Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Sales to Customers

Analysis of Consolidated Sales

For the fiscal nine months of 2022, worldwide sales were $71.2 billion, a total increase of 3.3%, including an operational increase of 7.9% as compared to 2021 fiscal nine months sales of $69.0 billion. Currency fluctuations had a negative impact of 4.6% for the fiscal nine months of 2022. In the fiscal nine months of 2022, the net impact of acquisitions and divestitures on worldwide operational sales growth was a negative 0.2%.

Sales by U.S. companies were $36.1 billion in the fiscal nine months of 2022, which represented an increase of 3.1% as compared to the prior year. In the fiscal nine months of 2022, the net impact of acquisitions and divestitures on the U.S. operational sales growth was a negative 0.1%. Sales by international companies were $35.2 billion, an increase of 3.5%, including an operational increase of 12.9%, and a negative currency impact of 9.4% as compared to the fiscal nine months sales of 2021. In the fiscal nine months of 2022, the net impact of acquisitions and divestitures on the international operational sales growth was a negative 0.2%.

In the fiscal nine months of 2022, sales by companies in Europe achieved growth of 5.8%, which included an operational increase of 18.2% and a negative currency impact of 12.4%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved growth of 6.7%, which included an operational increase of 9.6%, and a negative currency impact of 2.9%. Sales by companies in the Asia-Pacific, Africa region experienced a decline of 0.4%, including an operational increase of 7.2% offset by a negative currency impact of 7.6%.

Note: values may have been rounded

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For the fiscal third quarter of 2022, worldwide sales were $23.8 billion, a total increase of 1.9%, which included operational growth of 8.1% and a negative currency impact of 6.2% as compared to 2021 fiscal third quarter sales of $23.3 billion. In the fiscal third quarter of 2022, the net impact of acquisitions and divestitures on worldwide operational sales growth was a negative 0.1%.

Sales by U.S. companies were $12.5 billion in the fiscal third quarter of 2022, which represented an increase of 4.1% as compared to the prior year. In the fiscal third quarter of 2022, the net impact of acquisitions and divestitures on the U.S. operational sales growth was a negative 0.1%. Sales by international companies were $11.3 billion, a total decrease of 0.3%, which included operational growth of 12.3% offset by a negative currency impact of 12.6%. In the fiscal third quarter of 2022, the net impact of acquisitions and divestitures on the international operational sales growth was a negative 0.1%.

In the fiscal third quarter of 2022, sales by companies in Europe experienced a decline of 1.1%, which included operational growth of 14.5% offset by a negative currency impact of 15.6%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved growth of 4.1%, including operational growth of 9.1% and a negative currency impact of 5.0%. Sales by companies in the Asia-Pacific, Africa region experienced a decline of 0.9%, including operational growth of 10.5% offset by a negative currency impact of 11.4%.

Note: values may have been rounded

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Analysis of Sales by Business Segments

Consumer Health

Consumer Health segment sales in the fiscal nine months of 2022 were $11.2 billion, a decrease of 1.1% as compared to the same period a year ago, including operational growth of 2.6% offset by a negative currency impact of 3.7%. U.S. Consumer Health segment sales decreased by 1.7%. International Consumer Health segment sales decreased by 0.6%, including operational growth of 6.0% offset by a negative currency impact of 6.6%. In the fiscal nine months of 2022, the net impact of acquisitions and divestitures on the Consumer Health segment operational sales growth was a negative 0.5%.

Major Consumer Health Franchise Sales* — Fiscal Nine Months Ended

(Dollars in Millions)						October 2, 2022						October 3, 2021						Total Change						Operations Change						Currency Change
OTC(1)						$	4,462					$	4,183					6.7		%				10.3		%				(3.6)		%
Skin Health/Beauty						3,264						3,457						(5.6)						(2.2)						(3.4)
Oral Care						1,135						1,240						(8.5)						(5.0)						(3.5)
Baby Care						1,105						1,167						(5.4)						(1.5)						(3.9)
Women’s Health						684						684						(0.1)						7.8						(7.9)
Wound Care/Other						537						575						(6.7)						(5.8)						(0.9)
Total Consumer Health Sales						$	11,186					$	11,307					(1.1)		%				2.6		%				(3.7)		%

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

(1)In the first fiscal nine months of 2021, approximately $0.3 billion of certain international OTC products, primarily in China, were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes

Consumer Health segment sales in the fiscal third quarter of 2022 were $3.8 billion, a decrease of 0.4% as compared to the same period a year ago, including operational growth of 4.7% offset by a negative currency impact of 5.1%. U.S. Consumer Health segment sales increased by 2.1%. International Consumer Health segment sales decreased by 2.3% including operational growth of 6.7% offset by a negative currency impact of 9.0%. In the fiscal third quarter of 2022, the net impact of acquisitions and divestitures on the Consumer Health segment operational sales growth was a negative 0.1%.

Major Consumer Health Franchise Sales* — Fiscal Third Quarter Ended

(Dollars in Millions)						October 2, 2022						October 3, 2021						Total Change						Operations Change						Currency Change
OTC(1)						$	1,519					$	1,484					2.5		%				7.2		%				(4.7)		%
Skin Health/Beauty						1,126						1,124						0.1						5.0						(4.9)
Oral Care						375						398						(5.8)						(0.7)						(5.1)
Baby Care						375						391						(4.3)						1.6						(5.9)
Women’s Health						225						232						(3.0)						7.9						(10.9)
Wound Care/Other						176						182						(3.9)						(2.5)						(1.4)
Total Consumer Health Sales						$	3,795					$	3,812					(0.4)		%				4.7		%				(5.1)		%

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

(1)In the fiscal third quarter of 2021, approximately $0.1 billion of certain international OTC products, primarily in China, were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes

The OTC franchise achieved operational growth of 7.2% as compared to the prior year fiscal third quarter. The growth was driven by price actions and increased Cough/Cold/Flu and pediatric fever incidences as well as category recovery. This was partially offset by U.S. supply constraints.

