~~0000200406 us-gaap:NonUsMember jnj:PharmaceuticalMember jnj:PulmonaryHypertensionMember 2018-01-01 2018-07-01~~

0000200406jnj:CardiovascularMetabolismOtherMemberus-gaap:NonUsMemberjnj:OtherMemberjnj:PharmaceuticalMember2019-12-302020-06-28

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




☑						Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934




☐						Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Registrant’s telephone number, including area code (732) 524-0400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT



Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, Par Value $1.00		JNJ		New York Stock Exchange
~~4.75% Notes Due November 2019~~		~~JNJ~~	~~New York Stock Exchange~~
0.250% Notes Due January 2022	JNJ		New York Stock Exchange
0.650% Notes Due May 2024		JNJ		New York Stock Exchange
5.50% Notes Due November 2024		JNJ		New York Stock Exchange
1.150% Notes Due November 2028		JNJ		New York Stock Exchange
1.650% Notes Due May 2035		JNJ		New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On July ~~24, 2019, 2,639,165,527~~20, 2020, 2,632,823,475 shares of Common Stock, $1.00 par value, were outstanding.

JOHNSON & JOHNSON AND SUBSIDIARIES

TABLE OF CONTENTS



									Page
									No.
Part I — Financial Information									1

Item 1. Financial Statements (unaudited)									1

Consolidated Balance Sheets — June ~~30, 2019~~28, 2020 and December ~~30, 2018~~29, 2019									1

Consolidated Statements of Earnings for the Fiscal Second Quarter Ended June 28, 2020 and June 30, 2019 ~~and July 1, 2018~~									2

Consolidated Statements of Earnings for the Fiscal Six Months Ended June 28, 2020 and June 30, 2019 ~~and July 1, 2018~~									3

Consolidated Statements of Comprehensive Income for the Fiscal Second Quarter and Fiscal Six Months Ended June 28, 2020 and June 30, 2019 ~~and July 1, 2018~~									4

Consolidated Statements of Equity for the Fiscal Second Quarter and Fiscal Six Months Ended June 28, 2020 and June 30, 2019 ~~and July 1, 2018~~									5

Consolidated Statements of Cash Flows for the Fiscal Six Months Ended June 28, 2020 and June 30, 2019 ~~and July 1, 2018~~									7

Notes to Consolidated Financial Statements									8

Item 1A. Risk Factors									47

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations									4648

Item 3. Quantitative and Qualitative Disclosures About Market Risk									5966

Item 4. Controls and Procedures									5966

Part II — Other Information									6067

Item 1 - Legal Proceedings									6067

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds									6067

Item 6 - Exhibits									6168

Signatures									6269

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and Johnson & Johnson's other publicly available documents contain “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Management and representatives of Johnson & Johnson and its subsidiaries (the Company) also may from time to time make forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future. Forward-looking statements may be identified by the use of words such as “plans,” “expects,” “will,” “anticipates,” “estimates,” and other words of similar meaning in conjunction with, among other things: discussions of future operations, expected operating results, financial performance; impact of planned acquisitions and dispositions; impact and timing of restructuring initiatives including associated cost savings and other benefits; the Company's strategy for growth; product development activities; regulatory approvals; market position and expenditures.

Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of the Company's control. Investors should realize that if underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, the Company’s actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements. Investors are therefore cautioned not to rely on these forward-looking statements. Risks and uncertainties include, but are not limited to:

Risks Related to Product Development, Market Success and Competition

•Challenges and uncertainties inherent in innovation and development of new and improved products and technologies on which the Company’s continued growth and success depend, including uncertainty of clinical outcomes, additional analysis of existing clinical data, obtaining regulatory approvals, health plan coverage and customer access, and initial and continued commercial success;

•Challenges to the Company’s ability to obtain and protect adequate patent and other intellectual property rights for new and existing products and technologies in the United States and other important markets;

•The impact of patent expirations, typically followed by the introduction of competing biosimilars and generics and resulting revenue and market share losses;

•Increasingly aggressive and frequent challenges to the Company’s patents by competitors and others seeking to launch competing generic, biosimilar or other products and increased receptivity of courts, the United States Patent and Trademark Office and other decision makers to such challenges, potentially resulting in loss of market exclusivity and rapid decline in sales for the relevant product sooner than expected;

•Competition in research and development of new and improved products, processes and technologies, which can result in product and process obsolescence;

•Competition to reach agreement with third parties for collaboration, licensing, development and marketing agreements for products and technologies;

•Competition based on cost-effectiveness, product performance, technological advances and patents attained by competitors; and

•Allegations that the Company’s products infringe the patents and other intellectual property rights of third parties, which could adversely affect the Company’s ability to sell the products in question and require the payment of money damages and future royalties.

Risks Related to Product Liability, Litigation and Regulatory Activity

•Product efficacy or safety concerns, whether or not based on scientific evidence, potentially resulting in product withdrawals, recalls, regulatory action on the part of the United States Food and Drug Administration (or international counterparts), declining sales, reputational damage, increased litigation expense and share price impact;

•Impact, including declining sales and reputational damage, of significant litigation or government action adverse to the Company, including product liability claims and allegations related to pharmaceutical marketing practices and contracting strategies;

•Impact of an adverse judgment or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, product liability, personal injury claims, securities class actions, government investigations, employment and other legal proceedings;

•Increased scrutiny of the health care industry by government agencies and state attorneys general resulting in investigations and prosecutions, which carry the risk of significant civil and criminal penalties, including, but not limited to, debarment from government business;

•Failure to meet compliance obligations in the McNEIL-PPC, Inc. Consent Decree or any other compliance agreements with governments or government agencies, which could result in significant sanctions;

•Potential changes to applicable laws and regulations affecting United States and international operations, including relating to: approval of new products; licensing and patent rights; sales and promotion of health care products; access to, and reimbursement and pricing for, health care products and services; environmental protection and sourcing of raw materials;

•Compliance with local regulations and laws that may restrict the Company’s ability to manufacture or sell its products in relevant markets including, requirements to comply with medical device reporting regulations and other requirements such as the European Union's Medical Devices Regulation;

•Changes in domestic and international tax laws and regulations, including changes related to The Tax Cuts and Jobs Act in the United States, the Federal Act on Tax Reform and AHV Financing in Switzerland, increasing audit scrutiny by tax authorities around the world and exposures to additional tax liabilities potentially in excess of existing reserves; and

•Issuance of new or revised accounting standards by the Financial Accounting Standards Board and regulations by the Securities and Exchange Commission.

Risks Related to the Company’s Strategic Initiatives and ~~Health Care~~Healthcare Market Trends

•Pricing pressures resulting from trends toward health care cost containment, including the continued consolidation among health care providers and other market participants, trends toward managed care, the shift toward governments increasingly becoming the primary payers of health care expenses, significant new entrants to the health care markets seeking to reduce costs and government pressure on companies to voluntarily reduce costs and price increases;

•Restricted spending patterns of individual, institutional and governmental purchasers of health care products and services due to economic hardship and budgetary constraints;

•Challenges to the Company’s ability to realize its strategy for growth including through externally sourced innovations, such as development collaborations, strategic acquisitions, licensing and marketing agreements, and the potential heightened costs of any such external arrangements due to competitive pressures;

•The potential that the expected strategic benefits and opportunities from any planned or completed acquisition or divestiture by the Company may not be realized or may take longer to realize than expected; and

•The potential that the expected benefits and opportunities related to past and ongoing restructuring actions may not be realized or may take longer to realize than expected.

Risks Related to Economic Conditions, Financial Markets and Operating Internationally

~~Market conditions~~•The risks associated with global operations, including the impact of global public health crises and pandemics, such as the ~~possibility that~~outbreak of the ~~Company’s share repurchase program may be delayed, suspended or discontinued;~~novel coronavirus (COVID-19), on the Company and its customers and suppliers, including foreign governments in countries in which the Company operates.

•Impact of inflation and fluctuations in interest rates and currency exchange rates and the potential effect of such fluctuations on revenues, expenses and resulting margins;

•Potential changes in export/import and trade laws, regulations and policies of the United States and other countries, including any increased trade restrictions or tariffs and potential drug reimportation legislation;

•The impact on international operations from financial instability in international economies, sovereign risk, possible imposition of governmental controls and restrictive economic policies, and unstable international governments and legal systems;

•Changes to global climate, extreme weather and natural disasters that could affect demand for the Company's products and services, cause disruptions in manufacturing and distribution networks, alter the availability of goods and services within the supply chain, and affect the overall design and integrity of the Company's products and operations; ~~and~~

•The impact of armed conflicts and terrorist attacks in the United States and other parts of the world including social and economic disruptions and instability of financial and other ~~markets.~~markets; and

Risks Related to Supply Chain and Operations

•Difficulties and delays in manufacturing, internally through third party providers or otherwise within the supply chain, that may lead to voluntary or involuntary business interruptions or shutdowns, product shortages, withdrawals or suspensions of products from the market, and potential regulatory action;

•Interruptions and breaches of the Company's information technology systems or those of the Company's vendors which, could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action;

•Reliance on global supply chains and production and distribution processes that are complex and subject to increasing regulatory requirements that may adversely affect supply, sourcing and pricing of materials used in the Company’s products; and

•The potential that the expected benefits and opportunities related to restructuring actions contemplated for the global supply chain, including the Company's transaction with Jabil Inc., may not be realized or may take longer to realize than expected, including due to any required approvals from applicable regulatory authorities. Disruptions associated with the announced global supply chain actions may adversely affect supply and sourcing of materials used in the Company's products.

Investors also should carefully read the Risk Factors described in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December ~~30, 2018,~~29, 2019, for a description of certain risks that could, among other things, cause the Company’s actual results to differ materially from those expressed in its forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above to be a complete statement of all potential risks and uncertainties. The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.

Table of Contents

Part I — FINANCIAL INFORMATION

Item 1 — FINANCIAL STATEMENTS

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; Dollars in Millions Except Share and Per Share Data)


	June 28, 2020		December 29, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	11,174	17,305
Marketable securities	7,961		1,982
Accounts receivable, trade, less allowances for doubtful accounts and credit losses $334 (2019, $226)	14,645		14,481
Inventories (Note 2)	9,424		9,020
Prepaid expenses and other	2,588		2,392
Assets held for sale (Note 10)	100		94
Total current assets	45,892		45,274
Property, plant and equipment at cost	44,056		43,332
Less: accumulated depreciation	(26,458)		(25,674)
Property, plant and equipment, net	17,598		17,658
Intangible assets, net (Note 3)	47,413		47,643
Goodwill (Note 3)	33,890		33,639
Deferred taxes on income (Note 5)	7,805		7,819
Other assets	5,782		5,695
Total assets	$	158,380	157,728
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	5,332	1,202
Accounts payable	6,765		8,544
Accrued liabilities	8,940		9,715
Accrued rebates, returns and promotions	11,790		10,883
Accrued compensation and employee related obligations	2,313		3,354
Accrued taxes on income (Note 5)	1,632		2,266
Total current liabilities	36,772		35,964
Long-term debt (Note 4)	25,062		26,494
Deferred taxes on income (Note 5)	5,532		5,958
Employee related obligations (Note 6)	10,411		10,663
Long-term taxes payable (Note 5)	6,591		7,444
Other liabilities	11,034		11,734
Total liabilities	95,402		98,257
Commitments and Contingencies (Note 11)
Shareholders’ equity:
Common stock — par value $1.00 per share (authorized 4,320,000,000 shares; issued 3,119,843,000 shares)	$	3,120	3,120
Accumulated other comprehensive income (loss) (Note 7)	(15,533)		(15,891)
Retained earnings	113,898		110,659
Less: common stock held in treasury, at cost (487,466,000 and 487,336,000 shares)	38,507		38,417
Total shareholders’ equity	62,978		59,471
Total liabilities and shareholders' equity	$	158,380	157,728

June 30, 2019 December 30, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 14,376
18,107
Marketable securities 902
1,580
Accounts receivable, trade, less allowances for doubtful accounts $251 (2018, $248) 14,653
14,098
Inventories (Note 2) 9,263
8,599
Prepaid expenses and other 2,411
2,699
Assets held for sale (Note 10) 194
950
Total current assets 41,799
46,033
Property, plant and equipment at cost 42,905
41,851
Less: accumulated depreciation (25,657 ) (24,816 )
Property, plant and equipment, net 17,248
17,035
Intangible assets, net (Note 3) 49,332
47,611
Goodwill (Note 3) 33,661
30,453
Deferred taxes on income 7,647
7,640
Other assets 5,430
4,182
Total assets $ 155,117
152,954
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable $ 1,719
2,796
Accounts payable 6,912
7,537
Accrued liabilities 8,297
7,601
Accrued rebates, returns and promotions 10,433
9,380
Accrued compensation and employee related obligations 2,291
3,098
Accrued taxes on income 1,701
818
Total current liabilities 31,353
31,230
Long-term debt (Note 4) 27,699
27,684
Deferred taxes on income 7,725
7,506
Employee related obligations 9,910
9,951
Long-term taxes payable 7,543
8,242
Other liabilities 10,102
8,589
Total liabilities 94,332
93,202
Commitments and Contingencies (Note 11)

Shareholders’ equity:
Common stock — par value $1.00 per share (authorized 4,320,000,000 shares; issued 3,119,843,000 shares) $ 3,120
3,120
Accumulated other comprehensive income (loss) (Note 7) (14,969 ) (15,222 )
Retained earnings 109,809
106,216
Less: common stock held in treasury, at cost (477,778,000 and 457,519,000 shares) 37,175
34,362
Total shareholders’ equity 60,785
59,752
Total liabilities and shareholders' equity $ 155,117
152,954

See Notes to Consolidated Financial Statements

Table of Contents

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited; Dollars & Shares in Millions Except Per Share Amounts)


