Johnson & Johnson JNJ
Q4 2012 Earnings Call Transcript
Transcript Call Date 01/22/2013

Louise Mehrotra - VP, IR: Good morning and welcome. I am Louise Mehrotra, Vice President of Investor Relations for Johnson & Johnson, and it is my pleasure this morning to review our business results for the fourth quarter and full year of 2012.

Joining me on the podium today are Alex Gorsky, Chairman of the Board and Chief Executive Office; and Dominic Caruso, Vice President Finance and Chief Financial Officer. A few logistics before we get into the details. This meeting is being made available to a broader audience via a webcast accessible through the Investor Relations section of the Johnson & Johnson website.

I'll begin by briefly reviewing highlights of the fourth quarter and full year of 2012 for the corporation and highlights for our three business segments. Following my remarks, Alex will comment on the 2012 results and provide a strategic outlook for the Company. After completion of Alex's remarks, Dominic will provide some additional commentary on the financial results and guidance for 2013. We will then open the meeting to your questions. We will conclude our formal presentations at, approximately, 9.45 and following Q&A with some final remarks by Alex, we'll conclude this portion of the meeting around 10.15.

Following the break, we will resume at 11 o'clock and begin the Medical Devices and Diagnostics business review that was rescheduled because of Hurricane Sandy. That program will include presentations by Gary Pruden, Worldwide Chairman, Global Surgery Group; Karen Licitra, Worldwide Chairman, Global Medical Solutions Group; and Michel Orsinger, Worldwide Chairman, DePuy Synthes Companies. We will break for lunch in the technology displays around new and resume the presentation at, approximately, 12.45. We will include a question-and-answer panel at the end of the presentation and expect to close the meeting around 2.30.

Included with the press release that was issued earlier this morning is the schedule of sales for key products and/or businesses to facilitate updating your models. These schedules are available on the Johnson & Johnson website as is the press release. Please note this webcast includes slides, which are also available on the website.

Before I get into the results, let me remind you that some of the statements made during this review may be considered forward-looking statements. The 10-K for the fiscal year 2011 identifies certain factors that could cause the Company's actual results to differ materially from those projected in any forward-looking statements made today. The Company does not undertake to update any forward-looking statements as a result of new information or future events or developments. The 10-K is available through the Company or online.

During the review, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. These non-GAAP financial measures should not be considered replacements for GAAP results. Tables reconciling these measures to the most comparable GAAP measures are available in the press release and on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com.

A number of the compounds discussed today are being developed in collaboration with strategic partners or license from other companies. This slides list the acknowledgement of those relationships.

Now, I would like to review our results for the fourth quarter of 2012. If you would refer to your copy of the press release, let's begin with the schedule titled, Supplementary Sales Data by Geographic Area. Worldwide sales to customers were $17.6 billion for the fourth quarter of 2012, up 8% as compared to the fourth quarter of 2011. On an operational basis, sales were up 9.3% and currency had a negative impact of 1.3%.

The acquisition of Synthes was completed in the second quarter of 2012. In the fourth quarter, the acquisition net of the impact of the divestiture of the legacy DePuy trauma business to contributed 5.6% to the worldwide operational sales growth. In the U.S. sales were up 6.8%. In regions outside the U.S. our operational growth was 11.2%, while the effect of currency exchange rates negatively impacted our reported results by 2.3 points.

The Western Hemisphere excluding the U.S. grew by 18.7% operationally, while Europe grew 10.4% on an operational basis. The Asia-Pacific, Africa region grew 8.5% operationally. The success of new product launches and Synthes sales made strong contributions to the results in all regions.

If you’ll now turn to the consolidated statement of earnings, net earnings attributable to Johnson & Johnson were $2.6 billion compared to $218 million in the same period in 2011. Earnings per share were $0.91 versus $0.08 a year ago. Please direct your attention to the box section of the schedule where we have provided earnings adjusted to exclude special items. As referenced in the accompanying table on non-GAAP measures, 2012 fourth quarter net earnings were adjusted to exclude special items, primarily related to an increase in the litigation accrual and program costs associated with the DePuy ASR Hip, in-process research and development, and integration and transaction costs related to the acquisition of Synthes Inc. Fourth quarter 2011 net earnings included after-tax special items of $2.9 billion as detailed in the reconciliation on non-GAAP financial measures. Excluding these special items for both periods, net earnings for the current quarter were $3.4 billion and diluted earnings per share were $1.19, representing increases of 7.9% and 5.3%, respectively, as compared to the same period last year.

I would now like to make some comments relative to the components leading to earnings before we move on to the segment highlights. For the fourth quarter of 2012 cost of goods sold at 34.2% was up 140 basis points from the same period last year, primarily due to an inventory step up charge related to the Synthes acquisition. Excluding the inventory step-up charge, which has been treated as a special item, cost of goods sold increased 10 basis points versus the same period last year. Incremental amortization expense related to Synthes was almost completely offset by positive mix complemented by cost reduction efforts.

Fourth quarter selling, marketing and administrative expenses at 32.2% of sales were down 140 basis points due to cost containment initiatives across many of our businesses. Our investment in research and development as a percent of sales was 13.3%, consistent with our 2011 results.

Interest expense, net of interest income of $89 million, was down $59 million versus the fourth quarter of 2011 due to a lower debt level. Other expense, net of other income, was $319 million in the fourth quarter of 2012 compared to $2.9 billion in the same period last year.

Excluding special items, other income net of other expense of $420 million was $81 million less than 2011 due to lower gains on divestitures. Excluding special items, the effective tax rate of 18% in the fourth quarter of 2012 compared to 14.4% in the same period last year. Dominic will provide commentary on taxes in his remarks.

Now, turning to the consolidated statement of earnings for the full year of 2012; consolidated sales to customers for the year 2012 were $67.2 billion, an increase of 3.4% as compared to the same period last year. On an annual basis, sales grew 6.1 points operationally and currency had a negative impact of 2.7 points. Synthes notably impacted the divestiture of the legacy DePuy trauma business, contributed 3.1% to the worldwide operational sales growth.

On the consolidated statement of earnings, I'd like to draw your attention to the boxed section. For the year 2012 adjusted net earnings was $14.3 billion and adjusted earnings per share were $5.10, up 3.4% and 2%, respectively, versus the 2011 results.

Turning now to business statement highlights, please refer to the supplementary sales schedule highlighting key products or businesses for the fourth quarter of 2012. I'll begin with the Consumer segment. Worldwide Consumer segment sales for the fourth quarter of 2012 of $3.7 billion decreased 0.4% as compared to the same period last year. On an operational basis, sales increased 0.9%, while the impact of currency was negative 1.3%. U.S. sales were down 3.6%, while international sales grew 3.2% on an operational basis.

Baby care products increased on an operational basis by 2.8% when compared to the fourth quarter of 2011, primarily due to international sales of powders, wipes and hair care products. Sales in the oral care business increased 2% operationally due to strong sales outside the U.S. with the continued success of new product launches for LISTERINE.

For the fourth quarter of 2012, sales for OTC Pharmaceuticals and Nutritionals increased 2.6% on an operational basis compared to the same period in 2011, with U.S. sales down 3.8% and sales outside the U.S. up 5.7% on an operational basis. Sales in the U.S. decreased primarily due to lower sales of analgesics due to supply constraints and competitive pressures in Nutritional products. This was partially offset by very strong sales of upper respiratory products with the re-launch of many of them. Increased market penetration and product launches drove strong growth of analgesics, digestive health and upper respiratory products outside the U.S.

Our Skin Care business declined 3.9% on an operational basis in the fourth quarter of 2012, with U.S. down 4.5% due to divestitures and discontinued programs, while sales outside the U.S. were down 3.4% due to competitive and marketplace pressures. Women’s Health grew 5.5% on an operational basis due to international sales growth of 9.4%, with strong growth across the sanitary protection category. Wound Care/Other sales decreased 2.9% on an operational basis, with the sales decline outside the U.S. of 8% due to competitive pressures partially offset by growth in the U.S. of 1.8%.

That completes our review of the Consumer segment, and I’ll now review highlights for the Pharmaceutical segment. Worldwide net sales for the fourth quarter of $6.5 billion increased 7.1% versus the same period last year. On an operational basis, sales increased 8.5% with a negative currency impact of 1.4 points. Sales in the U.S. increased 4.4%, while sales outside the U.S. increased on an operational basis by 12.1%.

Now reviewing sales for the major therapeutic areas. Immunology products achieved double-digit operational sales growth of 10.4%. Sales in the U.S. increased 3.4%, while sales outside the U.S. increased 35.7% operationally. SIMPONI grew 54.8% operationally, with U.S. sales up 16.1% due primarily to strong market growth. In the quarter, sales outside the U.S. were up 96.8% on an operational basis, primarily due to increased shipments to our distribution partners and the continued success of the launch in Japan.

On an operational basis, STELARA was up 31.2%, with the U.S. up 25.4%, and sales outside the U.S. up 40.1% operationally. The strong results were due primarily to market share gains, complemented by strong market growth in the major regions. REMICADE grew 5.5% on an operational basis. Strong sales results were achieved in the U.S. with growth of 12.2% due to double-digit market growth.

Combined export and international sales were down just over 2% on an operational basis. As I mentioned last quarter, timing of shipments due to customer inventory planning impacted the quarterly comparison. Excluding the impact of customer inventory planning, combined export and international sales underlying growth in the quarter was approximately 8% on an operational basis. With the strength of our portfolio, we continue to be the U.S. market leader in immunology.

Sales of infectious disease products increased 22.6% on an operational basis. INCIVO, a treatment for hepatitis C, contributed approximately half of the infectious disease worldwide operational growth in the quarter. INCIVO sales nearly doubled when compared to the third quarter of 2012. Continued momentum in market share growth of PREZISTA made notable contributions to the results, as did the combined sales of COMPLERA and EDURANT.

Neuroscience product sales decreased 1.6% on an operational basis. Growth was impacted by generic competition for RISPERDAL, CONCERTA, RAZADYNE, TOPAMAX, and DURAGESIC. The long-acting injectable antipsychotics, RISPERDAL CONSTA and INVEGA SUSTENNA or XEPLION, achieved operational growth of nearly 15% due to an increase in combined market share.

INVEGA achieved strong operational growth of 18.9%, with the U.S. growth at 15.2% partially due to market growth. Outside the U.S., sales grew 23% operationally primarily due to strong growth in Japan.

