What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-16 compared with 2023-02-16 · 248 added, 281 removed, 393 unchanged (57% of the section changed)

4 unchanged sentences

The Company conducts business in virtually all countries of the world with the primary focus on products related to human health and well-being.

The Company is organized into three business segments:

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 the following therapeutic areas, including Immunology, Infectious diseases, Neuroscience, Oncology, Pulmonary Hypertension, and Cardiovascular and Metabolic diseases.

The Company is organized into two business segments:

Innovative Medicine and MedTech.

The Innovative Medicine 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 MedTech segment includes a broad portfolio 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 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.

The Executive Committee of Johnson & Johnson is the principal management group responsible for the strategic operations and allocation of the resources of the Company.

This Committee oversees and coordinates the activities of the Consumer Health, Pharmaceutical and MedTech business segments.

This Committee oversees and coordinates the activities of the Innovative Medicine and MedTech business segments.

In all of its product lines, the Company competes with other companies both locally and globally, throughout the world.

3 unchanged sentences

The competitive environment requires substantial investments in continuing research.

In addition, the development and maintenance of customer demand for the Company’s consumer products involves significant expenditures for advertising and promotion.

Management’s objectives

With “Our Credo” as the foundation, the Company’s purpose is to blend heart, science and ingenuity to profoundly change the trajectory of health for humanity.

The Company is committed to bringing its full breadth and depth to ensure health for people today and for future generations.

United around this common ambition, the Company is poised to fulfill its purpose and successfully meet the demands of the rapidly evolving markets in which it competes.

The Company is broadly based in human healthcare, and is committed to creating value by developing accessible, high quality, innovative products and services.

With “Our Credo” as the foundation, the Company’s purpose is to blend heart, science and ingenuity to profoundly impact health for humanity.

The Company, believes health is everything.

The Company's strength in healthcare innovation empowers us to build a world where complex diseases are prevented, treated, and cured, where treatments are smarter and less invasive, and solutions are personal.

Through the Company's expertise in Innovative Medicine and MedTech, the Company is uniquely positioned to innovate across the full spectrum of healthcare solutions today to deliver the breakthroughs of tomorrow, and profoundly impact health for humanity.

New products introduced within the past five years accounted for approximately 25% of 2023 sales.

In 2022, $14.6 billion was invested in research and development reflecting management’s commitment to create life-enhancing innovations and to create value through partnerships that will profoundly change the trajectory of health for humanity.

In 2023, $15.1 billion was invested in research and development reflecting management’s commitment to create life-enhancing innovations and to create value through partnerships that will profoundly impact of health for humanity.

A critical driver of the Company’s success is the diversity of its 131,900 employees worldwide.

3 unchanged sentences

This ensures the Company can remain focused on addressing the unmet needs of society every day and invest for an enduring impact, ultimately delivering value to its patients, consumers and healthcare professionals, employees, communities and shareholders.

Acquisitions*

(net of cash acquired)

*Includes acquisitions of in process research and development assets that were not accounted for as a business combination

Dividends paid

Results of operations

2 unchanged sentences

Management's discussion and analysis of results of operations and financial condition.

Prior periods disclosed herein were recast to reflect the continuing operations of the Company.

In 2023, worldwide sales increased 6.5% to $85.2 billion as compared to an increase of 1.6% in 2022.

5 unchanged sentences

Total 6.5 % 1.6 %

The net impact of acquisitions and divestitures on the worldwide sales growth was a negative impact of 0.1% in 2022 and a negative impact of 0.6% in 2021.

The net impact of acquisitions and divestitures on the worldwide sales growth was a positive impact of 1.5% in 2023 and no impact in 2022.

Sales by U.S.

2 unchanged sentences

Sales by international companies were $38.7 billion in 2023 and $38.0 billion in 2022.

This represents a decrease of 0.6% in 2022 and an increase of 18.2% in 2021.

This represents an increase of 1.9% in 2023 and a decrease of 0.2% in 2022.

The five-year compound annual growth rates for worldwide, U.S.

2 unchanged sentences

and international sales were 4.2%, 5.7% and 2.6%, respectively.

In 2022, sales by companies in Europe experienced a decline of 0.6% as compared to the prior year, which included operational growth of 11.0% and a negative currency impact of 11.6%.

In 2023, sales by companies in Europe experienced a decline of 1.2% as compared to the prior year, which included an operational decline of 2.2% and a positive currency impact of 1.0%.

In fiscal 2023, the net impact of the Covid-19 Vaccine and the loss of exclusivity of Zytiga on the European regions change in operational sales was a negative 9.8%.

Sales by companies in the Western Hemisphere, excluding the U.S., achieved growth of 10.7% as compared to the prior year, which included operational growth of 15.8%, and a negative currency impact of 5.1%.

Sales by companies in the Asia-Pacific, Africa region experienced a decline of 2.8% as compared to the prior year, including operational growth of 6.2% and a negative currency impact of 9.0%.

In 2022, the Company utilized three wholesalers distributing products for all three segments that represented approximately 16.5%, 13.0% and 12.0% of the total consolidated revenues.

In 2021, the Company had three wholesalers distributing products for all three segments that represented approximately 14.0%, 11.0% and 11.0% of the total consolidated revenues.

Sales by companies in the Asia-Pacific, Africa region achieved growth of 3.9% as compared to the prior year, including operational growth of 9.5% and a negative currency impact of 5.6%.

2023 Annual Report

In 2023, the Company utilized three wholesalers distributing products for both segments that represented approximately 18.2%, 15.1% and 14.2% of the total consolidated revenues.

In 2022, the Company had three wholesalers distributing products for both segments that represented approximately 18.9%, 15.0% and 13.8% of the total consolidated revenues.

2023 Sales by geographic region (in billions)

2023 Sales by segment (in billions)

values may have been rounded

Analysis of sales by business segments

Consumer Health Segment

Consumer Health segment sales in 2022 were $15.0 billion, a decrease of 0.5% from 2021, which included 3.6% operational growth and a negative currency impact of 4.1%.

Consumer Health segment sales were $6.6 billion, an increase of 1.3%.

International sales were $8.4 billion, a decrease of 1.9%, which included 5.3% operational growth and a negative currency impact of 7.2%.

In 2022, acquisitions and divestitures had a net negative impact of 0.3% on the operational sales growth of the worldwide Consumer Health segment.

Major Consumer Health Franchise Sales*:

Total Operations Currency

(Dollars in Millions) 2022 2021 Change Change Change

$ 6,031 5,627 7.2 % 11.2 % (4.0) %

Skin Health/Beauty 4,352 4,541 (4.2) (0.4) (3.8)

Oral Care 1,505 1,645 (8.5) (4.7) (3.8)

Baby Care 1,461 1,566 (6.7) (2.4) (4.3)

Women’s Health 904 917 (1.5) 7.0 (8.5)

Wound Care/Other 700 739 (5.3) (3.8) (1.5)

Total Consumer Health Sales $ 14,953 15,035 (0.5) % 3.6 % (4.1) %

* Certain prior year amounts have been reclassified to conform to current year presentation

(1) Fiscal 2021 reflects approximately $0.4 billion of certain international OTC products, primarily in China, which were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes

The OTC franchise sales of $6.0 billion increased 7.2% as compared to the prior year.

Operational growth was primarily attributable to increased Cough/Cold/Flu, adult and pediatric incidences, price actions primarily in the U.S.

and increased consumption in China due to easing of COVID-19 restrictions.

