JOHNSON & JOHNSON 10-K

Item 8. Financial statements and supplementary data Index to audited Consolidated Financial Statements Consolidated balance sheets 43 Consolidated statements of earnings 44 Consolidated statements of comprehensive income 45 Consolidated statements of equity 46 Consolidated statements of cash flows 47 Notes to consolidated financial statements 49 Report of independent registered public accounting firm (PCAOB ID 238 ) 108 Management’s report on internal control over financial reporting 111 42 Johnson & Johnson and subsidiaries consolidated balance sheets At December 28, 2025 and December 29, 2024 (Dollars in Millions Except Share and Per Share Amounts) (Note 1) 2025 2024 Assets Current assets Cash and cash equivalents (Notes 1 and 2) $ 19,709 24,105 Marketable securities (Notes 1 and 2) 393 417 Accounts receivable trade, less allowances $ 183 (2024, $ 167 ) 17,178 14,842 Inventories (Notes 1 and 3) 14,191 12,444 Prepaid expenses and other receivables 4,153 4,085 Total current assets 55,624 55,893 Property, plant and equipment, net (Notes 1 and 4) 23,169 20,518 Intangible assets, net (Notes 1 and 5) 50,403 37,618 Goodwill (Notes 1 and 5) 48,772 44,200 Deferred taxes on income (Note 8) 6,874 10,461 Other assets 14,368 11,414 Total assets $ 199,210 180,104 Liabilities and Shareholders’ Equity Current liabilities Loans and notes payable (Note 7) $ 8,495 5,983 Accounts payable 11,991 10,311 Accrued liabilities 8,594 8,549 Accrued rebates, returns and promotions 19,124 17,580 Accrued compensation and employee related obligations 4,534 4,126 Accrued taxes on income (Note 8) 1,388 3,772 Total current liabilities 54,126 50,321 Long-term debt (Note 7) 39,438 30,651 Deferred taxes on income (Note 8) 6,791 2,448 Employee related obligations (Notes 9 and 10) 6,957 7,255 Long-term taxes payable (Note 1) 486 390 Other liabilities 9,868 17,549 Total liabilities 117,666 108,614 Commitments and Contingencies (Note 19) Shareholders’ equity Preferred stock — without par value (authorized and unissued 2,000,000 shares) — — Common stock — par value $ 1.00 per share (Note 12) (authorized 4,320,000,000 shares; issued 3,119,843,000 shares) 3,120 3,120 Accumulated other comprehensive income (loss) (Note 13) ( 14,930 ) ( 11,741 ) Retained earnings and Additional-paid-in-capital 168,978 155,791 Less: common stock held in treasury, at cost (Note 12) ( 711,904,000 shares and 712,921,000 shares) 75,624 75,680 Total shareholders’ equity 81,544 71,490 Total liabilities and shareholders’ equity $ 199,210 180,104 See Notes to Consolidated Financial Statements 2025 Annual Report 43 Johnson & Johnson and subsidiaries consolidated statements of earnings (Dollars and Shares in Millions Except Per Share Amounts) (Note 1) 2025 2024 2023 Sales to customers $ 94,193 88,821 85,159 Cost of products sold 30,256 27,471 26,553 Gross profit 63,937 61,350 58,606 Selling, marketing and administrative expenses 23,676 22,869 21,512 Research and development expense 14,665 17,232 15,085 In-process research and development impairments 81 211 313 Interest income ( 1,056 ) ( 1,332 ) ( 1,261 ) Interest expense, net of portion capitalized (Note 4) 971 755 772 Other (income) expense, net ( 7,209 ) 4,694 6,634 Restructuring (Note 20) 228 234 489 Earnings before provision for taxes on income 32,581 16,687 15,062 Provision for taxes on income (Note 8) 5,777 2,621 1,736 Net earnings from continuing operations 26,804 14,066 13,326 Net earnings from discontinued operations, net of tax (Note 21) — — 21,827 Net earnings $ 26,804 14,066 35,153 Net earnings per share (Notes 1 and 15) Continuing operations - basic $ 11.13 5.84 5.26 Discontinued operations - basic — — 8.62 Total net earnings per share - basic $ 11.13 5.84 13.88 Continuing operations - diluted $ 11.03 5.79 5.20 Discontinued operations - diluted — — 8.52 Total net earnings per share - diluted $ 11.03 5.79 13.72 Average shares outstanding (Notes 1 and 15) Basic 2,407.4 2,407.3 2,533.5 Diluted 2,429.4 2,429.4 2,560.4 See Notes to Consolidated Financial Statements 44 Johnson & Johnson and subsidiaries consolidated statements of comprehensive income (Dollars in Millions) (Note 1) 2025 2024 2023 Net earnings $ 26,804 14,066 35,153 Other comprehensive income (loss), net of tax Foreign currency translation ( 5,506 ) 1,708 ( 3,221 ) Securities: Unrealized holding gain (loss) arising during period ( 1 ) 2 26 Reclassifications to earnings — — — Net change ( 1 ) 2 26 Employee benefit plans: Prior service credit (cost), net of amortization ( 144 ) ( 154 ) ( 149 ) Gain (loss), net of amortization 1,130 541 ( 1,183 ) Consumer settlement/ curtailment — — 23 Effect of exchange rates ( 128 ) 62 ( 90 ) Net change 858 449 ( 1,399 ) Derivatives & hedges: Unrealized gain (loss) arising during period 1,953 ( 511 ) 422 Reclassifications to earnings ( 493 ) ( 862 ) ( 569 ) Net change 1,460 ( 1,373 ) ( 147 ) Other comprehensive income (loss) ( 3,189 ) 786 ( 4,741 ) Comprehensive income $ 23,615 14,852 30,412 The tax cost/(benefit) effects in other comprehensive income for the fiscal years 2025, 2024 and 2023 respectively: Foreign Currency Translation; $ 2.5 billion, $( 1.1 ) billion and $ 797 million; Employee Benefit Plans: $ 214 million, $ 86 million and $( 289 ) million, Derivatives & Hedges: $ 388 million, $( 365 ) million and $( 39 ) million. See Notes to Consolidated Financial Statements Amounts presented for 2023 have not been recast to exclude discontinued operations 2025 Annual Report 45 Johnson & Johnson and subsidiaries consolidated statements of equity (Dollars in Millions) (Note 1) Total Retained Earnings and Additional paid-in capital Accumulated Other Comprehensive Income (Loss) Common Stock Issued Amount Treasury Stock Amount Balance, January 1, 2023 $ 76,804 128,345 ( 12,967 ) 3,120 ( 41,694 ) Net earnings 35,153 35,153 Cash dividends paid ($ 4.70 per share) ( 11,770 ) ( 11,770 ) Employee compensation and stock option plans 2,193 ( 336 ) 2,529 Repurchase of common stock ( 5,054 ) ( 5,054 ) Other ( 25 ) ( 25 ) Kenvue Separation /IPO (Note 21) ( 23,786 ) 2,451 5,181 ( 31,418 ) Other comprehensive income (loss), net of tax ( 4,741 ) ( 4,741 ) Balance, December 31, 2023 68,774 153,843 ( 12,527 ) 3,120 ( 75,662 ) Net earnings 14,066 14,066 Cash dividends paid ($ 4.91 per share) ( 11,823 ) ( 11,823 ) Employee compensation and stock option plans 2,094 ( 295 ) 2,389 Repurchase of common stock ( 2,407 ) ( 2,407 ) Other comprehensive income (loss), net of tax 786 786 Balance, December 29, 2024 71,490 155,791 ( 11,741 ) 3,120 ( 75,680 ) Net earnings 26,804 26,804 Cash dividends paid ($ 5.14 per share) ( 12,381 ) ( 12,381 ) Employee compensation and stock option plans 4,773 ( 1,236 ) 6,009 Repurchase of common stock ( 5,953 ) ( 5,953 ) Other comprehensive income (loss), net of tax ( 3,189 ) ( 3,189 ) Balance, December 28, 2025 $ 81,544 168,978 ( 14,930 ) 3,120 ( 75,624 ) See Notes to Consolidated Financial Statements 46 Johnson & Johnson and subsidiaries consolidated statements of cash flows (Dollars in Millions) (Note 1) 2025 2024 2023 Cash flows from operating activities Net earnings $ 26,804 14,066 35,153 Adjustments to reconcile net earnings to cash flows from operating activities: Depreciation and amortization of property and intangibles 7,503 7,339 7,486 Stock based compensation 1,354 1,176 1,162 Asset write-downs 204 405 1,295 Charges for acquired in-process research and development 109 1,841 483 Gain on Kenvue separation — — ( 20,984 ) Net gain on sale of assets/businesses ( 263 ) ( 226 ) ( 117 ) Deferred tax provision 1,538 ( 2,183 ) ( 4,194 ) Credit losses and accounts receivable allowances ( 1 ) 11 — Changes in assets and liabilities, net of effects from acquisitions and divestitures: Increase in accounts receivable ( 1,781 ) ( 406 ) ( 624 ) Increase in inventories ( 1,450 ) ( 1,128 ) ( 1,323 ) Increase in accounts payable and accrued liabilities 2,377 1,621 2,346 (Increase)/Decrease in other current and non-current assets ( 6,167 ) 1,717 ( 3,480 ) (Decrease)/Increase in other current and non-current liabilities ( 5,697 ) 33 5,588 Net cash flows from operating activities 24,530 24,266 22,791 Cash flows (used by) from investing activities Additions to property, plant and equipment ( 4,832 ) ( 4,424 ) ( 4,543 ) Proceeds from the disposal of assets/businesses, net 720 675 358 Acquisitions, net of cash acquired (Note 18) ( 17,541 ) ( 15,146 ) — Acquired in-process research and development/related milestones (Note 18) ( 385 ) ( 1,783 ) ( 470 ) Purchases of investments ( 920 ) ( 1,726 ) ( 10,906 ) Sales of investments 1,661 2,462 19,390 Credit support agreements activity, net ( 2,129 ) 1,517 ( 2,963 ) Other (including capitalized licenses and milestones) ( 162 ) ( 174 ) 12 Net cash (used by)/from investing activities ( 23,588 ) ( 18,599 ) 878 Cash flows (used by) from financing activities Dividends to shareholders ( 12,381 ) ( 11,823 ) ( 11,770 ) Repurchase of common stock ( 5,953 ) ( 2,432 ) ( 5,054 ) Proceeds from short-term debt 14,586 15,277 13,743 Repayment of short-term debt ( 12,330 ) ( 9,463 ) ( 22,973 ) Proceeds from long-term debt, net of issuance costs 9,138 6,660 — Repayment of long-term debt ( 1,757 ) ( 1,453 ) ( 1,551 ) Proceeds from the exercise of stock options/employee withholding tax on stock awards, net 3,418 838 1,094 Credit support agreements activity, net ( 226 ) 272 ( 219 ) 2025 Annual Report 47 2025 2024 2023 Settlement of convertible debt acquired from Shockwave — ( 970 ) — Proceeds of short and long-term debt, net of issuance cost, related to the debt that transferred to Kenvue at separation — — 8,047 Proceeds from Kenvue initial public offering — — 4,241 Cash transferred to Kenvue at separation — — ( 1,114 ) Other ( 34 ) ( 38 ) ( 269 ) Net cash used by financing activities ( 5,539 ) ( 3,132 ) ( 15,825 ) Effect of exchange rate changes on cash and cash equivalents 201 ( 289 ) ( 112 ) (Decrease)/Increase in cash and cash equivalents ( 4,396 ) 2,246 7,732 Cash and cash equivalents from continuing operations, beginning of period 24,105 21,859 12,889 Cash and cash equivalents from discontinued operations, beginning of period — — 1,238 Cash and cash equivalents, beginning of year (Note 1) 24,105 21,859 14,127 Cash and cash equivalents from continuing operations, end of period 19,709 24,105 21,859 Cash and cash equivalents from discontinued operations, end of period — — — Cash and cash equivalents, end of year (Note 1) $ 19,709 24,105 21,859 Supplemental cash flow data Cash paid during the year for: Interest $ 1,977 1,990 1,836 Interest, net of amount capitalized 1,863 1,911 1,766 Income taxes, inclusive of discontinued operations 6,539 6,714 8,574 Supplemental schedule of non-cash investing and financing activities Treasury stock issued for employee compensation and stock option plans, net of cash proceeds/ employee withholding tax on stock awards $ 2,591 1,551 1,435 See Notes to Consolidated Financial Statements Amounts presented for 2023 have not been recast to exclude discontinued operations. 48 Notes to consolidated financial statements 1. Summary of significant accounting policies Principles of consolidation The consolidated financial statements include the accounts of Johnson & Johnson and its subsidiaries (the Company). Intercompany accounts and transactions are eliminated. Columns and rows within tables may not add due to rounding. Percentages have been calculated using actual, non-rounded figures. Description of the company The Company has approximately 138,200 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the healthcare field. The Company conducts business in virtually all countries of the world and its primary focus is on products related to human health and well-being. Business segments The Company is organized into two business segments: Innovative Medicine and MedTech. The Innovative Medicine segment is focused on the following therapeutic areas: Oncology, Immunology, Neuroscience, Pulmonary Hypertension, Infectious Diseases, and Cardiovascular and Metabolic. 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 Surgery, Orthopaedic, Cardiovascular 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 October 2025, the Company announced its intention to separate its Orthopaedics business. The Company intends to explore multiple paths to effect the planned separation with a targeted completion within 18 to 24 months after the initial announcement. New accounting standards Recently adopted accounting standards ASU 2023-09: Income Taxes (Topic 740) - Improvements to Income Tax Disclosures This update standardizes categories for the effective tax rate reconciliation, requires disaggregation of income taxes and additional income tax-related disclosures. The Company adopted this standard prospectively for fiscal year 2025. As this accounting standard only impacts disclosures, it did not have an impact on the Company’s consolidated financial results. See Note 8 to the Company's financial statements for the required disclosures. Recently issued accounting standards Not adopted as of December 28, 2025 ASU 2024-03: Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses This update requires disclosure of disaggregated information about certain income statement expense line items on an annual and interim basis. This update will be effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. As this accounting standard only impacts disclosures, it will not have a material impact on the Company’s Consolidated Financial Statements. 2025 Annual Report 49 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 invests its cash primarily in government securities and obligations, corporate debt securities, money market funds and reverse repurchase agreements (RRAs). RRAs are collateralized by deposits in the form of Government Securities and Obligations for an amount not less than 102 % of their value. The Company does not record an asset or liability as the Company is not permitted to sell or repledge the associated collateral. The Company has a policy that the collateral has at least an A (or equivalent) credit rating. The Company utilizes a third party custodian to manage the exchange of funds and ensure that collateral received is maintained at 102 % of the value of the RRAs on a daily basis. RRAs with stated maturities of greater than three months from the date of purchase are classified as marketable securities. Investments 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. Available-for-sale securities available for current operations are classified as current assets; otherwise, they are classified as long term. Management determines the appropriate classification of its investment in debt and equity securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company reviews its investments for impairment and adjusts these investments to fair value through earnings, as required. The Company holds equity investments with readily determinable fair values and equity investments without readily determinable fair values. The Company measures equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Property, plant and equipment and depreciation Property, plant and equipment are stated at cost. The Company utilizes the straight-line method of depreciation over the estimated useful lives of the assets: Building and building equipment 30 years Land and leasehold improvements 10 - 20 years Machinery and equipment 2 - 13 years The Company capitalizes certain computer software and development costs, included in machinery and equipment, when incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are amortized over the estimated useful lives of the software, which generally range from 5 to 8 years. The Company reviews long-lived assets to assess recoverability using undiscounted cash flows. When certain events or changes in operating or economic conditions occur, an impairment assessment may be performed on the recoverability of the carrying value of these assets. If the asset is determined to be impaired, the loss is measured based on the difference between the asset’s fair value and its carrying value. If quoted market prices are not available, the Company will estimate fair value using a discounted value of estimated future cash flows. 50 Revenue recognition The Company recognizes revenue from product sales when obligations under the terms of a contract with the customer are satisfied; generally, this occurs with the transfer of control of the goods to customers. The Company's global payment terms are typically between 30 to 90 days. Provisions for certain rebates, sales incentives, trade promotions, coupons, product returns, discounts to customers and governmental clawback provisions are accounted for as variable consideration and recorded as a reduction in sales. The liability is recognized within Accrued rebates, returns, and promotions on the consolidated balance sheet. Adjustments to revenue recognized as a result of changes in estimates for the Company's most significant U.S. rebates and discounts liability balances for products shipped in previous periods were approximately 3.0 % and 2.0 % of U.S. Innovative Medicine revenue during the fiscal years 2025 and 2024, respectively. Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including consideration of competitor pricing. Rebates and discounts are estimated based on contractual terms, historical experience, patient outcomes, trend analysis and projected market conditions in the various markets served. A significant portion of the liability related to rebates is from the sale of the Company's pharmaceutical products within the U.S., primarily the Managed Care, Medicare and Medicaid programs, which amounted to $ 13.0 billion and $ 12.3 billion as of December 28, 2025 and December 29, 2024, respectively. The Company evaluates market conditions for products or groups of products primarily through the analysis of wholesaler and other third-party sell-through and market research data, as well as internally generated information. Sales returns are estimated and recorded based on historical sales and returns information. Products that have lost patent exclusivity, or that otherwise exhibit unusual sales or return patterns due to dating, competition or other marketing matters are specifically investigated and analyzed as part of the accounting for sales return accruals. Sales returns allowances represent a reserve for products that may be returned due to expiration, destruction in the field, or in specific areas, product recall. In accordance with the Company’s accounting policies, the Company generally issues credit to customers for returned goods. The Company’s sales returns reserves are accounted for in accordance with the U.S. GAAP guidance for revenue recognition when right of return exists. Sales returns reserves are recorded at full sales value. Sales returns in the Innovative Medicine segment 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 each of the fiscal years 2025, 2024 and 2023. Promotional programs 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. These arrangements are evaluated to determine the appropriate amounts to be deferred or recorded as a reduction of revenue. 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 the fiscal year 2025, 2024 and 2023. See Note 17 to the Consolidated Financial Statements for further disaggregation of revenue. Shipping and handling Shipping and handling costs incurred were $ 0.9 billion during each of the fiscal years 2025, 2024 and 2023, and are included in selling, marketing and administrative expense. The amount of revenue received for shipping and handling is less than 1.0 % of sales to customers for all periods presented. Inventories Inventories are stated at the lower of cost or net realizable value determined by the first-in, first-out method. 2025 Annual Report 51 Intangible assets and goodwill The authoritative literature on U.S. GAAP requires that goodwill and intangible assets with indefinite lives be assessed annually for impairment. The Company completed its annual impairment test for 2025 in the fiscal fourth quarter, which did not result in an impairment. Future impairment tests will be performed annually in the fiscal fourth quarter, or sooner if warranted. In-process research and development purchased as part of a business combination 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. 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 facts or circumstances indicate that the carrying value of the assets may not be recoverable. See Note 5 for further details on Intangible Assets and Goodwill. Financial instruments As required by U.S. GAAP, all derivative instruments are recorded on the balance sheet at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value, with Level 1 having the highest priority and Level 3 having the lowest. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. The Company documents all relationships between hedged items and derivatives. The overall risk management strategy includes reasons for undertaking hedge transactions and entering into derivatives. The objectives of this strategy are: (1) minimize foreign currency exposure’s impact on the Company’s financial performance; (2) protect the Company’s cash flow from adverse movements in foreign exchange rates; (3) ensure the appropriateness of financial instruments; and (4) manage the enterprise risk associated with financial institutions. See Note 6 for additional information on Financial Instruments. Leases The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Right of Use (ROU) Assets and Lease Liabilities for operating leases are included in Other assets , Accrued liabilities , and Other liabilities on the consolidated balance sheet. The ROU Assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Commitments under finance leases are not significant. ROU Assets and Lease Liabilities are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, when the implicit rate is not readily determinable. Lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has elected the following policy elections: 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 leases was $ 1.3 billion and $ 1.1 billion in fiscal years 2025 and 2024, respectively. The lease liability was $ 1.4 billion and $ 1.2 billion in fiscal years 2025 and 2024, respectively. The operating lease costs from continuing operations were $ 0.2 billion in fiscal years 2025, 2024 and 2023. Cash paid for amounts included in the measurement of lease liabilities from continuing operations were $ 0.3 billion in 2025 and $ 0.2 billion in fiscal years 2024 and 2023. 