Johnson & Johnson (JNJ.US) Q3 Earnings Call: Annual Revenue on Track to Top $100 Billion for the First Time; Strong Innovative Medicine Offsets MedTech Headwinds

Johnson & Johnson (JNJ.US) announced its fiscal year 2026 third quarter financial results and held an earnings conference call. The results showed that Johnson & Johnson's third quarter sales increased 5.9% year-over-year to $25.4 billion, in line with consensus expectations. On the earnings side, under GAAP, net income plunged 95.9% year-over-year to $210 million, with diluted earnings per share of just $0.09 (compared to $2.12 in the prior-year period), primarily due to a one-time pre-tax charge of $5.519 billion related to the proposed talc litigation settlement. On guidance, Johnson & Johnson raised the midpoint of its full-year 2026 reported sales guidance from approximately $101.1 billion to $101.2 billion (range of $101.0$101.4 billion), and raised the midpoint of adjusted earnings per share guidance from $11.04 to $11.10 (range of $11.05$11.15), both above consensus expectations. Management stated that 2026 will be a year of accelerating CKH HOLDINGS impact, and the company is on track to surpass $100 billion in annual revenue for the first time in its 140-year history, and reiterated its goal of achieving double-digit growth by the end of the decade. Strong Innovative Medicine offset headwinds in certain MedTech areas; MedTech long-term fundamentals remain strong, but the company clearly needs to improve Cardiovascular and surgery outside the U.S., and is taking action. The company expects better performance in 2027 and will provide more 2027 outlook and early pipeline information at its Enterprise Business Review on December 8. The following are the specific contents of Johnson & Johnson's third quarter earnings conference call. Management Statements Operator Good morning, and welcome to Johnson & Johnson's third quarter 2026 earnings conference call. Today's call will be recorded. I will now turn the call over to Johnson & Johnson. Ryan Koors (Vice President, Investor Relations) Hello everyone, I'm Ryan Koors, Vice President of Investor Relations at Johnson & Johnson. Welcome to the company's review of third quarter 2026 business results and full-year financial outlook. I'd like to remind everyone that today's presentation and related schedules are available for download in the Investor Relations section of the Johnson & Johnson website. This presentation contains forward-looking statements relating to the company's future operations and financial performance, market position, and business strategy. Please do not place undue reliance on these forward-looking statements, which are based on current expectations of future events and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Descriptions of relevant risks can be found in SEC filings. Today's agenda: Chairman and Chief Executive Officer Joaquin Duato will discuss business performance and growth drivers; I will review third quarter sales and P&L results; Chief Financial Officer Joe Wolk will share capital allocation priorities and updated 2026 guidance. Tom Cavanaugh, Worldwide Chairman of Innovative Medicine, John Reed, Executive Vice President of Innovative Medicine R&D, and Tim Schmid, Worldwide Chairman of MedTech, will join for Q&A. The call is expected to last approximately 60 minutes. Joaquin Duato (Chief Executive Officer and Chairman) Thank you Ryan, and good morning everyone. Our strong third quarter performance strengthens our confidence in 2026 as a year of accelerating CKH HOLDINGS impact. Third quarter operational sales growth of 6% exceeded consensus expectations and accelerated sequentially from the second quarter. We are leading in six strategic priority areas: Oncology, Immunology, Neuroscience, Cardiovascular, Surgery, and Vision. The powerful combination of Innovative Medicine and MedTech expertise enhances our competitiveness. We currently have 29 products and platforms with annual sales of at least $1 billion. The marketed portfolio continues to perform well, newly launched products are gaining significant momentum, and the new product pipeline will support growth in the next decade. Third quarter sales exceeded $25 billion, and we are on track to meet guidance and surpass $100 billion in annual revenue for the first time in the company's 140-year history. With a differentiated portfolio and pipeline advancing, we have a clear path to achieve double-digit growth by the end of this decade. Innovative Medicine operational sales grew 7.9%, with 8 brands achieving double-digit growth. In Oncology, we are redefining cancer care from treatment to cure. Third quarter Oncology grew approximately 17%. The multiple myeloma portfolio and pipeline are unparalleled, with 80% of patients receiving Johnson & Johnson therapies during their treatment journey. We continue to strengthen