Growth was partially offset by supply constraints.

The Skin Health/Beauty franchise sales of $4.4 billion declined 4.2% as compared to the prior year.

The operational decline was driven by supply constraints in the U.S.

partially offset by price actions and strong new product performance in the Asia Pacific and Latin America region.

The Oral Care franchise sales of $1.5 billion declined 8.5% as compared to the prior year.

The operational decline was due to portfolio simplification in the U.S., competitive pressures in EMEA and China, category decline and pricing pressures in EMEA, as well as suspension of personal care sales in Russia and negative COVID-19 impacts in China.

The Baby Care franchise sales of $1.5 billion declined 6.7% as compared to the prior year.

The operational decline was driven by category deceleration and competitive pressures in the U.S., suspension of personal care sales in Russia and weakness in India.

The Women’s Health franchise sales of $0.9 billion declined 1.5% as compared to the prior year.

Operational growth driven by lapping prior year supply constraints in EMEA, strength in India, and price actions in LATAM was partially offset by suspension of personal care sales in Russia and negative currency impacts.

The Wound Care/Other franchise sales of $0.7 billion declined 5.3% as compared to the prior year.

The operational decline was driven by lapping strong prior year consumption, competitive pressure in the U.S., and decreased consumption in China.

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.

Pharmaceutical Segment

Pharmaceutical segment sales in 2022 were $52.6 billion, an increase of 1.7% from 2021, which included operational growth of 6.7% and a negative currency impact of 5.0%.

Innovative Medicine segment (1)

Innovative Medicine segment sales in 2023 were $54.8 billion, an increase of 4.2% from 2022, which included operational growth of 4.8% and a negative currency impact of 0.6%.

sales were $31.2 billion, an increase of 9.0%.

International sales were $24.0 billion, an increase of 1.0%, which included 11.9% operational growth and a negative currency impact of 10.9%.

In 2022, acquisitions and divestitures had a net negative impact of 0.1% on the operational sales growth of the worldwide Pharmaceutical segment.

Adjustments to previous sales reserve estimates were approximately $0.1 billion and $0.7 billion in fiscal years 2022 and 2021, respectively.

Major Pharmaceutical Therapeutic Area Sales*:

Total Operations Currency

(Dollars in Millions) 2022 2021 Change Change Change

International sales were $23.6 billion, a decrease of 1.5%, which included an operational decline of 0.2% and a negative currency impact of 1.3%.

In 2023, acquisitions and divestitures had a net negative impact of 0.1% on the operational sales growth of the worldwide Innovative Medicine segment.

Major Innovative Medicine therapeutic area sales:

(Dollars in Millions) 2023 2022 Total

Change Operations

Change Currency

Total Immunology $18,052 $16,935 6.6 % 7.1 % (0.5) %

9 unchanged sentences

Other Infectious Diseases 297 318 (6.7) (3.6) (3.1)

318 363 (12.3) (7.2) (5.1)

Total Neuroscience 7,140 6,893 3.6 5.4 (1.8)

CONCERTA/methylphenidate 783 644 21.6 24.9 (3.3)

INVEGA SUSTENNA/XEPLION/

INVEGA TRINZA/TREVICTA 4,140 4,022 3.0 6.9 (3.9)

RISPERDAL CONSTA 485 592 (18.1) (13.0) (5.1)

INVEGA SUSTENNA/XEPLION/INVEGA TRINZA/TREVICTA 4,115 4,140 (0.6) 0.0 (0.6)

SPRAVATO 689 374 84.1 84.0 0.1

Other Neuroscience (2)

1 unchanged sentence

Total Oncology 17,661 15,983 10.5 11.2 (0.7)

CARVYKTI 500 133 * * *

DARZALEX 9,744 7,977 22.2 22.9 (0.7)

9 unchanged sentences

XARELTO 2,365 2,473 (4.4) (4.4) —

INVOKANA/ INVOKAMET 448 563 (20.4) (17.2) (3.2)

1,306 1,414 (7.6) (7.4) (0.2)

Total Pharmaceutical Sales $ 52,563 51,680 1.7 % 6.7 % (5.0) %

*Certain prior year amounts have been reclassified to conform to current year presentation

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

(2) Fiscal 2021 reflects approximately $0.4 billion of certain international OTC products, primarily in China, which were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes

Total Innovative Medicine Sales $54,759 52,563 4.2 % 4.8 % (0.6) %

* Percentage greater than 100% or not meaningful

(1) Previously referred to as Pharmaceutical

(2) Inclusive of RISPERDAL CONSTA which was previously disclosed separately

(3) Inclusive of INVOKANA which was previously disclosed separately

2023 Annual Report

Immunology products achieved sales of $18.1 billion in 2023, representing an increase of 6.6% as compared to the prior year.

Operational growth was driven by strong uptake of STELARA (ustekinumab) in Crohn's disease and Ulcerative Colitis and strength of TREMFYA (guselkumab) in Psoriasis and uptake in Psoriatic Arthritis.

This was partially offset by lower sales of REMICADE (infliximab) due to biosimilar competition.

Increased sales of STELARA (ustekinumab) were primarily driven by patient mix, market growth, and continued strength in Inflammatory Bowel Disease.

Growth of TREMFYA (guselkumab) was due to market growth, continued strength in PsO/PsA (Psoriasis and Psoriatic Arthritis) and patient mix.

Additionally, SIMPONI/SIMPONI ARIA growth was driven by growth outside the U.S.

Lower sales of REMICADE (infliximab) were due to biosimilar competition.

Biosimilar versions of REMICADE have been introduced in the United States and certain markets outside the United States and additional competitors continue to enter the market.

Continued infliximab biosimilar competition will result in a further reduction in sales of REMICADE.

The latest expiring United States patent for STELARA (ustekinumab) will expire in September 2023.

STELARA (ustekinumab) U.S.

sales in fiscal 2022 were approximately $6.4 billion and the expiration of this product patent or loss of market exclusivity will result in a reduction in sales.

Infectious disease products sales were $5.4 billion in 2022, representing a decline of 6.5% as compared to the prior year.

Operational growth was driven by the COVID-19 vaccine outside the U.S partially offset by lower sales of PREZISTA and PREZCOBIX/REZOLSTA (darunavir/cobicistat) due to increased competition and loss of exclusivity of PREZISTA in certain countries outside the U.S.

Neuroscience products sales were $6.9 billion, in 2022, representing a decline of 1.4% as compared to the prior year.

The operational sales growth of INVEGA SUSTENNA/XEPLION (paliperidone palmitate) and INVEGA TRINZA/TREVICTA from new patient starts and persistence as well as the launch of INVEGA HAFYERA was offset by negative currency impacts and lower sales of RISPERDAL CONSTA.

Sales of STELARA in the United States were approximately $7.0 billion in fiscal 2023.

Third parties have filed abbreviated Biologics License Applications with the FDA seeking approval to market biosimilar versions of STELARA.

The Company has settled certain litigation under the Biosimilar Price Competition and Innovation Act of 2009.

As a result of these settlements and other agreements with separate third parties, the Company does not anticipate the launch of a biosimilar version of STELARA until January 1, 2025 in the United States.

Infectious disease products sales were $4.4 billion in 2023, a decline of 18.9% as compared to the prior year primarily driven by a decline in COVID-19 vaccine revenue and loss of exclusivity of PREZISTA .

Neuroscience products sales were $7.1 billion in 2023, representing an increase of 3.6% as compared to the prior year.