52 Product liability Accruals for product liability claims are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information and actuarially determined estimates where applicable. 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. 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. The Company has self insurance through a wholly-owned captive insurance company. In addition to accruals in the self insurance program, claims that exceed the insurance coverage are accrued when losses are probable and amounts can be reasonably estimated. Research and development Research and development expenses are expensed as incurred in accordance with ASC 730, Research and Development. Upfront and milestone payments made to third parties in connection with research and development collaborations are expensed as incurred up to the point of regulatory approval. Payments made to third parties subsequent to regulatory approval are capitalized and amortized over the remaining useful life of the related product. Amounts capitalized for such payments are included in other intangibles, net of accumulated amortization. The Company enters into collaborative arrangements, typically with other pharmaceutical or biotechnology companies, to develop and commercialize drug candidates or intellectual property. These arrangements typically involve two (or more) parties who are active participants in the collaboration and are exposed to significant risks and rewards dependent on the commercial success of the activities. These collaborations usually involve various activities by one or more parties, including research and development, marketing and selling and distribution. Often, these collaborations require upfront, milestone and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development. Amounts due from collaborative partners related to development activities are generally reflected as a reduction of research and development expense because the performance of contract development services is not central to the Company’s operations. In general, the income statement presentation for these collaborations is as follows: Nature/Type of Collaboration Statement of Earnings Presentation Third-party sale of product & profit share payments received Sales to customers Royalties/milestones paid to collaborative partner (post-regulatory approval)* Cost of products sold Royalties received from collaborative partner Other income (expense), net Upfront payments & milestones paid to collaborative partner (pre-regulatory approval) Research and development expense Research and development payments to collaborative partner Research and development expense Research and development payments received from collaborative partner or government entity Reduction of Research and development expense * Milestones are capitalized as intangible assets and amortized to cost of products sold over the useful life. For all years presented, there was no individual project that represented greater than 5 % of the total annual consolidated research and development expense other than the acquired in-process research & development expense of $ 1.25 billion to secure the global rights to the NM26 bispecific antibody (Yellow Jersey acquisition) in fiscal year 2024. The Company has a number of products and compounds developed in collaboration with strategic partners including XARELTO, co-developed with Bayer HealthCare AG, IMBRUVICA, developed in collaboration and co-marketed with Pharmacyclics LLC, an AbbVie company and CARVYKTI, licensed and developed in collaboration with Legend Biotech USA Inc. and Legend Biotech Ireland Limited. Separately, the Company has a number of licensing arrangements for products and compounds including DARZALEX, licensed from Genmab A/S. 2025 Annual Report 53 Advertising Costs associated with advertising are expensed in the year incurred and are included in selling, marketing and administrative expenses. Advertising expenses worldwide, which comprised television, radio, print media and Internet advertising, were $ 1.6 billion, $ 0.6 billion and $ 0.5 billion in fiscal years 2025, 2024 and 2023, respectively. Income taxes Income taxes are recorded based on amounts refundable or payable for the current year and include the results of any difference between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. The Company estimates deferred tax assets and liabilities based on enacted tax law and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities in the future. The Company records unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Management believes that changes in these estimates would not have a material effect on the Company's results of operations, cash flows or financial position. The United States enacted into law on July 4, 2025, the One Big Beautiful Bill Act, (OBBBA). The OBBBA includes provisions modifying the corporate income tax code, including the immediate expensing of domestic research and development expenditures for tax purposes, 100% bonus depreciation for qualified assets, and an increase in the statutory tax rate on foreign earnings from 10.5% to 12.6%. The law also renamed the provision for taxes on foreign earnings from Global Intangible Low-Taxed Income (GILTI) to Net Controlled Foreign Corporation (CFC) Tested Income (NCTI). The Company will continue to account for NCTI under the deferred method as discussed below under the previous U.S. Tax Cuts and Jobs Act (TCJA) provisions. Previous to the OBBBA, the United States had passed legislative changes in 2017, the TCJA which 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. companies located in foreign jurisdictions. Undistributed earnings in the form of cash and cash equivalents were taxed at a rate of 15.5 % and all other earnings were taxed at a rate of 8.0 %. This tax is payable over 8 years and did not accrue interest. The final payment of $ 2.5 billion was made in fiscal year 2025. The TCJA also included provisions for a tax on GILTI, which is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets, as provided by the TCJA. In January 2018, the FASB issued guidance that allows companies to elect as an accounting policy whether to record the tax effects of GILTI in the period the tax liability is generated (i.e., period cost) or provide for deferred tax assets and liabilities related to basis differences that exist and are expected to affect the amount of GILTI inclusion in future years upon reversal (i.e., deferred method). The Company has elected to account for GILTI, now NCTI, under the deferred method. The deferred tax amounts recorded are based on the evaluation of temporary differences that are expected to reverse as NCTI is incurred in future periods. The Company has not provided deferred taxes on the undistributed earnings on certain international subsidiaries where the earnings are considered to be indefinitely reinvested. The Company intends to continue to reinvest these earnings in those international operations. If the Company decides at a later date to repatriate these earnings to the U.S., the Company would be required to record the net tax effects on these amounts. The Company estimates that the tax effect of this repatriation would be approximately $ 0.6 billion under currently enacted tax laws and regulations and at current currency exchange rates. This amount does not include the possible benefit of U.S. foreign tax credits, which may substantially offset this cost. See Note 8 to the Consolidated Financial Statements for further information regarding income taxes. Net earnings per share Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities were exercised or converted into common stock using the treasury stock method. Use of estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, rebates, allowances and incentives, product liabilities, income taxes, withholding taxes, depreciation, amortization, employee benefits, contingencies and intangible asset and liability valuations. Actual results may or may not differ from those estimates. 54 The Company follows the provisions of U.S. GAAP when recording litigation related contingencies. A liability is recorded when a loss is probable and can be reasonably estimated. The best estimate of a loss within a range is accrued; however, if no estimate in the range is better than any other, the minimum amount is accrued. Supplier finance program obligations The Company has agreements for supplier finance programs with third-party financial institutions. These programs provide participating suppliers the ability to finance payment obligations from the Company with the third-party financial institutions. The Company is not a party to the arrangements between the suppliers and the third-party financial institutions. The Company’s obligations to its suppliers, including amounts due, and scheduled payment dates (which have general payment terms of 90 days), are not affected by a participating supplier’s decision to participate in the program. Confirmed obligations under the program as of December 28, 2025, and December 29, 2024, were $ 0.8 billion and $ 0.8 billion, respectively. The obligations are presented as Accounts payable on the Consolidated Balance Sheets. The rollforward of the Company's valid obligations under the program were as follows: 2025 2024 (Dollars in Millions) Confirmed obligations - beginning of the year $ 788 704 Invoices confirmed during the year 2,997 3,048 Confirmed invoices paid during the year 3,016 2,964 Effect of exchange rates 15 — Confirmed obligations - end of the year $ 784 788 Kenvue IPO/separation and discontinued operations 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. On August 23, 2023, Johnson & Johnson completed the disposition of an additional 80.1 % ownership of the shares of Kenvue through an exchange offer. Following the exchange offer, the Company owned 9.5 % of the shares of Kenvue which were accounted for as an equity investment carried at fair value within continuing operations. The historical results of the Consumer Health business (which previously represented the Consumer Health business segment) are reflected as discontinued operations in the Company’s Consolidated Financial Statements through the date of the exchange offer (see Note 21 for additional details). Unless otherwise indicated, the information in the notes to the Consolidated Financial Statements refer only to Johnson & Johnson’s continuing operations. In the fiscal second quarter of 2024 the Company completed a debt for equity exchange of the retained stake in Kenvue. Upon completion of the debt for equity exchange, the Company no longer owns any shares of Kenvue Common Stock. Annual closing date The Company follows the concept of a fiscal year, which ends on the Sunday nearest to the end of the month of December. Normally each fiscal year consists of 52 weeks, but every five or six years the fiscal year consists of 53 weeks, and therefore includes additional shipping days, as was the case in fiscal year 2020, and will be the case again in fiscal year 2026. 2025 Annual Report 55 2. Cash, cash equivalents and current marketable securities At the end of the fiscal year 2025 and 2024, cash, cash equivalents and current marketable securities comprised: (Dollars in Millions) 2025 Carrying Amount Estimated Fair Value Cash & Cash Equivalents Current Marketable Securities Cash $ 3,299 3,299 3,299 — U.S. Reverse repurchase agreements 7,063 7,063 7,063 — Money market funds 5,993 5,993 5,993 — Time deposits (1) 893 893 893 — Subtotal $ 17,248 17,248 17,248 — U.S. Gov't Securities $ 2,365 2,365 2,324 41 Other Sovereign Securities 260 260 102 158 Corporate and other debt securities 229 229 35 194 Subtotal available for sale (2) $ 2,854 2,854 2,461 393 Total cash, cash equivalents and current marketable securities $ 19,709 393 (Dollars in Millions) 2024 Carrying Amount Unrecognized Gain Estimated Fair Value Cash & Cash Equivalents Current Marketable Securities Cash $ 2,918 — 2,918 2,918 — Non-U.S. Sovereign Securities (1) 120 — 120 — 120 U.S. Reverse repurchase agreements 7,100 — 7,100 7,100 — Money market funds 6,123 — 6,123 6,123 — Time deposits (1) 1,045 — 1,045 1,045 — Subtotal 17,306 — 17,306 17,186 120 U.S. Gov't Securities $ 6,815 1 6,816 6,796 20 Other Sovereign Securities 176 — 176 83 93 Corporate and other debt securities 224 — 224 40 184 Subtotal available for sale (2) $ 7,215 1 7,216 6,919 297 Total cash, cash equivalents and current marketable securities $ 24,105 417 (1) Held to maturity investments are reported at amortized cost and realized gains or losses are reported in earnings. (2) Available for sale debt securities are reported at fair value with unrealized gains and losses reported net of taxes in other comprehensive income. Fair value of government securities and obligations and corporate debt securities were estimated using quoted broker prices and significant other observable inputs. 56 The contractual maturities of the available for sale debt securities at December 28, 2025 are as follows: (Dollars in Millions) Cost Basis Fair Value Due within one year $ 2,829 2,829 Due after one year through five years 25 25 Due after five years through ten years — — Total debt securities $ 2,854 2,854 The Company invests its excess cash in both deposits with major banks throughout the world and other high-quality money market instruments. The Company has a policy of making investments only with commercial institutions that have at least an investment grade credit rating. 3. Inventories At the end of fiscal years 2025 and 2024, inventories comprised: (Dollars in Millions) 2025 2024 Raw materials and supplies $ 2,530 2,337 Goods in process 3,828 2,815 Finished goods 7,833 7,292 Total inventories $ 14,191 12,444 4. Property, plant and equipment At the end of fiscal years 2025 and 2024, property, plant and equipment at cost and accumulated depreciation were: (Dollars in Millions) 2025 2024 Land and land improvements $ 701 718 Buildings and building equipment 13,429 12,317 Machinery and equipment 32,873 29,444 Construction in progress 7,361 6,289 Total property, plant and equipment, gross $ 54,364 48,768 Less accumulated depreciation 31,195 28,250 Total property, plant and equipment, net $ 23,169 20,518 The Company capitalizes interest expense as part of the cost of construction of facilities and equipment. Interest expense capitalized in fiscal years 2025, 2024 and 2023 was $ 114 million, $ 79 million and $ 70 million, respectively. Depreciation expense, including the amortization of capitalized interest in fiscal years 2025, 2024 and 2023 was $ 2.9 billion, $ 2.8 billion and $ 2.6 billion, respectively. Upon retirement or other disposal of property, plant and equipment, the costs and related amounts of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds are recorded in earnings. 2025 Annual Report 57 5. Intangible assets and goodwill At the end of fiscal years 2025 and 2024, the gross and net amounts of intangible assets were: (Dollars in Millions) 2025 2024 Intangible assets with definite lives: Patents and trademarks — gross (1) $ 59,156 44,695 Less accumulated amortization ( 32,507 ) ( 26,124 ) Patents and trademarks — net $ 26,649 18,571 Customer relationships and other intangibles — gross $ 21,361 20,310 Less accumulated amortization ( 14,998 ) ( 13,544 ) Customer relationships and other intangibles — net (2) $ 6,363 6,766 Intangible assets with indefinite lives: Trademarks (3) 1,772 — Purchased in-process research and development 15,619 12,281 Total intangible assets with indefinite lives $ 17,391 12,281 Total intangible assets — net $ 50,403 37,618 (1) See Note 18 to the Consolidated Financial Statements for additional details related to acquisitions and divestitures. (2) The majority is comprised of customer relationships. (3) In October 2025, the Company announced its intention to separate its Orthopaedics business, to be named DePuy Synthes. In connection with this strategic decision, the Company determined the DePuy Synthes trademarks will continue to be used on existing and future products. Therefore, $ 1.7 billion of trademarks associated with the DePuy Synthes brand were reclassified from definite lived to indefinite lived. This reclassification reflects management’s revised expectations regarding the future economic life and continued use of these trademarks through and following the planned separation. Based on a qualitative assessment, the Company concluded that the trademarks are not impaired. Goodwill as of December 28, 2025 and December 29, 2024, as allocated by segment of business, was as follows: (Dollars in Millions) Innovative Medicine MedTech Total Goodwill at December 31, 2023 $ 10,407 26,151 36,558 Goodwill, related to acquisitions 640 7,569 8,209 Goodwill, related to divestitures — ( 56 ) ( 56 ) Currency translation/other ( 355 ) ( 156 ) ( 511 ) Goodwill at December 29, 2024 10,692 33,508 44,200 Goodwill, related to acquisitions 3,488 — 3,488 Goodwill, related to divestitures — ( 29 ) ( 29 ) Currency translation/other 787 326 1,113 Goodwill at December 28, 2025 $ 14,967 33,805 48,772 The weighted average amortization period for patents and trademarks is approximately 12 years. The weighted average amortization period for customer relationships and other intangible assets is approximately 19 years. The amortization expense of amortizable assets included in Cost of products sold was $ 4.6 billion, $ 4.5 billion and $ 4.5 billion before tax, for the fiscal years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively. Intangible asset write-downs are included in Other (income) expense, net. 58 The estimated amortization expense related to intangible assets for approved products, before tax, for the five succeeding years is approximately: (Dollars in Millions) 2026 2027 2028 2029 2030 $ 5,100 4,400 3,700 3,600 3,500 See Note 18 to the Consolidated Financial Statements for additional details related to acquisitions and divestitures. 6. Fair value measurements The Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany products and third-party purchases of materials denominated in a foreign currency. The Company uses cross currency interest rate swaps to manage currency risk primarily related to borrowings. 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. These derivatives are designated as fair value hedges. The Company uses cross currency interest rate swaps and forward foreign exchange contracts designated as net investment hedges. Additionally, the Company uses forward foreign exchange contracts to offset its exposure to certain foreign currency assets and liabilities. 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. 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 December 28, 2025 and December 29, 2024, the total amount of cash collateral paid by the Company under the CSA amounted to $ 4.6 billion and $ 2.2 billion net respectively, related to net investment and cash flow hedges. On an ongoing basis, the Company monitors counter-party credit ratings. The Company considers credit non-performance risk to be low, because the Company primarily enters into agreements with commercial institutions that have at least an investment grade credit rating. Refer to the table on significant financial assets and liabilities measured at fair value contained in this footnote for receivables and payables with these commercial institutions. As of December 28, 2025, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $ 40.6 billion, $ 38.9 billion and $ 8.0 billion, respectively. As of December 29, 2024, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $ 45.1 billion, $ 40.5 billion and $ 9.0 billion, respectively. All derivative instruments are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. Cash exchanged for derivatives is primarily in cash flows from operating activities. The designation as a cash flow hedge is made at the entrance date of the derivative contract. At inception, all derivatives are expected to be highly effective. Foreign exchange contracts designated as cash flow hedges are accounted for under the forward method and all gains/losses associated with these contracts will be recognized in the income statement when the hedged item impacts earnings. Changes in the fair value of these derivatives are recorded in accumulated other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction. 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 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. On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued. The Company designated its Euro denominated notes with due dates ranging from 2028 to 2055 as a net investment hedge of the Company's investments in certain of its international subsidiaries that use the Euro as their functional currency in order to reduce the volatility caused by changes in exchange rates. 2025 Annual Report 59 As of December 28, 2025, the balance of deferred net loss on derivatives included in accumulated other comprehensive income was $ 0.3 billion after-tax. For additional information, see the Consolidated Statements of Comprehensive Income and Note 13. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. The maximum length of time over which the Company is hedging transaction exposure is 18 months, excluding interest rate contracts and net investment hedges. The amount ultimately realized in earnings may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity of the derivative. The following table is a summary of the activity related to derivatives and hedges for the fiscal years ended December 28, 2025 and December 29, 2024, net of tax: December 28, 2025 December 29, 2024 (Dollars in Millions) Sales Cost of Products Sold R&D Expense Interest (Income) Expense Other (Income) Expense Sales Cost of Products Sold R&D Expense Interest (Income) Expense Other (Income) Expense The effects of fair value, net investment and cash flow hedging: Gain (Loss) on fair value hedging relationship: Interest rate swaps contracts: Hedged items $ — — — 338 — — — — 64 — Derivatives designated as hedging instruments — — — ( 338 ) — — — — ( 64 ) — Gain (Loss) on net investment hedging relationship: Cross currency interest rate swaps contracts: Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing $ — — — 193 — — — — 148 — Amount of gain or (loss) recognized in AOCI — — — 193 — — — — 148 — Gain (Loss) on cash flow hedging relationship: Forward foreign exchange contracts: Amount of gain or (loss) reclassified from AOCI into income 4 41 ( 52 ) — ( 19 ) 2 426 33 — 6 Amount of gain or (loss) recognized in AOCI 11 715 ( 109 ) — ( 44 ) ( 7 ) ( 156 ) 80 — 21 Cross currency interest rate swaps contracts: Amount of gain or (loss) reclassified from AOCI into income — — — 326 — — — — 247 — Amount of gain or (loss) recognized in AOCI $ — — — 1,187 — — — — ( 597 ) — 60 As of December 28, 2025 and December 29, 2024, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustment for fair value hedges: Line item in the Consolidated Balance Sheet in which the hedged item is included Carrying Amount of the Hedged Liability Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability (Dollars in Millions) December 28, 2025 December 29, 2024 December 28, 2025 December 29, 2024 Long-term Debt $ 8,318 $ 7,935 $( 694 ) $( 1,132 ) The following table is the effect of derivatives not designated as hedging instrument for the fiscal years ended December 28, 2025 and December 29, 2024: (Dollars in Millions) Location of Gain /(Loss) Recognized in Income on Derivative Gain/(Loss) Recognized In Income on Derivative Derivatives Not Designated as Hedging Instruments December 28, 2025 December 29, 2024 Foreign Exchange Contracts Other (income) expense $( 265 ) 8 The following table is the effect of net investment hedges for the fiscal years ended December 28, 2025 and December 29, 2024: Gain/(Loss) Recognized In Accumulated OCI Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income Gain/(Loss) Reclassified from Accumulated OCI Into Income (Dollars in Millions) December 28, 2025 December 29, 2024 December 28, 2025 December 29, 2024 Debt $ ( 1,190 ) 282 Interest (income) expense — — Cross Currency interest rate swaps $ 277 955 Interest (income) expense — — The following table is a summary of the activity related to equity investments for the fiscal years ended December 28, 2025 and December 29, 2024: December 29, 2024 December 28, 2025 (Dollars in Millions) Carrying Value Changes in Fair Value Reflected in Net Income (1) Sales/ Purchases/ Other (2) Carrying Value Non-Current Other Assets Equity Investments with readily determinable value $ 451 230 ( 16 ) 665 665 Equity Investments without readily determinable value $ 773 253 ( 116 ) 910 910 2025 Annual Report 61 December 31, 2023 December 29, 2024 (Dollars in Millions) Carrying Value Changes in Fair Value Reflected in Net Income (1) Sales/ Purchases/ Other (2) Carrying Value Non-Current Other Assets Equity Investments with readily determinable value* $ 4,473 ( 17 ) ( 4,005 ) 451 451 Equity Investments without readily determinable value $ 696 ( 197 ) 274 773 773 (1) Recorded in Other Income/Expense (2) Other includes impact of currency * The December 31, 2023 balance includes the 9.5 % remaining stake in Kenvue. A debt-for-equity exchange was completed in the fiscal second quarter of 2024. On May 15, 2024, the Company issued $ 3.6 billion aggregate principal amount of commercial paper and received $ 3.6 billion of net cash proceeds to be used for general corporate purposes. On May 17, 2024, the Company completed a Debt-for-Equity Exchange of its remaining 182,329,550 shares of Kenvue Common Stock for the outstanding Commercial Paper. Upon completion of the Debt-for-Equity Exchange, the Commercial Paper was satisfied and discharged, and the Company no longer owns any shares of Kenvue Common Stock. This exchange resulted in a loss of approximately $ 0.4 billion recorded in Other (income) expense. For the fiscal years ended December 28, 2025 and December 29, 2024 for equity investments without readily determinable market values, $ 115 million and $ 171 million, respectively, of the changes in fair value reflected in net income were the result of impairments. There were impacts of $ 368 million and $ 26 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. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. In accordance with ASC 820, a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described below with Level 1 having the highest priority and Level 3 having the lowest. The fair value of a derivative financial instrument (i.e., forward foreign exchange contracts, interest rate contracts) is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. The Company also holds equity investments which are classified as Level 1 and debt securities which are classified as Level 2. The Company holds acquisition related contingent liabilities based upon certain regulatory and commercial events, which are classified as Level 3, whose values are determined using discounted cash flow methodologies or similar techniques for which the determination of fair value requires significant judgment or estimations. The following three levels of inputs are used to measure fair value: Level 1 — Quoted prices in active markets for identical assets and liabilities. Level 2 — Significant other observable inputs. Level 3 — Significant unobservable inputs. 62 The Company’s significant financial assets and liabilities measured at fair value as of the fiscal year ended December 28, 2025 and December 29, 2024 were as follows: 2025 2024 (Dollars in Millions) Level 1 Level 2 Level 3 Total Total (1) Derivatives designated as hedging instruments: Assets: Forward foreign exchange contracts $ — 686 — 686 660 Interest rate contracts (2) — 589 — 589 1,484 Total $ — 1,275 — 1,275 2,144 Liabilities: Forward foreign exchange contracts — 413 — 413 794 Interest rate contracts (2) — 5,848 — 5,848 3,753 Total $ — 6,261 — 6,261 4,547 Derivatives not designated as hedging instruments: Assets: Forward foreign exchange contracts $ — 38 — 38 50 Liabilities: Forward foreign exchange contracts — 46 — 46 17 Available For Sale Other Investments: Equity investments (3) 665 — — 665 451 Debt securities (4) — 2,854 — 2,854 7,216 Other Liabilities Contingent Consideration (5) $ 753 753 1,217 Gross to Net Derivative Reconciliation 2025 2024 (Dollars in Millions) Total Gross Assets $ 1,313 2,194 Credit Support Agreements (CSA) ( 1,308 ) ( 2,172 ) Total Net Asset 5 22 Total Gross Liabilities 6,307 4,564 Credit Support Agreements (CSA) ( 5,903 ) ( 4,412 ) Total Net Liabilities $ 404 152 2025 Annual Report 63 Summarized information about changes in liabilities for contingent consideration is as follows: 2025 2024 2023 (Dollars in Millions) Beginning Balance $ 1,217 1,092 1,120 Changes in estimated fair value (6) ( 387 ) 88 29 Additions (7) — 112 — Payments/Other ( 77 ) ( 75 ) ( 57 ) Ending Balance (5) $ 753 1,217 1,092 (1) 2024 assets and liabilities are all classified as Level 2 with the exception of equity investments of $ 451 million, which are classified as Level 1 and contingent consideration of $ 1,217 million, classified as Level 3. (2) Includes cross currency interest rate swaps and interest rate swaps. (3) Classified as non-current other assets. (4) Classified as cash equivalents and current marketable securities. (5) Includes $ 753 million, $ 1,217 million and $ 1,092 million, classified as non-current other liabilities as of December 28, 2025, December 29, 2024 and December 31, 2023, respectively. (6) In fiscal year 2025, the Company recorded a reduction of $ 364 million to the CVR liability associated with the 2022 Abiomed acquisition based on the reduced probability of the achievement of certain developmental and commercial milestones by the dates required in the CVR agreement. The remaining CVR balance is $ 0.4 billion. (7) In fiscal year 2024, the Company recorded $ 105 million of contingent consideration related to Proteologix. As of December 28, 2025 and December 29, 2024, cash and cash equivalents includes money market funds of $ 5,993 million and $ 6,123 million, respectively, which would be considered level 1 in the fair value hierarchy See Notes 2 and 7 for financial assets and liabilities held at carrying amount on the Consolidated Balance Sheet. 64 7. Borrowings The components of long-term debt are as follows: (Dollars in Millions) 2025 2024 2.625 % Notes due 2025 $ — 750 0.55 % Notes due 2025 — 999 2.45 % Notes due 2026 2,000 1,999 2.95 % Notes due 2027 968 927 0.95 % Notes due 2027 1,499 1,458 4.50 % Notes due 2027 (4) 749 — 1.150 % Notes due 2028 ( 750 MM Euro 1.1785 ) (1) /( 750 MM Euro 1.0401 ) (2) 882 777 2.90 % Notes due 2028 1,498 1,498 4.55 % Notes due 2028 (4) 748 — 6.95 % Notes due 2029 299 298 4.80 % Notes due 2029 1,147 1,146 2.70 % Notes due 2029 (4) ( 600 MM Euro 1.1785 ) (1) 707 — 1.30 % Notes due 2030 1,693 1,646 4.70 % Notes due 2030 (4) 996 — 4.90 % Notes due 2031 1,146 1,145 3.20 % Notes due 2032 ( 700 MM Euro 1.1785 ) (1) /($ 700 MM Euro 1.0401 ) (2) 822 725 4.85 % Notes due 2032 (4) 1,243 — 4.95 % Notes due 2033 499 499 4.375 % Notes due 2033 853 854 3.05 % Notes due 2033 (4) ( 700 MM Euro 1.1785 ) (1) 823 — 4.95 % Notes due 2034 847 846 1.650 % Notes due 2035 ( 1.5 B Euro 1.1785 ) (1) /( 1.5 B Euro 1.0401 ) (2) 1,758 1,550 5.00 % Notes due 2035 (4) 1,244 — 3.35 % Notes due 2036 ( 800 MM Euro 1.1785 ) (1) ( 800 MM Euro 1.0401 ) (2) 938 827 3.587 % Notes due 2036 919 869 5.95 % Notes due 2037 995 994 3.625 % Notes due 2037 1,409 1,358 3.35 % Notes due 2037 (4) ( 1 B Euro 1.1785 ) (1) 1,176 — 5.85 % Notes due 2038 697 697 3.40 % Notes due 2038 994 993 4.50 % Notes due 2040 542 541 2.10 % Notes due 2040 898 845 4.85 % Notes due 2041 298 297 4.50 % Notes due 2043 497 496 3.55 % Notes due 2044 ( 1 B Euro 1.1785 ) (1) ( 1 B Euro 1.0401 ) (2) 1,168 1,030 3.60 % Notes due 2045 (4) ( 700 MM Euro 1.1785 ) (1) 819 — 3.73 % Notes due 2046 1,979 1,978 3.75 % Notes due 2047 876 822 3.50 % Notes due 2048 744 744 2025 Annual Report 65 2.25 % Notes due 2050 861 808 5.25 % Notes due 2054 843 843 3.70 % Notes due 2055 (4) ( 1 B Euro 1.1785 ) (1) 1,173 — 2.45 % Notes due 2060 1,112 1,058 Other 79 83 Subtotal 41,438 (3) 32,400 (3) Less current portion 2,000 1,749 Total long-term debt $ 39,438 $ 30,651 (1) Translation rate at December 28, 2025. (2) Translation rate at December 29, 2024. (3) The excess of the carrying value over the fair value of debt was $ 1.7 billion and $ 2.0 billion at the end of the fiscal year 2025 and the fiscal year 2024, respectively. (4) In the fiscal first quarter of 2025, the Company issued senior unsecured notes for approximately $ 9.2 billion. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition which closed on April 2, 2025, and for general corporate purposes. 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 June 2025, the Company secured a new 364-day Credit Facility of $ 10 billion, which expires on June 24, 2026. 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. Commitment fees under the agreements are not material. Throughout fiscal years 2025 and 2024, the Company continued to have access to liquidity through the commercial paper market. Short-term borrowings and the current portion of long-term debt amounted to approximately $ 8.5 billion and $ 6.0 billion at the end of fiscal years 2025 and 2024, respectively. The current portion of the long-term debt was $ 2.0 billion and $ 1.7 billion in 2025 and 2024, respectively, and the remainder is commercial paper and local borrowing by international subsidiaries. The current debt balance as of December 28, 2025 includes $ 6.5 billion of commercial paper which has a weighted average interest rate of 3.81 % and a weighted average maturity of approximately two months . The current debt balance as of December 29, 2024 includes $ 4.1 billion of commercial paper which has a weighted average interest rate of 4.46 % and a weighted average maturity of approximately two months . Aggregate maturities of long-term debt obligations commencing in 2026 are: (Dollars in Millions) 2026 2027 2028 2029 2030 After 2030 $ 2,000 3,216 3,128 2,153 2,689 28,252 66 8. Income taxes The provision for taxes on income on continuing operations consists of: (Dollars in Millions) 2025 2024 2023 Currently payable: U.S. taxes $ 1,163 2,200 2,705 International taxes 3,076 2,604 3,090 Total currently payable 4,239 4,804 5,795 Deferred: U.S. taxes 2,008 ( 2,539 ) ( 3,440 ) International taxes ( 470 ) 356 ( 619 ) Total deferred 1,538 ( 2,183 ) ( 4,059 ) Provision for taxes on income $ 5,777 2,621 1,736 2025 Annual Report 67 Below is a tabular rate reconciliation of the U.S. statutory income tax rate of 21 % to the Company's effective income tax rate for the fiscal year 2025, pursuant to the new disclosure requirements of ASU 2023-09 (See Note 1 of the Consolidated Financial Statements): (Dollars in Millions) 2025 U.S. $ 15,254 International 17,327 Earnings before taxes on income: 32,581 Tax rates: U.S. federal statutory rate 6,842 21.0 % State & local taxes: (1) 162 0.5 Foreign tax effects: ( 861 ) ( 2.7 ) Ireland Statutory tax rate difference between Ireland & U.S. ( 473 ) ( 1.5 ) Other ( 11 ) ( 0.0 ) Switzerland Statutory tax rate difference between Switzerland & U.S. ( 607 ) ( 1.9 ) Other 283 0.9 All Other Jurisdictions ( 53 ) ( 0.2 ) Effects of changes in tax laws or rates enacted in the current period: 1,003 3.1 OBBBA Deferred NCTI Remeasurement 1,003 3.1 Effects of cross border tax laws: 1,601 4.9 NCTI (2) 999 3.1 Subpart F 522 1.6 Other 80 0.2 Tax credits: ( 2,455 ) ( 7.6 ) NCTI foreign tax credits (2) ( 1,324 ) ( 4.1 ) Subpart F foreign tax credits ( 656 ) ( 2.0 ) All other tax credits ( 475 ) ( 1.5 ) Changes in valuation allowances: 136 0.4 Nontaxable or nondeductible items: 55 0.2 Changes in unrecognized tax benefits: ( 111 ) ( 0.3 ) Other adjustments: ( 595 ) ( 1.8 ) Net tax benefit on ordinary losses ( 595 ) ( 1.8 ) Effective Rate $ 5,777 17.7 % (1) Majority of state taxes are in the following states AL, CA, FL, IL, IN, KY, MA, MI, NJ, NY, PA, TN, VA, WI (2) NCTI includes $( 0.6 ) billion of accrued benefits as the Company has elected to account for NCTI under the deferred method. (See Note 1 to the Consolidated Financial Statements) 68 The fiscal year 2025 effective tax rate increased by 2.0 % as compared to fiscal year 2024 effective tax rate. The increase in the worldwide effective tax rate is primarily due to the United States enacting OBBBA (see Note 1). As a result, the Company remeasured its deferred tax balances related to NCTI for the changes in the tax rate and recorded a one-time re-measurement cost of approximately $ 1.0 billion which is reflected in the effective tax rate table under effects of changes in tax laws or rates enacted in the current period. The Company’s 2025 effective tax rate was also unfavorably impacted by more income in higher tax jurisdictions, specifically in the U.S. In fiscal year 2025, the Company reversed previously accrued reserves of approximately $ 7.0 billion for the Talc settlement proposal versus a charge of $ 5.1 billion recorded in fiscal 2024 for the Talc settlement proposal. Both were recorded at an effective rate for U.S. federal and state tax of approximately 22 % (for further information see Note 19 to the Consolidated Financial Statements). The Company’s 2025 effective tax rate was favorably impacted by a tax benefit as a result of ordinary losses attributed to certain international subsidiaries which is reflected in the other adjustments category in the effective tax rate table and favorable changes in unrecognized tax benefit positions due to expiration of statute of limitations. The below comparison table is a rate reconciliation of the U.S. statutory rate of 21 % to the Company's effective tax rate for fiscal years 2024 and 2023: (Dollars in Millions) 2024 2023 U.S. $( 458 ) ( 2,033 ) International 17,145 17,095 Earnings before taxes on income: $ 16,687 15,062 Tax rates: U.S. statutory rate 21.0 % 21.0 International operations (1) ( 5.2 ) ( 8.1 ) U.S. tax settlements 1.0 ( 3.0 ) U.S. taxes on international income (2) ( 2.6 ) ( 0.3 ) U.S. state taxes 1.5 1.0 Tax benefits on share-based compensation ( 0.6 ) ( 0.8 ) All other 0.6 1.7 Effective Rate 15.7 % 11.5 (1) International operations reflect the impacts of operations in jurisdictions with statutory tax rates different than the U.S., particularly Ireland, Switzerland, and Belgium, which is a favorable impact on the effective tax rate as compared with the U.S. statutory rate. (2) Includes the net impact of the GILTI tax, the Foreign-Derived Intangible Income deduction and other foreign income that is taxable under the U.S. tax code as well as related foreign tax credits. The fiscal year 2024 effective tax rate increased 4.2 % as compared to the fiscal year 2023 effective tax rate. The primary drivers of this change are discussed below. In fiscal year 2024, The Company had more income in higher tax jurisdictions compared to fiscal year 2023, primarily in the U.S. where the Company recorded a charge of approximately $ 5.1 billion in the fiscal year of 2024 versus approximately $ 7.0 billion in the fiscal year of 2023, both for the talc matters in the United States. Both charges were recorded at an effective U.S. tax rate of approximately 22 % (for further information see Note 19 to the Consolidated Financial Statements). Additionally in the fiscal year 2024, the effective tax rate was unfavorably impacted by legislative changes that went into effect for Pillar Two in some of the Company's foreign jurisdictions which are reflected in International operations on the Company’s effective tax rate reconciliation. Also in fiscal year 2024, the Company generated incremental U.S. foreign tax credits related to income sourced and taxed outside the United States and is reflected in U.S. taxes on international income on the Company’s effective tax rate reconciliation. In 2024, the Company finalized multi-year transfer pricing agreements with the U.S. Internal Revenue Service (IRS) and certain other foreign jurisdictions. The U.S portion of the agreements were partially offset by the related tax adjustments in the foreign jurisdictions which are reflected in U.S tax settlements and International operations, respectively, on the Company’s effective rate reconciliation. 2025 Annual Report 69 Temporary differences and carryforwards at the end of fiscal years 2025 and 2024 were as follows: 2025 Deferred Tax 2024 Deferred Tax (Dollars in Millions) Asset Liability Asset Liability Employee related obligations $ 54 372 Stock based compensation 651 717 Depreciation of property, plant and equipment ( 929 ) ( 833 ) Goodwill and intangibles ( 6,154 ) ( 3,261 ) R&D capitalized for tax 4,752 4,398 Reserves & liabilities 2,433 4,444 Inventory related 378 371 Net operating loss & tax credit carryforwards 3,561 2,658 Undistributed foreign earnings 1,718 ( 2,969 ) 2,668 ( 1,492 ) NCTI (Net CFC Tested Income) ( 2,495 ) ( 1,589 ) Miscellaneous international 620 852 Miscellaneous U.S. 300 346 Total deferred income taxes 14,467 ( 12,547 ) 16,826 ( 7,175 ) Valuation allowances ( 1,837 ) ( 1,638 ) Total deferred income taxes net of valuation allowances $ 12,630 ( 12,547 ) 15,188 ( 7,175 ) The Company has wholly-owned international subsidiaries that have cumulative losses that result in deferred tax assets. The Company believes that it is more likely than not that these subsidiaries will generate future taxable income sufficient to partially utilize these deferred tax assets. Net operating loss carryforwards for certain international subsidiaries that do not have an indefinite carryforward period will begin to expire in 2026. Valuation allowances have been recorded against deferred tax assets that are not more likely than not to be realized. The following table summarizes the activity related to valuation allowances for continuing operations: (Dollars in Millions) 2025 2024 Beginning of year $ 1,638 1,149 Provision 129 451 Utilization ( 70 ) — Foreign currency translation 90 ( 46 ) Net acquisitions / (dispositions/liquidations) 50 84 End of year $ 1,837 $ 1,638 70 The following table summarizes income taxes paid net of tax refunds: (Dollars in Millions) 2025 2024 2023 U.S. Federal (1) $ 3,577 3,815 4,722 U.S. State and Local taxes 169 341 236 Total U.S. 3,746 4,156 4,958 Total Foreign (2) 2,793 2,558 3,616 Total income taxes paid net of tax refunds $ 6,539 6,714 8,574 (1) Includes TCJA foreign undistributed earnings payments of $ 2.5 billion, $ 2.0 billion and $ 1.5 billion in fiscal years 2025, 2024 and 2023, respectively (2) Included in foreign income taxes paid net of refunds are payments made in 2025 to Ireland for $ 0.6 billion and Switzerland for $ 0.5 billion The following table summarizes the activity related to unrecognized tax benefits for continuing operations: (Dollars in Millions) 2025 2024 2023 Beginning of year $ 2,020 2,485 3,716 Increases related to current year tax positions 87 176 239 Increases related to prior period tax positions 925 129 244 Decreases related to prior period tax positions ( 160 ) ( 147 ) ( 781 ) Settlements ( 10 ) ( 583 ) ( 880 ) Lapse of statute of limitations ( 200 ) ( 40 ) ( 53 ) End of year $ 2,662 2,020 2,485 As of December 28, 2025 the Company had approximately $ 2.7 billion of unrecognized tax benefits. The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress with a number of tax authorities. With respect to the United States, the Internal Revenue Service has completed its audit for the tax years through 2016 and has commenced the audit for tax years 2017 through 2020. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2014. 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. The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities. Interest income and expense along with penalties related to unrecognized tax benefits are presented in the provision for income taxes. The Company recognized net after tax interest expense of $ 64 million, $ 217 million and $ 99 million in fiscal years 2025, 2024 and 2023, respectively. The total amount of accrued interest was $ 336 million and $ 274 million in fiscal years 2025 and 2024, respectively. 2025 Annual Report 71 9. Employee related obligations At the end of fiscal 2025 and fiscal 2024, employee related obligations recorded on the Consolidated Balance Sheets were: (Dollars in Millions) 2025 2024 Pension benefits $ 2,917 2,968 Postretirement benefits 1,774 1,920 Postemployment benefits 2,798 2,910 Deferred compensation 44 49 Total employee obligations 7,533 7,847 Less current benefits payable 576 592 Employee related obligations — non-current $ 6,957 7,255 Prepaid employee related obligations of $ 7.3 billion and $ 6.0 billion for 2025 and 2024, respectively, are included in Other assets on the Consolidated Balance Sheets. 