Good morning. Welcome to Johnson & Johnson's Third Quarter 2019 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.

Good morning. This is Chris DelOrefice, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the second quarter of 2019. Joining me on today's call is Joe Wolk, Executive Vice President, Chief Financial Officer. Additionally, during our Q&A session, Joe and I are pleased to be joined by Ashley McEvoy, Executive Vice President, Worldwide Chairman, Medical Devices; Thibaut Mongon, Executive Vice President, Worldwide Chairman, Consumer; and Jennifer Taubert, Executive Vice President, Worldwide Chairman, Pharmaceuticals. A few logistics before we get into the details. This review is being made available via webcast, accessible through the Investor Relations section of the Johnson & Johnson website at investor.jnj.com, where you can also find additional materials, including today's presentation and associated schedules. 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 2018 Form 10-K and our most recent 10-Q 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. Moving to today's agenda, Joe will first provide some perspective on our overall results for the third quarter. I will then review the sales and P&L results for the corporation and the three business segments. Joe will conclude by providing insights about our cash position, capital allocation deployment and our updated guidance for 2019, along with some considerations for the balance of this year and initial high level thoughts for next year. The remaining time will be available for your questions. We anticipate the webcast will last about 75 minutes. I'm now pleased to turn the call over to Joe Wolk.

Great, Chris. Good morning, everyone. Thank you for your interest in Johnson & Johnson. As you might suspect, we're very pleased to discuss our strong third quarter results. Our performance positions us well to exceed the 2019 outlook we provided at the start of the year, providing us with a solid foundation for the future. During the quarter, we delivered strong revenue and earnings growth while also making investments that advance our innovative pipeline across all three segments. We remain committed to advancing solutions that enhance the lives of patients, consumers, employees, and communities, while also delivering value to our shareholders. In a moment, Chris will provide details on our results, but before he does let me offer some general observations in context about the performance in the third quarter. While there are many headlines surrounding our company as well as the industry, we continue to deliver lifesaving and life enhancing products to patients and consumers, which translates into solid financial performance. We must recognize that businesses in the U.S. are working in a very litigious environment, but the fundamentals of Johnson & Johnson's business are strong. We remain confident in our ability to navigate challenges and deliver results focused on our mission as we have done for 133 years. For the quarter, our pharmaceutical business even in the face of significant generic and biosimilar competition once again delivered above-market performance across our broad base of therapeutic areas led by double-digit growth in 10 key products. We are particularly pleased by the progress in the quarter of regulatory approvals and submissions, notably the FDA's approval of ERLEADA for the treatment of metastatic castration-sensitive prostate cancer based on the TITAN data and the approval of STELARA in ulcerative colitis in the EU, additional indications for both of those products. In our Consumer Health business, third quarter performance reflects continued strength in areas we prioritized earlier this year, beauty and over-the-counter medicines. These businesses are fueled by new product innovations and recent acquisitions in large markets experiencing higher growth, which positions the consumer business to grow competitively [ph]with the market while also improving the profitability of this segment. Our Medical Device business continues to accelerate growth. We had some tailwinds that Chris will outline, but the adjusted operational sales growth was the best quarterly growth we posted since 2015. Interventional Solutions delivered yet another quarter of double-digit growth, Surgery improved, and Orthopedics progress continues. We have successfully executed multiple launches in the quarter, and we believe we are well-positioned to continue the momentum. Let me turn the discussion back to Chris for details on the third quarter sales drivers and notable line items in our P&L. I will return prior to the Q&A to provide comments on our cash position and guidance.

Thank you, Joe. Worldwide sales were $20.7 billion for the third quarter of 2019, an increase of 1.9% versus the third quarter of 2018. Operational sales growth, which excludes the effect of translational currency increased 3.2% as currency had a negative impact of 1.3 points. In the U.S., sales increased 1.2%. In regions outside the U.S., our reported growth was 2.6%. Operational sales growth outside the U.S. was 5.4% with currency negatively impacting our reported OUS results by 2.8 points. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.2% worldwide; 3.4% in the U.S.; and 7.3% outside the U.S. Turning now to earnings, for the quarter net earnings were $4.8 billion and diluted earnings per share was $1.81 versus diluted earnings per share of $1.44 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.7 billion and adjusted diluted earnings per share was $2.12, representing increases of 1.5% and 3.4% respectively compared to the third quarter of 2018. On an operational basis, adjusted diluted earnings per share grew 5.9%. Beginning with Consumer Health, I will now comment on business segment sales performance for the third quarter, highlighting items that build upon the slides you have in front of you. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the third quarter of 2018, and therefore exclude the impact of currency translation. Worldwide Consumer segment sales totaled $3.5 billion growing a 3.3%. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 1.3% with strong growth in the U.S. of 2.4% due primarily to strong performance in our beauty and OTC franchises. Growth outside of the U.S. was 0.6%. On a year-to-date basis, Consumer grew double…

