What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-16 compared with 2022-02-17 · 626 added, 600 removed, 1951 unchanged (39% of the section changed)

103 unchanged sentences

$ 460 million, $ 346 million and $ 536 million;

$ 1 million in 2021, Employee Benefit Plans:

$ 6 million and $ 1 million in 2022 and 2021, Employee Benefit Plans:

$ 461 million, $ 1,198 million and $ 21 million, Derivatives & Hedges:

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Other comprehensive income (loss), net of tax 649 649

Balance, December 29, 2019 59,471 110,659 ( 15,891 ) 3,120 ( 38,417 )

Balance, January 3, 2021 63,278 113,890 ( 15,242 ) 3,120 ( 38,490 )

Net earnings 20,878 20,878

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Repurchase of common stock ( 3,456 ) ( 3,456 )

Other ( 71 ) ( 71 )

Other comprehensive income (loss), net of tax 2,184 2,184

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Increase in accounts payable and accrued liabilities 1,098 2,437 5,141

Increase in other current and non-current assets ( 1,964 ) ( 3,704 ) ( 1,054 )

Decrease/(Increase) in other current and non-current assets 687 ( 1,964 ) ( 3,704 )

(Decrease)/Increase in other current and non-current liabilities ( 1,979 ) ( 1,061 ) 744

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Effect of exchange rate changes on cash and cash equivalents ( 312 ) ( 178 ) 89

Increase/(Decrease) in cash and cash equivalents 502 ( 3,320 ) ( 802 )

(Decrease)/Increase in cash and cash equivalents ( 360 ) 502 ( 3,320 )

Cash and cash equivalents, beginning of year (Note 1) 14,487 13,985 17,305

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Fair value of assets acquired $ 18,710 61 7,755

Fair value of liabilities assumed and noncontrolling interests ( 1 ) ( 432 ) ( 1,418 )

Fair value of liabilities assumed ( 1,058 ) ( 1 ) ( 432 )

Net cash paid for acquisitions (Note 18) $ 17,652 60 7,323

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The Company is organized into three business segments:

Consumer Health, Pharmaceutical and Medical Devices.

Consumer Health, Pharmaceutical and MedTech.

The Consumer Health segment includes a broad range of products used in the Baby Care, Oral Care, Skin Health/Beauty, Over-the-Counter pharmaceutical, Women’s Health and Wound Care markets.

These products are marketed to the general public and sold online (eCommerce) and to retail outlets and distributors throughout the world.

The Pharmaceutical segment is focused on six therapeutic areas, including Immunology, Infectious diseases, Neuroscience, Oncology, Pulmonary Hypertension, and Cardiovascular and Metabolic diseases.

The Pharmaceutical segment is focused on the following therapeutic areas, including Immunology, Infectious diseases, Neuroscience, Oncology, Pulmonary Hypertension, and Cardiovascular and Metabolic diseases.

Products in this segment are distributed directly to retailers, wholesalers, distributors, hospitals and healthcare professionals for prescription use.

The Medical Devices segment includes a broad range of products used in the Orthopaedic, Surgery, Interventional Solutions (cardiovascular and neurovascular) and Vision fields.

The MedTech segment includes a broad portfolio of products used in the Orthopaedic, Surgery, Interventional Solutions (cardiovascular and neurovascular) and Vision fields.

These products are distributed to wholesalers, hospitals and retailers, and used principally in the professional fields by physicians, nurses, hospitals, eye care professionals and clinics.

In November 2021, the Company announced its intention to separate the Company’s Consumer Health business, with the intention to create a new, publicly traded company.

The Company is targeting completion of the planned separation in 18 to 24 months after initial announcement.

In November 2021, the Company announced its intention to separate the Company’s Consumer Health business (Kenvue as the name for the planned New Consumer Health Company), with the intention to create a new, publicly traded company by the end of the fiscal year 2023.

New Accounting Standards

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Not Adopted as of January 1, 2023

The Company assesses the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on the Company's financial statements as well as material updates to previous assessments, if any, from the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2021.

There were no new material accounting standards issued in fiscal 2021 that impacted the Company.

Reference Rate Reform

In mid- 2017, the Financial Conduct Authority (FCA) announced that it will no longer require banks to submit rates for the London Interbank Offered Rate (LIBOR) after 2021 hence market participants should work to transition to alternative reference rates (Reference Rate Reform) and should not rely on LIBOR being available after the end of 2021.

Reference rate reform is the term used to refer to the efforts that have been undertaken by regulators and other market participants to introduce new reference rates that are based on a larger and more liquid population of observable transactions.

The Company evaluated the implications of reference rate reform and applicable financial reporting guidance in ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting on its key financial and commercial contracts that referenced LIBOR including any hedging relationships.

Most contracts reviewed will mature prior to the termination of LIBOR or will be modified to apply a new reference rate (primarily the Secured Overnight Financing Rate “SOFR” where applicable).

The company also applied available practical expedients under ASC 848 to in scope financial and commercial contracts that previously referenced LIBOR when applicable.

As a result, the Company's implementation of any reference rate reform provisions to commercial and financial contracts did not result in any material change for the Company.

Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations

This update requires that a buyer in a supplier finance program disclose additional information about the program to allow financial statement users to better understand the effect of the programs on an entity’s working capital, liquidity, and cash flows.

This update will be effective for the Company for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The Company is currently assessing the impact of this update on its disclosures and will adopt this standard in the fiscal first quarter of 2023.

Cash Equivalents

The Company classifies all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months from the date of purchase as current marketable securities.

The Company has a policy of making investments only with commercial institutions that have

at least an investment grade credit rating.

The Company has a policy of making investments only with commercial institutions that have at least an investment grade credit rating.

The Company invests its cash primarily in government securities and obligations, corporate debt securities, money market funds and reverse repurchase agreements (RRAs).

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Investments classified as held to maturity investments are reported at amortized cost and realized gains or losses are reported in earnings.

Investments classified as available-for-sale debt securities are carried at estimated fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income.

Investments classified as available-for-sale debt securities are carried at estimated fair value with unrealized gains and

losses recorded as a component of accumulated other comprehensive income.

Available-for-sale securities available for current operations are classified as current assets otherwise, they are classified as long term.

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Sales returns in the Consumer Health and Pharmaceutical segments are almost exclusively not resalable.

Sales returns for certain franchises in the

Medical Devices segment are typically resalable but are not material.

Sales returns for certain franchises in the MedTech segment are typically resalable but are not material.

The Company infrequently exchanges products from inventory for returned products.

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The Company also earns profit-share payments through collaborative arrangements for certain products, which are included in sales to customers.

For all years presented, profit-share payments were less than 3.0 % of the total revenues and are included in sales to customers.

Profit-share payments were less than 2.0 % of the total revenues in fiscal year 2022 and less than 3.0 % of the total revenues in fiscal years 2021 and 2020 and are included in sales to customers.

See Note 17 to the Consolidated Financial Statements for further disaggregation of revenue.

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Future impairment tests will be performed annually in the fiscal fourth quarter, or sooner if warranted.

Purchased in-process research and development is accounted for as an indefinite lived intangible asset until the underlying project is completed, at which point the intangible asset will be accounted for as a definite lived intangible asset, or abandoned, at which point the intangible asset will be written off or partially impaired.

If warranted the purchased in-process research and development could be written off or partially impaired depending on the underlying program.

Intangible assets that have finite useful lives continue to be amortized over their useful lives, and are reviewed for impairment when warranted by economic conditions.

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The Company has elected the following policy elections on adoption:

use of portfolio approach

on leases of assets under master service agreements, exclusion of short term leases on the balance sheet, and not separating lease and non-lease components.

use of portfolio approach on leases of assets under master service agreements, exclusion of short term leases on the balance sheet, and not separating lease and non-lease components.

The Company primarily has operating lease for space, vehicles, manufacturing equipment and data processing equipment.

The ROU asset pertaining to operating leases was $ 0.9 billion and $ 1.0 billion in 2021 and 2020, respectively.

The lease liability was $ 1.0 billion and $ 1.1 billion in 2021and 2020, respectively.

The operating lease costs were $ 0.3 billion, $ 0.3 billion and $ 0.3 billion in 2021, 2020 and 2019, respectively.

Cash paid for amounts included in the measurement of lease liabilities were $ 0.3 billion, $ 0.3 billion and $ 0.3 billion in 2021, 2020 and 2019, respectively.

The ROU asset pertaining to operating leases was $ 1.1 billion and $ 0.9 billion in fiscal years 2022 and 2021, respectively.

The lease liability was $ 1.3 billion and $ 1.0 billion in fiscal years 2022 and 2021, respectively.

The operating lease costs were $ 0.3 billion in fiscal years 2022, 2021 and 2020, respectively.

Cash paid for amounts included in the measurement of lease liabilities were $ 0.3 billion in fiscal years 2022, 2021 and 2020, respectively.

Product Liability

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The accruals are adjusted periodically as additional information becomes available.

The Company accrues an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated.

accrues an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated.

To the extent adverse verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated.

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This law included provisions for a comprehensive overhaul of the corporate income tax code, including a reduction of the statutory corporate tax rate from 35 % to 21 %, effective on January 1, 2018.

The TCJA included a provision for a tax on all previously undistributed earnings of U.S.

The TCJA included a provision for a tax on all previously

undistributed earnings of U.S.

companies located in foreign jurisdictions.

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however, if no estimate in the range is better than any other, the minimum amount is accrued.

The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to:

the magnitude and duration of COVID-19, the extent to which it will impact worldwide macroeconomic conditions including interest rates, employment rates and health insurance coverage, the speed of the anticipated recovery, and governmental and business reactions to the pandemic.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of January 2, 2022 and through the date of this report.

The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, inventory and related reserves, accrued rebates and associated reserves, and the carrying value of the goodwill and other long-lived assets along with the Company’s on-going vaccine development and distribution efforts.

While there was not a material impact to the Company’s consolidated financial statements as of and for the fiscal year ended January 2, 2022, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Annual Closing Date

8 unchanged sentences

Cash $ 4,926 — 4,926 4,926 —

Sovereign Securities (1)

1,006 — 1,006 90 916

Reverse repurchase agreements 1,419 — 1,419 1,419 —

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Gov't Securities $ 9,959 ( 28 ) 9,931 1,922 8,009

Other Sovereign Securities 1 — 1 1 —

Corporate debt securities 245 — 245 15 230

Gov't Agencies 210 ( 5 ) 205 — 205

Corporate and other debt securities 352 ( 1 ) 351 46 305

Subtotal available for sale (2)

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(Dollars in Millions) 2021

Carrying Amount Unrecognized Gain Estimated Fair Value Cash & Cash Equivalents Current Marketable Securities

Carrying Amount Unrecognized Loss Estimated Fair Value Cash & Cash Equivalents Current Marketable Securities

Cash $ 2,936 — 2,936 2,936 —

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Gov't Securities $ 19,485 ( 4 ) 19,481 6,785 12,696

Other Sovereign Securities 14 — 14 — 14

Corporate debt securities 250 — 250 24 226

Corporate and other debt securities 246 — 246 16 230

Subtotal available for sale (2)

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Total property, plant and equipment, net $ 19,803 18,962

$ 18,962 18,766

The Company capitalizes interest expense as part of the cost of construction of facilities and equipment.

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Patents and trademarks — net (1)

$ 21,746 18,484

Customer relationships and other intangibles — gross $ 22,987 23,011

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Total intangible assets — net $ 48,325 46,392

(1) The change was primarily related to the intangible assets acquired with the acquisition of Abiomed, Inc.

which was partially offset by amortization expense of previously existing intangible assets and the result of currency translation effects.

(2) The majority is comprised of customer relationships

(2) In fiscal 2021, the Company recorded a partial IPR&D impairment charge of $ 0.9 billion primarily related to expected development delays in the general surgery digital robotics platform (Ottava) acquired with the Auris Health acquisition in 2019.

The impairment charge was calculated based on revisions to the discounted cash flow valuation model reflecting a delay of first in human procedures of approximately two years from the initial acquisition model assumption of the second half of 2022.

The remaining reduction was driven by assets that reached commercialization and are now classified as having definite lives.

(3) The reduction was primarily related to an intangible asset impairment charge of approximately $ 0.8 billion recorded in the fiscal year 2022 related to an in-process research and development asset, bermekimab (JnJ-77474462), an investigational drug for the treatment of Atopic Dermatitis (AD) and Hidradenitis Suppurativa (HS) acquired with the acquisition of XBiotech, Inc.

in the fiscal year 2020.

Additional information regarding efficacy of the AD and HS indications became available which led the Company to the decision to terminate the development of bermekimab for AD and HS.

An additional reduction of $ 0.7 billion was driven by Monarch assets that reached commercialization and are now classified as having definite lives.

This was partially offset by approximately $ 1.1 billion of IPR&D acquired with Abiomed, Inc.

Goodwill as of January 1, 2023 and January 2, 2022, as allocated by segment of business, was as follows:

(Dollars in Millions) Consumer Health Pharmaceutical Medical Devices Total

Goodwill at December 29, 2019 $ 9,736 9,169 14,734 33,639

(Dollars in Millions) Consumer Health Pharmaceutical MedTech Total

Goodwill at January 3, 2021 $ 10,336 11,009 15,048 36,393

Goodwill, related to acquisitions — — — —

Goodwill, related to divestitures ( 9 ) — — ( 9 )

Currency translation/other ( 517 ) ( 429 ) ( 192 ) ( 1,138 )

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The weighted average amortization period for customer relationships and other intangible assets is 21 years.

The amortization expense of amortizable assets included in Cost of products sold was $ 4.7 billion, $ 4.7 billion and $ 4.5 billion before tax, for the fiscal years ended January 2, 2022, January 3, 2021 and December 29, 2019, respectively.

The amortization expense of amortizable assets included in Cost of products sold was $ 4.3 billion, $ 4.7 billion and $ 4.7 billion before tax, for the fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021, respectively.

Intangible asset write-downs are included in Other (income) expense, net.

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Both types of derivatives are designated as cash flow hedges.

Additionally, the Company uses interest rate swaps as an instrument to manage interest rate risk related to fixed rate borrowings.

Additionally, the Company primarily uses interest rate swaps as an instrument to manage interest rate risk related to fixed rate borrowings.

These derivatives are designated as fair value hedges.

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These forward foreign exchange contracts are not designated as hedges and therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities.

In the fiscal fourth quarter of 2022, the Company entered into forward starting interest rate swaps with notional amounts totaling $ 2.4 billion in contemplation of hedging interest rate risk associated with long-term financing for the Consumer Health segment separation.

These forward starting interest rate swaps are not designated as hedges and therefore, changes in the fair values of these derivatives are recognized in earnings.

At the end of the fiscal year 2022, the changes in fair value was not material and therefore not included in the table below.

The Company does not enter into derivative financial instruments for trading or speculative purposes, or that contain credit risk related contingent features.

The Company maintains credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements.

As of January 2, 2022, the total amount of cash collateral paid by the Company under the CSA amounted to $ 570 million net, related to net investment and cash flow hedges.

As of January 1, 2023, the total amount of cash collateral paid by the Company under the CSA amounted to $ 0.8 billion net, related to net investment and cash flow hedges.

On an ongoing basis, the Company monitors counter-party credit ratings.

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As of January 1, 2023, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $ 43.3 billion, $ 36.2 billion and $ 12.4 billion, respectively.

As of January 3, 2021, the Company had notional amounts outstanding for forward foreign exchange contracts and cross currency interest rate swaps of $ 37.8 billion and $ 30.6 billion, respectively.

As of January 2, 2022, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $ 45.8 billion, $ 37.4 billion and $ 10.0 billion, respectively.

All derivative instruments are recorded on the balance sheet at fair value.

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Gains and losses associated with interest rate swaps and changes in fair value of hedged debt attributable to changes in interest rates are recorded to interest expense in the period in which they occur.

Gains and losses on net investment hedge are accounted through the currency translation account within accumulated other comprehensive income.

Gains and losses on net investment hedges are accounted through the currency translation account within accumulated other comprehensive income.

The portion excluded from effectiveness testing is recorded through interest (income) expense using the spot method.

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Equity Investments without readily determinable value $ 500 91 107 698 698

December 29, 2019 January 3, 2021

January 3, 2021 January 2, 2022

(Dollars in Millions) Carrying Value Changes in Fair Value Reflected in Net Income (1)

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For the fiscal years ended January 1, 2023 and January 2, 2022 for equity investments without readily determinable market values, $ 51 million and $ 28 million, respectively, of the changes in fair value reflected in net income were the result of impairments.

There were offsetting impacts of $ 422 million and $ 21 million, respectively, of changes in fair value reflected in net income due to changes in observable prices and gains on the disposal of investments.

The impact in fiscal 2021 was driven by the gain on disposal of the Grail investment.

There were offsetting impacts of $ 142 million and $ 422 million, respectively, of changes in the fair value reflected in net income due to changes in observable prices and gains on the disposal of investments.

The impact in fiscal year 2021, was driven by the gain on disposal of the Grail investment.

In fiscal year 2022, the Company sold all of its equity investments in argenx SE for proceeds of $ 0.6 billion.

Fair value is the exit price that would be received to sell an asset or paid to transfer a liability.

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(4) Classified as cash equivalents and current marketable securities.

(5) Includes $ 520 million, $ 594 million and $ 1,631 million, classified as non-current other liabilities as of January 2, 2022, January 3, 2021 and December 29, 2019, respectively.

Includes $ 13 million, $ 39 million and $ 84 million classified as current liabilities as of January 2, 2022, January 3, 2021 and December 29, 2019, respectively.

(5) Includes $ 1,116 million, $ 520 million and $ 594 million, classified as non-current other liabilities as of January 1, 2023, January 2, 2022 and January 3, 2021, respectively.

Includes $ 4 million, $ 13 million and $ 39 million classified as current liabilities as of January 1, 2023, January 2, 2022 and January 3, 2021, respectively.

(6) Ongoing fair value adjustment amounts are recorded primarily in Research and Development expense.

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The reversal of the contingent consideration was recorded in Other income and expense.

(7) In fiscal year 2022, the Company recorded $ 704 million of contingent consideration related to Abiomed.

See Notes 2 and 7 for financial assets and liabilities held at carrying amount on the Consolidated Balance Sheet.

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Effective Rate %

3.55 % Notes due 2021

$ — — % $ 450 3.67 %

2.45 % Notes due 2021

1.65 % Notes due 2021

0.250 % Notes due 2022 ( 1 B Euro 1.1311 ) (2) /( 1 B Euro 1.2281 ) (3)

0.250 % Notes due 2022 ( 1 B Euro 1.1311 ) (3)

$ — — % $ 1,131 (3)

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(3) Translation rate at January 2, 2022.

(4) The excess of the fair value over the carrying value of debt was $ 3.2 billion at the end of fiscal year 2021 and $ 5.4 billion at the end of fiscal year 2020.

(4) The excess of the carrying value over the fair value of debt was $ 1.6 billion at the end of fiscal year 2022 and the excess of the fair value over the carrying value of debt was $ 3.2 billion at the end of fiscal year 2021.

Fair value of the long-term debt was estimated using market prices, which were corroborated by quoted broker prices and significant other observable inputs.

The Company has access to substantial sources of funds at numerous banks worldwide.

In September 2021, the Company secured a new 364-day Credit Facility.

Total credit available to the Company approximates $ 10 billion, which expires on September 8, 2022.

In September 2022, the Company secured a new 364-day Credit Facility of $ 10 billion, which expires on September 7, 2023.

In November 2022, the Company secured an additional 364-day Credit Facility of $ 10 billion, which expires on November 21, 2023.

Interest charged on borrowings under the credit line agreement is based on either the Term SOFR Reference Rate or other applicable market rates as allowed under the terms of the agreement, plus applicable margins.

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Short-term borrowings and the current portion of long-term debt amounted to approximately $ 12.8 billion and $ 3.8 billion at the end of fiscal years 2022 and 2021, respectively.

The current portion of the long term debt was $ 2.1 billion and $ 1.8 billion in 2021 and 2020, respectively, and the remainder is commercial paper and local borrowing by international subsidiaries.

The current debt balance as of January 2, 2022 includes $ 1.6 billion of commercial paper which has a weighted average interest rate of 0.11 % and a weighted average maturity of approximately three months .

The current portion of the long term debt was $ 1.6 billion and $ 2.1 billion in 2022 and 2021, respectively, and the remainder is commercial paper and local borrowing by international subsi diaries.

The current debt balance as of January 1, 2023 includes $ 11.2 billion of commercial paper which has a weighted average interest rate of 4.23 % and a weighted average maturity of approximately two months .

Aggregate maturities of long-term debt obligations commencing in 2023 are:

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( 4.5 ) ( 16.4 ) ( 9.9 )

Consumer health separation 2.2 — —

taxes on international income (2)

( 1.9 ) 6.7 2.7

Tax benefits from loss on capital assets — ( 1.3 ) ( 1.2 )

Tax benefits on share-based compensation ( 1.3 ) ( 1.0 ) ( 1.5 )

TCJA and related impacts ( 0.5 ) 0.7 ( 3.9 ) (3)

All other (3)

1.9 ( 0.7 ) ( 0.3 )

Effective Rate 17.4 % 8.3 10.8

(1) For all periods presented the Company has subsidiaries operating in Puerto Rico under various tax incentives.