The growth of SPRAVATO (esketamine) was driven by ongoing launches as well as increased physician confidence and patient demand.

Growth was partially offset by declines in RISPERDAL/RISPERDAL CONSTA and the paliperidone long-acting injectables outside the U.S.

due to the XEPLION loss of exclusivity in the European Union.

Oncology products achieved sales of $17.7 billion in 2023, representing an increase of 10.5% as compared to the prior year.

Contributions to operational growth were strong sales of DARZALEX (daratumumab) driven by share gains in all regions, continued strong market growth, and uptake of the subcutaneous formulation as well as the continued global launch uptake of ERLEADA (apalutamide).

This was partially offset by declining sales of IMBRUVICA (ibrutinib) due to competitive pressures and market suppression and ZYTIGA due to loss of exclusivity in the European Union in the second half of 2022.

Pulmonary Hypertension products sales were $3.4 billion, a decline of 1.0% as compared to the prior year.

The operational sales growth of OPSUMIT (macitentan) and UPTRAVI (selexipag) due to continued share gains and market growth was offset by COVID-19 related impacts and continued declines in Other Pulmonary Hypertension.

Sales of DARZALEX (daratumumab) were driven by continued share gains in all regions and market growth.

Growth of ERLEADA (apalutamide) was due to continued share gains and market growth in Metastatic Castration Resistant Prostate Cancer.

Sales of CARVYKTI (ciltacabtagene autoleucel) were driven by the ongoing launch, share gains and capacity improvement.

Additionally, sales from the launch of TECVAYLI (teclistamab-cqyv) and TALVEY (talquetamab-tgvs), included in Other Oncology, contributed to the growth.

Growth was partially offset by ZYTIGA (abiraterone acetate) due to loss of exclusivity and IMBRUVICA (ibrutinib) due to global competitive pressures.

Pulmonary Hypertension products sales were $3.8 billion, representing an increase of 11.6% as compared to the prior year.

Sales growth was due to favorable patient mix, share gains and market growth from UPTRAVI (selexipag) and OPSUMIT (macitentan) partially offset by declines in Other Pulmonary Hypertension.

Cardiovascular/Metabolism/Other products sales were $3.7 billion, a decline of 5.5% as compared to the prior year.

The operational decline was primarily attributable to lower sales of INVOKANA/INVOKAMET (canagliflozin) due to share erosion and PROCRIT/ EPREX (epoetin alfa) due to biosimilar competition.

The Company updated its policy so that no end customer will be permitted direct delivery of product to a location other than the billing location.

The policy impacts contract pharmacy transactions involving non-grantee 340B covered entities for most of the Company’s drugs, subject to multiple exceptions.

The decline of XARELTO (rivaroxaban) sales was primarily driven by unfavorable patient mix and access changes.

The Company maintains a policy that no end customer will be permitted direct delivery of product to a location other than the billing location.

This policy impacts contract pharmacy transactions involving non-grantee 340B covered entities for most of the Company’s drugs, subject to multiple exceptions.

Both grantee and non-grantee covered entities can maintain certain contract pharmacy arrangements under policy exceptions.

2 unchanged sentences

federal government program requiring drug manufacturers to provide significant discounts on covered outpatient drugs to covered entities.

This policy update had discount implications which positively impacted sales to customers in 2022.

This policy had discount implications which positively impacted sales to customers in 2023.

During 2023, the Company advanced its pipeline with several regulatory submissions and approvals for new drugs and additional indications for existing drugs as follows:

Product Name (Chemical Name) Indication US Approval EU Approval US Filing EU Filing

aprocitentan Treatment for difficult to treat hypertension •

CABENUVA (rilpivirine and cabotegravir) HIV treatment for adolescents •

CARVYKTI (ciltacabtagene autoleucel) Treatment for patients with relapsed or refractory Multiple Myeloma • •

(Chemical Name) Indication US

AKEEGA (Niraparib and Abiraterone Acetate) First-And-Only Dual Action Tablet for the Treatment of Patients with BRCA-Positive Metastatic Castration-Resistant Prostate Cancer (MAGNITUDE) • •

BALVERSA (erdafitinib) Treatment of Patients with Locally Advanced or Metastatic Urothelial Carcinoma and Selected Fibroblast Growth Factor Receptor Gene Alterations (THOR) • •

CARVYKTI (ciltacabtagene autoleucel) Treatment for Relapsed and Refactor multiple myeloma with 1-3 PL (CARTITUDE-4) • •

EDURANT (rilpivirine) Treatment for pediatric patients (2-12 years old) with HIV • •

(apalutamide) Tablet reduction • •

IMBRUVICA (ibrutinib) Treatment for Pediatric Patients with Chronic Graft-Versus-Host Disease •

Treatment for Frontline Chronic Lymphocytic Leukemia (I + V fixed duration) (GLOW) •

niraparib Treatment of L1 Prostate cancer metastatic castration-resistant in combination with abiraterone acetate and Prednisone •

STELARA (ustekinumab) Treatment of Pediatric Patients with Juvenile Psoriatic Arthritis •

Talquetamab Treatment of Patients with Relapsed Refractory Multiple Myeloma •

(BCMA/CD3) Treatment of Patients with Relapsed Refractory Multiple Myeloma • •

OPSUMIT (macitentan) Treatment for pediatric pulmonary arterial hypertension •

OPSYNVI (mecitentan/tadalafil STCT) Treatment for pulmonary arterial hypertension • •

RYBREVANT (amivantamab) In Combination with Chemotherapy for the First-Line Treatment of Adult Patients with Advanced Non-Small Cell Lung Cancer with Activating EGFR Exon 20 Insertion Mutations (PAPILLON) • •

RYBREVANT / lazertinib Treatment for Non-Small Cell Lung Cancer 2L (MARIPOSA) • •

RYBREVANT / lazertinib Treatment for Non-Small Cell Lung Cancer 2L (MARIPOSA-2) • •

TECVAYLI (teclistamab) Treatment of Patients with Relapsed Refractory Multiple Myeloma Biweekly Dosing •

TALVEY (talquetamab) Treatment of Patients with Relapsed and Refractory Multiple Myeloma • •

2023 Annual Report

MedTech segment

1 unchanged sentence

sales were $15.3 billion, an increase of 14.2% as compared to the prior year.

International sales were $14.1 billion, a decrease of 2.3% as compared to the prior year, which included operational growth of 6.9% and a negative currency impact of 9.2%.

In 2022, the net impact of acquisitions and divestitures on the MedTech segment worldwide operational sales growth was a positive 0.1%.

International sales were $15.1 billion, an increase of 7.7% as compared to the prior year, which included operational growth of 10.6% and a negative currency impact of 2.9%.

In 2023, the net impact of acquisitions and divestitures on the MedTech segment worldwide operational sales growth was a positive 4.6% primarily related to the Abiomed acquisition.

Major MedTech franchise sales:

Total Operations Currency

(Dollars in Millions) 2022 2021 Change Change Change

(Dollars in Millions) 2023 2022 Total

Change Operations

Change Currency

Surgery $10,037 9,690 3.6 % 5.5 % (1.9) %

6 unchanged sentences

Spine, Sports & Other 2,947 2,843 3.7 4.5 (0.8)

Interventional Solutions 6,350 4,300 47.7 49.8 (2.1)

Electrophysiology 4,688 3,937 19.1 21.1 (2.0)

Abiomed 1,306 31 * * *

Other Interventional Solutions 356 332 7.1 9.9 (2.8)

Vision 5,072 4,849 4.6 6.6 (2.0)

1 unchanged sentence

Surgical 1,370 1,306 4.9 5.8 (0.9)

Interventional Solutions

4,300 3,971 8.3 13.7 (5.4)

Total MedTech Sales $30,400 27,427 10.8 % 12.4 % (1.6) %

*Certain prior year amounts have been reclassified to conform to current year presentation

**Previously referred to as Medical Devices

The Surgery franchise sales were $9.7 billion in 2022, representing a decline of 1.2% from 2021.

