Johnson & Johnson 10-Q 2024-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

for the quarterly period ended March 31, 2024

or

Commission file number 1-3215

Johnson & Johnson

(Exact name of registrant as specified in its charter)

One Johnson & Johnson Plaza

New Brunswick, New Jersey 08933

(Address of principal executive offices)

Registrant’s telephone number, including area code (732) 524-0400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On April 25, 2024, 2,406,679,183 shares of Common Stock, $1.00 par value, were outstanding.

JOHNSON & JOHNSON AND SUBSIDIARIES

Table of contents

Cautionary note regarding forward-looking statements

This Quarterly Report on Form 10-Q and Johnson & Johnson’s other publicly available documents contain “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Management and representatives of Johnson & Johnson and its subsidiaries (the Company) also may from time to time make forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future. Forward-looking statements may be identified by the use of words such as “plans,” “expects,” “will,” “anticipates,” “estimates,” and other words of similar meaning in conjunction with, among other things: discussions of future operations, expected operating results, financial performance; impact of planned acquisitions and dispositions; impact and timing of restructuring initiatives including associated cost savings and other benefits; the Company’s strategy for growth; product development activities; regulatory approvals; market position and expenditures.

Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of the Company’s control. Investors should realize that if underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, the Company’s actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements. Investors are therefore cautioned not to rely on these forward-looking statements. Risks and uncertainties include, but are not limited to:

Risks related to product development, market success and competition

• Challenges and uncertainties inherent in innovation and development of new and improved products and technologies on which the Company’s continued growth and success depend, including uncertainty of clinical outcomes, additional analysis of existing clinical data, obtaining regulatory approvals, health plan coverage and customer access, and initial and continued commercial success;

• Challenges to the Company’s ability to obtain and protect adequate patent and other intellectual property rights for new and existing products and technologies in the United States and other important markets;

• The impact of patent expirations, typically followed by the introduction of competing generic, biosimilar or other products and resulting revenue and market share losses;

• Increasingly aggressive and frequent challenges to the Company’s patents by competitors and others seeking to launch competing generic, biosimilar or other products and increased receptivity of courts, the United States Patent and Trademark Office and other decision makers to such challenges, potentially resulting in loss of market exclusivity and rapid decline in sales for the relevant product sooner than expected;

• Competition in research and development of new and improved products, processes and technologies, which can result in product and process obsolescence;

• Competition to reach agreement with third parties for collaboration, licensing, development and marketing agreements for products and technologies;

• Competition based on cost-effectiveness, product performance, technological advances and patents attained by competitors; and

• Allegations that the Company’s products infringe the patents and other intellectual property rights of third parties, which could adversely affect the Company’s ability to sell the products in question and require the payment of money damages and future royalties.

Risks related to product liability, litigation and regulatory activity

• Product efficacy or safety concerns, whether or not based on scientific evidence, potentially resulting in product withdrawals, recalls, regulatory action on the part of the United States Food and Drug Administration (U.S. FDA) (or international counterparts), declining sales, reputational damage, increased litigation expense and share price impact;

• The impact, including declining sales and reputational damage, of significant litigation or government action adverse to the Company, including product liability claims and allegations related to pharmaceutical marketing practices and contracting strategies;

• The impact of an adverse judgment or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, product liability, personal injury claims, securities class actions, government investigations, employment and other legal proceedings;

• Increased scrutiny of the healthcare industry by government agencies and state attorneys general resulting in investigations and prosecutions, which carry the risk of significant civil and criminal penalties, including, but not limited to, debarment from government business;

• Failure to meet compliance obligations in compliance agreements with governments or government agencies, which could result in significant sanctions;

• Potential changes to applicable laws and regulations affecting United States and international operations, including relating to: approval of new products; licensing and patent rights; sales and promotion of healthcare products; access to, and reimbursement and pricing for, healthcare products and services; environmental protection; and sourcing of raw materials;

• Compliance with local regulations and laws that may restrict the Company’s ability to manufacture or sell its products in relevant markets, including requirements to comply with medical device reporting regulations and other requirements such as the European Union’s Medical Devices Regulation;

• Changes in domestic and international tax laws and regulations, increasing audit scrutiny by tax authorities around the world and exposures to additional tax liabilities potentially in excess of existing reserves; and

• The issuance of new or revised accounting standards by the Financial Accounting Standards Board and regulations by the Securities and Exchange Commission.

