J&J(JNJ) - 2025 Q2 - Quarterly Report

Registrant Information This report is Johnson & Johnson's quarterly report as of June 30, 2024, confirming all required filings and compliance, with the company designated as a large accelerated filer and its securities registered on the New York Stock Exchange - Johnson & Johnson submitted its quarterly report (Form 10-Q) as of June 30, 2024[1] - The company is designated as a Large accelerated filer[1] Registered Securities Information | Category | Trading Symbol | Registered Exchange | | :--- | :--- | :--- | | Common Stock, $1.00 par value | JNJ | New York Stock Exchange | | 5.50% Notes, due November 2024 | JNJ24BP | New York Stock Exchange | | 1.150% Notes, due November 2028 | JNJ28 | New York Stock Exchange | | 3.20% Notes, due November 2032 | JNJ32 | New York Stock Exchange | | 1.650% Notes, due May 2035 | JNJ35 | New York Stock Exchange | | 3.350% Notes, due November 2036 | JNJ36A | New York Stock Exchange | | 3.550% Notes, due November 2044 | JNJ44 | New York Stock Exchange | - As of July 19, 2024, the company had 2,407,243,667 shares of common stock, par value $1.00, outstanding[2] Cautionary Note Regarding Forward-Looking Statements Nature of Forward-Looking Statements This report contains forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, reflecting management's assumptions, views, plans, and projections on future operations, financial performance, product development, and regulatory approvals, not strictly based on historical or current facts - Forward-looking statements are not strictly based on historical or current facts, reflecting management's assumptions, views, plans, objectives, and projections for the future[7] - Investors should note that if underlying assumptions are inaccurate or if known/unknown risks and uncertainties arise, actual results may differ materially from forward-looking statements[7] Risks Related to Product Development, Market Success, and Competition The company faces multiple risks in product development, market success, and competition, including uncertainties in new product and technology innovation, patent protection challenges, competition from patent expirations, and third-party intellectual property infringement claims - New product and technology innovation and development present challenges and uncertainties, including clinical outcomes, regulatory approvals, market access, and commercial success[8] - The company faces challenges in obtaining and protecting patents and other intellectual property for new and existing products and technologies[8] - Patent expirations often lead to the introduction of generic, biosimilar, or other competing products, resulting in loss of revenue and market share[8] Risks Related to Product Liability, Litigation, and Regulatory Activity The company faces risks from product liability, significant litigation, and government actions, including product recalls, sales declines, and reputational damage due to product efficacy or safety issues, as well as potential fines and business restrictions from non-compliance with regulatory obligations and changes in laws - Product efficacy or safety issues may lead to product recalls, regulatory actions, sales declines, reputational damage, and increased litigation costs[8] - Failure to comply with compliance agreements with governments or governmental agencies may result in significant sanctions[9] - Changes in domestic and international tax laws and regulations, increased audit scrutiny, and the issuance of new accounting standards may lead to additional tax liabilities and financial impacts[9] Risks Related to Healthcare Market Trends and Realization of Benefits from Company's Strategic Initiatives The company faces pricing pressure from healthcare cost containment trends and uncertainties in realizing benefits from growth strategies, including external innovation, M&A, and divestitures, particularly that expected benefits from the Kenvue Inc. separation may not be fully achieved - Healthcare cost containment trends, including consolidation, managed care, and increased government payers, lead to pricing pressure[9] - The company faces challenges in executing its growth strategy through external innovation, strategic acquisitions, licensing, and marketing agreements[9] - The anticipated strategic benefits and opportunities from the Kenvue Inc. separation may not be realized or may take longer to achieve[9] Risks Related to Economic Conditions, Financial Markets, and International Operations The company faces risks in global operations from economic conditions, financial markets, and international political and economic instability, including inflation, interest and exchange rate fluctuations, changes in trade