Thanks Chris. With respect to cash at the end of the third quarter we had approximately $11 billion of net debt consisting of approximately $18 billion of cash and marketable securities approximately $29 billion of debt. We estimate our year-to-date free cash flow to be approximately $14.5 billion. We acted upon all four tenets of our capital allocation strategy which are designed to and continue to drive shareholder value. Some of the highlights include investing $2.6 billion in research and development in the quarter, investing in our business delivered transformative healthcare solutions remains a top priority at Johnson & Johnson. As in previous years we expect to experience even higher levels of investment during the fourth quarter. Some tangible examples of where this investment will be directed, we will be progressing our future digital surgery offerings and R&D activity related to CAR T, cusatuzumab, DARZALEX subcutaneous formulation and line extensions within the immunology portfolio, such as STELARA in lupus. At the same time, we continue to evaluate strategic transactions that will further enhance our broad-based business and drive value creation, having invested nearly $6 billion this year. We also used cash in the quarter to complete the authorized $5 billion share repurchase program announced just last December deploying $1.2 billion in the third quarter. I will now provide updates to our guidance for 2019. We continue to see strong results across our enterprise. As such, we are increasing sales guidance and are now comfortable with your models reflecting operational sales growth of 2.5% to 3.0% for the year. This growth would result in sales for 2019 on a constant currency basis of approximately $83.7 billion to $84.2 billion. We expect that operational sales growth excluding the impact of acquisitions and divestitures will be between 4.5% and 5.0% for the year.…

Thank you, Joe. We will now move to the Q&A portion of the webcast. As a reminder, I would encourage you to take advantage of Ashley, Thibaut, and Jennifer being on today's call, by directing questions to them about their areas of expertise. Operator, can you please provide instructions for those on the line wishing to ask a question?

[Operator Instructions] Your first question comes from David Lewis with Morgan Stanley.

Good morning and thanks for the questions. Maybe just Joe, one for you and then one for Ashley. Joe, this is a greater level of financial disclosure we typically get heading into 2020, so thank you in advance. We are just doing some quick math here, it does sound like you're basically suggesting for 2020 outlook, but you are not providing official guidance. Top line should accelerate into next year, and you're pretty comfortable with that kind of relative type of leverage J&J has done historically, which is sort of a earnings growth rate kind of in the 1.5 ratio at earnings relative to sales, is that a decent way of thinking about 2020?

Yes, so David, thanks for the comments. Certainly, glad that you find some of the outlook commentary helpful to you. I do want to emphasize though what I said in the prepared remarks in that it's -- our teams are still working through their plans for 2020. We want to see the momentum that we've seen through this year carry on through. With respect to top line, I would say, if you recall back in January, we were a little bit more conservative with this year's outlook given some of the ability to hold on to brands that were facing exclusivity risk, ZYTIGA, PROCRIT, TRACLEER. We performed a little bit better. So, we do expect to be above market, but just not as pronounced as we would have thought in the beginning of this year for 2020, but we're feeling very good about the momentum. With respect to the income ratio to sales growth ratio, I'd say that's a little bit early to comment on. I would expect to see some moderating more back towards -- around sales growth. This year if you look at it, let's just take adjusted -- to adjust it, so accounting for divestitures and acquisitions impact, it's a 1.8 ratio, that's a little bit higher than we typically run at, and then obviously we're going to digest a pretty significant hit on the other income line. So again, the team is working through the plans. We do have ambitious goals for next year. And what I would say is, stay tuned, is probably the best direction I can give you at this point in time.

Okay, maybe just two quick follow-ups, Joe. The first is for you on the repo -- you completed the repo this quarter. Just given the operational performance of J&J and the company's historical discount, what are you thinking now with the share repo completed going forward? And then Ashley, just real quickly, can you just talk a little bit about the U.S. market dynamics within Vision? Two specific dynamics, you talked about pressure in the surgical business, to what extent is that IOL dynamics in the marketplace versus the LASIK franchise? That'd be super helpful. Thanks so much.

So David, with respect to the share repurchase, we are pleased to have the $5 billion board authorized program completed. It continues to be one of the four pillars within our capital allocation strategy. I would say in terms of pecking order, as you know, having covered us for years, it's probably the least of our preferred options, although it is still an option, simply because it doesn't provide us capabilities going forward, but we'll continue to evaluate that along with the dividend increase, the investment in R&D, as well as opportunistic acquisitions that makes sense from a value creation standpoint, but also a really good strategic fit that expands our portfolio.

