Good morning and welcome to Johnson & Johnson’s Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode until the question-and-answer session of the conference. This call is being recorded. If anyone has any objections, you may disconnect at this time. [Operator Instructions] I would now like to turn the conference call over to Johnson & Johnson. You may begin.

Hello, and thank you for joining us to review Johnson & Johnson’s business results for the third quarter of 2017. I am Joe Wolk , Vice President of Investor Relations. I would like to provide a few logistics for today’s call. This review is being made available via webcast accessible through the Investor Relations section of Johnson & Johnson website at investor.jnj.com. There you can find additional materials, including today's presentation and accompanying schedules. We anticipate today's webcast to last approximately 75 minutes. Please note that today’s presentation includes forward-looking statements. We encourage you to review this cautionary statement regarding such statements included in today's presentation as well as the Company's Form 10-K which identifies certain factors that may cause the Company's actual results to differ materially from those projected. Our SEC filings, including our 2016 Form 10-K, along with reconciliations of the non-GAAP financial measures utilized for today's discussion to the most comparable GAAP measures are also available at investor.jnj.com. Several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. I am very pleased to be joined by a few members from our executive committee, Dominic Caruso, Executive Vice President and Chief Financial Officer will provide some prepared remarks prior to the Q&A portion of the call. You will not only have the opportunity to pose questions to Dominic during that time, but also to each of our segment leaders. Accompanying Dominic and I on today’s call are Joaquin Duato, Executive Vice President Worldwide Chairman, Pharmaceuticals, Jorge Mesquita, Executive Vice President, Worldwide Chairman, Consumer, and Sandy Peterson, Executive Vice President Worldwide Group Chair. We are very pleased with our strong results as highlighted in this morning’s press release and accompanying materials, the third…

Thanks, Joe and good morning everyone. We are very pleased with our strong third quarter results. The performance highlights the many areas of strength in our business that have given us the confidence to stay throughout the year that we would accelerate sales growth in the second half of 2017. That was exactly what we delivered in the third quarter. We experienced organic growth acceleration most significantly in the Pharmaceutical segment as oncology and immunology products continued to grow at robust levels. The Consumer segment, which declined modestly in the first half of 2017 grew in the third quarter, while Medical Devices was relatively stable, but as Joe noted, experienced a minor negative impact to growth due to hurricanes in Texas, Florida and Puerto Rico. In addition, we are very pleased with the performance from our recent acquisitions Actelion and Medical Optics which will continue to fuel our growth. And so, overall sales beat analyst estimates by approximately 2% or $350 million and adjusted earnings beat analyst estimates by $0.10 per share. I know for many of you there are questions regarding the impact of the unprecedented storms that occurred in the quarter. I want to take a moment to acknowledge the courage and resilience of all those who have been directly impacted by these storms. It’s really been incredible. The response of the global business community has also been impressive and I am especially proud of the role Johnson & Johnson has played. Our desire to improve lives is a foundational element in our credo and it is times like these when the character of our people who have been working on the ground side-by-side with relief organizations, and united effort to help their communities really shines proved. In terms of sales, the limited impact we experienced in the…

Thank you, Dominic. So let’s move into the Q&A session. Rob, can you please provide instructions for those on the line wishing to ask a question?

[Operator Instructions] Your first question comes from the line of Mike Weinstein with JP Morgan.

Good morning. Can you hear me okay?

Yes.

Yes, we can.

Yes, hi Mike.

Perfect. Thanks, Dominic. So, Dominic, first item, I just want to clarify for people because it appears to be there is a fair amount of confusion out there. The margin that you reported this morning, the kind of headliner or unadjusted margins this morning, those – that doesn’t back out the amortization cost and so those numbers that [Indiscernible] are not apples-to-apples, the ones you gave on your comments for more apples-to-apples for [Indiscernible] margins and operating margins, correct?

When I am commenting on our results, I am doing so by excluding the special items, the most impactful – impact of amortization expense, just so we can have an apples-to-apples comparison because of the significant acquisitions we did this year, and that’s right, Mike.

Okay, perfect. A couple items I wanted to be touched on, one was, can you give us an update on ZYTIGA? And what’s happening from what you can see with the IPR decision and the trial? And then second, could you spend a minute on STELARA because if we look at the pharma outperformance this quarter, and impart to overall acceleration in pharma from first half to second half. One of the big stories is STELARA’s acceleration over the last several months driven by the Crohn’s launch. So can you talk a little bit about how that launch is going and maybe the outlook for STELARA going forward, because that’s relative to consensus STELARA was the big outperformance this quarter. Thanks.