	Fiscal Second Quarter Ended
	June 28, 2020		Percent to Sales		June 30, 2019		Percent to Sales
Sales to customers (Note 9)	$	18,336	100.0	%	$	20,562	100.0	%
Cost of products sold	6,579		35.9		6,940		33.8
Gross profit	11,757		64.1		13,622		66.2
Selling, marketing and administrative expenses	4,993		27.2		5,546		27.0
Research and development expense	2,707		14.8		2,666		13.0
In-process research and development	6		0.0		—		—
Interest income	(19)		(0.1)		(88)		(0.4)
Interest expense, net of portion capitalized	45		0.3		83		0.4
Other (income) expense, net	24		0.1		(1,683)		(8.2)
Restructuring (Note 12)	61		0.3		57		0.2
Earnings before provision for taxes on income	3,940		21.5		7,041		34.2
Provision for taxes on income (Note 5)	314		1.7		1,434		6.9
NET EARNINGS	$	3,626	19.8	%	$	5,607	27.3	%

NET EARNINGS PER SHARE (Note 8)
Basic	$	1.38			$	2.11
Diluted	$	1.36			$	2.08

AVG. SHARES OUTSTANDING
Basic	2,632.9				2,652.5
Diluted	2,665.5				2,691.7

Fiscal Second Quarter Ended
June 30,
2019
Percent
to Sales
July 1,
2018
Percent
to Sales
Sales to customers (Note 9) $ 20,562
100.0 % $ 20,830
100.0 %
Cost of products sold 6,940
33.8
6,927
33.3
Gross profit 13,622
66.2
13,903
66.7
Selling, marketing and administrative expenses 5,546
27.0
5,743
27.5
Research and development expense 2,666
13.0
2,639
12.7
Interest income (88 ) (0.4 ) (126 ) (0.6 )
Interest expense, net of portion capitalized 83
0.4
253
1.2
Other (income) expense, net (1,683 ) (8.2 ) 364
1.7
Restructuring (Note 12) 57
0.2
57
0.3
Earnings before provision for taxes on income 7,041
34.2
4,973
23.9
Provision for taxes on income (Note 5) 1,434
6.9
1,019
4.9
NET EARNINGS $ 5,607
27.3 % $ 3,954
19.0 %

NET EARNINGS PER SHARE (Note 8)
Basic $ 2.11
$ 1.47

Diluted $ 2.08
$ 1.45

AVG. SHARES OUTSTANDING
Basic 2,652.5
2,682.3

Diluted 2,691.7
2,721.3

See Notes to Consolidated Financial Statements

Table of Contents

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited; Dollars & Shares in Millions Except Per Share Amounts)


	Fiscal Six Months Ended
	June 28, 2020		Percent to Sales		June 30, 2019		Percent to Sales
Sales to customers (Note 9)	$	39,027	100.0	%	$	40,583	100.0	%
Cost of products sold	13,641		35.0		13,555		33.4
Gross profit	25,386		65.0		27,028		66.6
Selling, marketing and administrative expenses	10,196		26.1		10,765		26.5
Research and development expense	5,287		13.5		5,524		13.6
In-process research and development	6		0.0		890		2.2
Interest income	(86)		(0.2)		(187)		(0.5)
Interest expense, net of portion capitalized	70		0.2		185		0.5
Other (income) expense, net	(655)		(1.7)		(1,705)		(4.2)
Restructuring (Note 12)	119		0.3		93		0.3
Earnings before provision for taxes on income	10,449		26.8		11,463		28.2
Provision for taxes on income (Note 5)	1,027		2.7		2,107		5.1
NET EARNINGS	$	9,422	24.1	%	$	9,356	23.1	%

NET EARNINGS PER SHARE (Note 8)
Basic	$	3.58			$	3.52
Diluted	$	3.53			$	3.47

AVG. SHARES OUTSTANDING
Basic	2,633.3				2,656.7
Diluted	2,671.0				2,697.0

See Notes to Consolidated Financial Statements

Fiscal Six Months Ended
June 30,
2019
Percent
to Sales
July 1,
2018
Percent
to Sales
Sales to customers (Note 9) $ 40,583
100.0 % $ 40,839
100.0 %
Cost of products sold 13,555
33.4
13,541
33.2
Gross profit 27,028
66.6
27,298
66.8
Selling, marketing and administrative expenses 10,765
26.5
11,006
27.0
Research and development expense 5,524
13.6
5,043
12.3
In-process research and development 890
2.2
—
—
Interest income (187 ) (0.5 ) (240 ) (0.6 )
Interest expense, net of portion capitalized 185
0.5
512
1.3
Other (income) expense, net (1,705 ) (4.2 ) 424
1.0
Restructuring (Note 12) 93
0.3
99
0.2
Earnings before provision for taxes on income 11,463
28.2
10,454
25.6
Provision for taxes on income (Note 5) 2,107
5.1
2,133
5.2
NET EARNINGS $ 9,356
23.1 % $ 8,321
20.4 %

NET EARNINGS PER SHARE (Note 8)
Basic $ 3.52
$ 3.10

Diluted $ 3.47
$ 3.05

AVG. SHARES OUTSTANDING
Basic 2,656.7
2,682.2

Diluted 2,697.0
2,728.5

See Notes to Consolidated Financial Statements

Table of Contents

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; Dollars in Millions)


												Fiscal Second Quarter Ended					Fiscal Six Months Ended
	Fiscal Second Quarter Ended					Fiscal Six Months Ended						June 28, 2020		June 30, 2019	June 28, 2020		June 30, 2019
	June 30, 2019			July 1, 2018		June 30, 2019			July 1, 2018
Net earnings	$	5,607		3,954		$	9,356		8,321		Net earnings	$	3,626	5,607	$	9,422	9,356

Other comprehensive income (loss), net of tax											Other comprehensive income (loss), net of tax
Foreign currency translation	350			(2,190	)	92			(1,567	)	Foreign currency translation	556		350	(963)		92

Securities:											Securities:
Unrealized holding gain (loss) arising during period	1			—		1			—		Unrealized holding gain (loss) arising during period	(2)		1	—		1
Reclassifications to earnings	—			—		—			—		Reclassifications to earnings	—		—	—		—

Net change	1			—		1			—		Net change	(2)		1	—		1

Employee benefit plans:											Employee benefit plans:
Prior service cost amortization during period	(5		)	(5	)	(12		)	(11	)	Prior service cost amortization during period	(5)		(5)	(11)		(12)
Gain (loss) amortization during period	142			190		318			382		Gain (loss) amortization during period	200		142	401		318

Net change	137			185		306			371		Net change	195		137	390		306

Derivatives & hedges:											Derivatives & hedges:
Unrealized gain (loss) arising during period	86			(61	)	(216		)	(225	)	Unrealized gain (loss) arising during period	21		86	853		(216)
Reclassifications to earnings	(26		)	(103	)	70			75		Reclassifications to earnings	(60)		(26)	78		70
Net change	60			(164	)	(146		)	(150	)	Net change	(39)		60	931		(146)

Other comprehensive income (loss)	548			(2,169	)	253			(1,346	)	Other comprehensive income (loss)	710		548	358		253

Comprehensive income	$	6,155		1,785		$	9,609		6,975		Comprehensive income	$	4,336	6,155	$	9,780	9,609

See Notes to Consolidated Financial Statements



The tax effects in other comprehensive income for the fiscal second quarter were as follows for ~~2019~~2020 and ~~2018,~~2019, respectively: Foreign Currency Translation: ~~$106~~$114 million and ~~$346~~$106 million; Securities: $1 million for 2020, Employee Benefit Plans: ~~$34~~$55 million and ~~$51~~$34 million; Derivatives & Hedges: ~~$16~~$10 million and ~~$44~~$16 million.

The tax effects in other comprehensive income for the fiscal six months were as follows for ~~2019~~2020 and ~~2018,~~2019, respectively: Foreign Currency Translation: ~~$44~~$68 million and ~~$183~~$44 million; Employee Benefit Plans: ~~$35~~$111 million and ~~$103~~$35 million; Derivatives & Hedges:~~$39~~ $246 million and ~~$40~~$39 million.

Table of Contents

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited; Dollars in Millions)

Fiscal Second Quarter Ended June 28, 2020


	Total		Retained Earnings	Accumulated Other Comprehensive Income	Common Stock Issued Amount	Treasury Stock Amount
Balance, March 29, 2020	$	61,294	112,901	(16,243)	3,120	(38,484)
Net earnings	3,626		3,626	—	—	—
Cash dividends paid ($1.01 per share)	(2,659)		(2,659)	—	—	—
Employee compensation and stock option plans	712		29	—	—	683
Repurchase of common stock	(706)		—	—	—	(706)
Other	1		1	—	—	—
Other comprehensive income (loss), net of tax	710		—	710	—	—
Balance, June 28, 2020	$	62,978	113,898	(15,533)	3,120	(38,507)

Fiscal Six Months Ended June 28, 2020


	Total		Retained Earnings	Accumulated Other Comprehensive Income	Common Stock Issued Amount	Treasury Stock Amount
Balance, December 29, 2019	$	59,471	110,659	(15,891)	3,120	(38,417)
Net earnings	9,422		9,422	—	—	—
Cash dividends paid ($1.96 per share)	(5,164)		(5,164)	—	—	—
Employee compensation and stock option plans	1,307		(1,020)	—	—	2,327
Repurchase of common stock	(2,417)		—	—	—	(2,417)
Other	1		1	—	—
Other comprehensive income (loss), net of tax	358			358	—	—
Balance, June 28, 2020	$	62,978	113,898	(15,533)	3,120	(38,507)

Table of Contents

Fiscal Second Quarter Ended June 30, 2019


	Total		Retained Earnings	Accumulated Other Comprehensive Income	Common Stock Issued Amount	Treasury Stock Amount
Balance, March 31, 2019	$	58,955	106,650	(15,517)	3,120	(35,298)

Net earnings	5,607		5,607	—	—	—
Cash dividends paid ($0.95 per share)	(2,522)		(2,522)	—	—	—
Employee compensation and stock option plans	683		74	—	—	609
Repurchase of common stock	(2,486)		—	—	—	(2,486)

Other comprehensive income (loss), net of tax	548		—	548	—	—
Balance, June 30, 2019	$	60,785	109,809	(14,969)	3,120	(37,175)

Total
Retained
Earnings

Accumulated
Other
Comprehensive
Income

Common Stock
Issued Amount

Treasury
Stock
Amount
Balance, March 31, 2019 $ 58,955
106,650
(15,517 ) 3,120
(35,298 )
Net earnings 5,607
5,607
—
—
—
Cash dividends paid ($0.95 per share) (2,522 ) (2,522 ) —
—
—
Employee compensation and stock option plans 683
74
—
—
609
Repurchase of common stock (2,486 ) —
—
—
(2,486 )
Other —
—
—
—
—
Other comprehensive income (loss), net of tax 548
—
548
—
—
Balance, June 30, 2019 $ 60,785
109,809
(14,969 ) 3,120
(37,175 )

Fiscal Six Months Ended June 30, 2019


	Total		Retained Earnings	Accumulated Other Comprehensive Income	Common Stock Issued Amount	Treasury Stock Amount
Balance, December 30, 2018	$	59,752	106,216	(15,222)	3,120	(34,362)

Net earnings	9,356		9,356	—	—	—
Cash dividends paid ($1.85 per share)	(4,918)		(4,918)	—	—	—
Employee compensation and stock option plans	1,034		(845)	—	—	1,879
Repurchase of common stock	(4,692)		—	—	—	(4,692)

Other comprehensive income (loss), net of tax	253		—	253	—	—
Balance, June 30, 2019	$	60,785	109,809	(14,969)	3,120	(37,175)

Total
Retained
Earnings

Accumulated
Other
Comprehensive
Income

Common Stock
Issued Amount

Treasury
Stock
Amount
Balance, December 30, 2018 $ 59,752
106,216
(15,222 ) 3,120
(34,362 )
Net earnings 9,356
9,356
—
—
—
Cash dividends paid ($1.85 per share) (4,918 ) (4,918 ) —
—
—
Employee compensation and stock option plans 1,034
(845 ) —
—
1,879
Repurchase of common stock (4,692 ) —
—
—
(4,692 )
Other —
—
—
—
—
Other comprehensive income (loss), net of tax 253
—
253
—
—
Balance, June 30, 2019 $ 60,785
109,809
(14,969 ) 3,120
(37,175 )

See Notes to Consolidated Financial Statements

Table of Contents

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~EQUITY (cont.)~~CASH FLOWS

(Unaudited; Dollars in Millions)

~~Fiscal Second Quarter Ended July 1, 2018~~

Total
Retained
Earnings

Accumulated
Other
Comprehensive
Income

Common Stock
Issued Amount

Treasury
Stock
Amount
Balance, April 1, 2018 $ 63,255
104,339
(12,608 ) 3,120
(31,596 )
Cumulative Adjustment to retained earnings —
—
—
—
—
Net earnings 3,954
3,954
—
—
—
Cash dividends paid ($0.90 per share) (2,415 ) (2,415 ) —
—
—
Employee compensation and stock option plans 409
245
—
—
164
Repurchase of common stock (145 ) —
—
—
(145 )
Other —
—
—
—
—
Other comprehensive income (loss), net of tax (2,169 ) —
(2,169 ) —
—
Balance, July 1, 2018 $ 62,889
106,123
(14,777 ) 3,120
(31,577 )

~~Fiscal Six Months Ended July 1, 2018~~

Total
Retained
Earnings

Accumulated
Other
Comprehensive
Income

Common Stock
Issued Amount

Treasury
Stock
Amount
Balance, December 31, 2017 $ 60,160
101,793
(13,199 ) 3,120
(31,554 )
Cumulative Adjustment to retained earnings 1,264
1,496
(232 ) —
—
Net earnings 8,321
8,321
—
—
—
Cash dividends paid ($1.74 per share) (4,668 ) (4,668 ) —
—
—
Employee compensation and stock option plans 760
(806 ) —
—
1,566
Repurchase of common stock (1,589 ) —
—
—
(1,589 )
Other (13 ) (13 ) —
—
—
Other comprehensive income (loss), net of tax (1,346 ) —
(1,346 ) —
—
Balance, July 1, 2018 $ 62,889
106,123
(14,777 ) 3,120
(31,577 )