Sales of oncology products increased 48.5% on an operational basis due to very strong results for ZYTIGA and VELCADE. ZYTIGA is now approved to treat both, chemo-refractory and chemo-naive Metastatic Castration Resistant Prostate Cancer. In the quarter, ZYTIGA achieved operational sales growth of over 75%, with U.S. sales growing 34.1% and sales outside the U.S. more than doubling.

VELCADE, a treatment for multiple myeloma, sales increased 47.6% on an operational basis. Approximately 60% of the operational increase is due to the timing of tender business, which will negatively impact the growth rate in the first quarter of 2013. Strong performance in patient share in the frontline setting continues to drive sales growth.

Regarding DOXIL/CAELYX, we have made significant progress to restore a reliable supply. An alternate manufacturing approach consisting of a collaboration between the current third-party manufacturer and another supplier to complete end-to-end production of DOXIL/CAELYX was approved in the EU and Japan late in 2012 and in Canada earlier this month.

In the European Union, the CAELYX Managed Access Program will remain in place until a full supply of CAELYX has been restored to ensure patients can complete their full course of treatment. In the U.S., Janssen announced in October 2012 that full access to DOXIL has been restored.

While Janssen continues to work with the FDA to seek approval of the alternate manufacturing solution, the agency is exercising its regulatory discretion to release DOXIL manufacture through this approach to the U.S. market to ensure continued full access to DOXIL for health care providers and their patients.

Other Pharmaceutical products declined 6.8% on an operational basis due to divestures, lower sales of PROCRIT primarily related to market decline, and EPREX and ACIPHEX/PARIET primarily due to the impact of generic competition. Positively impacting results, XARELTO sales grew 40% on a sequential basis contributing over 2.5 points to the U.S. Pharmaceutical growth rate.

On the pipeline front, we had a number of approvals during the quarter. ZYTIGA was approved by both the FDA and the European Commission for the chemo-naive indication. SIRTURO to treat pulmonary multi-drug resistant tuberculosis was approved by the FDA.

The FDA approved the expanded use of XARELTO to treat Deep Vein Thrombosis, or DVT, and pulmonary embolism, or PE, and to reduce the risk of recurrent DVT and PE following the initial treatment. And the FDA approved PREZISTA 800 mg tablet and just last week, it was also approved by the European Medicines Agency, or EMA.

Additionally, during the quarter as an update on filings, the NDA was submitted to the FDA for Canagliflozin/Metformin fixed-dose combination therapy to treat patients with type 2 diabetes. The Supplemental Biologics License Application for STELARA for the treatment of active psoriatic arthritis was submitted to the FDA and the type 2 variation to the EMA.

In the U.S., the two structural damage claims for SIMPONI will not be pursued at this time given other priorities, and a decision was made to withdraw the EMA application for SIMPONI IV for the treatment of adults with moderately to severely active RA pending additional manufacturing data, which would be unavailable within the current EMA review timeline required.

We plan to resubmit a marketing authorization application for the IV Pharmaceutical form with this additional manufacturing information. We anticipate having greater clarity on a potential resubmission timeline during the first quarter of 2013.

That completes the review of the Pharmaceutical segment. I'll now review the Medical Devices and Diagnostic segment results. Worldwide Medical Devices and Diagnostics segment sales of $7.4 billion grew 14.9% operationally as compared to the same period in 2011. Currency had a negative impact of 1.2 points, resulting in a total sales increase of 13.7%. Sales excluding the net impact of Synthes were up 0.8% on an operational basis, with U.S. sales down 2.2% and sales outside the U.S. up 3.2% on an operational basis.

Now turning to the MD&D businesses starting with Cardiovascular Care. Cardiovascular Care sales were down 5.2% operationally, with the U.S. down 2.6% and sales outside the U.S. down 6.6% operationally. Excluding the impact of drug-eluting stents, worldwide sales were flat on an operational basis. Endovascular sales declined versus the same period last year due to competitive pressures and the impact of the supply disruption earlier in the year that was resolved late in the third quarter. Biosense Webster achieved worldwide operational growth of nearly 14% in the quarter driven by strong market share growth.

The success of the ThermoCool catheter launches made strong contributions to the results. During the quarter, the FDA also approved the S.M.A.R.T. CONTROL Vascular Stent Systems for use in the superficial femoral artery. The Diabetes Care business operationally declined 2.6% in the fourth quarter of 2012, with the U.S. business down 10.6% due to the impact of mail order, lower price, and private-label competitors. The business outside the U.S. grew 5.2% operationally, with strong sales in the emerging markets, partially offset by lower sales in some of the developed markets.

The Diagnostics business declined 3.3% on an operational basis, with U.S. down 7.9% and sales outside the U.S. up 1.3% operationally in the fourth quarter. Sales were impacted by lower clinical lab sales and the divestiture of the RhoGAM business during the third quarter.

Infection prevention grew 4.9% on an operational basis, with sales in the U.S. down 8.5%. In the U.S., a customer program to upgrade systems to STERRAD solutions ended in the first quarter, impacting the timing of capital purchases for the year. Excluding capital sales, U.S. growth was approximately 9% in the quarter. Sales outside the U.S. were up 13.6% operationally due to strong consumables growth driven by the breadth of the installed base.

Orthopedic sales were up 65.1% on an operational basis when compared to the same period in 2011. Excluding the net impact of Synthes and the divestiture in December 2011 of certain neurosurgical instruments, sales grew, approximately, 3.5% on an operational basis with similar results both in and outside the U.S.

Operationally hips were up 6% worldwide driven by 7% growth in the U.S. due to strong results in primary stent platform sales, partially offset by continued pricing pressure. Hips outside the U.S. were up 4% operationally driven by the growth of (cemented) stents, heads and acetabular products.

Knees worldwide increased 4% on an operational basis with the U.S. up 7% driven by fixed bearing and revision platform. Sales outside the U.S. were up 1% with growth in Asia and Latin America partially offset by softer sales primarily in Europe, due to competitive pressures.

Including the Synthes business in both periods, and excluding the divested DePuy trauma business in both periods, trauma grew approximately 1% on operational basis with the U.S. down 4%, and sales outside the U.S. up 6% on operational basis. U.S. growth was impacted by a supply disruption.

Including the Synthes business in both periods, worldwide spine was down 3% on operational basis, with the U.S. down approximately 7%, impacted by continued softness in the market, as well as the restructuring of the commercial sales organization. Outside the U.S., sales grew approximately 4% operationally.

Specialty Surgery achieved operational growth of 4.4% in the fourth quarter of 2012. U.S. sales were down 0.3% with lower sales of energy products due to competitive pressures and the impact of reprocessing. This was offset by strong growth bio surgery products and additional sales from the acquisition of SteriMed. Sales outside the U.S. were up 9.5% on an operational basis, due to strong results for energy and biosurgical products.

Surgical Care worldwide sales were flat on an operational basis with the U.S. down 3.3% and sales outside the U.S. up 1.9% operationally. Increased sales of endoscopy products, with the success of the ECHELON FLEX Powered ENDOPATH Stapler, were offset by lower sales of mechanical products due to shifts to minimally evasive procedures and pressure from low cost competitors, as well as lower sales of Pelvic Floor Repair products and Breast Care products.

During the quarter, the FDA approved EVARREST Fibrin Sealant Patch, a novel product that rapidly and reliably aids in stopping problematic bleeding during surgery. Rounding at the review of the Medical Devices and Diagnostic segment, our Vision Care business achieved sales growth of 6.4% on an operational basis in the fourth quarter compared to the same period last year. Sales in the U.S. increased 7%, while sales outside the U.S. increased 6.1% on an operational basis. Growth was driven by daily lenses and astigmatism lenses.

That completes highlights for the Medical Devices and Diagnostics segment and concludes the segment highlights for Johnson & Johnson's fourth quarter of 2012.

It is now my pleasure to turn the meeting over to Alex Gorsky. Alex?

Alex Gorsky - Chairman and CEO: Thank you very much, Louise. She always delivers out with the great deal of precision and consistency, a lot of numbers, lot of nomenclature, but thank you very much for that great start Louise. I want to thank all of you for participating in today's meeting.

So, whether you are with us here in New York or you're logged into the webcast, welcome. I think you'll agree that 2012 was a very important year for Johnson & Johnson, in spite of many challenges around the globe in our markets, meaningful innovation, the breadth of our businesses and the extraordinary achievements and the dedication of our people drove solid business results for the enterprise.

Now as we enter 2013 I believe we are well-positioned to sustain and drive growth in this increasingly dynamic global healthcare market. Now, I'm very pleased to be with you here today to review our 2012 business highlights and to provide you with an overview of the healthcare market, including some of the dynamics and trends affecting our industry and then I'm going to review our strategic outlook for 2013 and beyond.

Now later today the leaders of our MD&D segment were going to update you on their respective businesses and most of you know our MD&D meeting was postponed. It was originally to have taken place last fall but unfortunately Hurricane Sandy disrupted that plan and while in this case the storm may have caused the delay in having us review our plans and our businesses with you, the devastating impact that Hurricane Sandy had in our region really can't be overstated. And as expected, our employees spring into action to help deliver supplies, rebuild communities, and very importantly we’ve committed more than $5 million in products and cash to help the region that our company has called home for more than a century.

Now on a personal note I want to say how fortunate I am to be working alongside the many great people of Johnson & Johnson, and as always I want to start with the comment on our credo. Together there are more than a 128,000 of us around the world with wide ranging responsibilities and capabilities and we’re united by a common purpose. At Johnson & Johnson we’re committed to caring for the world one person at a time. And it’s a testament to this commitment that more than a 1 billion healthcare consumers each day rely upon the use of Johnson & Johnson products.

So let’s start by looking at our performance. We delivered on our financial commitments generating significant free cash flow and maintaining our AAA credit rating. We also advanced our near-term business priorities. First, restoring reliable supply of our OTC products to the markets has been paramount. Key products like children's TYLENOL and children's MOTRIN returned to the shelves. And we’re committed to continue building trust in our OTC products. We also made significant strides in the integration of Synthes, solidifying our leadership position in orthopedics, and later today you’ll hear from our MD&D leaders on some of their new innovations. And we continue building strong momentum in our Pharmaceuticals, with REMICADE, ZYTIGA, INVEGA SUSTENNA, INCIVO. We also strengthened our focus on the future by investing in innovation, progressing some of our enterprise initiatives that I'll take you through and expanding our global presence.