support for recently launched multiple myeloma therapies and combinations. New Phase III results announced in July showed that TECVAYLI combined with TALVEY reduced the risk of disease progression or death by 89% in second-line treatment. In solid tumors, RYBREVANT sales grew 64%, reflecting its strength in lung cancer. We expect U.S. FDA approval of RYBREVANT FASPRO for advanced head and neck cancer by year-end. In bladder cancer, INLEXZO rapidly became the market leader in new patient share just one year after launch, with nearly one-third of eligible patients starting an INLEXZO regimen in the third quarter. We also completed the acquisition of Firefly Bio this quarter, adding a promising degrader antibody conjugate platform targeting difficult-to-treat cancer drivers such as KRAS. Our goal is to become the number one Oncology company by 2030, with sales projected to exceed $50 billion. In Immunology, we are driving industry-leading innovation on a 25-year legacy. TREMFYA sales grew 68% this quarter, reflecting strong momentum across indications. In the U.S., it has become the number one IL-23 inhibitor in new brand share in Crohn's disease, ulcerative colitis, and psoriatic arthritis. Based on the landmark STAR study, TREMFYA is the first and only IL-23 inhibitor to show positive results in a clinical trial in axial disease, including significant improvement in spinal pain, stiffness, and inflammation in patients with psoriatic arthritis. This reinforces our confidence in TREMFYA as a foundational medicine in inflammatory bowel disease and psoriatic disease, and we believe it can grow into a $10 billion-plus franchise. ICOTYDE is our first targeted oral peptide for plaque psoriasis and continues to outperform recent competitor launches. Since U.S. launch, more than 20,000 patients have started treatment, with nearly 9,000 prescribers. Commercial access is progressing strongly, and ICOTYDE now has broad coverage across national plans. This quarter, IMAAVY was approved as the first advanced therapy specifically for warm autoimmune hemolytic anemia, a rare life-threatening disease causing severe anemia and fatigue. This new indication builds on IMAAVY's momentum in generalized myasthenia gravis, reflecting its broad potential in autoantibody diseases. We continue to advance next-generation therapies. In July, we announced a collaboration with Sail Biomedicines to advance an in vivo CAR-T approach for immune-mediated diseases. In Neuroscience, we aim to change the future of brain health by addressing complex neurological disorders. Today we are the clear leader in neuropsychiatry. CAPLYTA year-to-date sales reached $1 billion, becoming our 29th billion-dollar platform. As an adjunctive treatment for major depressive disorder, CAPLYTA is the fastest-growing oral branded therapy in this area. Last month, we announced pivotal Phase III data showing CAPLYTA significantly and rapidly improved bipolar mania symptoms. SPRAVATO grew 36% this quarter, reflecting strong demand in treatment-resistant depression. In MedTech, third quarter operational sales grew 2.5%. While below expectations for the business, our confidence in the future direction is unchanged. In Cardiovascular, we continue to invest in heart recovery, circulatory recovery, and heart rhythm disorders to address the world's leading cause of death. Shockwave again grew 17%. The global launch of Shockwave C2 Aero continues to expand the intravascular lithotripsy platform's reach. The VARIPULSE pulsed field ablation platform reached an important milestone this quarter, treating more than 100,000 atrial fibrillation patients globally. VARIPULSE Pro, with 5x faster ablation, has been well received in Europe, driving double-digit growth. Last week, VARIPULSE Pro was approved in Japan. As clinical experience grows, we see VARIPULSE's differentiated advantages. A recent retrospective analysis showed VARIPULSE reduced the risk of adverse cardiac events by 68% compared to competing pulsed field ablation platforms. In heart recovery, while physician selectivity continues to impact Abiomed performance, we have confidence in the technology and are focused on supporting appropriate patient selection. In Surgery, we are poised to shape the next era of care through Siasun Robot&Automation, digital innovation, and advanced instruments. In July, the U.S. FDA granted OTTAVA De Novo authorization, the world's first table-integrated soft tissue Siasun Robot&Automation system. This is one of the largest MedTech innovations we will bring to market this decade. OTTAVA's unique architecture, automation capabilities, and next-generation Siasun Robot&Automation instruments help address operating room space and surgical workflow needs. Its connection to the open digital ecosystem Polyphonic transforms surgical data into actionable insights for clinicians. We have signed our first OTTAVA commercial