And thank you, David for the question on Vision. But before I get to that, I have to first acknowledge kind of the strong quarter for Medical Device in quarter three growing 5.3%. And, as Chris had mentioned, we did experience some forwared -buying in the Japan consumption. So, if you take that out, we're looking at around 4.5% growth, which is the strongest that we've had in four years. So, as you know, we've been on this journey since 2017 to really enhance our performance year-over-year. And when we look at '17, we exited 1.5% growth on revenue, and in '18 we exited 2.6%, and in 2019 to date we're tracking to a little bit north of 4%. So as I always say, I don't think our growth is going to be linear, but I do think that we've turned the corner, and that really is due to predominantly in the near term, the strategic choices that we're making to strengthen our competitiveness, and it's really about this very strong seasoned leadership team. We’ve got five quarters underneath them, and a very, very strong focus on execution. So I think this is starting to have an effect. So to your question on Vision; Vision had a good quarter. I would say contact lens in particular had a very healthy quarter, really driven by very strong growth in the United States of around 6%. In surgery, we had very strong outside of U.S. performance, double digits. The U.S. surgical business is challenged really due to two fronts; number one, some competitive inroads and we are working to strengthen our commercial execution. In U.S., we strengthened that leadership team, revisited our programs, and we are also accelerating some innovations. We expect to have three meaningful innovations in premium IOLs and monofocal IOLs over the next 18 months. And to your earlier point point, yes, we do believe that we've seen some softening in the LASIK market in the United States. Thanks for the question. David.

Great, thank you, David. I appreciate the question. Rob, next question please.

Your next question is from Chris Schott with JPMorgan.

Great, thanks very much. Just two questions here. Maybe first, can you talk about TREMFYA dynamics, particularly relative to SKYRIZI? The product obviously -- TREMFYA obviously ramping nicely, I know there’s some investor concern though, that that ramp could be impacted by a strong launch from your competitor. So, just how are you thinking about price and volume for that business going forward? The second question was on liabilities. It seems like kind of these liabilities have somewhat dominated the narrative for the J&J story this year, what do you think the company can do to address that overhang, and what's the company's approach towards settlement? Because it seems like right now the mix of opioids, talc, and some others have overshadowed what seemed to be very strong underlying fundamentals of the company. Thank you.

So Jennifer, why don't you address Chris' question around TREMFYA, and maybe you can give him some Pharmaceutical perspective, and then I'll take up the litigation matters.

Hi Chris and good morning everyone. First off, it was a really strong quarter for the Pharmaceutical Group, and I just wanted to highlight a couple of key points, the first being, sales of $10.9 billion, 6.5% operational growth. This was our sixth consecutive quarter with sales above $10 billion, and if you take a look at our growth excluding ZYTIGA, it was 10% and also with very strong contribution from the U.S. and the international markets, where actually we had 10% growth outside of the U.S. as well. Our growth was broadly based with 10 of our key brands growing at double-digit rates, which more than offset the erosion due to biosimilars in generics. Overall, our immunology business was up 10%, our oncology business, up 9%, and Neuroscience, up 8%. A few notable call-outs, STELARA had 31% growth, DARZALEX had 57%, IMBRUVICA 33% growth, TREMFYA, which I'll come back to, 70% growth, INVEGA SUSTENNA 15% and ERLEADA, 95% growth, so very strong performance across our base of business and across our key growth drivers. Additionally, it was a really nice quarter for the progression of our pipeline, and we had a number of significant approvals, as well as filings that are worth calling out. Most recently as of last Friday, we got approval for XARELTO to help prevent VTE in acutely medically ill patients. We got approval for INVOKANA for the treatment of diabetic kidney disease. DARZALEX, we got approval for the combination regimen in newly diagnosed transplant eligible patients, and for ERLEADA, we got approval for treatment of metastatic castration-sensitive prostate cancer, which expands our opportunity for that product, so that it's not only in the non-metastatic space, but into the metastatic space as well. We also had a number of regulatory submissions and two breakthrough designations that…

Thanks Jennifer. Chris, with respect to your second question on litigation more broadly and what can the company do. So I think it's important, without going into too deep of a litany about the cases that are out there, there's three I'd say headline grabbers that folks have taken notice of. And it is important for me to just give a brief summary of the position on each, because they are unique in their own right. With respect to the RISPERDAL judgment that you heard last week, first of all, let's make sure people understand the benefits of RISPERDAL, what it provides for psychosis. It has for decades now been on WHO's list of most preferred medicines and the judgment itself, based on U.S. Supreme Court precedent, would suggest it's very egregious. So we don't expect that to stand. We will appeal certainly the amount and you can expect that to come down, should precedent hold. With respect to opioids, you've seen two divergent paths there for us. So in Oklahoma, we thought that based on the theory of law and which was brought under in public nuisance, as well as the facts that underlie that case, where even the Attorney General of the State said many times during the court proceedings, this is not about Johnson & Johnson, it's about that there is an opioid crisis, where we have less than 1% market share. That's not just for the State of Oklahoma, but across the country. When those facts were ignored and we couldn't find a reasonable settlement approach. We decided to pursue with that case and we are currently appealing that case and have made motions to do that. In Ohio, you saw something different. We saw a reasonable amount in proportion to other companies that were involved…