So, now let's review our financial highlights for 2012 versus 2011. As you can see our sales for 2012 increased 3.4% or 6.1% operationally, reflecting the outstanding progress of our newly launched Pharmaceutical products, the addition of Synthes and strong growth in emerging markets.

Now excluding the net impact of Synthes, operational sales growth was 3%. With our continued focus on financial discipline, our adjusted earnings were $14.3 billion, 3.4% and adjusted EPS was $5.10, up 2%.

We also generated significant free cash flow of approximately $12.5 billion. Importantly, we continued our track record of delivering consistent performance with 29 straight years of adjusted earnings increases, and 50 consecutive years of dividend increases, making us only one of six companies in the S&P 100 to achieve that record.

Now you can see our products are making a difference in the care of people around the people, as approximately 70% of our sales come from the number one or number two global market share position. And our commitment to investing in R&D is also paying off, with about a quarter of our sales being generated from products that have been introduced in just the last five years.

The solid shareholder returns are a hallmark of Johnson & Johnson, founded in 1886 and listed on the New York Stock Exchange since 1944, our commitment to managing for the long term has made Johnson & Johnson a solid investment choice for decades.

In 2012 a total shareholder return of just under 11% exceeded the Dow Jones index and although a nice return, it trail the other indices we compare to. And as we move forward, we're focused on decisively shaping our portfolio to deliver even more meaningful innovations to patients and customers.

Here are results by segment reflecting our broad base of leadership in healthcare. Pharmaceuticals generated $25.4 billion or 38% of our total sales. It had a strong operational growth rate of 6.8%. Medical Devices and Diagnostics our largest segment generated $27.4 billion or 41% of our total. Operational growth was 8.7%.

Excluding the net impact of the acquisition of Synthes in the June, operational growth was about 1%. Overall growth in this segment was impacted by our decision to exit the drug eluting stent market and the continued economic pricing and austerity measures within these markets.

Our Consumer segment generated $14.4 billion in revenue or 21% of our total. Sales grew about 0.5% operationally reflecting our efforts to address the issues in the OTC Consumer business, targeted portfolio decisions we made over the year and continued pressures in the marketplace.

In 2012 we generated $19.1 billion in segment pre-tax profit and the margin expanded to 28.5%. We also continue to invest for sustainable growth and absorbed additional amortization related to Synthes and even with that we leveraged our segment pretax margin. This is a great tribute to our business leaders. So in summary, Johnson & Johnson delivered solid results in 2012, with momentum continuing to build as sales growth accelerated.

Now let's move to the segment highlights and I'd like to start with our Pharmaceutical group. By any measure, we have transformed our Pharmaceutical business, demonstrated first by the impact we're having on addressing unmet medical needs of patients and by our strong growth with sales results of $25.4 billion. Our recently approved products are accelerating our growth through the strong launch execution programs we've implemented to ensure access and reimbursement.

In Europe, the Middle East, Africa, ZYTIGA, INCIVO and Xeplion transformed our product portfolio. In most recent IMS data positions Janssen as the fastest growing among the top 20 companies in Europe.

In Japan, we are the fastest growing pharmaceutical company among the top 25, having launched seven new products in the last two years. In the U.S., we hold the leadership position in total sales of new products launched since 2009. At the same time, while focusing on that kind of execution, we made significant pipeline advancements and received FDA approval for SIRTURO at the end of December, the first therapy with a novel mechanism of action against tuberculosis that the agency has approved in more than 40 years.

Now given the growing concern and the increasing prevalence of resistant strains of TB, I'm particularly proud of the impact that this product is going to have on patients around the globe. And we’re leading the industry with FDA approval since 2009.

Now a great example of the quality of the work that our team is doing with ZYTIGA, which I’m going to discuss with you in just a few minutes; another is XARELTO. But before I begin talking and discussing individual products, let me share with you another indication of the transformation that our pharmaceutical teams have produced.

This graph illustrates our accelerated growth rate in Pharmaceuticals over the past 11 quarters, and I’m going to take a moment to commend Paul Stoffels and Joaquin Duato, our worldwide chairmen for the Pharmaceuticals and their teams for their vision and leadership in fundamentally transforming our business.

XARELTO, it has the broadest profile of any of the novel oral anticoagulants in the market, with six distinct uses, and we hope to expand this profile further with a pending indication in Acute Coronary Syndrome. And we are seeing XARELTO capture significant share in the U.S. There were more than 1 million prescriptions written last year, and according to recent IMS data, XARELTO is capturing 30% of new to brand share in this category and is up more than 8% since the DVT/PE approvals in November.

We’re also starting to see (a cut into the) use of warfarin as well, which is down nearly 8% during the same period. Now XARELTO is also more than doubled our closest competitor in new to brand share among cardiologists treating patients with non-valvular AFib and just 3 percentage points behind warfarin in this setting. Furthermore the brand continues to make strong gains with 75% of patients on Medicare Part D and 85% of commercial lives now having tier 2 access, the preferred co-pay position of course for branded products.

We have an exciting and late stage pipeline of differentiated medicines. Canagliflozin, which has the trade name INVOKANA, is already filed for the treatment of Type 2 diabetes. And simeprevir or TMC435 is a potential best in class protease inhibitor for Hepatitis C that we're co-developing with Medivir and anticipates the meeting for regulatory authorization Japan, the U.S. and the EU in the first half of this year.

So with a very focused end-to-end strategy in R&D, we're investing in earlier stage programs, across our five therapeutic areas, with the aim to reach leadership positions in each of these categories. This focused approached allows us to position and invest in building leadership capabilities that are very specific to these disease areas. It also helps us attract the best scientists, researchers and collaborators, and create frankly a more efficient market approach by optimizing our sales forces ability to sell more than one product to the same position.

Now let's talk about our MD&D business. It is the largest medical technology business in the world, with sales of $27.4 billion. Sales grew 8.7% operationally, with the inclusion of Synthes. While overall market growth has slowed somewhat, we've been focusing on building our market leadership position and that sustained or grown share in the majority of our key platforms, holding number one or number two positions in over 80% of them.

With Synthes, we're further expanding our global presence with strong double-digit growth in emerging markets. As we look to the future, we're advancing innovative new products in our pipeline, continuing to take a disciplined approach to managing our portfolio and by adapting our businesses to the changing marketplace. We continue to invest for long-term sustainable growth and completed the largest acquisition in our history with Synthes.

Now, back in June, DePuy Synthes joined to form the world's largest, most comprehensive orthopedics and neurologics organization. The leadership teams are strong combination of talents from the two companies. As all of you know, joining two companies of this size and scale is no easy task yet customers and sales integration has proceeded its plan and in our future synergy opportunities ahead. Fully integrating, manufacturing R&D, it's going to take some time, but in the end we are confident that this endeavor is going to be good for patients, customers and for our business.

I would like to particularly recognize Michel Orsinger, in his leadership team at DePuy Synthes, who have done a great job on this integration so far. In addition, Michel, we have an experienced and talent leadership team and Gary Pruden, who leads our Global Surgery Business and Karen Licitra in Global Medical Solutions.

These three seasoned leaders are really shaping the industry's future by making smart discipline portfolio investment decisions to even further increase our competitiveness and bringing innovative new products and solutions to patients in healthcare providers around the world. You're going to hear from each of them later today.

Now, in the past year our Consumer business generated sales of $14.4 billion, representing operational growth of 0.5% and we are the sixth largest consumer healthcare company in the world, and as I stated earlier today, we are absolutely committed to returning the consumer business to growth. We are starting by restoring of reliable supply McNeil OTC products to the market.

Now since all of our business segments our investments in growth in Consumer will be predicated on a very-focused portfolio approach to deliver science-based products with local market insights for special endorsements and commercial excellence. We've taken steps to reshape our portfolio and divest in certain products or brands and we're also investing in growth and expansion in emerging markets with market-specific brands like DOKTOR MOM cough and cold products in Russia and by leveraging our strong iconic brands like JOHNSON's Baby.

Now regarding McNeil, we're continuing to operate in accordance with the consent decree and we've achieved our commitments to-date under our work plan, which has been agreed to with the FDA. The work to bring our plans fully online is progressing and so we continue to take a prudent approach to production volumes. We will return a consistent supply of key products to the market over the course of 2013 and we will make targeted investments in marketing and commercial support to ensure they regain their leadership position over that time.

Sandy Peterson, who brings 25 years of diverse global healthcare experience to Johnson & Johnson assumed her role last month and is focusing on returning our Consumer segment to growth, together with Jesse Wu, our Worldwide Chairman of the Consumer Group and his leadership team.

So, now let's take a few moments to talk about the global market dynamics that are driving so much of this change. Now, I think we all know and we'd all agree that there are enormous challenges and uncertainly in the global economy and frankly, in the global healthcare environment overall, but we've got to break with zero-sum thinking. So, let's envision for just a moment a world where creativity and innovation helped remake our options. For a better tomorrow, we don't need just new medicines and new products, but we need new philosophies, new approaches, and frankly a new mindset. We simply got to reinvent the way we think about healthcare, and patient needs must be first and foremost in this discussion.

Now, traditionally, we recognize that in any country economic growth creates the demand for greater access to better quality healthcare. And what's also true is that better quality healthcare leads to economic growth. So finding a clear path forward in reforming healthcare is critical to addressing the rising demands on the system as the population ages and requires even more healthcare than they do today.

We ultimately cannot allow the uncertainties before us to impact the care of patients. We're eager to work with others to try to find solutions, and frankly not just with other healthcare companies, the universities, governments, NGOs, communities. Beyond the legislative front, health care is an industry that is changing rapidly. It's one of the most important and emotionally rewarding industries in the world.

The healthcare market is large, it's growing. In developed markets, approximately, $5.5 trillion was spent last year. Even though compounded average growth rate as a percentage have slowed in these nations, estimates suggest that it will reach $8 trillion by 2022. So it's unquestionably essential that we remain focused on sustaining and expanding our leadership positions in these important markets.

Meanwhile, the emerging markets present significant growth opportunities by growing at CAGR rates double of that of the developed world. So we are increasingly allocating resources there to establish leadership positions in all of our segments.