laws, and potential impacts of global public health crises and armed conflicts on business - Global operations face risks, including the impact of inflation, interest rate, and exchange rate fluctuations on revenue, expenses, and profit margins[9] - Changes in export/import and trade laws, regulations, and policies, including increased trade restrictions or tariffs, may affect international operations[9] - Global public health crises, climate change, extreme weather, and natural disasters may affect product demand, supply chains, and operations[9][10] Risks Related to Supply Chain and Operations The company faces supply chain and operational challenges, including manufacturing disruptions, IT system outages or breaches, reliance on global supply chains, and uncertainties in realizing restructuring benefits, all of which could lead to business interruptions, product shortages, reputational damage, and financial costs - Manufacturing difficulties and delays may lead to business interruptions, product shortages, product withdrawals or sales suspensions, and potential regulatory actions[10] - Disruptions and breaches of the company's or suppliers' information technology systems may result in reputational, competitive, operational, or other business damage, as well as financial costs and regulatory actions[10] - Reliance on complex global supply chains and increasing regulatory requirements may adversely affect material supply, procurement, and pricing[10] Part I — Financial Information Item 1 — Financial Statements Johnson & Johnson and Subsidiaries Consolidated Balance Sheets As of June 30, 2024, the company's total assets increased to $181.088 billion, an approximate 8.09% rise from December 31, 2023, with total liabilities reaching $109.550 billion and total shareholders' equity increasing to $71.538 billion, driven by significant increases in cash and cash equivalents, intangible assets, and goodwill due to acquisitions Consolidated Balance Sheet Key Data (Million USD) | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $24,878 | $21,859 | | Marketable securities | 597 | 1,068 | | Total current assets | 57,817 | 53,495 | | Property, plant and equipment, net | 19,748 | 19,898 | | Intangible assets, net | 39,725 | 34,175 | | Goodwill | 44,250 | 36,558 | | Total assets | $181,088 | $167,558 | | Total current liabilities | 53,933 | 46,282 | | Long-term debt | 31,636 | 25,881 | | Total liabilities | $109,550 | $98,784 | | Total shareholders' equity | $71,538 | $68,774 | Johnson & Johnson and Subsidiaries Consolidated Statements of Earnings (Quarterly) In Q2 2024, the company's sales increased by 4.3% year-over-year to $22.447 billion, but net earnings decreased from $5.144 billion to $4.686 billion, primarily impacted by R&D expenses, other (income) expense, net, and restructuring charges, leading to a diluted EPS decrease from $1.96 to $1.93 Consolidated Statements of Earnings Key Data (Q2 2024 vs Q2 2023, Million USD) | Indicator | June 30, 2024 | July 2, 2023 | Change Rate | | :--- | :--- | :--- | :--- | | Sales | $22,447 | $21,519 | 4.3% | | Cost of products sold | 6,869 | 6,462 | 6.3% | | Gross profit | 15,578 | 15,057 | 3.5% | | Selling, marketing and administrative expenses | 5,681 | 5,396 | 5.3% | | Research and development expenses | 3,440 | 3,703 | (7.1%) | | Earnings before tax | 5,748 | 6,306 | (8.8%) | | Provision for income taxes | 1,062 | 930 | 14.2% | | Net earnings from continuing operations | 4,686 | 5,376 | (12.8%) | | Net earnings | $4,686 | $5,144 | (8.9%) | | Diluted earnings per share | $1.93 | $1.96 | (1.5%) | Johnson & Johnson and Subsidiaries Consolidated Statements of Earnings (Six Months) For the six months ended June 30, 2024, the company's sales increased by 3.3% year-over-year to $43.830 billion, with net earnings from continuing operations significantly growing from $4.885 billion to $7.941 billion, and diluted EPS rising from $1.86 to $3.27, primarily driven by a notable improvement in other (income) expense, net, and a relatively lower provision for income taxes Consolidated Statements of Earnings Key Data (Six Months 2024 vs Six Months 2023, Million USD) | Indicator | June 30, 2024 | July 2, 2023 | Change Rate | | :--- | :--- | :--- | :--- | | Sales | $43,830 | $42,413 | 3.3% | | Cost of products sold | 13,380 | 13,149 | 1.8% | | Gross profit | 30,450 | 29,264 | 4.1% | | Selling, marketing and administrative expenses | 10,938 | 10,302 | 6.2% | | Research and development expenses | 6,982 | 7,158 | (2.5%) | | Earnings before tax | 9,462 | 5,019 | 88.5% | | Provision for income taxes | 1,521 | 134 | * | | Net earnings from continuing operations | 7,941 | 4,885 | 62.6% | | Net earnings | $7,941 | $5,076 | 56.4% | | Diluted earnings per share | $3.27 | $1.93 | 69.4% | Johnson & Johnson and Subsidiaries Consolidated Statements of Comprehensive Income For the six months ended June 30, 2024, the company's comprehensive income significantly increased to $9.215 billion from $4.360 billion in the prior year, primarily due to a shift from foreign currency translation losses to gains, alongside improvements in employee benefit plans and net changes in derivatives and hedging Consolidated Statements of Comprehensive Income Key Data (Million USD) | Indicator | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net earnings | $4,686 | $5,144 | $7,941 | $5,076 | | Other comprehensive income (loss), net of tax | (485) | (1,057) | 1,274 | (716) | | Foreign currency translation | (389) | (715) | 1,734 | (896) | | Securities: unrealized holding gains (losses) during period | (1) | 4 | 1 | 21 | | Employee benefit plans: net change | 9 | (70) | 61 | (138) | | Derivatives and hedging: net change | (104) | (276) | (522) | 297 | | Comprehensive income | $4,201 | $4,087 | $9,215 | $4,360 | - The tax effects for other comprehensive income (loss) for Q2 and six months 2024 are presented, including foreign currency translation, securities, employee benefit plans, and derivatives and hedging[21] Johnson & Johnson and Subsidiaries Consolidated Statements of Equity As of June 30, 2024, the company's total shareholders' equity increased to $71.538 billion from $68.774 billion at December 31, 2023, primarily driven by net earnings and employee compensation and stock option plans, partially offset by cash dividend payments and common stock repurchases Consolidated Statements of Equity Key Data (Q2 2024, Million USD) | Indicator | Total | Retained Earnings and Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Common Stock Issued Amount | Treasury Stock Amount | | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at March 31, 2024 | $70,020 | 153,378 | (10,768) | 3,120 | (75,710) | | Net earnings | 4,686 | 4,686 | — | — | — | | Cash dividends paid ($1.24 per share) | (2,985) | (2,985) | — | — | — | | Employee compensation and stock option plans | 438 | 281 | — | — | 157 | | Common stock repurchases | (136) | — | — | — | (136) | | Other comprehensive income (loss), net of tax | (485) | — | (485) | — | — | | Balance at June 30, 2024 | $71,538 | 155,360 | (11,253) | 3,120 | (75,689) | Consolidated Statements of Equity Key Data (Six Months 2024, Million USD) | Indicator | Total | Retained Earnings and Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Common Stock Issued Amount | Treasury Stock Amount | | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at December 31, 2023 | $68,774 | 153,843 | (12,527) | 3,120 | (75,662) | | Net earnings | 7,941 | 7,941 | — | — | — | | Cash dividends paid ($2.43 per share) | (5,854) | (5,854) | — | — | — | | Employee compensation and stock option plans | 1,015 | (570) | — | — | 1,585 | | Common stock repurchases | (1,611) | — | — | — | (1,611) | | Other | (1) | — | — | — | (1) | | Other comprehensive income (loss), net of tax | 1,274 | — | 1,274 | — | — | | Balance at June 30, 2024 | $71,538 | 155,360 | (11,253) | 3,120 | (75,689) | - In Q2 2023, the Kenvue IPO contributed $4.278 billion to the company's equity growth, including $2.470 billion in retained earnings and additional paid-in capital, and $1.260 billion in non-controlling interests[26][27] Johnson & Johnson and Subsidiaries Consolidated Statements of Cash Flows For the six months ended June 30, 2024, the company generated $9.290 billion in net cash from operating activities, used $14.151 billion in investing activities, and generated $8.090 billion in financing activities, resulting in an ending cash and cash equivalents balance of $24.878 billion Consolidated Statements of Cash Flows Key Data (Six Months 2024 vs Six Months 2023, Million USD) | Indicator | June 30, 2024 | July 2, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,290 | $7,439 | | Net cash used in investing activities | (14,151) | (461) | | Net cash provided by financing activities | 8,090 | 147 | | Effect of exchange rate changes | (210) | (69) | | Increase in cash and cash equivalents | 3,019 | 7,056 | | Cash and cash equivalents at end of period | $24,878 | $21,183 | - During the six months of 2024, net cash payments for acquisition activities totaled $14.119 billion, primarily for the Shockwave acquisition[31] Notes to Consolidated Financial Statements Note 1 — General Information and New Accounting Standards This note clarifies that the unaudited interim consolidated financial statements should be read in conjunction with the annual report and outlines the adoption of new accounting standards, noting no significant new standards were adopted in the first half of fiscal year 