10. Pensions and other benefit plans The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. The Company also provides post-retirement benefits, primarily healthcare, to all eligible U.S. retired employees and their dependents. Many international employees are covered by government-sponsored programs and the cost to the Company is not significant. In the U.S., non-union pension benefits for employees hired before January 1, 2015 are primarily based on the employee’s compensation during the last five years before retirement and the number of years of service (the Final Average Pay formula). U.S. pension benefits for employees hired after 2014, are calculated using a different formula based on employee compensation over total years of service (the Retirement Value formula). 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. International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased under group contracts, or reserves are provided. The Company does not fund retiree healthcare benefits in advance and has the right to modify these plans in the future. In 2025 and 2024 the Company used December 31, 2025 and December 31, 2024, respectively, as the measurement date for all U.S. and international retirement and other benefit plans. Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans for 2025, 2024 and 2023 include the following components: Retirement Plans Other Benefit Plans (Dollars in Millions) 2025 2024 2023 2025 2024 2023 Service cost $ 928 948 893 288 277 264 Interest cost 1,423 1,402 1,437 215 209 214 Expected return on plan assets ( 2,392 ) ( 2,560 ) ( 2,716 ) ( 7 ) ( 7 ) ( 7 ) Amortization of prior service cost ( 184 ) ( 184 ) ( 184 ) ( 2 ) ( 2 ) ( 2 ) Recognized actuarial losses (gains) 339 174 ( 199 ) 62 53 23 Curtailments and settlements — ( 2 ) 93 — — ( 5 ) Net periodic benefit cost (credit) $ 114 ( 222 ) ( 676 ) 556 530 487 72 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, Selling, marketing and administrative expenses, and Net earnings from discontinued operations, net of taxes if related to the separation of Kenvue. All other components of net periodic benefit cost are presented as part of Other (income) expense, net on the Consolidated Statement of Earnings, with the exception of certain amounts for curtailments and settlements, which are reported in Net earnings from discontinued operations, net of taxes if related to the separation of Kenvue (as noted above). Unrecognized gains and losses for the U.S. pension plans are amortized over the average remaining future service for each plan. For plans with no active employees, they are amortized over the average life expectancy. The amortization of gains and losses for the other U.S. benefit plans is determined by using a 10 % corridor of the greater of the market value of assets or the accumulated postretirement benefit obligation. Total unamortized gains and losses in excess of the corridor are amortized over the average remaining future service. Prior service costs/benefits for the U.S. pension plans are amortized over the average remaining future service of plan participants at the time of the plan amendment. Prior service cost/benefit for the other U.S. benefit plans is amortized over the average remaining service to full eligibility age of plan participants at the time of the plan amendment. The following table represents the weighted-average actuarial assumptions: Retirement Plans Other Benefit Plans Worldwide Benefit Plans 2025 2024 2023 2025 2024 2023 Net Periodic Benefit Cost Service cost discount rate 4.57 % 4.39 4.85 5.51 5.09 5.40 Interest cost discount rate 5.33 % 4.95 5.25 5.45 5.12 5.43 Rate of increase in compensation levels 3.69 % 3.70 3.71 4.22 4.22 4.22 Expected long-term rate of return on plan assets 7.21 % 7.25 7.21 Benefit Obligation Discount rate 5.03 % 4.95 4.58 5.31 5.54 5.11 Rate of increase in compensation levels 3.69 % 3.70 3.69 4.26 4.22 4.22 The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. The Company's methodology in determining service and interest cost uses duration specific spot rates along that yield curve to the plans' liability cash flows. The expected rates of return on plan asset assumptions represent the Company's assessment of long-term returns on diversified investment portfolios globally. The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class and the various asset class allocations by market. The following table displays the assumed healthcare cost trend rates, for all individuals: Healthcare Plans 2025 2024 Healthcare cost trend rate assumed for next year 13.90 % 9.33 % Rate to which the cost trend rate is assumed to decline (ultimate trend) 4.01 % 4.02 % Year the rate reaches the ultimate trend rate 2050 2048 2025 Annual Report 73 The following table sets forth information related to the benefit obligation and the fair value of plan assets at fiscal year-end 2025 and 2024 for the Company’s defined benefit retirement plans and other post-retirement plans: Retirement Plans Other Benefit Plans (Dollars in Millions) 2025 2024 2025 2024 Change in Benefit Obligation Projected benefit obligation — beginning of year $ 30,317 31,744 4,425 4,108 Service cost 928 948 288 277 Interest cost 1,423 1,402 215 209 Plan participant contributions 82 75 — — Actuarial (gains) losses (1) ( 245 ) ( 1,245 ) ( 12 ) 398 Divestitures & acquisitions 1 — — — Curtailments, settlements & restructuring ( 11 ) ( 121 ) — — Benefits paid from plan (2) ( 1,436 ) ( 1,801 ) ( 787 ) ( 556 ) Effect of exchange rates 1,185 ( 685 ) 9 ( 11 ) Projected benefit obligation — end of year $ 32,244 30,317 4,138 4,425 Change in Plan Assets Plan assets at fair value — beginning of year $ 33,395 33,607 93 86 Actual return (loss) on plan assets 3,133 2,113 13 15 Company contributions 244 229 780 548 Plan participant contributions 82 75 — — Settlements ( 11 ) ( 114 ) — — Benefits paid from plan assets (2) ( 1,436 ) ( 1,801 ) ( 787 ) ( 556 ) Effect of exchange rates 1,251 ( 714 ) — — Plan assets at fair value — end of year $ 36,658 33,395 99 93 Funded status — end of year $ 4,414 3,078 ( 4,039 ) ( 4,332 ) Amounts Recognized in the Company’s Balance Sheet consist of the following: Non-current assets $ 7,331 6,046 — — Current liabilities ( 144 ) ( 136 ) ( 432 ) ( 453 ) Non-current liabilities ( 2,773 ) ( 2,832 ) ( 3,607 ) ( 3,879 ) Total recognized in the consolidated balance sheet — end of year $ 4,414 3,078 ( 4,039 ) ( 4,332 ) Amounts Recognized in Accumulated Other Comprehensive Income consist of the following: Net actuarial loss $ 2,727 3,903 609 691 Prior service cost (credit) ( 867 ) ( 1,051 ) ( 2 ) ( 4 ) Unrecognized net transition obligation — — — — Total before tax effects $ 1,860 2,852 607 687 Accumulated Benefit Obligations — end of year $ 30,999 28,883 (1) The actuarial (gains)/losses for retirement plans in 2025 and 2024 were primarily driven by changes in the discount rates. (2) The fiscal year 2024 includes approximately $ 400 million transferred to a group annuity contract issued by a third-party insurer for the U.S. Salaried Pension. 74 Retirement Plans Other Benefit Plans (Dollars in Millions) 2025 2024 2025 2024 Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income Net periodic benefit cost (credit) $ 114 ( 222 ) 556 530 Net actuarial (gain) loss ( 985 ) ( 807 ) ( 19 ) 389 Amortization of net actuarial loss ( 339 ) ( 172 ) ( 62 ) ( 53 ) Prior service cost (credit) — — — — Amortization of prior service (cost) credit 184 184 2 2 Effect of exchange rates 148 ( 79 ) ( 1 ) 1 Total loss/(income) recognized in other comprehensive income, before tax $( 992 ) ( 874 ) ( 80 ) 339 Total recognized in net periodic benefit cost and other comprehensive income $( 878 ) ( 1,096 ) 476 869 The Company plans to continue to fund its U.S. Qualified Plans to comply with the Pension Protection Act of 2006. International Plans are funded in accordance with local regulations. Additional discretionary contributions are made when deemed appropriate to meet the long-term obligations of the plans. For certain plans, funding is not a common practice, as funding provides no economic benefit. Consequently, the Company has several pension plans that are not funded. In 2025, the Company contributed $ 138 million and $ 106 million to its U.S. and international pension plans, respectively. The following table displays the funded status of the Company's U.S. Qualified & Non-Qualified pension plans and international funded and unfunded pension plans at December 31, 2025 and December 31, 2024, respectively: U.S. Plans International Plans Qualified Plans Non-Qualified Plans Funded Plans Unfunded Plans (Dollars in Millions) 2025 2024 2025 2024 2025 2024 2025 2024 Plan Assets $ 24,057 22,250 — — 12,601 11,145 — — Projected Benefit Obligation 19,111 18,146 2,084 1,990 10,910 10,069 139 112 Accumulated Benefit Obligation 18,867 17,726 2,064 1,949 9,957 9,115 111 93 Over (Under) Funded Status Projected Benefit Obligation $ 4,946 4,104 ( 2,084 ) ( 1,990 ) 1,691 1,076 ( 139 ) ( 112 ) Accumulated Benefit Obligation 5,190 4,524 ( 2,064 ) ( 1,949 ) 2,644 2,030 ( 111 ) ( 93 ) Plans with accumulated benefit obligations in excess of plan assets have an accumulated benefit obligation, projected benefit obligation and plan assets of $ 3.0 billion, $ 3.1 billion and $ 0.3 billion, respectively, at the end of 2025, and $ 5.8 billion, $ 6.1 billion and $ 3.2 billion, respectively, at the end of 2024. The following table displays the projected future benefit payments from the Company’s retirement and other benefit plans: (Dollars in Millions) 2026 2027 2028 2029 2030 2031-2035 Projected future benefit payments Retirement plans $ 1,678 1,698 1,798 1,890 1,996 11,386 Other benefit plans $ 444 401 414 427 443 2,425 2025 Annual Report 75 The following table displays the projected future minimum contributions to the unfunded retirement plans. These amounts do not include any discretionary contributions that the Company may elect to make in the future. (Dollars in Millions) 2026 2027 2028 2029 2030 2031-2035 Projected future contributions $ 142 148 152 156 163 878 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; local tax regulations; availability of investment vehicles (separate accounts, commingled accounts, insurance funds, etc.); funded status of the plans; ratio of actives to retirees; duration of liabilities; and other relevant factors including: diversification, liquidity of local markets and liquidity of base currency. A majority of the Company’s pension funds are open to new entrants and are expected to be on-going plans. Permitted investments are primarily liquid and/or listed, with little reliance on illiquid and non-traditional investments such as hedge funds. The Company’s retirement plan asset allocation at the end of 2025 and 2024 and target allocations for 2026 are as follows: Percent of Plan Assets Target Allocation Worldwide Retirement Plans 2025 2024 2026 Equity securities 55 % 55 % 54 % Debt securities 45 45 46 Total plan assets 100 % 100 % 100 % Determination of fair value of plan assets The Plan has an established and well-documented process for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon models that primarily use, as inputs, market-based or independently sourced market parameters, including yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves. While the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Valuation hierarchy The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described in the table below with Level 1 having the highest priority and Level 3 having the lowest. The Net Asset Value (NAV) is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for the investments measured at fair value. • Short-term investment funds — Cash and quoted short-term instruments are valued at the closing price or the amount held on deposit by the custodian bank. Other investments are through investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is a quoted price in a market that is not active and classified as Level 2. • Government and agency securities — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. When quoted market prices for a security are not available in an active market, they are classified as Level 2. 76 • Debt instruments — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified as Level 1. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are classified as Level 2. • Equity securities — Equity securities are valued at the closing price reported on the major market on which the individual securities are traded. Substantially all equity securities are classified within Level 1 of the valuation hierarchy. • Commingled funds — These investment vehicles are valued using the NAV provided by the fund administrator. Assets in the Level 2 category have a quoted market price. • Other assets — Other assets are represented primarily by limited partnerships. These investment vehicles are valued using the NAV provided by the fund administrator. Other assets that are exchange listed and actively traded are classified as Level 1, while inactively traded assets are classified as Level 2. Level 3 other assets are priced based on unobservable inputs. The following table sets forth the Retirement Plans' investments measured at fair value as of December 31, 2025 and December 31, 2024: Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (1) Investments Measured at Net Asset Value (Level 1) (Level 2) (Level 3) Total Assets (Dollars in Millions) 2025 2024 2025 2024 2025 2024 2025 2024 2025 2024 Short-term investment funds $ 57 — 677 511 — — — — 734 511 Government and agency securities — — 9,149 7,885 — — — — 9,149 7,885 Debt instruments — — 2,310 2,321 — — — — 2,310 2,321 Equity securities 6,647 7,144 — — 1 — — — 6,648 7,144 Commingled funds — — 6,105 5,004 — 37 6,105 6,190 12,210 11,231 Other assets — — 567 88 108 128 4,932 4,087 5,607 4,303 Investments at fair value $ 6,704 7,144 18,808 15,809 109 165 11,037 10,277 36,658 33,395 (1) The activity for the Level 3 assets is not significant for all years presented. The Company's Other Benefit Plans are unfunded except for U.S. commingled funds (Level 2) of $ 99 million and $ 93 million at December 31, 2025 and December 31, 2024, respectively. The fair value of Johnson & Johnson Common Stock directly held in plan assets was $ 17 million at December 31, 2025 and $ 13 million at December 31, 2024. 11. Savings plan The Company has voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees. The Company matches a percentage of each employee’s contributions consistent with the provisions of the plan for which the employee is eligible. Total Company matching contributions to the plans were $ 277 million, $ 282 million and $ 263 million in fiscal years 2025, 2024 and 2023, respectively. 2025 Annual Report 77 12. Capital and treasury stock Changes in treasury stock were: Treasury Stock (Amounts in Millions Except Treasury Stock Shares in Thousands) Shares Amount Balance at January 1, 2023 506,246 $ 41,694 Employee compensation and stock option plans ( 15,521 ) ( 2,529 ) Repurchase of common stock 31,085 5,079 Kenvue share exchange (Note 21) 190,955 31,418 Balance at December 31, 2023 712,765 75,662 Employee compensation and stock option plans ( 15,027 ) ( 2,389 ) Repurchase of common stock 15,183 2,407 Balance at December 29, 2024 712,921 75,680 Employee compensation and stock option plans ( 34,920 ) ( 6,009 ) Repurchase of common stock 33,903 5,953 Balance at December 28, 2025 711,904 $ 75,624 Aggregate shares of common stock issued were approximately 3,119,843,000 shares at the end of fiscal years 2025, 2024 and 2023. Cash dividends paid were $ 5.14 per share in fiscal year 2025, compared with dividends of $ 4.91 per share in fiscal year 2024, and $ 4.70 per share in fiscal year 2023. On January 2, 2026, the Board of Directors declared a regular cash dividend of $ 1.30 per share, payable on March 10, 2026 to shareholders of record as of February 24, 2026. 13. Accumulated other comprehensive income (loss) Components of other comprehensive income (loss) consist of the following: (Dollars in Millions) Foreign Currency Translation Gain/(loss) On Securities Employee Benefit Plans Gain/ (Loss) On Derivatives & Hedges Total Accumulated Other Comprehensive Income (Loss) January 1, 2023 $( 11,813 ) ( 27 ) ( 897 ) ( 230 ) ( 12,967 ) Net 2023 changes ( 3,221 ) 26 ( 1,399 ) ( 147 ) ( 4,741 ) Kenvue Separation/IPO 4,885 — 296 * — 5,181 December 31, 2023 ( 10,149 ) ( 1 ) ( 2,000 ) ( 377 ) ( 12,527 ) Net 2024 changes 1,708 2 449 ( 1,373 ) 786 December 29, 2024 ( 8,441 ) 1 ( 1,551 ) ( 1,750 ) ( 11,741 ) Net 2025 changes ( 5,506 ) ( 1 ) 858 1,460 ( 3,189 ) December 28, 2025 $( 13,947 ) — ( 693 ) ( 290 ) ( 14,930 ) 78 Amounts in accumulated other comprehensive income are presented net of the related tax impact. Foreign currency translation is not adjusted for income taxes where it relates to permanent investments in international subsidiaries. For additional details on comprehensive income see the Consolidated Statements of Comprehensive Income. Details on reclassifications out of Accumulated Other Comprehensive Income: Gain/(Loss) On Securities - reclassifications released to Other (income) expense, net. Employee Benefit Plans - reclassifications are included in net periodic benefit cost. See Note 10 for additional details. Gain/(Loss) On Derivatives & Hedges - reclassifications to earnings are recorded in the same account as the hedged transaction. See Note 6 for additional details. * Includes impact of curtailments and settlements in connection with the separation of Kenvue. 14. International currency translation For translation of its subsidiaries operating in non-U.S. Dollar currencies, the Company has determined that the local currencies of its international subsidiaries are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years, or where a substantial portion of its cash flows are not in the local currency. For the majority of the Company's subsidiaries the local currency is the functional currency. In consolidating international subsidiaries, balance sheet currency effects are recorded as a component of accumulated other comprehensive income. The other current and non-current assets line within the Statement of Cash flows includes the impact of foreign currency translation. 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, Egypt, Turkey and Venezuela). The translation of balance sheet accounts for highly inflationary economies are reflected in the operating results. A rollforward of the changes during fiscal years 2025, 2024 and 2023 for foreign currency translation adjustments is included in Note 13. Net currency transaction gains and losses included in Other (income) expense were losses of $ 254 million, $ 214 million and $ 366 million in fiscal years 2025, 2024 and 2023, respectively. 2025 Annual Report 79 15. 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 December 28, 2025, December 29, 2024 and December 31, 2023: (In Millions Except Per Share Amounts) 2025 2024 2023 Basic net earnings per share from continuing operations $ 11.13 5.84 5.26 Basic net earnings per share from discontinued operations — — 8.62 Total net earnings per share - basic 11.13 5.84 13.88 Average shares outstanding — basic 2,407.4 2,407.3 2,533.5 Potential shares exercisable under stock option plans 124.1 77.7 94.1 Less: shares repurchased under treasury stock method ( 102.1 ) ( 55.6 ) ( 67.2 ) Adjusted average shares outstanding — diluted 2,429.4 2,429.4 2,560.4 Diluted net earnings per share from continuing operations 11.03 5.79 5.20 Diluted net earnings per share from discontinuing operations — — 8.52 Total net earnings per share - diluted $ 11.03 5.79 13.72 (Shares in Millions) The diluted net earnings per share calculation excluded the following 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. — 54.1 43.0 16. Common stock, stock option plans and stock compensation agreements At December 28, 2025, the Company had one active stock-based compensation plan, the 2022 Long-Term Incentive Plan. The shares outstanding are for contracts under the Company's 2012 Long-Term Incentive Plan and 2022 Long-Term Incentive Plan. 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 93 million at the end of fiscal year 2025. The compensation cost that has been charged against income for these plans was $ 1.4 billion, $ 1.2 billion and $ 1.1 billion for fiscal years 2025, 2024 and 2023, respectively. The total income tax benefit recognized in the income statement for share-based compensation costs was $ 283 million, $ 251 million and $ 221 million for fiscal years 2025, 2024 and 2023, respectively. The Company also recognized additional income tax benefits of $ 215 million, $ 94 million and $ 126 million for fiscal years 2025, 2024 and 2023, respectively, for which options were exercised or restricted shares were vested. The total unrecognized compensation cost was $ 1.1 billion, $ 1.0 billion and $ 0.9 billion for fiscal years 2025, 2024 and 2023, respectively. The weighted average period for this cost to be recognized was 1.76 years, 1.81 years and 1.80 years for fiscal years 2025, 2024, and 2023, respectively. Share-based compensation costs capitalized as part of inventory were insignificant in all periods. The Company settles employee benefit equity issuances with treasury shares. Treasury shares are replenished through market purchases throughout the year for the number of shares used to settle employee benefit equity issuances. 80 Stock options Stock options expire 10 years from the date of grant and vest over service periods that range from 6 months to 3 years. Options granted under the 2012 Long-Term Incentive Plan were granted at the average of the high and low prices of the Company’s Common Stock on the New York Stock Exchange on the date of grant. Options granted under the 2022 Long-Term incentive Plan were granted at the closing price of the Company’s Common Stock on the New York Stock Exchange on the date of grant. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. For 2025, 2024, and 2023 grants, expected volatility represents a blended rate of a 10-year weekly historical overall volatility rate, and a 5-week average implied volatility rate based on at-the-money traded Johnson & Johnson options with a life of 2 years. For all grants, historical data is used to determine the expected life of the option. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. The average fair value of options granted was $ 27.07 , $ 27.67 and $ 27.85 , in fiscal years 2025, 2024 and 2023, respectively. The fair value was estimated based on the weighted average assumptions of: 2025 2024 2023 Risk-free rate 4.33 % 4.15 % 3.74 % Expected volatility 17.99 % 17.85 % 17.69 % Expected life (in years) 7.0 7.0 7.0 Expected dividend yield 3.30 % 3.10 % 2.90 % A summary of option activity under the Plan as of December 28, 2025, is presented below: (Shares in Thousands) Outstanding Shares Weighted Average Exercise Price Aggregate Intrinsic Value (Dollars in Millions) Shares at December 29, 2024 112,629 $ 144.69 $ 1,129 Options granted 12,367 156.15 Options exercised ( 29,742 ) 128.09 Options canceled/forfeited ( 2,182 ) 160.90 Shares at December 28, 2025 93,072 $ 151.14 $ 5,257 The total intrinsic value of options exercised was $ 1,442 million, $ 560 million and $ 729 million in fiscal years 2025, 2024 and 2023, respectively. 2025 Annual Report 81 The following table summarizes stock options outstanding and exercisable at December 28, 2025: (Shares in Thousands) Outstanding Exercisable Exercise Price Range Options Average Life (1) Weighted Average Exercise Price Options Weighted Average Exercise Price $ 101.87 - $ 115.67 7,570 0.9 $ 112.45 7,570 $ 112.45 $ 129.51 - $ 131.94 15,519 2.7 130.89 15,518 130.89 $ 141.06 - $ 156.15 23,178 6.7 153.84 11,307 151.41 $ 157.92 - $ 162.75 23,350 7.6 160.27 10,318 161.13 $ 164.62 - $ 165.89 23,455 5.6 165.29 22,799 165.27 93,072 5.5 $ 151.14 67,512 $ 148.49 (1) Average contractual life remaining in years. Stock options outstanding at December 29, 2024 and December 31, 2023 were 112,629 and an average life of 5.3 years and 112,238 and an average life of 5.5 years, respectively. Stock options exercisable at December 29, 2024 and December 31, 2023 were 74,683 at an average price of $ 135.72 and 66,998 at an average price of $ 123.39 , respectively. Restricted share units and performance share units The Company grants restricted share units which vest over service periods that range from 6 months to 3 years. 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. 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. The number of shares actually earned at the end of the three-year period will vary, based only on actual performance, from 0 % to 200 % of the target number of performance share units granted. A summary of the restricted share units and performance share units activity under the Plans as of December 28, 2025 is presented below: (Shares in Thousands) Outstanding Restricted Share Units Outstanding Performance Share Units Shares at December 29, 2024 13,041 2,013 Granted 7,146 597 Issued ( 7,267 ) ( 406 ) Canceled/forfeited/adjusted ( 784 ) ( 93 ) Shares at December 28, 2025 12,136 2,111 The average fair value of the restricted share units granted was $ 146.95 , $ 147.51 and $ 152.63 in fiscal years 2025, 2024 and 2023, respectively, using the fair market value at the date of grant. The fair value of restricted share units was discounted for dividends, which are not paid on the restricted share units during the vesting period. The fair value of restricted share units issued was $ 1,104 million, $ 833 million and $ 605 million in 2025, 2024 and 2023, respectively. The weighted average fair value of the performance share units granted was $ 155.71 , $ 133.76 and $ 145.17 in fiscal years 2025, 2024 and 2023, calculated using the weighted average fair market value for each of the component goals at the date of grant. The fair values for the earnings per share goals of each performance share unit were estimated on the date of grant using the fair market value of the shares at the time of the award discounted for dividends, which are not paid on the performance share units during the vesting period. The fair value for the relative total shareholder return goal of each performance share unit was estimated on the date of grant using the Monte Carlo valuation model. The fair value of performance share units issued was $ 67 million, $ 146 million and $ 140 million in fiscal years 2025, 2024 and 2023, respectively. 82 17. Segments of business and geographic areas Following the separation of the Consumer Health business in the fiscal third quarter of 2023, the Company is now organized into two reportable segments: Innovative Medicine and MedTech. The Company’s chief operating decision maker (CODM) is the Chief Executive Officer (Principal Executive Officer). For the Innovative Medicine and MedTech segments, the CODM uses segment income before tax to allocate resources (including employees, financial, and capital resources) for each segment predominantly in the annual forecasting process. The CODM considers planning-to-actual variances on a quarterly basis to assess performance and make decisions about allocating resources to the segments. Sales to Customers % Change (Dollars in Millions) 2025 2024 2023 ’25 vs. ’24 ’24 vs. ’23 INNOVATIVE MEDICINE Oncology U.S. $ 13,659 10,854 8,462 25.8 % 28.3 International 11,721 9,926 9,199 18.1 7.9 Worldwide 25,380 20,781 17,661 22.1 17.7 CARVYKTI U.S. 1,492 869 469 71.6 85.2 International 395 94 30 * * Worldwide 1,887 963 500 95.9 92.7 DARZALEX U.S. 8,266 6,588 5,277 25.5 24.8 International 6,085 5,082 4,467 19.7 13.8 Worldwide 14,351 11,670 9,744 23.0 19.8 ERLEADA U.S. 1,453 1,282 1,065 13.4 20.3 International 2,121 1,717 1,322 23.5 29.8 Worldwide 3,574 2,999 2,387 19.2 25.6 IMBRUVICA U.S. 892 1,020 1,051 ( 12.5 ) ( 3.0 ) International 1,931 2,018 2,214 ( 4.3 ) ( 8.8 ) Worldwide 2,823 3,038 3,264 ( 7.1 ) ( 6.9 ) RYBREVANT/ LAZCLUZE (1) U.S. 534 257 66 * * International 200 70 27 * * Worldwide 734 327 93 * * TALVEY (2) U.S. 340 241 56 40.9 * International 123 46 7 * * Worldwide 463 287 63 61.3 * TECVAYLI U.S. 444 418 334 6.3 25.3 International 226 131 61 72.8 * Worldwide 670 549 395 22.1 38.8 2025 Annual Report 83 Sales to Customers % Change (Dollars in Millions) 2025 2024 2023 ’25 vs. ’24 ’24 vs. ’23 ZYTIGA /abiraterone acetate U.S. 23 34 50 ( 33.2 ) ( 32.2 ) International 480 597 837 ( 19.7 ) ( 28.6 ) Worldwide 502 631 887 ( 20.4 ) ( 28.8 ) OTHER ONCOLOGY U.S. 214 145 93 47.5 55.9 International 162 172 235 ( 6.0 ) ( 26.8 ) Worldwide 376 317 328 18.5 ( 3.4 ) Immunology U.S. 9,872 11,355 11,539 ( 13.1 ) ( 1.6 ) International 5,856 6,473 6,513 ( 9.5 ) ( 0.6 ) Worldwide 15,728 17,828 18,052 ( 11.8 ) ( 1.2 ) REMICADE U.S. 1,171 1,009 1,143 16.0 ( 11.7 ) U.S. Exports 74 98 147 ( 24.8 ) ( 33.0 ) International 523 497 549 5.3 ( 9.5 ) Worldwide 1,768 1,605 1,839 10.2 ( 12.8 ) SIMPONI / SIMPONI ARIA U.S. 1,193 1,082 1,124 10.3 ( 3.8 ) International 1,475 1,108 1,073 33.1 3.3 Worldwide 2,668 2,190 2,197 21.8 ( 0.3 ) STELARA U.S. 3,847 6,720 6,966 ( 42.7 ) ( 3.5 ) International 2,230 3,641 3,892 ( 38.7 ) ( 6.4 ) Worldwide 6,078 10,361 10,858 ( 41.3 ) ( 4.6 ) TREMFYA U.S. 3,529 2,443 2,147 44.5 13.7 International 1,626 1,227 999 32.5 22.8 Worldwide 5,155 3,670 3,147 40.5 16.6 OTHER IMMUNOLOGY U.S. 59 3 11 * ( 74.1 ) International 2 0 0 * — Worldwide 61 3 11 * ( 74.1 ) Neuroscience U.S. 5,151 4,398 4,065 17.1 8.2 International 2,686 2,718 3,076 ( 1.2 ) ( 11.6 ) Worldwide 7,837 7,115 7,140 10.1 ( 0.4 ) CAPLYTA (3) U.S. 700 — — * — International — — — — — Worldwide 700 — — * — 84 Sales to Customers % Change (Dollars in Millions) 2025 2024 2023 ’25 vs. ’24 ’24 vs. ’23 CONCERTA / methylphenidate U.S. 82 134 230 ( 38.6 ) ( 41.7 ) International 502 507 554 ( 1.2 ) ( 8.4 ) Worldwide 584 641 783 ( 9.0 ) ( 18.1 ) INVEGA SUSTENNA / XEPLION / INVEGA TRINZA / TREVICTA U.S. 2,725 3,125 2,897 ( 12.8 ) 7.9 International 1,085 1,097 1,218 ( 1.1 ) ( 9.9 ) Worldwide 3,810 4,222 4,115 ( 9.8 ) 2.6 SPRAVATO U.S. 1,485 929 589 59.9 57.8 International 210 148 100 41.9 48.2 Worldwide 1,696 1,077 689 57.4 56.4 OTHER NEUROSCIENCE U.S. 159 210 349 ( 24.5 ) ( 39.8 ) International 889 965 1,204 ( 7.9 ) ( 19.8 ) Worldwide 1,048 1,175 1,553 ( 10.9 ) ( 24.3 ) Pulmonary Hypertension U.S. 3,223 3,143 2,697 2.6 16.5 International 1,214 1,140 1,117 6.5 2.0 Worldwide 4,437 4,282 3,815 3.6 12.3 OPSUMIT/OPSYNVI (4) U.S. 1,633 1,557 1,292 4.8 20.5 International 692 668 681 3.7 ( 1.9 ) Worldwide 2,325 2,225 1,973 4.5 12.8 UPTRAVI U.S. 1,536 1,511 1,326 1.7 13.9 International 366 307 255 19.4 20.1 Worldwide 1,902 1,817 1,582 4.7 14.9 OTHER PULMONARY HYPERTENSION U.S. 54 75 79 ( 27.0 ) ( 5.1 ) International 155 165 182 ( 6.2 ) ( 9.3 ) Worldwide 209 240 260 ( 12.7 ) ( 7.7 ) Infectious Diseases U.S. 1,264 1,354 1,500 ( 6.6 ) ( 9.8 ) International 1,977 2,042 2,918 ( 3.2 ) ( 30.0 ) Worldwide 3,241 3,396 4,418 ( 4.6 ) ( 23.1 ) EDURANT / rilpivirine U.S. 26 31 35 ( 18.4 ) ( 10.0 ) 2025 Annual Report 85 Sales to Customers % Change (Dollars in Millions) 2025 2024 2023 ’25 vs. ’24 ’24 vs. ’23 International 1,461 1,241 1,115 17.7 11.2 Worldwide 1,486 1,272 1,150 16.9 10.6 PREZISTA / PREZCOBIX / REZOLSTA / SYMTUZA U.S. 1,226 1,311 1,446 ( 6.5 ) ( 9.4 ) International 353 401 408 ( 11.9 ) ( 1.7 ) Worldwide 1,579 1,712 1,854 ( 7.7 ) ( 7.7 ) OTHER INFECTIOUS DISEASES (5) U.S. 12 11 19 6.6 ( 41.0 ) International 163 401 1,395 ( 59.3 ) * Worldwide 175 412 1,414 ( 57.5 ) * Cardiovascular / Metabolism / Other U.S. 3,175 2,866 2,906 10.8 ( 1.4 ) International 603 696 765 ( 13.3 ) ( 9.1 ) Worldwide 3,778 3,562 3,671 6.1 ( 3.0 ) XARELTO U.S. 2,633 2,373 2,365 11.0 0.3 International — — — — — Worldwide 2,633 2,373 2,365 11.0 0.3 OTHER U.S. 542 494 541 9.8 ( 8.8 ) International 603 696 765 ( 13.3 ) ( 9.1 ) Worldwide 1,145 1,189 1,306 ( 3.7 ) ( 8.9 ) TOTAL INNOVATIVE MEDICINE U.S. 36,344 33,970 31,169 7.0 9.0 International 24,057 22,994 23,590 4.6 ( 2.5 ) Worldwide 60,401 56,964 54,759 6.0 4.0 MEDTECH Cardiovascular U.S. 5,305 4,513 3,633 17.5 24.2 International 3,623 3,194 2,717 13.4 17.6 Worldwide 8,928 7,707 6,350 15.8 21.4 ELECTROPHYSIOLOGY U.S. 2,891 2,738 2,458 5.6 11.4 International 2,743 2,529 2,230 8.5 13.4 Worldwide 5,634 5,267 4,688 7.0 12.3 ABIOMED U.S. 1,393 1,213 1,066 14.9 13.7 International 358 284 240 26.4 18.2 Worldwide 1,751 1,496 1,306 17.1 14.5 86 Sales to Customers % Change (Dollars in Millions) 2025 2024 2023 ’25 vs. ’24 ’24 vs. ’23 SHOCKWAVE (6) U.S. 897 442 — * * International 249 122 — * * Worldwide 1,146 564 — * * OTHER CARDIOVASCULAR U.S. 124 120 109 3.1 10.7 International 273 260 247 4.9 5.3 Worldwide 397 380 356 4.3 6.9 Orthopaedics U.S. 5,720 5,689 5,525 0.5 3.0 International 3,538 3,470 3,417 2.0 1.5 Worldwide 9,258 9,158 8,942 1.1 2.4 HIPS U.S. 1,080 1,057 996 2.1 6.2 International 594 581 564 2.2 3.0 Worldwide 1,674 1,638 1,560 2.1 5.0 KNEES U.S. 924 922 896 0.2 2.9 International 663 623 559 6.5 11.3 Worldwide 1,587 1,545 1,456 2.7 6.1 TRAUMA U.S. 2,058 2,013 1,949 2.2 3.3 International 1,088 1,036 1,030 5.0 0.6 Worldwide 3,146 3,049 2,979 3.2 2.3 SPINE, SPORTS & OTHER U.S. 1,658 1,696 1,684 ( 2.2 ) 0.7 International 1,193 1,230 1,263 ( 3.0 ) ( 2.6 ) Worldwide 2,852 2,926 2,947 ( 2.5 ) ( 0.7 ) Surgery U.S. 4,157 4,003 4,031 3.9 ( 0.7 ) International 5,980 5,842 6,006 2.4 ( 2.7 ) Worldwide 10,137 9,845 10,037 3.0 ( 1.9 ) ADVANCED U.S. 1,900 1,838 1,833 3.4 0.2 International 2,678 2,650 2,837 1.0 ( 6.6 ) Worldwide 4,577 4,488 4,671 2.0 ( 3.9 ) GENERAL U.S. 2,258 2,165 2,198 4.3 ( 1.5 ) International 3,302 3,192 3,168 3.4 0.8 Worldwide 5,560 5,358 5,366 3.8 ( 0.2 ) 2025 Annual Report 87 Sales to Customers % Change (Dollars in Millions) 2025 2024 2023 ’25 vs. ’24 ’24 vs. ’23 Vision U.S. 2,225 2,128 2,086 4.6 2.0 International 3,243 3,018 2,986 7.4 1.1 Worldwide 5,468 5,146 5,072 6.3 1.5 CONTACT LENSES / OTHER U.S. 1,754 1,684 1,626 4.1 3.6 International 2,157 2,049 2,076 5.3 ( 1.3 ) Worldwide 3,910 3,733 3,702 4.8 0.8 SURGICAL U.S. 471 444 460 6.1 ( 3.4 ) International 1,086 969 910 12.1 6.5 Worldwide 1,558 1,413 1,370 10.2 3.2 TOTAL MEDTECH U.S. 17,408 16,332 15,275 6.6 6.9 International 16,384 15,525 15,125 5.5 2.6 Worldwide 33,792 31,857 30,400 6.1 4.8 WORLDWIDE U.S. 53,752 50,302 46,444 6.9 8.3 International 40,441 38,519 38,715 5.0 ( 0.5 ) Worldwide $ 94,193 88,821 85,159 6.0 % 4.3 * percentage greater than 100% or not meaningful (1) Previously in Other Oncology, Includes the sales of RYBREVANT and RYBREVANT + LAZCLUZE (2) Previously in Other Oncology (3) Acquired with the Intra-Cellular Therapies acquisition on April 2, 2025 (4) In 2024 OPSYNVI was in Other Pulmonary Hypertension (5) Includes the Covid-19 Vaccine in 2024 and 2023 (6) Acquired on May 31, 2024 88 Income Before Tax by Segment (Dollars in Millions) 2025 (3) 2024 (4) 2023 (5) Innovative Medicine MedTech Total Innovative Medicine MedTech Total Innovative Medicine MedTech Total Sales to customers $ 60,401 33,792 56,964 31,857 54,759 30,400 Cost of products sold 15,646 14,549 14,036 13,345 13,715 12,722 Selling, marketing and administrative 11,375 11,354 10,906 10,812 9,842 10,476 Research and development expense 11,827 2,838 13,529 3,703 11,963 3,122 Other segment items (1) ( 713 ) 938 ( 426 ) 257 993 ( 589 ) Segment income before tax $ 22,266 4,113 26,379 18,919 3,740 22,659 18,246 4,669 22,915 (Income) Expense not allocated to segments (2) ( 6,202 ) 5,972 7,853 Worldwide total $ 32,581 16,687 15,062 Identifiable Assets (Dollars in Millions) 2025 2024 Innovative Medicine $ 78,057 57,070 MedTech 86,482 84,322 Total 164,539 141,392 General corporate (6) 34,671 38,712 Worldwide total $ 199,210 180,104 Additions to Property, Plant & Equipment Depreciation and Amortization (Dollars in Millions) 2025 2024 2023 2025 2024 2023 Innovative Medicine $ 2,076 1,710 1,653 $ 3,772 3,760 3,847 MedTech 2,501 2,443 2,372 3,490 3,237 2,943 Segments total 4,577 4,153 4,025 7,262 6,997 6,790 Discontinued operations — — 162 — — 383 General corporate 255 271 356 241 342 313 Worldwide total $ 4,832 4,424 4,543 $ 7,503 7,339 7,486 2025 Annual Report 89 Sales to Customers Long-Lived Assets (7) (Dollars in Millions) 2025 2024 2023 2025 2024 United States $ 53,752 50,302 46,444 $ 89,392 70,670 Europe 21,535 20,212 20,410 27,987 27,267 Western Hemisphere excluding U.S. 4,875 4,714 4,549 2,204 1,728 Asia-Pacific, Africa 14,031 13,593 13,756 1,544 1,454 Segments total 94,193 88,821 85,159 121,127 101,119 General corporate 1,217 1,217 Other non long-lived assets 76,866 77,768 Worldwide total $ 94,193 88,821 85,159 $ 199,210 180,104 See Note 1 for a description of the segments in which the Company operates. Export sales are not significant. In fiscal year 2025, the Company utilized three wholesalers distributing products for both segments that represented approximately 21.8 %, 15.5 % and 11.1 % of the total gross revenues. In fiscal year 2024, the Company had three wholesalers distributing products for both segments that represented approximately 20.5 %, 15.6 % and 12.3 % of the total gross revenues. In fiscal year 2023, the Company had three wholesalers distributing products for both segments that represented approximately 18.2 %, 15.1 %, and 14.2 % of the total gross revenues. (1) Other segment expenses for each reportable segment include charges related to other income and expenses, restructuring activities and impairment charges related to in-process research and development. (2) Amounts not allocated to segments include interest (income)/expense and general corporate (income)/expense. The fiscal year 2025 includes the reversal of approximately $ 7.0 billion, a significant portion of the previously accrued talc reserve. The fiscal years 2024 and 2023 include charges for talc matters of approximately $ 5.1 billion and $ 7.0 billion, respectively (See Note 19, Legal proceedings, for additional details). The fiscal year 2024 includes a loss of approximately $ 0.4 billion related to the debt to equity exchange of the Company's remaining shares of Kenvue Common Stock. The fiscal year 2023 includes the unfavorable change in the fair value of the retained stake in Kenvue of approximately $ 0.4 billion. (3) Innovative Medicine segment income before tax includes: • Acquisition, integration and divestiture related net expense of $ 0.4 billion primarily related to the Intra-Cellular and Halda acquisitions MedTech segment income before tax includes: • Litigation expense of $ 0.9 billion primarily related to the Auris shareholder litigation • Acquisition, integration and divestiture related net income of $ 0.2 billion, primarily driven by a contingent value right liability reduction associated with Abiomed • A restructuring related charge of $ 0.5 billion • A gain on the sale of securities of $ 0.2 billion (4) Innovative Medicine segment income before tax includes: • Acquired in-process research & development expense of $ 1.25 billion to secure the global rights to the NM26 bispecific antibody (Yellow Jersey acquisition) • Monetization of royalty rights of $ 0.3 billion • Litigation expense of $ 0.3 billion primarily related to Risperdal Gynecomastia • An intangible asset impairment charge of approximately $ 0.2 billion associated with the M710 (biosimilar) asset acquired as part of the acquisition of Momenta Pharmaceuticals in 2020. • A restructuring related charge of $ 0.1 billion • One-time COVID-19 Vaccine manufacturing exit related costs of $ 0.1 billion • Favorable changes in the fair value of securities of $ 0.1 billion MedTech segment income before tax includes: • Acquisition and integration related costs of $ 1.0 billion primarily related to the acquisition of Shockwave • Acquired in-process research and development expense of $ 0.5 billion from the V-Wave acquisition 90 • A gain of $ 0.2 billion related to the Acclarent divestiture • A Medical Device Regulation charge of $ 0.2 billion • A restructuring related charge of $ 0.2 billion (5) Innovative Medicine segment income before tax includes: • One-time COVID-19 Vaccine manufacturing exit related costs of $ 0.7 billion • A restructuring related charge of $ 0.5 billion • Unfavorable changes in the fair value of securities of $ 0.4 billion • Favorable litigation related items of $ 0.1 billion • Loss on divestiture of $ 0.2 billion. • An intangible asset impairment charge of approximately $ 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. MedTech segment income before tax includes: • Acquired in-process research and development expense of $ 0.4 billion related to the Laminar acquisition in 2023 • A restructuring related charge of $ 0.3 billion • Acquisition and integration related costs of $ 0.2 billion primarily related to the acquisition of Abiomed • A Medical Device Regulation charge of $ 0.3 billion • Income from litigation settlements of $ 0.1 billion (6) General corporate includes cash, cash equivalents, marketable securities and other corporate assets. (7) Long-lived assets include property, plant and equipment, net for fiscal years 2025, and 2024 of $ 23,169 and $ 20,518 , respectively, and intangible assets and goodwill, net for fiscal years 2025 and 2024 of $ 99,175 and $ 81,818 , respectively. 2025 Annual Report 91 18. Acquisitions and divestitures Business combinations Acquisitions of a business are accounted for as business combinations applying the acquisition method of accounting. Under this method, the assets acquired and liabilities assumed are recorded at their respective fair values as of the acquisition date in the Company’s consolidated financial statements. The excess of the purchase price over the fair value of the acquired net assets, where applicable, is recorded as goodwill. The results of operations of these acquisitions have been included in the Company’s financial statements from their respective dates of acquisition. 2025 Transactions During the fiscal year 2025, the Company acquired Intra-Cellular Therapies, Inc. (Intra-Cellular) and Halda Therapeutics OpCo, Inc. (Halda Therapeutics) for a total of $ 17.5 billion, net of cash acquired. Halda Therapeutics On December 26, 2025, the Company completed the acquisition of Halda Therapeutics, a clinical-stage biotechnology company with proprietary Regulated Induced Proximity TArgeting Chimera (RIPTAC TM ) platform to develop oral, targeting therapies for multiple types of solid tumors, including prostate cancer, in an all-cash merger transaction for total consideration transferred of approximately $ 3.05 billion, net of cash acquired. The acquisition was accounted for as a business combination and the results of operations and goodwill are included in the Innovative Medicine segment as of the acquisition date. Included in the total consideration transferred is $ 0.2 billion of acquisition-related costs, primarily related to post-closing compensation expense due to the acceleration of equity awards. This expense was recorded in Other (income) expense, net. The fair value of the assets acquired is $ 3.4 billion, which primarily relates to acquired in-process research and development (IPR&D) of $ 2.8 billion and goodwill of $ 0.6 billion. The fair value of the liabilities assumed is $ 0.6 billion, primarily related to deferred taxes. These values are preliminary and based on the best estimate of management, which is subject to change within the measurement period. The acquired in-process research and development includes two assets, HLD-0915 and HLD-0117, that are being studied to treat prostate cancer and breast cancer, respectively. The fair value of the IPR&D assets were calculated assuming a discount rate of 17 % and 17.5 %, respectively. Additionally, the cash flow projections assumed a probability of success factor of approximately 47 %- 68 % (depending on indication being studied) for HLD-0915 and approximately 17 % for HLD-0117. The goodwill is not deductible for tax purposes and is primarily attributable to intangible assets that did not qualify for separate recognition and currently unidentified projects and products, which will be developed using the RIPTAC TM platform. Intra-Cellular On April 2, 2025, the Company completed the acquisition of Intra-Cellular, a biopharmaceutical company focused on the development and commercialization of therapeutics for central nervous system disorders. This acquisition advances the Company’s industry-leading portfolio in mental health with the addition of CAPLYTA (lumateperone), the first and only U.S. FDA-approved treatment for bipolar I and II depression as an adjunctive therapy and monotherapy and is also approved for the treatment of schizophrenia in adults. During the fiscal fourth quarter of 2025, the U.S. FDA approved CAPLYTA as an adjunctive therapy with anti-depressants for the treatment of major depressive disorder in adults. This IPR&D asset was reclassified to a definite lived asset and began amortizing in the fiscal fourth quarter of 2025. This acquisition also includes a promising clinical-stage pipeline with best-in-class potential in generalized anxiety disorder and Alzheimer’s disease-related psychosis and agitation. The Company acquired all the outstanding shares of Intra-Cellular’s common stock for $ 132.00 per share in an all-cash merger transaction for total consideration transferred of $ 14.5 billion. The acquisition was accounted for as a business combination and the results of operations and goodwill are included in the Innovative Medicine segment as of the acquisition date. In addition, acquisition-related costs before tax incurred during the fiscal 2025 were $ 0.4 billion, of which $ 0.1 billion related to post-closing compensation expense due to the acceleration of equity awards and were recorded to Other (income) expense, net. 92 The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date and is based on the best estimate of management, which is subject to change within the measurement period. As of the fiscal year ended December 28, 2025, there have been no material measurement period adjustments. (Dollars in Billions) April 2, 2025 Assets acquired: Cash and cash equivalents $ 0.2 Marketable securities 0.6 Other current & non-current assets 0.3 Amortizable intangible asset (1) 5.2 Acquired in-process research and development (1) 8.3 Goodwill (2) 2.9 Total assets acquired $ 17.5 Liabilities assumed: Deferred taxes $ 2.8 Other current & non-current liabilities 0.2 Total liabilities assumed $ 3.0 Total assets acquired and liabilities assumed $ 14.5 (1) The estimated fair values of the intangible assets acquired were determined using the multi-period excess earnings method. The amortizable intangible asset relates to the currently marketed product, CAPLYTA, which has an estimated useful life of 8 years. The acquired in-process research and development includes two assets, one related to certain unapproved indications of lumateperone and another related to a compound being studied to treat psychosis and agitation in patients with Alzheimer’s disease and generalized anxiety disorder. The fair value of the in-process research and development assets were calculated assuming a discount rate of 11.5 % and 12.5 %, respectively. Additionally, the cash flow projections assumed a probability of success factor of 95 % and approximately 34 %- 50 % (depending on indication being studied), respectively. (2) Goodwill is primarily attributable to intangible assets that did not qualify for separate recognition and future projects or products currently unidentified. Goodwill is not expected to be deductible for tax purposes. 