Mike, let me turn that question over to Joaquin who is here – as you know runs our Pharmaceutical business. So, Joaquin?

Hi, Mike and good morning to all of you. Before I go to STELARA let me give you a couple of [Indiscernible] reflections on how the quarter went. I think when we met in May 2017 on the occasion of the Pharmaceutical R&D review day, we anticipated that the performance of the Pharmaceutical group was going to accelerate during the second half of the year. And that’s precisely what you are seeing today. You are seeing the pharmaceutical group moving from low single-digit growth in the first half of the year to 6.7% in this third quarter. So clear acceleration of the sales of the pharmaceutical group. That are driven by a number of factors, one is, the momentum that our key brands are gaining mainly driven by market share gains and one example of that that I will talk about this is STELARA as you mentioned had posted very impressive 43% gain in the U.S. in the quarter. The second is positive news on our pipeline. During this period, we have launched TREMFYA, which has been very well accepted by physicians. We have already 900 physicians prescribing TREMFYA about 3000 patients and as we speak TREMFYA, it’s already leading in new to brand share when compared to the new therapies when compared to the anti-IL 17. And then the third one is that, we completed the acquisition of Actelion and we are now in our first 100 days post integration. You’ve seen the results of Actelion there, very much aligned with the expectations, positive growth and share gains both in UPTRAVI and OPSUMIT. So the combination of these three factors is driving the 6.7% adjusted growth on the 14.6% of total pharmaceutical growth. This is very aligned on what we discuss in our pharmaceutical review day. When it comes to STELARA, I mean the growth is driven by two factors. First, share gains in the psoriasis market where STELARA is the leading brand in new to brand share in psoriasis and second, very impressive gains also in the Crohn’s disease market where we continue to gain share. So the combination of our continuous growth and sustained growth in psoriasis plus the launch in Crohn’s disease is driving this growth in STELARA that you are seeing today.

And Mike, with respect to the ZYTIGA patent, so I think as you are well aware there is two avenues that are being pursued there. The first was with respect to the court. So the New Jersey Court had set a preliminary trial date for October of this year. However during a status conference as recently as a few weeks ago in September, there is a schedule of pre-trial activity. So we don’t anticipate that a new trial date will be set until early next year. With respect to the second avenue in the U.S. patent and trademark office, we have not yet received the decision. We understand it’s the U.S. PTO’s right and permission to extend deadlines on that. So we await, we’re just like everyone else.

Next question please.

Your next question comes from the line of Matt Miksic with UBS.

Hi, good morning. Thanks for taking our questions. So one on pharma if I could just one follow-up on devices. So first, and I guess for Joaquin since we have you here, obviously very impressive results across core franchises excluding Actelion. I’d love to get your thoughts on – Mike mentioned STELARA, but how some of the other pieces fit together over the next 12 months specifically new indications, line extensions for key drugs like XARELTO and Dara and some of the other recent filings like apalutamide and how they sort of fit together against the potential increase biosimilar pressure. And the reason I mentioned in the next 12 months is because that I think investors are interested in seeing how you’ll maintain and extend those PAH Actelion franchise and fit these other pieces together and then sustain your growth going forward and then I had just one follow-up.

Thank you and thank you for the question and let me start with the drivers of the growth that we are having and we are seeing in the third quarter and in the second half of the year that you want to continue to see over the next year. Let me start with XARELTO that posted very impressive growth in this quarter of 20% mainly driven by share gains and that we believe will be sustained into next year. You remember that we already share the data of our COMPASS study, and we are planning to file these new indications by the end of the year and that will together with the existing share gains that we have in our markets drive the growth of XARELTO in 2018. XARELTO had the highest share gain in the quarter in the last four years mainly driven because we are starting to put a bigger dent on Warfarin. So that’s an important driver for us moving forward. If we continue with oncology, both IMBRUVICA and DARZALEX continue to have impressive share gains. IMBRUVICA, as Joe commented has already 50% share across line of therapies and DARZALEX is getting share both in third line, second line multiple myeloma with around 20%, 40% respectively and we plan to file our first-line study, our RTM study by the end of the year. So that’s going to be another positive driver moving into next year as we continue to gain share in different line of therapies. If you recall too this past quarter, we had the approval of the combination with Pomalyst in second line multiple myeloma. So, both IMBRUVICA and DARZALEX will remain important drivers of our growth into 2018. The other driver that sometimes goes unrecognized but is having an impact, that in the quarter posted 15% growth and we see that continue to gain share in the antipsychotic market as long-acting therapies remain relatively underutilized as compared to the potential of it. So those are going to be some of the most important drivers moving into 2018. Then, another two important updates on our pipeline. It’s the filing of apalutamide that we just completed and that it’s going to enable us to have - maybe seen that is going to have an indication in patients that have prostate cancer without metastases. It would be a very important new indication for apalutamide and great option for prostate cancers. We will continue to progress with TREMFYA in psoriasis and also in 2018, we are planning the filing of Esketamine, which we believe would be a very important option for the treatment of treatment resistant depression. So those are the drivers that will continue to enable our market growth in 2018.