2024, but two unadopted standards are expected to increase disclosures without material financial statement impact - The company did not adopt new significant accounting standards in the first half of fiscal year 2024[35] - ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes) will increase disclosures but are not expected to have a material impact on the company's consolidated financial statement results, effective after December 15, 2024[36][37] - As of June 30, 2024, and December 31, 2023, effective obligations under supplier finance programs were $600 million and $700 million, respectively, presented as accounts payable[38] Note 2 — Inventories As of June 30, 2024, the company's total inventories increased to $12.169 billion from $11.181 billion at December 31, 2023, primarily driven by growth in work-in-process and finished goods Inventory Composition (Million USD) | Category | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Raw materials and supplies | $2,407 | $2,355 | | Work-in-process | 2,556 | 1,952 | | Finished goods | 7,206 | 6,874 | | Total inventories | $12,169 | $11,181 | Note 3 — Intangible Assets and Goodwill As of June 30, 2024, the company's net intangible assets increased to $39.725 billion and goodwill to $44.250 billion, primarily due to acquisition activities, with weighted-average amortization periods of approximately 12 years for patents and trademarks, and 18 years for customer relationships and other intangible assets Net Intangible Assets (Million USD) | Category | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Patents and trademarks — net | $18,603 | $15,609 | | Customer relationships and other intangible assets — net | 7,158 | 7,637 | | Total indefinite-lived intangible assets | 13,964 | 10,929 | | Total intangible assets — net | $39,725 | $34,175 | Goodwill by Business Segment (Million USD) | Business Segment | Goodwill June 30, 2024 | Goodwill December 31, 2023 | | :--- | :--- | :--- | | Innovative Medicine | $10,768 | $10,407 | | MedTech | 33,482 | 26,151 | | Total goodwill | $44,250 | $36,558 | - Amortization expense for Q2 and six months 2024 was $1.1 billion and $2.2 billion, respectively, recorded in cost of products sold[42] Estimated Amortization Expense for the Next Five Years (Million USD) | 2024 | 2025 | 2026 | 2027 | 2028 | | :--- | :--- | :--- | :--- | :--- | | $4,500 | 3,900 | 3,300 | 2,700 | 2,000 | Note 4 — Fair Value Measurements and Debt The company uses derivative instruments like foreign currency forward contracts, cross-currency interest rate swaps, and interest rate swaps to manage foreign exchange and interest rate risks, designating them as cash flow hedges, fair value hedges, and net investment hedges, with an unrealized net loss on derivatives of $899 million (net of tax) as of June 30, 2024, and also discloses financial assets and liabilities measured at different fair value levels, along with detailed fair values of non-current debt - The company uses foreign currency forward contracts, cross-currency interest rate swaps, and interest rate swaps to manage foreign exchange and interest rate risks, not for trading or speculative purposes[47] - As of June 30, 2024, the accumulated deferred net loss on derivatives (net of tax) was $899 million, with most expected to be reclassified to earnings within the next 12 months[47] Financial Assets and Liabilities Measured at Fair Value (Million USD) | Category | Total June 30, 2024 | Total December 31, 2023 | | :--- | :--- | :--- | | Derivatives designated as hedging instruments: assets | $1,915 | $1,527 | | Derivatives designated as hedging instruments: liabilities | 4,386 | 5,962 | | Derivatives not designated as hedging instruments: assets | 27 | 64 | | Derivatives not designated as hedging instruments: liabilities | 19 | 75 | | Other investments: equity investments | 470 | 4,473 | | Other investments: debt securities | 6,840 | 8,874 | | Other liabilities: contingent consideration | 1,248 | 1,092 | - In Q2 2024, the company issued $6.7 billion in aggregate principal amount of senior unsecured notes to fund the Shockwave acquisition and for general corporate purposes[67] - As of June 30, 2024, the weighted-average effective interest rate on non-current debt was 3.28%[69] Note 5 — Income Taxes For the six months ended June 30, 2024, the company's global effective income tax rate significantly increased to 16.1% from 2.7% in the prior year, primarily due to increased charges related to talc matters, Pillar Two legislative changes, and tax audit expenses associated with multi-year transfer pricing agreements Global Effective Income Tax Rate | Period | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | | Effective income tax rate | 16.1% | 2.7% | - The tax rate