Rapid expansion of the middle-class is increasing demand for better healthcare in places like Brazil, India, China and Southeast Asia. And the other dynamic is people are living longer and are more likely to be managing chronic healthcare conditions than ever before. A recently published report in Lancet on the global burden of diseases showed that for the first time in history, soon after 2015 there will be more individuals over the age of 65 than people younger than the age of five.

Now this is really important, because people over 65 use an average of seven time more healthcare than younger people. We’re also seeing a decrease in the ratio of economically active people to retired people in many developed and even in (semi-developing) countries, shrinking the revenue base for health and other public spending. And this is an increasingly important issue for healthcare systems that must meet the demand to provide even more quality healthcare.

The estimate suggests that cancers, mental health disorders, diabetes will grow at the fastest rates, and we’ve aligned our businesses, our sciences to focus on meeting the needs of these patients and markets. And the future will require new approaches to science and technology, new and more innovative ways of delivering healthcare, and new approaches to partnerships, collaborations. These types of innovations are essential to enhancing outcomes for patients and potentially bending the healthcare cost curve.

And our strategic framework focuses on us being leaders in this evolving healthcare market. You might recall that I introduced this strategic framework in July. It starts as always with our (cradle), which is the very foundation of our business. It defines our values and drives everything we do as a business, from day-to-day decisions to long-term planning.

It is our aspiration that by caring one person at a time, we will help billions of people around the world live longer, healthy, healthier and happier lives. Now this is an important source of inspiration for our scientists, our business people and all of our employees worldwide, and our four strategic principles are as relevant today as they have ever been. So, here is how we're putting our strategic framework into action.

We've identified the four growth drivers and the first I'd like to discuss with you is innovation. Now realizing advancements in healthcare must start with identifying the unmet needs of patients, the patients have got to be at the center and we believe in creating value in three core ways. First, through our distinct model of innovation; next, by taking a lifecycle approach to building market-leading platforms, brands and products; and third, by engaging in broad partnerships with patients, customers, payors to provide solutions and unique offerings that improve access and outcomes. I'm going to explain each of these.

Our distinct model of innovation has two key elements. It begins with accessing the very best science and then leveraging our own specialized capabilities to ultimately develop differentiated products. We're really agnostic as to where the ideas may emanate from and we will access the science internally or externally, with skilled, smart scientist in our labs, we're leveraging our internal capabilities and exploring new approaches that will potentially lead to innovative treatments for things like infectious diseases, more effective skincare products, new ways to restore mobility and by capitalizing our new technologies like predictive modeling tools, bioinformatics, biomarkers, we are able to select compounds that will ultimately have a greater probability of success in development.

Now, consistent with our approach of sourcing, the best science from anywhere in the world, we have executed roughly 100 alliances, licensing and acquisitions, collaborations, strategic partnerships across the enterprise last year, and we've also established four regional innovation centers as part of the very focused approach to accessing early resource programs. Now, these centers will help us transform our pipelines and will be instrumental in unearthing future products and solutions that are going to drive future growth.

Now, the skill of oncology is a particularly good example of our innovation model in action. Consider for just a moment the unmet medical need here. While cancers today are detected earlier and treated with less toxic, more targeted therapeutics, the case for developing new oncologic drugs is painfully obvious. It is the fastest growing disease category.

As I showed earlier, it will continue to increase unfortunately at alarming rates. That is driving this segment to a $65 billion global market and the category is forecast to grow at a CAGR of 8% reaching $111 billion by 2018. In 2008, there were 12.7 million new cases of cancer diagnose with 7.6 million deaths. By 2030, an estimated 22.2 million people will be diagnosed to cancer, leading to 13.2 million deaths. So, as we better understand how cancer cells work, how to interrupt their processes with better and more innovative medicines, diagnostics and biomarkers they will improve outcome for these patients. ZYTIGA is a great example of identifying the best science.

As many of you are aware, we acquired Cougar Biotechnology in July 2009 when the Phase III trials had really just begun. We then execrated a comprehensive full development plan to ensure the clinical studies would fully support the potential of this product and make a meaningful difference to prostate cancer patients. Now the good news is ZYTIGA has helped to expand in the market and now in the U.S. approximately 80% of chemo refractory patients seek treatment which is up from about 40% at the time of launch.

ZYTIGA is now approved in more than 65 countries for post-chemo Metastatic Castration-Resistant Prostate Cancer and generated $960 million in sales last year, making it the most successful oral oncology launch in history and the drug is broadly accessible. Here in the U.S. it holds 100% Medicare Part D coverage and coverage of 98% of commercial lives. We're very excited last month we received an approval on expanded label from both the FDA and EMA and that will allow ZYTIGA to be used even earlier pre-chemotherapy setting and we're looking forward to continue optimizing it's lifecycle, developing in another metastatic prostate cancer settings and for potential use in breast cancer.

Ibrutinib, an oral anticancer compound that we are developing in collaboration with Pharmacyclics, for B-cell malignancies, is another instance of accessing the best science to serve an unmet need. We see compelling, early efficacy and safety data in multiple B-cell malignancies and have initiated a comprehensive global development program.

Now in addition to the U.S. and EU, this includes parallel development in China and Japan, and over the last 12 months, we've initiated three Chronic Lymphocytic Leukemia Phase III studies and one Phase III in Mantle Cell Lymphoma that is also ongoing, as well as a number of our other earlier studies in B-cell malignancies.

The EVARREST Fibrin Patch exemplifies how we're leveraging opportunities across our enterprise to create value through innovation for patients within our model of innovation. As all of you know bleeding is a potential complication of really any surgical procedure and composes a significant challenge to surgeons. Severe, uncontrollable bleeding can raise mortality rates from less than 1% to 20%. In clinical studies, EVARREST was 98% effective in stopping bleeding and maintaining hemostasis compared to the current standard of care. Gary Pruden will tell you more about this innovation in the surgical technology breakout, later today.

So, our lifecycle approach considers the needs of the patient. As we build our platform approaches with brands that endure and products that can grow and ultimately lead in the marketplace. Our immunology franchise is another strong example. The worldwide immunology market is estimated to reach $50 billion by 2018. One in six people in the United States suffers from an immune mediated disease such as rheumatoid arthritis, Crohn's disease, psoriasis or asthma. People of all ages are affected by these very debilitating, serious diseases that present systemic comorbidities which impact their ability to function day to day, week to week. Now these diseases collectively have a multi-billion-dollar impact on the entire healthcare system. And while REMICADE and other anti-TNF agents have clearly transformed the treatment of many of these diseases, we are aiming to still improve efficacy response rates for these patients.

Our leadership platform in immunology begins with the three currently marketed biologics and have achieved nearly $8 billion in sales in 2012. Each of these addresses significant conditions. Now, of course, REMICADE is our foundational pipeline and a product, having received 16 FDA approvals. And we’re also developing SIMPONI and STELARA for expanded uses. SIMPONI is filed in the U.S. and Europe for approval in subcutaneous treatment for ulcerative colitis, in the U.S. as an intravenous therapy for rheumatoid arthritis. We’ve also filed applications in the U.S. and in Europe for STELARA for the treatment of psoriatic arthritis and we are running a Phase III trial in Crohn's disease.

So to sustain our long-term leadership position in immunology we built a robust late-stage development pipeline of differentiated biologics that includes sirukumab and (olokizumab) formerly CNTO 1959. We’re also excited about the novel oral therapies in our pipeline and as this science immunology evolves, we’re well-positioned to continue global growth in this category.

So, diabetes is another example of how we're building platform approaches to combat a disease area. Diabetes is a global crisis that no population or country can ignore and the unmet needs are considerable. It's one of the most common non-communicable diseases globally and chronically affects the body's ability to metabolize glucose. According to the International Diabetes Federation, an estimated 366 million people live with the disease, 90% of which are type 2, and the estimates grow to over 550 million by 2030. So, with our breadth of offerings, we are making a difference in helping people better manage their diabetes, from wellness and prevention programs offered by the Human Performance Institute to the no calorie sweetener in SPLENDA and with insulin pumps from Animas as well as the new OneTouch Verio Sync Blood Glucose Meter from LifeScan, which when approved in the United States will be the first meter to transmit blood glucose results to an Apple iPhone using our one touch (reveal) app, enabling patients to view and share results remotely with their caregiver, a real breakthrough.

As you can see, we are in the process of building a comprehensive platform for the management of diabetes with these products, and we are very much looking forward to adding INVOKANA, an innovative example of how we are approaching the treatment of diabetes pharmaceutically. Now this is an investigational oral once daily medication, offering a unique insulin-independent mechanism of action that actually lowers glucose levels by directly blocking reabsorption by the kidneys. Now, studies have shown that INVOKANA is effective across the treatment paradigm. It is the highest dosed. It provides a statistically superior glucose lowering relative to Amaryl and Januvia with the low incidence of hypoglycemia. It also contributes to reductions in blood pressure and bodyweight. Now, given its benefit, its efficacy, its safety trial profile Invokana has the potential to be the first choice for add-on therapy to metformin.

Now, on January 10, an FDA Advisory Committee voted 10 to 5 and supported the approval based on the results of our 10,000 patient clinical program. When approved by the FDA, Invokana will be the first in its new class of diabetes therapies available in the United States and we anticipated decision from the agency later this quarter and from EMA in the third quarter.

So, shifting from diabetes, let's talk for a few moments about oral care.

Now, Listerine is truly a flagship brand and a great example of how with our science deep insights from the consumer needs around the world, we continue to expand the market with new products by adding claims and professional recommendations. Last year in Asia, we launched Listerine Green Tea tailored the local taste, which follows by year the successful introduction of Listerine Essential developed for emerging middle class consumers in Latin America. Formulas launched initially in the U.S. like alcohol free, Listerine Zero are now driving market expansion in Europe and the Middle East, and this cycle continues with the recent launch of Listerine Ultraclean in the United States.

Now, the best innovations in healthcare technology mean nothing that people can get them. We are caregivers don't know how to use them and we want to be part of the solution. And across Johnson & Johnson, we are establishing broad partnerships that provide unique offerings to patients, insurers providers to ensure access to our products and also increase capacity in the overall healthcare system. Many of you are familiar with the VELCADE program in the U.K. and we're very proud that thousands of multiple myeloma patients there have accessed this much-needed treatment since the program's inception.

In response to the most acute nursing shortage in the history of United States, we launched the campaign for nursing's future to help recruit new nurses and nurse faculty and we've seen enrollment at entry-level back more at nursing programs nearly double and the number of young nurses have increased 62%.