2024 Transactions During the fiscal year 2024, certain businesses were acquired for $ 15.1 billion, net of cash acquired. The fiscal year 2024 acquisitions primarily included; Ambrx Biopharma, Inc., Shockwave Medical Inc., and Proteologix, Inc. The remaining acquisitions were not material. On June 20, 2024, the Company completed the acquisition of Proteologix, Inc., a privately held biotechnology company focused on bispecific antibodies for immune-mediated diseases, in an all-cash merger transaction for total consideration of approximately $ 0.8 billion net of cash acquired, with potential for an additional milestone payment. The results of operations are included in the Innovative Medicine segment as of the acquisition date. The fair value of the acquisition was allocated to assets acquired of $ 1.2 billion, primarily non-amortizable intangible assets, inclusive of purchased IPR&D, for $ 0.9 billion, goodwill for $ 0.3 billion, and liabilities assumed of $ 0.3 billion, including $ 0.1 billion of contingent consideration. The goodwill is not deductible for tax purposes. Acquisition related costs before tax for the fiscal years 2025 and 2024 were not material. On May 31, 2024, the Company acquired all the outstanding shares of Shockwave Medical Inc. (SWAV), a leading, first-to-market provider of innovative intravascular lithotripsy (IVL) technology for the treatment of calcified coronary artery disease (CAD) and peripheral artery disease (PAD), in an all-cash merger transaction for total consideration of $ 12.6 billion, ($ 11.5 billion, net of cash acquired). The results of operations were included in the MedTech segment as of the acquisition date. The fair value of the acquisition was allocated to assets acquired of $ 14.4 billion primarily amortizable intangible assets of $ 5.3 billion, purchased IPR&D of $ 0.6 billion, goodwill for $ 7.6 billion, $ 0.5 billion of inventory and $ 0.4 billion of other assets, and liabilities assumed of $ 2.9 billion. The goodwill is not deductible for tax purposes. Acquisition related costs before tax were not material for the fiscal 2025 and were $ 0.9 billion for the fiscal 2024. 2025 Annual Report 93 On March 7, 2024, the Company completed the acquisition of Ambrx Biopharma, Inc., (Ambrx), a clinical-stage biopharmaceutical company with a proprietary synthetic biology technology platform to design and develop next-generation antibody drug conjugates (ADCs), in an all-cash merger transaction for a total consideration of approximately $ 1.8 billion net of cash acquired. The results of operations were included in the Innovative Medicine segment as of the acquisition date. The fair value of the acquisition was allocated to assets acquired of $ 2.3 billion, primarily non-amortizable intangible assets, inclusive of purchased IPR&D, for $ 1.9 billion, goodwill for $ 0.3 billion and liabilities assumed of $ 0.5 billion. The goodwill is not deductible for tax purposes. Acquisition related costs before tax for the fiscal years 2025 and 2024 were not material. 2023 Transactions During the fiscal year 2023, the Company did not make any acquisitions that qualified as a business combination. In accordance with U.S. GAAP standards related to business combinations, and goodwill and other intangible assets, supplemental pro forma information for fiscal years 2025, 2024 and 2023 is not provided, as the impact of the aforementioned acquisitions did not have a material effect on the Company’s results of operations. Asset acquisitions If it is determined that the acquired set does not meet the definition of a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition. In this case, no goodwill is recorded, acquired in-process research and development (IPR&D) with no alternative future use is immediately recorded as research and development expense and contingent consideration is recorded when the related event occurs. 2025 Transactions There were no material asset acquisitions in the fiscal 2025. 2024 Transactions The fiscal year 2024 asset acquisitions expensed as research and development included V-Wave Ltd. and the global rights to the NM26 bispecific antibody (Yellow Jersey acquisition). The remaining activity was not material. On October 8, 2024, the Company completed the acquisition of V-Wave Ltd, a privately-held company focused on developing innovative treatment options for patients with heart failure, for an upfront payment of $ 0.6 billion, with the potential for additional regulatory and commercial milestone payments up to approximately $ 1.1 billion. The Company recorded an IPR&D charge of approximately $ 0.5 billion, net of a gain recorded on the Company's existing investment in V-Wave and the results of operations are included in the MedTech segment as of the acquisition date. On July 11, 2024, the Company completed the acquisition of Yellow Jersey, a demerged subsidiary of Numab Therapeutics AG, to secure the global rights to NM26, a novel, investigational first-in-class bispecific antibody targeting two clinically proven pathways in atopic dermatitis (AD), in an all-cash transaction for approximately $ 1.25 billion. The Company recorded an IPR&D charge of approximately $ 1.25 billion, and the results of operations are included in the Innovative Medicine segment as of the acquisition date. In 2025, the results of a planned interim analysis of the Phase 2b Duplex-AD proof-of-concept study met prespecified criteria for early termination of the study. 2023 Transactions The fiscal year 2023 asset acquisitions expensed as research and development included Laminar Inc. The remaining activity was not material. During the fiscal year 2023, the Company completed the acquisition of Laminar Inc., a privately-held medical device company focused on eliminating the left atrial appendage (LAA) in patients with non-valvular atrial fibrillation (AFib), for an upfront payment of $ 0.4 billion. The Company recorded an IPR&D charge of approximately $ 0.4 billion and the results of operations are included in the MedTech segment as of the acquisition date. During 2025, the Company, in consultation with the Independent Data Safety Monitoring Board, suspended the pivotal investigational device exemption study. Divestitures There were no material divestitures in the fiscal year 2025. 94 During the fiscal year 2024, the Company completed the divestiture of Acclarent resulting in approximately $ 0.3 billion in proceeds and the divestiture of Ponvory outside of the U.S. resulting in approximately $ 0.2 billion in proceeds. All other divestitures were not material. There were no material divestitures in the fiscal year 2023. 19. Legal proceedings Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability; intellectual property; commercial; indemnification and other matters; governmental investigations; and other legal proceedings that arise from time to time in the ordinary course of their business. 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 December 28, 2025, 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. 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. 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; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; 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. To the extent adverse awards, judgments or 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. In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company’s balance sheet, is not expected to have a material adverse effect on the Company’s financial position. However, the resolution of, or increase in accruals for, one or more of these matters in any reporting period may have a material adverse effect on the Company’s results of operations and cash flows for that period. Matters concerning talc A significant number of personal injury claims alleging that talc causes cancer have been asserted against the Company and its affiliates arising out of the use of body powders containing talc, primarily JOHNSON’S Baby Powder. In talc cases that 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. In June 2020, the Missouri Court of Appeals reversed in part and affirmed in part a July 2018 verdict of $ 4.7 billion in Ingham v. Johnson & Johnson, et al., No. ED 207476 (Mo. 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. In June 2021, the Company paid the award, which, including interest, totaled approximately $ 2.5 billion. The facts and circumstances, including the terms of the award, were unique to the Ingham decision and not representative of other claims brought against the Company. The Company continues to believe that it has strong legal grounds to contest all the talc verdicts that it has appealed. Notwithstanding the Company’s confidence in the safety of its talc products, in certain circumstances the Company has settled cases. In an effort to expeditiously resolve the litigation for the overwhelming majority of claimants, beginning in October 2021, Johnson & Johnson Consumer Inc. (Old JJCI) implemented a corporate restructuring, through which Old JJCI ceased to exist and three new entities were created: (a) LTL Management LLC, a North Carolina limited liability company (LTL or Debtor); (b) Royalty A&M LLC, a North Carolina limited liability company and a direct subsidiary of LTL (RAM); and (c) the Debtor’s direct parent, Johnson & Johnson Consumer Inc., a New Jersey company (New JJCI). The Debtor received certain of Old JJCI’s assets and became solely responsible for the talc-related liabilities of Old JJCI, including all liabilities related in any way to injury or damage, or alleged injury or damage, sustained or incurred in the purchase or use of, or exposure to, talc, including talc 2025 Annual Report 95 contained in any product, or to the risk of, or responsibility for, any such damage or injury, except for any liabilities for which the exclusive remedy is provided under a workers’ compensation statute or act (the Talc-Related Liabilities). Following the 2021 Corporate Restructuring, Debtor and the Company attempted to achieve a full and comprehensive resolution of the Talc-Related Liabilities. Debtor filed voluntary petitions for Bankruptcy pursuant to Chapter 11 of the Bankruptcy Code in October 2021 and again in April 2023; both petitions were dismissed. In October 2023, the Company stated that it was pursuing the following four parallel and alternative pathways to achieve a comprehensive and final resolution of the talc claims: (i) the appeal of the LTL 2 dismissal decision; (ii) pursuing a consensual “prepackaged” bankruptcy case, as “strongly encouraged” by the Bankruptcy Court in its dismissal decision; (iii) aggressively litigating the talc claims in the tort system; and (iv) pursuing affirmative claims against experts for false and defamatory narratives regarding the Company’s talc powder products. In December 2023, LTL changed its state of formation to Texas and its name to LLT Management LLC (LLT). In May 2024, the Company commenced a three-month solicitation period of its proposed consensual “prepackaged” Chapter 11 bankruptcy plan (the Proposed Plan) for the comprehensive and final resolution of all current and future claims related to cosmetic talc in the United States, excluding claims related to mesothelioma or State consumer protection claims, in exchange for the payment by the Company of present value of approximately $ 6.475 billion payable over 25 years (nominal value of approximately $ 8.0 billion, discounted at a rate of 4.4 %). The claims encompassed by the Proposed Plan constituted 99.75 % of then-pending lawsuits against the Company relating to its talc powder products. In August 2024, LLT engaged in a restructuring that resulted in the creation of three new Texas limited liability companies: (a) Red River Talc, LLC (Red River); (b) Pecos River Talc LLC (Pecos River); and (3) New Holdco (Texas) LLC. As a result of this restructuring, all claims related to ovarian and other gynecological cancers were separated and allocated to Red River, and mesothelioma, governmental unit and certain other claims were allocated to Pecos River. While the Company had resolved 95 % of the mesothelioma lawsuits filed to date as of August 2024, cases continue to be filed. Trial activity has continued in various state courts. In September 2024, while reiterating the Company's continued confidence in the safety of its talc products, Red River filed a voluntary petition with the United States Bankruptcy Court for the Southern District of Texas, seeking relief under Chapter 11 of the Bankruptcy Code (the Red River Bankruptcy Case), in furtherance of the Company's consensual "prepackaged" Proposed Plan. Shortly thereafter, as a consequence of this filing, the Company withdrew its appeal of the LTL 2 dismissal decision. To account for the contemplated comprehensive resolution through the Proposed Plan, the Company recorded a cumulative incremental charge of approximately $ 5.0 billion during fiscal year 2024. As of the end of fiscal year 2024, the total present value of the reserve was approximately $ 11.6 billion (or nominal value of approximately $ 13.5 billion). In March 2025, the Texas Bankruptcy Court issued an order dismissing the case (the Texas dismissal) and, as a result, the Company reversed substantially all, or approximately $ 7 billion, from amounts previously reserved for the bankruptcy resolution. As of the fourth quarter 2025, the total present value of the reserve is approximately $ 3.4 billion, comprising previously executed settlement agreements, litigation defense and other costs. Approximately one-third of the reserve is recorded as a current liability. After the Texas dismissal, the Company announced it would not appeal the decision and returned to the tort system to litigate the talc claims and defend the safety of its products. Ovarian cancer trials are being scheduled in various state courts throughout 2026 and beyond. In the MDL, the court is addressing the Company's Daubert motions related to general causation, specific causation, and certain asbestos testing methods. In January 2026, the Special Master issued her Report and Recommendation related to general causation, excluding certain opinions by plaintiff experts, but also allowing other opinions to proceed. The Company will file an appeal of the Report and Recommendation to the District Court. The remaining Daubert motions are expected to be decided in the first half of 2026. In February 2019, the Company’s talc supplier, Imerys Talc America, Inc., and two of its affiliates, Imerys Talc Vermont, Inc. and Imerys Talc Canada, Inc. (collectively, Imerys), filed voluntary petitions for relief under Chapter 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (Imerys Bankruptcy). In February 2021, Cyprus Mines Corporation (Cyprus), which sold certain talc mines and assets to Imerys, filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Delaware Bankruptcy Court. 96 In July 2024, the Company, Imerys, and Cyprus and certain of their affiliates (including their parent entities), and the tort claimants' committees and future claimants' representatives appointed in the Imerys debtors' and Cyprus debtors' respective Chapter 11 cases, entered into a global settlement agreement (the Imerys Settlement Agreement) to resolve the parties' ongoing disputes, including disputes raised in the Imerys and Cyprus bankruptcies regarding (i) the Company's alleged obligations to indemnify Imerys and Cyprus for personal injury claims allegedly caused by exposure to talc contained in the Company's products and (ii) entitlements to proceeds of certain of the Company's insurance policies. In October 2024, the Delaware Bankruptcy Court entered an order approving the Imerys Settlement Agreement (the Settlement Order). Certain insurers have appealed the Settlement Order and sought a stay of the Settlement Order pending appeal, which the Delaware Bankruptcy Court denied in January 2025. In August 2025, the District Court denied the insurers' appeal of the Settlement Order. The insurers have appealed that decision to the Third Circuit. Briefing is expected to be completed in February 2026. Imerys and Cyprus have both proposed Chapter 11 plans, which contemplate talc claims being channeled to a trust and resolved in accordance with distribution procedures. A joint confirmation hearing for the plans began in April 2025 and is scheduled to continue in February 2026. 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. In April 2019, the Company moved to dismiss the complaint. In December 2019, the court denied, in part, the motion to dismiss. In December 2023, the court granted Plaintiff’s motion for class certification. In January 2024, Defendants filed a petition with the Third Circuit under Federal Rule of Civil Procedure 23(f) for permission to appeal the court’s order granting class certification, and in February 2024, the Third Circuit granted Defendants' petition. In February 2024, fact discovery closed, the court ordered the parties to mediate, and stayed the case pending mediation. In May 2024, the parties participated in an unsuccessful mediation. In June 2024, at the parties' request, the court lifted the stay for certain limited discovery, but otherwise kept the stay in place pending a decision from the Third Circuit on the 23(f) petition. Briefing on the 23(f) petition was completed in September 2024, and in March 2025, the Third Circuit heard oral argument. In July 2025, the Third Circuit affirmed the court's order granting class certification. In September 2025, Defendants petitioned the Third Circuit for rehearing or rehearing en banc, which was denied in October 2025. In February 2026, the Company filed a writ of certiorari with the United States Supreme Court. In December 2025, the District Court set deadlines for expert discovery through August 2026. Matters concerning opioids 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. Similar lawsuits have also been filed by private plaintiffs and organizations, including but not limited to the following: individual plaintiffs on behalf of children born with Neonatal Abstinence Syndrome (NAS); hospitals; and health insurers/payors. To date, the Company and JPI have litigated two of the cases to judgment and have prevailed in both, either at trial or on appeal. In July 2021, the Company announced finalization of an agreement to settle the state and subdivision claims for up to $ 5.0 billion. Approximately 80 % of the all-in settlement was paid by the end of fiscal year 2025. A few government entities opted out of the settlement. In September 2024, the Company reached an agreement to resolve the hospital cases. The Company and JPI continue to defend the cases brought by the remaining government entity litigants as well as the cases brought by private litigants. In total, there are approximately 23 remaining opioid cases against the Company and JPI in various state courts, 285 remaining cases in the Ohio multi-district litigation (MDL), and 3 additional cases 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. That action was certified as an opt in class action on behalf of other provincial/territorial and the federal governments in Canada in January 2025. The defendants, including the Company, filed appeals from the certification order in late February 2025. That appeal was heard in December 2025. A common issues trial has been scheduled in 2028. 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. The proposed class action in Quebec on behalf of residents diagnosed with opioid use disorder was authorized to proceed against Janssen Inc. and other industry members in April 2024; and leave to appeal was denied in October 2024. 2025 Annual Report 97 Product liability 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. While the Company believes it has substantial defenses, it is not feasible to predict the ultimate outcome of litigation. From time to time, even if it has substantial defenses, the Company considers isolated settlements based on a variety of circumstances. 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. 