The operational growth in Advanced Surgery was primarily driven by the following:

Endocutter market recovery and new products partially offset by competitive pressures in the U.S.;

Biosurgery market recovery and the success of new products partially offset by strong U.S.

market demand in the prior year for infection prevention products;

and Energy products driven by market recovery and new product penetration coupled with competitive supply challenges.

The operational growth in General Surgery was primarily driven by market recovery and technology penetration.

The Orthopaedics franchise sales were $8.6 billion in 2022, which was flat to the prior year.

The Orthopaedics franchise included operational sales growth of 3.7% offset by a negative currency impact of 3.7%.

The operational growth in hips reflects the market recovery combined with continued strength of the portfolio including the ACTIS stem and enabling technologies – KINCISE and VELYS Hip Navigation.

This growth was partially offset by impacts of volume-based procurement in China and the timing of tenders outside the U.S.

The operational growth in knees was primarily driven by procedure recovery, strength of the ATTUNE portfolio and pull through related to the VELYS Robotic assisted solution.

This growth was partially offset by impacts of volume-based procurement in China and timing of tenders outside the U.S.

The operational growth in Trauma was driven by global market recovery and uptake of new products.

The operational growth in Spine, Sports & Other was primarily driven by procedure recovery and new product introductions.

This growth was partially offset by competitive pressures in Spine and impacts of volume-based procurement in China.

* Percentage greater than 100% or not meaningful

The Surgery franchise sales were $10.0 billion in 2023, representing an increase of 3.6% from 2022.

The growth in Advanced Surgery was primarily driven by Biosurgery global procedure growth and strength of the portfolio as well as uptake of new products in Endocutters and Energy.

The growth was partially offset by competitive pressures and volume-based procurement impacts in Endocutters and Energy.

The growth in General Surgery was primarily driven by increased procedures coupled with technology penetration and benefits from the differentiated Wound Closure portfolio.

The Orthopaedics franchise sales were $8.9 billion in 2023, representing an increase of 4.1% from 2022.

The growth in hips reflects global procedure growth and continued strength of the portfolio partially offset by volume-based procurement impacts and Russia sanctions.

The growth in knees was primarily driven by procedures, benefits from recent product additions to the ATTUNE portfolio and pull through related to the VELYS Robotic assisted solution.

This was partially offset by stocking dynamics, primarily outside the U.S.

The growth in Trauma was driven by global procedures and the adoption of recently launched products.

This was partially offset by volume-based procurement impacts.

The growth in Spine, Sports & Other was primarily driven by Digital Solutions, Shoulders, Sports and Craniomaxillofacial products partially offset by Russia sanctions and supply constraints, primarily outside the U.S.

The Interventional Solutions franchise achieved sales of $6.4 billion in 2023, representing an increase of 47.7% from 2022, which includes sales from Abiomed acquired on December 22, 2022.

Electrophysiology grew by double digits due to global procedure growth, new product performance and commercial execution.

This was partially offset by the impacts of volume-based procurement in China.

Abiomed sales reflect the strength of all commercialized regions and continued adoption of Impella 5.5 and Impella RP.

The Vision franchise achieved sales of $5.1 billion in 2023, representing an increase of 4.6% from 2022.

The Contact Lenses/Other operational growth was due to market recovery, price actions, commercial execution and benefits from new products.

Surgical Vision operational growth was primarily due to market recovery and the success of new products and was partially offset by a higher prior year U.S.

Refractory market.

The Interventional Solutions franchise achieved sales of $4.3 billion in 2022, representing an increase of 8.3% from 2021.

Operational growth was driven by market recovery and success of new products and commercial strategies.

Interventional solutions also includes sales from Abiomed, Inc.

(Abiomed) which were reflected as of December 22, 2022.

The Contact Lenses/Other growth was primarily driven by the continued strong performance in the ACUVUE OASYS 1-Day family including recent launches and commercial execution.

This was partially offset by impacts of U.S.

stocking dynamics, Russia sanctions, impacts from strategic portfolio decisions and supply challenges.

The Surgical operational growth was primarily driven by cataract procedure growth, continued strength of recent innovations and reduction of prior year stocking outside the U.S.

This was partially offset by softer Refractive and premium IOL markets and Russia sanctions.

Analysis of consolidated earnings before provision for taxes on income

1 unchanged sentence

As a percent to sales, consolidated earnings before provision for taxes on income was 17.7% and 24.2%, in 2023 and 2022, respectively.

Earnings before provision for taxes

(Dollars in billions.

1 unchanged sentence

Cost of products sold and selling, marketing and administrative expenses:

Cost of products sold

Selling, marketing & administrative

(Dollars in billions.

Percentages in chart are as a percent to total sales)

Cost of products sold:

Cost of products sold increased as a percent to sales driven by:

• One-time COVID-19 vaccine manufacturing exit related costs

• Currency impacts in the Pharmaceutical segment

• Commodity inflation in the MedTech and Consumer Health segments

• Commodity inflation, unfavorable product mix, restructuring related excess inventory costs and Abiomed amortization in the MedTech business

partially offset by

• Supply chain benefits in the Consumer Health segment

• Favorable patient mix and lower one-time COVID-19 vaccine manufacturing related exit costs in 2023 in the Innovative Medicine business

The intangible asset amortization expense included in cost of products sold was $4.5 billion and $3.9 billion for the fiscal years 2023 and 2022, respectively.

Selling, Marketing and Administrative Expenses decreased as a percent to sales driven by:

• Reduction of brand marketing expenses in the Pharmaceutical and Consumer Health businesses

2023 Annual Report

Selling, Marketing and Administrative expense:

Selling, Marketing and Administrative Expenses decreased slightly as a percent to sales driven by:

• Leveraging in Selling and Marketing expenses both the Innovative Medicine and MedTech businesses

partially offset by

• An increase in administrative costs

Research and Development Expense:

1 unchanged sentence

(Dollars in Millions) Amount % of Sales* Amount % of Sales*

Consumer Health $ 493 3.3 % $ 459 3.1 %

Pharmaceutical 11,622 22.1 11,878 23.0

Innovative Medicine $11,963 21.8 % $11,642 22.1 %

MedTech 3,122 10.3 2,493 9.1

5 unchanged sentences

The Company remains committed to investing in research and development with the aim of delivering high quality and innovative products.

Research and Development decreased as a percent to sales primarily driven by:

• Lower milestone payments in the Pharmaceutical business

In-Process Research and Development (IPR&D):

In the fiscal year 2022, the Company recorded 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).

Research and Development was flat as a percent to sales primarily driven by:

• Higher milestone payments in the Innovative Medicine business

• Acquired in-process research & development asset from the Laminar acquisition in the MedTech business in the fiscal year 2023

• Portfolio prioritization in the Innovative Medicine business

In-Process Research and Development Impairments (IPR&D):

In the fiscal year 2023, the Company recorded a charge of approximately $0.3 billion which included $0.2 billion related to market dynamics associated with a non-strategic asset (M710) acquired as part of the acquisition of Momenta Pharmaceuticals in 2020, In the fiscal year 2022, the Company recorded 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).