That’s great. Thank you and then, if I could just couple things I think investors are curious about in devices, one, Joe or Dominic on the U.S. knee market, worldwide down obviously, there was some International pricing you mentioned, but any color on what you are seeing here in Q3 and then in Spine, the pressure you talked about portfolio gaps, anything being your position in the market as one of the leaders any comments you had on just the color of that market would be helpful? Thanks.

Sure, Matt. So just a little bit of commentary on knees. It was a little bit softer than what we had experienced in recent quarters, but I would say it’s not the 4% that was reported as down. You have some pricing issues, specifically in India with some legislation where we actually book the charges for three quarters, not just the one quarter since it was retroactive back to the beginning of the year. You also had some weather related impact albeit modest. So you are getting closer to a negative 1 to flat versus the minus 4 that reported maybe for some qualitative commentary with respect to knees and spine, I’ll turn it over to Sandy.

Hi, Matt. Thanks for your question. So, I’d just – couple of general comments and then I’ll specifically answer your questions about knees and spine in particular. As you know, I’ve just recently in last few months taken over responsibility for medical devices and I think in the quarter you will see that we have some clear areas where we are doing very well like EP, wound closure, biosurgery and some parts of our orthopedics portfolio. But there is some places in the portfolio where the full impact of some of our new product launches and some of our acquisitions have not fully taken hold yet. And as I’ve said to others before, we’ve also spent a lot of time over the last quarter talking about how do we ensure commercial execution on the ground in a much more robust in some of these markets. And I think we are beginning to see the positive impact of that with a lot of our businesses and some account wins that will start having some positive impact for us as we kind of continue through the fourth quarter. And Joe’s comments about knees are absolutely spot on. We also, I think, there is a little bit of the impact about elective surgeries in parts of the U.S. where we know a large percentage of the volume happens in that southeast part of the U.S. that clearly had some minor impact on the business also in the quarter. We also in Europe, which impacted our business, both our Spine and Knee business. We had a very unusual one-time impact on our ordering and distribution system that impacted about a week’s worth of sales, particularly in orthopedics. So we are catching up from that but it clearly had an impact in both Spine and…

Great, next question please, Rob?

Your next question will be coming from Larry Biegelsen with Wells Fargo.

Good morning. Thank you for taking the question. One for Jorge, one for Dominic. So, on Consumer, obviously, everyone have seen the news that Pfizer is exploring strategic alternatives for its Consumer Health business. What’s the implication if any for your consumer franchise and J&J has been reshaping its consumer portfolio in recent years? Are you interested in a large deal in Consumer? Do you prefer to continue to do smaller deals in your current category? As I said, I have one follow-up for Dominic.

So, good morning and thank you for your question. Well, as you know, we have a very disciplined and systemic approach to evaluating potential acquisitions and our focus primarily is always on value creation and that’s the overriding criteria that we use to establish whether or not we have an interest in a particular asset. So, as assets become available, we systemically evaluate them, but our focus is always can we create value for Johnson & Johnson regardless of the scale of the asset. And Dominic?

Yes, I wanted to ask about, the puts and takes for 2018. I know you are not giving guidance until the Q4 call. But, anything on the top-line that you would call out versus 2017, but I am more curious about EPS and how we should be thinking about the incremental Actelion accretion in 2018. It’s probably about an incremental $0.30 or so. And I am curious if that we should expect to see that on top of your normal 6% to 8% operational EPS growth or you will reinvest some of it? Thanks for taking the questions.

Hi, Larry, look I think, we’ve previously described the first full year of accretion for Actelion to be $0.35 to $0.40 a share. We have said that this year’s accretion is going to be about $0.07 a share. So, you are right, I mean, you get to a place that’s just under $0.30 of potential additional EPS accretion from that acquisition. As we always do, we are evaluating all our plans right now in determining where is the best place to invest. What the businesses have in terms of launches of new products and what they have in terms of their own momentum and we want to continue to invest behind new product launches. So it’s too early to give you an expectation of how much of the accretion from Actelion will fall through versus how much will be invested. But suffice it to say, we generally, as you know, grow our sales, we’ve aimed to grow our sales faster than categories we compete in and we aim to grow our earnings at a rate faster than sales. So we will continue to do that and we will give you a clear picture of that as we set our plans for 2018 when we talk in January.