The Skin Health/Beauty franchise achieved operational growth of 5.0% as compared to the prior year fiscal third quarter. The growth was driven by price actions, market growth and increased demand outside the U.S. for NEUTROGENA and AVEENO due to strong new product introductions.

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The Oral Care franchise experienced an operational decline of 0.7% as compared to the prior year fiscal third quarter. The decline was driven by softer consumption in China, category deceleration in the EMEA and Latin America regions, and suspension of personal care products in Russia. This was partially offset by price actions in the U.S.

The Baby Care franchise achieved operational growth of 1.6% as compared to the prior year fiscal third quarter. The growth was driven by price actions, market growth and AVEENO Baby facial cream relaunch in the Asia Pacific region. This was partially offset by competitive pressures in the U.S.

The Women’s Health franchise achieved operational growth of 7.9% as compared to the prior year fiscal third quarter primarily driven by continued strong performance in India, price actions, and lapping prior year supply disruption due to flooding in EMEA.

The Wound Care/Other franchise experienced an operational decline of 2.5% as compared to the prior year fiscal third quarter primarily driven by timing of club sales in Canada, U.S. market declines and lapping prior year strong COVID-19 related demand. This was partially offset by price actions primarily in the U.S.

In November 2021, the Company announced its intention to separate the Company’s Consumer Health business (Kenvue as the name for the planned New Consumer Health Company), with the intention to create a new, publicly traded company. The Company is targeting completion of the planned separation in 18 to 24 months after the initial announcement.

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Pharmaceutical

Pharmaceutical segment sales in the fiscal nine months of 2022 were $39.4 billion, an increase of 5.2% as compared to the same period a year ago, with an operational increase of 10.2% and a negative currency impact of 5.0%. U.S. Pharmaceutical sales increased 3.4% as compared to the same period a year ago. International Pharmaceutical sales increased by 7.3%, including operational growth of 18.5% and a negative currency impact of 11.2%. In the fiscal nine months of 2022, the net impact of acquisitions and divestitures on the Pharmaceutical segment operational sales growth was a negative 0.1%.

Major Pharmaceutical Therapeutic Area Sales** — Fiscal Nine Months Ended

(Dollars in Millions)						October 2, 2022						October 3, 2021						Total Change						Operations Change						Currency Change
Immunology						$	12,817					$	12,395					3.4		%				7.1		%				(3.7)		%
REMICADE						1,868						2,426						(23.0)						(21.8)						(1.2)
SIMPONI/ SIMPONI ARIA						1,682						1,717						(2.0)						2.9						(4.9)
STELARA						7,336						6,800						7.9						11.9						(4.0)
TREMFYA						1,916						1,434						33.6						38.5						(4.9)
Other Immunology						14						18						(19.3)						(19.3)						0.0
Infectious Diseases						3,908						3,394						15.2						23.9						(8.7)
COVID-19 VACCINE						1,490						766						*						*						*
EDURANT/rilpivirine						718						764						(6.1)						4.0						(10.1)
PREZISTA/ PREZCOBIX/ REZOLSTA/ SYMTUZA						1,450						1,568						(7.5)						(5.2)						(2.3)
Other Infectious Diseases(2)						251						295						(14.8)						(10.6)						(4.2)
Neuroscience						5,156						5,199						(0.8)						3.7						(4.5)
CONCERTA/methylphenidate						476						489						(2.5)						4.4						(6.9)
INVEGA SUSTENNA/ XEPLION/ INVEGA TRINZA/ TREVICTA						3,132						2,994						4.6						8.6						(4.0)
RISPERDAL CONSTA						373						452						(17.4)						(12.4)						(5.0)
Other Neuroscience(2)						1,174						1,265						(7.3)						(2.4)						(4.9)
Oncology						12,056						10,770						11.9						19.0						(7.1)
DARZALEX						5,894						4,378						34.6						41.6						(7.0)
ERLEADA						1,340						907						47.7						54.9						(7.2)
IMBRUVICA						2,918						3,307						(11.8)						(6.1)						(5.7)
ZYTIGA/ abiraterone acetate						1,500						1,749						(14.2)						(4.2)						(10.0)
Other Oncology						403						428						(5.9)						(0.8)						(5.1)
Pulmonary Hypertension						2,547						2,599						(2.0)						1.7						(3.7)
OPSUMIT						1,322						1,371						(3.6)						0.7						(4.3)
UPTRAVI						986						927						6.3						8.0						(1.7)
Other Pulmonary Hypertension						239						301						(20.5)						(13.5)						(7.0)
Cardiovascular / Metabolism / Other						2,916						3,106						(6.1)						(4.5)						(1.6)
XARELTO						1,806						1,794						0.7						0.7						—
INVOKANA/ INVOKAMET						357						443						(19.5)						(16.6)						(2.9)
Other(1,2)						753						869						(13.3)						(9.2)						(4.1)
Total Pharmaceutical Sales						$	39,400					$	37,463					5.2		%				10.2		%				(5.0)		%

• Percentage greater than 100% or not meaningful

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

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

(2)In the fiscal nine months of 2021, approximately $0.3 billion of certain international OTC products, primarily in China, were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes

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Pharmaceutical segment sales in the fiscal third quarter of 2022 were $13.2 billion, an increase of 2.6% as compared to the same period a year ago, including an operational increase of 9.0% and a negative currency impact of 6.4%. U.S. Pharmaceutical sales increased 3.0% as compared to the same period a year ago. International Pharmaceutical sales increased by 2.0%, including operational growth of 16.7% and a negative currency impact of 14.7%. In the fiscal third quarter of 2022, the net impact of acquisitions and divestitures on the Pharmaceutical segment operational sales growth was a negative 0.2%. Adjustments to previous sales reserve estimates were approximately $0.1 billion unfavorable in the fiscal third quarter of 2022 and approximately $0.2 billion favorable in the fiscal third quarter of 2021.