	Fiscal Six Months Ended
	June 28, 2020		June 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	9,422	9,356
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property and intangibles	3,473		3,466
Stock based compensation	589		572


Asset write-downs	33		989
Contingent consideration reversal	(983)		—
Net gain on sale of assets/businesses	(60)		(2,079)

Deferred tax provision	(428)		(694)
Credit losses and accounts receivable allowances	117		1
Changes in assets and liabilities, net of effects from acquisitions and divestitures:
Increase in accounts receivable	(520)		(336)
Increase in inventories	(637)		(423)
Decrease in accounts payable and accrued liabilities	(2,319)		(444)
Increase in other current and non-current assets	(1,048)		(862)
Decrease in other current and non-current liabilities	(829)		(55)

NET CASH FLOWS FROM OPERATING ACTIVITIES	6,810		9,491

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment	(1,287)		(1,493)
Proceeds from the disposal of assets/businesses, net	87		3,018
Acquisitions, net of cash acquired	(949)		(5,346)
Purchases of investments	(8,551)		(1,517)
Sales of investments	2,417		2,132
Proceeds from credit support agreements, net	672		—
Other (primarily licenses and milestones)	(492)		1

NET CASH USED BY INVESTING ACTIVITIES	(8,103)		(3,205)

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to shareholders	(5,164)		(4,918)
Repurchase of common stock	(2,417)		(4,692)
Proceeds from short-term debt	2,717		15
Repayment of short-term debt	(17)		(12)
Proceeds from long-term debt, net of issuance costs	1		1
Repayment of long-term debt	(11)		(1,005)
Proceeds from the exercise of stock options/employee withholding tax on stock awards, net	708		463
Other	(489)		98

NET CASH USED BY FINANCING ACTIVITIES	(4,672)		(10,050)

Effect of exchange rate changes on cash and cash equivalents	(166)		33
Decrease in cash and cash equivalents	(6,131)		(3,731)
Cash and Cash equivalents, beginning of period	17,305		18,107
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	11,174	14,376





Acquisitions
Fair value of assets acquired	$	1,173	6,744
Fair value of liabilities assumed and noncontrolling interests	(224)		(1,398)
Net cash paid for acquisitions	$	949	5,346

See Notes to Consolidated Financial Statements

JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in Millions)
Fiscal Six Months Ended
June 30,
2019 July 1,
2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 9,356
8,321
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property and intangibles 3,466
3,463
Stock based compensation 572
580
Asset write-downs 989
27
Net gain on sale of assets/businesses (2,079 ) (443 )
Deferred tax provision (694 ) (285 )
Accounts receivable allowances 1
(16 )
Changes in assets and liabilities, net of effects from acquisitions and divestitures:
Increase in accounts receivable (336 ) (989 )
Increase in inventories (423 ) (491 )
Decrease in accounts payable and accrued liabilities (444 ) (49 )
Increase in other current and non-current assets (862 ) (267 )
Decrease in other current and non-current liabilities (55 ) (166 )

NET CASH FLOWS FROM OPERATING ACTIVITIES 9,491
9,685

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (1,493 ) (1,533 )
Proceeds from the disposal of assets/businesses, net 3,018
870
Acquisitions, net of cash acquired (5,346 ) (222 )
Purchases of investments (1,517 ) (951 )
Sales of investments 2,132
743
Other 1
(33 )

NET CASH USED BY INVESTING ACTIVITIES (3,205 ) (1,126 )

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to shareholders (4,918 ) (4,668 )
Repurchase of common stock (4,692 ) (1,589 )
Proceeds from short-term debt 15
27
Retirement of short-term debt (12 ) (2,433 )
Proceeds from long-term debt, net of issuance costs 1
3
Retirement of long-term debt (1,005 ) (9 )
Proceeds from the exercise of stock options/employee withholding tax on stock awards, net 463
162
Other 98
(137 )

NET CASH USED BY FINANCING ACTIVITIES (10,050 ) (8,644 )

Effect of exchange rate changes on cash and cash equivalents 33
(170 )
Decrease in cash and cash equivalents (3,731 ) (255 )
Cash and Cash equivalents, beginning of period 18,107
17,824
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,376
17,569

Acquisitions
Fair value of assets acquired $ 6,744
334
Fair value of liabilities assumed and noncontrolling interests (1,398 ) (112 )
Net cash paid for acquisitions $ 5,346
222

Table of Contents

~~See Notes to Consolidated Financial Statements~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements of Johnson & Johnson and its subsidiaries (the Company) and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December ~~30, 2018~~.29, 2019. The unaudited interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented.

Columns and rows within tables may not add due to rounding. Percentages have been calculated using actual, non-rounded figures.

Use of Estimates

The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to: the magnitude and duration of COVID-19, the extent to which it will impact worldwide macroeconomic conditions including interest rates, employment rates and health insurance coverage, the speed of the anticipated recovery, and governmental and business reactions to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts COVID-19 as of June 28, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, inventory and related reserves, accrued rebates and associated reserves, and the carrying value of the goodwill and other long-lived assets. While there was not a material impact to the Company’s consolidated financial statements as of and for the quarter ended June 28, 2020, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

New Accounting Standards

The Company assesses the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on the Company's financial statements as well as material updates to previous assessments, if any, from the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019. There were no new material accounting standards issued in the fiscal second quarter of 2020 that impacted the Company.

Recently Adopted Accounting Standards

~~ASU 2016-02: Leases~~

~~The Company~~There were no new accounting standards adopted this standard as of the beginning of fiscal year 2019, on a prospective basis. This update requires the recognition of lease assets and lease liabilities on the balance sheet for all lease obligations and disclosing key information about leasing arrangements. This update requires the recognition of lease assets and lease liabilities by lessees for arrangements that are classified as operating leases. The Company’s operating leases resulted in ~~the recognition of additional assets and the corresponding liabilities on its Consolidated Balance Sheet, however it did not have a material impact on the consolidated financial statements.~~

The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.

Right of Use (ROU) Assets and Lease Liabilities for operating leases are included in Other assets, Accrued liabilities, and Other liabilities on the consolidated balance sheet. The ROU Assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Commitments under finance leases are not significant, and are included in Property, plant and equipment, Loans and notes payable, and Long-term debt on the consolidated balance sheet.

ROU Assets and Lease Liabilities are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, when the implicit rate is not readily determinable. Lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company has elected the following policy elections on adoption: use of portfolio approach on leases of assets under master service agreements, exclusion of short term leases on the balance sheet, and not separating lease and non-lease components.

The Company primarily has operating leases for space, vehicles, manufacturing equipment, and data processing equipment. Leases have remaining lease terms ranging from 1 year to 37 years, some of which could include options to extend the leases when they are reasonably certain.

As noted in the Company’s 2018 10-K, the approximate minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms in excess of one year at December 30, 2018 were:

~~(Dollars in Millions)~~

2019 2020 2021 2022 2023 After 2023 Total
$223 188 154 116 76 139 896

~~Commitments under finance leases are not significant.~~

~~Maturity of Lease Liabilities related to Operating Lease~~

~~The minimum rental payments required under operating leases that have initial or remaining non-cancellable lease terms in excess of one year as of June 30, 2019 are:~~

(Dollars in Millions) Operating Leases
2019 (for the remainder of fiscal 2019) $ 185
2020 245
2021 201
2022 156
2023 98
After 2023 214
Total lease payments 1,099
Less: Interest 88
Present Value of lease liabilities $ 1,011

~~The Weighted Average Remaining Lease Term and discount rate:~~

~~Operating leases 6.2 years~~

~~Weighted Average Discount Rate 3%~~

~~For~~ the fiscal second quarter ~~and first fiscal six months ended June 30, 2019, the operating lease costs were $50 million and $124 million, respectively. Cash paid for~~of 2020.

Reclassification

Certain prior period amounts ~~included in the measurement of lease liabilities were $76 million and $147 million for the fiscal second quarter and fiscal six months of 2019, respectively. Other supplemental information related~~have been reclassified to ~~these leases are as follows:~~conform to current year presentation.

~~Supplemental balance sheet information (for the fiscal first quarter ended June 30, 2019)~~

(Dollars in Millions)
Non-current operating lease right-of-use assets $ 980
Current operating lease liabilities 262
Non-current Operating lease liabilities 749
Total operating lease liabilities $ 1,011

Table of Contents

~~ASU 2018-02~~
~~: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~

This update allows a Company to elect to reclassify stranded tax effects resulting from the Tax Cuts and Job Act enacted in December 2017 from accumulated other comprehensive income to retained earnings. The Company has elected not to reclassify the income tax effects of this standard and therefore this standard will not impact the Company's consolidated financial statements.

~~ASU 2018-16: Derivatives and Hedging (Topic ASC 815)~~

This update adds the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as an eligible benchmark interest rate permitted in the application of hedge accounting. The guidance was effective for the Company as of the fiscal fourth quarter of 2018, due to the previous adoption of ASU 2017-12. The impact of the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. The standard may have an impact in the future as the market for SOFR derivatives develops over time and if SOFR is used to hedge the Company’s financial instruments.

~~Recently Issued Accounting Standards~~

~~Not Adopted as of June 30, 2019~~

~~ASU 2018-18: Collaborative Arrangements~~

This update clarifies the interaction between ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers. The update clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. This update will be effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. ASU 2018-18 should be applied retrospectively to the date of initial application of ASC 606 and early adoption is permitted. The Company is currently assessing the impact of this update on the Company’s consolidated financial statements and related disclosures.

~~ASU 2016-13: Financial Instruments - Credit Losses~~

This update introduces the current expected credit loss (CECL) model, which will require an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. This update will be effective for the Company for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact of this update on the Company’s consolidated financial statements and related disclosures.

NOTE 2 — INVENTORIES

(Dollars in Millions) June 30, 2019 December 30, 2018
Raw materials and supplies $ 1,198
1,114
Goods in process 2,024
2,109
Finished goods 6,041
5,376
Total inventories⁽¹⁾
$ 9,263
8,599


(Dollars in Millions)	June 28, 2020		December 29, 2019
Raw materials and supplies	$	1,303	1,117
Goods in process	1,962		1,832
Finished goods	6,159		6,071
Total inventories ⁽¹⁾	$	9,424	9,020

⁽¹⁾~~The balance as of June 30, 2019, does not include~~See Note 10 to the Consolidated Financial Statements for details on assets held for sale and the related to the strategic collaboration with Jabil Inc. of approximately $0.2 billion. The balance as of December 30, 2018, does not include the assets held for sale related to the divestiture of the Advanced Sterilization Products (ASP) business of approximately $0.2 billion and $0.3 billion related to the strategic collaboration with Jabil Inc.divestitures.

NOTE 3 — INTANGIBLE ASSETS AND GOODWILL

Intangible assets that have finite useful lives are amortized over their estimated useful lives. The latest annual impairment assessment of goodwill and indefinite lived intangible assets was completed in the fiscal fourth quarter of ~~2018~~.2019. Future impairment tests for goodwill and indefinite lived intangible assets will be performed annually in the fiscal fourth quarter, or sooner, if warranted.

(Dollars in Millions) June 30, 2019 December 30, 2018
Intangible assets with definite lives:
Patents and trademarks — gross $ 36,582
35,194
Less accumulated amortization 11,500
9,784
Patents and trademarks — net 25,082
25,410
Customer relationships and other intangibles — gross 21,862
21,334
Less accumulated amortization 8,874
8,323
Customer relationships and other intangibles — net 12,988
13,011
Intangible assets with indefinite lives:
Trademarks 6,939
6,937
Purchased in-process research and development ⁽¹⁾
4,323
2,253
Total intangible assets with indefinite lives 11,262
9,190
Total intangible assets — net $ 49,332
47,611


(Dollars in Millions)	June 28, 2020		December 29, 2019
Intangible assets with definite lives:
Patents and trademarks — gross	$	37,313	36,634
Less accumulated amortization	14,834		13,154
Patents and trademarks — net	22,479		23,480
Customer relationships and other intangibles — gross	22,272		22,056
Less accumulated amortization	10,072		9,462
Customer relationships and other intangibles — net*	12,200		12,594
Intangible assets with indefinite lives:
Trademarks	6,927		6,922
Purchased in-process research and development ⁽¹⁾	5,807		4,647
Total intangible assets with indefinite lives	12,734		11,569
Total intangible assets — net	$	47,413	47,643

*The majority is comprised of customer relationships

⁽¹⁾In the fiscal first quarter of 2019, the Company recorded an IPR&D impairment charge of $0.9 billion for the remaining intangible asset value related to the development program of AL-8176, an investigational drug for the treatment of Respiratory Syncytial Virus (RSV) and human metapneumovirus (hMPV) acquired with the 2014 acquisition of Alios Biopharma Inc. The impairment charge was based on

additional information, including clinical data, which became available and led to the Company's decision to abandon the development of AL-8176. A partial impairment charge of $0.8 billion was previously recorded in the fiscal third quarter of 2018 related to the development program of AL-8176. In the fiscal second quarter of 2019,2020, the Company completed the acquisition of ~~Auris Health,~~bermekimab and certain related assets from XBiotech Inc., as well as the acquisition of all outstanding shares in Verb Surgical Inc., and recorded an in-process research and development intangible ~~asset~~assets of ~~$2.9 billion.~~

$0.8 billion and $0.4 billion, respectively.