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

1 unchanged sentence

in the fiscal year 2020.

In fiscal year 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) 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 Company will continue to monitor the remaining $1.5 billion Ottava platform intangible asset as development program activities are ongoing.

Other (Income) Expense, Net:

3 unchanged sentences

(Dollars in Billions)(Income)/Expense 2023 2022 Change

Consumer Health separation costs $ 1.0 0.1 0.9

Litigation related (1)

0.9 2.3 (1.4)

Changes in the fair value of securities (2)

One-time COVID-19 vaccine manufacturing exit related costs 0.7 0.0 0.7

Acquisition, Integration and Divestiture related (2)

0.6 0.7 (0.1)

Restructuring related 0.1 0.1 0.0

COVID-19 vaccine manufacturing exit related costs 0.4 0.7 (0.3)

Acquisition, Integration and Divestiture related (3)

Employee benefit plan related (1.4) (1.2) (0.2)

1 unchanged sentence

Total Other (Income) Expense, Net $6.6 0.8 5.8

( 1) 2022 was primarily related to pelvic mesh and 2021 was primarily related to talc and Risperdal Gynecomastia

(1) 2023 was primarily related to the approximately $7.0 billion charge for talc (See Note 19 to the Consolidated Financial Statements for more details) and favorable intellectual property related litigation settlements of approximately $0.3 billion.

2022 was primarily related to pelvic mesh.

(2) The fiscal 2023 includes $0.4 billion related to the unfavorable change in the fair value of the remaining stake in Kenvue and $0.4 billion related to the partial impairment of Idorsia convertible debt and the change in the fair value of the Idorsia equity securities held.

(3) 2023 primarily related to the impairment of Ponvory and one-time integration costs related to the acquisition of Abiomed.

2022 was primarily costs related to the acquisition of Abiomed.

2021 was p rimarily related to divestiture gains of two pharmaceutical brands outside the U.S.

Interest (Income) Expense:

Interest (income) expense in the fiscal of 2022 was net interest income of $214 million as compared to interest expense of $130 million in the fiscal year 2021 primarily due to higher rates of interest earned on cash balances.

Cash, cash equivalents and marketable securities totaled $23.5 billion at the end of 2022, and averaged $27.6 billion as compared to the cash, cash equivalents and marketable securities total of $31.6 billion and $28.4 billion average cash balance in 2021.

Interest income in the fiscal year 2023 was $1.3 billion as compared to interest income of $0.5 billion in the fiscal year 2022 primarily due to higher rates of interest earned on cash balances.

Interest expense in the fiscal year 2023 was $0.8 billion as compared to interest expense of $0.3 billion in the fiscal year 2022 primarily due to higher interest rates on debt balances.

Cash, cash equivalents and marketable securities totaled $22.9 billion at the end of 2023, and averaged $22.6 billion as compared to the cash, cash equivalents and marketable securities total of $22.3 billion and $26.9 billion average balance in 2022.

The total debt balance at the end of 2023 was $29.3 billion with an average debt balance of $34.5 billion as compared to $39.6 billion at the end of 2022 and an average debt balance of $36.7 billion.

The lower average cash, cash equivalents and marketable securities and higher average debt balance were primarily due to the acquisition of Abiomed in late December of 2022.

The lower average cash, cash equivalents and marketable securities was primarily due to the acquisition of Abiomed in late December of 2022.

The lower average debt balance was primarily due to the repayment of commercial paper.

Income before tax by segment

2 unchanged sentences

(Dollars in Millions) 2023 2022 2023 2022 2023 2022

Consumer Health (3)

$ 2,930 1,573 14,953 15,035 19.6 % 10.5

Pharmaceutical (3)

15,901 17,969 52,563 51,680 30.3 34.8

Innovative Medicine $18,246 15,647 54,759 52,563 33.3 % 29.8

MedTech 4,669 4,447 30,400 27,427 15.4 16.2

2 unchanged sentences

Expenses not allocated to segments (2)

Consumer Health separation costs 1,089 67

Worldwide income before tax $15,062 19,359 85,159 79,990 17.7 % 24.2

1 unchanged sentence

(2) Amounts not allocated to segments include interest (income) expense and general corporate (income) expense.

(3) Prior year income before tax of approximately $0.2 billion 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.

Consumer Health Segment:

In 2022, the Consumer Health segment income before tax as a percent of sales was 19.6% versus 10.5% in 2021.

Fiscal 2023 includes an approximately $7.0 billion charge related to talc matters and the approximately $0.4 billion unfavorable change in the fair value of the retained stake in Kenvue.

2023 Annual Report

Innovative Medicine segment:

In 2023, the Innovative Medicine segment income before tax as a percent to sales was 33.3% versus 29.8% in 2022.

The increase in the income before tax as a percent of sales was primarily driven by the following:

• Lower litigation expense of $0.2 billion in 2022 versus $1.6 billion (primarily talc related) in 2021

• Reduction in brand marketing expenses in 2022 versus 2021

• Supply chain benefits in 2022

partially offset by:

• Commodity inflation in 2022

Pharmaceutical Segment:

In 2022, the Pharmaceutical segment income before tax as a percent to sales was 30.3% versus 34.8% in 2021.

The decrease in the income before tax as a percent of sales was primarily driven by the following:

• One-time COVID-19 vaccine manufacturing exit related costs of $1.5 billion in 2022

• Unfavorable changes in the fair value of securities ($0.7 billion loss in 2022 vs.

$0.5 billion gain in 2021)

• An IPR&D charge of $0.8 billion in 2022 related to bermekimab (JnJ-77474462), an investigational drug for the treatment of Atopic Dermatitis (AD) and Hidradenitis Suppurativa (HS)

• Lower divestiture gains of $0.1 billion in 2022 versus $0.6 billion related to two pharmaceutical brands outside the U.S.

in fiscal 2021

• Currency impacts in Cost of Products Sold

• Lower one-time COVID-19 Vaccine related exit costs of $0.7 billion in 2023 versus $1.5 billion in 2022

• Lower In-process research & development impairments of $0.2 billion in 2023 versus $0.8 billion in 2022

• Unfavorable changes in the fair value of securities in 2023 of $0.4 billion as compared to $0.7 billion in 2022

• Lower litigation related expense of $0.2 billion

• Leveraging in selling and marketing expenses

• R&D Portfolio prioritization

partially offset by

• Lower litigation related expense of $0.1 billion in 2022 versus $0.6 billion (primarily related to Risperdal Gynecomastia) in 2021

• Lower Research & Development milestone payments in 2022

• Lower brand marketing expenses in 2022 versus 2021

In fiscal 2020 and 2021, the Company entered into a series of contract manufacturing arrangements for vaccine production with third party contract manufacturing organizations.

These arrangements provided the Company with supplemental commercial capacity for vaccine production and potentially transferable rights to such production if capacity is not required.

The Company continues to evaluate and monitor both its internal and external supply arrangements.

In fiscal 2022, the COVID-19 Vaccine related costs (mentioned above) included the remaining commitments and obligations, including external manufacturing network exit and related inventory costs and required clinical trial expenses, associated with the Company's modification of its

COVID-19 vaccine research program and manufacturing capacity to levels that meet all remaining customer contractual requirements.