customer and are advancing development programs. An investigational device exemption trial is underway in inguinal hernia repair, with plans to expand to urology and gynecology in the future. In Vision, we advance lifelong eye health, bringing better vision to more than 40 million people each year. TECNIS PureSee recently launched in the U.S., further strengthening the intraocular lens portfolio. This quarter, TECNIS PureSee and TECNIS Odyssey surpassed 1 million global implants, reflecting continued physician adoption and our leadership in personalized vision solutions. We also received CE certification for ACUVUE OASYS MAX 2-Week reusable lenses, expanding the ACUVUE portfolio in Europe. Overall, this quarter's strong results demonstrate the impact of our choices to lay the foundation for durable growth. We have streamlined the portfolio to focus on the innovations with the greatest potential to change lives. We have proven our ability to grow through major patent expirations. Strategic investments in high-growth areas are producing results, and the innovation engine continues to drive breakthroughs for patients. We are therefore confident in saying that 2026 will be a strong finish, and 2027 will be better for Johnson & Johnson. I'll now turn it over to Ryan. Ryan Koors (Vice President, Investor Relations) Thank you Joaquin. Moving to financial results. Unless otherwise noted, percentages are operational results, excluding currency impacts. Third Quarter 2026 Sales: Global sales of $25.4 billion, up 6%. U.S. growth of 9.1%, and growth outside the U.S. of 1.8%. Acquisitions and divestitures had a net negative impact of 10 basis points on global growth. Earnings: Third quarter net income of $210 million, diluted earnings per share of $0.09, compared to $2.12 in the prior-year period. Results were impacted by approximately $7 billion in charges related to the proposed talc litigation settlement, the Firefly Bio transaction, and the Sail Biomedicines collaboration. Adjusted net income was $6.3 billion, and adjusted diluted earnings per share were $2.59, down 6.8% and 7.5% year-over-year, respectively. Adjusted earnings were also impacted by Firefly Bio and Sail Biomedicines charges. Business Sales: Innovative Medicine: Global sales of $16.8 billion, up 7.9%, with U.S. growth of 11.1% and growth outside the U.S. of 3%. Divestitures had a negative impact of 10 basis points on global growth. Oncology: In multiple myeloma, DARZALEX grew 15.6%, primarily driven by a 5 percentage point share increase across all lines of therapy, a 10 percentage point increase in first-line, and market growth, partially offset by pricing headwinds outside the U.S. CARVYKTI grew 35.2%, driven by share gains in earlier lines of therapy and site expansion. TECVAYLI grew 77.3%, driven by launch adoption and share gains in earlier lines of therapy, with U.S. growth exceeding 100%. TALVEY grew 42.1%, driven by share gains from deeper community prescribing. In lung cancer, RYBREVANT in combination with LAZCLUZE grew 63.5%, with strong first- and second-line share gains. In prostate cancer, ERLEADA grew 9.4%, driven by share and market growth, partially offset by unfavorable patient mix. Immunology: TREMFYA grew 68.2%, driven by continued momentum in IBD launches, with share gains of 4 percentage points in both ulcerative colitis and Crohn's disease. STELARA declined 54%, reflecting biosimilar competition and a shift to new classes. Other Immunology growth was driven by U.S. launch adoption of IMAAVY and ICOTYDE. Neuroscience: SPRAVATO grew 36%, driven by share gains, physician adoption, and patient demand. CAPLYTA grew 66.1%, driven by launch momentum in major depressive disorder adjunctive treatment and demand in bipolar disorder and schizophrenia. MedTech: Global sales of $8.6 billion, up 2.5%, with U.S. growth of 4.8% and growth outside the U.S. of 0.1%. Overall Cardiovascular grew 4.1%, including a 20 basis point acquisition contribution. Electrophysiology grew 4.4%, driven by procedure expansion, commercial execution, and new product performance, partially offset by competitive PFA pressure, more pronounced in Asia Pacific, and the prior-year baseline impact from inventory dynamics outside the U.S. Abiomed declined 1.5% due to lower patient volumes. There are signs of improvement in U.S. performance, with continued adoption in acute myocardial infarction, cardiogenic shock, and Impella 5.5. Shockwave grew 17.2%, driven by adoption of coronary and peripheral products, new product launches, and U.S. office-based lab reimbursement. Surgery declined 1%, including an approximately 30 basis point negative impact from divestitures. The decline was primarily driven by China volume-based procurement expansion, results of the surgery transformation program, and Middle East disruptions affecting tender timing and order patterns. This was partially offset