International operations reflects the impacts of operations in jurisdictions with statutory tax rates different than the U.S., particularly Ireland, Switzerland and Puerto Rico, which is a favorable impact on the effective tax rate as compared with the U.S.

International operations reflect the impacts of operations in jurisdictions with statutory tax rates different than the U.S., particularly Ireland, Switzerland and Puerto Rico, which is a favorable impact on the effective tax rate as compared with the U.S.

statutory rate.

The 2021 amounts include the reorganization of international subsidiaries;

the 2020 and 2019 amounts include the impact of the new tax legislation enactment in Switzerland, both of which are further described below.

the 2020 amounts include the impact of the new tax legislation enactment in Switzerland, both of which are further described below.

(2) Includes the impact of the GILTI tax, the Foreign-Derived Intangible Income deduction and other foreign income that is taxable under the U.S.

The 2022 amount includes the impact of certain provisions of the 2017 TCJA that became effective in fiscal 2022.

The 2021 amounts include the reorganization of international subsidiaries;

the 2020 and 2019 amounts include the impact of the new tax legislation enactment in Switzerland, both of which is further described below.

(3) Represents impact of adjustments to balances originally recorded as part of the 2017 TCJA provisional tax charge.

Further information provided below.

the 2020 amounts include the impact of the new tax legislation enactment in Switzerland, both of which are further described below.

(3) Certain prior year amounts have been reclassified to conform to current year presentation.

The fiscal year 2022 effective tax rate increased 9.1 % as compared to the fiscal year 2021 effective tax rate.

As part of the planned separation of the Company’s Consumer Health business, the Company has recognized approximately $ 0.5 billion in net incremental tax costs in fiscal year 2022, which increased the 2022 effective tax rate by approximately 2.2 %.

Additionally, the Company recorded certain non-recurring favorable tax items in fiscal year 2021 which resulted in an unfavorable impact to the Company’s fiscal 2022 effective tax rate when compared to the prior fiscal year.

These items are described below.

The Company’s 2022 tax rate also benefited from certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in fiscal 2022, the impairment of bermekimab for AD and HS IPR&D (for further information see Note 5 of the 2022 10-K Consolidated Financial Statements) and changes in the fair value of securities in the Company’s investment portfolio, both recorded at the U.S.

statutory rate.

The fiscal year 2021 tax rate decreased by 2.5 % compared to the fiscal year 2020 tax rate, which was primarily driven by the following items.

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Additionally other fiscal 2021 impacts to the rate were primarily driven by litigation and acquisition related items as follows:

• the Company accrued additional legal expenses, of approximately $ 1.6 billion for talc at an effective tax rate of 23.5 % and $ 0.8 billion for Risperdal settlements at an effective tax rate of 16.4 % (See Note 19 to the Consolidated Financial Statements for more details).

• the Company recorded a partial IPR&D charge of $ 0.9 billion for the Ottava intangible asset (acquired with the Auris Health acquisition in 2019) at an effective rate of 22.4 % (See Notes 5 and 18 to the Consolidated Financial Statements for more details).

The fiscal year 2020 tax rate decreased by 1.9 % compared to the fiscal year 2019 tax rate.

which was primarily driven by the following items.

In fiscal year 2019, Switzerland enacted the Federal Act on Tax Reform and AHV Financing (TRAF) which became effective on January 1, 2020.

• the Company accrued additional legal expenses, of approximately $ 1.6 billion for talc at an effective tax rate of 23.5 % and $ 0.8 billion for Risperdal Gynecomastia settlements at an effective tax rate of 16.4 % (See Note 19 to the Consolidated Financial Statements for more details).

• the Company recorded a partial IPR&D charge of $ 0.9 billion for the Ottava intangible asset (acquired with the Auris Health acquisition in 2019) at an effective rate of 22.4 %.

In fiscal year 2019, Switzerland enacted the Federal Act on Tax Reform and AHV Financing (TRAF) and became effective for fiscal year 2020.

The Federal transitional provisions of TRAF allow companies, under certain conditions, to adjust the tax basis in certain assets to fair value (i.e., “step-up”) to be depreciated and amortized resulting in an incremental Swiss tax deduction over the transitional period.

TRAF also provides for parameters which enable the Swiss cantons to establish localized tax rates and regulations for companies.

The new cantonal tax parameters include favorable tax benefits for patents and additional research and development

tax deductions.

The new cantonal tax parameters include favorable tax benefits for patents and additional research and development tax deductions.

The cantonal transitional provisions of TRAF allowed companies to elect either 1) tax basis step-up similar to the Federal transition benefit or 2) alternative statutory tax rate for a period not to exceed 5 years.

The Company currently has operations located in various Swiss cantons.

During the fiscal year 2019, as described in further detail below, the Company recorded the impacts of the TRAF that were enacted in that period.

The Company has operations located in various Swiss cantons.

During the fiscal year 2020, the final canton where the Company maintains significant operations enacted TRAF legislation.

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• the accrual of additional legal costs, including an additional $ 1.0 billion associated with a revised agreement in principle to settle opioid litigation at an effective tax rate of 21.4 %

The Company also reduced the contingent consideration liability related to the Auris Health acquisition (see Note 18) and reversed of some of its unrecognized tax benefits due to the completion of several years of tax examinations in certain jurisdictions during the fiscal year 2020.

In fiscal year 2019, the Company reorganized the ownership structure of certain wholly-owned international subsidiaries in the fiscal fourth quarter of 2019, which resulted in a reduction of certain withholding and local taxes that it had previously recognized as part of the provisional Tax Cuts and Jobs Act (TCJA) tax charge in the fiscal year 2017 and finalized in the fiscal year 2018.

Following the completion of this restructuring and approval by the applicable local authorities, the Company reversed a deferred tax liability of $ 0.6 billion and a related deferred tax asset of $ 0.2 billion for U.S.

foreign tax credits, for a net deferred tax benefit of $ 0.4 billion decreasing the annual effective tax rate by 2.2 %.

This benefit has been reflected as “TCJA and related impacts” on the Company’s effective tax rate reconciliation.

The following items also impacted the fiscal year 2019 effective tax rate:

• The impact of the agreement in principle to settle opioid litigation for $ 4 billion (see Note 19 to the Consolidated Financial Statements) which reduced the U.S.

earnings before taxes at an effective tax rate of 23.5 % and decreased the Company’s annual effective tax rate by approximately 2.1 %.

• In December of fiscal year 2019, the U.S.

Treasury issued final foreign tax credit regulations, which resulted in the Company revising the amount of foreign tax credits that were initially recorded in the fiscal year 2017 as part of the provisional TCJA tax charge.

As a result, the Company recorded an increased deferred tax asset related to these foreign tax credits of approximately $ 0.3 billion or 1.7 % to the annual effective tax rate.

This benefit has been reflected as “TCJA and related impacts” on the Company’s effective tax rate reconciliation.

• The Company reassessed its uncertain tax positions related to the current IRS audit and increased its unrecognized tax benefit by $ 0.3 billion liability which increased the annual effective tax rate by approximately 1.5 % (see section on Unrecognized Tax Benefits for additional information).

As these positions were related to uncertain tax regarding international transfer pricing, this expense has been classified as “International Operations” on the Company’s effective tax rate reconciliation.

As described above for the Swiss tax legislation, in the fiscal year 2019, the Company recorded a net tax expense of $ 0.1 billion which increased the effective tax rate for the fiscal year 2019 by approximately 0.6 %.

This net tax expense related to federal and certain cantonal enactments in the fiscal year 2019 consisting of the following provisions:

• approximately $ 0.6 billion tax expense relating to the remeasurement of Swiss deferred tax assets and liabilities for the change in the Federal and cantonal tax rates, where enactment occurred by December 29, 2019;

this expense has been reflected as “International Operations” on the Company’s effective tax rate reconciliation.

• a $ 0.9 billion deferred tax asset related to the estimated value of a Federal tax basis step-up of the Company’s Swiss subsidiaries’ assets;

this benefit has been reflected as “International Operations” on the Company’s effective tax rate reconciliation.

• approximately $ 450 million of U.S.

deferred tax expense relating to the GILTI deferred tax liability resulting from the remeasurement of the Swiss deferred tax assets and liabilities and the new deferred tax asset for the Federal step-up.

This benefit has been reflected as “U.S.

tax on international income” on the Company’s effective tax rate reconciliation.

The Company also reduced the contingent consideration liability related to the Auris Health acquisition in 2019 and reversed some of its unrecognized tax benefits due to the completion of several years of tax examinations in certain jurisdictions during the fiscal year 2020.

Temporary differences and carryforwards at the end of fiscal years 2022 and 2021 were as follows:

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Goodwill and intangibles ( 4,271 ) (3)

( 2,659 ) (2)

R&D capitalized for tax 2,611 1,664

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Income reported for tax purposes 2,045 2,566

Net realizable operating loss carryforward 1,073 990

Net realizable operating loss carryforwards (4)

Undistributed foreign earnings 1,565 ( 1,693 ) 1,015 ( 1,461 )

5 unchanged sentences

(2) Amount is inclusive of the $ 2.3 billion deferred tax asset established as part of the reorganized ownership structure of certain wholly-owned international subsidiaries, as previously described.

(3) Amount is inclusive of the $ 1.8 billion deferred tax liability due to the acquisition of Abiomed.

(4) Net of valuation allowances of $ 0.9 billion in both 2022 and 2021.

The Company has wholly-owned international subsidiaries that have cumulative net losses.

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However, in certain jurisdictions, valuation allowances have been recorded against deferred tax assets for loss carryforwards that are not more likely than not to be realized.

Such valuation allowances are not material.

The following table summarizes the activity related to unrecognized tax benefits:

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Treasury related to the final settlement of 2010-2012 tax audit liability.

In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2008.

The Company believes it is possible that tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions outside of the United States.

However, the Company is not able to provide a reasonably reliable estimate of the timing of any other future tax payments relating to uncertain tax positions.

The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities, except as previously noted on amounts related to the current United States IRS audit.

In other major jurisdictions where the Company conducts business, the years that remain open to tax audits go back to the year 2008.

The Company believes it is possible that some tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions, including in the United States.

However, the Company is not able to provide a reasonably reliable estimate of the timing of any other future tax payments or change in uncertain tax positions, if any.

The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities.

Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense.

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accrued under the Final Average Pay formula for service before January 1, 2026.

The impact of this change decreases the

Projected Benefit Obligation as of January 3, 2021 by approximately $ 1.8 billion and is included in the “Amendments” line in the Change in Benefit Obligation.

International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased under group contracts, or reserves are provided.

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Curtailments and settlements 1 1 23 — — —

Net periodic benefit cost $ 623 790 593 503 524 551

Net periodic benefit cost (credit) $ ( 47 ) 623 790 533 503 524

The service cost component of net periodic benefit cost is presented in the same line items on the Consolidated Statement of Earnings where other employee compensation costs are reported, including Cost of products sold, Research and development expense, and Selling, marketing and administrative expenses.

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Amendments 7 5 — —

5 ( 1,780 ) — —

Actuarial (gains) losses (1)

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Plan assets at fair value — beginning of year $ 41,930 38,195 102 90

Actual return on plan assets 4,439 5,524 17 14

Actual return (loss) on plan assets ( 8,665 ) 4,439 ( 17 ) 17

Company contributions 270 969 386 343

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Accumulated Benefit Obligations — end of year $ 28,023 39,049

(1) In January 2021, the Company announced that, effective on January 1, 2026, all eligible U.S.

non-union employees, regardless of hire date, will earn benefits under the Retirement Value formula.

This amendment does not affect the benefits accrued under the Final Average Pay formula for service before January 1, 2026.

(2) The actuarial gain for retirement plans in 2021 was primarily related to increases in discount rates;

the actuarial losses for retirement plans in 2020 were primarily related to decreases in discount rates.

(1) The actuarial gain for retirement plans in 2022 and 2021 was primarily related to increases in discount rates.

Retirement Plans Other Benefit Plans

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Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income

Net periodic benefit cost $ 623 790 503 524

Net periodic benefit cost (credit) $ ( 47 ) 623 533 503

Net actuarial (gain) loss ( 793 ) ( 3,927 ) ( 751 ) ( 199 )

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Each pension plan is overseen by a local committee or board that is responsible for the overall administration and investment of the pension plans.

In determining investment policies, strategies and goals, each committee or board considers factors

including, local pension rules and regulations;

In determining investment policies, strategies and goals, each committee or board considers factors including, local pension rules and regulations;

local tax regulations;

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Repurchase of common stock 21,760 3,221

Balance at December 29, 2019 487,336 38,417

Balance at January 3, 2021 487,331 38,490

Employee compensation and stock option plans ( 17,399 ) ( 2,847 )

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On January 3, 2023, the Board of Directors declared a regular cash dividend of $ 1.13 per share, payable on March 7, 2023 to shareholders of record as of February 21, 2023.

On December 17, 2018, the Company announced that its Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $ 5.0 billion of the Company's shares of common stock.

This share repurchase program was completed as of September 29, 2019.

On September 14, 2022, the Company announced that its Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $ 5.0 billion of the Company's shares of common stock.

Share repurchases may be made at management’s discretion from time to time on the open market or through privately negotiated transactions.

The repurchase program has no time limit and may be suspended for periods or discontinued at any time.

Through January 1, 2023, approximately $ 2.5 billion has been repurchased under the program.

Accumulated Other Comprehensive Income (Loss)

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Net 2020 changes ( 233 ) 1 ( 66 ) 947 649

December 29, 2019 ( 8,705 ) — ( 6,891 ) ( 295 ) ( 15,891 )

January 3, 2021 ( 8,938 ) 1 ( 6,957 ) 652 ( 15,242 )

Net 2021 changes ( 1,079 ) ( 4 ) 4,255 ( 988 ) 2,184

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This equity account includes the results of translating certain balance sheet assets and liabilities at current exchange rates and some accounts at historical rates, except for those located in highly inflationary economies, (Argentina and Venezuela).

Beginning in the fiscal second quarter of 2022, the Company also accounted for operations in Turkey as highly inflationary.

The translation of balance sheet accounts for highly inflationary economies are reflected in the operating results.

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Earnings Per Share

The following is a reconciliation of basic net earnings per share to diluted net earnings per share for the fiscal years ended January 2, 2022, January 3, 2021 and December 29, 2019:

The following is a reconciliation of basic net earnings per share to diluted net earnings per share for the fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021:

(In Millions Except Per Share Amounts) 2022 2021 2020

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shares repurchased under treasury stock method ( 101.4 ) ( 96.1 ) ( 80.4 )

Convertible debt shares — — 0.7

Adjusted average shares outstanding — diluted 2,663.9 2,674.0 2,670.7

Diluted net earnings per share $ 6.73 7.81 5.51

The diluted net earnings per share calculation for fiscal year 2021 included all shares related to stock options, as the exercise price of these options was less than the average market value of the Company's stock.

As of January 2, 2022, the Company did not have convertible debt.

The diluted net earnings per share calculation for the fiscal years 2022 and 2021 included all shares related to stock options, as the exercise price of these options was less than the average market value of the Company's stock.

The diluted net earnings per share calculation for fiscal year 2020 excluded 18 million shares related to stock options, as the exercise price of these options was greater than the average market value of the Company's stock.

As of January 3, 2021, the Company did not have convertible debt.

The diluted net earnings per share calculation for fiscal year 2019 excluded an insignificant number of shares related to stock options, as the exercise price of these options was greater than the average market value of the Company’s stock.

The diluted net earnings per share calculation for fiscal year 2019 included the dilutive effect of convertible debt that was offset by the related reduction in interest expense of $ 1 million after-tax.

Common Stock, Stock Option Plans and Stock Compensation Agreements

At January 2, 2022, the Company had 2 stock-based compensation plans.

At January 1, 2023, the Company had one stock-based compensation plan.

The shares outstanding are for contracts under the Company's 2012 Long-Term Incentive Plan and the 2022 Long-Term Incentive Plan.

The 2005 Long-Term Incentive Plan expired April 26, 2012.

All options and restricted shares granted subsequent to that date were under the 2012 Long-Term Incentive Plan.

Under the 2012 Long-Term Incentive Plan, the Company may issue up to 650 million shares of common stock, plus any shares canceled, expired, forfeited, or not issued from the 2005 Long-Term Incentive Plan subsequent to April 26, 2012.

The 2012 Long-Term Incentive Plan expired on April 26, 2022.

All awards (stock options, restricted shares units and performance share units) granted subsequent to that date were under the 2022 Long-Term Incentive Plan.

Under the 2022 Long-Term Incentive Plan, the Company may issue up to 150 million shares of common stock, of which up to 110 million shares of common stock may be issued subject to stock options or stock appreciation rights and up to 40 million shares of common stock may be issued subject to full value awards.

Awards will generally be counted on a 1-for-1 basis against the share reserve, provided that if more than 40 million full value awards are granted, each full value award in excess of 40 million will be counted on a 5-for-1 basis against the share reserve.

Shares available for future grants under the 2022 Long-Term Incentive Plan were 150 million at the end of fiscal year 2022.

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The Company also recognized additional income tax benefits of $ 282 million, $ 223 million and $ 248 million for fiscal years 2022, 2021 and 2020, respectively, for which options were exercised or restricted shares were vested.

The total unrecognized compensation cost was $ 862 million, $ 804 million and $ 823 million for fiscal years 2021, 2020 and 2019,

respectively.

The total unrecognized compensation cost was $ 939 million, $ 862 million and $ 804 million for fiscal years 2022, 2021 and 2020, respectively.

The weighted average period for this cost to be recognized was 1.80 years, 1.78 years and 1.76 years for fiscal years 2022, 2021, and 2020, respectively.

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Expected dividend yield 2.70 % 2.50 % 2.60 %

A summary of option activity under the Plan as of January 2, 2022, January 3, 2021 and December 29, 2019, and changes during the years ending on those dates is presented below:

A summary of option activity under the Plan as of January 1, 2023, January 2, 2022 and January 3, 2021, and changes during the years ending on those dates is presented below:

(Shares in Thousands) Outstanding Shares Weighted

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Options canceled/forfeited ( 1,835 ) 137.62

Shares at December 29, 2019 111,637 105.63 4,478

Shares at January 3, 2021 114,250 116.22 4,703

Options granted 18,525 164.62

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(1) Average contractual life remaining in years.

Stock options outstanding at January 3, 2021 and December 29, 2019 were 114,250 and an average life of 6.0 years and 111,637 and an average life of 6.0 years, respectively.

Stock options exercisable at January 3, 2021 and December 29, 2019 were 61,289 at an average price of $ 96.97 and 60,761 at an average price of $ 88.88 , respectively.

Stock options outstanding at January 2, 2022 and January 3, 2021 were 117,361 and an average life of 5.8 years and 114,250 and an average life of 6.0 years, respectively.

Stock options exercisable at January 2, 2022 and January 3, 2021 were 62,742 at an average price of $ 104.42 and 61,289 at an average price of $ 96.97 , respectively.

Restricted Share Units and Performance Share Units

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The Company also grants performance share units, which are paid in shares of Johnson & Johnson Common Stock after the end of a three-year performance period.

Whether any performance share units vest, and the amount that does vest, is tied to the completion of service periods that range from 6 months to 3 years and the achievement, over a three-year period, of three equally-weighted goals that directly align with or help drive long-term total shareholder return:

operational sales, adjusted operational earnings per share, and relative total shareholder return.

Beginning in fiscal 2020, performance shares were granted with two equally-weighted goals that directly align with or help drive long-term total shareholder return:

Performance shares were granted with two equally-weighted goals that directly align with or help drive long-term total shareholder return:

adjusted operational earnings per share and relative total shareholder return.