Risks related to healthcare market trends and the realization of benefits from the Company's strategic initiatives

• Pricing pressures resulting from trends toward healthcare cost containment, including the continued consolidation among healthcare providers and other market participants, trends toward managed care, the shift toward governments increasingly becoming the primary payors of healthcare expenses, significant new entrants to the healthcare markets seeking to reduce costs and government pressure on companies to voluntarily reduce costs and price increases;

• Restricted spending patterns of individual, institutional and governmental purchasers of healthcare products and services due to economic hardship and budgetary constraints;

• Challenges to the Company’s ability to realize its strategy for growth including through externally sourced innovations, such as development collaborations, strategic acquisitions, licensing and marketing agreements, and the potential heightened costs of any such external arrangements due to competitive pressures;

• The potential that the expected strategic benefits and opportunities from any planned or completed acquisition or divestiture by the Company may not be realized or may take longer to realize than expected;

• The potential that the expected benefits and opportunities related to past and ongoing restructuring actions may not be realized or may take longer to realize than expected;

• The Company’s ability to divest the Company’s remaining ownership interest in Kenvue Inc. (Kenvue) and realize the anticipated benefits from the separation; and

• Kenvue's ability to succeed as a standalone publicly traded company.

Risks related to economic conditions, financial markets and operating internationally

• The risks associated with global operations on the Company and its customers and suppliers, including foreign governments in countries in which the Company operates;

• The impact of inflation and fluctuations in interest rates and currency exchange rates and the potential effect of such fluctuations on revenues, expenses and resulting margins;

• Potential changes in export/import and trade laws, regulations and policies of the United States and other countries, including any increased trade restrictions or tariffs and potential drug reimportation legislation;

• The impact on international operations from financial instability in international economies, sovereign risk, possible imposition of governmental controls and restrictive economic policies, and unstable international governments and legal systems;

• The impact of global public health crises and pandemics;

• Changes to global climate, extreme weather and natural disasters that could affect demand for the Company’s products and services, cause disruptions in manufacturing and distribution networks, alter the availability of goods and services within the supply chain, and affect the overall design and integrity of the Company’s products and operations;

• The impact of global or economic changes or events, including global tensions and war; and

• The impact of armed conflicts and terrorist attacks in the United States and other parts of the world, including social and economic disruptions and instability of financial and other markets.

Risks related to supply chain and operations

• Difficulties and delays in manufacturing, internally, through third-party providers or otherwise within the supply chain, that may lead to voluntary or involuntary business interruptions or shutdowns, product shortages, withdrawals or suspensions of products from the market, and potential regulatory action;

• Interruptions and breaches of the Company’s information technology systems or those of the Company’s vendors, which could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action;

• Reliance on global supply chains and production and distribution processes that are complex and subject to increasing regulatory requirements that may adversely affect supply, sourcing and pricing of materials used in the Company’s products; and

• The potential that the expected benefits and opportunities related to restructuring actions may not be realized or may take longer to realize than expected, including due to any required approvals from applicable regulatory authorities.

Investors also should carefully read the Risk Factors described in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, for a description of certain risks that could, among other things, cause the Company’s actual results to differ materially from those expressed in its forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above to be a complete statement of all potential risks and uncertainties. The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.

Part I — Financial information

Johnson & Johnson and subsidiaries consolidated balance sheets

(Unaudited; Dollars in Millions Except Share and Per Share Data)

See Notes to Consolidated Financial Statements

Johnson & Johnson and subsidiaries consolidated statements of earnings

(Unaudited; Dollars & Shares in Millions Except Per Share Amounts)

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Results of operations

Sales to customers

Analysis of consolidated sales

For the fiscal first quarter of 2024, worldwide sales were $21.4 billion, a total increase of 2.3%, which included operational growth of 3.9% and a negative currency impact of 1.6% as compared to 2023 fiscal first quarter sales of $20.9 billion. In the fiscal first quarter of 2024, the net impact of acquisitions and divestitures on worldwide operational sales growth was a negative 0.1%. In the fiscal first quarter of 2024, the impact of the Covid-19 Vaccine sales decline on the worldwide operational sales was a negative 3.7%