by recent innovations such as ETHICON 4000 and DUALTO, as well as commercial execution in biosurgery. Vision grew 5.1%, driven by premium innovation, execution, and global reach. Contact Lenses & Other grew 4.3%, driven by strong performance of the ACUVUE OASYS 1-Day family, partially offset by U.S. inventory dynamics. Surgical Vision grew 7.1%, driven by new product innovation, premium IOL demand, and commercial execution, partially offset by market factors including Middle East disruptions. Orthopaedics grew 3.4%, primarily driven by new product launches such as VOLT Trauma and EMPHASYS Hip, as well as VELYS knee traction. Income Statement: Cost of sales deleveraged 150 basis points, driven by unfavorable product mix and increased amortization of Innovative Medicine Intra-Cellular intangible assets, partially offset by MedTech tariff recoveries. Selling, marketing, and administrative expenses were flat as a percentage of sales. R&D investment was approximately $4.7 billion, or 18.3% of sales, including $1 billion related to the Firefly Bio acquisition. In-process R&D impairment of $339 million this quarter related to the write-down of preCARDIA assets. Other income and expense was a net expense of $5.8 billion, compared to income of $478 million in the prior-year period, with the change primarily due to the proposed talc litigation settlement and costs related to the orthopaedics separation. The tax rate was a slight net benefit this quarter, primarily related to the tax impact of the talc litigation settlement accrual. Adjusted pre-tax income: Innovative Medicine margin decreased from 44.3% to 35.4%, primarily due to approximately $1 billion in IPR&D expense related to the Firefly Bio acquisition, Sail Biomedicines transaction costs, and unfavorable product mix and costs. MedTech margin increased from 21% to 22.9%, driven by tariff recoveries, partially offset by strategic investments in commercial capabilities. Enterprise adjusted pre-tax income as a percentage of sales decreased from 35.2% to 30.2%. Joseph Wolk (Executive Vice President and Chief Financial Officer) Thank you Ryan. Hello everyone. As Joaquin and Ryan said, third quarter results were driven by strong Innovative Medicine performance, offsetting headwinds in certain MedTech areas, allowing us to exceed expectations on both the top and bottom lines while continuing to invest in the pipeline and future growth. We are clear that MedTech needs improvement, particularly in Cardiovascular and surgery outside the U.S., and we are taking action to strengthen results. While disappointing, MedTech business fundamentals remain strong, supporting our long-term confidence in the business. Across Johnson & Johnson, the drivers underpinning our outlook remain solid. We are therefore raising our 2026 guidance compared to our latest update in July. Financial Metrics and Cash: At the end of the third quarter, cash and marketable securities were approximately $17 billion, debt was approximately $45 billion, net debt was approximately $28 billion, and third quarter free cash flow exceeded $6 billion. We remain confident in our full-year free cash flow guidance of approximately $21 billion. We completed the $1 billion Firefly Bio acquisition this quarter, deepening our Oncology capabilities. We also partnered with Sail Biomedicines to advance in vivo CAR-T. Capital Allocation Principles: Prioritize supporting key commercial launches, accelerating future innovation, increasing the annual dividend, and strengthening the pipeline through strategic value-creating inorganic opportunities. In July, we announced a $5.5 billion settlement of ovarian cancer talc litigation, which is reflected in third quarter GAAP results. The agreement is conditioned on at least 95% of remaining ovarian claims definitively participating. We are trending toward reaching the 95% threshold. Full-Year 2026 Guidance: Based on year-to-date performance and fourth quarter expectations, we are raising the midpoint of operational sales guidance and narrowing the range. We expect full-year operational sales growth of 6.7%-7.1%, with a midpoint of $100.7 billion, representing 6.9% growth. We do not speculate on future currency rates. Last week, the euro to U.S. dollar spot rate was 1.12, but the fiscal year average rate is 1.15. Based on that average rate, we expect reported sales growth of 7.2%-7.6%, with a midpoint of $101.2 billion, representing 7.4% growth. Assuming current spot rates continue into next year, currency could become a headwind. Other P&L Items: Operational margin is expected to decline approximately 60 basis points, an improvement from the 75 basis point decline in July guidance, which included the impact of the Firefly Bio and Sail Biomedicines transactions, an unfavorable impact of 150 basis points. Excluding these transactions, we continue to achieve underlying margin improvement. The