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OTHER IMMUNOLOGY

17 21 — ( 18.4 ) **

International 0 3 11 ** ( 73.3 )

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Worldwide 448 563 795 ( 20.4 ) ( 29.3 )

PROCRIT ® / EPREX ®

376 446 600 ( 15.5 ) ( 25.7 )

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Worldwide 966 1,119 1,394 ( 13.6 ) ( 19.7 )

223 323 380 ( 31.0 ) ( 15.1 )

International 758 864 974 ( 12.2 ) ( 11.3 )

Worldwide 981 1,186 1,353 ( 17.3 ) ( 12.4 )

TOTAL PHARMACEUTICAL

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Worldwide 52,563 51,680 45,175 1.7 14.4

MEDICAL DEVICES

Interventional Solutions

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Worldwide 1,306 1,248 925 4.6 34.9

TOTAL MEDICAL DEVICES

TOTAL MEDTECH

13,377 12,686 11,036 5.4 14.9

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**Percentage greater than 100% or not meaningful

(1) Approximately $ 0.4 billion in both the fiscal 2021 and 2020, of certain international OTC products, primarily in China, were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes

(2) Inclusive of PROCRIT / EPREX which was previously disclosed separately

(3) Pr eviously referred to as Medical Devices

Income (Loss) Before Tax* Identifiable Assets

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Pharmaceutical 15,901 17,969 15,250 58,436 64,376

Medical Devices 4,373 3,044 7,286 53,372 49,578

MedTech 4,607 4,373 3,044 70,956 53,372

Total 23,438 23,915 17,442 153,460 142,829

1 unchanged sentence

624 1,072 945

Consumer Health separation costs 1,089 67

General corporate (2)

1 unchanged sentence

Worldwide total $ 21,725 22,776 16,497 $ 187,378 182,018

*Income before tax of approximately $ 0.2 billion and $ 0.2 billion in the fiscal years 2021 and 2020, respectively, has been reclassified as certain international OTC products, primarily in China, were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes

Additions to Property,

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Pharmaceutical 1,374 1,198 863 3,687 4,029 4,006

Medical Devices 1,933 1,980 1,912 2,286 2,140 2,014

MedTech 2,120 1,933 1,980 2,302 2,286 2,140

Segments total 3,817 3,462 3,091 6,647 7,074 6,931

20 unchanged sentences

(3) Consumer Health includes:

• Litigation expense of $ 1.6 billion, primarily talc related reserves

• Litigation expense of $ 0.2 billion

• A restructuring related charge of $ 0.1 billion

Pharmaceutical includes:

• Litigation expense of $ 0.6 billion, primarily related to Risperdal

• One-time COVID-19 Vaccine manufacturing exit related costs of $ 1.5 billion

• An intangible asset impairment charge of approximately $ 0.8 billion related to an in-process research and development asset, bermekimab (JnJ-77474462), an investigational drug for the treatment of Atopic Dermatitis (AD) and Hidradenitis Suppurativa (HS) acquired with the acquisition of XBiotech, Inc.

in the fiscal year 2020.

Additional information regarding efficacy of the AD and HS indications became available which led the Company to the decision to terminate the development of bermekimab for AD and HS

• Litigation expense of $ 0.1 billion

• Loss of $ 0.7 billion related to the change in the fair value of securities

• A restructuring related charge of $ 0.1 billion

MedTech includes:

• Litigation expense of $ 0.6 billion primarily for pelvic mesh related costs

• A restructuring related charge of $ 0.3 billion

• Acquisition and integration related costs of $ 0.3 billion primarily related to the acquisition of Abiomed

• A Medical Device Regulation charge of $ 0.3 billion

(4) Consumer Health includes:

• Litigation expense of $ 1.6 billion, primarily talc related costs

• A restructuring related charge of $ 0.1 billion

Pharmaceutical includes:

• Litigation expense of $ 0.6 billion, primarily related to Risperdal Gynecomastia

• Divestiture gains of $ 0.6 billion

• Gains on securities of $ 0.5 billion

• Gains of $ 0.5 billion related to the change in the fair value of securities

• A restructuring related charge of $ 0.1 billion

Medical Devices includes:

MedTech includes:

• A restructuring related charge of $ 0.3 billion

• An in-process research and development expense of $ 0.9 billion

• An in-process research and development expense of $ 0.9 billion related to Ottava

• A Medical Device Regulation charge of $ 0.2 billion

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(5) Consumer Health includes:

• Litigation expense of $ 3.9 billion, primarily talc related reserves and certain settlements.

• Litigation expense of $ 3.9 billion, primarily talc related costs and certain settlements.

Pharmaceutical includes:

• Litigation expense of $ 0.8 billion, primarily related to the agreement in principle to settle opioid litigation

• An unrealized gain on securities of $ 0.5 billion

• A gain of $ 0.5 billion related to the change in the fair value of securities

• A restructuring related charge of $ 0.1 billion

Medical Devices includes:

MedTech includes:

• A contingent consideration reversal of $ 1.1 billion related to the timing of certain developmental milestones associated with the Auris Health acquisition.

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• A Medical Device Regulation charge of $ 0.1 billion

(5) Consumer Health includes:

• A gain of $ 0.3 billion related to the Company's previously held equity investment in DR.

• Litigation expense of $ 0.4 billion

• A restructuring related charge of $ 0.1 billion

Pharmaceutical includes:

• Litigation expense of $ 4.3 billion of which $ 4.0 billion is related to the agreement in principle to settle opioid litigation

• An in-process research and development expense of $ 0.9 billion related to the Alios asset

• A research and development expense of $ 0.3 billion for an upfront payment related to argenx

• An unrealized gain on securities of $ 0.6 billion

• Actelion acquisition and integration related costs of $ 0.2 billion

• A restructuring charge of $ 0.1 billion

Medical Devices includes:

• A gain of $ 2.0 billion from the divestiture of the ASP business

• A restructuring related charge of $ 0.4 billion

• Litigation expense of $ 0.4 billion

• Auris Health acquisition and integration related costs of $ 0.1 billion

(6) Long-lived assets include property, plant and equipment, net for fiscal years 2022, and 2021 of $ 19,803 and $ 18,962 , respectively, and intangible assets and goodwill, net for fiscal years 2022 and 2021 of $ 93,556 and $ 81,638 , respectively.

Acquisitions and Divestitures

During the fiscal year 2022, certain businesses were acquired for $ 17.7 billion in cash and $ 1.1 billion of liabilities assumed.

These acquisitions were accounted for using the acquisition method and, accordingly, results of operations have been included in the financial statements from their respective dates of acquisition.

The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $ 17.3 billion and has been assigned to identifiable intangible assets, with any residual recorded to goodwill.

The fiscal year 2022 acquisitions primarily included Abiomed, Inc.

The remaining acquisitions were not material.

On December 22, 2022, the Company completed the acquisition of Abiomed, a leading, first-to-market provider of cardiovascular medical technology with a first-in-kind portfolio for the treatment of coronary artery disease and heart failure which also has an extensive innovation pipeline of life-saving technologies.

The transaction broadens the Company’s position as a growing cardiovascular innovator, advancing the standard of care in heart failure and recovery, one of healthcare’s largest areas of unmet need.

The transaction was accounted for as a business combination and the results of operations were included in the MedTech segment as of the date of the acquisition.

The acquisition was completed through a tender offer for all outstanding shares.

The consideration paid in the acquisition consisted of an upfront payment of $ 380.00 per share in cash, amounting to $ 17.1 billion, net of cash acquired, as well as a non-tradeable contingent value right (“CVR”) entitling the holder to receive up to $ 35.00 per share in cash (which with respect to the CVRs total approximately $ 1.6 billion in the aggregate) if certain commercial and clinical milestones are achieved.

The corresponding enterprise value (without taking into account the CVRs) of approximately $ 16.5 billion includes cash, cash equivalents and marketable securities acquired.

The milestones of the CVR consist of:

$ 17.50 per share, payable if net sales for Abiomed products exceeds $ 3.7 billion during Johnson & Johnson’s fiscal second quarter of 2027 through fiscal first quarter of 2028, or if this threshold is not met during this period and is subsequently met during any rolling four quarter period up to the end of Johnson & Johnson’s fiscal first quarter of 2029, $ 8.75 per share;

$ 7.50 per share payable upon FDA premarket application approval of the use of Impella ® products in ST-elevated myocardial infarction (STEMI) patients without cardiogenic shock by January 1, 2028;

$ 10.00 per share payable upon the first publication of a Class I recommendation for the use of Impella ® products in high risk PCI or STEMI with or without cardiogenic shock within four years from their respective clinical endpoint publication dates, but in all cases no later than December 31, 2029.

The fair value of the acquisition was allocated to assets acquired of $ 19.9 billion (net of $ 0.3 billion cash acquired), primarily to goodwill for $ 10.9 billion, amortizable intangible assets for $ 6.6 billion, IPR&D for $ 1.1 billion, marketable

securities of $ 0.6 billion and liabilities assumed of $ 2.8 billion, which includes the fair value of the contingent consideration mentioned above for $ 0.7 billion and deferred taxes of $ 1.8 billion.

The goodwill is primarily attributable to the commercial acceleration and expansion of the portfolio and is not expected to be deductible for tax purposes.

The contingent consideration was recorded in Other Liabilities on the Consolidated Balance Sheet.

As the acquisition occurred in December 2022, the Company is still finalizing the allocation of the purchase price to the individual assets acquired and liabilities assumed.

The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change.

To assist management in the allocation, the Company engaged valuation specialists to prepare appraisals.

The Company will finalize the amounts recognized as the information necessary to complete the analysis is obtained.

The Company expects to finalize these amounts as soon as possible but no later than one year from the acquisition date.

The amortizable intangible assets were primarily comprised of already in-market products of the Impella ® platform with an average weighted life of 14 years.

The IPR&D assets were valued for technology programs for unapproved products.

The value of the IPR&D was calculated using probability-adjusted cash flow projections discounted for the risk inherent in such projects.

The probability of success factor ranged from 52 % to 70 %.

The discount rate applied was 9.5 %.

In 2022, the Company recorded acquisition related costs before tax of approximately $ 0.3 billion, which was recorded in Other (income)/expense.

During fiscal year 2021, the Company did not make any material acquisitions.

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The discount rate applied was approximately 16 %.

XBiotech may be eligible to receive additional payments upon the receipt of certain commercialization authorizations.

The transaction was accounted for as a business combination and included in the Pharmaceutical segment.

On January 28, 2022, subsequent to the fiscal year 2021, additional information regarding efficacy became available which led the Company to the decision to terminate the development of bermekimab for Atopic Dermatitis (AD).

The Company recorded an intangible asset impairment charge of approximately $ 0.6 billion related to an in-process research and development asset, bermekimab (JnJ-77474462), an investigational drug for the treatment of AD and Hidradenitis Suppurativa (HS).

The impairment charge is related to the AD indication and is a nonrecognized subsequent event and will be reflected in the first quarter 2022 financial statements.

The Company acquired all rights to bermekimab from XBiotech, Inc.

in fiscal year 2020.

In fiscal 2022, the Company recorded an intangible asset impairment charge of approximately $ 0.8 billion related to this in-process research and development asset.

Additionally, in the fiscal first quarter of 2020, the Company completed the acquisition of all outstanding shares in Verb Surgical Inc., a company with significant robotics and data science capabilities, including those shares previously held by Verily.

The transaction was accounted for as a business combination and included in the Medical Devices segment.

The transaction was accounted for as a business combination and included in the MedTech segment.

The fair value of the acquisition was allocated primarily to non-amortizable intangible assets, primarily IPR&D, for $ 0.4 billion, goodwill for $ 0.2 billion, other assets of $ 0.2 billion and liabilities assumed of $ 0.3 billion.

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The transaction was accounted for as a business combination and included in the Pharmaceutical segment.

During fiscal year 2019 certain businesses were acquired for $ 5.8 billion in cash and $ 1.4 billion of liabilities assumed.

These acquisitions were accounted for using the acquisition method and, accordingly, results of operations have been included in the financial statements from their respective dates of acquisition.

The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $ 6.8 billion and has been assigned to identifiable intangible assets, with any residual recorded to goodwill.

The fiscal year 2019 acquisitions primarily included DR.

CI:LABO, a Japanese company focused on the marketing, development and distribution of a broad range of dermocosmetic, cosmetic and skincare products and Auris Health, Inc.

privately held developer of robotic technologies, initially focused in lung cancer, with an U.S.

FDA-cleared platform currently used in bronchoscopic diagnostic and therapeutic procedures.

On January 17, 2019, the Company acquired DR.

CI:LABO, a Japanese company focused on the marketing, development and distribution of a broad range of dermocosmetic, cosmetic and skincare products for a total purchase price of approximately ¥ 230 billion, which equates to approximately $ 2.1 billion, using the exchange rate of 109.06 Japanese Yen to each U.S.

Dollar on January 16, 2019.

Additionally, in the fiscal first quarter of 2019, the Company recognized a pre-tax gain recorded in Other (income) expense, net, of approximately $ 0.3 billion related to the Company's previously held equity investment in DR.

The Company treated this transaction as a business combination and included it in the Consumer Health segment.

During the fiscal first quarter of 2020, the Company finalized the purchase price allocation.

The final fair value of the acquisition was allocated primarily to amortizable intangible assets for $ 1.5 billion, goodwill for $ 1.2 billion and liabilities of $ 0.4 billion.

The amortizable intangible assets were comprised of brand/trademarks and customer relationships with a weighted average life of 15.3 years.

The goodwill is primarily attributable to synergies expected to arise from the business acquisition and is not expected to be deductible for tax purposes.

On April 1, 2019 the Company completed the acquisition of Auris Health, Inc.

for approximately $ 3.4 billion, net of cash acquired.

Additional contingent payments of up to $ 2.35 billion, in the aggregate, may be payable upon reaching certain predetermined milestones.

Auris Health was a privately held developer of robotic technologies, initially focused in lung cancer, with a U.S.

FDA-cleared platform currently used in bronchoscopic diagnostic and therapeutic procedures.

The Company treated this transaction as a business combination and included it in the Medical Devices segment.

The fair value of the acquisition was allocated primarily to amortizable and non-amortizable intangible assets, primarily IPR&D for $ 3.0 billion, goodwill for $ 2.0 billion, marketable securities of $ 0.2 billion and liabilities assumed of $ 1.8 billion, which includes the fair value of the contingent payments mentioned above.

The goodwill is primarily attributable to synergies expected to arise from the business acquisition and is not expected to be deductible for tax purposes.

During the fiscal second quarter of 2020, the Company finalized the purchase price allocation.

During fiscal 2020, the Company recorded Other income of approximately $ 1.1 billion for the reversal of all of the contingent consideration related to the timing of certain developmental and commercial milestones, which are not expected to be met based on the Company’s current timelines.

During the fiscal third quarter of 2020, the Company recorded a partial IPR&D impairment charge of $ 0.1 billion related to timing and progression of the digital surgery platforms.

In the fiscal third quarter of 2021, the Company recorded a partial IPR&D charge of $ 0.9 billion primarily related to expected development delays in the general surgery digital robotics platform (Ottava).

A probability of success factor ranging from 18 % to 66 % across Ottava sub-platforms, was used in the fair value calculation to reflect inherent regulatory and commercial risk of the contingent payments and IPR&D.

The discount rate applied was approximately 9.5 %.

In accordance with U.S.

GAAP standards related to business combinations, and goodwill and other intangible assets, supplemental pro forma information for fiscal years 2021, 2020 and 2019 is not provided, as the impact of the aforementioned acquisitions did not have a material effect on the Company’s results of operations, cash flows or financial position.

GAAP standards related to business combinations, and goodwill and other intangible assets, supplemental pro forma information for fiscal years 2022, 2021 and 2020 is not provided, as the impact of the aforementioned acquisitions did not have a material effect on the Company’s results of operations.

During fiscal year 2022, the Company did not make any material divestitures.

During fiscal year 2021, in separate transactions, the Company divested two brands outside the U.S.

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During the fiscal third quarter of 2021, the Company's undrawn credit facility with Idorsia was terminated.

During fiscal year 2019, the Company divested its ASP business to Fortive Corporation for an aggregate value of approximately $ 2.8 billion, consisting of $ 2.7 billion of cash proceeds and $ 0.1 billion of retained net receivables.

The Company recognized a pre-tax gain recorded in Other ( income) expense, net, of approximately $ 2.0 billion.

Legal Proceedings

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and other legal proceedings that arise from time to time in the ordinary course of their business.

Due to the ongoing impacts of the COVID-19 pandemic, certain trials have been rescheduled or delayed.

The Company continues to monitor its legal proceedings as the situation evolves and in person trials resume.

The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability will be incurred, and the amount of the loss can be reasonably estimated.

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PRODUCT LIABILITY

Johnson & Johnson and certain of its subsidiaries are involved in numerous product liability claims and lawsuits involving multiple products.

The Company and certain of its subsidiaries are involved in numerous product liability claims and lawsuits involving multiple products.

Claimants in these cases seek substantial compensatory and, where available, punitive damages.

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pelvic meshes;

RISPERDAL ® ;

body powders containing talc, primarily JOHNSON'S Baby Powder;

and ETHICON PHYSIOMESH ® Flexible Composite Mesh.

ETHICON PHYSIOMESH Flexible Composite Mesh;

As of January 1, 2023, in the United States there were approximately 170 plaintiffs with direct claims in pending lawsuits regarding injuries allegedly due to the DePuy ASR XL Acetabular System and DePuy ASR Hip Resurfacing System;

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1,100 with respect to RISPERDAL;

5,500 with respect to XARELTO ® ;

40,300 with respect to body powders containing talc;

100 with respect to INVOKANA ® ;

and 4,700 with respect to ETHICON PHYSIOMESH ® Flexible Composite Mesh.

2,100 with respect to ETHICON PHYSIOMESH Flexible Composite Mesh;

2,000 with respect to ELMIRON;

and 170 with respect to TYLENOL.

The number of pending lawsuits is expected to fluctuate as certain lawsuits are settled or dismissed and additional lawsuits are filed.

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(DePuy) announced a worldwide voluntary recall of its ASR XL Acetabular System and DePuy ASR Hip Resurfacing System (ASR Hip) used in hip replacement surgery.

Claims for personal injury have been made against DePuy and Johnson & Johnson.

Claims for personal injury have been made against DePuy and the Company.

Cases filed in federal courts in the United States have been organized as a multi-district litigation in the United States District Court for the Northern District of Ohio.

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In Canada, the Company has reached agreements to settle the class actions filed in that country.

The Company continues to receive information with respect to potential additional

costs associated with this recall on a worldwide basis.

The Company continues to receive information with respect to potential additional costs associated with this recall on a worldwide basis.

The Company has established accruals for the costs associated with the United States settlement program and ASR Hip-related product liability litigation.

Claims for personal injury have also been made against DePuy Orthopaedics, Inc.

and Johnson & Johnson (collectively, DePuy) relating to the PINNACLE ® Acetabular Cup System used in hip replacement surgery.

and the Company (collectively, DePuy) relating to the PINNACLE Acetabular Cup System used in hip replacement surgery.

Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases.

Cases filed in federal courts in the United States have been organized as a multi-district litigation in the United States District Court for the Northern District of Texas.

Litigation also has been filed in some state courts and in countries outside of the United States.

Several adverse verdicts have been rendered against DePuy, one of which was reversed on appeal and remanded for retrial.

Most cases filed in federal courts in the United States have been organized as a multi-district litigation in the United States District Court for the Northern District of Texas (Texas MDL).

Beginning on June 1, 2022, the Judicial Panel on Multidistrict Litigation ceased transfer of new cases into the Texas MDL, and there are now cases pending in federal court outside the Texas MDL.

Litigation also has been filed in state courts and in countries outside of the United States.

Prior to 2019, several adverse verdicts had been rendered against DePuy, one of which was reversed on appeal and remanded for retrial.

During the first quarter of 2019, DePuy established a United States settlement program to resolve these cases.

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Claims for personal injury have been made against Ethicon, Inc.

(Ethicon) and Johnson & Johnson arising out of Ethicon’s pelvic mesh devices used to treat stress urinary incontinence and pelvic organ prolapse.

(Ethicon) and the Company arising out of Ethicon’s pelvic mesh devices used to treat stress urinary incontinence and pelvic organ prolapse.

The Company continues to receive information with respect to potential costs and additional cases.

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The Company has settled or otherwise resolved the majority of the United States cases and the estimated costs associated with these settlements and the remaining cases are reflected in the Company’s accruals.

In addition, class actions and individual personal injury cases or claims seeking damages for alleged injury resulting from Ethicon’s pelvic mesh devices have been commenced in various countries outside of the United States, including claims and cases in the United Kingdom, the Netherlands and class actions in Israel, Australia and Canada.

In addition, class actions and individual personal injury cases or claims seeking damages for alleged injury resulting from Ethicon’s pelvic mesh devices have been commenced in various countries outside of the United States, including claims and cases in the United Kingdom, the Netherlands, Belgium, France, Ireland, Italy, Spain and Slovenia and class actions in Israel, Australia, Canada and South Africa.

In November 2019, the Federal Court of Australia issued a judgment regarding its findings with respect to liability in relation to the three Lead Applicants and generally in relation to the design, manufacture, pre and post-market assessments and testing, and supply and promotion of the devices in Australia used to treat stress urinary incontinence and pelvic organ prolapse.

In March 2020, the Court issued a decision and entered damages awards to the three Lead Applicants.

The Company appealed the decision to the intermediate appellate court, the Full Court.

The appeal was heard in February 2021 and, in March 2021, the Full Court entered a judgment dismissing the appeal.

An application for special leave to the High Court of Australia was filed in April 2021, and the High Court heard oral argument on the application in November 2021.

Special leave was refused.

While this brings an end to the appellate process, there will now be an individual case assessment process for the remaining group member claims.

The parties currently are in discussions with the Court to determine the form and mechanism of that individual case assessment process.

The next hearing is scheduled for late February 2022.

In September 2022, after exhausting its appeals, the Company reached an in-principle agreement to resolve the two pelvic mesh class actions in Australia, pending Federal Court approval.

In November 2022, the application for approval of the settlement was filed, and a hearing on the settlement has been scheduled for the end of February 2023.

The class actions in Canada were discontinued in 2020 as a result of a settlement of a group of cases and an agreement to resolve the Israeli class action was reached in May 2021.

The parties in the Israeli class action are currently negotiating the wording and some of the terms thereof and once finalized, the settlement will be subject to court approval.

The parties are due to update the court on the status of the finalization of the settlement negotiations by the end of February 2022.

The parties in the Israeli class action are currently finalizing the terms of the settlement.