In France, prior to agreeing to reimbursement the payers wanted to validate the RISPERDAL CONSTA would actually reduce the risk of hospitalization for patients with schizophrenia compared to other available antipsychotics. So, we worked with them and we initiated a one-year comparative affect in the study that showed RISPERDAL CONSTA reduced the risk of hospitalization by 34%.

This is a win for everyone. Patients are able to be treated with a very effective medication that improves their quality of life, we are fully reimbursed and this has had a neutral impact on the French healthcare system due to the actual savings that they get by reducing hospitalization.

Just in December we expanded ZYTIGA 1 support, a multi-channel adherence program with an award-winning educational component that has already helped to improve access and compliance for thousands of prostate cancer patients in the United States. You're going to hear more about this program, as well as the other innovative partnership programs Janssen has been involved with around the world during our Pharmaceuticals review that will take place in May of this year.

Later today you'll see how LifeScan and Animas are working with Aetna and Pfizer to help drive value in outcomes in diabetes. How in orthopedics, we're partnering with the AO Foundation to increase access to training programs for surgeons around the world. You'll also have the chance to learn more about other programs, when you visit the technical displays outside in the ballroom during the breaks later today.

Now I've talked some already about the importance of emerging markets. Here's a closer look at our global reach and local focus approach. As the world has changed, so has the geographical distribution of our businesses; employees, our products and our sales. Today, 56% of Johnson & Johnson's revenues come from outside the United States compared to about 40% just a decade ago.

Now we traditionally talk with you about BRIC markets which comprise nearly 10% of Johnson & Johnson's total revenue in 2012. Yet, the broader emerging markets are increasingly important approaching a quarter of our sales today, reflecting double-digit growth in 2012 on an operational basis, inclusive of Synthes.

Now to meet the demands of the emerging markets, the ability to capitalize on our broad-base of product offerings and critical mass, it really positions us well with customers and with governments and we've established and expanded our presence in global markets. We've leveraged our global portfolio. We selectively acquired new products that are really tailored to meet the needs of specific populations and I'll show you how we're doing that in China in just a minute.

To support our business approach, our regional companies have also optimized their infrastructure and we're continuing to invest and support dozens of institutes around the word designed to train healthcare providers on the effective use of our products. For instance at Sao Paulo Institute in Brazil, trains nearly 3,000 healthcare providers annually. The example of our commitment to offer localized healthcare solutions is also evident in India where we’ve opened the DePuy institute. Approximately, 1,000 physicians a year are trained there in the latest orthopedics techniques and technologies to help ensure that patients get the quality care that they need and that they deserve.

Now the work that we’re doing in China really illustrates how we’re building our businesses in important emerging markets. There are about 1.4 billion people in China. The majority are covered by some form of insurance but increases in healthcare expenditures are estimated to run to a 20% plus CAGR through 2016. And as their economy grows and more people enter the middle-class, there’s a rising demand for a broader array of better healthcare solutions. And while many companies are talking about expanding their businesses in China, at Johnson & Johnson we’ve been there for 27 years and we employ about 9,000 people. Our China business generated nearly $2.5 billion in sales last year, driven by a diverse and expanding portfolio of brands that Johnson & Johnson is known for globally as well as those that we’ve acquired to meet specific local need and demand.

We have seven major manufacturing facilities in China. Our (indiscernible) plant is equipped with world-class capabilities and produces over 240 million packaging units of high quality pharmaceutical products to supply 26 countries with benchmark cost efficiency. Our sutures plant in Shanghai provides raw material and semi-finished silk to the U.S., Europe and South America where we then complete production. We have a major new innovation center in Suzhou and I had the pleasure of attending that opening myself. The center is supplying medical device and diagnostics product specifically for the S2 market in both India and China. And these products are targeted at specific diseases states that are more prevalent in the region and they include simplified or smaller devices that are better suited for use outside the major cities in the top tier hospitals as well as multi-use products or even disposable products that are more economical. We already have a number of these products on the market; staplers, sutures, the blood glucose meter, and artificial knee, but all of us know there’s much, much more work that need to be done.

And as we seek to bring the promise of good health for as many people as possible, we know we've got to do more. Now as you can see our portfolio of offerings is diverse and expanding and includes iconic brands from our Johnson's Baby and our NEUTROGENA franchises. Important pharmaceutical products such as REMICADE, INVEGA SUSTENNA have grown strongly in the market. And they should be aided by Resolor and EDURANT, which are approved there late in December and also by SIMPONI and STELARA which we expect regulatory decisions on later this year. We’re also conducting research and development into new medicines that will address specific needs in China and in fact across all of Asia.

Just this last May we acquired Guangzhou Bioseal Biotech which has the only approved porcine plasma-derived fibrin sealant on the market in China. This acquisition will expand our biosurgery business there. Now we know the model in China works and we’re applying it to other countries as well. So let’s move now to our third growth driver, execution.

Excellence in execution is extremely important. Across our enterprise we have built greater accountability for quality into the requirements of all of our leaders and have strengthened quality and compliance at the enterprise level by taking specific steps to reduce variation and increase governance. We've also redefined standards and processes in the Johnson & Johnson supply chain. So, most importantly, improve the level of execution and to deliver efficiencies that can free resources up for investment.

Our recent productivity in pharmaceutical R&D leads the industry and our model for executing the launch of new pharmaceuticals is best in class. In MD&D we are changing the way we sell our products here in the U.S. by rolling out a new go-to market strategy that Gary and Michel will walk you through later today, and we're making decisive leadership decisions with respect to our investments.

As I've discussed with many of you before, there are many opportunities for us to pursue in managing our portfolio, and we must be more decisive and deliberate about our investment choices to remain focused on accelerating our growth and driving greater value. Now, while we've invested considerably in growth opportunities, we have also exited businesses, such as drug-eluting stents, and divested products and brands in each segment, including several in our consumer business as well as the professional wound care, Codman, (Theracos) and RhoGAM business in MD&D.

Now, as we look at our portfolio relative to our growth drivers, we've also made a decision to explore strategic alternatives for Ortho-Clinical Diagnostics business. We will be exploring all options, including a possible divestiture, where OCD could have greater potential from operating as part of another organization whose focus is more closely aligned with its core strength, or as a standalone company. In evaluating these options, we will also strive to maximize shareholder value. We continue to believe that diagnostics is important to the future of healthcare. We remain committed to exploring ways in which diagnostics can fuel our growth, such as the work we're doing in companion diagnostics to support our Pharmaceutical pipeline, as well as the point-of-care diagnostics that you're going to hear more about later today.

Our OCD business has made and we expect it will continue to make significant contributions to the field of clinical diagnostics whether or not it remains within Johnson & Johnson. OCD plays an important role in healthcare and meets an important demand in the marketplace with excellent product offerings.

Again, I want to reiterate that we are initiating the first steps of an exploratory process. There is much more work to be done in the meantime it's going to be business as usual. Our employees will continue to focus on the patent – with their patent in expertise and meeting the needs of our customers and the patients they serve.

I now want to touch briefly on our views about leading with purpose. We take our responsibilities as a leader in healthcare very seriously and we're fortunate to be in an industry where human healthcare is a very basis of our business and we measure success by improving the quality of people's lives.

First, the most fundamental obligation in health to expand access to care for people everywhere in the world, this is core to most healthcare reform efforts, but it's also essential to help address the HIV epidemic in the world's poorest countries, we're allowing generic drug manufacturers to responsibly produce generic versions of PREZISTA expanding access to this important medication.

We're also fully committed to working with health authorities around the world to make SIRTURO available to assist healthcare professionals in the fight against multi-drug resistant tuberculosis and we're going to make sure that we manage distribution in an appropriate manner to ensure and maintain this efficacy.

Our commitment to transforming the lives of patients and communities includes our contributions of about $900 million in products in cash last year, in support of over 600 programs that address major health related issues in local communities in more than 50 countries around the world. We've also made great progress toward our healthy future 2015 sustainability goals, as well as against our goals to reduce water consumption, carbon dioxide emissions and waste disposal. Initiatives such as these help the entire world.

Now all of this is possible because of the passion and the conviction of our people, who are the driving force behind everything we do at Johnson & Johnson. Our commitment and resolve to global citizenship, with an engaged global workforce, coupled with the scale and the breadth of company, positions Johnson & Johnson to deliver sustainable growth for the long-term.

Our financial strength; breadth of products and services, our global footprint and commitment to global citizenship positions Johnson & Johnson to drive growth in today's dynamic global market. And with our cradle as the foundation, we're delivering on our commitments to patients, employees, communities and our shareholders and we're committed to achieving our financial targets, which we will meet by executing against our near-term priorities and our growth drivers.

Thank you very much. I'm now going to turn the program over to our CFO, Dominic Caruso, to provide some additional comments on our 2012 performance, and guidance with respect to 2013. Then we'll go into our Q&A session. Dominic?

Dominic Caruso - VP, Finance and CFO: Thank you, Alex, and good morning, everyone. I’d like to provide some comments on our 2012 fourth quarter and full year results as well as provide guidance for you to consider as you update your models for 2013. It is a great pleasure to report solid financial results for 2012, a year where we also saw many successes that position us very well in the marketplace.

At the beginning of 2012, I provided you with an outlook of our financial performance for the year. Specifically we guided to net income margin that would remain at, approximately, the same level as in 2011 but that operating margins would improve over 2011 by 100 to 150 basis points due primarily to improved leverage across all operating expenses. As a reminder, we updated our original guidance in July 2012 to include the impact of the Synthes acquisition including the incremental amortization expense, and we forecasted that with good expense management we could still achieve that same 100 to 150 basis-point improvement in operating margins.

With the completion of the divestiture of our (Theracos) business late in the fourth quarter, the other income and expense line resulted in a higher net gain for 2012 than the guidance we had provided in October. As has been our practice, we take the opportunity to redeploy those types of gain in higher growth areas with additional investments in the business. This additional gain was offset by additional R&D expenses is related to the licensing and collaboration deals we entered into in the fourth quarter, such as the collaboration with Astellas for the development of a new JAK inhibitor and milestone payments related to other collaborations that have advanced in our pipeline.

Even with these additional investments and the incremental amortization expense associated with Synthes, I am pleased to report that we did improve operating margins by 100 basis points.