Goodwill as of June ~~30, 2019~~28, 2020 was allocated by segment of business as follows:


(Dollars in Millions)	Consumer Health		Pharmaceutical	Medical Devices	Total
Goodwill at December 29, 2019	$	9,736	9,169	14,734	33,639
Goodwill, related to acquisitions	—		1	183	184

Currency translation/Other	10		45	12	67
Goodwill at June 28, 2020	$	9,746	9,215	14,929	33,890

(Dollars in Millions) Consumer Pharm Med Devices Total
Goodwill, net at December 30, 2018 $ 8,670
9,063
12,720
30,453
Goodwill, related to acquisitions 1,196
—
2,019
3,215
Currency translation/Other (49 ) 41
1
(7 )
Goodwill, net at June 30, 2019 $ 9,817
9,104
14,740
33,661

The weighted average amortization period for patents and trademarks is 12 years. The weighted average amortization period for customer relationships and other intangible assets is 21 years. The amortization expense of amortizable intangible assets included in cost of products sold was $1.1 billion for each of the fiscal second quarters ended June 28, 2020 and June 30, ~~2019 and July 1, 2018.~~2019. The amortization expense of amortizable intangible assets included in cost of products sold was $2.2 billion for each of the fiscal six months ended June 28, 2020 and June 30, ~~2019 and July 1, 2018. The estimated amortization expense for the five succeeding years approximates $4.4 billion, before tax, per year.~~2019. Intangible asset write-downs are included in Other (income) expense, net.

Table of Contents

The estimated amortization expense for approved products, before tax, for the five succeeding years is approximately:


(Dollars in Millions)
2020	2021	2022	2023	2024
$4,500	4,300	4,100	4,100	4,000

See Note 10 to the Consolidated Financial Statements for additional details related to acquisitions and divestitures.

Table of Contents

NOTE 4 — FAIR VALUE MEASUREMENTS

The Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany product and third-party purchases of materials denominated in a foreign currency. The Company uses cross currency interest rate swaps to manage currency risk primarily related to borrowings.

Both types of derivatives are designated as cash flow hedges.

Additionally, the Company uses interest rate swaps as an instrument to manage interest rate risk related to fixed rate borrowings. These derivatives are designated as fair value hedges. The Company uses cross currency interest rate swaps and forward foreign exchange contracts designated as net investment hedges. Additionally, the Company uses forward foreign exchange contracts to offset its exposure to certain foreign currency assets and liabilities. These forward foreign exchange contracts are not designated as hedges, and therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities.

~~The Company early adopted ASU 2017-12: Targeted Improvements to Accounting for Hedge Activities effective as of the beginning of fiscal second quarter of 2018.~~

The Company does not enter into derivative financial instruments for trading or speculative purposes, or that contain credit risk related contingent features. The Company maintains credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. As of June ~~30, 2019,~~28, 2020, the total amount of cash collateral ~~paid~~held by the Company under the credit support agreements (CSA) amounted to ~~$384~~$926 million, net. On an ongoing basis, the Company monitors counter-party credit ratings. The Company considers credit non-performance risk to be low, because the Company primarily enters into agreements with commercial institutions that have at least an investment grade credit rating. Refer to the table on significant financial assets and liabilities measured at fair value contained in this footnote for receivables and payables with these commercial institutions. As of June ~~30,~~28, 2020, the Company had notional amounts outstanding for forward foreign exchange contracts and cross currency interest rate swaps of $43.9 billion and $22.2 billion, respectively. As of December 29, 2019, the Company had notional amounts outstanding for forward foreign exchange contracts and cross currency interest rate swaps ~~and interest rate swaps~~ of ~~$49.7 billion, $15.3~~$45.3 billion and $0.5 billion, respectively. As of December 30, 2018, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $41.1 billion, $7.3 billion and $0.5$20.1 billion, respectively.

All derivative instruments are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction.

The designation as a cash flow hedge is made at the entrance date of the derivative contract. At inception, all derivatives are expected to be highly effective. Foreign exchange contracts designated as cash flow hedges are accounted for under the forward method and all gains/losses associated with these contracts will be recognized in the income statement when the hedged item impacts earnings. Changes in the fair value of these derivatives are recorded in accumulated other comprehensive income until the underlying transaction affects earnings and are then reclassified to earnings in the same account as the hedged transaction.

Gains and losses associated with interest rate swaps and changes in fair value of hedged debt attributable to changes in interest rates are recorded to interest expense in the period in which they occur. Gains and losses on net investment hedges are accounted for through the currency translation account within accumulated other comprehensive income. The portion excluded from effectiveness testing is recorded through interest (income) expense using the spot method. On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued.

The Company designated its Euro denominated notes issued in May 2016 with due dates ranging from 2022 to 2035 as a net investment hedge of the Company's investments in certain of its international subsidiaries that use the Euro as their functional currency in order to reduce the volatility caused by changes in exchange rates.

As of June ~~30, 2019,~~28, 2020, the balance of deferred net ~~loss~~gain on derivatives included in accumulated other comprehensive income was ~~$341~~$636 million after-tax. For additional information, see the Consolidated Statements of Comprehensive Income and Note 7. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. The maximum length of time over which the Company is hedging transaction exposure is 18 months,, excluding interest rate contracts and net investment ~~hedges~~hedge ~~and equity collar~~ contracts. The amount ultimately realized in earnings may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity of the derivative.

The following table is a summary of the activity related to derivatives and hedges for the fiscal second quarters ended in ~~2019~~2020 and 2019, net of tax:

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	June 28, 2020										June 30, 2019
(Dollars in Millions)	Sales		Cost of Products Sold	R&D Expense	Interest (Income) Expense	Other (Income) Expense	Sales	Cost of Products Sold	R&D Expense	Interest (Income) Expense	Other (Income) Expense


The effects of fair value, net investment and cash flow hedging:





Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing	—		—	—	39	—	—	—	—	39	—
Amount of gain or (loss) recognized in AOCI	—		—	—	39	—	—	—	—	39	—

Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	(2)		(62)	2	—	—	(14)	(101)	36	—	2



Amount of gain or (loss) recognized in AOCI	(2)		(128)	(10)	—	22	—	(50)	18	—	(3)

Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—		—	—	83	—	—		—	64	—

Amount of gain or (loss) recognized in AOCI	$	—	—	—	100	—	—	—	—	82	—

~~2018~~:

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June 30, 2019 July 1, 2018
(Dollars in Millions) Sales Cost of Products Sold R&D Expense Interest (Income) Expense Other (Income) Expense Sales Cost of Products Sold R&D Expense Interest (Income) Expense Other (Income) Expense
The effects of fair value, net investment and cash flow hedging:
Gain (Loss) on fair value hedging relationship:
Interest rate swaps contracts:
    Hedged items $ —
—
—
1
—
—
—
—
5
—
    Derivatives designated as hedging instruments —
—
—
(1 ) —
—
—
—
(5 ) —

Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
   Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing —
—
—
39
—
—
—
—
2
—
   Amount of gain or (loss) recognized in AOCI —
—
—
39
—
—
—
—
2
—

Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
   Amount of gain or (loss) reclassified from AOCI into income (14 ) (101 ) 36
—
2
17
76
(14 ) —
(10 )

   Amount of gain or (loss) recognized in AOCI —
(50 ) 18
—
(3 ) (49 ) (57 ) 21
—
3

Cross currency interest rate swaps contracts:
   Amount of gain or (loss) reclassified from AOCI into income —
—
—
64
—
—

—
32
—
   Amount of gain or (loss) recognized in AOCI $ —
—
—
82
—
—
—
—
19
—

The following table is a summary of the activity related to derivatives and hedges for the fiscal six months ended in ~~2019~~2020 and ~~2018~~:2019, net of tax:



	June 28, 2020										June 30, 2019
(Dollars in Millions)	Sales		Cost of Products Sold	R&D Expense	Interest (Income) Expense	Other (Income) Expense	Sales	Cost of Products Sold	R&D Expense	Interest (Income) Expense	Other (Income) Expense


The effects of fair value, net investment and cash flow hedging:





Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing	—		—	—	79	—	—	—	—	78	—
Amount of gain or (loss) recognized in AOCI	—		—	—	79	—	—	—	—	78	—

Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	7		(235)	(108)	—	(2)	(35)	(136)	(103)	—	8



Amount of gain or (loss) recognized in AOCI	9		174	(120)	—	(14)	(6)	(346)	(92)	—	10

Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—		—	—	181	—	—	—	—	118	—

Amount of gain or (loss) recognized in AOCI	$	—	—	—	725	—	—	—	—	140	—

The following table is the effect of derivatives not designated as hedging instruments for the fiscal second quarters and fiscal six months ended in 2020 and 2019:

Gain/(Loss)
Recognized In
Income on Derivative

(Dollars in Millions)

Location of Gain /(Loss) Recognized in Income on Derivative

Fiscal Second Quarter Ended

Fiscal Six Months Ended

Derivatives Not Designated as Hedging Instruments

June 28, 2020

June 30, 2019

June 28, 2020

June 30, 2019

Foreign Exchange Contracts

Other (income) expense

(24)

(50)

(88)

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June 30, 2019 July 1, 2018
(Dollars in Millions) Sales Cost of Products Sold R&D Expense Interest (Income) Expense Other (Income) Expense Sales Cost of Products Sold R&D Expense Interest (Income) Expense Other (Income) Expense
The effects of fair value, net investment and cash flow hedging:
Gain (Loss) on fair value hedging relationship:
Interest rate swaps contracts:
Hedged items $ —
—
—
1
—
—
—
—
10
—
Derivatives designated as hedging instruments —
—
—
(1 ) —
—
—
—
(10 ) —

Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
   Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing —
—
—
78
—
—
—
—
2
—
   Amount of gain or (loss) recognized in AOCI —
—
—
78
—
—
—
—
2
—

Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
   Amount of gain or (loss) reclassified from AOCI into income (35 ) (136 ) (103 ) —
8
46
78
(252 ) —
(21 )

   Amount of gain or (loss) recognized in AOCI (6 ) (346 ) (92 ) —
10
(18 ) (54 ) (216 ) —
(15 )

Cross currency interest rate swaps contracts:
   Amount of gain or (loss) reclassified from AOCI into income —
—
—
118
—
—
—
—
72
—
   Amount of gain or (loss) recognized in AOCI $ —
—
—
140
—
—
—
—
76
—

~~As of June 30, 2019, and December 30, 2018, the following amounts were recorded on the Consolidated Balance Sheet related to cumulative basis adjustment for fair value hedges:~~

Line item in the Consolidated Balance Sheet in which the hedged item is included
Carrying Amount of the Hedged Liability

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
(Dollars in Millions) June 30, 2019 December 30, 2018 June 30, 2019 December 30, 2018
Current Portion of Long-term Debt $ 498
494
1
5
Long-term Debt —
—
—
—

The following table is the effect of derivatives not designated as hedging instrument for the fiscal second quarter and fiscal six months ended in 2019 and 2018:

Gain/(Loss)
Recognized In
Income on Derivative
Gain/(Loss)
Recognized In
Income on Derivative
(Dollars in Millions) Location of Gain /(Loss) Recognized in Income on Derivative Fiscal Second Quarter Ended Fiscal Six Months Ended
Derivatives Not Designated as Hedging Instruments June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Foreign Exchange Contracts Other (income) expense $ (50 ) (53 ) (88 ) (72 )

The following table is the effect of net investment hedges for the fiscal second quarters ended in ~~2019~~2020 and ~~2018~~2019



	Gain/(Loss) Recognized In Accumulated OCI				Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income	Gain/(Loss) Reclassified From Accumulated OCI Into Income
(Dollars in Millions)	June 28, 2020		June 30, 2019		June 28, 2020	June 30, 2019
Debt	$	(95)	(57)	Interest (income) expense	—	—
Cross Currency interest rate swaps	$	(186)	(57)	Interest (income) expense	—	—

Gain/(Loss)
Recognized In
Accumulated
OCI
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income
Gain/(Loss) Reclassified From
Accumulated OCI
Into Income
(Dollars in Millions) June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Debt $ (57 ) 306
Other (income) expense —
—
Cross Currency interest rate swaps $ (57 ) 37

Other (income) expense

—
—

The following table is the effect of net investment hedges for the fiscal six months ended in ~~2019~~2020 and ~~2018~~:2019



	Gain/(Loss) Recognized In Accumulated OCI				Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income	Gain/(Loss) Reclassified From Accumulated OCI Into Income

(Dollars in Millions)	June 28, 2020		June 30, 2019		June 28, 2020	June 30, 2019
Debt	$	(48)	14	Interest (income) expense	—	—
Cross Currency interest rate swaps	$	641	313	Interest (income) expense	—	—

Gain/(Loss)
Recognized In
Accumulated OCI
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income
Gain/(Loss) Reclassified From
Accumulated OCI
Into Income
(Dollars in Millions) June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Debt $ 14
156

Other (income) expense

—
—
Cross Currency interest rate swaps $ 313
37
Other (income) expense —
—

The Company holds equity investments with readily determinable fair values and equity investments without readily determinable fair values. The Company has elected to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The following table is a summary of the activity related to equity investments:

(Dollars in Millions) December 30, 2018 June 30, 2019
Carrying Value
Changes in Fair Value Reflected in Net Income ⁽¹⁾

Sales/ Purchases/Other ⁽²⁾
Carrying Value Non Current Other Assets
Equity Investments with readily determinable value $ 511
292
160
963
963

Equity Investments without readily determinable value $ 681
(23 ) 19
677
677


(Dollars in Millions)	December 29, 2019				June 28, 2020
	Carrying Value		Changes in Fair Value Reflected in Net Income ⁽¹⁾	Sales/ Purchases/Other ⁽²⁾	Carrying Value	Non Current Other Assets
Equity Investments with readily determinable value	$	1,148	196	144	1,488	1,488

Equity Investments without readily determinable value	$	712	(28)	28	712	712

⁽¹⁾ Recorded in Other Income/Expense

⁽²⁾ Other includes impact of currency

For equity investments without readily determinable market values, ~~$22~~$39 million of the decrease in the fair value reflected in net income were the result of impairments. There ~~was a $1~~were $11 million ~~decrease~~of increase in ~~the~~ fair value reflected in net income due to changes in observable prices.

Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. In accordance with ASC 820, a three-level hierarchy was established to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described below with Level 1 inputs having the highest priority and Level 3 inputs having the lowest.

The fair value of a derivative financial instrument (i.e., forward foreign exchange contracts, interest rate contracts) is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and

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subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. The Company also holds equity investments which are classified as Level 1 and debt securities which are classified as Level 2. The Company holds acquisition related contingent liabilities based upon certain regulatory and commercial events, which are classified as Level 3, whose values are determined using discounted cash flow methodologies or similar techniques for which the determination of fair value requires significant judgment or estimations.

The following three levels of inputs are used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets and liabilities.

Level 2 — Significant other observable inputs.

Level 3 — Significant unobservable inputs.

The Company’s significant financial assets and liabilities measured at fair value as of June ~~30,~~28, 2020 and December 29, 2019 were as follows:


	June 28, 2020						December 29, 2019
(Dollars in Millions)	Level 1		Level 2	Level 3	Total	Total⁽¹⁾
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$	—	395	—	395	209
Interest rate contracts ⁽²⁾⁽³⁾	—		1,126	—	1,126	693

Total	—		1,521	—	1,521	902
Liabilities:
Forward foreign exchange contracts	—		260	—	260	426
Interest rate contracts ⁽³⁾	—		251	—	251	193

Total	—		511	—	511	619
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts	—		38	—	38	23
Liabilities:
Forward foreign exchange contracts	—		47	—	47	33
Other Investments:
Equity investments ⁽⁴⁾	1,488		—	—	1,488	1,148
Debt securities⁽⁵⁾	$	—	10,047	—	10,047	4,368
Other Liabilities
Contingent consideration ⁽⁶⁾				796	796	1,715


Gross to Net Derivative Reconciliation	June 28, 2020		December 29, 2019
(Dollars in Millions)
Total Gross Assets	$	1,559	925
Credit Support Agreement (CSA)	(1,437)		(841)
Total Net Asset	122		84

Total Gross Liabilities	558		652
Credit Support Agreement (CSA)	(510)		(586)
Total Net Liabilities	$	48	66

~~and~~ Table of Contents

Summarized information about changes in liabilities for contingent consideration is as follows:



	June 28, 2020		June 30, 2019
(Dollars in Millions)
Beginning Balance	$	1,715	$	397
Changes in estimated fair value ⁽⁷⁾	(938)		35
Additions	106		1,133
Payments	(87)		(3)
Ending Balance	$	796	$	1,562

⁽¹⁾December 30, ~~2018~~2019 assets and liabilities are all classified as Level 2 with the exception of equity investments of $1,148 million, which are classified as Level 1 and contingent consideration of $1,715 million, classified as Level 3.

⁽²⁾Includes $1 million of non-current other assets as of December 29, 2019.

⁽³⁾Includes cross currency interest rate swaps and interest rate swaps.

⁽⁴⁾Classified as non-current other assets.

⁽⁵⁾ Classified within cash equivalents and current marketable securities.

⁽⁶⁾ Includes $793 million and $1,631 million (primarily related to Auris Health), classified as non-current other liabilities as of June 28, 2020 and December 29, 2019, respectively. Includes $3 million and $84 million classified as current liabilities as of June 28, 2020 and December 29, 2019, respectively.

⁽⁷⁾ Ongoing fair value adjustment amounts are primarily recorded in Research and Development expense.

During the fiscal first quarter of 2020, the Company recorded a contingent consideration reversal of $983 million related to the timing of certain developmental milestones associated with the Auris Health acquisition. The one-time reversal of the contingent consideration was recorded in Other income and expense. As of June 28, 2020, the estimated fair value of the remaining contingent consideration is $169 million. For additional details see Note 10 ~~were as follows:~~to the Consolidated Financial Statements.

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June 30, 2019 December 30, 2018
(Dollars in Millions) Level 1 Level 2 Level 3 Total
Total⁽¹⁾
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts $ —
251
—
251
501
Interest rate contracts ⁽²⁾⁽⁴⁾
—
325
—
325
161
Total —
576
—
576
662
Liabilities:
Forward foreign exchange contracts —
481
—
481
548
Interest rate contracts ⁽³⁾⁽⁴⁾
—
394
—
394
292
Total —
875
—
875
840
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts —
23
—
23
32
Liabilities:
Forward foreign exchange contracts —
55
—
55
32
Other Investments:
Equity investments ⁽⁵⁾
963
—
—
963
511
Debt securities⁽⁶⁾
$ —
2,767
—
2,767
9,734
Other Liabilities
Contingent consideration ⁽⁷⁾
1,479
1,479
335

Gross to Net Derivative Reconciliation June 30, 2019 December 30, 2018
(Dollars in Millions)
Total Gross Assets $ 599
694
Credit Support Agreement (CSA) (437 ) (423 )
Total Net Asset 162
271

Total Gross Liabilities 930
872
Credit Support Agreement (CSA) (821 ) (605 )
Total Net Liabilities $ 109
267


⁽¹⁾	December 30, 2018 assets and liabilities are all classified as Level 2 with the exception of equity investments of $511 million, which are classified as Level 1 and $335 million, classified as Level 3.


⁽²⁾	~~Includes $6 million of non-current other assets as of December 30, 2018.~~


⁽³⁾	~~Includes $1 million and $3 million of non-current other liabilities as of June 30, 2019 and December 30, 2018, respectively.~~


⁽⁴⁾	~~Includes cross currency interest rate swaps and interest rate swaps.~~


⁽⁵⁾	~~Classified as non-current other assets. The carrying amount of the equity investments were $963 million and $511 million as of June 30, 2019 and December 30, 2018, respectively.~~


⁽⁶⁾	~~Classified within cash equivalents and current marketable securities.~~


⁽⁷⁾	Includes $1,370 million (primarily related to Auris Health) and $335 million, classified as non-current other liabilities as of June 30, 2019 and December 30, 2018, respectively. Includes $109 million classified as current liabilities as of June 30, 2019

The Company's cash, cash equivalents and current marketable securities as of June ~~30, 2019~~28, 2020 comprised:


(Dollars in Millions)	Carrying Amount		Unrecognized Gain	Estimated Fair Value	Cash & Cash Equivalents	Current Marketable Securities	(Dollars in Millions)	Carrying Amount		Unrecognized Gain	Unrecognized Loss	Estimated Fair Value	Cash & Cash Equivalents	Current Marketable Securities
Cash	$	2,615	—	2,615	2,615		Cash	$	2,215	—	—	2,215	2,215
Other sovereign securities⁽¹⁾	380		—	380	380

Non-U.S. sovereign securities⁽¹⁾							Non-U.S. sovereign securities⁽¹⁾	655		—	—	655	225	430
U.S. reverse repurchase agreements	7,014		—	7,014	7,014		U.S. reverse repurchase agreements	2,372		—	—	2,372	2,372	—
Other reverse repurchase agreements	219		—	219	219		Other reverse repurchase agreements	460		—	—	460	460
Corporate debt securities⁽¹⁾	264		—	264	264		Corporate debt securities⁽¹⁾	1,279		—	—	1,279	301	978
Money market funds	1,368		—	1,368	1,368		Money market funds	1,528		—	—	1,528	1,528
Time deposits⁽¹⁾	651		—	651	651		Time deposits⁽¹⁾	579		—	—	579	579
Subtotal	12,511		—	12,511	12,511	—	Subtotal	9,088		—	—	9,088	7,680	1,408

			Unrealized Gain							Unrealized Gain	Unrealized Loss
Government securities	2,501		1	2,502	1,845	657
U.S. Gov't securities							U.S. Gov't securities	9,786		—	—	9,786	3,480	6,306
Other sovereign securities	—		—	—	—	—	Other sovereign securities	5		—	—	5	—	5
Corporate debt securities	265		—	265	20	245	Corporate debt securities	255		1	—	256	14	242
Subtotal available for sale debt⁽²⁾	$	2,766	1	2,767	1,865	902	Subtotal available for sale debt⁽²⁾	$	10,046	1	—	10,047	3,494	6,553
Total cash, cash equivalents and current marketable securities	$	15,277	1	15,278	14,376	902	Total cash, cash equivalents and current marketable securities	$	19,134	1	—	19,135	11,174	7,961

⁽¹⁾Held to maturity investments are reported at amortized cost and gains or losses are reported in earnings.

⁽²⁾Available for sale debt securities are reported at fair value with unrealized gains and losses reported net of taxes in other comprehensive income.

In the fiscal year ended December ~~30, 2018~~29, 2019 the carrying amount was the same as the estimated fair value.

Fair value of government securities and obligations and corporate debt securities was estimated using quoted broker prices and significant other observable inputs.

The Company classifies all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months from the date of purchase as current marketable securities. Available for sale securities with stated maturities of greater than one year from the date of purchase are available ~~for~~to fund current operations and are classified as cash equivalents and current marketable securities.

The contractual maturities of the available for sale securities as of June ~~30, 2019~~28, 2020 are as follows:


(Dollars in Millions)	Cost Basis		Fair Value
Due within one year	$	10,023	10,024
Due after one year through five years	23		23
Due after five years through ten years	—		—
Total debt securities	$	10,046	10,047

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(Dollars in Millions) Cost Basis Fair Value
Due within one year $ 2,711
2,712
Due after one year through five years 55
55
Due after five years through ten years —
—
Total debt securities $ 2,766
2,767

Financial Instruments not measured at Fair Value:

The following financial liabilities are held at carrying amount on the consolidated balance sheet as of June ~~30, 2019~~:

(Dollars in Millions) Carrying Amount Estimated Fair Value

Financial Liabilities

Current Debt $ 1,719
1,739

Non-Current Debt
3% Zero Coupon Convertible Subordinated Debentures due in 2020 52
99
1.950% Notes due 2020 499
498
2.95% Debentures due 2020 548
554
3.55% Notes due 2021 449
462
2.45% Notes due 2021 349
353
1.65% Notes due 2021 999
993
0.250% Notes due 2022 (1B Euro 1.1364) 1,134
1,150
2.25% Notes due 2022 997
1,004
6.73% Debentures due 2023 250
298
3.375% Notes due 2023 805
852
2.05% Notes due 2023 498
498
0.650% Notes due 2024 (750MM Euro 1.1364) 849
882
5.50% Notes due 2024 (500 MM GBP 1.2709) 631
770
2.625% Notes due 2025 748
762
2.45% Notes due 2026 1,992
2,024
2.95% Notes due 2027 996
1,032
2.90% Notes due 2028 1,493
1,541
1.150% Notes due 2028 (750MM Euro 1.1364) 845
916
6.95% Notes due 2029 297
414
4.95% Debentures due 2033 498
618
4.375% Notes due 2033 856
1,008
1.650% Notes due 2035 (1.5B Euro 1.1364) 1,688
1,910
3.55% Notes due 2036 988
1,049
5.95% Notes due 2037 992
1,377
3.625% Notes due 2037 1,487
1,592
3.40% Notes due 2038 990
1,032
5.85% Debentures due 2038 696
946
4.50% Debentures due 2040 538
635
4.85% Notes due 2041 297
364
4.50% Notes due 2043 495
594
3.70% Notes due 2046 1,973
2,144
3.75% Notes due 2047 991
1,089
3.50% Notes due 2048 742
778
Other 37
37
Total Non-Current Debt $ 27,699
30,275

28, 2020:


(Dollars in Millions)	Carrying Amount		Estimated Fair Value

Financial Liabilities

Current Debt	$	5,332	5,388

Non-Current Debt
2.45% Notes due 2021	350		360

0.250% Notes due 2022 (1B Euro 1.1217)	1,121		1,131
2.25% Notes due 2022	998		1,029
6.73% Debentures due 2023	250		302
3.375% Notes due 2023	803		891
2.05% Notes due 2023	499		523
0.650% Notes due 2024 (750MM Euro 1.1217)	839		864
5.50% Notes due 2024 (500 MM GBP 1.2431)	618		749
2.625% Notes due 2025	748		813
2.45% Notes due 2026	1,993		2,179
2.95% Notes due 2027	997		1,111
2.90% Notes due 2028	1,494		1,681
1.150% Notes due 2028 (750MM Euro 1.1217)	835		917
6.95% Notes due 2029	297		435
4.95% Debentures due 2033	498		689
4.375% Notes due 2033	856		1,127
1.650% Notes due 2035 (1.5B Euro 1.1217)	1,667		1,974
3.55% Notes due 2036	989		1,170
5.95% Notes due 2037	992		1,531
3.625% Notes due 2037	1,487		1,791
3.40% Notes due 2038	991		1,168
5.85% Debentures due 2038	696		1,060
4.50% Debentures due 2040	539		736
4.85% Notes due 2041	297		420
4.50% Notes due 2043	495		685
3.70% Notes due 2046	1,974		2,467
3.75% Notes due 2047	991		1,255
3.50% Notes due 2048	742		923
Other	6		10
Total Non-Current Debt	$	25,062	29,991

The weighted average effective interest rate on non-current debt is ~~3.19%~~3.24%.

The excess of the estimated fair value over the carrying value of debt was ~~$0.3~~$3.0 billion at December ~~30, 2018.~~29, 2019.

The Current Debt balance as of June 28, 2020 includes $2.7 billion of commercial paper which has a weighted average interest rate of 0.15% and a weighted average maturity of 3.7 months. There was no commercial paper as of December 29, 2019.

Fair value of the non-current debt was estimated using market prices, which were corroborated by quoted broker prices and significant other observable inputs.