• Restructuring charges of $0.5 billion in 2023 versus $0.1 billion in 2022

• Impairment of Ponvory in 2023

• Higher milestone payments in 2023

MedTech segment:

In 2023, the MedTech segment income before tax as a percent to sales was 15.4% versus 16.2% in 2022.

The increase in the income before tax as a percent to sales was primarily driven by the following:

• An IPR&D charge of $0.9 billion in 2021 related to the general surgery offering in digital robotics (Ottava) acquired with the Auris Health acquisition in 2019

The decrease in the income before tax as a percent to sales was primarily driven by the following:

• Higher amortization expense of $0.5 billion in 2023 related to Abiomed

• Expense of $0.4 billion for an acquired in process research and development asset from the Laminar acquisition in 2023

• Commodity inflation in 2023

partially offset by

• Higher litigation related expense of $0.6 billion in 2022, primarily related to pelvic mesh costs versus $0.1 billion in 2021

• Acquisition related costs of $0.3 billion in 2022 related to the Abiomed acquisition versus $0.1 billion in 2021

• Income from litigation settlements of $0.1 billion in 2023 versus expense of $0.6 billion in 2022

• Lower integration/acquisition costs related to Abiomed of $0.2 billion in 2023 versus $0.3 billion in 2022

• Leveraging in selling and marketing expenses in 2023

Restructuring:

In the fiscal second quarter of 2018, the Company announced plans to implement actions across its Global Supply Chain that are intended to enable the Company to focus resources and increase investments in critical capabilities, technologies and solutions necessary to manufacture and supply its product portfolio of the future, enhance agility and drive growth.

The Global Supply Chain actions included expanding its use of strategic collaborations, and bolstering its initiatives to reduce complexity, improving cost-competitiveness, enhancing capabilities and optimizing its supply chain network.

The Company has achieved approximately $0.8 billion in annual pre-tax cost savings as outlined in the restructuring actions.

In 2022, the Company recorded a pre-tax charge of $0.5 billion, which is included on the following lines of the Consolidated Statement of Earnings, $0.3 billion in restructuring, $0.1 billion in other (income) expense and $0.1 billion in cost of products sold.

Total project costs of approximately $2.2 billion have been recorded since the restructuring was announced.

The program was completed in the fiscal fourth quarter of 2022.

In the fiscal year 2023, the Company completed a prioritization of its research and development (R&D) investment within the Innovative Medicine segment to focus on the most promising medicines with the greatest benefit to patients.

This resulted in the exit of certain programs within therapeutic areas.

The R&D program exits are primarily in infectious diseases and vaccines including the discontinuation of its respiratory syncytial virus (RSV) adult vaccine program, hepatitis and HIV development.

The pre-tax restructuring charge of approximately $0.5 billion in the fiscal year 2023, of which $449 million was recorded in Restructuring and $30 million was recorded in Cost of products sold on the Consolidated Statement of Earnings, included the termination of partnered and non-partnered program costs and asset impairments.

In the fiscal year 2023, the Company initiated a restructuring program of its Orthopaedics franchise within the MedTech segment to streamline operations by exiting certain markets, product lines and distribution network arrangements.

The pre-tax restructuring expense of $0.3 billion in the fiscal year 2023, of which $40 million was recorded in Restructuring and $279 million was recorded in Cost of products sold on the Consolidated Statement of Earnings, primarily included inventory and instrument charges related to market and product exits.

In 2022, the Company recorded a pre-tax charge of $0.4 billion related to a restructuring program of its Global Supply Chain.

The Global Supply Chain program was announced in the second quarter of 2018 and was completed in the fiscal fourth quarter of 2022.

See Note 20 to the Consolidated Financial Statements for additional details related to the restructuring programs.

Provision for Taxes on Income:

The worldwide effective income tax rate was 17.4% in 2022 and 8.3% in 2021.

In the fiscal 2022, the Company incurred approximately $0.5 billion net incremental international tax cost related to the legal separation of the Consumer Health business, and may continue to incur additional cost in fiscal 2023.

The worldwide effective income tax rate from continuing operations was 11.5% in 2023 and 15.4% in 2022.

On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework that was supported by over 130 countries worldwide.

The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.

A significant number of other countries are expected to also implement similar legislation, including South Korea which approved legislation on December 23, 2022 with a full effective date of January 1, 2024.

The Company is continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries, including those within the European Union.

As of December 31, 2023, several EU and non-EU countries have enacted Pillar 2 legislation with an initial effective date of January 1, 2024, with other aspects of the law effective in 2025 or later.

The Company is estimating that as result of this legislation the 2024 effective tax rate will increase by approximately 1.5% or 150 basis points compared to fiscal 2023.

Further legislation, guidance and regulations that may be issued in fiscal 2024, as well as other business events, may impact this estimate.

For discussion related to the fiscal 2023 provision for taxes refer to Note 8 to the Consolidated Financial Statements.

2 unchanged sentences

Cash and cash equivalents were $21.9 billion at the end of 2023 as compared to $14.1 billion at the end of 2022.

The primary sources and uses of cash that contributed to the $0.4 billion decrease were:

The primary sources and uses of cash that contributed to the $7.8 billion increase were:

(Dollars in billions)

1 unchanged sentence

22.8 cash generated from operating activities

(12.4) net cash used by investing activities

0.9 net cash from investing activities

(15.8) net cash used by financing activities

6 unchanged sentences

$35.2 Net Earnings

7.3 non-cash expenses and other adjustments primarily for depreciation and amortization, stock-based compensation and asset write-downs partially offset by the deferred tax provision, net gain on sale of assets/businesses and credit losses and accounts receivable allowances

(2.0) a decrease in current and non-current liabilities

0.7 a decrease in other current and non-current assets

(14.9) gain on the Kenvue separation, net gain on sale of assets/businesses and the deferred tax provision partially offset by non-cash expenses and other adjustments primarily for depreciation and amortization, stock-based compensation, asset write-downs and charge for purchase of in process research and development assets

5.6 an increase in current and non-current liabilities

(3.5) an increase in other current and non-current assets

2.3 an increase in accounts payable and accrued liabilities

1 unchanged sentence

$22.8 Cash flow from operations

Investing activities use of $12.4 billion of cash was primarily used for:

2023 Annual Report

Cash flow from investing activities of $0.9 billion was primarily due to:

(Dollars in billions)

$(4.5) additions to property, plant and equipment

(17.7) acquisitions

0.4 proceeds from the disposal of assets/businesses, net

(0.5) purchases of in-process research and development assets

8.5 net sales of investments

(3.0) credit support agreements activity, net

(0.2) other (primarily licenses and milestones) and rounding

$ (12.4) Net cash used for investing activities

Financing activities use of $8.9 billion of cash was primarily used for:

$0.9 Net cash from investing activities

Cash flow used for financing activities of $15.8 billion was primarily due to:

(Dollars in billions)

1 unchanged sentence

(5.1) repurchase of common stock

7.5 net proceeds from short and long term debt

(10.8) net repayment from short and long term debt

1.1 proceeds from stock options exercised/employee withholding tax on stock awards, net

(0.2) Credit support agreements activity, net

8.0 Proceeds of short and long-term debt, net of issuance cost, related to the debt that transferred to Kenvue at separation

4.2 proceeds from Kenvue initial public offering

(1.1) Cash transferred to Kenvue at separation

(0.1) other and rounding

$(15.8) Net cash used for financing activities

As of January 1, 2023, the Company's notes payable and long-term debt was in excess of cash, cash equivalents and marketable securities.