Sales by U.S. companies were $11.6 billion in the fiscal first quarter of 2024, which represented an increase of 7.8% as compared to the prior year. In the fiscal first quarter of 2024, the net impact of acquisitions and divestitures on the U.S. operational sales growth was a negative 0.1%. Sales by international companies were $9.8 billion, a total decrease of 3.4%, which included an operational decline of 0.3% and a negative currency impact of 3.1%. In the fiscal first quarter of 2024, acquisitions and divestitures had no impact on international operational sales. In the fiscal first quarter of 2024, the impact of the Covid-19 Vaccine sales decline on the international operational sales was a negative 7.7%

In the fiscal first quarter of 2024, sales by companies in Europe experienced a decline of 7.6%, which included an operational decline of 7.7% and a positive currency impact of 0.1%. In the fiscal first quarter of 2024, the impact of the Covid-19 Vaccine sales decline on the European region operational sales was a negative 13.7%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved growth of 11.0%, including operational growth of 21.3% and a negative currency impact of 10.3%. Sales by companies in the Asia-Pacific, Africa region experienced a decline of 1.1%, which included operational growth of 5.0% offset by a negative currency impact of 6.1%.

Q1 2024 Sales by Geographic Region (in billions)

Q1 2024 Sales by Segment (in billions)

Note: values may have been rounded

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Analysis of sales by business segments

Innovative Medicine

Innovative Medicine segment sales in the fiscal first quarter of 2024 were $13.6 billion, an increase of 1.1% as compared to the same period a year ago, including an operational increase of 2.5% and a negative currency impact of 1.4%. In the fiscal first quarter of 2024, the impact of the Covid-19 Vaccine sales decline on the Innovative Medicine segment operational sales was a negative 5.8%. U.S. Innovative Medicine sales increased 8.4% as compared to the same period a year ago. International Innovative Medicine sales decreased by 6.9%, including an operational decline of 4.0% and a negative currency impact of 2.9%. In the fiscal first quarter of 2024, the impact of the Covid-19 Vaccine sales decline on the international Innovative Medicine operational sales was a negative 12.3%. In the fiscal first quarter of 2024, acquisitions and divestitures had no impact on the Innovative Medicine segment operational sales growth.

Major Innovative Medicine therapeutic area sales — Fiscal First Quarter Ended

• Percentage greater than 100% or not meaningful

(1)Previously in Other Oncology

Immunology products achieved operational growth of 4.6% as compared to the same period a year ago. Sales of STELARA (ustekinumab) were driven by market growth and share gains in Inflammatory Bowel Disease partially offset by unfavorable patient mix. Growth of TREMFYA (guselkumab) was due to market growth and share gains. Additionally, SIMPONI/SIMPONI ARIA growth was driven by growth outside the U.S. Lower sales of REMICADE (infliximab) were due to biosimilar competition.

Sales of STELARA in the United States were approximately $7.0 billion in fiscal 2023. Third parties have filed abbreviated Biologics License Applications with the FDA seeking approval to market biosimilar versions of STELARA. The Company has settled certain litigation under the Biosimilar Price Competition and Innovation Act of 2009. As a result of these settlements and other agreements with separate third parties, the Company does not anticipate the launch of a biosimilar version of STELARA until January 1, 2025 in the United States. The latest expiring European composition of matter patent (Supplementary Protection Certificate) expires in 2024 in most European Union Member States and the United Kingdom.

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.

Infectious disease products experienced an operational decline of 48.3% as compared to the same period a year ago primarily driven by a decline in COVID-19 vaccine revenue. The Company expects an insignificant amount of COVID-19 vaccine revenue in fiscal 2024.

Neuroscience products achieved operational sales growth of 2.2% as compared to the same period a year ago. The growth of SPRAVATO (esketamine) was driven by increased physician and patient demand. Growth was partially offset by declines in RISPERDAL CONSTA.