Major Pharmaceutical Therapeutic Area Sales** — Fiscal Third Quarter Ended

(Dollars in Millions)						October 2, 2022						October 3, 2021						Total Change						Operations Change						Currency Change
Immunology						$	4,287					$	4,250					0.9		%				5.6		%				(4.7)		%
REMICADE						558						761						(26.6)						(25.1)						(1.5)
SIMPONI/ SIMPONI ARIA						545						571						(4.6)						1.9						(6.5)
STELARA						2,449						2,378						3.0						8.0						(5.0)
TREMFYA						729						537						35.9						41.9						(6.0)
Other Immunology						5						3						*						*						*
Infectious Diseases						1,295						1,378						(6.0)						3.8						(9.8)
COVID-19 VACCINE						489						502						(2.7)						13.1						(15.8)
EDURANT/rilpivirine						245						259						(5.2)						8.2						(13.4)
PREZISTA/ PREZCOBIX/ REZOLSTA/ SYMTUZA						485						517						(6.4)						(3.3)						(3.1)
Other Infectious Diseases(2)						77						99						(22.4)						(17.2)						(5.2)
Neuroscience						1,681						1,680						0.0						5.9						(5.9)
CONCERTA/ methylphenidate						158						157						0.8						10.5						(9.7)
INVEGA SUSTENNA/ XEPLION/ INVEGA TRINZA/ TREVICTA						1,031						1,004						2.6						7.8						(5.2)
RISPERDAL CONSTA						119						140						(14.9)						(8.6)						(6.3)
Other Neuroscience(2)						374						379						(1.9)						4.3						(6.2)
Oncology						4,064						3,665						10.9						20.0						(9.1)
DARZALEX						2,052						1,580						29.8						38.7						(8.9)
ERLEADA						490						344						42.2						51.2						(9.0)
IMBRUVICA						911						1,066						(14.6)						(7.2)						(7.4)
ZYTIGA/ abiraterone acetate						456						548						(16.7)						(2.6)						(14.1)
Other Oncology						155						126						23.1						30.2						(7.1)
Pulmonary Hypertension						852						868						(1.9)						3.0						(4.9)
OPSUMIT						441						458						(3.9)						1.8						(5.7)
UPTRAVI						333						309						7.7						9.9						(2.2)
Other Pulmonary Hypertension						78						101						(22.1)						(12.9)						(9.2)
Cardiovascular / Metabolism / Other						1,034						1,041						(0.6)						1.4						(2.0)
XARELTO						689						636						8.4						8.4						—
INVOKANA/ INVOKAMET						109						133						(18.4)						(14.1)						(4.3)
Other(1,2)						236						271						(12.8)						(7.3)						(5.5)
Total Pharmaceutical Sales						$	13,214					$	12,882					2.6		%				9.0		%				(6.4)		%

• Percentage greater than 100% or not meaningful

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

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

(2)In the fiscal third quarter of 2021, approximately $0.1 billion of certain international OTC products, primarily in China, were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes

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Immunology products achieved operational growth of 5.6% as compared to the same period a year ago driven by market growth and share gains of STELARA (ustekinumab) in Crohn's disease and Ulcerative Colitis partially offset by a net unfavorable adjustment to previous sales reserves. Additionally, strong growth of TREMFYA (guselkumab) was due to market growth and share gains in Psoriasis and Psoriatic Arthritis. This was partially offset by lower sales of REMICADE (infliximab) due to biosimilar competition.

Biosimilar versions of REMICADE have been introduced in the United States and certain markets outside the United States and additional competitors continue to enter the market. Continued infliximab biosimilar competition will result in a further reduction in sales of REMICADE.

The latest expiring United States composition of matter patent for STELARA (ustekinumab) will expire in September 2023. STELARA (ustekinumab) U.S. sales in fiscal 2021 were approximately $5.9 billion. The expiration of a product patent or loss of market exclusivity is likely to result in a reduction in sales.

Infectious disease products achieved operational growth of 3.8% as compared to the same period a year ago. Growth was primarily driven by the contribution of the COVID-19 vaccine. This was partially offset by lower sales of PREZISTA and PREZCOBIX/REZOLSTA (darunavir/cobicistat) due to increased competition and loss of exclusivity of PREZISTA in certain countries outside the U.S.

Neuroscience products achieved operational sales growth of 5.9% as compared to the same period a year ago. Growth of Paliperidone long-acting injectables INVEGA SUSTENNA/XEPLION (paliperidone palmitate) and INVEGA TRINZA/TREVICTA was due to new patient starts and persistence of treatment as well as the launch of INVEGA HAFYERA.

Oncology products achieved operational sales growth of 20.0% as compared to the same period a year ago. Contributors to the growth were strong sales of DARZALEX (daratumumab) driven by share gains in all regions, continued strong market growth, and uptake of the subcutaneous formulation and the continued global launch uptake of ERLEADA (apalutamide). IMBRUVICA (ibrutinib) sales declined due to competitive pressures.

Pulmonary Hypertension achieved operational sales growth of 3.0% as compared to the same period a year ago. Sales growth was due to demand and share gains from UPTRAVI (selexipag) and OPSUMIT (macitentan) partially offset by COVID-19 related market constraints and unfavorable patient mix in OPSUMIT (macitentan) as well as continued declines in Other Pulmonary Hypertension.

Cardiovascular / Metabolism / Other products achieved operational growth of 1.4% as compared to the same period a year ago. The growth of XARELTO (rivaroxaban) was primarily driven by volume growth and share gains. The decline in sales of INVOKANA/INVOKAMET (canagliflozin) were due to continued share erosion.

Starting in the second quarter of fiscal 2022, the Company updated its policy so that no end customer will be permitted direct delivery of product to a location other than the billing location. The updated policy impacts contract pharmacy transactions involving non-grantee 340B covered entities for most of the Company’s drugs, subject to multiple exceptions. Both grantee and non-grantee covered entities can maintain unlimited contract pharmacy arrangements under policy exceptions. The Company will continue to offer 340B discounts to covered entities on all of its covered outpatient drugs, and it believes its policy will improve its ability to identify inappropriate duplicate discounts and diversion prohibited by the 340B statute. The 340B Drug Pricing Program is a U.S. federal government program requiring drug manufacturers to provide significant discounts on covered outpatient drugs to covered entities. This policy update has discount and volume implications in the current year and going forward.