As of January 1, 2023, the net debt position was $16.1 billion as compared to the prior year of $2.1 billion.

The increase was primarily due to the acquisition of Abiomed, Inc.

in December 2022.

As of December 31, 2023, the Company's notes payable and long-term debt was in excess of cash, cash equivalents and marketable securities.

As of December 31, 2023, the net debt position was $6.4 billion as compared to the prior year of $17.4 billion.

The debt balance at the end of 2023 was $29.3 billion as compared to $39.6 billion in 2022.

Considering recent market conditions, the Company has re-evaluated its operating cash flows and liquidity profile and does not foresee any significant incremental risk.

The Company anticipates that operating cash flows, the ability to raise funds from external sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will continue to provide sufficient resources to fund operating needs, including the Company's remaining balance to be paid on the agreement to settle opioid litigation for approximately $2.7 billion and the establishment of the $2.0 billion trust for talc related liabilities (See Note 19 to the Consolidated Financial Statements for additional details).

The Company anticipates that operating cash flows, the ability to raise funds from external sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will continue to provide sufficient resources to fund operating needs, including the Company's remaining balance to be paid on the agreement to settle opioid litigation for approximately $2.1 billion and the establishment of the approximately $9 billion reserve for talc matters (See Note 19 to the Consolidated Financial Statements for additional details).

In addition, the Company monitors the global capital markets on an ongoing basis and from time to time may raise capital when market conditions are favorable.

Effective beginning in fiscal 2022, the U.S.

Tax Cuts and Job Act of 2017 (TCJA) requires the Company to deduct U.S.

and international research and development expenditures for tax purposes over 5 to 15 years, instead of in the current fiscal year.

As a result, in fiscal 2022, the Company experienced an increase in annual cash tax payments of approximately $1.2 billion above what otherwise would have been remitted to the U.S Treasury.

The Company concurrently records a deferred tax benefit for the future amortization of the research and development (R&D) for tax purposes.

The requirement to expense R&D as incurred is unchanged for U.S.

GAAP purposes and the impact to pre-tax R&D expense is not affected by this provision.

On May 8, 2023, Kenvue, completed an initial public offering (the IPO) resulting in the issuance of 198,734,444 shares of its common stock, par value $0.01 per share (the Kenvue Common Stock), at an initial public offering of $22.00 per share for net proceeds of $4.2 billion.

The excess of the net proceeds from the IPO over the net book value of the Johnson & Johnson divested interest was $2.5 billion and was recorded to additional paid-in capital.

As of the closing of the IPO, Johnson & Johnson owned approximately 89.6% of the total outstanding shares of Kenvue Common Stock and at July 2, 2023, the non-controlling interest of $1.3 billion associated with Kenvue was reflected in equity attributable to non-controlling interests in the consolidated balance sheet.

On August 23, 2023, Johnson & Johnson completed the disposition of an additional 80.1% ownership of Kenvue Common Stock through an exchange offer, which resulted in Johnson & Johnson acquiring 190,955,436 shares of the Company’s common stock in exchange for 1,533,830,450 shares of Kenvue Common Stock.

The $31.4 billion of Johnson & Johnson common stock received in the exchange offer is recorded in Treasury stock.

Following the exchange offer, the Company owns 9.5% of the total outstanding shares of Kenvue Common Stock that was recorded in other assets within continuing operations at the fair market value of $4.3 billion as of August 23, 2023 and $3.9 billion as of December 31, 2023.

Johnson & Johnson divested net assets of $11.6 billion as of August 23, 2023, and the accumulated other comprehensive loss attributable to the Consumer Health business at that date was $4.3 billion.

Additionally, at the date of the exchange offer,

Johnson & Johnson decreased the non-controlling interest by $1.2 billion to record the deconsolidation of Kenvue.

This resulted in a gain on the exchange offer of $21.0 billion that was recorded in Net earnings from discontinued operations, net of taxes in the consolidated statements of earnings for the fiscal third quarter of 2023.

This one-time gain includes a gain of $2.8 billion on the Kenvue Common Stock retained by Johnson & Johnson.

The gain on the exchange offer qualifies as a tax-free transaction for U.S.

federal income tax purposes.

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 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.

Any shares acquired will be available

for general corporate purposes.

The Company intends to finance the share repurchase program through available cash.

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

The following table summarizes the Company’s material contractual obligations and their aggregate maturities as of January 1, 2023:

In the fiscal year 2022, approximately $2.5 billion was repurchased under the program.

In the fiscal year 2023, $2.5 billion has been repurchased and the repurchase program was completed.

The following table summarizes the Company’s material contractual obligations and their aggregate maturities as of December 31, 2023:

To satisfy these obligations, the Company intends to use cash from operations.

9 unchanged sentences

For tax matters, see Note 8 to the Consolidated Financial Statements.

2023 Annual Report

Financing and market risk

3 unchanged sentences

A 10% appreciation of the U.S.

Dollar from the January 1, 2023 market rates would increase the unrealized value of the Company’s forward contracts by $0.1 billion.

Dollar from the December 31, 2023 market rates would increase the unrealized value of the Company’s forward contracts by $0.1 billion.

Conversely, a 10% depreciation of the U.S.

Dollar from the January 1, 2023 market rates would decrease the unrealized value of the Company’s forward contracts by $0.1 billion.

Dollar from the December 31, 2023 market rates would decrease the unrealized value of the Company’s forward contracts by $0.1 billion.

In either scenario, the gain or loss on the forward contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no impact on future anticipated earnings and cash flows.

14 unchanged sentences

In September 2023, the Company secured a new 364-day Credit Facility of $10 billion, which expires on September 5, 2024.

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

The Company early terminated the additional 364-day revolving Credit Facility of $10 billion, which had an expiration of November 21, 2023.

Interest charged on borrowings under the credit line agreement is based on either Secured Overnight Financing Rate (SOFR) Reference Rate or other applicable market rate as allowed plus applicable margins.

1 unchanged sentence

Total borrowings at the end of 2023 and 2022 were $29.3 billion and $39.6 billion, respectively.

The increase in borrowings was due to the acquisition of Abiomed, Inc.

The decrease in the debt balance was due to the repayment of commercial paper.

In 2023, net debt (cash and current marketable securities, net of debt) was $6.4 billion compared to net debt of $17.4 billion in 2022.

2 unchanged sentences

A summary of borrowings can be found in Note 7 to the Consolidated Financial Statements.

The Company increased its dividend in 2022 for the 60th consecutive year.

The Company increased its dividend in 2023 for the 61st consecutive year.

Cash dividends paid were $4.70 per share in 2023 and $4.45 per share in 2022.

23 unchanged sentences

Sales returns reserves are recorded at full sales value.

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

Sales returns in the Innovative Medicine segments are almost exclusively not resalable.

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.

The sales returns reserve for the total Company has been approximately 1.0% of annual net trade sales during the fiscal years 2022, 2021 and 2020.

Promotional programs, such as product listing allowances and cooperative advertising arrangements, are recorded in the same period as related sales.

Continuing promotional programs include coupons and volume-based sales incentive programs.

The redemption cost of consumer coupons is based on historical redemption experience by product and value.

The sales returns reserve for the total Company has been less than 1.0% of annual net trade sales during the fiscal years 2023, 2022 and 2021.

Promotional programs, such as product listing allowances are recorded in the same period as related sales and include volume-based sales incentive programs.