pre-tax adjusted operational margin outlook also reflects the 53rd week operating costs and the previously announced agreement with the U.S. government to improve drug affordability. Net interest expense guidance was lowered to $150-$200 million. Effective tax rate guidance was narrowed to 17.0%-17.5%. We expect adjusted operational earnings per share of $10.95-$11.05, with a midpoint growth of 2%. We expect reported adjusted earnings per share of $11.05-$11.15, with a midpoint of $11.10, representing 2.9% growth. Excluding the $0.64 impact from the Firefly Bio and Sail Biomedicines transactions, reported EPS growth would be close to 9%. As a reminder for 2027 modeling, Firefly Bio and Sail Biomedicines are expected to be a combined full-year adjusted EPS dilution of $1.36. We will provide more 2027 outlook at our Enterprise Business Review later this year. Upcoming Developments: In Oncology, multiple important data readouts are expected in the fourth quarter, including pasritamig (a bispecific antibody for advanced prostate cancer) and JNJ-6143 (a once-daily oral therapy for metastatic castration-resistant prostate cancer). INLEXZO year-to-date sales are approximately $200 million, with high-risk non-muscle-invasive bladder cancer data expected by year-end. We expect U.S. approval of RYBREVANT FASPRO for advanced head and neck cancer. In Immunology, ICOTYDE is off to a strong start, with psoriatic arthritis data expected later this year. In MedTech, we expect U.S. approval of VARIPULSE Pro in the fourth quarter, complementing last week's approval in Japan. In heart recovery, corrective actions are underway to improve Abiomed performance. We continue to invest in clinical evidence, with results from the HRPCI PROTECT IV trial expected in 2027. The trial enrolled 1,252 patients, four times the size of the CHIP-BCIS3 study, and evaluates the safety and efficacy of Impella CP in high-risk percutaneous coronary intervention. In Surgery, following the recent FDA De Novo authorization for OTTAVA, we are focused on commercialization, with adoption and revenue contribution expected to increase over time, targeting a significant pillar of the surgery portfolio by the end of the decade. In Orthopaedics, DePuy Synthes remains on track to separate in mid-2027. I am proud of the team's evaluation of all separation methods, with all options better than at the time of announcement. Given DePuy Synthes' performance and the momentum of Namal Nawana's team, we are leaning toward a spin-off as the best option for long-term value creation. We will provide updates in due course. Finally, I look forward to the Enterprise Business Review on December 8. We will provide more details on the 2027 outlook and the key drivers supporting double-digit growth by the end of the decade. More importantly, we will show how the early pipeline represents the next decade's wave of growth. Attendees will also have the opportunity to experience the latest innovations such as OTTAVA. 2026 is shaping up to be another successful year, exceeding expectations at the start of the year. We look forward to a strong finish to 2026 and laying the foundation for continued success in 2027. Thank you to my colleagues for their dedication. We are now ready to take questions. Kevin, please open the Q&A. Q&A Session Asad Haider (Goldman Sachs) Question: Congratulations on the progress. One clarification: regarding double-digit growth by the end of the decade, the press release mentioned "along with strategic investments." Please confirm this refers to internal investments rather than M&A. Also Joe, you said you are not satisfied with MedTech performance and are taking action. Does that mean there is now more urgency to add high-growth areas through M&A? Or do you believe the existing portfolio is sufficient to drive improvement? Joseph Wolk: Yes, Asad, thank you. The first point is correct. You should understand it as internal strategic investments that will drive us to double-digit growth by the end of the decade, with performance improving progressively over the coming years. No inorganic additions are assumed. We are always looking at strategic drivers that can complement the business, that would be more meaningful under our ownership than under current owners, and that create value for shareholders while taking risk. On urgency, it is the urgency to fix the existing business. We like the current portfolio and structure, with three priority areas: Vision Care, Surgery, and Cardiovascular. You may be familiar, but perhaps I'll turn it to Tim to talk about specific actions in heart recovery, which is now stabilizing but we want to catalyze back to double-digit growth. We are excited about OTTAVA joining Surgery in the future, which will significantly contribute to growth by the end of the decade. Vision is performing well in both surgical and contact lenses, where we are