Table of Contents

NOTE 5 — INCOME TAXES

The worldwide effective income tax rates for the ~~first~~ fiscal six months of 2020 and 2019 ~~and 2018~~ were 9.8% and 18.4% ~~and 20.4%~~, respectively. ~~The U.S.~~In the third fiscal quarter of 2019, Switzerland enacted the Federal Act on Tax ~~Cuts~~Reform and ~~Jobs Act (TCJA) was enacted into law~~AHV Financing (TRAF), which became effective on January 1, ~~2018. This law reduced~~2020. More information on the provisions of TRAF, including the step-up transitional provisions, can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2019. During the first fiscal quarter of 2020, the final canton where the Company maintains significant operations enacted TRAF legislation and, accordingly, the Company recorded an estimated deferred tax benefit of approximately $0.3 billion for the remeasurement of existing deferred tax liabilities offset by a related $0.2 billion increase in U.S. ~~statutory corporate~~GILTI deferred taxes. During the second fiscal quarter of 2020, the Company received rulings from the Swiss Federal and cantonal tax authorities in the remaining jurisdictions where it has significant operations. These rulings resulted in the Company revising its estimate on the tax basis adjustment (i.e., “step-up”) for its assets. As a result, the Company recorded additional deferred tax benefits in the second fiscal quarter of 2020 to recognize this step-up. Consequently, the benefit recorded related to Swiss Tax reform in the first six months of fiscal 2020 was approximately $0.4 billion, or 3.8% benefit to the Company’s fiscal six months effective tax rate, ~~from 35%~~inclusive of the impact of U.S. GILTI deferred taxes. The Company does not expect to ~~21%, eliminated or reduced~~receive future rulings regarding the transitional provisions of TRAF.

During the second fiscal quarter of 2020, the Company reversed some of its international unrecognized tax benefits due to the completion of several years of tax examinations in certain ~~corporate income~~jurisdictions. This reserve reversal benefited the Company’s effective tax ~~deductions and introduced a tax on Global Intangible Low-Taxed Income (GILTI) and a Base Erosion and Anti Abuse Tax (BEAT). During~~rate by approximately 1.0% for the first fiscal six months of 2018, the Company estimated the impact of these changes based on the best information and guidance available at that time. Subsequent U.S. Treasury guidance on the application of these provisions allowed the Company to better refine these calculations for fiscal ~~year 2018 and when combined with the election to account for GILTI under the deferred method reduced~~2020. In the first fiscal ~~six months~~quarter of 2020, the Company reduced a contingent consideration liability related to the 2019 Auris Health acquisition that has benefited the year to date overall effective ~~income~~ tax rate by approximately ~~2.5% versus~~1.0% (see Note 10 to the ~~first fiscal six months of 2018. This reduction was partially offset by~~Consolidated Financial Statements for more details.)

Additionally, the Company ~~having more~~had less income in higher tax jurisdictions relative to lower tax jurisdictions ~~including~~as compared to the ~~one-time impact of~~same period in the ~~ASP~~prior fiscal year primarily due to:

•the 2019 divestiture gain related to Advanced Sterilization Products (ASP) which was primarily taxed in the U.S.~~, as compared~~

•the accrual of additional legal costs, at the U.S. statutory rate, in the second fiscal quarter of 2020 (see Notes 9 and 11 to the ~~same period~~Consolidated Financial Statements for more details)

partially offset by:

•the reduced income in ~~2018.~~lower tax jurisdictions due to the ongoing COVID-19 pandemic.

The Company also generated additional tax benefits from stock-based compensation that were either exercised or vested during the first and second fiscal quarters.

As of June ~~30, 2019,~~28, 2020, the Company had approximately ~~$3.3~~$3.1 billion of liabilities from unrecognized tax benefits. The Company ~~believes it is possible that~~conducts business and files tax returns in numerous countries and currently has tax audits ~~may be completed by tax authorities~~ in ~~some jurisdictions over the next twelve months. The Company is not able to provide~~progress in a ~~reasonably reliable estimate~~number of ~~the timing of any future tax payments relating to uncertain tax positions.~~jurisdictions. With respect to the United States, the IRS has completed its audit for the tax years through 2009 and is currently auditing the tax years 2010 through 2012. The Company currently expects ~~substantial~~ completion of this audit ~~within~~and settlement of the related tax liabilities in the fiscal year 2020. As of June 28, 2020, the Company has classified unrecognized tax benefits and related interest of approximately $0.2 billion as a current liability on the “Accrued taxes on Income” line of the Consolidated Balance Sheet. This is the amount expected to be paid over the next ~~twelve months.~~12 months with respect to the IRS audit. During the first fiscal quarter of 2020, the Company made a payment of approximately $0.6 billion to the U.S. Treasury with respect to the 2010-2012 tax audit in anticipation of a final settlement later in the fiscal year 2020. The ~~outcome from~~completion of this tax audit may result in additional adjustments to the Company’s ~~current estimates that may have a material impact on the Company’s current and future operating results or cash flows in the period that the audit is substantially completed.~~unrecognized tax benefit liability.

~~Swiss Tax Reform~~

On September 28, 2018 the Swiss Parliament approved the Federal Act on Tax Reform and AHV Financing (TRAF). On May 19, 2019 a public referendum was held in Switzerland that approved the federal reform proposals and subsequently announced the TRAF will become effective on January 1, 2020. In ~~the fiscal third quarter of 2019, the Swiss Federal Council enacted TRAF.~~

TRAF provides for parameters which enable the Swiss cantons to establish localized tax rates and regulations for multinational companies. The new cantonal tax parameters include favorable tax benefits for patents and an additional research and development tax deduction to encourage investment. The cantons are required to implement new local legislation by January 1, 2020 or the new federal law will be directly applied.

~~The significant cantons in which~~other major jurisdictions where the Company ~~operates have not yet enacted legislation in response~~conducts business, the years that remain open to ~~TRAF.~~tax audit go back to the year 2006. The ~~transitional provisions of TRAF are also expected to allow companies to elect~~Company believes it is possible that tax ~~basis adjustments to fair value which is used for tax depreciation and amortization purposes resulting in a deduction~~audits may be completed over the ~~transitional period. The adjustment~~next twelve months by taxing authorities in some jurisdictions outside of the ~~Company’s asset tax basis will likely require review and approval by the federal and cantonal tax agencies. The Company has not yet applied for the adjustment to the tax basis.~~

~~As TRAF was not enacted as of June 30, 2019,~~United States. However, the Company ~~has~~is not ~~reflected the financial impacts in its fiscal second quarter results. The Company estimates the impact of revaluing its deferred tax assets and liabilities as~~able to provide a result of Swiss Federal enactment of TRAF, without consideration of future cantonal tax rate changes or the transitional provisions, to result in an incremental tax expense between $0.3 billion to $0.5 billion in the fiscal third quarter of 2019. The financial impactreasonably reliable estimate of the timing of any other future ~~cantonal~~ tax ~~rate changes or the transitional provisions cannot currently be reasonably estimated but may result in a material impact~~payments relating to ~~the future results~~uncertain tax positions.

Table of ~~the Company.~~Contents

NOTE 6 — PENSIONS AND OTHER BENEFIT PLANS

Components of Net Periodic Benefit Cost

Net periodic benefit ~~cost~~costs for the Company’s defined benefit retirement plans and other benefit plans for the fiscal second quarters and ~~the first~~ fiscal six months of ~~2019~~2020 and ~~2018~~2019 include the following components:



	Retirement Plans				Other Benefit Plans			Retirement Plans		Other Benefit Plans
(Dollars in Millions)	June 28, 2020		June 30, 2019	June 28, 2020	June 30, 2019	June 28, 2020	June 30, 2019	June 28, 2020	June 30, 2019
Service cost	$	323	277	72	69	649	553	144	137
Interest cost	237		274	33	46	477	549	66	92
Expected return on plan assets	(608)		(581)	(1)	(1)	(1,222)	(1,164)	(3)	(3)
Amortization of prior service cost/(credit)	1		1	(8)	(8)	1	2	(16)	(16)

Recognized actuarial losses	222		146	35	33	445	290	71	65
Curtailments and settlements	—		8	—	—	19	7	—	—
Net periodic benefit cost	$	175	125	131	139	369	237	262	275

Fiscal Second Quarter Ended Fiscal Six Months Ended
Retirement Plans Other Benefit Plans Retirement Plans Other Benefit Plans
(Dollars in Millions) June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Service cost $ 277
309
69
68
553
618
137
135
Interest cost 274
249
46
38
549
501
92
75
Expected return on plan assets (581 ) (554 ) (1 ) (2 ) (1,164 ) (1,114 ) (3 ) (4 )
Amortization of prior service cost/(credit) 1
—
(8 ) (8 ) 2
1
(16 ) (16 )
Recognized actuarial losses 146
213
33
31
290
428
65
61
Curtailments and settlements 8
—
—
—
7
(2 ) —
—
Net periodic benefit cost $ 125
217
139
127
237
432
275
251

The service cost component of net periodic benefit cost is presented in the same line items on the Consolidated Statement of Earnings where other employee compensation costs are reported. All other components of net periodic benefit cost are presented as part of Other (income) expense, net on the Consolidated Statement of Earnings.

Company Contributions

For the fiscal six months ended June ~~30, 2019~~,28, 2020, the Company contributed ~~$42~~$144 million and ~~$87~~$18 million to its U.S. and international retirement plans, respectively. The Company plans to continue to fund its U.S. defined benefit plans to comply with the Pension Protection Act of 2006. International plans are funded in accordance with local regulations.

NOTE 7 — ACCUMULATED OTHER COMPREHENSIVE INCOME

Components of other comprehensive income (loss) consist of the following:



	Foreign		Gain/(Loss)	Employee	Gain/(Loss)	Total Accumulated
	Currency		On	Benefit	On Derivatives	Other Comprehensive
(Dollars in Millions)	Translation		Securities	Plans	& Hedges	Income (Loss)
December 29, 2019	$	(8,705)	—	(6,891)	(295)	(15,891)
Net change	(963)		—	390	931	358

June 28, 2020	$	(9,668)	—	(6,501)	636	(15,533)

Foreign Gain/(Loss) Employee Gain/(Loss) Total Accumulated
Currency On Benefit On Derivatives Other Comprehensive
(Dollars in Millions) Translation Securities Plans & Hedges Income (Loss)
December 30, 2018 $ (8,869 ) —
(6,158 ) (195 ) (15,222 )
Net change 92
1
306
(146 ) 253
June 30, 2019 $ (8,777 ) 1
(5,852 ) (341 ) (14,969 )

Amounts in accumulated other comprehensive income are presented net of the related tax impact. Foreign currency translation is not adjusted for income taxes where it relates to permanent investments in international subsidiaries. For additional details on comprehensive income see the Consolidated Statements of Comprehensive Income.

Details on reclassifications out of Accumulated Other Comprehensive Income:

Gain/(Loss) On Securities - reclassifications released to Other (income) expense, net.

Employee Benefit Plans - reclassifications are included in net periodic benefit cost. See Note 6 for additional details.

Gain/(Loss) On Derivatives & Hedges - reclassifications to earnings are recorded in the same account as the underlying transaction. See Note 4 for additional details.

NOTE 8 — EARNINGS PER SHARE

The following is a reconciliation of basic net earnings per share to diluted net earnings per share for the fiscal second quarters and ~~the first~~ fiscal six months ended June 28, 2020 and June 30, ~~2019~~ ~~and~~ ~~July 1, 2018~~:2019:


	Fiscal Second Quarter Ended				Fiscal Six Months Ended
(Shares in Millions)	June 28, 2020		June 30, 2019	June 28, 2020	June 30, 2019
Basic net earnings per share	$	1.38	2.11	3.58	3.52
Average shares outstanding — basic	2,632.9		2,652.5	2,633.3	2,656.7
Potential shares exercisable under stock option plans	119.6		140.8	122.6	138.6
Less: shares which could be repurchased under treasury stock method	(87.5)		(102.3)	(85.4)	(99.0)
Convertible debt shares	0.5		0.7	0.5	0.7
Average shares outstanding — diluted	2,665.5		2,691.7	2,671.0	2,697.0
Diluted net earnings per share	$	1.36	2.08	3.53	3.47

Fiscal Second Quarter Ended Fiscal Six Months Ended
(Shares in Millions) June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Basic net earnings per share $ 2.11
1.47
3.52
3.10
Average shares outstanding — basic 2,652.5
2,682.3
2,656.7
2,682.2
Potential shares exercisable under stock option plans 140.8
127.5
138.6
141.8
Less: shares which could be repurchased under treasury stock method (102.3 ) (89.3 ) (99.0 ) (96.3 )
Convertible debt shares 0.7
0.8
0.7
0.8
Average shares outstanding — diluted 2,691.7
2,721.3
2,697.0
2,728.5
Diluted net earnings per share $ 2.08
1.45
3.47
3.05

The diluted net earnings per share calculation for both the fiscal second quarters ended June 28, 2020 and June 30, 2019 ~~and July 1, 2018~~ included the dilutive effect of convertible debt that was offset by the related reduction in interest expense. The diluted net earnings per share calculation for the fiscal second quarter ended June 28, 2020 excluded 20 million shares related to stock options, as the exercise price of these options was greater than their average market value. The diluted net earnings per share calculation for the fiscal second quarter ended June 30, 2019 excluded an insignificant number of shares related to stock options, as the exercise price of these options was greater than their average market value.

The diluted net earnings per share calculation for both the fiscal six months ended June 28, 2020 and June 30, 2019 included the dilutive effect of convertible debt that was offset by the related reduction in interest expense. The diluted net earnings per share calculation for the fiscal ~~second quarter~~six months ended ~~July 1, 2018~~June 28, 2020 excluded 1715 million shares related to stock options, as the exercise price of these options was greater than their average market value.