Oncology products achieved operational sales growth of 18.8% as compared to the same period a year ago. Strong sales of DARZALEX (daratumumab) were driven by continued share gains in all regions. Growth of ERLEADA (apalutamide) was due to continued share gains and market growth. Increased sales of CARVYKTI (ciltacabtagene autoleucel) were driven by continued share gains, capacity expansion and manufacturing efficiencies. Additionally, sales from the ongoing launch of TECVAYLI (teclistamab-cqyv) and the launch of TALVEY (talquetamab) and RYBREVANT (amivantamab) in Other Oncology contributed to the growth. Growth was partially offset by ZYTIGA (abiraterone acetate) due to loss of exclusivity and IMBRUVICA (ibrutinib) declines due to global competitive pressures.

Pulmonary Hypertension achieved operational sales growth of 22.4% as compared to the same period a year ago. Sales growth was due to favorable patient mix, market growth and share gains from UPTRAVI (selexipag) and OPSUMIT (macitentan).

Cardiovascular / Metabolism / Other products experienced an operational decline of 10.5% as compared to the same period a year ago. The decline of XARELTO (rivaroxaban) sales was primarily driven by unfavorable patient mix and share loss.

The Company maintains a policy that no end customer will be permitted direct delivery of product to a location other than the billing location. This policy impacts contract pharmacy transactions involving non-grantee 340B covered entities for most of the Company’s drugs, subject to multiple exceptions. Both grantee and non-grantee covered entities can maintain certain contract pharmacy arrangements under policy exceptions. The Company has been and 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.

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MedTech

The MedTech segment sales in the fiscal first quarter of 2024 were $7.8 billion, an increase of 4.5% as compared to the same period a year ago, which included operational growth of 6.3% and a negative currency impact of 1.8%. U.S. MedTech sales increased 6.6%. International MedTech sales increased by 2.4%, including operational growth of 6.1% and a negative currency impact of 3.7%. In the fiscal first quarter of 2024, the net impact of acquisitions and divestitures on the MedTech segment operational sales growth was a negative 0.2%.

Major MedTech franchise sales — Fiscal First Quarter Ended

• Percentage greater than 100% or not meaningful

(1) Previously referred to as Interventional Solutions

The Surgery franchise achieved operational sales growth of 1.9% as compared to the prior year fiscal first quarter. The decline in Advanced Surgery was primarily driven by competitive pressures and volume-based procurement impacts in Endocutters and Energy partially offset by Biosurgery global procedure growth, strength of the portfolio and commercial execution as well as uptake of new products in Endocutters and Energy. The operational growth in General Surgery was primarily driven by increased procedures coupled with technology penetration and upgrades within the differentiated Wound Closure portfolio. The growth was partially offset by fewer selling days.

The Orthopaedics franchise achieved operational sales growth of 4.8% as compared to the prior year fiscal first quarter. The fiscal first quarter of 2024, includes a one-time revenue recognition timing change related to certain products across all Orthopaedic platforms in the U.S. which positively impacted the worldwide Orthopaedics franchise growth by approximately 3.0%. The operational growth in Hips reflects global procedure growth, continued strength of the portfolio and the aforementioned revenue recognition timing change partially offset by Russia Sanctions and one less selling day. The operational growth in Knees was primarily driven by procedures, continued strength of the ATTUNE portfolio, pull through related to the VELYS Robotic assisted solution, the aforementioned revenue recognition timing change and timing of tenders outside the U.S. partially offset by one less selling day. The operational growth in Trauma was driven by the aforementioned revenue recognition timing change and the continued adoption of recently launched products. This was partially offset by U.S. competitive challenges, one less selling day, weather-related softness in core trauma and volume-based procurement impacts. The operational growth in Spine, Sports & Other was primarily driven by growth in Digital Solutions, Craniomaxillofacial, Shoulders, and the aforementioned revenue recognition timing change partially offset by Spine competitive pressures and one less selling day.

The Cardiovascular franchise (previously referred to as Interventional Solutions) achieved operational sales growth of 22.5% as compared to the prior year fiscal first quarter. Electrophysiology grew by double digits due to global procedure growth, new product uptake, commercial execution and Asia Pacific distributor inventory dynamics partially offset by the impacts of volume-

based procurement in China and fewer selling days. Abiomed sales reflect the strength of all major commercialized regions driven by continued strong adoption of Impella 5.5 and Impella RP.