Thank you, Larry. And the next question, Rob?

Your next question comes from Jeff Holford with Jefferies.

Hi, thanks for taking me very much. Just wonder if you can just give us a little bit more color on DARZALEX. I guess, unless you talk about in the U.S. so you have better information hopefully, just your market share in the lines of therapies that you are in and what kind of duration of therapy you think you are going to get to in those lines? Thanks very much.

Thank you. So, as far as DARZALEX, as I commented, our market share in third line plus is in north of 40% in the U.S. already and in second line, depending on the shortage, generally north of 20% and it continue to grow. Our – the trends that we are seeing in the market are very positive, particularly after the approval in one prior line and the data we presented in one prior line and also as I commented earlier, we already finished the study in first-line in combination with BMP and we are planning to file before the end of the year. So, all is positive on that side. Importantly, we are also working as you guys know, in developing a subcue formulation and we are going to start our phase 3 study with the subcue formulation this year. So, increasingly we see that DARZALEX becoming a backbone therapy in the treatment of multiple myeloma and that’s the feedback that we are getting from customers.

And then just one quick follow-up if I can on Actelion. I mean, Dominic, I think just talked couple of times about how accretion from this deal can be delivered pretty quickly. Just wondering, for 2018, do you think you will give us some kind of update on the level of accretion that really will drop through from this in 2018 and whether there is any potential upside to the $0.35 to $0.40 that you previously talked to? Thank you.

Yes, Jeff, when we talk in January, we’ll obviously point out the impacts of Actelion and actually all of our acquisitions on growth. So we’ll give you an estimate of organic growth and therefore you will be able to see the impact of acquisitions and on the bottom-line, we’ll talk about the impact it has to our overall earnings picture and also any major investments we plan to make.

Thank you, Jeff. Next question please, Rob?

Your next question comes from David Lewis with Morgan Stanley.

Good morning. Just a couple of questions. Maybe just, Jorge, starting with you, maybe a couple for Joaquin. Just, Jorge, just strategically since you got to the company, you really saw some very impressive improvements in the consumer franchise earlier last year and that has flowed in the near term. There are lot of strategic questions investors have about the impact of the Amazon on the broader consumer business, the impact of Millennials on brands. Other than just making some of the investments you’ve talked about, is there a change in the strategic focus for this business for you based on some of these sort of macro pressures or is it just continuing to do that the prior plans, strategically how well do you think you are positioned now versus when you first joined J&J?

Thanks very much for the question, Dave and it’s a very good one. I mean, there is no doubt that the broader CPG industry is seeing a change in the competitive landscape and there is a fundamental shift here enabled by digital technologies and we see the rise of a lot of small companies that are now competing with the large established companies in this field. But in the fate of it, I am very confident that our strategies are absolutely the right one for us to continue with what we’ve had for a number of years which is a strong sustained run of market share growth. We have to make some adjustments in terms of the operational focus of those strategies. In particular, we have to drive accelerated growth on the online channel and we are doing just that. We are growing, we estimate at this point, at twice the rates of the broader online channel with our e-commerce capabilities. We are investing very heavily in leadership, in systems, in capabilities in general and for sales fundamentals online, so that we drive our share of e-commerce to match our offline share. So, there are some adjustments we are making, but overall, the broad strategic focus that we have had and that’s driven our results for the last few years remains very much in place and we feel we are very well positioned.

Okay, very helpful and then Joaquin just two questions from me on pharma. First is, ZYTIGA’s strength this quarter, how much does that have to do with the patient assistance programs disconnects me part of the year resolving and how should we think about that franchise growth going forward? And the second question is just talacotuzumab, you talked about this at the Analyst Day potential multi-billion dollar opportunity. Can you just give us a little more detail with this safety issue, efficacy issue and what’s the future path going forward for talacotuzumab? Thanks so much.

Thank you. Thank you for the question and ZYTIGA strength in – it’s been mainly driven in the U.S. by the combination of market growth and share gains. So that’s the reason we have had these ZYTIGA strength in the U.S.

Joaquin, just an – the Patient Assistance Foundation still hasn’t anniversaried yet. Would you expect that in the fourth quarter? So that was actually about a four to five point headwind to growth in this quarter. Again, these are independent organizations, so it’s hard to predict what may happen, but we didn’t see the incremental lift from the sequential quarter from Q2, but it is still a significant comparator when you compare to last year’s Q3.