change is primarily due to $3 billion and $7 billion in charges related to talc matters recorded in the six months of 2024 and 2023, respectively, as well as Pillar Two legislative changes and tax audit expenses[70] - As of June 30, 2024, the company had approximately $2.5 billion in unrecognized tax benefits, with about $400 million classified as current liabilities and expected to be resolved within the next 12 months[70] Note 6 — Pensions and Other Benefit Plans For the six months ended June 30, 2024, the company's net periodic benefit cost for pension plans was a credit of $145 million, while other benefit plans incurred a cost of $264 million, as the company continues to fund its US and international pension plans in compliance with relevant regulations Net Periodic Benefit Cost Components (Million USD) | Category | Q2 2024 (Pension Plans) | Q2 2023 (Pension Plans) | Q2 2024 (Other Benefit Plans) | Q2 2023 (Other Benefit Plans) | Six Months 2024 (Pension Plans) | Six Months 2023 (Pension Plans) | Six Months 2024 (Other Benefit Plans) | Six Months 2023 (Other Benefit Plans) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Service cost | $222 | 215 | 69 | 69 | 446 | 425 | 138 | 137 | | Interest cost | 351 | 371 | 52 | 55 | 703 | 723 | 104 | 109 | | Expected return on plan assets | (639) | (694) | (1) | (2) | (1,281) | (1,362) | (3) | (3) | | Net periodic benefit cost/(credit) | $(76) | (204) | 132 | 128 | (145) | (406) | 264 | 255 | - During the six months of 2024, the company contributed $61 million and $7 million to its US and international retirement plans, respectively[74] Note 7 — Accumulated Other Comprehensive Income As of June 30, 2024, the company's accumulated other comprehensive income (loss) improved to a deficit of $11.253 billion from $12.527 billion at December 31, 2023, primarily due to a shift from foreign currency translation losses to gains, partially offset by increased losses from derivatives and hedging Accumulated Other Comprehensive Income (Loss) Components (Million USD) | Category | December 31, 2023 | Net Change | June 30, 2024 | | :--- | :--- | :--- | :--- | | Foreign currency translation | $(10,149) | 1,734 | (8,415) | | Securities gains/(losses) | (1) | 1 | 0 | | Employee benefit plans | (2,000) | 61 | (1,939) | | Derivatives and hedging gains/(losses) | (377) | (522) | (899) | | Total accumulated other comprehensive income (loss) | $(12,527) | 1,274 | (11,253) | Note 8 — Earnings Per Share For the second quarter ended June 30, 2024, the company reported basic EPS from continuing operations of $1.95 and diluted EPS of $1.93, while for the six months ended June 30, 2024, basic EPS from continuing operations was $3.30 and diluted EPS was $3.27 Earnings Per Share (USD) | Indicator | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS from continuing operations | $1.95 | $2.07 | $3.30 | $1.88 | | Diluted EPS from continuing operations | $1.93 | $2.05 | $3.27 | $1.86 | | Average basic shares outstanding (millions) | 2,406.8 | 2,598.4 | 2,407.5 | 2,601.9 | | Average diluted shares outstanding (millions) | 2,422.0 | 2,625.7 | 2,428.5 | 2,630.7 | - Diluted EPS calculation excludes certain stock options because their exercise price was higher than the average market value of the company's stock[79] Note 9 — Segments of Business and Geographic Areas Following the Kenvue separation, the company reorganized into two business segments: Innovative Medicine and MedTech, with global sales increasing by 4.3% to $22.447 billion in Q2 2024, driven by 5.5% growth in Innovative Medicine and 2.2% in MedTech, while US sales showed strong growth and international sales were negatively impacted by currency exchange rates - The company reorganized into two business segments, Innovative Medicine and MedTech, with results for all periods restated[80] Sales by Business Segment (Q2 2024 vs Q2 2023, Million USD) | Business Segment | June 30, 2024 | July 2, 2023 | Percentage Change | | :--- | :--- | :--- | :--- | | Innovative Medicine | $14,490 | $13,731 | 5.5% | | MedTech | 7,957 | 7,788 | 2.2% | | Total Global | $22,447 | $21,519 | 4.3% | Sales by Geographic Area (Q2 2024 vs Q2 2023, Million USD) | Geographic Area | June 30, 2024 | July 2, 2023 | Percentage Change | | :--- | :--- | :--- | :--- | | United States | $12,569 | $11,657 | 7.8% | | Europe | 5,214 | 5,131 | 1.6% | | Western Hemisphere (excluding U.S.) | 1,212 | 1,136 | 6.7% | | Asia-Pacific, Africa | 3,452 | 3,595 | (4.0%) | | Total | $22,447 | $21,519 | 4.3% | Pre-Tax Earnings by Business Segment (Q2 2024 vs Q2 2023, Million USD) | Business Segment | June 30, 2024 | July 2, 2023 | Percentage Change | | :--- | :--- | :--- | :--- | | Innovative Medicine | $5,459 | $4,812 | 13.4% | | MedTech | 1,089 | 1,671 | (34.8%) | | Total Segment Pre-Tax Earnings | 6,548 | 6,483 | 1.0% | | Unallocated expenses | 800 | 177 | * | | Total Global Pre-Tax Earnings | $5,748 | $6,306 | (8.8%) | Note 10 — Acquisitions and Divestitures In Q2 2024, the company completed several acquisitions, including Yellow Jersey Therapeutics for $1.25 billion, Proteologix, Inc. for $800 million, and Shockwave Medical Inc. for $13.1 billion in an all-cash transaction, while divesting Acclarent and Ponvory (outside the US) for approximately $300 million and $200 million in gains, respectively - On July 11, 2024, the company acquired Yellow Jersey Therapeutics for approximately $1.25 billion in cash, gaining global rights to NM26, expected to result in $1.25 billion in in-process research and development (IPR&D) expense[92] - On June 20, 2024, the company acquired Proteologix, Inc. for approximately $800 million in net cash, with primary assets including $900 million in non-amortizing intangible assets (including IPR&D) and $300 million in goodwill[93] - On May 31, 2024, the company acquired Shockwave Medical Inc. for $335 per share in an all-cash transaction, with a total enterprise value of $13.1 billion, generating $7.5 billion in goodwill and $5.3 billion in amortizable intangible assets[93][94][95] - In Q1 2024, the company acquired Ambrx Biopharma, Inc. for approximately $2 billion ($1.8 billion net cash), with primary assets including $1.9 billion in non-amortizing intangible assets (including IPR&D) and $300 million in goodwill[96] - In Q2 2024, the company divested Acclarent, generating approximately $300 million in gains; in Q1, it divested Ponvory (outside the US), generating approximately $200 million in gains[97] Note 11 — Legal Proceedings The company faces multiple significant legal proceedings, including personal injury claims related to talc products, for which it has accrued approximately $10.6 billion (nominal value $12.8 billion) and proposed a $6.475 billion prepackaged bankruptcy plan, in addition to opioid, other product liability, intellectual property infringement, and government investigation lawsuits, with some cases settled or actively defended - The company has accrued approximately $10.6 billion (nominal value $12.8 billion) for talc matters and proposed a $6.475 billion prepackaged bankruptcy plan to resolve related claims[102] - The company has reached a settlement for opioid litigation, agreeing to pay up to $5 billion, with approximately 70% paid as of the end of Q2 2024[104] Number of Plaintiffs in Major Product Liability Lawsuits (as of June 30, 2024) | Product or Product Category | Number of Plaintiffs | | :--- | :--- | | Talc-based body powders (primarily Johnson's Baby Powder) | 62,370 | | DePuy ASR XL Acetabular System and DePuy ASR Hip Resurfacing System | 160 | | PINNACLE Acetabular Cup System | 910 | | Pelvic mesh | 6,230 | | ETHICON PHYSIOMESH Flexible Composite Mesh | 170 | | RISPERDAL | 20 | | ELMIRON | 2,170 | - The company faces challenges from generic and biosimilar manufacturers in multiple intellectual property lawsuits, which could lead to loss of market share and revenue[118][119] - The company is responding to multiple government investigations and lawsuits, including a Brazilian antitrust investigation, US Department of Justice investigations regarding ophthalmic surgical products and HIV drug promotion, and Anti-Terrorism Act lawsuits related to contracts with the Iraqi Ministry of Health[131][132][133][134] Note 12 — Restructuring In fiscal year 2023, the company initiated two restructuring plans: prioritizing R&D investments in the Innovative Medicine segment, leading to the exit of certain therapeutic areas, and streamlining operations in the MedTech segment's orthopedics business; as of Q2 2024, the Innovative Medicine restructuring generated $10 million in income, while the MedTech restructuring incurred $10 million in expenses - The Innovative Medicine segment restructuring primarily involves prioritizing R&D investments and exiting certain therapeutic areas, including the Respiratory Syncytial Virus (RSV) adult vaccine program, hepatitis, and HIV development[138] - The MedTech segment's orthopedics business restructuring aims to streamline operations, exiting certain markets, product lines, and distribution network arrangements, with total costs estimated between $700 million and $800 million, expected to be completed by the end of fiscal year 2025[138] Restructuring (Income) Expense (Pre-Tax, Million USD) | Business Segment | Q2 2024 | Six Months 2024 | | :--- | :--- | :--- | | Innovative Medicine Segment | $(63) | $81 | | MedTech Segment | 52 | 79 | | Total Plan | $(11) | $160 | Note 13 — Kenvue Separation Following the Kenvue separation, the performance