Volume-based incentive programs are based on the estimated sales volumes for the incentive period and are recorded as products are sold.

1 unchanged sentence

The Company also earns profit-share payments through collaborative arrangements of certain products, which 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.

Profit-share payments were less than 2.0% of the total revenues in fiscal year 2023 and less than 3.0% of the total revenues in fiscal year 2022 and 2021 are included in sales to customers.

In addition, the Company enters into collaboration arrangements that contain multiple revenue generating activities.

4 unchanged sentences

The Company currently discloses the impact of changes to assumptions in the quarterly or annual filing in which there is a material financial statement impact.

Below are tables that show the progression of accrued rebates, returns, promotions, reserve for doubtful accounts and reserve for cash discounts by segment of business for the fiscal years ended January 1, 2023 and January 2, 2022.

Consumer Health Segment

(Dollars in Millions) Balance at

Beginning of Period Accruals Payments/Credits Balance at

End of Period

Accrued rebates (1)

$ 287 1,052 (948) 391

Accrued returns 76 83 (88) 71

Accrued promotions 387 2,077 (2,008) 456

Subtotal $ 750 3,212 (3,044) 918

Reserve for doubtful accounts 32 5 (3) 34

Reserve for cash discounts 15 210 (208) 17

Total $ 797 3,427 (3,255) 969

Accrued rebates (1)

$ 289 893 (895) 287

Accrued returns 76 136 (136) 76

Accrued promotions 428 1,958 (1,999) 387

Subtotal $ 793 2,987 (3,030) 750

Reserve for doubtful accounts 39 0 (7) 32

Reserve for cash discounts 12 213 (210) 15

Total $ 844 3,200 (3,247) 797

(1) Includes reserve for customer rebates of $82 million at January 1, 2023 and $80 million at January 2, 2022, recorded as a contra asset.

Pharmaceutical Segment

2023 Annual Report

Innovative Medicine segment

(Dollars in Millions) Balance at

Beginning of Period Accruals Payments/Credits (2)

End of Period

Accruals Payments/

Accrued rebates (1)

14 unchanged sentences

Total $10,998 44,756 (42,661) 13,093

(1) Includes reserve for customer rebates of $203 million at January 1, 2023 and $218 million at January 2, 2022, recorded as a contra asset.

(1) Includes reserve for customer rebates of $165 million at December 31, 2023 and $203 million at January 1, 2023, recorded as a contra asset.

(2) Includes prior period adjustments

1 unchanged sentence

(Dollars in Millions) Balance at

Beginning of Period Accruals Payments/Credits Balance at

End of Period

Period Accruals Payments/

Credits Balance at

Accrued rebates (1)

14 unchanged sentences

Total $1,792 6,869 (6,880) 1,781

(1) Includes reserve for customer rebates of $802 million at January 1, 2023 and $845 million at January 2, 2022, recorded as a contra asset.

(1) Includes reserve for customer rebates of $740 million at December 31, 2023 and $802 million at January 1, 2023, recorded as a contra asset.

Income Taxes:

23 unchanged sentences

A liability is recorded when a loss is probable and can be reasonably estimated.

2023 Annual Report

See Notes 1 and 19 to the Consolidated Financial Statements for further information regarding product liability and legal proceedings.

16 unchanged sentences

New accounting pronouncements

Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of January 1, 2023.

Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 31, 2023.

Economic and market factors

6 unchanged sentences

Inflation rates continue to have an effect on worldwide economies and, consequently, on the way companies operate.

The Company has accounted for operations in Argentina and Venezuela as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%.

Beginning in the fiscal second quarter of 2022, the Company accounted for operations in Turkey as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%.

The Company has accounted for operations in Argentina, Venezuela and Turkey (beginning in the fiscal second quarter of 2022) as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%.

This did not have a material impact to the Company's results in the period.

In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and periodic price increases.

In December 2023, the Argentine government devalued the peso by approximately 50%.

During 2023, the Company recorded a charge of approximately $130 million related to operations in Argentina due to the application of highly inflationary accounting.

As of December 31, 2023, the Company’s Argentine subsidiaries represented less than 1.0% of the Company's consolidated assets, liabilities, revenues and profits from continuing operations;

therefore, the effect of a change in the exchange rate is not expected to have a material adverse effect on the Company's 2024 full-year results.

In July 2023, Janssen Pharmaceuticals, Inc.

(Janssen) filed litigation against the U.S.

Department of Health and Human Services as well as the Centers for Medicare and Medicaid Services challenging the constitutionality of the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program.

The litigation requests a declaration that the IRA violates Janssen’s rights under the First Amendment and the Fifth Amendment to the Constitution and therefore that Janssen is not subject to the IRA’s mandatory pricing scheme.

Russia-Ukraine War

Although the long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time, the financial impact of the conflict in the fiscal 2022, including accounts receivable or inventory reserves, was not material.

As of both the fiscal years ending January 1, 2023 and January 2, 2022, the business of the Company’s Ukraine subsidiaries represented less than 1% of the Company’s consolidated assets and revenues.

As of both the fiscal years ending January 1, 2023 and January 2, 2022, the business of the Company’s Russian subsidiaries represented less than 1% of the Company’s consolidated assets and represented 1% of revenues.

In early March, the Company took steps to suspend all advertising, enrollment in clinical trials, and any additional investment in Russia.

Additionally, at the end of March, the Company made the decision to suspend supply of personal care products in Russia.

The Company continues to supply its other products as patients rely on many of the products for healthcare purposes.

Although the long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time, the financial impact of the conflict in the fiscal year 2023, including accounts receivable or inventory reserves, was not material.

As of and for each of the fiscal years ending December 31, 2023 and January 1, 2023, the business of the Company’s Russian subsidiaries represented less than 1% of the Company’s consolidated assets and represented 1% of revenues.

The Company does not maintain Ukraine subsidiaries subsequent to the Kenvue separation.

In early March of 2022, the Company took steps to suspend all advertising, enrollment in clinical trials, and any additional investment in Russia.

The Company continues to supply products relied upon by patients for healthcare purposes.

Conflict in the Middle East

Although the long-term implications of Israel's conflict are difficult to predict at this time, the financial impact of the conflict in the fiscal year 2023, including accounts receivable or inventory reserves, was not material.

As of and for the fiscal year ending December 31, 2023, the business of the Company’s Israel subsidiaries represented 1% of the Company’s consolidated assets and represented less than 1% of revenues.

The Company is exposed to fluctuations in currency exchange rates.

8 unchanged sentences

The Company faces various worldwide healthcare changes that may continue to result in pricing pressures that include healthcare cost containment and government legislation relating to sales, promotions, pricing and reimbursement of healthcare products.

Changes in the behavior and spending patterns of purchasers of healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and foregoing healthcare insurance coverage, as a result of the current global economic downturn, may continue to impact the Company’s businesses.

Changes in the behavior and spending patterns of purchasers of healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and foregoing healthcare insurance coverage may continue to impact the Company’s businesses.

2023 Annual Report

The Company also operates in an environment increasingly hostile to intellectual property rights.

8 unchanged sentences

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.

As of January 1, 2023, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated.

The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might be warranted based

on new information and further developments in accordance with ASC 450-20-25.

As of December 31, 2023, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated.

The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with ASC 450-20-25, Contingencies.

For these and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company is unable to estimate the possible loss or range of loss beyond the amounts accrued.

17 unchanged sentences

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 7. Management’s Discussion and Analysis