So that’s the source of the strength of ZYTIGA is the market is growing and also we continue to gain share and price overall including the effect of the third-party foundations continues to be a negative for ZYTIGA. What has been new recently is the presentation of the latitude data which was very well received by the customers and by patients with very significant results in increasing overall survival and radioactive progression free survival in patients that the - where metastatic but get hormone naïve. So this is the first time that a medicine is tested in this indication and we are filing in this indication in the U.S. and in Europe and some other fact in Europe we received a positive opinion for the CHMP recently. So that is the major driver of ZYTIGA growth is higher market penetration combined with share gains across the port. Regarding talacotuzumab, I mean, as Joe commented, we discontinued talacotuzumab based on recommendation of the IDMC in AML based on the safety risk benefit ratio and we are now evaluating that data and using those revenues to see which other indications we may pursue in the future. So it is still premature to comment on what else we would be doing with talacotuzumab.

Thank you, David. Next question please, Rob?

Your next question comes from Bob Hopkins with Bank of America Merrill Lynch.

Hi, thanks for taking the questions. Just one clarifying question and then one question for Sandy. First just to clarify, the impact on the hurricanes on the medical device growth is there was 30 basis points. Is that global or U.S. and it wasn’t more pronounced in certain areas of hospital med tech versus others?

I would say, Bob, the best way to classify that is a very preliminary analysis. We looked at some zip codes to see what particular metropolitan areas might have been hit that were indirect line of the storm. But it’s mostly – it would be a U.S. phenomena obviously because it was related to surgery days and not anything to do with supply disruption.

So, but the 30 basis point was the impact on worldwide hospital med tech growth?

Correct.

Not U.S., okay. And then, the bigger picture question for Sandy, just on the outlook for pricing in hospital med tech, because we’ve been noticing that whether it’s China or Australia or India, it just feels like governments in these countries are sort of taking a harder line around med tech pricing and it could be something that impacts growth going forward. So just curious to get your views on how big of a concern is this for you as you look at the hospital med tech business growth outlook outside the United States?

So, thanks for the question. Our sense of it is, it’s in some of these markets, it’s an episodic thing that happens and it’s not that unusual over time, but I think what we are also finding, I guess the punch line is we are concerned about it. But not terribly concerned about it because we have been able to go and work with many of these governments and hospital systems to find ways to provide incremental value to them beyond the physical product alone and that’s a ways for us to actually be able to deal with some of these questions about pricing. Now, obviously, the situation in India, this one-time price impact on knees clearly has an impact on the marketplace in that regard and I think that’s sort of a much more extreme example of what we’ve seen in other marketplaces which were a lot more moderated and we have the opportunity in some cases to have broader conversations with them and it’s part of why we have changed our business strategy to really show up as an integrated business talking to them about a number of different things beyond purely the physical product going forward. And so that’s how we believe are going to address this question when it arises in OUS markets.

Hey, Bob, maybe just to pick up on that point for the benefit of those on the call. If you look at our price contribution to the enterprise results, it was actually about negative 2% and it was a slight positive price impact in consumer, slightly negative in medical devices and where we actually saw some price decline or price erosion it was about 3% in the Pharmaceutical sector and that translates to about 2% down for the entire enterprise. So it speaks to the strength of pharma that it really came from volume, market share related types of improvements. Rob next question please?

Your next question comes from Glenn Novarro with RBC Capital Markets.

Hi, good morning guys. Thanks for taking the question. Another question for Sandy. J&J has been reshaping its device portfolio for several years now selling diagnostic, selling cardio. I know you are strategically looking at diabetes. So I was hoping you give us an update beyond what you said on ANIMAS most recently. And then, as you look at the portfolio, and I know you've only been there a short time, but are there other areas when you analyze the portfolio that may be divested? And then as you look at the portfolio, are there areas that you see that that may be helped through M&A? So long question and then I have a follow-up on utilization in the U.S.? Thanks.

So, thanks, Glenn. So, I’ll start with – you have seen the actions we have taken regarding our portfolio. But I think the most important thing is, all of the actions we’ve taken to invest in the platforms that we believe have significant growth and we’ve been doing this both in terms of acquisitions, strategic partnerships and investing in R&D. So if you look at our – as you know, we’ve made a significant bet in our neurovascular business where stroke is a huge unmet need and it’s only growing. And so we now have a business due to some things we get internally as well as a couple of acquisitions in the last 12 months. So, you should see us over time build that business the way that we have built the EP business. So, it’s an important growth driver for us as a company. Obviously, in our core orthopedics businesses, we have been making acquisitions, small tuck-in acquisitions plus investing in technology as well as innovation and you’ll see us continue to drive that. The most obvious significant one in the last year is all of the investments we have been making in vision to broaden our portfolio in vision care. So we did three acquisitions this year to broaden the depth and breadth of our vision portfolio. So I think you should think about this as a combination of where do we see growth in the business. Whether it’s in core surgery, whether it’s in orthopedics, whether it’s in vision care or what we call now interventional. You should expect to see us continuing to make those investments and over time, as we make choices about other parts of our portfolio, we’ll let you know when we make those choices.