A motion to approve the settlement was filed with the Court.

The Company has established accruals with respect to product liability litigation associated with Ethicon’s pelvic mesh products.

Following a June 2016 worldwide market withdrawal of ETHICON PHYSIOMESH Flexible Composite Mesh (Physiomesh), claims for personal injury have been made against Ethicon, Inc.

(Ethicon) and Johnson & Johnson alleging personal injury arising out of the use of this hernia mesh device.

(Ethicon) and the Company alleging personal injury arising out of the use of this hernia mesh device.

Cases filed in federal courts in the United States have been organized as a multi-district litigation (MDL) in the United States District Court for the Northern District of Georgia.

A multi-county litigation (MCL) also has been formed in New Jersey state court and assigned to Atlantic County for cases pending in New Jersey.

In addition to the matters in the MDL and MCL, there are additional lawsuits pending in the United States District Court for the Southern District of Ohio, which are part of the MDL for polypropylene mesh devices manufactured by C.R.

Bard, Inc., one multi-plaintiff lawsuit pending in Oklahoma state court and lawsuits pending outside the United States.

In addition to the matters in the MDL and MCL, there are additional lawsuits pending in the United States District Court for the Southern District

of Ohio, which are part of the MDL for polypropylene mesh devices manufactured by C.R.

Bard, Inc., and lawsuits pending in two New Jersey MCLs formed for Proceed/Proceed Ventral Patch and Prolene Hernia systems, and lawsuits pending outside the United States.

In May 2021, Ethicon and lead counsel for the plaintiffs entered into a term sheet to resolve approximately 3,600 Physiomesh cases (covering approximately 4,300 plaintiffs) pending in the MDL and MCL at that time.

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All deadlines and trial settings in those proceedings are currently stayed pending the completion of the settlement agreement.

The deadline for issuance of Individual Allocation amounts by the Special Master is March 2022.

The costs associated with this proposed settlement are reflected in the Company’s accruals.

Of the cases subject to the MSA, 2,236 have been dismissed with prejudice.

Post-settlement cases in the Physiomesh MDL and MCL are subject to docket control orders requiring early expert reports and discovery requirements.

As of February 2022, there are approximately 90 active cases subject to these orders which are being reviewed and evaluated.

Claims have also been filed against Ethicon and Johnson & Johnson alleging personal injuries arising from the PROCEED ® Mesh and PROCEED ® Ventral Patch hernia mesh products.

As of January 2023, there are approximately 208 active cases subject to these orders which are being reviewed and evaluated.

Claims have also been filed against Ethicon and the Company alleging personal injuries arising from the PROCEED Mesh and PROCEED Ventral Patch hernia mesh products.

In March 2019, the New Jersey Supreme Court entered an order consolidating these cases pending in New Jersey as an MCL in Atlantic County Superior Court.

Additional cases have been filed in various federal and state courts in the United States, and in jurisdictions outside the United States.

Discovery is underway in the MCL proceedings.

Ethicon and Johnson & Johnson also have been subject to claims for personal injuries arising from the PROLENE™ Polypropylene Hernia System.

Ethicon and the Company also have been subject to claims for personal injuries arising from the PROLENE Polypropylene Hernia System.

In January 2020, the New Jersey Supreme Court created an MCL in Atlantic County Superior Court to handle such cases.

Cases involving this product have also been filed in other federal and state courts in the United States.

In October 2022, an agreement in principle, subject to various conditions, was reached to settle the majority of the pending cases involving Proceed, Proceed Ventral Patch, Prolene Hernia System and related multi-layered mesh products.

All litigation activities in the two New Jersey MCLs are stayed pending resolution of the proposed settlement.

Future cases that are filed in the New Jersey MCLs will be subject to docket control orders requiring early expert reports and discovery requirements.

The Company has established accruals with respect to product liability litigation associated with ETHICON PHYSIOMESH Flexible Composite Mesh, PROCEED Mesh and PROCEED Ventral Patch, and PROLENE Polypropylene Hernia System products.

Claims for personal injury have been made against Janssen Pharmaceuticals, Inc.

and Johnson & Johnson arising out of the use of RISPERDAL ® , and related compounds, indicated for the treatment of schizophrenia, acute manic or mixed episodes associated with bipolar I disorder and irritability associated with autism.

and the Company arising out of the use of RISPERDAL, and related compounds, indicated for the treatment of schizophrenia, acute manic or mixed episodes associated with bipolar I disorder and irritability associated with autism.

Lawsuits primarily have been filed in state courts in Pennsylvania, California, and Missouri.

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Claims for personal injury arising out of the use of XARELTO, an oral anticoagulant, have been made against Janssen Pharmaceuticals, Inc.

Johnson & Johnson;

and JPI’s collaboration partner for XARELTO, Bayer Healthcare AG, and certain of its affiliates.

Cases filed in federal courts in the United States have been organized as a multi-district litigation in the United States District Court for the Eastern District of Louisiana.

In addition, cases have been filed in state courts across the United States.

In addition, cases were filed in state courts across the United States.

Many of these cases were consolidated into a state mass tort litigation in Philadelphia, Pennsylvania and in a coordinated proceeding in Los Angeles, California.

Class action lawsuits also have been filed in Canada.

In March 2019, JPI and Johnson & Johnson announced an agreement in principle to settle the XARELTO ® cases in the United States;

In March 2019, JPI and the Company announced an agreement in principle to settle the XARELTO cases in the United States;

the settlement agreement was executed in May 2019, the settlement became final in December 2019, and the settlement was funded in January 2020.

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A significant number of personal injury claims alleging that talc causes cancer were made against Johnson & Johnson Consumer Inc.

and Johnson & Johnson arising out of the use of body powders containing talc, primarily JOHNSON’S ® Baby Powder.

The number of these personal injury lawsuits, filed in state and federal courts in the United States as well as outside of the United States, continued to increase through fiscal year 2021.

and the Company arising out of the use of body powders containing talc, primarily JOHNSON’S Baby Powder.

The number of these personal injury lawsuits, filed in state and federal courts in the United States as well as outside of the United States, continued to increase.

In talc cases that previously have gone to trial, the Company has obtained a number of defense verdicts, but there also have been verdicts against the Company, many of which have been reversed on appeal.

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App.), reducing the overall award to $ 2.1 billion.

An application for transfer of the case to the Missouri Supreme Court was subsequently denied and in June 2021, a petition for certiorari, seeking a review of the Ingham decision by the United States Supreme Court, was denied.

An application for transfer of the case to the Missouri Supreme Court

was subsequently denied and in June 2021, a petition for certiorari, seeking a review of the Ingham decision by the United States Supreme Court, was denied.

In June 2021, the Company paid the award, which, including interest, totaled approximately $ 2.5 billion.

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In October 2021, notwithstanding the Company’s confidence in the safety of its talc products, the Debtor filed a voluntary petition with the United States Bankruptcy Court for the Western District of North Carolina, Charlotte Division, seeking relief under chapter 11 of the Bankruptcy Code (the LTL Bankruptcy Case).

As a result of the LTL Bankruptcy Case, the Court entered a temporary restraining order staying all litigation against LTL and Old JJCI.

On November 15, 2021, the North

Carolina Bankruptcy Court confirmed the scope of the stay, issuing a Preliminary Injunction (PI) prohibiting and enjoining the commencement and prosecution of talc-related claims against LTL, Old JJCI, New JJCI, Johnson & Johnson, other of their corporate affiliates, identified retailers, insurance companies, and certain other parties.

The LTL Bankruptcy Case was transferred to the United States Bankruptcy Court for the District of New Jersey in November 2021, and that court subsequently extended the PI through the end of February 2022.

Claimants have filed a motion to dismiss the LTL Bankruptcy Case.

The court commenced a hearing on February 14, 2022 regarding the motion to dismiss and on whether the PI should be extended.

While the PI effectively stays all of the Company’s talc-related personal injury litigation, LTL has agreed to lift the automatic stay on a small number of appeals where appeal bonds have been filed.

The Company has agreed to provide funding to LTL for the payment of amounts the Bankruptcy Court determines are owed by LTL through the establishment of a $ 2 billion trust in furtherance of this purpose.

As a result of the LTL Bankruptcy Case, the North Carolina Bankruptcy Court entered a temporary restraining order staying all litigation against LTL and Old JJCI.

On November 15, 2021, the North Carolina Bankruptcy Court confirmed the scope of the stay, issuing a Preliminary Injunction (PI) prohibiting and enjoining the commencement and prosecution of talc-related claims against LTL, Old JJCI, New JJCI, the Company, other of their corporate affiliates, identified retailers, insurance companies, and certain other parties (the Protected Parties).

The LTL Bankruptcy Case was transferred to the United States Bankruptcy Court for the District of New Jersey in November 2021, and that court extended the PI through the end of February 2022.

Claimants filed motions to dismiss the LTL Bankruptcy Case and, following a multiple day hearing, the New Jersey Bankruptcy Court denied those motions by order issued in March 2022.

The New Jersey Bankruptcy Court simultaneously issued another order extending the stay as to the Protected Parties.

The claimants subsequently filed notices of appeal as to the denial of the motions to dismiss and the extension of the stay.

In May 2022, the Third Circuit Court of Appeals granted the petitions to appeal.

The briefing and oral argument on the appeal were completed in September 2022.

On January 30, 2023, the Third Circuit reversed the Bankruptcy Court’s ruling and remanded to the Bankruptcy Court to dismiss the LTL bankruptcy.

LTL filed a petition for rehearing on the decision.

While the New Jersey Bankruptcy Court’s order effectively stays all of the Company’s talc-related personal injury litigation, LTL has agreed to lift the stay on a small number of appeals where appeal bonds have been filed.

The Company has agreed to provide funding to LTL for the payment of amounts the New Jersey Bankruptcy Court determines are owed by LTL and the establishment of a $ 2 billion trust in furtherance of this purpose.

The Company has established a reserve for approximately $ 2 billion in connection with the aforementioned trust.

Subsequent to the fiscal third quarter of 2021, the Company de-consolidated LTL, which is a related party, as a result of the bankruptcy filing.

After and as a result of the filing of the LTL Bankruptcy Case, the Company de-consolidated LTL, which is a related party.

The impact of the de-consolidation is not material to the Company.

The parties have not yet been able to reach a resolution of all matters related to talc, and while certain amounts under various scenarios have recently been referred to in testimony as part of the LTL bankruptcy proceedings, the Company is unable to estimate the possible loss or range of loss beyond the amount accrued.

The parties have not yet reached a resolution of all talc matters in the LTL Bankruptcy Case, and the Company is unable to estimate the possible loss or range of loss beyond the amount accrued.

A class action advancing claims relating to industrial talc was filed against the Company and others in New Jersey state court in May 2022 (the Edley Class Action).

The Edley Class Action asserts, among other things, that the Company fraudulently defended past asbestos personal injury lawsuits arising from exposure to industrial talc mined, milled, and manufactured before January 6, 1989 by the Company’s then wholly owned subsidiary, Windsor Minerals, Inc., which is currently a debtor in the Imerys Bankruptcy described hereafter.

The Company removed the Edley Class Action to federal court in the District of New Jersey.

In July 2022, Imerys filed a motion in the Imerys Bankruptcy to stay the Edley Class Action, which was denied in August 2022.

In October 2022, the Company filed motions to dismiss and to deny certification of a class to pursue the Edley Class Action in the New Jersey District Court.

In February 2019, the Company’s talc supplier, Imerys Talc America, Inc.

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(collectively, Imerys) filed a voluntary petition under chapter 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (Imerys Bankruptcy).

The Imerys Bankruptcy relates to Imerys’s potential liability for personal injury from exposure to talcum powder sold by Imerys (Talc Claims).

The Imerys Bankruptcy relates to Imerys’s potential liability for personal injury from exposure to talcum powder sold by Imerys.

In its bankruptcy, Imerys alleges it has claims against the Company for indemnification and rights to joint insurance proceeds.

In May 2020, Imerys, its parent Imerys S.A., the Tort Claimants’ Committee (TCC), and the Future Claimants’ Representative (FCR) (collectively, the Plan Proponents) filed their Plan of Reorganization (the Plan) and the Disclosure Statement related thereto.

The Plan Proponents have since filed numerous amendments to the Plan and Disclosure Statement.

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The Company challenged certain improprieties with respect to portions of the vote and sought to disqualify those votes.

In October 2021, the Bankruptcy Court issued a ruling deeming thousands of votes as withdrawn as improperly voted.

In October 2021, the Bankruptcy Court issued a ruling deeming thousands of votes as withdrawn.

In October 2021, Imerys cancelled the confirmation hearing on the Plan.

Imerys, the TCC, the FCR, and certain of Imerys’s insurers (the Mediation Parties) have since agreed to engage in mediation.

Imerys, the TCC, the FCR, certain of Imerys’s insurers, and certain parties in the Cyprus Mines chapter 11 case (described below) (collectively the Mediation Parties) agreed to engage in mediation.

The most recent term of the mediation ended on December 31, 2022.

In July 2021, Imerys commenced an adversary proceeding against the Company in the Imerys Bankruptcy (the Imerys Adversary Proceeding).

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In October 2021, the Company filed a Notice of Bankruptcy Filing and Stay of Proceedings clarifying that the automatic stay arising upon the filing of the LTL Bankruptcy Case should apply to the Imerys Adversary Proceeding.

In June 2020, Cyprus Mines Corporation and its parent (together, Cyprus), which had owned certain Imerys talc mines, filed an adversary proceeding against the Company and Imerys in the Imerys Bankruptcy seeking a declaration of indemnity rights under certain contractual agreements (the Cyprus adversary proceeding).

In June 2020, Cyprus Mines Corporation and its parent, Cyprus Amax Minerals Company (CAMC) (together, Cyprus), which had owned certain Imerys talc mines, filed an adversary proceeding against the Company and Imerys in the Imerys Bankruptcy seeking a declaration of indemnity rights under certain contractual agreements (the Cyprus Adversary Proceeding).

The Company denies such indemnification is owed, and filed a motion to dismiss the adversary complaint.

In February 2021, Cyprus filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code and filed its Disclosure Statement and Plan.

The Plan contemplates a settlement with Imerys and talc claimants where Cyprus would make a monetary contribution to a trust established under the Imerys Plan in exchange for an injunction against Talc Claims asserted against it.

In February 2021, Cyprus filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code and filed its Disclosure Statement and Plan (the Cyprus Plan).

The Cyprus Plan contemplates a settlement with Imerys and talc claimants where Cyprus would make a monetary contribution to a trust established under the Imerys Plan in exchange for an injunction against talc claims asserted against it and certain protected parties.

Cyprus has not yet sought approval of its Disclosure Statement and Plan.

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In June 2022, Cyprus commenced an Adversary Proceeding in its chapter 11 case seeking an order enforcing the automatic stay by enjoining parties from commencing or continuing “talc-related claims” against CAMC.

In June 2022, the court entered a preliminary injunction order enjoining claimants from pursuing talc-related claims against CAMC through January 2023.

In February 2021, several of the Company’s insurers involved in coverage litigation in New Jersey State Court (the Coverage Action) filed a motion in the Imerys Bankruptcy Court proceeding seeking a determination that the automatic stay does not apply to the Coverage Action and, in the alternative, seeking relief from the automatic stay to allow them to continue to litigate their claims in the Coverage Action.

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In October 2021, LTL filed a Notice of Bankruptcy Filing and Stay of Proceedings clarifying that the automatic stay arising upon the filing of the LTL Bankruptcy Case should apply to the Coverage Action.

In February 2018, a securities class action lawsuit was filed against Johnson & Johnson and certain named officers in the United States District Court for the District of New Jersey, alleging that Johnson & Johnson violated the federal securities laws by failing to disclose alleged asbestos contamination in body powders containing talc, primarily JOHNSON’S ® Baby Powder, and that purchasers of Johnson & Johnson’s shares suffered losses as a result.

In March 2022, the New Jersey Bankruptcy Court ruled that the LTL automatic stay applied to the Coverage Action.

In February 2018, a securities class action lawsuit was filed against the Company and certain named officers in the United States District Court for the District of New Jersey, alleging that the Company violated the federal securities laws by failing to disclose alleged asbestos contamination in body powders containing talc, primarily JOHNSON’S Baby Powder, and that purchasers of the Company’s shares suffered losses as a result.

Plaintiff is seeking damages.

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In March 2020, the Company answered the complaint.

In April 2021, briefing on Plaintiffs’ motion for class certification was completed.

In April 2021, briefing on Plaintiff’s motion for class certification was completed.

In July 2021, the Company filed a notice of supplemental authority in opposition to Plaintiff’s motion for class certification, and Plaintiff filed a response.

In December 2021, the Company filed a motion to supplement the class certification record, and in January 2022, Plaintiff responded.

Discovery is ongoing.

In June 2019, a shareholder filed a complaint initiating a summary proceeding in New Jersey state court for a books and records inspection.

In August 2019, Johnson & Johnson responded to the books and records complaint and filed a cross motion to dismiss.

In September 2019, Plaintiff replied and the Court heard oral argument.

In February 2022, the Court granted Johnson & Johnson's cross motion to dismiss.

In October 2019, December 2019, and January 2020, four shareholders filed four separate derivative lawsuits against Johnson & Johnson as the nominal defendant and its current directors and certain officers as defendants in the United States District Court for the District of New Jersey, alleging a breach of fiduciary duties related to the alleged asbestos contamination in body powders containing talc, primarily JOHNSON’S ® Baby Powder, and that Johnson & Johnson has suffered damages as a result of those alleged breaches.

In February 2020, the four cases were consolidated into a single action under the caption In re Johnson & Johnson Talc Stockholder Derivative Litigation .

In July 2020, a report was delivered to the Company’s Board of Directors by independent counsel retained by the Board to investigate the allegations in the derivative lawsuits and in a series of shareholder letters that the Board received raising similar issues and demanding that suit be brought against certain Directors.

Four of the shareholders who sent demands are plaintiffs in th e In re Johnson & Johnson Talc Stockholder Derivative Litigation .

The independent counsel recommended that the Company reject the shareholder demands and take the steps that are necessary or appropriate to secure dismissal of the derivative lawsuits.

The Board unanimously adopted the recommendations of the independent counsel’s report.

In October 2020, the shareholders filed a consolidated complaint, and in January 2021, Johnson & Johnson moved to dismiss the consolidated complaint.

In March 2021, Plaintiffs filed a motion for discovery.

The Court temporarily terminated Johnson & Johnson’s motion to dismiss pending a decision on Plaintiff’s motion for discovery.

In November 2021, at the Court’s request, the parties submitted supplemental briefing on Plaintiff’s motion for discovery.

In January 2019, two ERISA class action lawsuits were filed by participants in the Johnson & Johnson Savings Plan against Johnson & Johnson, its Pension and Benefits Committee, and certain named officers in the United States District Court for the District of New Jersey, alleging that the defendants breached their fiduciary duties by offering Johnson & Johnson stock as a Johnson & Johnson Savings Plan investment option when it was imprudent to do so because of failures to disclose alleged asbestos contamination in body powders containing talc, primarily JOHNSON’S ® Baby Powder.

Plaintiffs are seeking damages and injunctive relief.

In September 2019, Defendants filed a motion to dismiss.

In April 2020, the Court granted Defendants’ motion but granted leave to amend.

In June 2020, Plaintiffs filed an amended complaint, and in July 2020, Defendants moved to dismiss the amended complaint.

As of October 2020, briefing on Defendants’ motion was complete.

In February 2021, the Court granted Defendants’ motion, and granted Plaintiffs leave to amend.

In April 2021, Plaintiffs informed the Court that they did not intend to file an amended complaint, and the Court dismissed the case with prejudice.

In May 2021, Plaintiffs filed a notice of appeal with the Third Circuit.

In July 2021, Plaintiffs filed their opening brief in the Third Circuit and in September 2021, Defendants filed their response brief, and in October 2021, Plaintiffs filed their reply brief.

In January 2022, the Third Circuit heard oral argument.

In March 2022, LTL asked the New Jersey Bankruptcy Court to stay the securities class action.

In April 2022, Defendants filed a second motion to supplement the class certification record.

In May 2022, the New Jersey Bankruptcy Court entered an order staying the securities class action.

Plaintiff has appealed the Bankruptcy Court’s order.

A lawsuit was brought against the Company in the Superior Court of California for the County of San Diego alleging violations of California’s Consumer Legal Remedies Act (CLRA) relating to JOHNSON’S Baby Powder.

In that lawsuit, the plaintiffs allege that Johnson & Johnson violated the CLRA by failing to provide required Proposition 65 warnings.

In that lawsuit, the plaintiffs allege that the Company violated the CLRA by failing to provide required Proposition 65 warnings.

In July 2019, the Company filed a notice of removal to the United States District Court for the Southern District of California and plaintiffs filed a second amended complaint shortly thereafter.

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A bankruptcy stay was imposed in December 2021, and the Court held the reply deadline in abeyance.

In addition, the Company has received inquiries, subpoenas, and requests to produce documents regarding talc matters, including from Senator Murray, a member of the Senate Committee on Health, Education, Labor and Pensions, the Department of Justice, the Subcommittee on Economic and Consumer Policy of the House Committee on Oversight and Reform, the Senate

Committee on the Judiciary, the House Committee on Oversight and Reform, and individual Members of Congress.