The diluted net earnings per share calculation for the fiscal six months ended June 30, 2019 and July 1, 2018 included the dilutive effect of convertible debt that was offset by the related reduction in interest expense. The diluted net earnings per share calculation for the fiscal six months ended June 30, 2019 excluded an insignificant number of shares related to stock options, as the exercise price of these options was greater than their average market value. The diluted net earnings per share calculation for the fiscal six months ended July 1, 2018 included all shares related to stock options, as there were no options or other instruments which were anti-dilutive.

Table of Contents

NOTE 9 — SEGMENTS OF BUSINESS AND GEOGRAPHIC AREAS

SALES BY SEGMENT OF BUSINESS

Fiscal Second Quarter Ended Fiscal Six Months Ended
(Dollars in Millions) June 30,
2019 July 1,
2018
Percent
Change
June 30,
2019 July 1,
2018 Percent Change

CONSUMER
Baby Care
     U.S. $ 99
89
11.5 % $ 186
186
(0.2 )%
     International 344
367
(6.3 ) 651
727
(10.5 )
     Worldwide 443
456
(2.8 ) 837
913
(8.4 )
Beauty
     U.S. 663
637
4.1
1,251
1,248
0.3
     International 539
472
14.1
1,041
945
10.1
     Worldwide 1,202
1,109
8.4
2,292
2,193
4.5
Oral Care
     U.S. 155
157
(1.6 ) 306
314
(2.5 )
     International 234
236
(0.7 ) 450
458
(1.7 )
     Worldwide 389
393
(1.1 ) 756
772
(2.0 )
OTC
     U.S. 484
454
6.6
991
919
7.8
     International 580
612
(5.1 ) 1,160
1,219
(4.9 )
     Worldwide 1,064
1,066
(0.1 ) 2,151
2,138
0.6
Women's Health
     U.S. 3
4
(10.3 ) 6
7
(3.7 )
     International 250
276
(9.5 ) 472
516
(8.6 )
     Worldwide 253
280
(9.5 ) 478
523
(8.5 )
Wound Care/Other
     U.S. 132
135
(1.9 ) 234
238
(1.5 )
     International 61
65
(6.4 ) 114
125
(8.9 )
     Worldwide 193
200
(3.4 ) 348
363
(4.0 )
TOTAL CONSUMER
     U.S. 1,537
1,476
4.1
2,975
2,912
2.2
     International 2,007
2,028
(1.0 ) 3,887
3,990
(2.6 )
     Worldwide 3,544
3,504
1.2
6,862
6,902
(0.6 )


	Fiscal Second Quarter Ended								Fiscal Six Months Ended
(Dollars in Millions)	June 28, 2020		June 30, 2019	Percent Change		June 28, 2020		June 30, 2019	Percent Change

Consumer Health*
Baby Care
U.S.	$	96	99	(3.5)	%	$	188	186	1.2	%
International	260		344	(24.3)		529		651	(18.7)
Worldwide	356		443	(19.7)		717		837	(14.3)
Oral Care
U.S.	170		155	9.7		346		306	12.9
International	227		234	(2.8)		446		450	(0.8)
Worldwide	397		389	2.2		792		756	4.8
OTC
U.S.	627		484	29.6		1,316		991	32.8
International	522		580	(10.1)		1,181		1,160	1.8
Worldwide	1,149		1,064	7.9		2,497		2,151	16.1
Skin Health/Beauty
U.S.	536		663	(19.2)		1,195		1,251	(4.5)
International	471		539	(12.5)		929		1,041	(10.7)
Worldwide	1,007		1,202	(16.2)		2,124		2,292	(7.3)
Women's Health
U.S.	3		3	(2.9)		7		6	14.3
International	199		250	(20.4)		427		472	(9.6)
Worldwide	202		253	(20.1)		434		478	(9.3)
Wound Care/Other
U.S.	126		132	(4.7)		245		234	4.7
International	59		61	(2.4)		111		114	(1.9)
Worldwide	185		193	(4.0)		356		348	2.6
TOTAL Consumer Health
U.S.	1,557		1,537	1.3		3,297		2,975	10.8
International	1,739		2,007	(13.4)		3,624		3,887	(6.8)
Worldwide	3,296		3,544	(7.0)		6,921		6,862	0.9
* Previously referred to as Consumer

PHARMACEUTICAL
Immunology
     U.S. 2,379
2,317
2.7
4,542
4,317
5.2
     International 1,087
1,021
6.3
2,175
2,063
5.4
     Worldwide 3,466
3,338
3.8
6,717
6,380
5.3
     REMICADE^®

     U.S. 801
918
(12.7 ) 1,575
1,834
(14.1 )
     U.S. Exports 62
104
(40.3 ) 138
246
(43.9 )
     International 244
298
(18.5 ) 496
629
(21.2 )
     Worldwide 1,107
1,320
(16.2 ) 2,209
2,709
(18.5 )
     SIMPONI / SIMPONI ARIA^®

     U.S. 281
274
2.7
544
498
9.1
     International 282
274
2.7
543
568
(4.4 )
     Worldwide 563
548
2.7
1,087
1,066
1.9
     STELARA^®

     U.S. 1,058
919
15.2
1,940
1,571
23.5
     International 499
422
18.1
1,022
831
23.0
     Worldwide 1,558
1,341
16.1
2,963
2,402
23.3
     TREMFYA^®

     U.S. 176
102
72.3 344
168
*
     International 59
24
* 108
30
*
     Worldwide 235
126
86.5 452
198
*
     OTHER IMMUNOLOGY

     U.S. —
—
— —
—
—
     International 3
3
27.7 6
5
23.6
     Worldwide 3
3
27.7 6
5
23.6

Infectious Diseases
     U.S. 387
328
17.8
744
661
12.5
     International 475
521
(8.7 ) 964
1,018
(5.3 )
     Worldwide 862
849
1.5
1,708
1,679
1.7
     EDURANT^® / rilpivirine

     U.S. 12
15
(15.8 ) 24
29
(17.3 )
     International 198
196
0.5
397
392
1.4
     Worldwide 210
211
(0.6 ) 421
421
0.1
     PREZISTA^® / PREZCOBIX^® / REZOLSTA^® / SYMTUZA^®

     U.S. 344
277
24.2
659
550
19.9
     International 191
215
(11.1 ) 399
420
(5.0 )
     Worldwide 535
492
8.7
1,058
970
9.1
     OTHER INFECTIOUS DISEASES

     U.S. 31
36
(16.6 ) 61
82
(26.0 )
     International 86
110
(20.8 ) 168
206
(18.6 )
     Worldwide 117
146
(19.7 ) 229
288
(20.7 )

Table of Contents


PHARMACEUTICAL
Immunology
U.S.	2,362	2,379	(0.7)	4,772	4,542	5.1
International	1,161	1,087	6.8	2,389	2,175	9.8
Worldwide	3,523	3,466	1.6	7,161	6,717	6.6
REMICADE^®
U.S.	593	801	(25.8)	1,218	1,575	(22.7)
U.S. Exports	133	62	*	243	138	75.7
International	208	244	(14.5)	464	496	(6.4)
Worldwide	935	1,107	(15.5)	1,925	2,209	(12.9)
SIMPONI / SIMPONI ARIA^®
U.S.	256	281	(8.7)	528	544	(2.9)
International	289	282	2.6	547	543	0.8
Worldwide	546	563	(3.0)	1,075	1,087	(1.1)
STELARA^®
U.S.	1,138	1,058	7.5	2,355	1,940	21.4
International	558	499	11.9	1,161	1,022	13.6
Worldwide	1,697	1,558	8.9	3,516	2,963	18.7
TREMFYA^®
U.S.	241	176	36.7	428	344	24.4%
International	101	59	71.0	210	108	94.0
Worldwide	342	235	45.4	638	452	41.1%
OTHER IMMUNOLOGY
U.S.	—	—	—	—	—	—
International	3	3	11.8	6	6	2.7
Worldwide	3	3	11.8	6	6	2.7

Infectious Diseases
U.S.	416	387	7.4	852	744	14.5
International	463	475	(2.5)	946	964	(1.8)
Worldwide	878	862	1.9	1,798	1,708	5.3
EDURANT^® / rilpivirine
U.S.	10	12	(14.0)	22	24	(6.9)
International	246	198	24.5	458	397	15.4
Worldwide	256	210	22.2	480	421	14.1
PREZISTA^® / PREZCOBIX^® / REZOLSTA^® / SYMTUZA^®
U.S.	379	344	10.5	775	659	17.7
International	130	191	(32.0)	314	399	(21.4)
Worldwide	510	535	(4.7)	1,089	1,058	2.9
OTHER INFECTIOUS DISEASES
U.S.	25	31	(18.7)	54	61	(11.2)
International	87	86	1.0	174	168	3.8
Worldwide	113	117	(4.2)	229	229	(0.2)

Neuroscience
     U.S. 664
639
3.8
1,387
1,263
9.8
     International 875
889
(1.6 ) 1,780
1,824
(2.4 )
     Worldwide 1,538
1,528
0.6
3,167
3,087
2.6
     CONCERTA^® / methylphenidate

     U.S. 15
68
(78.6 ) 112
134
(16.4 )
     International 123
115
6.2
239
222
7.3
     Worldwide 137
183
(25.2 ) 351
356
(1.6 )
     INVEGA SUSTENNA^® / XEPLION^® / INVEGA TRINZA^® / TREVICTA^®

     U.S. 506
438
15.6
989
838
18.1
     International 312
282
10.4
619
578
7.0
     Worldwide 818
720
13.6
1,608
1,416
13.6
     RISPERDAL CONSTA^®

     U.S. 81
80
0.8
158
162
(3.0 )
     International 101
108
(6.5 ) 203
222
(8.4 )
     Worldwide 182
188
(3.4 ) 361
384
(6.2 )
     OTHER NEUROSCIENCE

     U.S. 62
53
16.1
128
129
(0.4 )
     International 340
384
(11.5 ) 719
802
(10.3 )
     Worldwide 401
437
(8.1 ) 847
931
(8.9 )

Oncology
     U.S. 1,013
1,085
(6.6 ) 1,975
2,018
(2.1 )
     International 1,684
1,371
22.8
3,240
2,749
17.9
     Worldwide 2,697
2,456
9.8
5,215
4,767
9.4
     DARZALEX^®

     U.S. 369
298
24.4
721
562
28.5
     International 405
213
89.5
682
381
78.7
     Worldwide 774
511
51.6
1,403
943
48.8
     IMBRUVICA^®

     U.S. 367
250
47.0
716
477
50.2
     International 463
370
25.3
898
730
23.1
     Worldwide 831
620
34.1
1,615
1,207
33.8
     VELCADE^®

     U.S. —
—
— —
—
—
     International 224
280
(20.1 ) 487
593
(17.9 )
     Worldwide 224
280
(20.1 ) 487
593
(17.9 )
     ZYTIGA^® / abiraterone acetate

     U.S. 198
486
(59.4 ) 383
893
(57.1 )
     International 500
423
18.0
994
861
15.4
     Worldwide 698
909
(23.3 ) 1,377
1,754
(21.5 )
     OTHER ONCOLOGY

     U.S. 78
51
50.5 154
86
77.7
     International 92
85
8.8
179
184
(2.5 )
     Worldwide 170
136
24.7
333
270
23.2

Table of Contents


Neuroscience
U.S.	778	664	17.4	1,526	1,387	10.1
International	809	875	(7.6)	1,719	1,780	(3.5)
Worldwide	1,587	1,538	3.2	3,245	3,167	2.5
CONCERTA^® / methylphenidate
U.S.	55	15	*	107	112	(4.2)
International	94	123	(23.0)	212	239	(11.0)
Worldwide	149	137	8.7	320	351	(8.9)
INVEGA SUSTENNA^® / XEPLION^® / INVEGA TRINZA^® / TREVICTA^®
U.S.	576	506	13.8	1,120	989	13.2
International	303	312	(2.8)	642	619	3.7
Worldwide	879	818	7.5	1,762	1,608	9.5
RISPERDAL CONSTA^®
U.S.	74	81	(9.3)	150	158	(4.9)
International	79	101	(21.2)	173	203	(14.9)
Worldwide	153	182	(15.9)	323	361	(10.5)
OTHER NEUROSCIENCE
U.S.	75	62	21.5	150	128	16.8
International	331	340	(2.5)	691	719	(3.9)
Worldwide	406	401	1.2	841	847	(0.7)

Oncology
U.S.	1,181	1,013	16.6	2,356	1,975	19.3
International	1,609	1,684	(4.4)	3,448	3,240	6.4
Worldwide	2,791	2,697	3.5	5,804	5,215	11.3
DARZALEX^®
U.S.	492	369	32.9	955	721	32.3
International	409	405	1.2	883	682	29.6
Worldwide	901	774	16.3	1,838	1,403	31.0
ERLEADA^®
U.S.	136	62	*	255	120	*
International	33	7	*	57	10	*
Worldwide	170	69	*	313	130	*
IMBRUVICA^®
U.S.	447	367	21.5	879	716	22.6
International	502	463	8.3	1,101	898	22.6
Worldwide	949	831	14.1	1,980	1,615	22.6
VELCADE^®
U.S.	—	—	—	—	—	—
International	98	224	(56.1)	206	487	(57.7)
Worldwide	98	224	(56.1)	206	487	(57.7)
ZYTIGA^® / abiraterone acetate
U.S.	87	198	(55.6)	226	383	(40.9)
International	480	500	(3.9)	1,032	994	3.8
Worldwide	568	698	(18.6)	1,258	1,377	(8.6)

Pulmonary Hypertension
     U.S. 439
429
2.2 869
790
10.0
     International 251
236
6.7 477
460
3.7
     Worldwide 690
665
3.8 1,346
1,250
7.7
     OPSUMIT^®

     U.S. 203
180
12.8 375
329
14.2
     International 146
131
11.5 279
253
10.3
     Worldwide 348
311
12.3 654
582
12.5
     TRACLEER^®