the market leader. Tim, perhaps you can talk about Abiomed. Tim Schmid: Sure, Joe. Asad, Abiomed remains in a temporary headwind, as shown in the third quarter, but our confidence in the long-term opportunity is unchanged. The slowdown is still the same issue highlighted last quarter, namely high-risk PCI studies outside the U.S. Importantly, we do not believe the challenge is structural and will not have a long-term impact on the business. There has been no change in patient demand, reimbursement access, or competitive pressure. We also question whether the study followed best practices, so the current focus is on education and advancing the clinical evidence base to demonstrate the tremendous impact Impella has in saving and improving lives. We believe this is a short-term headwind. In any emerging science, there will always be debate and discussion, and our responsibility is to continue advancing the evidence base in the best interests of patients. That is exactly what Abiomed is doing. Short-term headwind, but we are very confident this will be a strong growth platform for Johnson & Johnson in the future. Larry Biegelsen (Wells Fargo) Question: Joe, I wanted to ask about your previous comments at Deutsche Bank Aktiengesellschaft regarding 2027. On the top line, you said reported sales growth is expected to be similar to 2026, and adjusting for the extra week in each of the two years at 100 basis points, that implies reported growth of about 5.4% next year. On EPS, how should we think about growth capability excluding IPR&D? And remind us how much Firefly and Sail IPR&D dilution there is this year and next year? Joseph Wolk: This year IPR&D dilution is $0.64, and next year the two transactions combined are $1.36. Larry, you've covered us for a long time and know that typically revenue growth or EPS growth is slightly better than sales growth. After adjusting for the $1.36, you can think about next year that way. We will continue to focus on margin improvement from the orthopaedics separation, looking at the business more holistically, and technology advances improving efficiency. That is the framework for thinking about 2027. We will be more specific at the December 8 investor day, laying out the specific components and potentially providing pro forma data and long-term outlook for the orthopaedics separation. Chris Schott (JPMorgan) / Richard Wagner (BofA) Question: I wanted to talk about ICOTYDE. Two parts: First, patient adoption, new biologics vs. oral switches vs. injectable switches? Second, the bigger picture, you said this is a $10 billion-plus asset, but with a strong psoriasis launch and multiple indications pending approval, could the peak sales opportunity be much larger than $10 billion? Tom Cavanaugh: Chris, this is Tom. First, thank you to Jennifer Taubert for her leadership and collaboration. She has positioned Innovative Medicine extremely well, and the quarterly earnings show strong momentum, an excellent portfolio and pipeline, and a great team. We are fortunate to build on the foundation she established. ICOTYDE is expected to be one of the largest assets in Innovative Medicine, and it is off to an excellent start. As Joaquin said, more than 20,000 patients have started treatment, with nearly 9,000 prescribers. That is absolutely better than most psoriasis drug launches. Early prescribing trends: about 60% of patients are systemic-naive, and of the 40%, 20% come from oral medications and 20% from other treatments, mostly biologics. We are expanding the systemic treatment market. Commercial access is broad, with preferred access across all national commercial plans, and we are actively expanding Medicare. We are equally excited about the launch and the future. We expect upcoming PsA and Phase III data, as well as head-to-head data versus STELARA in ASCEND. Future expansion into IBD, UC, and CD is expected to have similar launch performance. Joanne Wuensch (Citi) Question: I wanted to focus on MedTech. When you say "MedTech fundamentals are solid," do you mean patient volumes, hospital CapEx spending, and overall traffic? Also, what needs to be done to improve Johnson & Johnson's MedTech business? Tim Schmid: Joanne, this is Tim. Thank you. Let me first give context on MedTech's overall Q3 results. To be clear, our performance was below our internal standards and prior expectations communicated to investors. Simply put, we can do better, and we absolutely will. The current focus is on the actions needed for stronger results in the fourth quarter and beyond. Breaking down the results, pressure was concentrated in two distinct areas: first, outside the U.S.; second, Abiomed globally. The U.S., our most important market, grew strongly this quarter, accelerating to nearly 5%. The challenges outside the U.S. reflect largely known headwinds, such as the surgery transformation program and China volume-based