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MedTech*

The MedTech segment sales in the fiscal nine months of 2022 were $20.7 billion, an increase of 2.2% as compared to the same period a year ago, with an operational increase of 6.6% and a negative currency impact of 4.4%. U.S. MedTech sales increased 4.9%. International MedTech sales decreased by 0.1%, including an operational increase of 8.2% offset by a negative currency impact of 8.3%. In the fiscal nine months of 2022, the net impact of acquisitions and divestitures on the MedTech segment operational sales growth was negative 0.1%.

Major MedTech Franchise Sales — Fiscal Nine Months Ended

(Dollars in Millions)						October 2, 2022						October 3, 2021						Total Change						Operations Change						Currency Change
Surgery						$	7,306					$	7,299					0.1		%				4.6		%				(4.5)		%
Advanced						3,460						3,430						0.9						5.2						(4.3)
General						3,846						3,869						(0.6)						4.1						(4.7)
Orthopaedics						6,440						6,433						0.1						3.5						(3.4)
Hips						1,129						1,102						2.5						5.7						(3.2)
Knees						1,005						983						2.3						5.6						(3.3)
Trauma						2,161						2,157						0.2						3.6						(3.4)
Spine, Sports & Other						2,144						2,190						(2.1)						1.4						(3.5)
Vision						3,704						3,517						5.3						11.1						(5.8)
Contact Lenses/Other						2,712						2,607						4.0						10.2						(6.2)
Surgical						992						910						9.0						13.6						(4.6)
Interventional Solutions						3,202						2,952						8.5						13.2						(4.7)
Total MedTech Sales						$	20,651					$	20,201					2.2		%				6.6		%				(4.4)		%

*Previously referred to as Medical Devices

The MedTech segment sales in the fiscal third quarter of 2022 were $6.8 billion, an increase of 2.1% as compared to the same period a year ago, which included operational growth of 8.1% and a negative currency impact of 6.0%. U.S. MedTech sales increased 7.7%. International MedTech sales decreased by 2.9%, including operational growth of 8.5% offset by a negative currency impact of 11.4%. In the fiscal third quarter of 2022, the net impact of acquisitions and divestitures on the MedTech segment operational sales growth was negligible.

Major MedTech Franchise Sales — Fiscal Third Quarter Ended

(Dollars in Millions)						October 2, 2022						October 3, 2021						Total Change						Operations Change						Currency Change
Surgery						$	2,422					$	2,405					0.7		%				7.1		%				(6.4)		%
Advanced						1,158						1,144						1.2						7.5						(6.3)
General						1,264						1,261						0.3						6.7						(6.4)
Orthopaedics						2,095						2,093						0.1						4.7						(4.6)
Hips						352						355						(0.9)						3.5						(4.4)
Knees						317						316						0.4						4.9						(4.5)
Trauma						717						715						0.2						4.8						(4.6)
Spine, Sports & Other						708						706						0.3						5.2						(4.9)
Vision						1,206						1,189						1.4						8.6						(7.2)
Contact Lenses/Other						908						882						3.0						10.8						(7.8)
Surgical						298						308						(3.2)						2.3						(5.5)
Interventional Solutions						1,060						957						10.8						17.7						(6.9)
Total MedTech Sales						$	6,782					$	6,644					2.1		%				8.1		%				(6.0)		%

*Previously referred to as Medical Devices

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The Surgery franchise achieved operational sales growth of 7.1% as compared to the prior year fiscal third quarter. The operational growth in Advanced Surgery was primarily driven by the following: Endocutter market recovery and new products partially offset by competitive pressures in the U.S.; Biosurgery market recovery, market expansion efforts and the success of new products partially offset by strong U.S. market demand in the prior year for infection prevention products; and Energy products driven by new product penetration coupled with competitive supply challenges partially offset by competitive pressures. The operational growth in General Surgery was primarily driven by market recovery and technology penetration.

The Orthopaedics franchise achieved operational sales growth of 4.7% as compared to the prior year fiscal third quarter. The operational growth in hips reflects procedure recovery, continued strength from the portfolio including ACTIS Stem and PINNACLE Dual Mobility, driven by KINCISE and VELYS Hip Navigation and momentum in the U.S. Ambulatory Surgery Center channel. This was partially offset by impacts of volume-based procurement in China and the timing of tenders outside the U.S. The operational growth in knees was primarily driven by procedure recovery, strength of the ATTUNE portfolio and pull through related to the VELYS Robotic assisted solution. This was partially offset by impacts of volume-based procurement in China and timing of tenders outside the U.S. The operational growth in Trauma was driven by market recovery and the uptake of new products. The operational growth in Spine, Sports & Other reflects procedure recovery and the benefit from new products in Spine, Sports, Shoulders and VELYS Digital Solutions. This was partially offset by competitive pressures in Spine.

The Vision franchise achieved operational sales growth of 8.6% as compared to the prior year fiscal third quarter. The Contact Lenses/Other operational growth was primarily driven by market recovery, price actions, commercial execution and

new products as well as the benefit of stocking in the U.S. related to new product launches. The Surgical operational growth was primarily driven by the success of new products mostly offset by global supply challenges, a high prior year comparison in Refractive lenses and timing of stocking in ASPAC.

The Interventional Solutions franchise achieved operational sales growth of 17.7% as compared to the prior year fiscal third quarter. The double digit growth in all regions was driven by continued market recovery, new product performance

and commercial execution.

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ANALYSIS OF CONSOLIDATED EARNINGS BEFORE PROVISION FOR TAXES ON INCOME

Consolidated earnings before provision for taxes on income for the fiscal nine months of 2022 was $17.5 billion representing 24.6% of sales as compared to $17.9 billion in the fiscal nine months of 2021, representing 26.0% of sales.