In February 2022, the Bankruptcy Court issued an order extending the stay.

The appeal continues to be held in abeyance, with the Company being required to file periodic status updates.

In addition, the Company has received inquiries, subpoenas, and requests to produce documents regarding talc matters and the LTL Bankruptcy Case from various governmental authorities.

The Company has produced documents and responded to inquiries, and will continue to cooperate with government inquiries.

Claims for personal injury have been made against a number of Johnson & Johnson companies, including Janssen Pharmaceuticals, Inc.

and Johnson & Johnson, arising out of the use of INVOKANA ® , a prescription medication indicated to improve glycemic control in adults with Type 2 diabetes.

and the Company, arising out of the use of INVOKANA, a prescription medication indicated to improve glycemic control in adults with Type 2 diabetes.

In December 2016, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the United States District Court for the District of New Jersey.

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Claims for personal injury have been made against a number of Johnson & Johnson companies, including Janssen Pharmaceuticals, Inc.

and Johnson & Johnson, arising out of the use of ELMIRON ® , a prescription medication indicated for the relief of bladder pain or discomfort associated with interstitial cystitis.

and the Company, arising out of the use of ELMIRON, a prescription medication indicated for the relief of bladder pain or discomfort associated with interstitial cystitis.

These lawsuits, which allege that ELMIRON contributes to the development of permanent retinal injury and vision loss, have been filed in both state and federal courts across the United States.

In December 2020, lawsuits filed in federal courts in the United States, including putative class action cases seeking medical monitoring, were organized as a multi-district litigation in the United States District Court for the District of New Jersey.

Cases also have been filed in various state courts.

In addition, cases have been filed in various state courts of New Jersey, which have been coordinated in a multi-county litigation in Bergen County, as well as the Court of Common Pleas in Philadelphia, which have been coordinated and granted mass tort designation.

In addition, three class action lawsuits have been filed in Canada.

Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases.

The Company has established accruals for defense costs associated with ELMIRON ® related product liability litigation.

The Company has established accruals for defense and indemnity costs associated with ELMIRON related product liability litigation.

Claims for personal injury have been made against Johnson and Johnson Consumer Inc.

(JJCI), arising out of the use of TYLENOL, an over-the-counter pain medication, alleging that prenatal exposure to acetaminophen is associated with the development of autism spectrum disorder and/or attention-deficit/hyperactivity disorder.

In October 2022, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the United States District Court for the Southern District of New York.

In addition, lawsuits have been filed in Canada.

Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases.

The Company has established accruals for defense costs associated with TYLENOL related product liability litigation.

INTELLECTUAL PROPERTY

Certain subsidiaries of Johnson & Johnson are subject, from time to time, to legal proceedings and claims related to patent, trademark and other intellectual property matters arising out of their businesses.

Certain subsidiaries of the Company are subject, from time to time, to legal proceedings and claims related to patent, trademark and other intellectual property matters arising out of their businesses.

Many of these matters involve challenges to the coverage and/or validity of the patents on various products and allegations that certain of the Company’s products infringe the patents of third parties.

Although these subsidiaries believe that they have substantial defenses to these challenges and allegations with respect to all significant patents, there can be no assurance as to the outcome of these matters.

A loss in any of these cases could adversely affect the ability of these subsidiaries to sell their products, result in loss of sales due to loss of market exclusivity, require the payment of past damages and future royalties, and may result in a non-cash impairment charge for any associated intangible asset.

A loss in any of these cases could adversely affect the ability of these subsidiaries to sell their products, result in loss of sales due to loss of market exclusivity,

require the payment of past damages and future royalties, and may result in a non-cash impairment charge for any associated intangible asset.

Significant matters are described below.

Medical Devices

In December 2016, Dr.

Ford Albritton sued Acclarent, Inc.

(Acclarent) in United States District Court for the Northern District of Texas alleging that Acclarent’s RELIEVA ® Spin and RELIEVEA SpinPlus ® products infringe U.S.

Albritton also alleges breach of contract, fraud and that he is the true owner of Acclarent’s U.S.

Trial began in October 2021, and shortly thereafter, the parties reached an agreement to settle the case.

Plaintiff’s motion to dismiss with prejudice was filed in October 2021.

The case was dismissed with prejudice in November 2021.

In August 2018, Intuitive Surgical, Inc.

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8,142,447 (’447);

6,800,056 (’056);

8,142,447 (’447);

8,620,473 (’473);

8,801,601 (’601);

and 9,452,276 (’276) based on Auris’ MONARCH Platform.

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Patent and Trademark Office (USPTO) regarding the ’056, ’447, ’276 and ’906 patents.

Intuitive subsequently dropped the ’200, ’473 and ’701 patents from the suit.

In December 2019, the USPTO instituted review of the ’601 patent and denied review of the ’056 patent.

In December 2019, the USPTO denied review of the ’056 patent.

In February and March 2020, the USPTO instituted review of the ’447, and ’906 patents and denied review of the ’276 patent.

In December 2020, the USPTO declared all of the challenged claims in the ’601 patent to be invalid.

Intuitive has appealed that decision.

In March 2021, the USPTO ruled that the challenged claims of the ’447 and ’906 patents are not invalid.

Auris has appealed that decision.

Auris appealed, and in April 2022, the United States Court of Appeals for the Federal Circuit vacated the decision that the ’447 patent was not invalid and remanded the decision to the USPTO for further review.

In May 2022, the United States Court of Appeals for the Federal Circuit confirmed the ruling that claim 53 of the ’906 patent was not invalid, vacated the decision that the remaining claims of the ’906 patent were not invalid and remanded the decision to the USPTO for further review.

Auris filed a request for reexamination of the ’276 patent in November 2021, and in January 2022, the USPTO granted the reexamination request.

Trial is scheduled to begin in January 2023.

Trial is scheduled to begin in September 2023.

In August 2019, RSB Spine LLC (RSB Spine) filed a patent infringement suit against DePuy Synthes, Inc.

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and DePuy Synthes Products, Inc.

In the suit, RSB Spine alleges willful infringement of United States Patent Nos.

In the suit, RSB Spine alleges willful infringement of U.S.

6,984,234 (’234) and 9,713,537 (’537) by one or more of the following products:

ZERO-P-VA Spacer, ZERO-P Spacer, ZERO-P NATURAL Plate, SYNFIX LR Spacer and SYNFIX Evolution System.

RSB Spine seeks

monetary damages and injunctive relief.

RSB Spine seeks monetary damages and injunctive relief.

In November 2019, the suit was consolidated for pre-trial purposes with other patent infringement suits brought by RSB Spine in the United States District Court for the District of Delaware against Life Spine, Inc., Medacta USA, Inc., and Precision Spine, Inc.

A stay that had been entered pending Inter Partes Review at the U.S.

Patent & Trademark Office has been lifted, and trial is scheduled to begin in December 2022.

In March 2020, Osteoplastics, LLC filed a patent infringement suit against DePuy Synthes, Inc., DePuy Synthes Products, Inc., Medical Device Business Services, Inc., and Synthes, Inc.

(collectively, DePuy Synthes) in the United States District Court for the District of Delaware.

In the suit, Osteoplastics alleges willful infringement of U.S.

and 9,275,191 based on the PROPLAN CMF ® Virtual Surgical Planning Services and the TruMatch ® CMF Personalize Solutions.

In April 2020, Osteoplastics filed an amended complaint to substitute U.S.

9,292,920 for U.S.

Osteoplastics seeks monetary damages and injunctive relief.

In June 2020, DePuy Synthes filed a motion to dismiss the complaint.

In October 2020, the Court dismissed Medical Device Business Services, Inc.

from the case but otherwise denied the motion.

In June 2021, Osteoplastics admitted that the PROPLAN CMF ® Virtual Surgical Planning Services do not infringe any asserted patents.

Trial was scheduled for October 2022.

In October 2021, the case was settled and dismissed.

In June 2022, DePuy filed potentially dispositive summary judgment motions that the ’234 patent is invalid as anticipated and the ’537 patent is not infringed.

In November 2022, the Court granted DePuy’s summary judgment motion that the ’234 patent is invalid as anticipated and denied DePuy’s motion that the ’537 patent is not infringed.

In December 2022, the Court conducted a jury trial on the ’537 patent where the jury found that the ’537 patent was not literally infringed, but that DePuy infringed under the doctrine of equivalents (DOE).

The jury awarded RSB $12 million in damages subject to post-trial motions and appeals.

In October 2020, Rasmussen Instruments, LLC (Rasmussen) filed a patent infringement suit against DePuy Synthes Products, Inc., DePuy Synthes Sales, Inc.

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Rasmussen seeks treble damages for willful infringement.

Trial is scheduled for February 2022.

Trial concluded in March 2022, with the jury returning a verdict in favor of Rasmussen, finding willful infringement of the ’180 patent, and awarding damages in the amount of $ 20 million.

DePuy challenged the verdict in its post-trial motions.

In July 2022, a hearing was held on the post-trial motions.

Pharmaceutical

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The following summarizes lawsuits the Company’s subsidiaries have brought against generic companies that have filed ANDAs with the U.S.

FDA or undertaken similar regulatory processes outside of the United States, seeking to market generic forms of products sold by various subsidiaries of Johnson & Johnson prior to expiration of the applicable patents covering those products.

FDA or undertaken similar regulatory processes outside of the United States, seeking to market generic forms of products sold by various subsidiaries of the Company prior to expiration of the applicable patents covering those products.

These ANDAs typically include allegations of non-infringement and invalidity of the applicable patents.

The Inter Partes Review (IPR) process with the USPTO, created under the 2011 America Invents Act, is also being used at times by generic companies in conjunction with ANDAs and lawsuits, to challenge the applicable patents.

In the event the Company’s subsidiaries are not successful in an action, or the automatic statutory stay of the ANDAs expires before the United States District Court rulings are obtained, the generic companies involved would have the ability, upon approval of the U.S.

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In addition, from time to time, the Company’s subsidiaries may settle these types of actions and such settlements can involve the introduction of generic versions of the products at issue to the market prior to the expiration of the relevant patents.

Beginning in January 2019, Janssen Inc.

and Janssen Oncology, Inc.

Beginning in January 2019, Janssen Inc., Janssen Oncology, Inc., and BTG International Ltd.

(collectively, Janssen) initiated Statements of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations in Canada against Apotex Inc.

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In February 2021, Janssen appealed the decision.

In March 2021, Janssen Pharmaceuticals, Inc.

(JPI) and Bayer Pharma AG and Bayer AG (collectively, Bayer) filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Lupin Limited and Lupin Pharmaceuticals, Inc.

which filed an ANDA seeking approval to market a generic version of XARELTO ® before expiration of U.S.

The appeal hearing took place in September 2022.

In November 2022, Janssen's appeal was dismissed.

In April 2021, July 2021 and April 2022, respectively, Apotex, DRL and Pharmascience initiated Statements of Claim under Section 8 of the Patented Medicines (Notice of Compliance) Regulations against Janssen seeking damages in respect of those parties generic Zytiga tablets.

Trials against Apotex and DRL are scheduled for June 2023.

A trial date for the Pharmascience action has not been set.

Beginning in March 2021, Janssen Pharmaceuticals, Inc.

(JPI) and Bayer Pharma AG and Bayer AG (collectively, Bayer) filed patent infringement lawsuits in the United States District Court for the District of Delaware against a number of generic companies who filed ANDAs seeking approval to market generic versions of XARELTO (2.5 mg) before expiration of U.S.

10,828,310 (’310).

In May 2021, JPI and Bayer filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Dr.

The following generic drug companies are named defendants:

Reddy’s Laboratories, Inc.

Reddy’s Laboratories, Ltd.;

which filed an ANDA seeking approval to market a generic version of XARELTO ® before expiration of the ’310 patent.

In July 2021, JPI and Bayer filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Taro Pharmaceutical Industries Ltd.

Lupin Limited and Lupin Pharmaceuticals, Inc.;

Taro Pharmaceutical Industries Ltd.

and Taro Pharmaceuticals U.S.A., Inc.;

(collectively, Taro) which filed an ANDA seeking approval to market a generic version of XARELTO ® before expiration of the ’310 patent.

In July 2021, JPI and Bayer filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Teva Pharmaceuticals USA, Inc.

and Teva Pharmaceutical Industries Ltd.

which filed an ANDA seeking approval to market a generic version of XARELTO ® before expiration of the ’310 patent.

In August 2021, the court entered a joint stipulation dismissing Teva Pharmaceutical Industries Ltd.

and Teva Pharmaceuticals USA, Inc.

In October 2021, the court consolidated the Delaware lawsuits for all purposes, including trial.

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and Mylan Inc.

which filed an ANDA seeking approval to market a generic version of XARELTO ® before expiration of the ’310 patent.

(collectively, Mylan) which filed an ANDA seeking approval to market a generic version of XARELTO (2.5 mg) before expiration of the ’310 patent.

In August 2021, JPI and Bayer filed a motion before the United States Judicial Panel on Multidistrict Litigation (the MDL panel) to transfer this lawsuit to the United States District Court for the District of Delaware for coordinated and consolidated pretrial proceedings.

In December 2021, the MDL panel granted the motion.

No trial date has been set in this lawsuit.

In each of these lawsuits, JPI and Bayer are seeking an order enjoining defendants from marketing their generic version of XARELTO ® before the expiration of the ’310 patent.

INVOKANA ® /INVOKAMET ® /INVOKAMET XR ®

In October 2019, Janssen Pharmaceuticals, Inc., Janssen Research & Development, LLC, Cilag GmbH International and Janssen Pharmaceutica NV (collectively, Janssen) and Mitsubishi Tanabe Pharma Corporation (MTPC) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Dr.

Reddy’s Laboratories, Inc.

Reddy’s Laboratories Ltd (DRL), who filed an ANDA seeking approval to market a generic version of INVOKAMET ® before expiration of MTPC’s United States Patent No.

7,943,788 (’788) relating to INVOKAMET ® .

In January 2021, Janssen and MTPC filed a patent infringement lawsuit in the United States District Court for the District of New Jersey against Macleods Pharmaceuticals, Ltd.

and Macleods Pharma USA, Inc.

(Macleods), which filed an ANDA seeking approval to market a generic version of INVOKAMET XR ® before expiration of MTPC’s United States Patent Nos.

7,943,582 (’582) and/or 8,513,202 (’202) relating to INVOKAMET XR ® .

In each of these U.S.

lawsuits, Janssen and MTPC are seeking an order enjoining the defendant from marketing their generic versions of INVOKAMET ® and/or, INVOKAMET XR ® before the expiration of the relevant patents.

In October 2020, Janssen Inc., Janssen Pharmaceutica NV and MTPC initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Sandoz Canada Inc.

(Sandoz) in Canada in response to Sandoz’s filing of an ANDS seeking approval to market a generic version of INVOKANA ® before the expiration of the Canadian Patent Nos.

2,799,204, 2,534,024 and 2,671,357.

Janssen Inc., Janssen Pharmaceutica NV and MTPC are seeking an order enjoining Sandoz from marketing its generic version of INVOKANA ® before the expiration of the relevant patents.

The trial is scheduled to begin in August 2022.

In August 2022, after receiving a second notice letter from Mylan regarding the same ANDA, JPI and Bayer filed a second patent infringement lawsuit in the United States District Court for the Northern District of West Virginia against Mylan.

In September 2022, Mylan moved to dismiss the second lawsuit.

In September 2022, the MDL panel transferred the second lawsuit to the District of Delaware.

No trial date has been set for these two lawsuits.

In October 2022, Mylan voluntarily withdrew its motion to dismiss.

In each of these lawsuits, JPI and Bayer are seeking an order enjoining defendants from marketing their generic version of XARELTO (2.5 mg) before the expiration of the ’310 patent.

In January 2023, the court issued an order staying the lawsuits until after a final written decision is issued in the Inter Partes Review proceedings on the ’310 patent.

In February 2022, Mylan Pharmaceuticals Inc.

filed a Petition for Inter Partes Review (IPR) with the United States Patent and Trademark Office (USPTO), seeking to invalidate the ’310 patent.

In August 2022, the Patent Trial and Appeal Board (PTAB) issued a decision instituting IPR.

In September 2022, InvaGen Pharmaceuticals, Inc.

filed a Petition for IPR with the USPTO seeking to invalidate the ’310 patent.

Also in September 2022, Teva Pharmaceuticals USA, Inc.

filed a Petition for IPR with the USPTO seeking to invalidate the ’310 patent.

In October 2022, the PTAB issued decisions instituting IPR in both proceedings and joining them with the earlier IPR proceeding filed by Mylan Pharmaceuticals Inc.

In September 2022, JPI, Bayer, and Bayer Intellectual Property GmbH (BIP) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against USV Private Limited (USV), who filed an ANDA seeking approval to market generic versions of XARELTO (2.5 mg, 10 mg, 15 mg, and 20 mg) before the expiration of the '310 patent and U.S.

9,539,218 (’218).

JPI, Bayer, and BIP are seeking an order enjoining USV from marketing its generic version of XARELTO (2.5 mg) before the expiration of the ’310 patent, and its generic versions of XARELTO (10 mg, 15 mg, and 20 mg) before the expiration of the ’218 patent.

In November 2022, the MDL panel transferred this lawsuit to the United States District Court for the District of Delaware.

In September 2022, JPI, Bayer AG, and BIP initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Mankind Pharma Limited (Mankind), who filed an ANDA seeking approval to market generic versions of XARELTO (10 mg, 15 mg, and 20 mg) before the expiration of the ’218 patent.

JPI, Bayer AG, and BIP are seeking an order enjoining Mankind from marketing its generic versions of XARELTO before the expiration of the ’218 patent.

In November 2022, JPI, Bayer, and BIP initiated a patent infringement lawsuit in the United States District Court for the District of Delaware against Epic Pharma, LLC (Epic), who filed an ANDA seeking approval to market generic versions of XARELTO (2.5 mg, 10 mg, 15 mg, and 20 mg) before the expiration of the ’310 patent and the ’218 patent.

JPI, Bayer, and BIP are seeking an order enjoining Epic from marketing its generic version of XARELTO (2.5 mg) before the expiration of the ’310 patent, and its generic versions of XARELTO (10 mg, 15 mg, and 20 mg) before the expiration of the ’218 patent.

In December 2022, JPI and Bayer initiated a patent infringement lawsuit in the United States District Court for the District of Delaware against Apotex Inc.

and Apotex Corp.

(collectively, Apotex), who filed an ANDA seeking approval to market generic versions of XARELTO (2.5 mg) before the expiration of the ’310 patent.

JPI and Bayer are seeking an order enjoining Apotex from marketing its generic version of XARELTO (2.5 mg) before the expiration of the ’310 patent.

In May 2020, Janssen Inc.

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2,659,770 (’770).

Trial is ongoing.

Sandoz stipulated to infringement of the ’770 patent.

Trial against Sandoz on the issue of validity concluded in February 2022, and in May 2022, the Court issued a decision in favor of Janssen and Actelion.

In June 2022, Sandoz appealed the decision.

In May 2020, Janssen and Actelion initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Apotex Inc.

(Apotex) in Canada in response to Apotex’s filing of an ANDS seeking approval to market a generic version of OPSUMIT 10 mg, before the expiration of the ’770 patent.

Trial is scheduled to begin in February 2022.

In July 2020, Janssen and Actelion initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against JAMP Pharma Corporation (JAMP) in Canada in response to JAMP’s filing of an ANDS seeking approval to market a generic version of OPSUMIT ® 10 mg before the expiration of the ’770 patent and Canadian Patent No.

2,621,273 (’273).

Trial is scheduled to begin in April 2022.

Apotex stipulated to validity of the ’770 patent.

Trial against Apotex on the issue of infringement concluded in March 2022, and in May 2022, the Court issued a decision in favor of Janssen and Actelion.

In June 2022, Apotex appealed the decision.

In January 2023, Janssen and Actelion initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Generic Medical Partners Inc.

(GMP) in Canada in response to GMP’s filing of an ANDS seeking approval to market a generic version of OPSUMIT 10 mg, before the expiration of Canadian Patent Nos.

2,659,770 and 2,621,273.

In each of these Canadian actions, Janssen and Actelion are seeking an order enjoining the defendants from marketing their generic versions of OPSUMIT before the expiration of the relevant patents.

In January 2023, Actelion Pharmaceuticals Ltd and Actelion Pharmaceuticals US, Inc.

(collectively, Actelion) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Sun Pharmaceutical Industries Limited and Sun Pharmaceutical Industries, Inc.

(collectively, Sun) who filed an ANDA seeking approval to market a generic version of OPSUMIT before the expiration of U.S.

7,094,781 (’781) and 10,946,015 (’015).

Actelion is seeking an order enjoining Sun from marketing their generic versions of OPSUMIT before the expiration of the ’781 and ’015 patents.

INVEGA SUSTENNA

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(collectively, Janssen) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Teva Pharmaceuticals USA, Inc.

(Teva), which filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA ® before the expiration of United States Patent No.

(Teva), which filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA before the expiration of U.S.

9,439,906 (’906).