of the former Consumer Health business has been presented as discontinued operations in the company's consolidated statements of earnings, with a net loss from discontinued operations of $232 million in Q2 2023 and net earnings of $191 million for the six months - The performance of the Consumer Health business (Kenvue) has been presented as discontinued operations in the consolidated statements of earnings, as of August 23, 2023[141] Net Earnings (Loss) from Discontinued Operations, Net of Tax (Million USD) | Indicator | Q2 2023 | Six Months 2023 | | :--- | :--- | :--- | | Sales | $4,011 | $7,863 | | Cost of products sold | 1,750 | 3,458 | | Gross profit | 2,261 | 4,405 | | Pre-tax earnings from discontinued operations | 456 | 1,006 | | Provision for income taxes | 688 | 815 | | Net (loss)/earnings from discontinued operations | $(232) | $191 | Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The company's global sales increased by 4.3% to $22.447 billion in Q2 2024 and 3.3% to $43.830 billion for the six months, with growth across both Innovative Medicine and MedTech segments, though international sales were negatively impacted by currency exchange rates, and pre-tax earnings were affected by litigation expenses, acquisition integration costs, and restructuring activities Consolidated Sales Analysis (Million USD) | Period | Global Sales | Total Growth | Operational Growth | Currency Impact | | :--- | :--- | :--- | :--- | :--- | | Six Months 2024 | $43,830 | 3.3% | 5.2% | (1.9%) | | Q2 2024 | $22,447 | 4.3% | 6.6% | (2.3%) | - During the six months of 2024, a decline in COVID-19 vaccine sales had a 2.2% negative impact on global operational sales growth[144] Sales by Business Segment (Million USD) | Business Segment | Six Months 2024 Sales | Operational Growth | | :--- | :--- | :--- | | Innovative Medicine | $28,052 | 5.2% | | MedTech | $15,778 | 5.4% | - Innovative Medicine segment sales growth was primarily driven by strong performance in immunology products (e.g., TREMFYA, STELARA) and oncology products (e.g., DARZALEX, ERLEADA, CARVYKTI), but REMICADE and COVID-19 vaccine sales declined[156] - MedTech segment sales growth was primarily driven by cardiovascular (electrophysiology, Abiomed, Shockwave) and orthopedics (hip, knee, trauma) businesses, but surgical and vision businesses faced competitive pressures and macroeconomic factors[161][162][164] - For the six months of 2024, the company's pre-tax earnings were $9.462 billion, a significant 88.5% increase from the prior year, primarily due to reduced litigation-related expenses[182] - In Q2 2024, the company's pre-tax earnings were $5.748 billion, an 8.8% year-over-year decrease, primarily impacted by acquisition integration costs, litigation expenses, and R&D impairments[185] Liquidity and Capital Resources As of the end of Q2 2024, the company's cash and cash equivalents totaled $24.9 billion, an increase of $3 billion from year-end 2023, with $9.3 billion generated from operating activities, but $14.2 billion used in investing activities primarily for acquisitions, while possessing ample funding sources, including credit lines and the commercial paper market, to meet operational needs and future litigation settlement payments Cash Flow Overview (Billion USD) | Period | Q4 2023 Cash and Cash Equivalents Balance | Net Cash from Operating Activities | Net Cash from Investing Activities | Net Cash from Financing Activities | Effect of Exchange Rate Changes | Q2 2024 Cash and Cash Equivalents | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Six Months 2024 | $21.9 | 9.3 | (14.2) | 8.1 | (0.2) | $24.9 | - As of June 30, 2024, the company's total cash, cash equivalents, and marketable securities were approximately $25.5 billion, with a net debt position of $16 billion[199] - The company expects operating cash flow, external financing capacity, existing credit lines, and the commercial paper market to provide sufficient resources to cover remaining opioid litigation settlements (approximately $1.5 billion) and talc settlement proposal provisions (approximately $10.6 billion)[199] - In Q2 2024, the company paid approximately $3.1 billion to the US Treasury, including $2 billion for foreign undistributed earnings taxes and $1.1 billion for estimated income tax payments[199] Dividends The company's Board of Directors declared regular cash dividends of $1.24 per share on April 16, 2024, and July 17, 2024, respectively, and anticipates continuing to pay regular quarterly cash dividends - On April 16, 2024, the Board of Directors declared a regular cash dividend of $1.24 per share, paid on June 4, 2024[200] - On July 17, 2024, the Board of Directors declared a regular cash dividend of $1.24 per share, payable on