Also, although we are pleased with the passage of the legislation to renew the R&D tax credit retroactively for 2012 and prospectively for 2013 under the American Taxpayer Relief Act the credit is not included in 2012 results, since the legislation was not passed until 2013. Therefore, our effective tax rate for 2012 did not benefit from this credit as we had assumed. Yet, I am pleased to report that we were able to implement other tax planning strategies that resulted in our effective tax rate coming within the guidance we had provided.

Now during the fourth quarter, we recorded several special items. These special items amounted to approximately $1 billion on a pre-tax basis and consist of the following. We increased our reserves for litigation and program cost associated with the DePuy ASR Hip. As we disclosed previously, changes to the accrual would be required as additional information became available. We have taken an impairment charge for in-process research and development in the fourth quarter related to a small acquisition we did several years ago, where we have terminated one of the development programs.

Finally, we continue to report cost associated with the Synthes acquisition, which are consistent with what we expected would be incurred a special items throughout 2012 and which we expect will continue although at a lower level in 2013, as we continue to integrate that business. Together, these special items impacted our fourth quarter results by $0.28 per share. Excluding these special items, our adjusted earnings per share of $1.19 for the fourth quarter exceeded the mean of analyst estimates as published by First Call.

To wrap up our formal presentation this morning, I would like to provide some guidance for you to consider as you update your models for 2013. Let me begin with a discussion of cash and interest income and expense. At the end of 2012, we had approximately $5 billion of net cash. This consists of approximately $21 billion of cash and marketable securities and $16 billion of debt. For purposes of your models, assuming no major acquisitions I suggest you consider modeling net interest expense of between $450 million to $500 million.

Turning to other income and expenses, as a reminder this is the account where we record royalty income, as well as gains and losses arriving from such items as litigation, investments by our Development Corporation and divestitures, asset sales or write-offs. This account is difficult to forecast, but we would be comfortable with your models for 2013, reflecting other income and expense as a net gain ranging from approximately $750 million to $850 million, a substantially lower level than what we saw in 2012.

Now, a word on taxes; for 2012, the Company's effective tax rate excluding special items was 21.2%. We suggest that you model our effective tax rate for 2013 at approximately 20%. This effective tax rate for 2013 includes the Federal R&D tax credit renewed by Congress under the American Taxpayer Relief Act for both 2012 and 2013. As always, we will continue to pursue opportunities in this area to improve upon the rate throughout the year.

Now turning to sales and earnings; our sales guidance for 2013 takes into account several assumptions and key factors, but I would like to highlight which may not be fully reflected yet in your models. Those key assumptions and factors are. We have assumed a generic competition for CONCERTA will be on the market beginning in early 2013 and along with the impact of generic competition for ACIPHEX/PARIET in 2013 we expect that the impact to sales from generic competition will be at the same level as it was for 2012.

We divested a number of consumer brands throughout 2011 and 2012, as well as an MD&D divestitures that I just mentioned late in 2012, which of course impacts the absolute level of sales in those businesses. Looking at your models, we noted that the impact of these two items has not yet been totally reflected. If properly reflected this would have about a 1% negative impact on our growth rate versus many as your models.

As we have done for several years, our guidance will be based first on a constant currency basis, reflecting our results from operations. This is the way we manage our business and we believe this provides a good understanding of the underlying performance of our business. We will also provide an estimate of our sales and EPS results for 2013 with the impact to currency exchange rates could have.

As we've done in the past, we will use the euro as an example. As of the end of last week, the euro was at a $1.33 and it strengthened along with several other major currencies versus 2012 levels. Considering the factors I just noted, we would be comfortable with your models reflecting an operational sales increase on a constant currency basis, of between 5.2% and 6.2% for the year. This should result in sales for 2013 on a constant currency basis, of approximately $70.7 billion to $71.4 billion.

We are not predicting the impact of currency movements, but as an example to give you an idea of the potential impact on sales, there's currency exchange rates for all of 2013 or to remain where they were as of the end of last week, our sales growth rate would increase by nearly 0.003%. Thus under this scenario, we would expect reported sales growth to range between 5.5% and 6.5% for a total expected level of reported sales between approximately $70.9 billion and $71.6 billion.

Now turning to earnings; our guidance reflects the following major assumptions. First, the implementation of the medical device excise tax. This has an incremental negative impact to earnings per share of $0.05 and will be recorded in cost of goods sold. It is important to note that the overall impact of Johnson & Johnson of the provisions of the Affordable Care Act in 2013 is estimated to be the equivalent of $1 billion of cost or approximately $0.25 of earnings per share.

While this is a significant cost, we remain committed to the principle of providing broader access to healthcare for all Americans. We will have a full-year impact of amortization related to the Synthes acquisition of approximately $550 million on a pretax basis, or an incremental half year negative impact on earnings per share of approximately $0.06. Our estimated 2013 earnings include total intangible amortization expense for the entire enterprise of, approximately, $1.4 billion on a pre-tax basis.

We expect to continue to incur cost in 2013 at a similar level as we did in 2012, related to the ongoing implementation of our (approved) work plan for the remediation of McNeil OTC manufacturing facilities consistent with the consent decree. We expect to experience pricing pressure in 2013 across many markets, particularly in Europe. The impact of this negative pricing pressure is expected to negatively impact our operating margins by, approximately, 50 basis points.

And finally with respect to our shares outstanding I’ve noticed that in many of your models you expect a lower share count that we are projecting to have. As a reminder, in connection with the financing of the Synthes transaction, we had implemented an accelerated share repurchase through Goldman Sachs and J.P. Morgan. Until those two investment banks complete buying back those shares in the open market we cannot engage in the share repurchases even for shares issued in connection with our employee stock plans. We expect this program will be completed by the middle of this year.

Now considering the factors I just noted, we suggest that you consider full-year 2013 EPS estimates, excluding the impact of special items of between $5.30 and $5.40 per share on an operational basis or growth rate of between 4% and 6% on a constant currency basis. We are not predicting the impact of currency movements but to give you an idea of the potential impact on EPS if currency exchange rates for all of 2013 were to remain where they were as of the end of last week, then our reported EPS excluding special items will be positively impacted by approximately $0.05 per share due to exchange rate fluctuations. We therefore suggest that you model our reported EPS excluding special items in a range of $5.35 and $5.45 per share or a growth rate between 5% and 7%. At this early stage in the year, we would be comfortable with your models, reflecting the midpoint of this range.

Finally, as you update your models for the guidance I just provided, you will see that we do expect that operating margins will show a slight improvement in 2013 over 2012 levels. We also expect that overall net income margin will be approximately the same as in 2012 as we expect to achieve net income growth consistent with sales growth despite the incremental impact of the full year of amortization expense related to the Synthes acquisition, the pricing pressure that I mentioned and of course the impact of the medical device excise tax.

Additionally, as a reminder we expect to have significantly lower level of gains in the other income than expense line as compared to the prior year. So, we recommend that your models reflect that lower level in the first half of the year.

Now in closing, we are very pleased with the overall results for 2012 and we expect the continuation of the growth and momentum into 2013. We have the financial strength and breadth to execute on our near-term priorities and deliver solid results, while continuing to invest in growth by following our four core growth drivers.

We are confident in the underlying strength in our business as evidenced by strong core products, exciting new product launches, robust pipelines and extraordinary global expansion opportunities. I look forward to updating you on our progress throughout the year.

Now I would like to turn the program back over to Louise to begin the Q&A session. Louise?

Louise Mehrotra - VP, IR: Thank you, Dominic. We'll now open the floor to your questions. As we have Alex with us I would appreciate that you keep your questions at the strategic level and please wait for the microphone as we are webcasting this meeting. So, Mike?

Transcript Call Date 01/22/2013

Operator: Mike Weinstein, JPMorgan.

Michael Weinstein - JPMorgan: So, two questions, Alex and the first is you've identified the OCD business as one to evaluate today where you said you'd be exploring strategic options. Could you spend a minute on why that business first, you said there was a lot you contextually do with the portfolio, so, why would that business necessarily call it first on the list? Then second you showed a great chart which showed the turn in the pharma business over the last couple of years. Can you – since we're going to spend the day today talking about MD&D? Can you spend a minute on Consumer and how we think about the turn in the Consumer business over the next couple of years with McNeil products coming back and what gets that back into a growth phase?

Alex Gorsky - Chairman and CEO: Sure. Thanks for the thoughtful questions, Mike. Let's start first with OCD and let me first start by making a strong statement about our continued commitment to our employees in OCD and what they are doing each and every day to make a difference for healthcare around the world but with only Johnson & Johnson and as we talked about a number of times in the past, as we are looking or as we look at our strategies, as we look at our portfolio, we realized that it's more and more important particularly in today's healthcare marketplace to be very decisive and deliberate about where we believe we can make investments that number one, make the biggest difference for patients and number two, they can drive the greatest growth for our business. And as we conducted our portfolio review looking across our enterprise, when we looked at diagnostics what we see is a business with many very good technologies. We also saw business that did not have a number one or number two position within their respective marketplace. We also look obviously at the future pipeline. Could we in fact and did see a path forward to be able to be in a more competitive position. And three, how did we see it fitting in a more complementary way with some of our other businesses. While we certainly believe in the future of diagnostics, we think that that will more likely be in an area outside of clinical diagnostics, such as molecular diagnostics, biomarkers, some of the other things that we're already working on with some of your oncology programs. So when we looked at that in total, we felt that stepping back and looking at broader strategic options for that business was in fact the best thing to do for that business longer-term as well as for more broadly across Johnson & Johnson. I also just think it is indicative of the need for us to continue to look for ways, again, to make a better difference for patients and to drive growth in our organization. Now to your second question, if I look more broadly across Consumer, I'd start by saying that we remain very committed and excited about the future of our Consumer group. It's been central to J&J for many, many years. And as we look to the future, there's a couple of aspects that I think are very important. One, and something that we've been extremely consistent about over the past several years, is returning and repairing some of the quality and supply issues that we've had in our OTC, particularly in the OUS division. I'm very pleased with the progress that we're making in that. We mentioned to you that the consent decree that we had designed in conjunction with the FDA was approved and reviewed in October with very few comments, and given the breadth and scale of that agreement we felt very good about that. We've had teams working hard since then. We've achieved all of our major milestones since we've submitted that agreement. And very importantly, we're starting to see some of that pay off in the marketplace. So over the past six months, we've seen the re-entry of things like children's TYLENOL, children's MOTRIN. And what we're particularly pleased about is that if you look at some of the consumer ratings of the quality of those brands, we've seen them be remarkably resilient through this period. And when we get them back to the market, we've seen uptick occurs. So we're cautiously optimistic. Our plan through 2013 continues with this driving performance, consistent with the consent decree. We would expect that over the course of 2013 to return about 75% of the brands to the marketplace. Of course, as we do that, we will also begin shifting our focus, not only from making sure that we can have a consistent and reliable supply of that product, but also that we can truly re-launch working with our trade partners, working with our great marketing teams to reestablish those brands and their leadership positions in the market. And we'll do that as the brands reenter over the course of 2013. Let me just make one other comment. We’re also very pleased to see, particularly in the fourth quarter, the upper respiratory strong performance of our consumer brands. So we believe that we continue to have a lot of skills and capabilities that are going to be important for us to continue to build on going forward. Now outside the OTC business, I think, there's, again, a lot of other reasons to be optimistic. And granted as we looked at the results, we’d be the first ones to say, while we’re pleased in some areas, we’re not satisfied, and that we know we need to do a better job across the portfolio. Also some of the results were impacted by divestitures and portfolio decisions that we made in our Consumer group. But when we look at some of the core areas, such as skin care, our NEUTROGENA business, and some of the things that they have in CYTOMIMIC, wrinkle reduction, other technologies, really science-based technology and what we think we can do there, if you take a look at things like oral care, where we’ve driven strong growth, great opportunity to build on that brand, LISTERINE, in a global fashion. When we look to an opportunity to grow and expand our business globally, particularly in emerging markets, and we admit we’ve seen some setbacks in China due to some of the ingredient issues, but our teams have addressed that over the past year and we’re confidence that we have a path forward. And finally last, but certainly not least, our Johnson's Baby line, which is really an iconic brand that we still know has a lot of potential, we see it as an important driver of growth in the future. I think for 2013, to be clear, our projections are very consistent with many of yours, but beyond that, our Consumer group remains a very important strategic driver at Johnson & Johnson.