The Vision franchise experienced an operational sales decline of 1.4% as compared to the prior year fiscal first quarter. The Contact Lenses/Other operational decline was primarily driven by U.S. stocking dynamics, the impact of the Blink divestiture in the fiscal third quarter of 2023 and economic pressures in Asia Pacific partially offset by the continued strong performance in the ACUVUE OASYS 1-Day family of products (including recent launches) and price actions. The Surgical operational growth was primarily driven by the continued strength of recent innovations and commercial execution partially offset by preparation for volume-based procurement implementation in China and refractive softness in the U.S.

Analysis of consolidated earnings before provision for taxes on income

Consolidated earnings before provision for taxes on income for the fiscal first quarter of 2024 was $3.7 billion representing 17.4% of sales as compared to a loss of $1.3 billion in the fiscal first quarter of 2023, representing (6.2)% of sales.

Cost of products sold

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

Q1 2024 versus Q1 2023

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

• Lower one-time COVID-19 vaccine supply network related exit costs in 2024 ($0 in 2024 versus $0.2 billion 2023) and favorable patient mix in the Innovative Medicine business

partially offset by

• Macroeconomic factors and unfavorable currency in the MedTech business

The intangible asset amortization expense included in cost of products sold for the fiscal first quarters of 2024 and 2023 was $1.1 billion in both periods.

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Selling, marketing and administrative expenses

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

Q1 2024 versus Q1 2023

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

• Timing of brand marketing investment and administrative costs in the Innovative Medicine business

Research and development expense

Research and development expense by segment of business was as follows:

Q1 2024 versus Q1 2023

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

• Increased investments in the Innovative Medicine business

offset by

• Phasing of expenses in the MedTech business

In-process research and development (IPR&D) impairments

In the fiscal first quarter of 2023, the Company recorded a charge of approximately $0.1 billion associated with the IPR&D acquired with Pulsar Vascular in 2016.

Interest (income) expense

Interest income in the fiscal first quarter of 2024 was $364 million as compared to $198 million in the fiscal first quarter of 2023 primarily due to higher rates of interest earned on cash balances. Interest expense in the fiscal first quarter of 2024 was $155 million as compared to $212 million in the same period a year ago primarily due to a lower average debt balance. The balance of cash, cash equivalents and current marketable securities was $26.2 billion at the end of the fiscal first quarter of 2024 as compared to $32.3 billion (including $7.7 billion of restricted cash related to Kenvue) at the end of the fiscal first quarter of 2023. The Company’s debt position was $33.6 billion as of March 31, 2024, as compared to $52.9 billion the same period a year ago (including $7.7 billion related to Kenvue debt).

Other (income) expense, net*

Q1 2024 versus Q1 2023

Other (income) expense, net for the fiscal first quarter of 2024 reflected less expense as compared to the prior year primarily due to the following:

(1)The fiscal first quarters of 2024 and 2023 include charges for talc matters

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

(1)Amounts not allocated to segments include interest (income) expense, certain litigation expenses and general corporate (income) expense. The fiscal first quarters of 2024 and 2023 include charges for talc matters of $2.7 billion and $6.9 billion, respectively.

Innovative Medicine segment

The Innovative Medicine segment income before tax as a percent of sales in the fiscal first quarter of 2024 was 36.6% versus 32.8% for the same period a year ago. The increase in the income before tax as a percent of sales for the fiscal first quarter of 2024 as compared to the prior year was primarily driven by the following:

• One-time COVID-19 Vaccine related exit costs of $0.4 billion in 2023

• Favorable patient mix in Cost of products sold

partially offset by

• An increase in brand marketing investment

• Higher administrative costs

• Higher investments in research and development

MedTech segment

The MedTech segment income before tax as a percent of sales in the fiscal first quarter of 2024 was 19.4% versus 18.8% for the same period a year ago. The increase in the income before tax as a percent of sales for the fiscal first quarter of 2024 as compared to the prior year was primarily driven by the following:

• An IPR&D charge in 2023 of approximately $0.1 billion related to the Pulsar Vascular acquisition in the fiscal year 2016

• Research and development expense phasing

partially offset by

• Macroeconomic factors and unfavorable currency in Cost of products sold

Restructuring

In the fiscal year 2023, the Company completed a prioritization of its research and development (R&D) investment within the Innovative Medicine segment to focus on the most promising medicines with the greatest benefit to patients. This resulted in the exit of certain programs within therapeutic areas. The R&D program exits are primarily in infectious diseases and vaccines including the discontinuation of its respiratory syncytial virus (RSV) adult vaccine program, hepatitis and HIV development. The pre-tax restructuring charge of approximately $0.1 billion in both the fiscal first quarters of 2024 and 2023, included the termination of partnered and non-partnered program costs and asset impairments. Total project costs of approximately $0.6 billion have been recorded since the restructuring was announced.