Consolidated earnings before provision for taxes on income for the fiscal third quarter of 2022 was $5.8 billion representing 24.5% of sales as compared to $3.8 billion in the fiscal third quarter of 2021, representing 16.5% of sales.

Cost of Products Sold

(Dollars in billions. Percentages in chart are as a percent to total sales)

Fiscal Nine months Q3 2022 versus Fiscal Nine months Q3 2021

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

• Commodity inflation in the MedTech and Consumer Health segments

• Currency in the Pharmaceutical segment

partially offset by

• Favorable segment mix with a higher percentage of sales coming from the Pharmaceutical segment

• Supply chain benefits in the MedTech and Consumer Health segments

The intangible asset amortization expense included in cost of products sold for the fiscal nine months of 2022 and 2021 was $3.2 billion and $3.6 billion, respectively.

Q3 2022 versus Q3 2021

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

• Commodity inflation in the MedTech and Consumer Health segments

• Currency in the Pharmaceutical segment

partially offset by

• Supply chain benefits in the MedTech and Consumer Health segments

The intangible asset amortization expense included in cost of products sold for the fiscal third quarters of 2022 and 2021 was $1.0 billion and $1.1 billion, respectively.

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Selling, Marketing and Administrative Expenses

(Dollars in billions. Percentages in chart are as a percent to total sales)

Fiscal Nine months Q3 2022 versus Fiscal Nine months Q3 2021

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

• Increased spending to support product launches in the MedTech segment

Q3 2022 versus Q3 2021

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

• Investment prioritization in the Consumer Health segment

• Leveraging of marketing expense spending in the MedTech segment

Research and Development Expense

(Dollars in billions. Percentages in chart are as a percent to total sales)

Fiscal Nine months Q3 2022 versus Fiscal Nine months Q3 2021

Research and Development increased as a percent to sales driven by:

• General portfolio progression in the Pharmaceutical segment

• Increased investment across multiple franchises in the MedTech segment

Q3 2022 versus Q3 2021

Research and Development increased as a percent to sales driven by:

• General portfolio progression in the Pharmaceutical segment

• Increased investment across multiple franchises in the MedTech segment

In-Process Research and Development (IPR&D)

In the fiscal nine months of 2022, the Company recorded an intangible asset impairment charge of approximately $0.6 billion related to an in-process research and development asset, bermekimab (JnJ-77474462), an investigational drug for the treatment of Atopic Dermatitis (AD) and Hidradenitis Suppurativa (HS). Additional information regarding efficacy of the AD indication became available which led the Company to the decision to terminate the development of bermekimab for AD. In the fiscal third quarter and fiscal nine months of 2021, the Company recorded a partial IPR&D charge of $0.9 billion primarily related to

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expected development delays in the general surgery digital robotics platform (Ottava) acquired with the Auris Health acquisition in 2019.

In October 2022, subsequent to the fiscal third quarter, additional information regarding efficacy of the HS indication became available which led the Company to the decision to terminate the development of bermekimab for HS. The Company will record a charge of approximately $0.2 billion in the fiscal fourth quarter related to this impairment. The Company acquired all rights to bermekimab from XBiotech, Inc. in the fiscal year 2020.

Interest (Income) Expense

Interest (income) expense in the first fiscal nine months of 2022 was a net interest income of $137 million as compared to interest expense of $83 million in the same period a year ago primarily due to higher rates of interest earned on cash balances. Interest (income) expense in the fiscal third quarter of 2022 was a net interest income of $99 million as compared to interest expense of $7 million in the same period a year ago primarily due to higher rates of interest earned on cash balances. The balance of cash, cash equivalents and current marketable securities was $34.1 billion at the end of the fiscal third quarter of 2022 as compared to $31.0 billion at the end of the fiscal third quarter of 2021. The Company’s debt position was $32.0 billion as of October 2, 2022 as compared to $33.9 billion the same period a year ago.

Other (Income) Expense, Net*

Fiscal Nine months Q3 2022 versus Fiscal Nine months Q3 2021

Other (income) expense, net for the fiscal nine months of 2022 was unfavorable by $0.2 billion as compared to the prior year primarily due to the following:

Fiscal Nine Months
(Dollars in Billions)(Income)/Expense						2022						2021						Change
Changes in the fair value of securities						$	0.7					(0.3)						1.0
Consumer Health separation costs						0.6						0.0						0.6
Litigation related(1)						0.6						2.1						(1.5)
COVID-19 Vaccine related costs						0.2						0.0						0.2
Acquisition, integration and divestiture related(2)						0.0						(0.5)						0.5
Employee benefit plan related						(0.9)						(0.5)						(0.4)
Other						(0.5)						(0.3)						(0.2)
Total Other (Income) Expense, Net						$	0.7					0.5						0.2

(1) Primarily related to pelvic mesh in the fiscal nine months of 2022 and talc and Risperdal Gynecomastia in the fiscal nine months of 2021.

(2) Primarily related to divestiture gains of two pharmaceutical brands outside the U.S. in the fiscal nine months of 2021.

Q3 2022 versus Q3 2021

Other (income) expense, net for the fiscal third quarter of 2022 was favorable by $1.4 billion as compared to the prior year primarily due to the following:

Fiscal Third Quarter
(Dollars in Billions)(Income)/Expense						2022						2021						Change
Litigation related(1)						$	0.2					2.1						(1.9)
Consumer Health separation costs						0.2						0.0						0.2
Changes in the fair value of securities						0.2						(0.1)						0.3
COVID-19 Vaccine related costs						0.2						0.0						0.2
Employee benefit plan related						(0.3)						(0.2)						(0.1)
Other						0.0						0.1						(0.1)
Total Other (Income) Expense, Net						$	0.5					1.9						(1.4)

(1) Primarily related to pelvic mesh in the fiscal third quarter of 2022 and talc and Risperdal Gynecomastia in the fiscal third quarter of 2021.

*Other (income) expense, net is the account where the Company records gains and losses related to the sale and write-down of certain investments in equity securities held by Johnson & Johnson Innovation - JJDC, Inc. (JJDC), changes in the fair value of securities, gains and losses on divestitures, gains and losses on sale of assets, certain transactional currency gains and losses, acquisition-related costs, litigation accruals and settlements, investment (income)/loss related to employee benefit plans, as well as royalty income.