Louise Mehrotra - VP, IR: Next question, Matt, fourth row.

Matthew Dodds - Citi: It’s Matt Dodds from Citigroup. Probably a little for Alex and Dominic on this one. If you look at the ’13 guidance, the op margin increasing next year. This year you got a lot of it at SG&A, but I would assume you also did bring down some cost in the gross margin. If you look at ’13 broadly, should we assume it’s mostly SG&A, or is there more cost on the COGS line in 2013? And (I’ll wrap in the end with a question) for Alex.

Dominic Caruso - VP, Finance and CFO: So I could take that. So, Matt, yeah, we did see actually in ‘13 a pretty dramatic reduction in SG&A cost – sorry – in ‘12. In ‘13, we won't have as significant an overall pretax margin expansion as we saw in ‘12, but we will still expand these operating margins, some again in the SG&A line, not so much in the R&D line, but we will see cost improvements kick-in in the COGS line in 2013.

Matthew Dodds - Citi: Then, Alex, just to follow-up on that, with the U.S. still kind of sluggish in Devices and Consumer, can you pull out enough costs over the next couple of years to maintain the margins in that business? I know you've done some restructuring changes in some of the sales force or some things. Where do you look at the profits in the U.S., if we don't get a bit of a bounce in the overall growth rate?

Alex Gorsky - Chairman and CEO: Matt, was your question specifically for Consumer or…

Matthew Dodds - Citi: It's overall, but I think MD&D and Consumer are the two where you've seen the weakness. Pharma’s come back quite well.

Alex Gorsky - Chairman and CEO: Right. Well, certainly, the macroeconomic situation is something that influences, I believe, our Medical Device business and our Consumer business to a greater degree. As we look at some of the underlying dynamics in the market and some of these metrics, of course, we talked about with you in the past. If we look at hospital admissions, if we look at surgical procedure rates, if we look at things such as diagnostic rates in hospitals, and even primary care physician visits. Most of those categories appear to be about between minus 1 and plus 1, depending on the specifics ,so like negative 4.4, plus 0.7. So, we're projecting it’s likely for a pretty flat trend to continue in the short-term, and I think it's very – we have to work our way through what happens with some of the fiscal discussions here in the United States. That's very difficult to predict and I don't think any of us would try to make a projection on that going forward. I think beyond that, we still see a lot of reasons to believe in underlying growth, and as procedures are delayed and in certain areas, by the way, we were very pleased with some of the resurgence that we saw, for example, in the hip and knee categories, especially in the fourth quarter of this past year in MD&D. Michel is going to take you through that later on, but as you heard in Louise's discussion earlier, we saw a 7% growth rate in the U.S. – excuse me – worldwide we saw 7% and 4%, 6% on a worldwide basis. So, we are pleased with what we've been seeing there, and particularly pleased with that team, because I think that there were some significant challenges and they seem to be making some really good headway. But I think, overall in MD&D, we would expect there to be continued pricing pressure. In Consumers, in the Consumer area, again, I think a lot is going to depend on the macroeconomic environment, but I would get back to some of the drivers that I mentioned as part of my last response to say why we are still optimistic about that area going forward.

Louise Mehrotra - VP, IR: Larry Biegelsen, Wells Fargo.

Lawrence Biegelsen - Wells Fargo: One question for Dominic, one for Alex. Dominic, the contribution from Synthes in 2013, is it similar to 2012, up 3%? The reason I'm asking is because your guidance, if it is similar, would be about 2% to 3% organic growth, which will be a lot lower than what we saw in the second half of 2012. I understand the generic impact, but you do have Consumer potentially coming back, DOXIL potentially coming back. So, is the math right, and why the conservatism, if that's what it is in the guidance? Then one for Alex, just your U.S. businesses in the fourth quarter, all seem to have slowed a little bit. Were there specific issues to J&J, or is there anything in the U.S. market that you saw? Just lastly, maybe an update on Europe, just the state of Europe from your big picture perspective.

Dominic Caruso - VP, Finance and CFO: Let me take your first set of questions. The impact of Synthes is about the same in both years. I think, therefore, your observation is that the growth rate ex-Synthes is also similar, and couple of points on that. One is that, yes, the consumer business is coming back, although, as Alex mentioned throughout the year, so it’ll take some time by the time all those products get back on the shelf. The MD&D business will do better in 2013 than in ‘12. The growth rate in the pharma business, of course, in ‘12 was dramatically fuelled by the launch of the new products that came into the market, so the growth rate in ‘12 versus ‘11 is impacted by that, and we don't have that same phenomenon in ‘13 over ‘12. Those products continue to do well, but relatively speaking compared to the two years the growth rate in pharma would be not as dramatic as the growth rate we saw in ‘12 over ‘11. You asked about why the conservatism and – look, it's early, it’s January 22nd. So we'll keep you posted throughout the year.

Alex Gorsky - Chairman and CEO: What I would say is, if we look at the U.S. business, particularly in the back end of the year, as you noted, I think it started on – it started on strongly with our pharmaceutical business. We saw very strong performance particularly in our launch brands, XARELTO, ZYTIGA, with some of the new indication information data that was being released, but really across that portfolio, even the immunology as well, very strong performance. As we look at MD&D, we did have some challenges in certain areas of our business. I think it's important to acknowledge that. Some of them due competitively, some of them due to some disruptions in supply, But I would characterize those as I think more of event driven versus systemic in nature, and I think you'll hear later today from Gary and Michel and Karen about the pipeline, about their competitiveness, about some of the very innovative programs they are driving, that you'll walk away confident with the plans that they have in place. Just a couple of things that I would note there. One was the – we're really starting to see a pickup in our Vision Care business. For example, in the fourth quarter this year, as you heard, 6% and 7% growth, respectively. We've got a very exciting portfolio there. So we're excited about that opportunity. As I just mentioned a couple of minutes ago, in Synthes, particularly in core, hip and knee business, we also saw some strong performance. Then we're offsetting that in orthopedics and the Synthes. We did have the nail recall in trauma, which again was more event specific than we think longer term. I really think that the DePuy Synthes team has done a great job in managing that; in fact, by later in the quarter, very early in January, we had product back in the operating rooms, and we're real confident in our ability in managing that going forward. Now if I look at consumer, we would say there were some areas of softness, again that we think were more related to some regulatory actions that were earlier in the year related to our Skillman facility. But if we look more broadly, and we look at things like our OTC performance – again, this was a business that's been under a significant amount of pressure in a very competitive category and to drive the kind of growth they did in upper respiratory, we're really proud of that team, and oral care also turned in a strong performance as well. So, as Dominic just mentioned, I think we look at all of these markets right now, given the macroeconomic issues, and we have to be realistic. But, nonetheless, I think overall the trends that we mentioned we think are manageable and you’ll see that as performance grows in 2013.

Louise Mehrotra - VP, IR: Rick, third row from the front here.

Rick Wise - Stifel Nicolaus: Rick Wise, Stifel Nicolaus. First for Dominic and then for Alex. Dominic, both you and Alex have mentioned the seemingly better performance for ortho. Just can you help us understand, is it product driven, is it comps, is it – were there any difference in selling days? Seemed like a nice step-up versus the third quarter. Alex, a broader, bigger question for you. I’m always fascinated by leadership and change in leadership. Every leader brings a special passion and differentiates themselves versus their predecessors, no matter how excellent. Today you’re talking about decisiveness, many opportunities to manage the portfolio technology. Can you help us understand how we should be holding you accountable or thinking about your plans or what’s truly a special sauce, if you will, you’re going to bring to the job?

Dominic Caruso - VP, Finance and CFO: Alex will comment on the orthopedics business, as will Michel later, but just a reminder, we haven't seen all the orthopedic companies report yet, right. So ,although, we’re pleased with our results, a little too early for us to indicate that we've gained share or not. But certainly these results are impressive and our early indications are that we have done better in share in both hips and knees, especially in the U.S., but a little too early to comment on that, given the fact we haven’t seen the other competitors yet.