Sure. Good morning everyone. The short answer is no. We do not see any significant effect across the Consumer business. As Joe just referenced, our employees around the world in the consumer sector are hyper-focused on delivering personal health in a very differentiated way, with very strong brands that are rooted in science and endorsed by professionals. In Q3 as Chris highlighted earlier, we delivered solid growth in our key priority areas that we declared at the beginning of the year. You heard about 5.2% growth in OTC, 2% in beauty, strong performance by brands like TYLENOL, NEUTROGENA, AVEENO. Full perspective to ground you, the baby franchise represents only 12% approximately of our revenues, and approximately 80% of those sales outside the United States, where there is less of an impact from the U.S. events. So you see the performance of the business. In the U.S., we continue to gain share. In beauty and OTC we are outperforming the market. We are well positioned in segments that are growing 2% to 2.5% in the markets and segments where we compete. You also saw that we increased our adjusted IBT [ph] significantly this year, 210 [ph] basis points so far year-to-date at 22.4%. So we are focused on executing our strategy.

Great, thanks Thibaut. Chris, thanks for the question, Rob, next question please.

Your next question is from Larry Biegelsen with Wells Fargo.

Good morning, thanks for taking the question. One for China, - one on China and one on MedTech for Ashley. So first on China, Joe, any color on what you're seeing across divisions there and your expectations going forward? Obviously there has been some concern about the environment in China, and just remind us as to how much China accounts for as a percent of total J&J sales, and I just had one follow-up for Ashley.

Yes sure, Larry. Good to speak with you. So China continues to perform extremely well for us. So if you look - if I strip out significant divestitures of LifeScan and ASP, our overall growth was about 15%. I would say Medical Devices, which we know is the number one company for medical devices in China, we were up around 19%, 14% in Pharmaceuticals and about 5% in consumer, so very healthy across the board. We have not seen any impacts on tariffs and we don't know of any that are pending around healthcare. So we've been fortunate in that way. We continue to monitor it. The business overall was $1 billion for the quarter. So that's I think a high watermark for that business, as it continues to go fairly strong in terms of growth levels.

That's very helpful Joe. And Ashley, European surgery business has been growing outside the U.S. nicely, but has been soft in the U.S. So my question is, what turned that around in the U.S., and will these recent trends continue until you launch your surgical robot? Thanks for taking the question.

Thanks Larry. I mean before I kind of get specifically into kind of the surgery business, I do think it's helpful to share - I had talked at the last quarter, some of our hotspots on how do we address some of those, and then will we look at some of the areas that are really on fire. As Joe mentioned in China, like our Asia business continues to perform double digits, and we actually performed high single-digit, if not double-digit, in all of our franchises, in orthopedics, in surgery, as well as in interventional. And as I talked last time, really, the U.S. is our largest market, how do we continue to accelerate growth there. So, I am pleased to see that year-to-date, that business is up around 2.2%, and this time last year, that number was a little bit south of 1%. And then when I look at our global orthopedics business where we are, we do command the world-leading position in orthopedics. We've accelerated that revenue in 2019. So year-to-date that business is up around 1%, really fueled by very strong quarter. In quarter three, up of around 2.3%, which is our strongest quarter since 2016, which is growth acceleration versus a year ago, where that number was about down 1%. So if I turn my attention to surgery, I would say our energy business has a very strong performance, really double-digit growth OUS. In the U.S., we will be challenged until we get our digital surgery offerings out there. And then similarly for endocutters; endocutters globally had a softer quarter versus the second quarter, really due to some phasing between quarter two and quarter three, and due to a very healthy comp last year, where we grew 10% in endocutters. Similarly, we're seeing very strong performance outside of the United States, high single-digit, but we are challenged versus the robotic penetration happening in the United States.

Thank you.

Great, thank you, Larry. I appreciate the question, Rob, next question please.

Next question is from Danielle Antalffy with SVB Leerink.

Hey, good morning guys. Thanks so much for taking my question. I appreciate all the commentary on Medical Devices. I love to see the growth this quarter. Ashley, just a quick question for you, as we think about that 4.5% growth, you talked about like some one-timers. How should we think about the sustainability of this? I know there's probably going to be volatility quarter-to-quarter, but just wanted to make sure this level of growth isn't going to fall off for any sort of reason. So I am wondering if you could talk about this, as we look out over the next four to six quarters, the sustainability of that 4% to 5% growth level, or are there any headwinds at any particular quarter coming up that we should be thinking about?

