Johnson & Johnson 10-Q 2024-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

for the quarterly period ended June 30, 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 July 19, 2024, 2,407,243,667 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 realize the anticipated benefits from the separation of Kenvue Inc.

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 six months of 2024, worldwide sales were $43.8 billion, a total increase of 3.3%, including an operational (which excludes translational currency) increase of 5.2% as compared to 2023 fiscal six months sales of $42.4 billion. Currency fluctuations had a negative impact of 1.9% for the fiscal six months of 2024. In the fiscal six months of 2024, acquisitions and divestitures had no net impact on the worldwide operational sales growth. In the fiscal six months of 2024, the impact of the Covid-19 Vaccine sales decline on the worldwide operational sales was a negative 2.2%.

Sales by U.S. companies were $24.2 billion in the fiscal six months of 2024, which represented an increase of 7.8% as compared to the prior year. In the fiscal six months of 2024, acquisitions and divestitures had no net impact on the U.S. operational sales growth. Sales by international companies were $19.6 billion, a decrease of 1.7%, including an operational increase of 2.4%, offset by a negative currency impact of 4.1% as compared to the fiscal six months sales of 2023. In the fiscal six months of 2024, the net impact of acquisitions and divestitures on the international operational sales growth was a negative 0.1%. In the fiscal six months of 2024, the impact of the Covid-19 Vaccine sales decline on the international operational sales was a negative 4.5%.

In the fiscal six months of 2024, sales by companies in Europe experienced a decline of 3.2%, which included an operational decline of 2.4% and a negative currency impact of 0.8%. In the fiscal six months of 2024, the impact of the Covid-19 Vaccine sales decline on the European region operational sales was a negative 8.4%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved growth of 8.8%, which included an operational increase of 21.9%, and a negative currency impact of 13.1%. Sales by companies in the Asia-Pacific, Africa region experienced a decline of 2.6%, including an operational increase of 3.4% offset by a negative currency impact of 6.0%.

Fiscal six months 2024 sales by geographic region (in billions)

Fiscal six months 2024 sales by segment (in billions)

Note: values may have been rounded

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For the fiscal second quarter of 2024, worldwide sales were $22.4 billion, a total increase of 4.3%, which included operational growth of 6.6% and a negative currency impact of 2.3% as compared to 2023 fiscal second quarter sales of $21.5 billion. In the fiscal second quarter of 2024, the net impact of acquisitions and divestitures on worldwide operational sales growth was a positive 0.1%. In the fiscal second quarter of 2024, the impact of the Covid-19 Vaccine sales decline on the worldwide operational sales was a negative 0.6%.

Sales by U.S. companies were $12.6 billion in the fiscal second quarter of 2024, which represented an increase of 7.8% as compared to the prior year. In the fiscal second quarter of 2024, the net impact of acquisitions and divestitures on the U.S. operational sales growth was a positive 0.2%. Sales by international companies were $9.9 billion, a total increase of 0.2%, which included operational growth of 5.1% and a negative currency impact of 4.9%. In the fiscal second quarter of 2024, the net impact of acquisitions and divestitures on international operational sales growth was a negative 0.2%. In the fiscal second quarter of 2024, the impact of the Covid-19 Vaccine sales decline on the international operational sales was a negative 1.3%.

In the fiscal second quarter of 2024, sales by companies in Europe achieved growth of 1.6%, which included a operational growth of 3.4% and a negative currency impact of 1.8%. In the fiscal second quarter of 2024, the impact of the Covid-19 Vaccine sales decline on the European region operational sales was a negative 2.6%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved growth of 6.7%, including operational growth of 22.6% and a negative currency impact of 15.9%. Sales by companies in the Asia-Pacific, Africa region experienced a decline of 4.0%, which included operational growth of 1.9% offset by a negative currency impact of 5.9%.

Q2 2024 Sales by Geographic Region (in billions)

Q2 2024 Sales by Segment (in billions)

Note: values may have been rounded

Analysis of sales by business segments

Innovative Medicine

Innovative Medicine segment sales in the fiscal six months of 2024 were $28.1 billion, an increase of 3.3% as compared to the same period a year ago, with an operational increase of 5.2% and a negative currency impact of 1.9%. In the fiscal six months of 2024, the impact of the Covid-19 Vaccine sales decline on the Innovative Medicine segment operational sales was a negative 3.4%. U.S. Innovative Medicine sales increased 8.6% as compared to the same period a year ago. International Innovative Medicine sales decreased by 3.0%, including operational growth of 1.0% offset by a negative currency impact of 4.0%. In the fiscal six months of 2024, the impact of the Covid-19 Vaccine sales decline on the international Innovative Medicine segment operational sales was a negative 7.5%. In the fiscal six months of 2024, the net impact of acquisitions and divestitures on the Innovative Medicine segment operational sales growth was a negative 0.1%.

Major Innovative Medicine therapeutic area sales — Fiscal Six Months Ended

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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 second 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 second quarter.

(1)During the fiscal second quarter of 2024, the Company repurchased an aggregate of 921,524 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 second 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.