Alex Gorsky - Chairman and CEO: If could augment onto that, again Michel, the true expert, can jump on this later. But I think if we looked particularly in knees, we are seeing the market come back a bit more than in hips right now. I think Dominic's points are spot-on, and that we believe although we haven't seen everybody else report. So, it's preliminary that we performed well in both those categories. We saw knees come back a little bit more than hips, but fundamentally, we think that if you look at our product offering too that we have, you're going to hear more about the new knee system that will be launching through the course of 2013 with ATTUNE. We brought a number of new offerings in our hip portfolio out there. So, we think it's a combination of, one, some internal market, and some of it was what I would call the fourth quarter dynamic in orthopedics that you sometime see as people go until the end of the year, but overall, we are encouraged by the signs that we saw back into 2014. Now regarding the broader agenda, Rick, I think that I've been very fortunate in taking over a great organization from Bill and his leadership, and it's really not about my agenda. It's about the agenda, the great leaders that we have sitting out in front of you, and when you consider the scale, the breadth and the depth of our business, it's far beyond one person. It really takes a team of great minds working together. What I'm particularly pleased about is that there is a strong recognition of wanting to what I’d call respect the past and the great heritage that we have across many of our brands in our portfolios, but there is also a real recognition on this team and a hunger for what do we need to do fundamentally differently to drive growth going forward around patients and our business. That became the foundation for the strategy review that we pulled together looking hard at innovation, and recognizing that while we have a good track record innovation, the market is going to demand us to do even more, and whether it's Paul Stoffels and his team, Martin Madden and his team, and others that we have going, that throughout our portfolio our ability to bring technology to market that really makes a difference, that has the right clinical data around it, including outcomes data, to innovate in the way that we commercialize our products in the market. You are going to hear a lot of information about that this afternoon, is that we fundamentally believe that as customers experienced the pressure – when I say customers, it can be governments, it can be hospital systems -- of this increasing demand and increasing costs in a challenging economic environment, that they are going to be looking for fundamentally different ways of engaging with partners. We think that's where the breadth and the scale and the depth of our portfolio across areas such as orthopedics, such as general surgery, such as diabetes, such as immunology, is going to better position us by having a broader, more comprehensive offering than, frankly, any of our customers. You are going to hear a lot more specific examples of that this afternoon, and in fact in the coming weeks and months, because we want to be part of the solution in working in healthcare, but we also want to be competitive and we are going to win. So that's part of our mindset. I think the second component to that is global, and we are spending a lot of time focusing on how can we accelerate our growth outside the United States. You have to figure earlier, 56% of our sales are currently outside the U.S. We know we have even greater growth opportunities beyond just the BRIC markets, but I would say in overall the emerging markets. Hence, greater investments in those areas, as well as different kind of product offerings in many cases, and clearly those two things being topped off with a major focus on execution and leading with the purpose that really inspires our people.

Kristen Stewart - Deutsche Bank: It's Kristen Stewart from Deutsche Bank. I just wanted to focus a little bit on the portfolio management. Obviously, today, the question is already asked on OCD, but maybe if you could just help us a little more broadly about how you think about J&J in just looking at the portfolio. Through the past there's been references to adding in a fourth leg, I know Dominic has mentioned that before, which seems not necessarily the case. I don't know if that's changed. Other times you've already talked about things like microelectronics, life science tools, structural heart. I don't know if eye care is also interested in expanding in solutions. But maybe you could just help us think about J&J as you're going forward looking at strategic alternatives for OCD what the appetite for M&A might be on 2013 and beyond?

Alex Gorsky - Chairman and CEO: I think we've been fairly consistent in the way we've articulated our strategy around M&A. First, really starting with what is – where is there unmet need that we feel -- where we should or can be a part of the solution, and that can start with great technologies, that can start with great companies, and there's examples of both that we've had. Historically, that resulted in us going out and acquiring something new. I think more and more we're looking at the second aspect of how does it fit in a complementary way with our other businesses as part of making a broader offering, similar to what we're seeing now in Synthes in our vision. So we're always looking for businesses again that can complement, just don't replicate. but truly complement and synergize with some of our existing businesses or some of our platforms. I think the other area that we're also acutely aware of is how do we drive additional growth globally, particularly in emerging markets. We've done that, I believe, in a disciplined and selective way so far. I mentioned the recent acquisition we did in China to expand our biologics platform. Here we're very excited about the patient and the business opportunity represented by our biosurgical franchise. It's another example of where we started with that product, the technology, and we're building an entire platform to reshape the way that the bleeding is controlled. An important component of that is not only to do that in developed markets, but how do we do that in developing markets, how do we source the right kind of capabilities. So by doing this in China, we think that that's going to give us a great opportunity. We've done it in our consumer group with some of the products I mentioned in Russia, DOKTOR MOM. So that's an area where we realize that if we only rely on endogenous growth in some of those markets, we won't accelerate at the rate that we're hoping for. That being said, we need to be very thoughtful about which companies and how we go about it in some of those markets. So those are a few examples of, I think, areas of interest for us.

Tony Butler - Barclays Capital: Tony Butler of Barclays Capital. Alex, one for you, and then two quick ones for Dominic, please. Alex, I'm just curious if we could just go back to comments made earlier about Washington and not knowing which way the wind blows there, and I think we all would agree. But what is your view of the dual eligible, and do you think there's a resolution in the near-term? Then, Dominic, just two brief questions, one on VELCADE, and could you discuss the tenders and what happened in that particular – in this particular quarter of Q4? Also comments around the flatness sequentially in ZYTIGA.

Alex Gorsky - Chairman and CEO: Look, our approach all along has been that it’s very important to make sure that as we work our way through healthcare reform that we stay focused on solutions that, one, do improve or provide access for people who are either un or underinsured in this country. We think it's unacceptable there’s such a high number, and so we’ve tried to work very closely with our trade organizations, with governments, to make sure the patients can get access, so we think that’s important, number one. Number two, specifically as it relates to dual eligible, we try to work with our trade partners at pharma, with the government in good faith towards the additional ACA. We think that, by and large, the program run Medicare Part D has been very successful, and we just need to be aware that as we make commitments, as we create programs, that we do so in a way that leads to a consistent approach and, number two, that ensures we continue to reward innovation. Because if we don't reward innovation, we’re not going to have the next ZYTIGA, we’re not going to have the next ibrutinib, and some of these wonderful compounds. By only focusing on costs, we will not cure Alzheimer's, we will not take care of diabetes in the way that we should. So that's why we’re very anxious to work with a lot of other partners on coming up with a way that we’re preserving this underlying encouragement and motivator for innovation, and that’s something that we’re working on.

Dominic Caruso - VP, Finance and CFO: With respect to VELCADE, the only thing that happened there is that, typically the tender process would've called for a new tender in the early part of 2013. It actually was accelerated by the Russian government into 2012, so it was just an earlier tender there and we won that tender, so we actually had the sales benefit from that in the fourth quarter. Then ZYTIGA, the flatness can be described or can be attributed really to the patient assistance program that we initiated, so that patients that can’t otherwise afford ZYTIGA for prostate cancer can still have access. If we look at underlying scripts, the scripts are still growing.

Louise Mehrotra - VP, IR: One final question from David up here, and then we'll have some closing remarks from Alex.

David Lewis - Morgan Stanley: Thanks. David Lewis, Morgan Stanley. I'll limit to one, Alex, for you. You talked extensive innovation in your prepared remarks. Since last several years there's been this big debate about what J&J spends are on R&D as a percent of Pharmaceutical sales, and whether that number should be 15% or 20%, that's kind of huddling around 20%. It sounds like if we think about our comments on innovation, should we expect that level of R&D for Pharmaceutical, Alex, to remain around that 20% level? Maybe a quick comment, if you could just talk about the total corporation how you see R&D spending under your leadership?

Alex Gorsky - Chairman and CEO: Sure. I'll keep it at fairly high level, and then Dominic you can take it any deeper. But we believe that innovation continues to be absolutely critical to our success going forward. If you take a look at our investment that we've made in the Pharmaceutical business, for example, over the last several years, I think we can make a pretty compelling case that we've seen the results of that based upon the transformation that we've had in our Pharmaceutical business. Now that being said, we realize it's also incumbent upon us to be as absolutely efficient as we can be, as well as being effective. Paul and his team have done, I think, a remarkable job on that side as well. As I talked about, if you look at some of the efficiency indices that are out there right now on a per patient basis, I think we've done a very good job of managing that, because we realized that that's critical for us as well. Other groups, we also realize – look, we are going to be under increasing pressures, whether it's on a pricing perspective or from a markets, and that's why we have taken some of the actions we have. So, Gary, Michel and Karen are going to take you through some of their ideas later on. We're bringing together Ethicon and Ethicon Endo-Surgery the way that we did we think will provide us not only with a better ability to continue invest in innovation and differentiation, but also frankly better serve our customers and respond to some of the demands that that they’ve had, and Michel in a very similar way. The other thing that I’d add on innovation that I think makes us unique and it's a real opportunity, is this opportunity around conversions as well. Biosurgery business is a wonderful example, but in every one of our businesses, we've got examples now. Again, diabetes we talked about commercially, but also some things scientifically. We got other things that we're working right now and the whole biosurgery area and there is a number of opportunities for us to work across J&J that I think allows us to not only build better capabilities, but leverage scientific capabilities better than many of our competitors.

Dominic Caruso - VP, Finance and CFO: Just additional comments on the R&D spending at the higher end of the industry norm although there are other innovators in pharma that will also spend at that high level. So, we view ourselves as an innovator in pharma and for that you should expect us to be spending at the higher level and quite frankly, with the productivity that our R&D organization and pharma has been able to deliver that's a fantastic investment from my point of view. Overall, for the enterprise, we tend to average an R&D spend as a percent of sales higher than our competitive set blended. Again, that's much more capital efficient way of growing our business and as long as that's productive we're happy to invest at higher levels than our competitors. We've had the find ways to fund that and you saw that that's what we did this past year about a significant reduction in the SG&A costs. So, as long as our R&D is productive and we can bring innovation to the marketplace we're happy to spend more in the industry in that regard and then obviously then hopefully grow at a rate faster than our competitors as well.

Dominic Caruso - VP, Finance and CFO: Well, everyone I'd like to end where I started earlier this morning and really thank all of you for participating in today's meeting. As I said, during my talk earlier I think our strategic framework, our board-base of product offerings, critical mass, really positions Johnson & Johnson well to drive growth in today's dynamic market. This year, we'll continue delivering innovative new products and solutions for consumers, for patients around the world by implementing the long-term priorities that we outlined, as well as our short term priorities and I look forward to updating you on our progress against them as we move through the year. So, I'd like to say thank you again and I'll turn it back over to Louise.

Louise Mehrotra - VP, IR: Thank you, Alex and Dominic. And we will now take a short break and resume at 11 o'clock. Thank you.