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EARNINGS BEFORE PROVISION FOR TAXES BY SEGMENT

Income before tax by segment of business for the fiscal nine months were as follows:

						Income Before Tax												Segment Sales												Percent of Segment Sales
(Dollars in Millions)						October 2, 2022						October 3, 2021						October 2, 2022						October 3, 2021						October 2, 2022						October 3, 2021
Consumer Health(1)						$	2,279					$	1,131					$	11,186					$	11,307					20.4		%				10.0		%
Pharmaceutical(1)						12,593						13,663						39,400						37,463						32.0						36.5
MedTech						3,742						3,798						20,651						20,201						18.1						18.8
Segment earnings before tax						18,614						18,592						71,237						68,971						26.1						27.0
Less: Expenses not allocated to segments(2)						471						652
Less: Consumer Health separation costs						619						—
Worldwide income before tax						$	17,524					$	17,940					$	71,237					$	68,971					24.6		%				26.0		%

(1) Prior year income before tax has been reclassified as Certain international OTC products, primarily in China, were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes.

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

Consumer Health Segment

The Consumer Health segment income before tax as a percent of sales in the fiscal nine months of 2022 was 20.4% versus 10.0% for the same period a year ago. The increase in the income before tax as a percent of sales in the fiscal nine months of 2022 as compared to the prior year was primarily driven by the following:

• Lower litigation expense, primarily talc ($0.1 billion in 2022 vs. $1.5 billion in 2021)

• Supply chain benefits in 2022

partially offset by

• Commodity inflation in 2022

Pharmaceutical Segment

The Pharmaceutical segment income before tax as a percent of sales in the fiscal nine months of 2022 was 32.0% versus 36.5% for the same period a year ago. The decrease in the income before tax as a percent of sales for the fiscal nine months of 2022 as compared to the prior year was primarily driven by the following:

• An IPR&D charge of $0.6 billion in 2022 related to bermekimab (JnJ-77474462), an investigational drug for the treatment of AD and Hidradenitis Suppurativa (HS)

• Divestiture gains of $0.6 billion in 2021, primarily related to divestiture gains of two pharmaceutical brands outside the U.S.

• Unfavorable changes in the fair value of securities ($0.7 billion loss in 2022 vs. $0.2 billion gain in 2021)

• COVID-19 Vaccine supply network related costs of $0.7 billion in 2022

• Increased Research & Development investment for general portfolio progression

• Unfavorable currency in Cost of Products Sold

partially offset by

• Litigation related expense of $0.7 billion in 2021, primarily related to Risperdal Gynecomastia

• Lower intangible asset amortization expense ($2.2 billion in 2022 vs. $2.5 billion in 2021)

MedTech Segment

The MedTech segment income before tax as a percent of sales in the fiscal nine months of 2022 was 18.1% versus 18.8% for the same period a year ago. The decrease in the income before tax as a percent of sales for the fiscal nine months of 2022 was primarily driven by the following:

• Higher litigation related expense ($0.5 billion in 2022 vs. income of $0.1 billion in 2021)

• Commodity inflation in 2022

• Increased selling, marketing and administrative spending to support product launches

• Increased investment in Research & Development

partially offset by

• Supply chain benefits in 2022

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

Income (loss) before tax by segment of business for the fiscal third quarters were as follows:

						Income Before Tax												Segment Sales												Percent of Segment Sales
(Dollars in Millions)						October 2, 2022						October 3, 2021						October 2, 2022						October 3, 2021						October 2, 2022						October 3, 2021
Consumer Health(1)						$	809					$	(577)					$	3,795					$	3,812					21.3		%				(15.1)		%
Pharmaceutical(1)						4,249						4,200						13,214						12,882						32.2						32.6
MedTech						1,124						423						6,782						6,644						16.6						6.4
Segment earnings before tax						6,182						4,046						23,791						23,338						26.0						17.3
Less: Expenses not allocated to segments(2)						111						197
Less: Consumer Health separation costs						249						—
Worldwide income before tax						$	5,822					$	3,849					$	23,791					$	23,338					24.5		%				16.5		%

(1) Prior year income before tax has been reclassified as Certain international OTC products, primarily in China, were reclassified from the Pharmaceutical segment to the Consumer Health segment based on operational changes.

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

Consumer Health Segment

The Consumer Health segment income (loss) before tax as a percent of sales in the fiscal third quarter of 2022 was 21.3% versus (15.1)% for the same period a year ago. The increase in the income before tax as a percent of sales in the fiscal third quarter of 2022 as compared to the prior year was primarily driven by the following:

• Lower litigation expense primarily talc

• Supply chain benefits in 2022

partially offset by

• Commodity inflation in 2022

Pharmaceutical Segment

The Pharmaceutical segment income before tax as a percent of sales in the fiscal third quarter of 2022 was 32.2% versus 32.6% for the same period a year ago. The decrease in the income before tax as a percent of sales for the fiscal third quarter as compared to the prior year was primarily driven by the following:

• Unfavorable changes in the fair value of securities ($0.2 billion loss in 2022 vs. $0.1 billion gain in 2021)

• COVID-19 Vaccine supply network related costs of $0.4 billion in 2022

• Unfavorable currency in Cost of Products Sold

• Increased Research & Development investment for general portfolio progression

partially offset by

• Litigation related expense of $0.8 billion in 2021, primarily related to Risperdal

MedTech Segment

The MedTech segment income before tax as a percent of sales in the fiscal third quarter of 2022 was 16.6% versus 6.4% for the same period a year ago. The increase in the income before tax as a percent of sales for the fiscal third quarter was primarily driven by the following:

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

• Supply chain benefits in 2022

• Leveraging of marketing expense

partially offset by

• Commodity Inflation in 2022

• Increased investment in Research & Development

• Litigation related expense of $0.2 billion in 2022

Restructuring

In the fiscal second quarter of 2018, the Company announced plans to implement actions across its Global Supply Chain that are intended to enable the Company to focus resources and increase investments in critical capabilities, technologies and