procurement expansion. Electrophysiology competitive intensity, especially in Asia Pacific, where PFA adoption is still relatively early. An incremental headwind is added pressure from the Middle East conflict. But looking deeper, we see several encouraging indicators that give us confidence in a stronger Q4 and future outlook. For example, in Electrophysiology, in markets where VARIPULSE Pro has launched, such as Europe, we returned to double-digit growth. Japan will launch soon following last week's approval. U.S. launch is expected by year-end. On Abiomed's high-risk PCI study, we believe the methodology did not follow established practices, and we are addressing this through education. The evidence base is very strong, especially in AMI cardiogenic shock, where 5.5 is performing strongly. We have seen sequential improvement this quarter and believe the business will return to growth soon. While Q3 MedTech was not strong, it should not distort the full picture. The issues are concentrated in two areas. The surgical environment remains stable in key markets. Our task is to convert demand into more consistent performance. We are confident in U.S. momentum and the moderation of near-term headwinds, which will support Q4 improvement and position us for stronger performance in 2027 and beyond. We will share more details on December 8, especially on new innovations such as OTTAVA. Vamil Divan (Guggenheim) Question: Following up on ICOTYDE, can you comment on net sales this quarter or how it compared to consensus? Also INLEXZO, year-to-date sales, SunRISe-5 data, and expansion of the market opportunity? Tom Cavanaugh: We have not disclosed ICOTYDE sales, but based on momentum and progress, I believe we will disclose next year. INLEXZO is also an exciting product, even a platform, considering the TAR-210 opportunity. Off to an excellent start. Joe disclosed year-to-date net sales of nearly $200 million. We did not report quarterly sales, but Q3 was more than $90 million. Sequential growth was strong. New patient inserts increased 45% sequentially this quarter. This is the high-risk non-muscle-invasive bladder cancer population with carcinoma in situ, totaling about 4,000 patients, relatively small, but still one-third of patients are using INLEXZO. SunRISe-5 is a broader population, about 15,000 patients; SunRISe-3 is the BCG-naive population, about 50,000. Here we see a $5 billion-plus opportunity for the platform, and I believe it will reach and exceed that, given the unmet medical need, the simplicity of INLEXZO, and the high durable complete response rates. John can talk about clinical development. John Reed: It is currently approved for CIS-type non-muscle-invasive bladder cancer, with lateral spread. The more common type is papillary. In the SunRISe-1 study, we had a papillary cancer cohort where urologists resected the outward-protruding lesions and then applied INLEXZO to prevent recurrence. Nearly 75% of patients were recurrence-free at 1 year, and more than 95% had no progression. Based on this, INLEXZO for papillary disease has been included in NCCN guidelines, and the FDA has invited us to submit for label expansion. Joaquin Duato: ICOTYDE and INLEXZO, along with RYBREVANT, will be key drivers of accelerating growth, driving double-digit growth. They will all become among our largest products. Michael Yee (UBS) Question: Two pipeline science questions. ICOTYDE has good psoriasis data, slightly below biologics, but strong UC data in IBD. Is it possible that gut release replicates biologic-like efficacy, making it a bigger driver? Second, milvexian, SSP data is upcoming. Do you have confidence it is similar to asundexian, as a Factor XI relative de-risking? John Reed: This is John Reed. ICOTYDE and IBD, we are often asked whether oral absorption in the gut leads to stronger efficacy. We can only say we will see when the data come. We are pleased with the UC Phase II data. Phase III studies, like the psoriasis and PsA studies, enrolled rapidly, with enrollment times about one-third of usual in prior studies, reflecting enthusiasm among physicians and patients for an oral option. The theory that oral absorption improves efficacy awaits data. Milvexian, we remain confident in the studies, especially secondary stroke, because of the asundexian data. In vitro, milvexian is a stronger Factor XI inhibitor. We have a safety margin that allows us to push the dose into a range where we are confident of efficacy. We are confident in the results, and secondary stroke data may be announced this year, event-driven. The larger atrial fibrillation study is next year. If both indications succeed, it will be exciting, because about 25% of secondary stroke candidate patients have atrial fibrillation. In the atrial fibrillation study, the dose can be four times higher, and monitoring anticoagulation status shows it is in the correct