September 10, 2024[200] - The company expects to continue paying regular quarterly cash dividends[200] Other Information The company is evaluating the impact of new accounting standards and closely monitoring economic and market factors, including challenges from the Inflation Reduction Act (IRA) on drug pricing, the non-material financial impact of the Russia-Ukraine war and Middle East conflicts, and macroeconomic factors such as inflation, exchange rate fluctuations, and intellectual property challenges - The company is evaluating the impact of new accounting standards, as detailed in Note 1 to the consolidated financial statements[201] - The company is challenging the constitutionality of the Medicare drug price negotiation program under the Inflation Reduction Act (IRA)[202] - The Russia-Ukraine war and Middle East conflicts did not have a material financial impact on the company in Q2 2024, with Russian and Israeli operations each accounting for less than 1% of the company's consolidated assets and revenue[203][204] - The company's operations in Venezuela, Argentina, and Turkey are considered highly inflationary, and it faces pricing pressure from global healthcare cost containment, government legislation, and intellectual property challenges[205][206] Item 3 — Quantitative and Qualitative Disclosures About Market Risk The company's assessment of market risk sensitivity has not materially changed since the annual report as of December 31, 2023 - The company's assessment of market risk sensitivity has not materially changed since the annual report as of December 31, 2023[208] Item 4 — Controls and Procedures As of the end of this reporting period, the company's disclosure controls and procedures were deemed effective, with no significant changes in internal control over financial reporting during the period, as the company implements a multi-year, enterprise-wide plan to integrate, simplify, and standardize processes and systems across human resources, information technology, procurement, supply chain, and finance functions to support financial shared service capabilities and standardized financial systems - As of the end of this reporting period, the company's disclosure controls and procedures were deemed effective[209] - There were no material changes in the company's internal control over financial reporting during this reporting period[209] - The company is implementing a multi-year, enterprise-wide plan to integrate, simplify, and standardize processes and systems across human resources, information technology, procurement, supply chain, and finance functions[209] Part II — Other Information Item 1 — Legal Proceedings This information has been incorporated by reference to Note 11 of the consolidated financial statements - This information has been incorporated by reference to Note 11 of the consolidated financial statements[211] Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2024, the company repurchased 921,524 shares of common stock at an average price of $146.74 per share, as part of a systematic plan to meet the needs of its compensation programs Company Common Stock Repurchase Information for Q2 2024 | Fiscal Monthly Period | Total Number of Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1 to April 28, 2024 | 281,530 | 145.46 | | April 29 to May 26, 2024 | 350,000 | 148.98 | | May 27 to June 30, 2024 | 289,994 | 145.27 | | Total | 921,524 | 146.74 | - All repurchases were part of a systematic plan to meet the needs of the company's compensation programs[213] Item 5 — Other Information In Q2 2024, no directors or executive officers of the company informed of the adoption or termination of any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" - In Q2 2024, no directors or executive officers of the company informed of the adoption or termination of any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[214] Item 6 — Exhibits This report includes several exhibits, such as certifications by the Chief Executive Officer and Chief Financial Officer under Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL taxonomy extension files - Exhibits 31.1 and 31.2 are certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act[215] - Exhibits 32.1 and 32.2 are certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act[215][216] - Exhibit 101 contains XBRL taxonomy extension files, and Exhibit 104 is the cover page interactive data file[216] Signatures This report was signed by J. J. Wolk, Executive Vice President and Chief Financial Officer, and R. J. Decker Jr., Controller, of Johnson & Johnson on July 25, 2024 - This report was signed by J. J. Wolk, Executive Vice President and Chief Financial Officer, and R. J. Decker Jr., Controller, on July 25, 2024[217]