Okay. Anything on - no update on diabetes other than the announcement on anti mos, is that correct?

Right.

The question was on utilization?

Yes, yes, Joe. If I look at your U.S. surgery business, I look at your U.S. orthopedic business, it be coming lighter better than we expected and it looks like in the third quarter, there was a step-down slightly negative growth versus positive growth in the first half. So, I was wondering if you can provide commentary on what you are seeing in the U.S. with respect to utilization? Is there any impact from fewer sign-ups with ACA? Is there impact occurring because of high deductible plans being purchased? So, any color as to why we saw some weakness in either your business or utilization in the third quarter? Thank you.

What we are seeing in the line is, and again this is very preliminary for the third quarter but pretty much on par with hospital machines being down maybe 50 basis points to 100 basis points. Surgical procedures from our lens looks to be down about 2.5% and then lab procedures are remaining flat sequentially up about 2%. Thanks for the questions, Glenn. Next question please, Rob?

Your next question comes from Geoff Meacham with Barclays.

Good morning guys. Thanks for the question. Just have a few quick ones for pharma. On INVOKANA, it looks like the quarter performance was a little weak. I want to get your perspective from the field. Now that it’s been a few months since the Janus presentation ADA. How much of the sequential drop would you attribute to pricing? And what that looks like going forward? And then on apalutamide, I just want to get the J&J perspective on kind of the cost benefit, the profile have stacks against ZYTIGA. Obviously, down the road you’ll be competing, it’s a generic. So that’s obviously a different sort of sales cycle on that. And then maybe a bigger picture on prostate. You guys have had good data and pre-metastatic has extended. Just want to get your perspective on the tipping point really for broader urologist adoption. Thanks guys.

Thank you, and let me start with INVOKANA. INVOKANA first continues to be the leader in prescriptions in the ALD2 category. So it’s still the leader in the SAT2 category. When it comes to this quarter, we show a decline, and the decline was mainly, mainly driven by price and also we saw a fair impact since we included the black box warning in our label. So it was a combination of mainly price and some share declines due to the black box warning. As we move forward, we see opportunities with INVOKANA. The first one is we just file our main indication based on the campus data and that’s going to be important for us moving into 2018 and the second one we continue to progress with our CREDENCE study in patients with diabetic nephropathy in order to evaluate how their kidney function progresses. So those are two elements that make us confident of the future of INVOKANA moving into 2018. Regarding apalutamide, we are super excited of being able to continue our leadership in prostate cancer with apalutamide. I mean, it’s been great that we have been able to file recently for this indication as you commented this is going to be the first time that these agents are indicating in patients that have no metastases. To your question of ZYTIGA, I think you are aware that in metastatic prostate cancer what we are analyzing it’s a combination of apalutamide and ZYTIGA compared to ZYTIGA. So, that would be transformational if we are able to demonstrate that superiority. So that’s how we see the market moving forward and as you are also aware we have alliances of with PARP inhibitor in the area of prostate cancer that we are studying now that we plan to file in this indication in 2018 that eventually we will combine with our androgen anti-androgen agents. So we’ll have a full line of products in the area of prostate cancer from the non-metastatic to the metastatic indications combining apalutamide, ZYTIGA and eventually Niraparib. So we feel very confident about the options that we are bringing to those patients and also we feel very confident about how competitive our offering is, which is being demonstrated by the share gains that you have seen in this quarter and about our speed in being able to complete the apalutamide trials and file for that.

Great. Thanks for the question, Geoff. Rob, next question please?

The next question is from Jami Rubin with Goldman Sachs.

Thank you. Joaquin, maybe you could just follow-up on the question related to INVOKANA. What are you seeing with the SGLT2 class? Are you losing share to Jardiance because of the amputation warning? And you talked about price, how should we think about this franchise going forward? INVOKANA was one of those drugs that had such a spectacular – now it’s a negative territory down 20% this quarter. How should we think about the growth of this franchise going forward? Would you anticipate price continues to be a thorn or is this more of a step down and sort of a rebalancing or rebasing and would you expect to see the SGLT2 cloud start to pay some share? And then I have a couple follow-up questions for Dominic, thanks.