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. For certain of these matters, the Company has accrued additional amounts such as estimated costs associated with settlements, damages and other losses. Product liability accruals can represent projected product liability for thousands of claims around the world, each in different litigation environments and with different fact patterns. Changes to the accruals may be required in the future as additional information becomes available. The table below contains the most significant of these cases and provides the approximate number of plaintiffs in the United States with direct claims in pending lawsuits regarding injuries allegedly due to the relevant product or product category as of December 28, 2025. Product or product category Number of plaintiffs Body powders containing talc, primarily JOHNSON’S Baby Powder 74,360 DePuy ASR XL Acetabular System and DePuy ASR Hip Resurfacing System 30 PINNACLE Acetabular Cup System 680 Pelvic meshes 5,190 ETHICON PHYSIOMESH Flexible Composite Mesh 110 ELMIRON 790 The number of pending lawsuits is expected to fluctuate as certain lawsuits are settled or dismissed and additional lawsuits are filed. There may be additional claims that have not yet been filed. MedTech DePuy ASR XL Acetabular System and ASR Hip Resurfacing System In August 2010, DePuy Orthopaedics, Inc. (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 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. In November 2013, DePuy reached an agreement with a Court-appointed committee of lawyers representing ASR Hip plaintiffs to establish a program to settle claims with eligible ASR Hip patients in the United States. This settlement program has resolved more than 10,000 claims, thereby bringing to resolution significant ASR Hip litigation activity in the United States. A small number of lawsuits, however, remain active throughout the world, including individual actions in the United States, Ireland, and India, among others. The Company continues to receive information with respect to potential additional costs associated with these outstanding actions and has established accruals for the remaining worldwide litigation and recall costs. DePuy PINNACLE Acetabular Cup System Claims for personal injury have also been made against DePuy Orthopaedics, Inc. 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. 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 in June 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. During the first quarter of 2019, DePuy established a United States settlement program to resolve these cases. As part of the settlement program, adverse verdicts have been settled. The Company has established an accrual for product liability litigation associated with the PINNACLE Acetabular Cup System and the related settlement program. 98 Ethicon Pelvic Mesh Claims for personal injury have been made against Ethicon, Inc. (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. Cases filed in federal courts in the United States had been organized as a multi-district litigation (MDL) in the United States District Court for the Southern District of West Virginia. In March 2021, the MDL Court entered an order closing the MDL. The MDL Court has remanded cases for trial to the jurisdictions where the case was originally filed and additional pelvic mesh lawsuits have been filed, and remain, outside of the MDL. 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 Ireland, and class actions in Israel, Australia, Canada and South Africa. The vast majority of these actions are now resolved. The Company has established accruals with respect to product liability litigation associated with Ethicon’s pelvic mesh products. Ethicon Physiomesh 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 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., 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. A master settlement agreement (MSA) was entered into in September 2021 and includes 3,729 cases in the MDL and MCL. Other than a small number of cases still pending in the MDL, all Physiomesh matters in the United States have been resolved or are undergoing formal review for purposes of settlement. 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. 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, as well as a number of unfiled claims. All litigation activities in the two New Jersey MCLs are stayed pending effectuation 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. Innovative Medicine ELMIRON Claims for personal injury have been made against a number of Johnson & Johnson companies, including Janssen Pharmaceuticals, Inc. 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 (MDL). 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 2025 Annual Report 99 and granted mass tort designation. In addition, three class action lawsuits have been filed in Canada. The Company continues to defend ELMIRON product liability lawsuits and continues to evaluate potential costs related to those claims. All U.S. based ELMIRON matters have been resolved or are undergoing formal review for purposes of settlement. The Company has established accruals for defense and indemnity costs associated with ELMIRON related product liability litigation. Intellectual property 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 scope and/or validity of patents that relate to various products and allegations that certain of the Company’s products infringe the intellectual property rights 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. The Company’s Innovative Medicine subsidiaries have brought lawsuits against generic companies that have filed ANDAs with the U.S. FDA (or similar lawsuits outside of the United States) seeking to market generic versions of products sold by various subsidiaries of the Company prior to expiration of the applicable patents covering those products. These lawsuits typically include allegations of non-infringement and/or invalidity of patents listed in FDA’s publication “Approved Drug Products with Therapeutic Equivalence Evaluations” (commonly known as the Orange Book). In each of these lawsuits, the Company’s subsidiaries are seeking an order enjoining the defendant from marketing a generic version of a product before the expiration of the relevant patents (Orange Book Listed Patents). In the event the Company’s subsidiaries are not successful in an action, or any automatic statutory stay expires before the court rulings are obtained, the generic companies involved would have the ability, upon regulatory approval, to introduce generic versions of their products to the market, resulting in the potential for substantial market share and revenue losses for the applicable products, and which may result in a non-cash impairment charge in any associated intangible asset. 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. The Inter Partes Review (IPR) process with the United States Patent and Trademark Office (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. Innovative Medicine XARELTO Beginning in March 2021, Janssen Pharmaceuticals, Inc., Bayer Pharma AG, Bayer AG, and Bayer Intellectual Property GmbH filed patent infringement lawsuits in United States district courts against generic manufacturers who have filed ANDAs seeking approval to market generic versions of XARELTO before expiration of certain Orange Book Listed Patents. The following entities are named defendants: Dr. Reddy’s Laboratories, Inc.; Dr. Reddy’s Laboratories, Ltd.; Lupin Limited; Lupin Pharmaceuticals, Inc.; Taro Pharmaceutical Industries Ltd.; Taro Pharmaceuticals U.S.A., Inc.; Teva Pharmaceuticals USA, Inc.; Mylan Pharmaceuticals Inc.; Mylan Inc.; Mankind Pharma Limited; Apotex Inc.; Apotex Corp.; Cipla Ltd.; Cipla USA Inc.; InvaGen Pharmaceuticals, Inc.; and Prinston Pharmaceuticals, Inc. The following U.S. patents are included in one or more cases: 9,539,218 and 10,828,310. In December 2025 and January 2026, the cases against Dr. Reddy's Laboratories, Inc.; Dr. Reddy's Laboratories, Ltd.; Lupin Limited; Lupin Pharmaceuticals, Inc.; Taro Pharmaceutical Industries Ltd.; Taro Pharmaceuticals U.S.A., Inc.; Teva Pharmaceuticals USA, Inc.; Mylan Pharmaceuticals Inc.; Mylan Inc.; Mankind Pharma Limited; Apotex Inc.; Apotex Corp.; Cipla Ltd.; Cipla USA Inc.; InvaGen Pharmaceuticals, Inc.; and Prinston Pharmaceuticals, Inc. were dismissed with prejudice. In January 2026, the Company entered into a confidential settlement agreement with Mankind Pharma Limited. U.S. Patent No. 10,828,310 was also under consideration by the USPTO in an IPR proceeding. In July 2023, the USPTO issued a final written decision finding the claims of the patent invalid. In September 2023, Bayer Pharma AG filed an appeal to the U.S. Court of Appeals for the Federal Circuit. In September 2025, the Federal Circuit entered a decision affirming-in-part, vacating- in-part, and remanding for further proceedings. In January 2026, the USPTO entered judgment against petitioners upon remand. 100 INVEGA SUSTENNA Beginning in January 2018, Janssen Pharmaceutica NV and Janssen Pharmaceuticals, Inc. filed patent infringement lawsuits in United States district courts against generic manufacturers who have filed ANDAs seeking approval to market generic versions of INVEGA SUSTENNA before expiration of the Orange Book Listed Patent. The following entities are named defendants: Pharmascience Inc.; Mallinckrodt PLC; Specgx LLC; Tolmar, Inc.; Accord Healthcare, Inc.; Qilu Pharmaceutical Co. Ltd.; Qilu Pharma Inc.; Sun Pharmaceutical Industries Ltd.; and Sun Pharmaceutical Industries, Inc. The following U.S. patent is included in one or more cases: 9,439,906. In February 2024, the district court issued a decision in the case against Tolmar Inc. finding that United States Patent No. 9,439,906 is not invalid. Tolmar previously stipulated to infringement of a subset of the claims, and based on a claim construction ruling, the district court entered a non-infringement order with respect to the remaining asserted claims. Tolmar has appealed the validity decision, and Janssen appealed the non-infringement decision. In November 2025, the court entered judgments against the Accord and Qilu defendants. In December 2025, Janssen and the Sun defendants entered into a confidential settlement agreement and a consent judgment was entered by the court. Beginning in February 2018, Janssen Inc. and Janssen Pharmaceutica NV initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against generic manufacturers who have filed ANDSs seeking approval to market generic versions of INVEGA SUSTENNA before expiration of the listed patent. The following entities are named defendants: Pharmascience Inc. and Apotex Inc. The following Canadian patent is included in one or more cases: 2,655,335. In June 2024, the Supreme Court dismissed the Apotex case. In September 2024, the Supreme Court granted Pharmascience's motion to appeal the Federal Court's decision that the 2,655,335 Patent is not invalid. ERLEADA In January 2025, Aragon Pharmaceuticals, Inc., Janssen Inc., (collectively, Janssen Inc.) and Sloan-Kettering Institute for Cancer Research (SKI) initiated Statements of Claims 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 ERLEADA before the expiration of CA Patent Nos. 3,008,345 (the ’345 patent), 2,875,767 (the ’767 patent), 2,885,415 (the ’415 patent), and 3,128,331 (the ’331 patent). Janssen Inc. and SKI are seeking an order enjoining Sandoz from marketing a generic version of ERLEADA before the expiration of the relevant patents. Beginning in April 2025, Aragon Pharmaceuticals, Inc., Janssen Biotech, Inc., The Regents of the University of California, and Sloan-Kettering Institute for Cancer Research variously initiated patent infringement lawsuits in U.S. District Court for the District of New Jersey against generic manufacturers who have filed ANDAs seeking approval to market generic versions of ERLEADA before the expiration of certain Orange Book Listed Patents. The following entities are named defendants: Lupin Limited; Lupin Pharmaceuticals, Inc.; Hetero Labs Limited Unit V; and Hetero USA, Inc. The following U.S. patents are included in one or more cases: 8,445,507; 8,802,689; 9,338,159; 9,987,261; 9,481,663; 9,884,054; RE49,353; 10,849,888; 10,702,508; and 11,963,952. Aragon Pharmaceuticals, Inc., Janssen Biotech, Inc. and the Lupin parties entered into a confidential settlement in August 2025, and the case was dismissed. SPRAVATO Beginning in May 2023, Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV filed patent infringement lawsuits in United States district courts against generic manufacturers who have filed ANDAs seeking approval to market generic versions of SPRAVATO before expiration of certain Orange Book Listed Patents. The following entities are named defendants: Sandoz Inc.; Hikma Pharmaceuticals Inc. USA; Hikma Pharmaceuticals PLC; and Alkem Laboratories Ltd. The following U.S. patents are included in one or more cases: 10,869,844; 11,173,134; 11,311,500; and 11,446,260. In January 2026, Janssen and Hikma entered into a confidential settlement agreement, and a consent judgment was entered by the court. A trial against Sandoz is scheduled to begin in February 2026. CAPLYTA Beginning in March 2024, Intra-Cellular Therapies, Inc. (Intra-Cellular) filed patent infringement lawsuits in the United States District Court for the District of New Jersey against generic manufacturers who have filed ANDAs seeking approval to market generic versions of CAPLYTA before expiration of certain Orange Book Listed Patents. The following entities are named defendants: Aurobindo Pharma Ltd., Aurobindo Pharma USA, Inc., Alkem Laboratories Ltd., Dr. Reddy’s Laboratories Inc., Dr. Reddy’s Laboratories Ltd., MSN Laboratories Private Ltd., Zydus Pharmaceuticals (USA) Inc., and Zydus Lifesciences Ltd. The following U.S. Patents are included in one or more cases: US RE 48,825; RE 48,839; 8,648,077; 9,168,258; 9,199,995; 9,616,061; 9,956,227; 10,117,867; 10,464,938; 10,960,009; 11,026,951; 11,753,419; 11,980,617; 12,070,459; 12,090,155; 12,122,792; 12,128,043; 12,409,176; and 12,410,195. In December 2025, Intra-Cellular, Dr. Reddy's Laboratories Inc., and Dr. Reddy's Laboratories Ltd. entered into a confidential settlement agreement, and the case was dismissed. 2025 Annual Report 101 UPTRAVI Beginning in September 2025, Actelion Pharmaceuticals Ltd, Actelion Pharmaceuticals US, Inc., and Nippon Shinyaku Co. Ltd. filed a patent infringement lawsuit in the United States District Court for the District of New Jersey against generic manufacturers who have filed ANDAs seeking approval to market generic versions of UPTRAVI before expiration of certain Orange Book Listed Patents. The following entities are named defendants: VGYAAN Pharmaceuticals LLC, RK Pharma, Inc., Apotex Inc., and Apotex Corp. The following patents are included in one or more cases: 7,205,302; 8,791,122; and 9,284,280. In November 2025, Actelion, Nippon Shinyaku Co. Ltd., VGYAAN Pharmaceuticals LLC, and RK Pharma Inc. entered into a confidential settlement agreement, and the court entered a consent judgment ending the action. CARVYKTI In January 2026, 2seventy bio, Inc. filed suit in the Unitary Patent Court, Local Division of Brussels, against Johnson & Johnson, Janssen Biotech, Inc., Janssen Pharmaceuticals Inc., Janssen-Cilag International NV, Janssen Pharmaceutica NV, Janssen-Cilag NV, Janssen Biologics B.V., Janssen-Cilag B.V., Janssen-Cilag GmbH, Janssen-Cilag, Janssen-Cilag SpA, Janssen-Cilag A/S, Janssen-Cilag Aktiebolag, Janssen-Cilag Farmaceutica Lda., Legend Biotech Corporation, Legend Biotech USA Inc., Legend Biotech Ireland Limited, and Legend Biotech Belgium BV. alleging that the manufacture and sale of CARVYKTI infringes EU Patent No. 3 689 383. In the suit, 2seventy bio, Inc. seeks damages and an injunction. MedTech In March 2016, Abiomed, Inc. filed a declaratory judgment action against Maquet Cardiovascular LLC (Maquet) in the U.S. District Court for the District of Massachusetts seeking a declaration that certain Impella products do not infringe Maquet patents, including U.S. Patent Nos. 7,022,100 (’100 patent); 8,888,728; and 9,327,068. Maquet counterclaimed for infringement of those patents against Abiomed, Inc., Abiomed Europe GmbH, and Abiomed R&D, Inc. (collectively, Abiomed), and later added claims for infringement of U.S. Patent Nos. 9,545,468; 9,561,314; and 9,597,437. After claim construction, Maquet alleged infringement of only the ’100 patent. In September 2021, the court granted Abiomed’s motion for summary judgment of non-infringement of the ’100 patent and, in September 2023, the district court entered final judgment in favor of Abiomed on all patents-in-suit. Maquet appealed. In February 2026, the U.S. Court of Appeals for the Federal Circuit affirmed-in-part, vacated-in-part, and remanded to the District Court. In November 2017, Maquet Cardiovascular LLC filed suit against Abiomed, Inc., Abiomed R&D, Inc., and Abiomed Europe GmbH (collectively, Abiomed) in the U.S. District Court for the District of Massachusetts, alleging that certain Impella products infringe U.S. Patent No. 9,789,238 (’238 patent). Maquet subsequently added U.S. Patent No. 10,238,783 (’783 patent). After claim construction, the court entered a stipulated judgment of non-infringement of both patents. Maquet appealed. In March 2025, the U.S. Court of Appeals for the Federal Circuit left undisturbed the judgment on non-infringement of the ’238 patent, vacated the judgment regarding the ’783 patent, and remanded the case to the District Court for further proceedings on the ’783 patent. Trial is scheduled to begin in May 2026. Government proceedings Like other companies in the pharmaceutical and medical technologies 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. The most significant litigation brought by, and investigations conducted by, government agencies are listed below. It is possible that criminal charges and substantial fines and/or civil penalties or damages could result from government investigations or litigation. MedTech In July 2023, the DOJ issued Civil Investigative Demands to the Company, Johnson & Johnson Surgical Vision, Inc., and Johnson & Johnson Vision Care, Inc. (collectively, J&J Vision) in connection with a civil investigation under the False Claims Act relating to free or discounted intraocular lenses and equipment used in eye surgery, such as phacoemulsification and laser systems. J&J Vision has provided documents and information responsive to the Civil Investigative Demands and is continuing to cooperate with the DOJ regarding its inquiry. Innovative Medicine 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. The federal and state governments have declined to intervene, and the lawsuit is being 102 prosecuted by the relators. The Court denied summary judgment on all claims in December 2021. Daubert motions were granted in part and denied in part in January 2022, and trial commenced in May 2024. In June 2024, a jury found no liability regarding the anti-kickback violations but found liability for a portion of the off-label promotion claims. The Company challenged the verdict on the off-label claims in post-trial briefing. In March 2025, the court dismissed the state law portion of the claims but entered judgment on the federal claims. The Company appealed the remainder of the verdict to the Third Circuit. Briefing is complete and oral argument is scheduled for March 2026. In March 2017, Janssen Biotech, Inc. (JBI) received a Civil Investigative Demand from the United States Department of Justice regarding a False Claims Act investigation concerning management and advisory services provided to rheumatology and gastroenterology practices that purchased REMICADE or SIMPONI ARIA. In August 2019, the United States Department of Justice notified JBI that it was closing the investigation. Subsequently, the United States District Court for the District of Massachusetts unsealed a qui tam False Claims Act complaint, which was served on the Company. The Department of Justice had declined to intervene in the qui tam lawsuit in August 2019. The Company filed a motion to dismiss, which was granted in part and denied in part. Discovery is underway. General litigation The Company or its subsidiaries regularly face claims in legal proceedings related to contracts, trade secrets, antitrust, unfair competition, consumer protection, and environmental issues, the most significant of which are listed below. Although the Company and its subsidiaries believe that they have substantial defenses to these cases, there can be no assurance as to the outcome of these matters. A loss in any of these cases could require the payment of damages, injunctions, and/or other relief. 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. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health. In July 2020, the District Court dismissed the complaint. In January 2022, the United States Court of Appeals for the District of Columbia Circuit reversed the District Court’s decision. In June 2024, the Supreme Court vacated the D.C. Circuit's decision and remanded the case to the D.C. Circuit for reconsideration. In January 2026, the D.C. Circuit affirmed its reversal of the District Court's dismissal of the complaint. In February 2024, a putative class action was filed against the Company and the Pension & Benefits Committee of Johnson & Johnson (Committee) in United States District Court for the District of New Jersey. The complaint alleges that defendants breached fiduciary duties under the Employee Retirement Income Security Act (ERISA) by allegedly mismanaging the Company’s prescription-drug benefits program. The complaint seeks damages and other relief. In January 2025, the court granted in part and denied in part defendants’ motion to dismiss, with leave to replead. In March 2025, plaintiffs filed a second amended complaint. In April 2025, defendants filed a motion to dismiss plaintiffs' fiduciary duty claims. In November 2025, the court granted defendants' motion to dismiss plaintiffs' fiduciary duty claims. Plaintiffs voluntarily withdrew their remaining claim, and the court entered final judgment in defendants' favor in January 2026. Plaintiffs have filed a notice of appeal to the United States Court of Appeals for the Third Circuit. MedTech 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 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. The complaint seeks damages and other relief. In December 2021, the court granted in part and denied in part defendants’ motion to dismiss certain causes of action. All claims against the individual defendants were dismissed. Trial occurred in January 2024. In September 2024, the court found liability with respect to certain claims and no liability with respect to other claims. In January 2026, the Delaware Supreme Court reversed in part and affirmed in part the Chancery Court's decision, including a $ 0.8 billion judgment against the Company that was accrued in the fiscal fourth quarter of 2025 and subsequently paid in January 2026. In October 2019, Innovative Health, LLC filed a complaint against Biosense Webster, Inc. (BWI) in the United States District Court for the Central District of California. The complaint alleges that certain of BWI's business practices and contractual terms violate the antitrust laws of the United States and the State of California by restricting competition in the sale of High Density Mapping Catheters and Ultrasound Catheters. In May 2025, a jury returned its verdict in favor of Innovative Health. In August 2025, the court issued a permanent injunction concerning BWI's business practices. BWI appealed both the jury verdict and the permanent injunction. 