In the fiscal year 2023, the Company initiated a restructuring program of its Orthopaedics franchise within its MedTech segment to streamline operations by exiting certain markets, product lines and distribution network arrangements. The pre-tax restructuring expense of $27 million in the fiscal first quarter of 2024, of which $20 million was recorded in Restructuring and $7 million was recorded in Cost of products sold on the Consolidated Statement of Earnings, primarily included costs related to market and product exits. Total project costs of approximately $0.3 billion have been recorded since the restructuring was announced.

Provision for taxes on income

The worldwide effective income tax rate for the fiscal three months was 12.4% in 2024 and 61.8% in 2023.

On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework that was supported by over 130 countries worldwide. Several EU and non-EU countries have enacted Pillar Two legislation with an initial effective date of January 1, 2024, with other aspects of the law effective in 2025 or later. The Company is estimating that as result of this legislation the 2024 effective tax rate will increase by 1.5% (150 basis points) compared to fiscal 2023. Further legislation, guidance and regulations that may be issued in fiscal 2024, as well as other business events, may impact this estimate.

For further details related to the 2024 provision for taxes refer to Note 5 to the Consolidated Financial Statements.

Liquidity and capital resources

Acquisitions (net of cash acquired)

Proceeds from the disposal of assets/businesses, net

Dividends to shareholders

Cash flows

Cash and cash equivalents were $25.5 billion at the end of the fiscal first quarter of 2024 as compared with $21.9 billion at the end of fiscal year 2023. The primary sources and uses of cash that contributed to the $3.6 billion increase were:

In addition, the Company had $0.7 billion in marketable securities at the end of the fiscal first quarter of 2024 and $1.1 billion at the end of fiscal year 2023.

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Cash flow from operations of $3.7 billion was the result of:

Cash flow used by investing activities of $0.5 billion was primarily from:

Cash flow from financing activities of $0.5 billion was primarily from:

The Company has access to substantial sources of funds at numerous banks worldwide and has the ability to issue up to $20 billion in Commercial Paper. Furthermore, in September 2023, the Company secured a new 364-day Credit Facility of $10 billion (expiration on September 5, 2024) which may be used for general corporate purposes including to support our commercial paper borrowings. Interest charged on borrowings under the credit line agreement is based on either Secured Overnight Financing Rate (SOFR) Reference Rate or other applicable market rate as allowed plus applicable margins. Commitment fees under the agreement are not material.

As of March 31, 2024, the Company's cash, cash equivalents and marketable securities was approximately $26.2 billion and had approximately $33.6 billion of notes payable and long-term debt for a net debt position of $7.4 billion as compared to the prior year fiscal first quarter net debt position of $20.6 billion (which included cash of $1.7 billion and debt of $7.7 billion related to Kenvue). The Company anticipates that operating cash flows, the ability to raise funds from external sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will continue to provide sufficient resources to fund operating needs, including the Company’s remaining balance to be paid on the agreement to settle opioid litigation for approximately $2.1 billion and the approximately $11.0 billion ($13.7 billion nominal) reserve remaining for the talc settlement proposal (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.

Subsequent to March 31, 2024, the Company paid approximately $2.6 billion to the U.S. Treasury, including $2.0 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 December 31, 2023) and $0.6 billion primarily related to the normal estimated payment for the fiscal first quarter of 2024.

Dividends

On January 2, 2024, the Board of Directors declared a regular cash dividend of $1.19 per share, payable on March 5, 2024, to shareholders of record as of February 20, 2024.

On April 16, 2024, the Board of Directors declared a regular cash dividend of $1.24 per share, payable on June 4, 2024, to shareholders of record as of May 21, 2024. The Company expects to continue the practice of paying regular quarterly cash dividends.