So, to your first question, yes, we are losing share to the other SGLT2 agents since we introduced the box warning in our label. We remain the leader of the category, but we are losing share, particularly in new patients. Certainly, the price has been even a bigger driver in the step decline that you have seen this quarter. Our belief in INVOKANA moving forward is based on the very positive data that we have submitted in MACE and the overall risk reduction that we see in utilizing INVOKANA and also in the study that we are conducting, the CREDENCE 1 in patients with diabetic nephropathy evaluating their renal function. So, overall, we see the SGLT2 category and INVOKANA bringing important benefits and we continue to see INVOKANA as an important brand for us moving into 2018.

Okay, thank you. And Dominic, just a couple P&L questions. I think you had said that currency has now swung from minus five to plus three, so that’s an 8 percentage point benefit. So should we assume that most of the top-line and bottom-line guidance increases, not all but most – the majority is related to FX. And then secondly, on the net or on the other income line, that’s a line that, I know you are going to give us guidance in 2018, but it’s very hard for us to analyze, because it fluctuates so much depending on asset sales. I mean, going back in my model, this is a line item that was more in the sort of $500 million, $600 million range and now it’s $1.7 billion, $1.8 billion. There was a year when it was $2 billion. Can you just give us kind of a big picture view in terms of how we should think about this line going forward, because obviously it’s become a driver to earnings? Thanks.

Yes. Hi, Jami. So first of all, on the FX question, you are correct that the increase in our guidance is partly due to of course a different outlook on FX on both top and bottom-line. So I think that’s an accurate assessment. With respect to other income, here is a good way to think about it. I mean, we have consistently talked about the fact that we intend to actively manage our portfolio as we’ve been doing that over the last several years. And in doing that, we will make a determination whether the asset is better in our hands or better in someone else’s hands, and once those decisions are made we do include in our overall guidance for the year our expectation on this other income line which is difficult for anyone to forecast. So, unless we can – and that’s why we give you our expectation and you can see that we are pretty much in line with the expectation we gave you from the beginning of the year with respect to the asset sales that we think would occur this year and therefore be part of our overall expectation from the very beginning. We are executing on those. The way to think about this is, we don’t expect that our work in evaluating the portfolio is going to diminish. We are going to continue to do that. We are going to make sure that assets are better either in our hands or in someone else’s hands and when you look at the other income line in your model and you see it increase, please take also a look at pretax operating margin which is after COGS and SG&A and R&D, and you could see that that margin at the same time decreases which goes to the point that I made earlier that when we do this, it’s a portfolio decision. So we are increasing our investment in R&D, SG&A et cetera, at the same time that we are recognizing these gains. So, they are not really drivers of earnings, they are really drivers of investments in the portfolio and so take a look at that and as I said earlier, we expect to complete this group of asset sales this year in our guidance. But I said earlier when we talked last quarter, that I would not expect that this line item would drop off significantly in 2018 and therefore that allows us to keep our investment levels up high going into 2018 as well.

Thanks for the question, Jami. Rob, next question please?

The next question is coming from Josh Jennings with Cowen & Company.

Hi, good morning and thank you. I just had two quick questions for Joaquin. First, on this REMICADE the biosimilar readiness plan is installed as been effective, you’ve been highly successful in contracting in 2017, but just wanted to get your input on if anything changes within the REMICADE defense strategy with a second biosimilar mark into 2018 in terms of continuing to secure wins with your innovative contracting model and I just have one follow-up.

So, thank you for the question and important thing here is to understand the dynamics on the REMICADE and in the immunology biologics market overall. I mean, the key factor for REMICADE being successful is the fact that physicians and patients have a high confidence and trust in REMICADE based on more than 2 million patients treated and 16 indications. There is no other medicine as a study has experienced as REMICADE is. And the second factor which is important to recognize is that these medicines are not interchangeable and sometimes, this element is lost in the debate. These medicines are not designated as interchangeable by the FDA. So in other words, they are not like generics and they are not the same. They are biosimilars but not the same. So, having said that, what we are seeing in the marketplace that the physicians are very reluctant to switch stable patients for REMICADE into other medicines. And that is normal, I mean, because in many of the indications that REMICADE is used, particularly in the most frequent one in gastroenterology these biosimilars do not have any data to show for. So, the most important factor in the success of REMICADE is the physician and the patient experience and the body of data that supports using REMICADE on the lack of interchangeability. Now, we continue to compete vigorously in price and we continue to drive reductions of course for the overall system based on that. And as a matter of fact, the price of REMICADE has decreased year-over-year when you look at the net price. So, when we move into 2018, we are going to continue to work along the same lines of making sure that physicians have the option to continue to use REMICADE and making sure that they are aware of the body of data and the experience that they have had during the last years in which they have been able to have these therapeutic options. So that’s really the base of our 2018 plan making sure that physicians have the option to prescribe REMICADE and making sure that patients that are stable that can benefit from REMICADE can remain in REMICADE.