2025 Annual Report 103 Innovative Medicine In October 2018, two separate putative class actions were filed against Actelion Pharmaceutical Ltd., Actelion Pharmaceuticals U.S., Inc. and Actelion Clinical Research, Inc. (collectively, Actelion) in United States District Court for the District of Maryland and United States District Court for the District of Columbia. The complaints allege that Actelion violated state and federal antitrust and unfair competition laws by allegedly refusing to supply generic pharmaceutical manufacturers with samples of TRACLEER. TRACLEER is subject to a Risk Evaluation and Mitigation Strategy required by the U.S. Food and Drug Administration, which imposes restrictions on distribution of the product. In January 2019, the plaintiffs dismissed the District of Columbia case and filed a consolidated complaint in the United States District Court for the District of Maryland. In September 2024, the district court granted plaintiffs' motion for class certification. Trial is scheduled for March 2026. In December 2023, a putative class action lawsuit was filed against the Company and Janssen Biotech Inc. (collectively, Janssen) in the United States District Court for the Eastern District of Virginia. The complaint alleges that Janssen violated federal and state antitrust laws and other state laws by delaying biosimilar competition with STELARA through Janssen's enforcement of patent rights covering STELARA. The complaint seeks damages and other relief. In February 2024, plaintiffs filed an amended complaint, which Janssen moved to dismiss in March 2024. In August 2024, the court granted in part and denied in part Janssen's motion to dismiss. In December 2025, the court granted plaintiffs' motion for class certification. In January 2026, the court granted summary judgment for Janssen on plaintiffs' claim regarding patents obtained through the acquisition of Momenta Pharmaceuticals, Inc. in 2020. 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 on behalf of the United States, certain states, and the District of Columbia. The complaint 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 sales and reimbursement programs. At this time, the federal and state governments have declined to intervene. In December 2021, the United States District Court for the District of New Jersey denied Janssen's motion to dismiss. In August 2025, Xoma Corporation (Xoma) filed a complaint against Janssen Biotech, Inc. (Janssen) in the United States District Court for the Eastern District of Pennsylvania. The complaint alleges breach of contract, unjust enrichment, and declaratory relief claims against Janssen regarding the alleged failure to obtain a license from Xoma in connection with Janssen's commercialization of TREMFYA. In December 2025, the court denied Janssen's motion to dismiss the complaint. 20. Restructuring In fiscal 2025, the company initiated a restructuring program of its Surgery franchise within the MedTech segment to simplify and focus operations by exiting certain non-strategic product lines and optimize select sites across the network. The pre-tax restructuring expense of $ 0.2 billion in the fiscal year 2025, primarily included costs related to asset impairments as well as product exits. The estimated costs of the total program are between $ 0.9 billion - $ 1.0 billion and is expected to be substantially completed by the end of fiscal year 2026. In fiscal 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 2025 primarily included costs related asset impairments as well as market and product exits. The pre-tax restructuring expense of $ 0.2 billion in the fiscal year 2024 primarily included costs related to market and product exits. The pre-tax restructuring expense of $ 0.3 billion in the fiscal year 2023 primarily included inventory and instrument charges related to market and product exits. Total project costs of approximately $ 0.8 billion have been recorded since the restructuring was announced and the program has been substantially completed in the fiscal year 2025. In fiscal 2023, the Company completed a prioritization of its research and development (R&D) investment within its 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 certain 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. Pre-tax Restructuring expenses of $ 0.1 billion in the fiscal year 2024 included the termination of partnered and non-partnered development program costs, asset impairments and asset divestments. Pre-tax Restructuring expenses of $ 0.5 billion in the fiscal year 2023 included the termination of partnered and non-partnered development program costs and asset impairments. Total project costs of approximately $ 0.6 billion have been recorded since the restructuring was announced and the program was completed in the fiscal fourth quarter of 2024. 104 The following table summarizes the restructuring expenses for the fiscal years 2025, 2024 and 2023: (Pre-tax Dollars in Millions) 2025 2024 2023 MedTech Segment Surgery franchise (1) $ 205 — — MedTech Segment Orthopaedics franchise (2) 307 167 319 Innovative Medicine Segment (3) — 102 479 Total Programs $ 512 269 798 (1) The fiscal year of 2025 included $ 76 million in restructuring, $ 122 million in Other income and expense and $ 7 million in Cost of products sold on the Consolidated Statement of Earnings (2) The fiscal year of 2025 included $ 152 million in restructuring, $ 71 million in Other income and expense and $ 84 million in Cost of products sold on the Consolidated Statement of Earning The fiscal year of 2024 included $ 132 million in Restructuring and $ 35 million in Cost of products sold on the Consolidated Statement of Earnings. The fiscal year of 2023 Included $ 40 million in Restructuring and $ 279 million in Cost of products sold on the Consolidated Statement of Earnings. This program was substantially completed in the fiscal year 2025. (3) The fiscal year of 2024 included $ 102 million in Restructuring on the Consolidated Statement of Earnings. The fiscal year of 2023 included $ 449 million in Restructuring and $ 30 million in Cost of products sold on the Consolidated Statement of Earnings. This program was completed in the fiscal fourth quarter of 2024. Restructuring reserves as of December 28, 2025, December 29, 2024 and December 31, 2023 were insignificant. 2025 Annual Report 105 21. Kenvue separation and discontinued operations The results of the Consumer Health business (previously reported as a separate business segment) have been reflected as discontinued operations in the Company’s consolidated statements of earnings as Net earnings from discontinued operations, net of taxes through August 23, 2023, the date of the exchange offer. On May 15, 2024, the Company issued $ 3.6 billion aggregate principal amount of commercial paper and received $ 3.6 billion of net cash proceeds to be used for general corporate purposes. On May 17, 2024, the Company completed a Debt-for-Equity Exchange of its remaining 182,329,550 shares of Kenvue Common Stock for the outstanding Commercial Paper. Upon completion of the Debt-for-Equity Exchange, the Commercial Paper was satisfied and discharged and the Company no longer owns any shares of Kenvue Common Stock. This exchange resulted in a loss of approximately $ 0.4 billion recorded in Other (income) expense. 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 in the fiscal second quarter of 2023. 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 owned 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. Subsequent changes are reflected in other income/expense and amounted to $ 0.4 billion expense through 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 non-cash 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. Also in connection with the separation, Johnson & Johnson and Kenvue entered into a separation agreement and also entered into various other agreements that provide for certain transactions to effect the transfer of the assets and liabilities of the Consumer Health business to Kenvue and to govern various interim and ongoing relationships between Kenvue and Johnson & Johnson following the completion of the Kenvue IPO, including transition services agreements (TSAs), transition manufacturing agreements (TMAs), trademark agreements, intellectual property agreements, an employee matters agreement, and a tax matters agreement. Under the TSAs, Johnson & Johnson will provide Kenvue various services and, similarly, Kenvue will provide Johnson & Johnson various services. The provision of the majority of services under the TSAs generally terminated 24 months following the Kenvue IPO. Additionally, Johnson & Johnson and Kenvue entered into TMAs pursuant to which Johnson & Johnson will manufacture and supply to Kenvue certain products and, similarly, Kenvue will manufacture and supply to Johnson & Johnson certain products. The terms of the TMAs range in initial duration from 3 months to 5 years. Amounts related to the TSAs and TMAs included in the consolidated statements of earnings were immaterial for fiscal years 2025, 2024 and 2023. Additionally, the amounts due to and from Kenvue for the above agreements was not material as of December 28, 2025. The results of the Consumer Health business (previously reported as a separate business segment), as well as the associated gain, have been reflected as discontinued operations in the Company’s consolidated statements of earnings as Net earnings from discontinued operations, net of taxes. As a result of the separation of Kenvue, Johnson & Johnson incurred separation costs of $ 145 million in the fiscal year 2024, which was included in Net Earnings and incurred separation costs of $ 986 million in the fiscal year 2023, which were included in Net earnings from discontinued operations, net of taxes. These costs were primarily related to external advisory, legal, accounting, contractor and other incremental costs directly related to separation activities. 106 Details of Net Earnings from Discontinued Operations, net of taxes are as follows: (Dollars in Millions) 2023 (1) Sales to customers $ 10,036 Cost of products sold 4,369 Gross profit 5,667 Selling, marketing and administrative expenses 3,085 Research and development expense 258 Interest Income ( 117 ) Interest expense, net of portion capitalized 199 Other (income) expense, net 1,092 (Gain) on separation of Kenvue ( 20,984 ) Earnings from Discontinued Operations Before Provision for Taxes on Income 22,134 Provision for taxes on income 307 Net earnings from Discontinued Operations $ 21,827 (1) The Company ceased consolidating the results of the Consumer Health business on August 23, 2023, the date of the exchange offer, but continued to reflect any separation costs incurred as part of discontinued operations through the end of the fiscal fourth quarter. The following table presents depreciation, amortization and capital expenditures of the discontinued operations related to Kenvue: (Dollars in Millions) 2023 (1) Depreciation and Amortization $ 383 Capital expenditures $ 162 2025 Annual Report 107 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Johnson & Johnson Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Johnson & Johnson and its subsidiaries (the "Company") as of December 28, 2025 and December 29, 2024, and the related consolidated statements of earnings, of comprehensive income, of equity and of cash flows for each of the three fiscal years in the period ended December 28, 2025, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 28, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 28, 2025 and December 29, 2024, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 28, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. 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 Intra-Cellular Therapies, Inc. (“Intra-Cellular”), from its assessment of internal control over financial reporting as of December 28, 2025 because it was acquired by the Company in a purchase business combination during 2025. We have also excluded Intra-Cellular from our audit of internal control over financial reporting. Intra-Cellular 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 December 28, 2025. 108 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters 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. U.S. Innovative Medicine Rebate Reserves – Managed Care, Medicare and Medicaid As described in Note 1 to the consolidated financial statements, the Company recognizes revenue from product sales when obligations under the terms of a contract with the customer are satisfied. Rebates and discounts provided to customers are accounted for as variable consideration and recorded as a reduction in sales. The liability for such rebates and discounts is recognized within Accrued rebates, returns, and promotions on the consolidated balance sheet. A significant portion of the liability related to rebates is from the sale of pharmaceutical products within the U.S., primarily the Managed Care, Medicare and Medicaid programs, which amounted to $13.0 billion as of December 28, 2025. Rebates estimated by management are based on contractual terms, historical experience, patient outcomes, trend analysis, and projected market conditions in the various markets served. The principal considerations for our determination that performing procedures relating to U.S. Innovative Medicine rebate reserves - Managed Care, Medicare and Medicaid is a critical audit matter are (i) the significant judgment by management due to the significant measurement uncertainty when developing the estimate of these reserves and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the assumptions related to contractual terms, historical experience, patient outcomes, trend analysis, and projected market conditions in the U.S. pharmaceutical market. 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 estimate of the U.S. Innovative Medicine rebate reserves - Managed Care, Medicare and Medicaid, including controls over the assumptions used to estimate these rebates. These procedures also included, among others (i) developing an independent estimate of the rebates by utilizing third party information on price and market conditions in the U.S. pharmaceutical market, the contractual terms of the specific rebate programs, and the historical experience, patient outcomes, and trend analysis of actual rebate claims paid; (ii) testing, on a sample basis, rebate claims processed by the Company, including evaluating those claims for consistency with the contractual terms of the Company’s rebate arrangements; and (iii) comparing the independent estimates to management’s estimates to evaluate the reasonableness of management’s estimates. 2025 Annual Report 109 Litigation Contingencies – Talc As described in Notes 1 and 19 to the consolidated financial statements, a significant number of personal injury claims alleging that talc causes cancer have been asserted against the Company and its affiliates arising out of the use of body powders containing talc, primarily JOHNSON’S Baby Powder. The Company records accruals for loss contingencies associated with legal matters, including talc, 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; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; 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. As of December 28, 2025, the total present value of the reserve to resolve the talc claims is approximately $3.4 billion, comprising previously executed settlement agreements, litigation defense, and other costs. The principal considerations for our determination that performing procedures relating to the litigation contingencies – talc is a critical audit matter are (i) the significant judgment by management when assessing the likelihood of a loss being incurred for the remaining unresolved talc claims and when determining whether a reasonable estimate of the loss or range of loss for the remaining unresolved talc claims can be made and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s assessment of the litigation contingencies associated with the unresolved talc claims. 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 assessment of the litigation contingencies – talc claims, 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) testing management’s process for developing the estimated loss contingency related to the talc claims; (ii) evaluating the appropriateness of the methodology used by management to develop the estimated loss or range of loss; (iii) obtaining and evaluating certain executed settlement agreements related to the talc litigation; (iv) testing a sample of payments for litigation defense and other costs; (v) discussing the status of significant known actual and potential litigation and settlements activity with the Company’s internal legal counsel; (vi) confirming with internal and external legal counsel the possibility or probability of an unfavorable outcome and the extent to which the loss or range of loss is reasonably estimable related to talc claims; (vii) evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable; and (viii) evaluating the sufficiency of the Company’s litigation contingencies disclosures. /s/ PricewaterhouseCoopers LLP Florham Park, New Jersey February 11, 2026 We have served as the Company’s auditor since at least 1920. We have not been able to determine the specific year we began serving as auditor of the Company. 110 Management’s report on internal control over financial reporting Under Section 404 of the Sarbanes-Oxley Act of 2002, management is required to assess the effectiveness of the Company’s internal control over financial reporting as of the end of each fiscal year and report, based on that assessment, whether the Company’s internal control over financial reporting is effective. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Company’s financial reporting and the preparation of external financial statements in accordance with generally accepted accounting principles. Internal controls over financial reporting, no matter how well designed, have inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 28, 2025. In making this assessment, the Company used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework (2013).” These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. 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 Intra-Cellular Therapies, Inc. (Intra-Cellular), in a business combination in April 2025. Intra-Cellular'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 December 28, 2025. As the acquisition occurred in the fiscal year 2025, the scope of the Company's assessment of the design and effectiveness of internal control over financial reporting for the fiscal year 2025 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 December 28, 2025, the Company’s internal control over financial reporting was effective. The effectiveness of the Company’s internal control over financial reporting as of December 28, 2025 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears herein. /s/ J. Duato /s/ J. J. Wolk Joaquin Duato Joseph J. Wolk Chairman, Board of Directors Executive Vice President, Chief Financial Officer Chief Executive Officer 2025 Annual Report 111 Shareholder return performance graphs Set forth below are line graphs comparing the cumulative total shareholder return on the Company’s Common Stock for periods of five years and ten years ending December 31, 2025, against the cumulative total return of the Standard & Poor’s 500 Stock Index, the Standard & Poor’s Pharmaceutical Index and the Standard & Poor’s Healthcare Equipment Index. The graphs and tables assume that $100 was invested on December 31, 2020 and December 31, 2015 in each of the Company’s Common Stock, the Standard & Poor’s 500 Stock Index, the Standard & Poor’s Pharmaceutical Index and the Standard & Poor’s Healthcare Equipment Index and that all dividends were reinvested. 5 Year Shareholder Return Performance J&J vs. Indices Johnson & Johnson S&P 500 Index S&P Pharmaceutical Index S&P Healthcare Equipment Index 5-year CAGR J&J 8.7 % S&P 500 14.4 % S&P Pharm 13.5 % S&P H/C Equip 4.9 % 2020 2021 2022 2023 2024 2025 Johnson & Johnson $100.00 $111.40 $118.08 $107.93 $102.75 $151.55 S&P 500 Index $100.00 $128.70 $105.41 $133.13 $166.41 $196.20 S&P Pharmaceutical Index $100.00 $125.90 $136.60 $137.01 $148.25 $188.57 S&P Healthcare Equipment Index $100.00 $119.40 $96.83 $105.55 $117.05 $126.77 112 10 Year Shareholder Return Performance J&J vs. Indices Johnson & Johnson S&P 500 Index S&P Pharmaceutical Index S&P Healthcare Equipment Index 10-year CAGR J&J 10.3 % S&P 500 14.8 % S&P Pharm 10.8 % S&P H/C Equip 12.1 % 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Johnson & Johnson $100.00 $115.30 $143.43 $136.12 $158.17 $175.41 $195.41 $207.13 $189.32 $180.23 $265.84 S&P 500 Index $100.00 $112.00 $136.42 $130.41 $171.49 $203.05 $261.32 $214.02 $270.31 $337.89 $398.37 S&P Pharmaceutical Index $100.00 $98.40 $110.80 $119.77 $137.86 $148.20 $186.58 $202.44 $203.05 $219.70 $279.46 S&P Healthcare Equipment Index $100.00 $106.50 $139.41 $161.99 $209.46 $246.32 $294.11 $238.52 $259.99 $288.33 $312.26 2025 Annual Report 113 Item 9. Changes in and disagreements with accountants on accounting and financial disclosure Not applicable.