Other information

New accounting pronouncements

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

Economic and market factors

In July 2023, Janssen Pharmaceuticals, Inc. (Janssen) filed litigation against the U.S. Department of Health and Human Services as well as the Centers for Medicare and Medicaid Services challenging the constitutionality of the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program. The litigation requests a declaration that the IRA violates Janssen’s rights under the First Amendment and the Fifth Amendment to the Constitution and therefore that Janssen is not subject to the IRA’s mandatory pricing scheme. In April 2024, Janssen appealed the district court’s denial of its summary judgment motion to the Third Circuit.

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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 first quarter of 2024, including accounts receivable or inventory reserves, was not material. As of the fiscal first quarter ending March 31, 2024, and the fiscal year ending December 31, 2023, the business of the Company’s Russian subsidiaries represented less than 1% of both Company’s consolidated assets and revenues. The Company does not maintain Ukraine subsidiaries subsequent to the Kenvue separation.

In March of 2022, the Company took steps to suspend all advertising, enrollment in clinical trials, and any additional investment in Russia. The Company continues to supply products relied upon by patients for healthcare purposes.

Conflict in the Middle East

Although the long-term implications of the conflict in the Middle East are difficult to predict at this time, the financial impact of the conflict in the fiscal first quarter of 2024, including accounts receivable or inventory reserves, was not material. As of the fiscal three months ending March 31, 2024, and the fiscal year ending December 31, 2023, the business of the Company’s Israel subsidiaries represented approximately 1% of the Company’s consolidated assets and represented less than 1% of revenues.

Other Macroeconomic Considerations

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, Argentina and Turkey as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%. 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.

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 faces regular intellectual property challenges from third parties, including generic and biosimilar manufacturers, seeking to manufacture and market generic and biosimilar versions of key pharmaceutical products prior to the expiration of the applicable patents. These challengers file Abbreviated New Drug Applications or abbreviated Biologics License Applications with the FDA or otherwise challenged the coverage and/or validity of the Company’s patents. 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 may 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 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.

There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Disclosure controls and procedures. At the end of the period covered by this report, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Joaquin Duato, Chief Executive Officer; Chairman, Executive Committee and Joseph J. Wolk, Executive Vice President, Chief Financial Officer, reviewed and participated in this evaluation. Based on this evaluation, Messrs. Duato and Wolk concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

Internal control. During the period covered by this report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company continues to monitor and assess the effectiveness of the design and operation of its disclosure controls and procedures.

The Company is implementing a multi-year, enterprise-wide initiative to integrate, simplify and standardize processes and

systems for the human resources, information technology, procurement, supply chain and finance functions. These are

enhancements to support the growth of the Company’s financial shared service capabilities and standardize financial systems.

This initiative is not in response to any identified deficiency or weakness in the Company’s internal control over financial

reporting. In response to this initiative, the Company has and will continue to align and streamline the design and operation of

its financial control environment.

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Part II — Other information

Item 1 — Legal proceedings

The information called for by this item is incorporated herein by reference to Note 11 included in Part I, Item 1, Financial Statements (unaudited) — Notes to Consolidated Financial Statements.

Item 2 — Unregistered sales of equity securities and use of proceeds

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

The following table provides information with respect to Common Stock purchases by the Company during the fiscal first quarter of 2024. Common stock purchases on the open market are made as part of a systematic plan to meet the needs of the Company's compensation programs. The repurchases below also include the stock-for-stock option exercises that settled in the fiscal first quarter.

(1)During the fiscal first quarter of 2024, the Company repurchased an aggregate of 9,324,436 shares of Johnson & Johnson Common Stock in open-market transactions, all of which were purchased as part of a systematic plan to meet the needs of the Company’s compensation programs.

Securities trading plans of Directors and Executive Officers. During the fiscal first quarter of 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408 of Regulation S-K.

Exhibit 31.1 Certification of Chief Executive Officer under Rule 13a-14(a) of the Securities Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — Filed with this document.

Exhibit 31.2 Certification of Chief Financial Officer under Rule 13a-14(a) of the Securities Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — Filed with this document.

Exhibit 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — Furnished with this document.

Exhibit 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — Furnished with this document.

Exhibit 101:

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.