and the spine side. And you mentioned in Europe one of the elements I think you threw into one of the businesses, there was a competitive dynamic in the quarter. If you could maybe highlight where that was and the nature of that pressure, that would be very helpful, as well.
Louise, do you want to take that?
Okay. So the competitive dynamic in hips and knees were actually some lower-cost competition. So Dominic, did you want to -?
Sure. On the Synthes integration, it’s early. We closed the deal in mid-June, as I said, our first priority is no disruption to customers. But the updates that we’re getting tell us that things are moving along just fine. We’re integrating obviously the spine businesses, because they’re the two businesses that we had that were similar. So that’s where the bulk of the integration is occurring.
And so far so good. We’re going to take this carefully. We’re going to be measured in the way we do this so that there’s very little disruption if any, and we’re confident that’s the right way to do it for the long term. The leaders are intact. We’re very pleased to have the Synthes leadership team join Johnson & Johnson, and as you all know, Michelle Orzinger, the previous CEO of Synthes now leads our entire combined orthopedics business. And on November 1st, you’ll get to hear more from Michelle and I’m sure he’ll give you some more color commentary on the how the accretion is going but so far we’re pleased
So some closing remarks from Dominic?
Sure. Thanks, Louise. And I also want to take a moment to thank Paul and Joaquin for joining us this morning and giving us an update on the exciting development in the pharmaceutical pipeline and in our pharmaceutical business. I look forward to speaking to you again on November 1st at our MD&D business review, and then again in January, early mid January when we review our fourth quarter and full-year results. So thank you for your time this morning and have a great day
Thank you. This does conclude today’s Johnson & Johnson Third Quarter 2012 Earnings Conference Call. You may now disconnect.
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