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Pursuant to an agreement by the parties, judgment in favor of Janssen was entered in December 2021.

Mylan has filed an appeal.

Mylan appealed.

In December 2019, Janssen initiated a patent infringement lawsuit in the United States District Courts for the Districts of New Jersey and Delaware against Pharmascience Inc., Mallinckrodt PLC and Specgx LLC (collectively, Pharmascience), which filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA before the expiration of the ’906 patent.

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(collectively, Tolmar), which filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA before the expiration of the ’906 patent.

A trial is scheduled to begin in October 2023.

In February 2022, Janssen initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Accord Healthcare, Inc., Accord Healthcare, Ltd.

and Intas Pharmaceuticals, Ltd.

(collectively, Accord), who filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA before the expiration of the ’906 patent.

In each of these U.S.

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Janssen subsequently discontinued the portion of the lawsuit relating to the ’629 patent.

In May 2020, the Canadian Federal Court issued a Public Judgment and Reasons declaring that Teva Canada’s generic version of INVEGA SUSTENNA ® , if approved, would infringe certain claims of the ’335 patent and that the claims of the ’335 patent are not invalid for obviousness.

In May 2020, the Canadian Federal Court issued a Public Judgment and Reasons declaring that Teva Canada’s generic version of INVEGA SUSTENNA, if approved, would infringe certain claims of the ’335 patent and that the claims of the ’335 patent are not invalid.

Teva Canada appealed.

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In January 2022, the Court issued a decision in favor of Janssen on the issue of infringement.

A trial on the issue of validity is scheduled to begin in July 2022.

Pharmascience filed an appeal.

In March 2022, Janssen Canada initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Pharmascience in response to Pharmascience’s filing of an ANDS seeking approval to market a generic version of an additional strength of INVEGA SUSTENNA before the expiration of the ’335 patent.

The action has been consolidated with the November 2020 action for trial, which took place in July 2022.

In August 2022, the Court issued a decision finding the claims of the’335 patent are not invalid.

Pharmascience appealed.

In January 2021, Janssen Canada initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Apotex Inc.

(Apotex) in response to Apotex’s filing of an ANDS seeking approval to market a generic version of INVEGA SUSTENNA ® before the expiration of the ’335 patent.

(Apotex) in response to Apotex’s filing of an ANDS (original ANDS) seeking approval to market a generic version of INVEGA SUSTENNA before the expiration of the ’335 patent.

A summary trial on the issue of infringement took place in December 2021.

In January 2022, the Court issued a decision in favor of Janssen on the issue of infringement.

Apotex has not contested validity.

Apotex appealed.

In June 2022, Janssen Canada initiated Statements of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Apotex in response to Apotex’s Notice of Allegation of invalidity with respect to the original ANDS and in response to Apotex’s filing of an ANDS seeking approval to market a generic version of an additional strength of INVEGA SUSTENNA before the expiration of the ’335 patent.

A trial is scheduled to begin in March 2024.

In each of these Canadian lawsuits, Janssen Canada is seeking an order enjoining the defendant from marketing a generic version of INVEGA SUSTENNA before the expiration of the relevant patents.

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In September 2020, Janssen Pharmaceuticals, Inc., Janssen Pharmaceutica NV, and Janssen Research & Development, LLC (collectively, Janssen) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Mylan Laboratories Limited, Mylan Pharmaceuticals Inc., and Mylan Institutional LLC (collectively, Mylan).

Mylan filed an ANDA seeking approval to market generic versions of INVEGA TRINZA ® (546 mg) before expiration of United States Patent No.

Mylan filed an ANDA seeking approval to market generic versions of INVEGA TRINZA (546 mg) before expiration of U.S.

10,143,693 (’693) relating to INVEGA TRINZA (546 mg).

Janssen is seeking an order enjoining Mylan from marketing a generic version of INVEGA TRINZA ® before the expiration of the ’693 patent.

Trial is scheduled to begin in October 2022.

In August 2021, Janssen initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Mylan.

Mylan filed an ANDA seeking approval to market generic versions of INVEGA TRINZA (819 mg) before expiration of the ’693 patent.

Janssen is seeking an order enjoining Mylan from marketing a generic version of INVEGA TRINZA ® (819 mg) before the expiration of the ’693 patent.

In October 2021, Janssen initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Mylan.

Mylan filed an ANDA seeking approval to market generic versions of INVEGA TRINZA (273 mg and 410 mg) before expiration of the ’693 patent.

Janssen is seeking an order enjoining Mylan from marketing a generic version of INVEGA TRINZA ® (273 mg and 410 mg) before the expiration of the ’693 patent.

In January 2022, the court consolidated the three cases into the case filed in September 2020.

In each of these consolidated cases, Janssen is seeking an order enjoining Mylan from marketing its generic versions of INVEGA TRINZA before expiration of the ’693 patent.

Trial was conducted in November and December 2022, and post-trial briefing is proceeding.

Closing arguments will be held in March 2023.

In March 2019, Pharmacyclics LLC (Pharmacyclics) and Janssen Biotech, Inc.

(JBI) filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Alvogen Pine Brook LLC and Natco Pharma Ltd.

(collectively, Alvogen), which filed an ANDA seeking approval to market generic versions of IMBRUVICA ® tablets, asserting infringement of United States Patent Nos.

(collectively, Alvogen), which filed an ANDA seeking approval to market generic versions of IMBRUVICA tablets, asserting infringement of U.S.

and 10,125,140.

In June 2019, Pharmacyclics and JBI amended their complaint against Alvogen to further allege infringement of United States Patent No.

Pharmacyclics and JBI are seeking an order enjoining the defendants from marketing generic versions of IMBRUVICA ® before the expiration of the relevant patents.

In June 2019, Pharmacyclics and JBI amended their complaint against Alvogen to further allege infringement of U.S.

Trial against Alvogen took place in October 2020.

In August 2021, the District Court issued a decision in favor of Pharmacyclics and Janssen finding the asserted claims against Alvogen to be infringed and not invalid.

Alvogen has appealed that decision.

In November 2022, the United States Court of Appeals for the Federal Circuit affirmed the District Court’s decision.

In September 2021, Pharmacyclics and Janssen Inc.

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(Natco) in response to Natco’s filing of two ANDSs seeking approval to market generic versions of IMBRUVICA capsules before the expiration of Canadian Patent Nos.

2,663,116 (’116);

2,928,721 (’721);

2,800,913 (’913);

3,007,787 (’787);

3,007,788 (’788);

2,875,986 (’986);

and 3,022,256 (’256).

The trial is scheduled to begin in July 2023.

Pharmacyclics and Janssen are seeking an order enjoining Natco from marketing its generic versions of IMBRUVICA ® before the expiration of the relevant patents.

In April 2020, Actelion Pharmaceuticals Ltd (Actelion) and Nippon Shinyaku Co., Ltd.

(Nippon Shinyaku) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Zydus Pharmaceuticals (USA), Inc.

and Zydus Worldwide DMCC (collectively, Zydus), who filed an ANDA seeking approval to market a generic version of UPTRAVI ® before expiration of Nippon Shinyaku’s United States Patent Nos.

In this lawsuit, Pharmacyclics and Janssen Canada are seeking an order enjoining Natco from marketing its generic version of IMBRUVICA before the expiration of the relevant patents.

Trial is scheduled to begin in July 2023.

In October 2022, Pharmacyclics and Janssen Canada initiated a second Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Natco in response to Natco’s filing of an ANDS seeking approval to market a generic version of IMBRUVICA capsules before the expiration of the ’116, ’721, ’913, ’787, and ’788 patents and Canadian Patent No.

In this lawsuit, Pharmacyclics and Janssen Canada are seeking an order enjoining Natco from marketing its generic version of IMBRUVICA capsules before the expiration of the relevant patents.

Trial in this second action is scheduled to begin in August 2024.

In February 2023, Pharmacyclics and Janssen Canada initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Sandoz Canada Inc.

(Sandoz) in response to Sandoz’s filing of an ANDS seeking approval to market a generic version of IMBRUVICA capsules before the expiration of the ’116, ’913, ’787, and ’788 patents.

Also in February 2023, Pharmacyclics and Janssen initiated a Statement of Claim under Section 8.2 of the Patented Medicines (Notice of Compliance) Regulations against Sandoz asserting the ’721 and ’256 patents, which are also listed in Health Canada’s Patent Register for IMBRUVICA.

In these lawsuits, Pharmacyclics and Janssen Canada are seeking an order enjoining Sandoz from marketing its generic version of IMBRUVICA capsules before the expiration of the relevant patents.

A trial date for these actions has not been set.

In November 2021, Janssen Products, L.P.

and Janssen Sciences Ireland Unlimited Company (collectively, Janssen) and Gilead Sciences, Inc.

and Gilead Sciences Ireland UC (collectively, Gilead) initiated a patent infringement lawsuit in the United States District Court for the District of Delaware against Lupin Limited, Lupin Pharmaceuticals, Inc., MSN Laboratories Private Ltd., MSN Life Sciences Private Ltd., and MSN Pharmaceuticals Inc.

(collectively, Lupin), which filed an ANDA seeking approval to market a generic version of SYMTUZA before the expiration of U.S.

10,039,718 (’718) and 10,786,518 (’518).

The trial is scheduled to begin in October 2023.

In October 2022, Janssen Products, L.P.

and Janssen Sciences Ireland Unlimited Company (collectively, Janssen) and Gilead Sciences, Inc.

and Gilead Sciences Ireland UC (collectively, Gilead) initiated a patent infringement lawsuit in the United States District Court for the District of Delaware against Apotex Inc.

and Apotex Corp.

(collectively, Apotex), which filed an ANDA seeking approval to market a generic version of SYMTUZA before the expiration of the ’718 and ’518 patents.

In each of these U.S.

lawsuits, Janssen is seeking an order enjoining the defendant from marketing a generic version of SYMTUZA before the expiration of the relevant patents.

In May 2022, Aragon Pharmaceuticals, Inc.

and Janssen Biotech, Inc.

(collectively, Janssen) and Sloan Kettering Institute for Cancer Research (SKI) initiated patent infringement lawsuits in United States District Court for the Districts of New Jersey and Delaware against Lupin Limited and Lupin Pharmaceuticals, Inc.

(collectively, Lupin), which filed an ANDA seeking approval to market a generic version of ERLEADA before the expiration of U.S.

9,481,663 (’663).

relating to UPTRAVI ® .

Actelion is the exclusive licensee of the ’302 patent.

In January 2022, Actelion, Nippon Shinyaku and Zydus entered into a confidential settlement agreement and the lawsuit was dismissed.

In August 2022, Janssen and SKI filed a first amended complaint against Lupin adding U.S.

9,884,054 (’054), 10,052,314 (’314), 10,702,508 (’508) and 10,849,888 (’888) to the suit.

Janssen and SKI are seeking an order enjoining Lupin from marketing its generic version of ERLEADA before the expiration of the ’663, ’054, ’314, ’508, and ’888 patents.

In August 2022, Janssen and SKI voluntarily dismissed the Delaware complaint.

The New Jersey action is proceeding.

In May 2022, Janssen and SKI initiated a patent infringement lawsuit in United States District Court for the District of New Jersey against Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA), Inc., and Zydus Lifesciences Limited (collectively, Zydus), which filed an ANDA seeking approval to market a generic version of ERLEADA before the expiration of the ’663, ’054, ’314, ’508, and ’888 patents.

Janssen and SKI are seeking an order enjoining Zydus from marketing its generic version of ERLEADA before the expiration of the ’663, ’054, ’314, ’508, and ’888 patents.

In May 2022, Janssen, The Regents of the University of California (UC), and SKI initiated patent infringement lawsuits in United States District Court for the Districts of New Jersey and Delaware against Sandoz Inc.

(Sandoz), which filed an ANDA seeking approval to market a generic version of ERLEADA before the expiration of the ’663 patent and U.S.

8,445,507 (’507), 8,802,689 (’689), 9,338,159 (’159), and 9,987,261 (’261).

In August 2022, Janssen, UC, and SKI filed a first amended complaint against Sandoz adding the ’054, ’314, ’508, and ’888 patents to the suit.

In August 2022, Janssen, UC, and SKI voluntarily dismissed the Delaware complaint.

In December 2022, Janssen, UC, and SKI filed a second amended complaint against Sandoz withdrawing the ’054, ’314, ’508, and ’888 patents from the suit without prejudice.

Janssen, UC, and SKI are seeking an order enjoining Sandoz from marketing its generic version of ERLEADA before the expiration of the ’663, ’507, ’689, ’159, and ’261 patents.

The New Jersey action is proceeding.

In May 2022, Janssen, UC, and SKI initiated patent infringement lawsuits in United States District Court for the Districts of New Jersey and Delaware against Eugia Pharma Specialities Limited, Aurobindo Pharma USA, Inc., and Auromedics Pharma LLC (collectively, Eugia), which filed an ANDA seeking approval to market a generic version of ERLEADA before the expiration of the ’663, ’507, ’689, ’159 and ’261 patents.

In September 2022, Janssen, UC, and SKI filed a first amended complaint against Eugia adding U.S.

9,884,054 (’054), 10,052,314 (’314), 10,702,508 (’508) and 10,849,888 (’888) to the suit.

In September 2022, Janssen, UC, and SKI voluntarily dismissed the Delaware complaint.

Janssen, UC, and SKI are seeking an order enjoining Eugia from marketing its generic version of ERLEADA before the expiration of the ’663,’507, ’689, ’159, ’261, ’054, ’314, ’508, and ’888 patents.

The New Jersey action is proceeding.

In May 2022, Janssen, UC, and SKI initiated patent infringement lawsuits in United States District Court for the Districts of New Jersey and Delaware against Hetero Labs Limited Unit V and Hetero USA, Inc.

(collectively, Hetero), which filed an ANDA seeking approval to market a generic version of ERLEADA before the expiration of the ’663, ’507,’054, ’314,’508, and ’888 patents.

Janssen, UC, and SKI are seeking an order enjoining Hetero from marketing its generic version of ERLEADA before the expiration of the ’663, ’507, ’054, ’314, ’508 and ’888 patents.

In August 2022, Janssen, UC, and SKI voluntarily dismissed the Delaware complaint.

The New Jersey action is proceeding.

In August 2022, Actelion Pharmaceuticals Ltd, and Janssen Inc.

(collectively, Janssen) and Nippon Shinyaku Co.

(Nippon Shinyaku) initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Sandoz Canada Inc.

in response to Sandoz’s filing of an ANDS seeking approval to market generic versions of UPTRAVI tablets before the expiration of Canadian Patent Nos.

2,731,370 and 2,764,475.

In this lawsuit, Janssen and Nippon Shinyaku are seeking an order enjoining Sandoz from marketing its generic version of UPTRAVI before the expiration of the relevant patents.

A trial is scheduled to begin in May 2024.

In November 2022, Actelion Pharmaceuticals US Inc.

and Actelion Pharmaceuticals Ltd (collectively, Actelion) and Nippon Shinyaku Co., Ltd.

(Nippon Shinyaku) initiated a patent infringement lawsuit in the United States District Court for the District of Delaware against Alembic Pharmaceuticals Limited and Alembic Pharmaceuticals Inc.

(collectively, Alembic) who filed an

ANDA seeking approval to market generic versions of UPTRAVI injection for intravenous use before expiration of U.S.

8,791,122 (’122) and 9,284,280 (’280) relating to UPTRAVI.

In this lawsuit, Actelion and Nippon Shinyaku are seeking an order enjoining Alembic from marketing a generic version of UPTRAVI before the expiration of the relevant patents.

A trial date has not been set.

In February 2023, Actelion and Nippon Shinyaku initiated a patent infringement lawsuit in the United States District Court for the District of Delaware against Lupin Ltd.

and Lupin Pharmaceuticals, Inc.

(collectively, Lupin) who filed an ANDA seeking approval to market generic versions of UPTRAVI injection for intravenous use before expiration of the ’122 and ’280 patents relating to UPTRAVI.

In this lawsuit, Actelion and Nippon Shinyaku are seeking an order enjoining Lupin from marketing a generic version of UPTRAVI before the expiration of the relevant patents.

A trial date has not been set.

Other Litigation

In November 2021, Janssen Pharmaceutica N.V.

(Janssen) provided to Alkermes Pharma Ireland Limited, Elan Pharma International Limited, and Elan Drug Delivery, Inc.

three-months’ notice of termination of a License Agreement by and among Elan Pharmaceutical Research Corp., d/b/a Nanosystems, Elan Pharma International Limited and Janssen, executed in March, 1999.

In November 2021, Janssen also provided to Alkermes Pharma Ireland Limited three-months’ notice of termination of a License Agreement between Elan Pharma International Limited and Janssen executed in July 2003.

In April 2022, in response to these notices, Alkermes Pharma Ireland Limited (Alkermes) initiated arbitration in the International Institute for Conflict Prevention and Resolution.

The parties exchanged opening briefs in July 2022 and responsive briefs in September 2022.

In December 2022, the Arbitration Tribunal issued an Interim Decision finding that Janssen may terminate the agreements, but it may not continue to sell products developed during the term of the agreements without continuing to pay royalties to Alkermes.

GOVERNMENT PROCEEDINGS

Like other companies in the pharmaceutical, consumer health and medical devices industries, Johnson & Johnson and certain of its subsidiaries are subject to extensive regulation by national, state and local government agencies in the United States and other countries in which they operate.

Like other companies in the pharmaceutical, consumer health and medical devices industries, the Company and certain of its subsidiaries are subject to extensive regulation by national, state and local government agencies in the United States and other countries in which they operate.

Such regulation has been the basis of government investigations and litigations.

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Average Wholesale Price (AWP) Litigation

Johnson & Johnson and several of its pharmaceutical subsidiaries (the J&J AWP Defendants), along with numerous other pharmaceutical companies, were named as defendants in a series of lawsuits in state and federal courts involving allegations that the pricing and marketing of certain pharmaceutical products amounted to fraudulent and otherwise actionable conduct because, among other things, the companies allegedly reported an inflated Average Wholesale Price (AWP) for the drugs at issue.

The Company and several of its pharmaceutical subsidiaries (the J&J AWP Defendants), along with numerous other pharmaceutical companies, were named as defendants in a series of lawsuits in state and federal courts involving allegations that the pricing and marketing of certain pharmaceutical products amounted to fraudulent and otherwise actionable conduct because, among other things, the companies allegedly reported an inflated Average Wholesale Price (AWP) for the drugs at issue.

Payors alleged that they used those AWPs in calculating provider reimbursement levels.

The plaintiffs in these cases included three classes of private persons or entities that paid for any portion of the purchase of the drugs at issue based on

AWP, and state government entities that made Medicaid payments for the drugs at issue based on AWP.

The plaintiffs in these cases included three classes of private persons or entities that paid for any portion of the purchase of the drugs at issue based on AWP, and state government entities that made Medicaid payments for the drugs at issue based on AWP.

Many of these cases, both federal actions and state actions removed to federal court, were consolidated for pre-trial purposes in a multi-district litigation in the United States District Court for the District of Massachusetts, where all claims against the J&J AWP Defendants were ultimately dismissed.

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and Ortho Biotech Inc.

(both now Janssen Biotech, Inc.), Johnson & Johnson and ALZA Corporation.

(both now Janssen Biotech, Inc.), the Company and ALZA Corporation.

All other cases have been resolved.

Opioid Litigation

Beginning in 2014 and continuing to the present, Johnson & Johnson and Janssen Pharmaceuticals, Inc.

(JPI), along with other pharmaceutical companies, have been named in approximately 3,400 lawsuits related to the marketing of opioids, including DURAGESIC ® , NUCYNTA ® and NUCYNTA ® ER.

Beginning in 2014 and continuing to the present, the Company and Janssen Pharmaceuticals, Inc.

(JPI), along with other pharmaceutical companies, have been named in close to 3,500 lawsuits related to the marketing of opioids, including DURAGESIC, NUCYNTA and NUCYNTA ER.

The suits also raise allegations related to previously owned active pharmaceutical ingredient supplier subsidiaries, Tasmanian Alkaloids Pty, Ltd.

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Similar lawsuits have also been filed by private plaintiffs and organizations, including but not limited to the following:

individual plaintiffs on behalf of children suffering from Neonatal Abstinence Syndrome;

individual plaintiffs on behalf of children born with Neonatal Abstinence Syndrome;

and health insurers/payors.

To date, complaints against pharmaceutical manufacturers, including Johnson & Johnson and JPI, have been filed by the state Attorneys General in Arkansas, Florida, Idaho, Illinois, Kentucky, Louisiana, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, South Dakota, Texas, Washington and West Virginia.

Complaints against the manufacturers also have been filed in state or federal court by city, county and local government agencies in the following states:

Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

To date, complaints against pharmaceutical manufacturers, including the Company and JPI, have been filed by the state Attorneys General in Arkansas, Florida, Idaho, Illinois, Kentucky, Louisiana, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, South Dakota, Texas, Washington and West Virginia.

Complaints against the manufacturers also have been filed in state or federal court by city, county and local government agencies in every state but Alaska.

The Government of Puerto Rico filed suit in Superior Court of San Juan.

There are over 380 cases pending in various state courts.

There are close to 3,000 federal cases coordinated in a federal Multi-District Litigation (MDL) pending in the U.S.