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solutions necessary to manufacture and supply its product portfolio of the future, enhance agility and drive growth. The Company expects these supply chain actions will include expanding its use of strategic collaborations, and bolstering its initiatives to reduce complexity, improving cost-competitiveness, enhancing capabilities and optimizing its network. Discussions regarding specific future actions are ongoing and are subject to all relevant consultation requirements before they are finalized. In total, the Company expects these actions to generate approximately $0.7 to $0.8 billion in annual pre-tax cost savings that will be substantially delivered by the end of 2022. The Company expects to record pre-tax restructuring charges of approximately $2.2 to $2.3 billion by the completion of the program in December 2022. In the first fiscal nine months of 2022, the Company recorded a net pre-tax charge of $323 million, which is included on the following lines of the Consolidated Statement of Earnings, $237 million in restructuring, $46 million in cost of products sold and $40 million in other (income) expense, net. In the first fiscal nine months of 2021, the Company recorded a pre-tax charge of $333 million, which is included on the following lines of the Consolidated Statement of Earnings, $169 million in restructuring, $65 million in cost of products sold and $99 million in other (income) expense, net. In the fiscal third quarter of 2022, the Company recorded a net pre-tax charge of $123 million, which is included on the following lines of the Consolidated Statement of Earnings, $82 million in restructuring, $13 million in cost of products sold and $28 million in other (income) expense, net. In the fiscal third quarter of 2021, the Company recorded a pre-tax charge of $121 million, which is included on the following lines of the Consolidated Statement of Earnings, $60 million in restructuring, $18 million in cost of products sold and $43 million in other (income) expense, net. Restructuring charges of approximately $2.1 billion have been recorded since the restructuring was announced.

See Note 12 to the Consolidated Financial Statements for additional details related to the restructuring.

Provision for Taxes on Income

The worldwide effective income tax rate for the fiscal nine months of 2022 was 17.7% in 2022 and 10.0% in 2021. The Company will continue to incur additional international tax related expenses until the legal separation of the Consumer Health business.

For discussion related to the fiscal nine months of 2022 provision for taxes refer to Note 5 to the Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash and cash equivalents were $11.4 billion at the end of the fiscal third quarter of 2022 as compared with $14.5 billion at the end of fiscal year 2021. The primary sources and uses of cash that contributed to the $3.1 billion decrease were:

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(Dollars In Billions)
$	14.5		Q4 2021 Cash and cash equivalents balance
15.8			cash generated from operating activities
(8.0)			net cash used by investing activities
(10.6)			net cash used by financing activities
(0.3)			effect of exchange rate and rounding
$	11.4		Q3 2022 Cash and cash equivalents balance

In addition, the Company had $22.7 billion in marketable securities at the end of the fiscal third quarter of 2022 and $17.1 billion at the end of fiscal year 2021.

Cash flow from operations of $15.8 billion was the result of:

(Dollars In Billions)
$	14.4		Net Earnings
4.2			non-cash expenses and other adjustments primarily for depreciation and amortization, stock-based compensation and asset write-downs partially offset by the deferred tax provision, net gain on sale of assets/businesses and credit losses and accounts receivable allowances
(3.5)			an increase in accounts receivable and inventories
0.1			an increase in accounts payable and accrued liabilities
4.6			a decrease in other current and non-current assets
(4.0)			a decrease in other current and non-current liabilities
$	15.8		Cash Flow from operations

Investing activities use of $8.0 billion of cash was primarily used for:

(Dollars In Billions)
$	(2.4)		additions to property, plant and equipment
0.3			proceeds from the disposal of assets/businesses, net
(0.5)			acquisitions, net of cash acquired and other
(4.8)			net purchases of investments
(0.3)			credit support agreements activity, net
$	(0.3)		Other and rounding
$	(8.0)		Net cash used for investing activities

Financing activities use of $10.6 billion of cash was primarily used for:

(Dollars In Billions)
$	(8.7)		dividends to shareholders
(4.7)			repurchase of common stock
0.2			net proceeds from short and long term debt
0.9			proceeds from stock options exercised/employee withholding tax on stock awards, net
1.7			credit support agreements activity, net
0.0			other and rounding
$	(10.6)		Net cash used for financing activities

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The Company has access to substantial sources of funds at numerous banks worldwide. In September 2022, the Company secured a new 364-day Credit Facility. Total credit available to the Company approximates $10 billion, which expires on September 7, 2023. Interest charged on borrowings under the credit line agreement is based on either Term Secured Overnight Financing Rate (SOFR) Reference Rate or other applicable market rates as allowed under the terms of the agreement, plus applicable margins. Commitment fees under the agreement are not material.

As of October 2, 2022, the Company's cash, cash equivalents and marketable securities was approximately $34.1 billion and approximately $32.0 billion of notes payable and long-term debt for a net cash position of $2.1 billion as compared to the prior year net debt position of $2.9 billion. Considering recent market conditions and the on-going COVID-19 pandemic, the Company has re-evaluated its operating cash flows and liquidity profile and does not foresee any significant incremental risk. The Company anticipates that operating cash flows, the ability to raise funds from external sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will continue to provide sufficient resources to fund operating needs, including the Company's approximate $0.5 billion in contractual supply commitments associated with its development of the COVID-19 vaccine, the remaining balance to be paid on the agreement to settle opioid litigation for approximately $2.8 billion and the establishment of the $2.0 billion trust for talc related liabilities (See Note 11 to the Consolidated Financial Statements for additional details). In addition, the Company monitors the global capital markets on an ongoing basis and from time to time may raise capital when market conditions are favorable.

On September 14, 2022, the Company announced that its Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $5.0 billion of the Company's Common Stock. Share repurchases may be made at management’s discretion from time to time on the open market or through privately negotiated transactions. The repurchase program has no time limit and may be suspended for periods or discontinued at any time. Any shares acquired will be available for general corporate purposes. The Company intends to finance the share repurchase program through available cash. Through September 30, 2022, $2.0 billion has been repurchased under the program.