So thanks for the question. Danielle, and listen, it's really good to see a number four, and we're pleased with quarter three, and we're pleased with really kind of the year-over-the-year enhancement. So I feel confident in that continued year-over-year progression. I don't anticipate us having a perfect linear line every quarter-to-quarter. The market is just - we will have to adapt to the market. But I really think that we're going to accomplish that. What you're seeing is really the benefit of strength in commercial execution. But I would say what I'm equally bullish on, is really the innovation agenda. And when I look at 2019, I think we benefited from some really novel innovations in our circular -- powered circular stapler for complex oncology cases. We had a first in contact lens with a light adaptive lens. We are launching our cementless, which is a high-growing segment in knees in quarter three. In quarter four, we'll have some news in spine, related to our Symfony launch for our complex posterior cervical and deformity. So I really think that those are going to have an effect, but equally important is really what I look at the innovations coming out over the next, let's say 18 months. And we're going to have a first-in-kind, smart micro catheter in our electrophysiology business under QDOT, which is going to deliver about two to three times the amount of energy, and take the procedure from four hours to two hours. We're going to have another novel innovation in Vision, related to the first ever drug-eluting contact lens for allergy. More premium intraocular lens coming, and we're going to have some digital surgery robots in our orthopedics business really beginning with the filing in 2020, let alone all the digital surgery offerings that we have with Monarch and the future with Verb and Eye platform. So thanks for the question.

Thanks Danielle. I appreciate the question. Rob, next question please.

Your next question is from Terence Flynn with Goldman Sachs.

Hi, thanks for taking the question. Just as we think about margins, obviously posted a really strong quarter, it looks like Consumer and MedTech were the key drivers of the improvement. Just wondering if that level is sustainable here, or if there is room for further improvement in each of these segments as we look into 2020? And then on DARZALEX looking ahead into 2020, is it reasonable to assume that year-over-year growth in the U.S. should inflect positively next year, given the front-line label? Thanks.

May be Thibaut and Ashley, if you'd like to address your levels of investment with respect to your businesses and then Jennifer you can handle the DARZALEX question.

Sure, I can start with Consumer, Terrence. On - as you saw, we are very focused on improving our profitability level. I just talked about the sequential improvement we are seeing this year. As I look at 2020, we expect to see moderate acceleration in the topline, with market growing around 3% and we remain focused on driving our productivity agenda. So that's the agenda for 2020.

Yes, I think that the best way to characterize it relative to this year, Terence, is that this year was the bigger lift in terms of profit improvement - profitability margins improving for the consumer unit. So you will still see continued improvement, as Thibaut mentioned, but not to the same degree you probably saw in 2019.

And just to build, Terence, this is Ashley, on the kind of the investments and what the expectations are, I think we're seeing very strong performance in Asia. We've made continued investment in Asia, and continued investment in China. We command a leadership position in China and we command leadership position in emerging markets, and it's really nice to see emerging markets up 10% and China up 19% and we will continue to make those very, very select investments. And then in areas like commercial infrastructure around having a world class sales force and world-class professional education, I think we're seeing the investments that we made, particularly in new deployment models in the United States, having an effect. And then clearly in innovation, both in digital surgery, through the Auris acquisition, and what we're continuing to do with our Verb and Orthotaxy, and some robotic programs in spine, and as you know, we've invested about $12 billion in M&A since 2017 in Medical Devices to make sure that we're playing in the most attractive spaces.

To be fair Terence, it's a little bit of a tough question for our business leaders to answer at this point in time. As I mentioned at the outset, we're still developing our plans for 2020, and for us, when we go through those planning, we're really looking at what investment opportunities are available to us, in terms of fortifying not just the short term, but the long term. What's going to make us truly competitively advantaged two, three, five years down the road. So that's why it's a little bit difficult to answer. But we're always looking to make sure that we've got over sustained periods of time, sales growth that exceeds the market in the respective segments, and then profit a little bit better growth than sales growth.