District Court for the Northern District of Ohio.

In addition, the Province of British Columbia filed suit against Johnson & Johnson and its Canadian affiliate Janssen Inc., and many other industry members, in Canada, and is seeking to have that action certified as an opt in class action on behalf of other provincial/territorial and the federal governments in Canada.

Additional proposed class actions have been filed in Canada against Johnson & Johnson and Janssen Inc., and many other industry members, by and on behalf of people who used opioids (for personal injuries), municipalities and First Nations bands.

The Company, JPI and other pharmaceutical companies had also received subpoenas or requests for information related to opioids marketing practices from the following state Attorneys General:

Alaska, Indiana, Montana, New Hampshire, South Carolina, Tennessee, Texas and Washington.

In September 2017, the Company and JPI were contacted by the Texas and Colorado Attorney General’s Offices on behalf of approximately 38 states regarding a multi-state Attorney General investigation.

In 2019, the trial in the matter filed by the Oklahoma Attorney General resulted in a judgment against the Company and JPI in the amount of $ 465 million.

The Company and JPI appealed the judgment, and in November 2021, the Oklahoma Supreme Court reversed the trial court’s judgment and directed entry of judgment for Defendants.

In October 2019 the Company and JPI announced a settlement of the first case set for trial in the MDL with two counties in Ohio.

In April 2021, three California counties and the City of Oakland commenced a trial in California state court against the Company and JPI, and other affiliates, as well as three other pharmaceutical manufacturers.

The trial concluded in October 2021, and in December 2021, the Court entered a final trial judgment in favor of Defendants on all claims.

In February 2022, Plaintiffs’ motion to set aside and vacate the judgment was denied.

Plaintiffs appealed the judgment, but later filed a request to dismiss the appeal after electing to participate in the national settlement agreement.

In October 2019, the Company announced a proposed agreement in principle that would include the Company paying $ 4 billion as settlement of these matters that had not been tried or settled.

In October 2020, the Company agreed to contribute up to an additional $ 1 billion to an all-in settlement amount that would resolve opioid lawsuits filed and future claims by states, cities, counties and tribal governments, for a total of $ 5 billion which has been accrued, subject to various conditions and an agreement being finalized.

This agreement is not an admission of liability or wrong-doing.

In July 2021, the Company announced that the terms of the agreement to settle the state and subdivision claims had been finalized and approximately half of the all-in settlement was expected to be paid by the end of fiscal year 2022, depending upon the level of participation by the states and their subdivisions.

The terms provided a period of time for states to elect to participate in the agreement and, thereafter, a period for the subdivisions of the participating states to opt-in.

Based on expected participation, the Company committed in advance to proceed with the settlement in five of the participating states (New York, Texas, Florida, Nevada, and New Mexico) and with tribal governments.

By late February 2022, 45 states, five territories, the District of Columbia, and the vast majority of eligible subdivisions had elected to participate in the settlement, and the Company confirmed that the level of participation was sufficient to proceed with the agreement as to all participants.

The agreement was effective in April 2022.

Also in April 2022, the Company entered into settlement agreements with the states of Alabama and West Virginia and their participating subdivisions.

In July 2022, the Company reached a settlement agreement with all litigating Oklahoma subdivisions, and in September 2022, the Company settled with the State of New Hampshire and its participating subdivisions.

Consequently, by the end of the fiscal year 2022, the Company had settled the opioid claims advanced by all states except Washington.

There are approximately 60 cases remaining post-settlement in various state courts.

There are approximately 570 remaining federal cases against the Company and JPI coordinated in a federal Multi-District Litigation (MDL) pending in the U.S.

District Court for the Northern District of Ohio, and approximately 20 additional cases pending against the Company and JPI in other federal courts.

In addition, the Province of British Columbia filed suit against the Company and its Canadian affiliate Janssen Inc., and many other industry members, in Canada, and is seeking to have that action certified as an opt in class action on behalf of other provincial/territorial and the federal governments in Canada.

Additional proposed class actions have been filed in Canada against the Company and Janssen Inc., and many other industry members, by and on behalf of people who used opioids (for personal injuries), municipalities and First Nations bands.

In October 2019, an antitrust complaint was filed by private plaintiffs in federal court in Tennessee and is pending transfer to the MDL.

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An adverse judgment in any of these lawsuits could result in the imposition of large monetary penalties and significant damages including, punitive damages, cost of abatement, substantial fines, equitable remedies and other sanctions.

In 2019, the trial in the matter filed by the Oklahoma Attorney General resulted in a judgment against Johnson & Johnson and JPI in the amount of $ 465 million.

Johnson & Johnson and JPI appealed the judgment, and in November 2021, the Oklahoma Supreme Court reversed the trial court’s judgment.

In October 2019 Johnson & Johnson and JPI announced a settlement of the first case set for trial in the MDL with two counties in Ohio.

In April 2021, three California counties and the City of Oakland commenced a trial in California state court against Johnson & Johnson and JPI, and other affiliates, as well as three other pharmaceutical manufacturers.

The trial concluded in October 2021, and in December 2021, the Court entered a final trial judgment in favor of Defendants on all claims.

In February 2022, Plaintiffs' motion to set aside and vacate the judgment was denied.

In August 2019, Johnson & Johnson received a grand jury subpoena from the United States Attorney’s Office for the Eastern District of New York for documents related to the Company’s anti-diversion policies and procedures and distribution of its opioid medications, in what the Company understands to be part of a broader investigation into manufacturers’ and distributors’ monitoring programs and reporting under the Controlled Substances Act.

In September 2019, Johnson & Johnson received subpoenas from the New York State Department of Financial Services (NYDFS) as part of an industry-wide inquiry into the effect of opioid prescriptions on New York health insurance premiums.

In September 2020, the Company learned that NYDFS filed a statement of charges related to this investigation.

In June 2021, the Company and JPI announced a settlement agreement with the State of New York and its participating subdivisions, including Nassau County and Suffolk County, resolving their opioid-related claims against the Company on terms consistent with the Company’s previously announced agreement in principle to contribute up to $ 5 billion to all-in settlement of opioid-related claims by states, cities, counties, and tribal governments.

The settlement provides New York and its participating subdivisions with up to $ 263 million to address opioid-related issues, reimburses attorney fees and costs, and removes the

Company and Janssen from a multi-defendant trial of opioid-related claims that commenced in Suffolk County in June 2021.

In exchange, the Company and JPI receive releases from the claims asserted by New York and the participating parties, including NYDFS.

In October 2021, the Company and JPI announced a settlement agreement with the State of Texas and its participating subdivisions, including Dallas County, Bexar County, and Tarrant County, resolving their opioid-related claims against the Company on terms consistent with the Company’s previously announced agreement to contribute up to $ 5 billion to all-in settlement of opioid-related claims by states, cities, counties, and tribal governments.

The settlement provides Texas and its participating subdivisions with up to $ 297 million to address opioid-related issues and reimburse attorney fees and costs, and removes the Company and Janssen from multi-defendant bellwether trials of opioid-related claims scheduled to commence in Texas state courts in early 2022.

In exchange, the Company and JPI will receive releases from the claims asserted by Texas and the participating subdivisions.

Johnson & Johnson, JPI and other pharmaceutical companies have also received subpoenas or requests for information related to opioids marketing practices from the following state Attorneys General:

Alaska, Indiana, Montana, New Hampshire, South Carolina, Tennessee, Texas and Washington.

In September 2017, Johnson & Johnson and JPI were contacted by the Texas and Colorado Attorney General’s Offices on behalf of approximately 38 states regarding a multi-state Attorney General investigation.

In October 2019, the Company announced a proposed agreement in principle that would include the Company paying $ 4 billion as settlement of these matters.

This agreement in principle is not an admission of liability or wrong-doing.

In July 2021, the Company announced that the terms of the agreement to settle the state and subdivision claims have been finalized and up to one-third of the all-in settlement is expected to be paid within the next 12 months, depending upon the level of participation by the states and their subdivisions.

The terms provide a period of time for states to elect to participate in the agreement and, thereafter, a period for the subdivisions of the participating states to opt-in.

As of January 2022, 45 states, five territories, and the District of Columbia had elected to participate in the settlement.

The subdivision opt-in period expired in January 2022.

The Company retains the right to opt-out of the agreement until late February 2022 if, in its sole discretion, there is insufficient participation.

Based on expected participation, the Company has committed in advance to proceed with the settlement in five of the participating states (New York, Texas, Florida, Nevada, and New Mexico) and with tribal governments, whose cases were scheduled for trial in 2021, 2022, or 2023.

In August 2019, the Company received a grand jury subpoena from the United States Attorney’s Office for the Eastern District of New York for documents related to the Company’s anti-diversion policies and procedures and distribution of its opioid medications, in what the Company understands to be part of a broader investigation into manufacturers’ and distributors’ monitoring programs and reporting under the Controlled Substances Act.

From June 2017 through December 2019, the Company’s Board of Directors received a series of shareholder demand letters alleging breaches of fiduciary duties related to the marketing of opioids.

The Board retained independent counsel to investigate the allegations in the demands, and in April 2020, independent counsel delivered a report to the Board recommending that the Company reject the shareholder demands and take the steps that are necessary or appropriate to secure dismissal of related derivative litigation.

The Board retained independent counsel to investigate the allegations in the demands, and in April 2020, independent counsel delivered a report to the Board recommending that the

Company reject the shareholder demands and take the steps that are necessary or appropriate to secure dismissal of related derivative litigation.

The Board unanimously adopted the recommendations of the independent counsel’s report.

In November 2019, one of the shareholders who sent a demand filed a derivative complaint against Johnson & Johnson as the nominal defendant and certain current and former directors and officers as defendants in the Superior Court of New Jersey.

The complaint alleges breaches of fiduciary duties related to the marketing of opioids, and that Johnson & Johnson has suffered damages as a result of those alleged breaches.

In May 2020, the shareholder filed an amended complaint challenging the Board’s rejection of his demand.

In August 2020, Johnson & Johnson moved to dismiss the amended complaint.

In February 2021, the Court held oral argument on Johnson & Johnson’s motion.

In February 2022, the Court granted Johnson & Johnson’s motion to dismiss the amended complaint.

In August 2020, another shareholder who sent a demand filed a separate derivative complaint in the same court making similar allegations.

In October 2020, the Court granted defendants’ request to reassign the second-filed case to the division where the first-filed case is pending.

In December 2019, two additional shareholders who sent demands filed two separate derivative complaints making similar allegations against Johnson & Johnson as the nominal defendant and certain current and former directors and officers as defendants in the United States District for the District of New Jersey.

In April 2020, the two federal cases were consolidated into a single action captioned In re Johnson & Johnson Opioid Stockholder Derivative Litigation .

In July 2020, the shareholders filed a consolidated complaint.

In September 2020, Johnson & Johnson moved to dismiss the consolidated complaint, and in December 2020, the shareholders opposed Johnson & Johnson’s motion.

Johnson & Johnson filed its reply in February 2021.

In July 2020, an additional shareholder who sent a demand filed a derivative complaint in the same federal court making similar allegations against the same defendants named in the consolidated action.

In January 2021, pursuant to an order in the consolidated action, the third case was consolidated into the consolidated action.

In February 2021, the Court granted the shareholders motion to voluntarily dismiss the consolidated action without prejudice, and the shareholders’ counsel then filed a notice of association in the first-filed derivative action pending in the Superior Court of New Jersey.

In November 2019, one of the shareholders who sent a demand filed a derivative complaint against the Company as the nominal defendant and certain current and former directors and officers as defendants in the Superior Court of New Jersey.

The complaint alleges breaches of fiduciary duties related to the marketing of opioids, and that the Company has suffered damages as a result of those alleged breaches.

A series of additional derivative complaints making similar allegations against the same and similar defendants were filed in New Jersey state and federal courts in 2019 and 2020.

By 2022, all but two state court cases had been voluntarily dismissed.

In February 2022, the state court granted the Company’s motion to dismiss one of the two cases, and the shareholder that brought the second case filed a notice of dismissal.

The shareholder whose complaint was dismissed filed a motion for reconsideration.

In May 2022, the state court held oral argument on the motion for reconsideration and subsequently denied the motion.

The shareholder has appealed the state court’s dismissal order.

In August 2012, DePuy Orthopaedics, Inc., DePuy, Inc.

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The District Court’s order was unsealed in December 2021.

The Relators filed several post-dismissal motions, including a January 2022 omnibus motion for reconsideration.

Following the District Court’s order dismissing the case with prejudice, DePuy filed a December 2021 motion seeking the recovery of attorneys’ fees.

In October 2012, Johnson & Johnson was contacted by the California Attorney General’s office regarding a multi-state Attorney General investigation of the marketing of surgical mesh products for hernia and urogynecological purposes by Johnson & Johnson’s subsidiary, Ethicon, Inc.

In May 2016, California and Washington filed civil complaints against Johnson & Johnson, Ethicon and Ethicon US, LLC alleging violations of their consumer protection statutes.

The relators filed several post-dismissal motions, including a January 2022 omnibus motion for reconsideration, which the District Court denied.

Following the District Court’s order dismissing the case with prejudice, DePuy filed a December 2021 motion seeking the recovery of attorneys’ fees and costs, which the District Court denied except as to costs.

The Relators have appealed the District Court’s dismissal of the case to the First Circuit.

The briefing on the appeal is complete, the First Circuit held oral argument on December 6, 2022, and the First Circuit’s decision remains pending.

In October 2012, the Company was contacted by the California Attorney General’s office regarding a multi-state Attorney General investigation of the marketing of surgical mesh products for hernia and urogynecological purposes by the Company’s subsidiary, Ethicon, Inc.

In May 2016, California and Washington filed civil complaints against the Company, Ethicon and Ethicon US, LLC alleging violations of their consumer protection statutes.

Similar complaints were filed against the companies by the following states:

Kentucky, Mississippi, West Virginia and Oregon.

In April 2019, Johnson & Johnson and Ethicon settled the Washington case.

In April 2019, the Company and Ethicon settled the Washington case.

In October 2019, the Company and Ethicon settled the multi-state investigation with 41 other states and the District of Columbia.

In April 2020, the Company settled the West Virginia case.

In October 2020, the Company settled with the Attorney General of Oregon.

In November 2020, the Company settled with the Attorney General of Mississippi.

Trial in the Kentucky matter is scheduled for June 2023.

The California case started trial in July 2019 and concluded in September 2019.

In October 2019, Johnson & Johnson and Ethicon settled the multi-state investigation with 41 other states and the District of Columbia.

In January 2020, the Court in California issued a statement of decision, finding in favor of the State of California, and awarded civil penalties in the amount of $ 344 million.

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In August 2020, the Court entered judgment with respect to the penalties of $ 344 million, but denied the Attorney General’s request for injunctive relief.

The Company is appealing the penalty judgment.

In April 2020, the Company settled the West Virginia case.

In October 2020, the Company settled with the Attorney General of Oregon.

Trial in the Kentucky matter is scheduled for May 2023.

In June 2014, the Mississippi Attorney General filed a complaint in Chancery Court of The First Judicial District of Hinds County, Mississippi against Johnson & Johnson and Johnson & Johnson Consumer Companies, Inc.

The Company appealed the penalty judgment.

In April 2022, the Court of Appeals reduced the judgment to $ 302 million, but otherwise denied the appeal.

In July 2022, the Supreme Court of California denied the Company’s petition to review the Court of Appeals decision, and the Company recorded a charge to reflect the judgment in the second quarter of 2022.

In November 2022, the Company petitioned the United States Supreme Court for review.

In June 2014, the Mississippi Attorney General filed a complaint in Chancery Court of The First Judicial District of Hinds County, Mississippi against the Company and Johnson & Johnson Consumer Companies, Inc.

(now known as Johnson & Johnson Consumer Inc.) (collectively, JJCI).

The complaint alleges that JJCI violated the Mississippi Consumer Protection Act by failing to disclose alleged health risks associated with female consumers’ use of talc contained in JOHNSON’S Baby Powder and JOHNSON’S Shower to Shower (a product divested in 2012) and seeks injunctive and monetary relief.

Johnson & Johnson and JJCI moved for summary judgment on the grounds that the State’s claim was barred by preemption, which the trial court denied.

The Mississippi Supreme Court granted Johnson & Johnson and JJCI’s request to file an interlocutory appeal of the denial of the motion for summary judgment in late 2019.

The Company and JJCI moved for summary judgment on the grounds that the State’s claim was barred by preemption, which the trial court denied.

The Mississippi Supreme Court granted the Company and JJCI’s request to file an interlocutory appeal of the denial of the motion for summary judgment in late 2019.

Briefing and oral argument were completed.

Thereafter, the Court rejected the interlocutory appeal in April 2021 and remanded the matter to the trial court.

Thereafter, the State moved for a trial setting.

JJCI objected to any trial setting due to the LTL Bankruptcy and that any decision on whether the stay applied should be deferred to the LTL Bankruptcy court.

The State opposed any stay and argued that the trial court should decide issues concerning the stay.

The motion for trial setting and JJCI’s objections were heard in November 2021 and in January 2022, the Court granted plaintiff’s motion for trial setting and directed the parties to consult with the Court administrator to secure a trial date.

That process is underway.

In August 2021, JJCI filed a Petition for Writ of Certiorari in the United States Supreme Court as to the Mississippi Supreme Court’s ruling of April 2021, the State responded to the Petition for Writ of Certiorari in November 2021, the JJCI filed a reply in November 2021, and the United States Supreme Court denied the Petition for Writ of Certiorari in December 2021.

Thereafter, the Court

rejected the interlocutory appeal in April 2021 and remanded the matter to the trial court.

In August 2021, JJCI filed a Petition for Writ of Certiorari in the United States Supreme Court as to the Mississippi Supreme Court’s ruling of April 2021.

In December 2021 the United States Supreme Court denied the Petition for Writ of Certiorari.

After the Mississippi Supreme Court remanded the matter to the trial court, the State moved for a trial setting.

JJCI objected to any trial setting as barred by the stay arising from the LTL Bankruptcy Case, referenced above, while the State argued that the stay did not apply.

In January 2022, the Court granted the State’s motion for trial setting and directed the parties to consult with the Court administrator to secure a trial date.

In February 2022, the trial court set the case for trial to begin in February 2023.

However, given the efforts to resolve talc-related claims in the LTL Bankruptcy Case, the Company and the State agreed to a temporary stay of discovery until May 2022.

The temporary stay expired in May 2022.

LTL thereafter moved to enjoin prosecution of the case in the LTL Bankruptcy Case.

In October 2022, the bankruptcy court issued an order staying the case.

The State filed an appeal to the Third Circuit concerning the stay order.

In January 2020, the State of New Mexico filed a consumer protection case alleging that the Company deceptively marketed and sold its talcum powder products by making misrepresentations about the safety of the products and the presence of carcinogens, including asbestos.

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The Company then filed a motion for partial judgment on the pleadings in December 2020, which was denied.

The Company made its first document production in February 2021 and discovery is currently scheduled to close on April 25, 2022.

In March 2022, the New Mexico court denied the Company’s motion to compel the State of New Mexico to engage in discovery of state agencies and denied the Company’s request for interlocutory appeal of that decision.

The Company then filed a Petition for Writ of Superintending Control and a Request for a Stay to the New Mexico Supreme Court on the issue of the State of New Mexico’s discovery obligations.

In April 2022, in view of the efforts to resolve talc-related claims in the LTL Bankruptcy Case, the Company and the State agreed to a 60-day stay of all matters except for the pending writ before the New Mexico Supreme Court, which expired in June 2022.

Thereafter, the Company moved to enjoin prosecution of the case in the LTL Bankruptcy Case.

In October 2022, the bankruptcy court issued an order staying the case.

In December 2022, the State filed an appeal to the Third Circuit concerning the stay order.

Separately, in September 2022, the New Mexico Supreme Court granted the Company's request for a stay pending further briefing on the scope of the State of New Mexico’s discovery obligations.

Forty-two states and the District of Columbia have commenced a joint investigation into the Company’s marketing of its talcum powder products.

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Five states have issued Civil Investigative Demands seeking documents and other information.

The Company has produced documents to Arizona,

North Carolina, Texas, and Washington and entered into confidentiality agreements.

The Company has produced documents to Arizona, North Carolina, Texas, and Washington and entered into confidentiality agreements.

The Company has not received any follow up requests from those states.

In March 2016, Janssen Pharmaceuticals, Inc.

(JPI) received a Civil Investigative Demand from the United States Attorney’s Office for the Southern District of New York related to JPI’s contractual relationships with pharmacy benefit managers over the period from January 1, 2006 to the present with regard to certain of JPI’s pharmaceutical products.

The demand was issued in connection with an investigation under the False Claims Act.

The Company has provided documents in response to the demand.

In July 2016, Johnson & Johnson and Janssen Products LP were served with a qui tam complaint pursuant to the False Claims Act filed in the United States District Court for the District of New Jersey alleging the off-label promotion of two HIV products, PREZISTA ® and INTELENCE ® , and anti-kickback violations in connection with the promotion of these products.

In March 2022, each of the forty-two states (including Mississippi and New Mexico) agreed to mediation of their claims in the LTL Bankruptcy Case.