Thanks again. Just a quick one on XARELTO in the COMPASS trial. It’s still early days post-data, but any preliminary thoughts on how to maximize capitalization on the coronary peripheral artery disease opportunities? Thanks a lot.

Thank you for the question. I mean, as I said, XARELTO has had terrific share gains during this quarter. It’s the highest share gain in the last four years and that, well we are very pleased with the COMPASS results has nothing to do with the COMPASS results because as you know, COMPASS population, the coronary and peripheral arterial vascular disease is a different one and XARELTO will be used in a different dose. So all you seeing in XARELTO today is driven by our existing indications particularly atrial fibrillation and VTE treatment and prophylaxis. So, moving into 2018, we are filing this year for the COMPASS data as I commented. So we see significant opportunities in COMPASS. It’s a 6 to 7 million patients that can be treated – is the total population and we believe that the profile of XARELTO based on the data of the COMPASS trial is going to be extremely competitive and that’s going to be one of the drivers. This is only one of the study that are included in our excluded program that contains multiple indications seeking the studies in congestive heart failure, acute coronary syndrome, medically ill patients that would continue to drive the growth of XARELTO in 2018 and after 2018.

Thanks for the questions, Josh. Rob, it looks like we’ve got time for one more question?

Yes, your next question comes from the line of Tony Butler with Guggenheim Partners.

Yes, thanks very much. The immunology section for J&J has been a tremendous grower or even since you date back to the acquisition of Sinacore in the 1990s, but one of the things that you’ve recently done is that you’ve backed out sirukumab in RA. So I am curious outside of the products you have on the market today, is there anything to back fill into RA that you have in the portfolio? And number two within immunology, can you comment on how sirukumab has been received with payers? And if I may a third, in for IMBRUVICA for GVHD, Joaquin would you say that that’s a large market opportunity for you and if so how large? Thanks very much.

Okay, so, we – let’s say, it’s important for me to remind that when it comes to the discussion of sirukumab or talacotuzumab, those were setbacks but our outlook of continue to drive above market growth through 2021 remains more surely than before based on the growth of our existing brands and the progress that we have had with several key elements of our pipeline like TREMFYA, apalutamide, and Esketamine. So that's an important theme for me to remind. When it comes to immunology, we are the company with more assets in this category. We have four approved assets, REMICADE, SIMPONI, STELARA and TREMFYA. Are we disappointed with sirukumab? We are, because we stand behind sirukumab and the value it has as an anti IL-60. The additional data request that we were having the complete response letter would have delayed the introduction of sirukumab significantly and based on the competition that exists there with other anti IL-6, we thought the best thing for us is to focus on other priorities. I mean, TREMFYA, it’s been very well received by physicians and by patients. As a matter of fact, as I commented, we already have 900 physicians prescribing TRMFYA in 3000 patients and as we speak it’s the leading the new to brand share in psoriasis when you consider new therapies anti IL-17. What about the payers? Look, this is a very competitive market in this category and we feel confident that we will have appropriate access moving into 2018. We’d be negotiating that access in this part of the year and when the formula is come for 2019 we feel good that patients that want to use TREMFYA, physicians that want to use TREMFYA will be able to use it and will be able to prescribe it. So overall, as we discuss, we see that even in immunology, even considering the erosion that we are going to have with REMICADE, we are going to continue to post positive growth in immunology based on the strength of STELARA and on the strength of TREMFYA moving forward.

Great. So that concludes the Q&A portion of today’s call. Thanks to everyone for the questions and continued interest in Johnson & Johnson and apologies for those questions we weren’t able to address today. I’ll now turn the call back to Dominic for some brief closing remarks.

Well, thanks, Joe. And as I noted earlier, we are very, very pleased with our strong third quarter performance. And I am also glad you had the opportunity to hear directly from our business leaders, Sandy, Jorge and Joaquin who are doing a terrific job in leading our strong businesses and delivering very, very strong results. We owe our strong performance and therefore our thanks to the very talented colleagues we have around the world who continue to bring innovative solutions to patients and consumers. So, thank you for your time today. I look forward to updating you on our full year results in January. Have a great day.