Hi Terrence. Our oncology business had another strong quarter and DARZALEX was really one of the key drivers of that, with 57% growth versus the third quarter of last year. As you noted, we've got a great opportunity to make strides in the front line setting. Right now DARZALEX is a leader in line 2+. However, at the end of June, we gained approval in the front line setting for transplant in eligible patients, in combination with REVLIMID and at the end of the third quarter we gained approval in front line for the transplant eligible patients in combination with Velcade and Thalidomide, are based on our CASSIOPEIA data. And so we're really looking to continue to expand DARZALEX across the various lines of therapy and in various combinations to really be the backbone of therapy. Importantly for us, and I believe the key growth driver for the future, we filed our subcu formulation, which is going to take us from a several hour infusion on this product, down to under five minutes. And so we think that's going to be an important catalyst for growth, particularly in the outpatient settings, the more community settings, and we're also importantly studying DARZALEX in amyloidosis, smoldering myeloma, so we think that there is both near-term, short-term growth, as well as continued long-term growth potential on this asset. So based on the strength of the performance to-date, the additional data that we're seeing and the opportunities that we have in the front line setting and growth potential, coupled with the subcu formulation that's coming up, we believe that there is very good reasons for a very strong, continued growth for DARZALEX going forward.

Great, thanks Terrence. I appreciate the question. Rob, next question please?

Your next question is from Kristen Stewart with Barclays.

Hey everyone. Thanks for taking the question. I just wanted to I guess clarify just some of the timing around the digital surgery platforms. I think Ashley mentioned filing for Orthotaxy in 2020. Just wanted to get some clarification there, and then also any updates on progress with Monarch and then timing around Verb? And I think you might have a Medical Device Day next year, just wondering what we should expect with that, and just kind of Verb and thoughts with Medtronic I guess showcasing their platform too?

Thank you, Kristen for the question. So listen, I couldn't be more bullish around how J&J is going to create value in this space, and really kind of the goal that we're trying to achieve is really to make medical interventions smarter, less invasive, more personalized, quite frankly to change the standard of care, not just for the next 10 years, but to 20 years and 30 years. So it really starts with, as you know, a very strong footprint that we actually have today in - as a world leader in open surgery and a world leader in minimally invasive laparoscopic surgery. I'm very pleased to share that Monarch is off to a great start, as a first in, in endoluminal surgery. We've conducted over a thousand bronchoscopes using the Monarch system. You'll see in the chest, at the end of October, we will be sharing our post-market surveillance data, and so stay tuned for that. We have a very healthy pipeline with Monarch, for not just lung biopsies, but potentially lung treatment via ablation, and potential treatment via oncolytic viruses, so that program is well on its way. We also are looking at applications of Monarch in endourology for the treatment of kidney stones, and we also are assessing the potential application of [indiscernible] in GI endoscopy. So very encouraged with Monarch, equally encouraged with the acquisition of Auris as well as Verb. We brought in a new leader to head our Verb program, Kurt Azarbarzin. He's got over 30 years experience in minimally invasive surgery and robotics. It's pretty fun to watch Kurt and the community of Dr. Fred Moll, again one of the founders of Intuitive, Peter Shen, he has grown up on Ethicon instrumentation and then Andy Conrad from Verily, kind of put those thought leaders together with over 30 different key opinion leaders from around the world, who've been really assessing how we can create value with all of these assets over the next several years. So I am encouraged to say both programs have conducted - and I mean both programs both the [Auris-I] platform and Verb have conducted end-to-end procedures in multiple different indications in general surgery. We've gotten very good feedback from over 30 plus surgeons, and we're going to take the absolute best of all of those, as we in parallel advance both of those programs. Equally pleased to see Dr. Fred Moll engage with our orthopedics team. We plan to file our orthopedics program for filing middle of 2020. And so, when I take a step back, I really see us having a healthy cadence of news starting last year, with the launch of Monarch, every single year having meaningful news. We are completing our assessment, Kristen, as you had mentioned around the eye platform and Verb and how do we create the most amount of value. Right now, we're not changing any timelines until that assessment is complete, so stay tuned.

Great, thanks, Ashley. And may be just another update to Ashley's point on the progress of the Monarch platform, while it's early and limited revenue today, we're very pleased with the progress of the placement of systems, two times the amount year-to-date versus where we were in 2018. So, that continues to progress well from an adoption standpoint in the marketplace.

Thanks, Kristen. Rob, next question please.

Your next question is from Josh Jennings with Cowen & Company.

Hi, good morning, congratulations on the strong quarter. I was hoping to start off around on the Pharma business. I just wanted an update on the generic/biosimilar headwind, you guys have called out a kind of $3 billion number for 2019. And is there any way you can help us think about where that headwind will sit, as we head into 2020? And then the second question, another pharma question just on XARELTO; congrats on the line extension. Any help there, just in terms of how you would perceive launching into this new indication? Are there any pricing considerations you need to undertake and can XARELTO return to growth? It has been a blockbuster that's been relatively anchored over the last number of quarters? Thanks a lot.