In July 2022, New Mexico and Mississippi indicated they would no longer voluntarily submit to further mediation in the LTL Bankruptcy and would proceed with their respective cases in state court.

LTL moved the New Jersey Bankruptcy Court for an order staying further proceedings in those two actions, which the Bankruptcy Court granted in October 2022.

In December 2022, the Bankruptcy Court allowed New Mexico and Mississippi to file a direct appeal of its stay.

In July 2016, the Company and Janssen Products, LP were served with a qui tam complaint pursuant to the False Claims Act filed in the United States District Court for the District of New Jersey alleging the off-label promotion of two HIV products, PREZISTA and INTELENCE, and anti-kickback violations in connection with the promotion of these products.

The complaint was filed under seal in December 2012.

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Discovery is underway.

In April and September 2017, Johnson & Johnson received subpoenas from the United States Attorney for the District of Massachusetts seeking documents broadly relating to pharmaceutical copayment support programs for DARZALEX ® , OLYSIO ® , REMICADE ® , SIMPONI ® , STELARA ® and ZYTIGA ® .

In April and September 2017, the Company received subpoenas from the United States Attorney for the District of Massachusetts seeking documents broadly relating to pharmaceutical copayment support programs for DARZALEX, OLYSIO, REMICADE, SIMPONI, STELARA and ZYTIGA.

The subpoenas also seek documents relating to Average Manufacturer Price and Best Price reporting to the Center for Medicare and Medicaid Services related to those products, as well as rebate payments to state Medicaid agencies.

The Company has provided documents in response to the subpoenas.

In June 2017, Johnson & Johnson received a subpoena from the United States Attorney’s Office for the District of Massachusetts seeking information regarding practices pertaining to the sterilization of DePuy Synthes, Inc.(DePuy) spinal implants at three hospitals in Boston as well as interactions of employees of Company subsidiaries with physicians at these hospitals.

Johnson & Johnson and DePuy have produced documents in response to the subpoena and are fully cooperating with the government’s investigation.

In June 2017, the Company received a subpoena from the United States Attorney’s Office for the District of Massachusetts seeking information regarding practices pertaining to the sterilization of DePuy Synthes, Inc.

(DePuy) spinal implants at three hospitals in Boston as well as interactions of employees of Company subsidiaries with physicians at these hospitals.

The Company and DePuy fully cooperated with the government’s investigation.

In January 2023, the Company, DePuy Synthes, Inc., and DePuy Synthes Sales Inc.

entered into a settlement agreement with the United States resolving the matter for an immaterial amount.

In July 2018, the Public Prosecution Service in Rio de Janeiro and representatives from the Brazilian antitrust authority CADE inspected the offices of more than 30 companies including Johnson & Johnson do Brasil Indústria e Comércio de Produtos para Saúde Ltda.

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GENERAL LITIGATION

In March and April 2015, over 30 putative class action complaints were filed by contact lens patients in a number of courts around the United States against Johnson & Johnson Vision Care, Inc.

(JJVCI) and other contact lens manufacturers, distributors, and retailers, alleging vertical and horizontal conspiracies to fix the retail prices of contact lenses.

The complaints allege that the manufacturers reached agreements with each other and certain distributors and retailers concerning the prices at which some contact lenses could be sold to consumers.

The plaintiffs are seeking damages and injunctive relief.

All of the class action cases were transferred to the United States District Court for the Middle District of Florida in June 2015.

The plaintiffs filed a consolidated class action complaint in November 2015.

Discovery and pre-trial motion practice are complete.

Trial is scheduled to begin in March 2022.

Beginning in September 2017, multiple purported class actions were filed on behalf of indirect purchasers of REMICADE ® against Johnson & Johnson and Janssen Biotech, Inc.

Beginning in September 2017, multiple purported class actions were filed on behalf of indirect purchasers of REMICADE against the Company and Janssen Biotech, Inc.

(collectively, Janssen) alleging that Janssen has violated federal antitrust laws through its contracting strategies for REMICADE.

The cases were consolidated for pre-trial purposes as In re

REMICADE ® Antitrust Litigation in United States District Court for the Eastern District of Pennsylvania.

The consolidated complaint seeks damages and injunctive relief.

Discovery is ongoing.

In June 2018, Walgreen Co.

and Kroger Co., filed an antitrust complaint against Johnson & Johnson and Janssen Biotech, Inc.

(collectively, Janssen) in the United States District Court for the Eastern District of Pennsylvania.

The complaint alleges that Janssen has violated federal antitrust laws through its contracting strategies for REMICADE ® .

The complaint seeks damages and injunctive relief.

In March 2019, summary judgment was granted in favor of Janssen.

In February 2020, the United States Court of Appeals for the Third Circuit reversed the District Court’s decision.

This matter was settled in January 2022.

In June 2019, the United States Federal Trade Commission (FTC) issued a Civil Investigative Demand to Johnson & Johnson in connection with its investigation of whether Janssen’s REMICADE ® contracting practices violate federal antitrust laws.

The cases were consolidated for pre-trial purposes as In re REMICADE Antitrust Litigation in United States District Court for the Eastern District of Pennsylvania.

This case was settled in February 2022.

The final approval hearing is scheduled for February 2023.

In June 2019, the United States Federal Trade Commission (FTC) issued a Civil Investigative Demand to the Company and Janssen Biotech, Inc.

(collectively, Janssen) in connection with its investigation of whether Janssen’s REMICADE contracting practices violate federal antitrust laws.

The Company has produced documents and information responsive to the Civil Investigative Demand.

Janssen is in ongoing discussions with the FTC staff regarding its inquiry.

In February 2022, the United States Federal Trade Commission (FTC) issued Civil Investigative Demands to Johnson & Johnson and Janssen Biotech, Inc.

(collectively, Janssen) in connection with its investigation of whether advertising practices for REMICADE violate federal law.

Janssen has produced documents and information responsive to the Civil Investigative Demands.

Janssen is in ongoing discussions with the FTC staff regarding the inquiry.

In June 2022, Genmab A/S filed a Notice for Arbitration with International Institute for Conflict Prevention and Resolution (CPR) against Janssen Biotech, Inc.

seeking milestones and an extended royalty term for Darzalex FASPRO.

Janssen filed its Notice of Defense in July 2022.

Genmab and Janssen have cross-moved for early disposition of the arbitration.

Argument was had in January 2023.

In October 2017, certain United States service members and their families brought a complaint against a number of pharmaceutical and medical devices companies, including Johnson & Johnson and certain of its subsidiaries in United States District Court for the District of Columbia, alleging that the defendants violated the United States Anti-Terrorism Act.

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In January 2022, the United States Court of Appeals for the District of Columbia Circuit reversed the District Court’s decision.

In February 2022, defendants petitioned for rehearing en banc.

In October 2018, two separate putative class actions were filed against Actelion Pharmaceutical Ltd., Actelion Pharmaceuticals U.S., Inc., and Actelion Clinical Research, Inc.

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Discovery is ongoing.

In December 2018, Janssen Biotech, Inc., Janssen Oncology, Inc, Janssen Research & Development, LLC, and Johnson & Johnson (collectively, Janssen) were served with a qui tam complaint filed on behalf of the United States, 28 states, and the District of Columbia.

The complaint, which was filed in December 2017 in United States District Court for the Northern District of California, alleges that Janssen violated the federal False Claims Act and state law when providing pricing information for ZYTIGA ® to the government in connection with direct government sales and government-funded drug reimbursement programs.

At this time, the federal and state governments have declined to intervene.

The case has been transferred to United States District Court for the District of New Jersey.

Janssen’s motion to dismiss was denied in December 2021.

In May 2019, a class action antitrust complaint was filed against Janssen R&D Ireland (Janssen) and Johnson & Johnson in the United States District Court for the Northern District of California.

The complaint alleges that Janssen violated federal and state antitrust and consumer protection laws by agreeing to exclusivity provisions in its agreements with Gilead concerning the development and marketing of combination antiretroviral therapies (cART) to treat HIV.

The complaint alleges that Janssen violated federal and state

antitrust and consumer protection laws by agreeing to exclusivity provisions in its agreements with Gilead concerning the development and marketing of combination antiretroviral therapies (cART) to treat HIV.

The complaint also alleges that Gilead entered into similar agreements with Bristol-Myers Squibb and Japan Tobacco.

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In December 2021, several insurance companies and other payers filed individual “Opt-Out” complaints containing allegations similar to the original complaint.

Discovery is ongoing.

In September 2022, the Court granted in part and denied in part plaintiff’s motion for class certification.

In January 2023, the Court granted in part and denied in part defendants’ motion for summary judgment.

Trial is scheduled for May 2023.

In October 2019, Innovative Health, LLC filed a complaint against Biosense Webster, Inc.

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In December 2021, BWI filed a motion for summary judgment.

The trial is set for April 2022.

In November 2019, Johnson & Johnson received a demand for indemnification from Pfizer Inc., pursuant to the 2006 Stock and Asset Purchase Agreement between the Company and Pfizer.

In March 2022, the Court granted BWI’s motion for summary judgment.

In April 2022, Innovative appealed this ruling to the United States Court of Appeals for the Ninth Circuit.

In November 2019, the Company received a demand for indemnification from Pfizer Inc.

(Pfizer), pursuant to the 2006 Stock and Asset Purchase Agreement between the Company and Pfizer.

Also in November 2019, Johnson & Johnson Inc.

received a demand for indemnification from Sanofi Consumer Health, Inc., pursuant to the 2016 Asset Purchase Agreement between Johnson & Johnson Inc.

In January 2020, Johnson & Johnson received a demand for indemnification from

Boehringer Ingelheim Pharmaceuticals, Inc., pursuant to the 2006 Asset Purchase Agreement among the Company, Pfizer, and Boehringer Ingelheim.

received notice reserving rights to claim indemnification from Sanofi Consumer Health, Inc.

(Sanofi), pursuant to the 2016 Asset Purchase Agreement between Johnson & Johnson Inc.

In January 2020, Johnson & Johnson received a demand for indemnification from Boehringer Ingelheim Pharmaceuticals, Inc.

(Boehringer Ingelheim), pursuant to the 2006 Asset Purchase Agreement among the Company, Pfizer, and Boehringer Ingelheim.

In November 2022, Johnson & Johnson received a demand for indemnification from GlaxoSmithKline LLC (GSK), pursuant to the 2006 Stock and Asset Purchase Agreement between the Company and Pfizer, and certain 1993, 1998, and 2002 agreements between Glaxo Wellcome and Warner-Lambert entities.

The notices seek indemnification for legal claims related to over-the-counter ZANTAC (ranitidine) products.

Plaintiffs in the underlying actions allege that ZANTAC and other over-the-counter ranitidine medications contain unsafe levels of NDMA (N-nitrosodimethylamine) and can cause and/or have caused various cancers in patients using the products, and seek injunctive and monetary relief.

The Company and Johnson & Johnson Inc.

have also been named in putative class actions filed in Canada with similar allegations regarding ZANTAC or ranitidine use.

Johnson & Johnson Inc.

was also named as a defendant along with other manufacturers in various personal injury actions in Canada related to ZANTAC products.

Johnson & Johnson Inc.

has provided Sanofi notice reserving rights to claim indemnification pursuant to the 2016 Asset Purchase Agreement related to the class actions and personal injury actions.

In October 2020, Fortis Advisors LLC (Fortis), in its capacity as representative of the former stockholders of Auris Health Inc.

(Auris), filed a complaint against Johnson & Johnson, Ethicon Inc., and certain named officers and employees (collectively, Ethicon) in the Court of Chancery of the State of Delaware.

(Auris), filed a complaint against the Company, Ethicon Inc., and certain named officers and employees (collectively, Ethicon) in the Court of Chancery of the State of Delaware.

The complaint alleges breach of contract, fraud, and other causes of action against Ethicon in connection with Ethicon’s acquisition of Auris in 2019.

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All claims against the individual defendants were dismissed.

The trial is scheduled for January 2024.

In June 2022, Janssen Pharmaceuticals, Inc.

filed a Demand for Arbitration against Emergent Biosolutions Inc.

et al (“EBSI”) with the American Arbitration Association, alleging that EBSI breached the parties’ Manufacturing Services Agreement for the Company’s COVID-19 vaccine.

In July 2022, Emergent filed its answering statement and counterclaims.

In October 2022, Janssen Pharmaceuticals, Inc.

filed a Demand for Arbitration against Merck Sharp & Dohme Corp.

with the American Arbitration Association pursuant to the Parties’ agreements relating to production of drug substance and drug product for the Company’s COVID-19 vaccine.

Also in October 2022, Merck filed its answer and counterclaims.

Beginning in May 2021, multiple putative class actions were filed in state and federal courts (California, Florida, New York, and New Jersey) against various Johnson & Johnson entities alleging violations of state consumer fraud statutes based on nondisclosure of alleged benzene contamination of certain Neutrogena and Aveeno sunscreen products and the affirmative promotion of those products as “safe”;

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In October 2021, the Company reached an agreement in principle for the settlement of a nationwide class, encompassing the claims of the consolidated actions, subject to approval by the Florida federal Court.

In December 2021, plaintiffs in the consolidated actions filed a motion for preliminary approval of a nationwide class settlement.

Johnson & Johnson (subsequently substituted by Johnson & Johnson Consumer Inc.

In December 2021,

plaintiffs in the consolidated actions filed a motion for preliminary approval of a nationwide class settlement.

The settlement was preliminarily approved by the court in March 2022.

The Company (subsequently substituted by Johnson & Johnson Consumer Inc.

(JJCI)) along with more than 120 other companies, is a defendant in a cost recovery and contribution action brought by Occidental Chemical Corporation in June 2018 in the United States District Court for the District of New Jersey, related to the clean-up of a section of the Lower Passaic River in New Jersey.

Johnson & Johnson or its subsidiaries are also parties to a number of proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.

The Company or its subsidiaries are also parties to various proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.

Restructuring

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Total project costs of approximately $ 2.2 billion have been recorded since the restructuring was announced.

See the following table for additional details on the restructuring program.

In total, the Company expects the Global Supply Chain actions to generate approximately $ 0.6 billion to $ 0.8 billion in annual pre-tax cost savings that will be substantially delivered by the end of 2022.

The program is set to be completed at the end of 2022.

The Company expects to record pre-tax restructuring charges of approximately $ 2.1 billion to $ 2.3 billion, over the 4 to 5 year period of this activity.

These costs are associated with network optimizations, exit costs and accelerated depreciation and amortization.

The program was completed in the fiscal fourth quarter of 2022.

The following table summarizes the severance charges and the associated spending under these initiatives through the fiscal year ended 2022:

(Dollars in Millions) Severance Asset Write-offs/Sales Other (2)

Reserve balance, December 29, 2019

Reserve balance, January 3, 2021

$ 135 — 9 144

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$ 75 — 34 109

(1) Cash outlays for severance are expected to be substantially paid out over the next year in accordance with the Company's plans and local laws.

(1) Although the restructuring program has been completed in the fiscal year 2022, the Company expects that severance charges will continue beyond that date.

The reserve balance as of January 1, 2023 is recorded in the Employee Related Obligation account in the Consolidated Balance Sheet.

(2) Other includes project expense such as salaries for employees supporting these initiatives and consulting expenses.

The Company continuously reevaluates its severance reserves related to restructuring and the timing of payments due to the planned release of associates regarding several longer-term projects.

The Company believes that the existing severance reserves are sufficient to cover the Global Supply Chain plans given the period over which the actions will take place.

The Company will continue to assess and make adjustments as necessary if additional amounts become probable and estimable.

(3) Represents gain on sale of assets

Report of Independent Registered Public Accounting Firm

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Abiomed, Inc., (“Abiomed”) from its assessment of internal control over financial reporting as of January 1, 2023, because it was acquired by the Company in a business combination during 2022.

We have also excluded Abiomed from our audit of internal control over financial reporting.

Abiomed is a wholly-owned subsidiary whose total assets and total sales excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% of each of the related consolidated financial statement amounts as of and for the fiscal year ended January 1, 2023.

Definition and Limitations of Internal Control over Financial Reporting

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Critical Audit Matters

disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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On November 15, 2021, the North Carolina Bankruptcy Court confirmed the scope of the stay, issuing a Preliminary Injunction (PI) prohibiting and enjoining the commencement and prosecution of talc-related claims against LTL, Old JJCI, New JJCI, Johnson & Johnson, other of their corporate affiliates, identified retailers, insurance companies, and certain other parties.

Claimants have filed a motion to dismiss the LTL bankruptcy case.

The court commenced a hearing on February 14, 2022 regarding the motion to dismiss and on whether the PI should be extended.

The Company has established a reserve for approximately $2 billion in connection with the aforementioned trust.

The LTL Bankruptcy Case was transferred to the United States Bankruptcy Court for the District of New Jersey in November 2021, and that court extended the PI through the end of

February 2022.

Claimants filed motions to dismiss the LTL Bankruptcy Case and, following a multiple day hearing, the New Jersey Bankruptcy Court denied those motions by order issued in March 2022.

The New Jersey Bankruptcy Court simultaneously issued another order extending the stay as to the Protected Parties.

The claimants subsequently filed notices of appeal as to the denial of the motions to dismiss and the extension of the stay.

In May 2022,the Third Circuit Court of Appeals granted the petitions to appeal.

The briefing and oral argument on the appeal were completed in September 2022.

On January 30, 2023, the Third Circuit reversed the Bankruptcy Court’s ruling and remanded to the Bankruptcy Court to dismiss the LTL bankruptcy.

LTL has filed a petition for rehearing on the decision.

The principal considerations for our determination that performing procedures relating to the talc litigation is a critical audit matter are the significant judgment by management when assessing the likelihood of a loss being incurred and when determining whether a reasonable estimate of the loss or range of loss for the future and existing talc claims can be made, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s assessment of the loss contingencies associated with this litigation.

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and (v) evaluating the sufficiency of the Company’s litigation contingencies disclosures.

Litigation – Opioids

As described in Notes 1 and 19 to the consolidated financial statements, the Company records accruals for loss contingencies associated with legal matters, including opioids, when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated.

To the extent adverse awards, judgments, or verdicts have been rendered against the Company, management does not record an accrual until a loss is determined to be probable and can be reasonably estimated.

For these matters, management is unable to estimate the possible loss or range of loss beyond the amounts accrued.

Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments.

The ability to make such estimates and judgments can be affected by various factors, including, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate;

matters present legal uncertainties;

there are significant facts in dispute;

procedural or jurisdictional issues;

the uncertainty and unpredictability of the number of potential claims;

ability to achieve comprehensive multi-party settlements;

complexity of related cross-claims and counterclaims;

and/or there are numerous parties involved.

The Company has been named in numerous lawsuits brought by certain state and local governments, including tribal governments, related to opioids matters.

In October 2019, the Company announced a proposed agreement in principle that would include the Company paying $4 billion as settlement of the matters.

In October 2020, the Company agreed to contribute up to an additional $1 billion to an all-in settlement amount that would resolve opioid lawsuits filed and future claims by states, cities, counties and tribal governments, for a total of $5 billion.

In July 2021, the Company announced that the terms of the agreement to settle the state and subdivision claims have been finalized, depending upon the level of participation by the various parties.

The terms provide a period of time for states to elect to participate in the agreement and, thereafter, a period for the subdivisions of the participating states to opt-in.

The subdivision opt-in period expired in January 2022.

The Company retains the right to opt-out of the agreement until late February 2022 if, in its sole discretion, there is insufficient participation.

The principal considerations for our determination that performing procedures relating to the opioids litigation is a critical audit matter are the significant judgment by management when determining whether a reasonable estimate of the range of loss for the agreement to settle the opioids litigation can be made, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s assessment of the loss contingencies associated with this litigation.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s evaluation of the opioid litigation, including controls over determining whether a loss is probable and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures.

These procedures also included, among others, (i) gaining an understanding of the Company’s process around the accounting and reporting for the opioids litigation;

(ii) discussing the status of significant known actual and potential litigation and ongoing settlement negotiations with the Company’s in-house legal counsel, as well as external counsel when deemed necessary;

(iii) obtaining and evaluating the letters of audit inquiry with internal and external legal counsel for significant litigation;

(iv) evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable;

and (v) evaluating the sufficiency of the Company’s litigation contingencies disclosures.

/s/ PricewaterhouseCoopers LLP

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The Company’s assessment included extensive documenting, evaluating and testing the design and operating effectiveness of its internal controls over financial reporting.

The Company acquired Abiomed, Inc.

(Abiomed), in a business combination in December 2022.

Abiomed's total assets, excluding intangible assets and goodwill, and total sales represented less than 1% of each of the related consolidated financial statement amounts as of and for the fiscal year ended January 1, 2023.

As the acquisition occurred in the fiscal year 2022, the scope of the Company's assessment of the design and effectiveness of internal control over financial reporting for the fiscal year 2022 excluded the above mentioned acquisition.

This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from the scope in the year of acquisition.

Based on the Company’s processes and assessment, as described above, management has concluded that, as of January 1, 2023, the Company’s internal control over financial reporting was effective.

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Joaquin Duato Joseph J.

Director Executive Vice President, Chief Financial Officer

Chairman, Board of Directors Executive Vice President, Chief Financial Officer

Chief Executive Officer

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data