range. Thank you. Tom Cavanaugh: To add to John. There is absolutely a need for effective oral anticoagulation with reduced bleeding risk. In atrial fibrillation alone, about 40% of patients eligible for oral anticoagulation are not receiving it, often due to concerns about the safety and bleeding risk of current DOACs. Jayson Bedford (Raymond James) Question: Back to international MedTech. Can you quantify the Middle East and VBP impacts? Tim, in international surgery, can you confirm there is no change in underlying demand? Joe mentioned actions in international surgery, what specifically are they? Tim Schmid: Thank you Jayson. First on the Middle East, we highlighted this is a new risk and has expanded over time. The impact is no longer limited to the initial few markets. We are seeing broader disruption in country order patterns, tender timing, and hospital spending decisions. Governments and healthcare systems are more cautious with spending, and funding and procurement decisions are taking longer. The impact on purchasing behavior is more pronounced than earlier in the year. But importantly, we view this as a short-term factor. Clinical demand is unchanged, and many opportunities may be delayed rather than permanently lost. In Surgery, we are excited about U.S. performance. The issue is outside the U.S., primarily driven by the transformation program and volume-based procurement, as well as incremental Middle East pressure. Despite headwinds, we are focused on areas we can influence, and there are many opportunities. Wound closure growth is benefiting, a category where we are absolutely dominant, driven by innovations such as STRATAFIX and Plus Sutures. Biosurgery is another billion-dollar-plus platform, driven by brands such as SURGIFLO, SURGICEL, and VISTASEAL. Internal mechanical innovations ETHICON 4000 and DUALTO also have good traction. We believe U.S. growth will continue, EMEA will accelerate, and overall we will return to growth in the fourth quarter. It is also worth mentioning our long-term confidence in this business. This is core to Johnson & Johnson MedTech, and we are committed long term. The biggest reason for confidence is entering surgical Siasun Robot&Automation, combined with leadership in wound closure, biosurgery, and advanced instruments, OTTAVA allows us to participate more fully in the most attractive and underpenetrated surgical area. With portfolio transformation, innovation in existing businesses, and OTTAVA launch preparation, we are confident in the long-term trajectory. We will provide an OTTAVA outlook on December 8, reinforcing confidence in a significant long-term contribution. Alexandria Hammond (Wolfe Research) Question: As CARTITUDE-5 and 6 advance in newly diagnosed multiple myeloma, how is Johnson & Johnson educating physicians and treatment centers to prepare for earlier use of CARVYKTI? How should investors think about taking share from existing frontline regimens? Tom Cavanaugh: Alex, this is Tom. First, we are eagerly awaiting these trial readouts. We are already doing this globally through CARTITUDE-4. CARVYKTI is available in more than 20 markets, with significant share gains in earlier lines of therapy. About 50% of CARVYKTI use in the U.S. is in second- and third-line. Product familiarity, access, and excitement are increasing, mainly due to the unparalleled overall survival seen in second-line. We are already educating healthcare providers on earlier use, including appropriate patient selection, the earlier the better, and appropriate bridging to get patients to the highest MRD negativity for effective treatment. John Reed: As a reminder, recent myeloma conferences presented 5-year follow-up data from CARTITUDE-2 in second-line, where about half of patients remained in sustained complete response at 5 years without further treatment. One treatment, 5 years of sustained disease-free survival. Very exciting. Closing Remarks Ryan Koors: Thank you John, and thank you Alex for the question. Thank you everyone for your questions and continued interest in the company. I will now turn it over to Joaquin for brief closing remarks. Joaquin Duato: Thank you for your questions and participation. As you can see, we continue to build momentum. Third quarter growth improved sequentially, and we expect further acceleration in 2027, with a clear path to double-digit growth by the end of the decade. Innovative Medicine growth will come from the existing portfolio, including DARZALEX and TREMFYA, as well as new products such as ICOTYDE, RYBREVANT, and INLEXZO, which will begin contributing more significantly. MedTech has similar opportunities, including the potential of Cardiovascular launches, next-generation PFA and IVL catheters, and additional data for Impella and OTTAVA Siasun Robot&Automation surgery not yet fully reflected in growth. Taken together, these drivers make Johnson