Hi Josh, it's Jennifer. So as we take a look at this year, first on your question regarding sort of biosimilar and generic impact. We think we're seeing about $2 billion of incremental impact from biosims and generics. This is a little bit less than what we had anticipated this year. However, the number of generic approvals and the erosion rates are starting to catch up. And so we think as we enter into next year, we'll work through the rest of that. So part of it - a little bit of it's going to carry over into till 2020, and then we'll be working through and be done with that. As it relates to XARELTO, we are very excited about the new indication. This is actually the eighth indication for XARELTO and that product really remains unmatched in the oral space, in terms of the number of indications. So the asset has indications in AFib, VTE prevention and treatment, and then also in CAD, PAD. So how to think about the acute medically ill indication? First of all, it broadens XARELTO's base of indications across these three areas, and it's that's really unmatched. And so that can help from a formulary and from a payer perspective. And then within the market, there are over 7 million Americans that are hospitalized each year with acute medical illnesses and so these patients are at increased risk of clots for up to three months post discharge. So currently they are treated in hospital, with a product like Lovenox, but because of the complications and the difficulties with injections, they typically go untreated, once they leave the hospital. What we now know from our studies and our data, is that it's much better for these patients to actually be treated for about 31…

Great, thanks Josh. I appreciate the question, Rob, next question please.

Next question is from Matt Miksic with Credit Suisse.

Hi, thanks for taking the question. So just two follow-ups, if I could, one on the digital surgery side, Ashley, I appreciate the color on the strategy across the major business lines. The one that I wanted to ask about was just spine. You have a partnership with Brainlab, and that continues to progress. You have pretty solid set of new products that you mentioned are going to drive improving growth in spine. But just if you could, what amount of the competitive pressure there is coming from this sort of increase in robots in that space, and how do you think about that strategically? And then just one follow-up for Joe, if I could?

Sure. Thank you, Matt. So spine, we're number two in the world in spine. We have been challenged. Our revenue performance has been challenged, and really what we've been working on is, one to give very dedicated focus to - if I'll call it like the top six markets in spine, that are really going to be the growth contributors in stabilizing those, from a leadership point of view, from a commercial execution point of view, from a clinical acumen of how we engage with spine surgeons and then rebuilding the spine portfolio. And so, I think we are starting to see the fruit of that on stabilization. And we mentioned some of - Chris had mentioned some of the innovations around VIPER PRIME, around CONDUIT Interbody cages, around Symfony which is going out in quarter four, and so clearly digital surgery is also going to be important that we launch that. To date, that has had a very minimal effect. As you know and you referenced, we do have a strategic partnership with Brainlab, which is offering us an end-to-end navigation solution, and we actually in quarter three entered into a co-marketing distribution and R&D agreement with Tinavi, who is the market leader in orthopedics robotics in China and actually is the only arm based robotic technology approved for spine in China. So clearly, we feel like we have to have a digital surgery offering as well in spine.

That's helpful. And the question for Joe, if I could, just I understand from your comments on the call that you're working through the plan for next year and it's still not a full outlook for next year, but just if you could help us understand perhaps the puts and takes and how you think about spending as you've mentioned balancing near-term to long-term, again some of the year-over-year challenges you may have elsewhere in the P&L that would be super helpful just to maybe walk us through R&D and SG&A and any potential ForEx or opportunities you have in gross margin just at a high level Joe, that would be super helpful?

Yes so, I appreciate the question Matt. I think I'm going to be respectful to the teams on letting them finalize their plans. But I would say in terms of puts and takes I feel very good about the top line growth. We need to see where the net of all the incremental generic and biosimilar erosions will eventually land as we go through the 4th quarter here that will give us a pretty good insight. As you saw, with Medical Devices we expect to be around the markets of 4% to 5% is where we see that market overall. As you know, some of that is influenced by some of the higher segments where we yet don't have a, I'd say a pronounced presence but working our way towards that. But again, Ashley and the team have their line of sight in continued acceleration there. Maybe as a step back for the overall pharma market, we see about 4% growth for next year. And then in Consumer you've heard from Thibaut that we expect to be competitive with the market, which we anticipate will be around 3%, but the focus there has been on prioritization to skin health and self-care and improving the profitability profile, We're going to continue to invest in R&D, that's been a bias of ours for a number of years, you can see that when we issue our P&Ls that there is a disproportionate share and that's where we grow as a percent of sales more often than not. And we're going to continue to look for those opportunities to advance the pipeline. I was really thrilled with the press release today, not simply because of the financial results, although, I was very pleased with those. I would say it was the 15 items that were listed across our businesses of notable advancements in our pipeline and that really just bodes well for the future. So, Matt, I appreciate the question, I apologize, I can't give you a little bit more detailed guidance today, but stay tuned for our report out in January and we'll be pretty specific then.

Great, thanks, Matt. I appreciate it. Rob, next question please.

And your next question is from Bob Hopkins with Bank of America.