In the fiscal nine months of 2022, the Company paid approximately $2.1 billion to the U.S. Treasury which included $0.8 billion related to the current installment due on foreign undistributed earnings as part of the TCJA charge (see Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2022) and $1.3 billion primarily related to the normal estimated payments for the fiscal nine months of 2022.

During the fiscal third quarter ended October 2, 2022, the Company sold all of its shares in argenx SE for proceeds of $0.6 billion.

Dividends

On July 18, 2022, the Board of Directors declared a regular cash dividend of $1.13 per share, payable on September 6, 2022 to shareholders of record as of August 23, 2022. The Company expects to continue the practice of paying regular quarterly cash dividends.

On October 19, 2022, the Board of Directors declared a regular cash dividend of $1.13 per share, payable on December 6, 2022 to shareholders of record as of November 22, 2022.

OTHER INFORMATION

New Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements for new accounting pronouncements.

Economic and Market Factors

COVID-19 considerations and business continuity

The Company has considered various internal and external factors in assessing the potential impact of COVID-19 on its business and financial results based upon information available at this time, as follows:

• Operating Model: The Company has a diversified business model across the healthcare industry with flexibility designed into its manufacturing, research and development clinical operations and commercial capabilities.

• Supply Chain: The Company continues to leverage its global manufacturing footprint and dual-source capabilities while closely monitoring and maintaining critical inventory at major distribution centers away from high-risk areas to ensure adequate and effective distribution.

• Business Continuity: The robust, active business continuity plans across the Company's network have been instrumental in preparing the Company for events like COVID-19 and the ability to meet the majority of patient and consumer needs remains uninterrupted.

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• Workforce: The Company has put procedures in place to protect its essential workforce in manufacturing, distribution, commercial and research operations while ensuring appropriate remote working protocols have been established for other employees.

• Liquidity: The Company's high-quality credit rating allows the Company superior access to the financial capital markets for the foreseeable future.

• Domestic and Foreign Legislation: The Company will continue to assess and evaluate the on-going global legislative efforts to combat the COVID-19 impact on economies and the sectors in which it participates. Currently, the recent legislative acts put in place are not expected to have a material impact on the Company’s operations.

In fiscal 2021 and 2020, the Company entered into a series of contract manufacturing arrangements for vaccine production with third party contract manufacturing organizations. These arrangements provide the Company with future supplemental commercial capacity for vaccine production and potentially transferable rights to such production if capacity is not required. In the fiscal third quarter of 2022, amounts paid for services to be delivered and contractually obligated to be paid to these contract manufacturing organizations of approximately $0.5 billion are reflected in the prepaid expenses and other and the accrued liabilities accounts in the Company's consolidated balance sheet. Additionally, the Company has entered into certain vaccine development cost sharing arrangements with government related organizations.

Based on the global progress on vaccine development and distribution as well as the amount of existing global supply, the Company is modifying its COVID-19 vaccine research programs and manufacturing capacity to levels that meet all customer contractual commitments which will result in incremental costs for the year. The Company continues to evaluate the global demand for the COVID-19 vaccine and its related supply.

The Company continues to evaluate and monitor both its internal and external supply arrangements. The Company has established a global vaccine supply network, where, in addition to its internal manufacturing site in Leiden, the Netherlands, ten other manufacturing sites have been involved in the production of the vaccine across different countries and continents. The Company does not believe that a disruption relating to vaccine manufacturing, or the resulting delay would have a material financial impact on the Company’s consolidated financial statements or results.

Russia-Ukraine War

Although the long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time, the financial impact of the conflict in the fiscal third quarter and nine months of 2022, including accounts receivable or inventory reserves, was not material. As of both the 2021 fiscal year ending January 2, 2022, and the fiscal third quarter ending October 2, 2022, the business of the Company’s Ukraine subsidiaries represented less than 1% of the Company’s consolidated assets and revenues. As of both the 2021 fiscal year ending January 2, 2022, and the fiscal third quarter ending October 2, 2022, the business of the Company’s Russian subsidiaries represented less than 1% of the Company’s consolidated assets and represented 1% of revenues.

In early March, the Company took steps to suspend all advertising, enrollment in clinical trials, and any additional investment in Russia. Additionally, at the end of March, the Company made the decision to suspend supply of personal care products in Russia. The Company continued to supply its other products throughout the third quarter as patients rely on many of the products for healthcare purposes.

The Company operates in certain countries where the economic conditions continue to present significant challenges. The Company continues to monitor these situations and take appropriate actions. Inflation rates and currency exchange rates continue to have an effect on worldwide economies and, consequently, on the way the Company operates. The Company has accounted for operations in Venezuela and Argentina as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%. Beginning in the fiscal second quarter of 2022, the Company accounted for operations in Turkey as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%. This did not have a material impact on the Company's results in the period. In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and periodic price increases.

Governments around the world consider various proposals to make changes to tax laws, which may include increasing or decreasing existing statutory tax rates. In connection with various government initiatives, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. A change in statutory tax rate in any country would result in the revaluation of the Company’s deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change would result in an expense or benefit recorded to the Company’s Consolidated Statement of Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to the statutory tax rate may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted.

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

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

The Company also operates in an environment increasingly hostile to intellectual property rights. Firms have filed Abbreviated New Drug Applications or Biosimilar Biological Product Applications with the FDA or otherwise challenged the coverage and/or validity of the Company's patents, seeking to market generic or biosimilar forms of many of the Company’s key pharmaceutical products prior to expiration of the applicable patents covering those products. In the event the Company is not successful in defending the patent claims challenged in the resulting lawsuits, generic or biosimilar versions of the products at issue will be introduced to the market, resulting in the potential for substantial market share and revenue losses for those products, and which may result in a non-cash impairment charge in any associated intangible asset. There is also a risk that one or more competitors could launch a generic or biosimilar version of the product at issue following regulatory approval even though one or more valid patents are in place.