Oh, thanks very much for taking the question. Just two really quick ones; given the strength in Medical Devices, I was wondering if you could comment on two quick things. One, you had very strong growth in hips and knees outside the United States. I was wondering if you could just elaborate on what drove that incremental growth? Was it market share, was it market strength? And then just one last one on Verb, I was just wondering, when you think you'll be able to be in a position to provide us with a more detailed update on the timelines for filing and approval? And I ask in part, because your comments on endocutters, and in part because one of the other large competitors has now provided pretty specific timelines, so, just those two quick device questions? Thank you.

Sure, thanks Bob. I think I'm pleased with the performance that we've had in hips, around 3%. We have a strong portfolio in hips and we're really leading the way on the anterior approach. We actually just completed a new acquisition of JointPoint, which is going to help us with kind of an intra-operative software program, to enable a more digitally oriented procedure in hips. I'd say hips is pretty balanced between OUS and U.S. Knees, I am encouraged. This is our first quarter in several quarters that we actually posted growth in knees of around 2%, really fueled by OUS performance. The U.S. I'll come back to that. ATTUNE is performing well in the U.S., we've seen a pivot and start in primary and revision in ATTUNE. We're working off some legacy transition in some of our legacy knee brands in Sigma. Really what's enabling knees is just a couple of things; one, strength in commercial execution in our top six markets. It's also about innovation. We have a very strong foundation in our ATTUNE knee platform that we've invested over 10 years in bringing to market. It's performing very well from an efficacy and safety point of view. We now have a full portfolio in the ATTUNE Revision, both fixed bearing and rotating platform and we've also launched our cementless in quarter three. And then you could add to that, Bob, you can see next year when we'll have cementless in fixed bearing, and we'll have our digital surgery offering in knees, I feel pretty confident that our join platform will start to get back to the market performance. As it relates to Verb, we have been progressing Verb and all of the milestones to bring this to market. We have been preparing for kind of validation studies. We've been in active discussions with all regulatory authorities, both in the United States as well as in Europe. As I mentioned, we brought in a new CEO of Verb, Kurt Azarbarzin, about 60 days ago. So we've been letting him get underneath the hood of what needs more focus, what needs acceleration. Very pleased with, again, the customer feedback from Verb. What we've done is, we've brought in the combination of Auris. There are leaders with Dr. Fred Moll and Kurt and Verily, our partner, Verily are creating kind of this connected OR [ph] of the future, and we're in the middle of assessing how do we really optimize all of these assets to make a difference in healthcare systems. So we're still in the middle of that, and I expect to have that completed before the end of the year. Right now, we're holding to the timelines, but I expect probably in quarter one with some updates, we will keep you posted. Thanks for the question, Bob.

Great, thanks, Ashley. Rob, we have time for one last question, and then after that I will turn it over to Joe Wolk for some closing remarks.

Thank you. Your next question comes from Jayson Bedford with Raymond James.

Hi, good morning. I'll keep it to one question and thanks for squeezing me in. Just maybe for Thibaut and I apologize if I missed this earlier, but your International Consumer business seems to lag year-to-date about 1% growth. Can you give us a little detail on why the international growth has been a little slower? And then you've alluded to bit of a pickup in market growth next year in consumer, what are the big factors driving that better growth? Thanks.

Yes, thank you for the question. Regarding -- as you said, we had a very strong quarter in the U.S., a bit softer outside of the U.S., a number of factors internal and external -- externally we see some softness in some emerging markets, Latin America, especially, and we are rolling out our baby, our new Johnson's Baby brand around the world. The rollout will be completed by the end of this year and this has an impact on our shipments outside of the U.S. In the U.S. we have already completed this rollout last year as we just talked about. Regarding next year, we anticipate modest acceleration in the markets and geographies in which we compete, from 2% to 2.5% this year to 3% next year. And as Joe just mentioned, we are finalizing our plans to grow competitively in these markets while continuing to work on our profitability agenda, so we can improve our profitability and at the same time invest behind growth opportunities we see in our priority areas. Great, thank you, Jayson. I appreciate the question. Joe, final comments from you?

Sure. Well, first let me thank all of you on the webcast today for your time and your continued interest in Johnson & Johnson. Ashley, Thibaut, Jennifer, Chris and I were certainly proud to discuss the quarterly results and also engage in discussing the overall health of our business. What you hopefully saw from today's press release and the discussion that we're about to conclude is that you have a focused organization here on delivering transformational innovation for the betterment of healthcare and much broader society. We manage through any challenges that we face to deliver those results, not just over one year or five years, but many, many years, many, many decades and hopefully you saw that on display today. So again, thank you for your time and look forward to the next encounter.

Thank you. This concludes today's Johnson & Johnson's third quarter 2019 earnings conference call. You may now disconnect.