     U.S. 41
71
(41.8) 102
139
(26.3 )
     International 62
72
(14.5) 118
144
(18.7 )
     Worldwide 103
143
(28.0) 220
283
(22.4 )
     UPTRAVI^®

     U.S. 175
155
13.4 351
279
25.9
     International 28
16
62.5 50
32
53.1
     Worldwide 203
171
18.2 401
311
28.7
     OTHER

     U.S. 20
23
(18.2) 41
43
(8.4 )
     International 16
17
3.7 31
31
4.1
     Worldwide 37
40
(9.6) 72
74
(3.4 )

Cardiovascular / Metabolism / Other
     U.S. 902
1,101
(18.1 ) 1,849
2,204
(16.1 )
     International 373
417
(10.5 ) 771
831
(7.2 )
     Worldwide 1,275
1,518
(16.0 ) 2,620
3,035
(13.7 )
     XARELTO^®

     U.S. 549
679
(19.2 ) 1,091
1,257
(13.2 )
     International —
—
— —
—
—
     Worldwide 549
679
(19.2 ) 1,091
1,257
(13.2 )
     INVOKANA^® / INVOKAMET^®

     U.S. 132
169
(21.2 ) 286
373
(23.2 )
     International 43
46
(6.0 ) 92
90
2.6
     Worldwide 177
215
(17.9 ) 379
463
(18.2 )
     PROCRIT^® / EPREX^®

     U.S. 113
156
(27.5 ) 261
345
(24.3 )
     International 70
80
(13.4 ) 148
167
(11.7 )
     Worldwide 183
236
(22.7 ) 409
512
(20.2 )
     OTHER

     U.S. 107
97
9.3
211
229
(8.2 )
     International 260
291
(10.5 ) 531
574
(7.5 )
     Worldwide 368
388
(5.5 ) 742
803
(7.7 )

TOTAL PHARMACEUTICAL
     U.S. 5,783
5,899
(2.0 ) 11,365
11,253
1.0
     International 4,746
4,455
6.5
9,408
8,945
5.2
     Worldwide 10,529
10,354
1.7
20,773
20,198
2.8

Table of Contents


OTHER ONCOLOGY
U.S.	20	16	22.9	42	34	21.4
International	87	85	2.2	169	169	(0.3)
Worldwide	106	101	5.5	210	203	3.4

Pulmonary Hypertension
U.S.	545	439	24.2	1,031	869	18.7
International	243	251	(3.3)	503	477	5.3
Worldwide	789	690	14.2	1,534	1,346	13.9
OPSUMIT^®
U.S.	256	203	26.1	485	375	29.3
International	150	146	3.0	310	279	11.2
Worldwide	406	348	16.5	795	654	21.6
UPTRAVI^®
U.S.	254	175	44.5	466	351	32.6
International	28	28	4.0	66	50	33.6
Worldwide	282	203	39.0	532	401	32.7
OTHER PULMONARY HYPERTENSION
U.S.	37	61	(40.2)	81	143	(43.5)
International	64	78	(17.6)	126	149	(15.1)
Worldwide	101	140	(27.5)	207	292	(29.0)

Cardiovascular / Metabolism / Other
U.S.	837	902	(7.2)	1,643	1,849	(11.1)
International	347	373	(7.0)	701	771	(9.1)
Worldwide	1,184	1,275	(7.1)	2,344	2,620	(10.5)
XARELTO^®
U.S.	559	549	1.7	1,086	1,091	(0.5)
International	—	—	—	—	—	—
Worldwide	559	549	1.7	1,086	1,091	(0.5)
INVOKANA^® / INVOKAMET^®
U.S.	132	132	(0.8)	249	286	(13.0)
International	47	43	9.1	105	92	14.1
Worldwide	179	177	1.6	354	379	(6.4)
PROCRIT^® / EPREX^®
U.S.	70	113	(38.3)	146	261	(44.1)
International	66	70	(5.0)	145	148	(2.2)
Worldwide	136	183	(25.6)	291	409	(28.9)
OTHER
U.S.	78	107	(27.7)	163	211	(22.9)
International	234	260	(10.2)	451	531	(15.0)
Worldwide	312	368	(15.3)	614	742	(17.3)

TOTAL PHARMACEUTICAL
U.S.	6,120	5,783	5.8	12,181	11,365	7.2
International	4,632	4,746	(2.4)	9,705	9,408	3.2
Worldwide	10,752	10,529	2.1	21,886	20,773	5.4

MEDICAL DEVICES
Diabetes Care
     U.S. —
129
* —
246
*
     International —
226
* —
448
*
     Worldwide —
355
* —
694
*
Interventional Solutions
     U.S. 366
323
13.7
709
627
13.2
     International 385
344
11.6
774
680
13.7
     Worldwide 750
667
12.6
1,482
1,307
13.4
Orthopaedics
     U.S. 1,331
1,332
(0.1 ) 2,649
2,639
0.4
     International 894
930
(3.8 ) 1,779
1,873
(5.0 )
     Worldwide 2,224
2,262
(1.6 ) 4,428
4,512
(1.9 )
     HIPS

     U.S. 216
211
2.1
429
420
2.1
     International 147
149
(0.7 ) 295
303
(2.3 )
     Worldwide 364
360
0.9
725
723
0.3
     KNEES

     U.S. 218
229
(4.8 ) 441
457
(3.5 )
     International 153
153
0.4
299
312
(4.0 )
     Worldwide 372
382
(2.8 ) 741
769
(3.7 )
     TRAUMA

     U.S. 407
394
3.3
824
801
2.9
     International 265
281
(5.9 ) 533
570
(6.5 )
     Worldwide 672
675
(0.6 ) 1,357
1,371
(1.0 )
     SPINE & OTHER

     U.S. 490
498
(1.5 ) 955
961
(0.6 )
     International 328
347
(5.3 ) 651
688
(5.4 )
     Worldwide 818
845
(3.1 ) 1,606
1,649
(2.6 )
Surgery
     U.S. 926
1,022
(9.5 ) 1,927
2,015
(4.4 )
     International 1,427
1,493
(4.4 ) 2,821
2,923
(3.5 )
     Worldwide 2,353
2,515
(6.5 ) 4,748
4,938
(3.9 )
     ADVANCED

     U.S. 396
402
(1.7 ) 800
795
0.6
     International 633
603
5.0
1,209
1,176
2.8
     Worldwide 1,029
1,005
2.3
2,009
1,971
1.9
GENERAL

     U.S. 443
436
1.6
868
859
1.0
     International 674
733
(7.9 ) 1,339
1,437
(6.8 )
     Worldwide 1,119
1,169
(4.3 ) 2,208
2,296
(3.9 )
     SPECIALTY

     U.S. 87
184
(53.1 ) 259
361
(28.3 )
     International 120
157
(23.7 ) 273
310
(12.1 )
     Worldwide 206
341
(39.6 ) 531
671
(20.8 )

Table of Contents


MEDICAL DEVICES








Interventional Solutions
U.S.	255	366	(30.5)	620	709	(12.6)
International	335	385	(12.8)	697	774	(9.9)
Worldwide	590	750	(21.5)	1,317	1,482	(11.2)
Orthopaedics
U.S.	869	1,331	(34.7)	2,119	2,649	(20.0)
International	583	894	(34.8)	1,371	1,779	(22.9)
Worldwide	1,451	2,224	(34.7)	3,489	4,428	(21.2)
HIPS
U.S.	137	216	(36.5)	343	429	(20.1)
International	88	147	(39.8)	220	295	(25.4)
Worldwide	226	364	(37.8)	563	725	(22.3)
KNEES
U.S.	108	218	(50.5)	322	441	(27.1)
International	66	153	(56.8)	196	299	(34.6)
Worldwide	174	372	(53.1)	517	741	(30.1)
TRAUMA
U.S.	354	407	(12.9)	761	824	(7.6)
International	198	265	(25.2)	445	533	(16.5)
Worldwide	553	672	(17.8)	1,207	1,357	(11.1)
SPINE, SPORTS & OTHER
U.S.	270	490	(45.0)	693	955	(27.4)
International	230	328	(29.9)	510	651	(21.7)
Worldwide	499	818	(39.0)	1,202	1,606	(25.1)
Surgery
U.S.	490	926	(47.0)	1,334	1,927	(30.8)
International	1,060	1,427	(25.7)	2,317	2,821	(17.9)
Worldwide	1,551	2,353��	(34.1)	3,651	4,748	(23.1)
ADVANCED
U.S.	277	396	(30.0)	658	800	(17.7)
International	498	633	(21.2)	1,065	1,209	(11.9)
Worldwide	775	1,029	(24.6)	1,723	2,009	(14.2)
GENERAL
U.S.	213	530	(59.8)	676	1,127	(40.0)
International	562	794	(29.2)	1,252	1,612	(22.4)
Worldwide	775	1,325	(41.5)	1,928	2,739	(29.6)
Vision
U.S.	248	461	(46.1)	687	907	(24.2)
International	447	701	(36.1)	1,075	1,383	(22.3)
Worldwide	695	1,161	(40.1)	1,762	2,290	(23.0)
CONTACT LENSES / OTHER
U.S.	203	333	(39.0)	549	654	(16.1)
International	352	509	(30.9)	819	1,011	(19.0)
Worldwide	554	842	(34.1)	1,368	1,666	(17.9)

Vision
     U.S. 461
459
0.4
907
899
1.0
     International 701
714
(2.0 ) 1,383
1,389
(0.5 )
     Worldwide 1,161
1,173
(1.0 ) 2,290
2,288
0.1
CONTACT LENSES / OTHER

     U.S. 333
320
3.9
654
629
4.0
     International 509
524
(2.9 ) 1,011
1,022
(1.0 )
     Worldwide 842
844
(0.3 ) 1,666
1,651
0.9
SURGICAL

     U.S. 128
139
(7.7 ) 253
270
(6.1 )
     International 191
190
0.7
371
367
1.0
     Worldwide 319
329
(2.8 ) 624
637
(2.0 )

TOTAL MEDICAL DEVICES
     U.S. 3,083
3,265
(5.6 ) 6,192
6,426
(3.6 )
     International 3,406
3,707
(8.1 ) 6,756
7,313
(7.6 )
     Worldwide 6,489
6,972
(6.9 ) 12,948
13,739
(5.7 )

WORLDWIDE
     U.S. 10,403
10,640
(2.2 ) 20,532
20,591
(0.3 )
     International 10,159
10,190
(0.3 ) 20,051
20,248
(1.0 )
     Worldwide $ 20,562
20,830
(1.3 )% $ 40,583
40,839
(0.6 )%

Table of Contents


SURGICAL
U.S.	45		128	(64.6)		138		253	(45.3)
International	96		191	(49.9)		256		371	(31.0)
Worldwide	141		319	(55.8)		394		624	(36.8)

TOTAL MEDICAL DEVICES
U.S.	1,862		3,083	(39.6)		4,760		6,192	(23.1)
International	2,426		3,406	(28.8)		5,460		6,756	(19.2)
Worldwide	4,288		6,489	(33.9)		10,220		12,948	(21.1)

WORLDWIDE
U.S.	9,539		10,403	(8.3)		20,238		20,532	(1.4)
International	8,797		10,159	(13.4)		18,789		20,051	(6.3)
Worldwide	$	18,336	20,562	(10.8)	%	$	39,027	40,583	(3.8)	%

*Percentage greater than 100% or not meaningful

EARNINGS BEFORE PROVISION FOR TAXES BY SEGMENT

Fiscal Second Quarter Ended Fiscal Six Months Ended
(Dollars in Millions) June 30,
2019 July 1,
2018
Percent
Change
June 30,
2019 July 1,
2018 Percent Change
Consumer ⁽¹⁾
$ 406
829
(51.0 )% $ 1,147
1,377
(16.7 )%
Pharmaceutical⁽²⁾
3,677
3,651
0.7
6,008
7,317
(17.9 )
Medical Devices⁽³⁾
3,189
796
*
4,686
2,375
97.3
Segment earnings before provision for taxes 7,272
5,276
37.8
11,841
11,069
7.0
Less: Expense not allocated to segments⁽⁴⁾
231
303

378
615

Worldwide income before tax $ 7,041
4,973
41.6 % $ 11,463
10,454
9.7 %


	Fiscal Second Quarter Ended								Fiscal Six Months Ended
(Dollars in Millions)	June 28, 2020		June 30, 2019	Percent Change		June 28, 2020		June 30, 2019	Percent Change
Consumer Health ⁽¹⁾	$	32	406	(92.1)	%	$	802	1,147	(30.1)	%
Pharmaceutical⁽²⁾	4,514		3,677	22.8		8,348		6,008	38.9
Medical Devices⁽³⁾	(354)		3,189	*		1,671		4,686	(64.3)
Segment earnings before provision for taxes	4,192		7,272	(42.4)		10,821		11,841	(8.6)
Less: Expense not allocated to segments⁽⁴⁾	252		231			372		378
Worldwide income before tax	$	3,940	7,041	(44.0)	%	$	10,449	11,463	(8.8)	%

*Percentage greater than 100%

⁽¹⁾ Includes a gain of $0.3 billion related to the Company's previously held equity investment in Ci:z Holdings Co., Ltd. ~~(Dr. Ci: Labo)~~(DR. CI: LABO) in the fiscal six months of 2019. Includes ~~a gain~~litigation expense of ~~$0.3~~$0.6 billion ~~from the divestiture of NIZORAL~~^®and $0.2 billion in both the fiscal second ~~quarter~~quarters of 2020 and 2019, primarily talc related costs, respectively. Includes litigation expense of $0.6 billion and $0.2 billion in both the fiscal six months of ~~2018.~~2020 and 2019, primarily talc related costs, respectively. Includes amortization expense of $0.1 billion ~~and $0.1 billion~~ in both the fiscal second quarters of 2020 and 2019, respectively and $0.2 billion ~~and $0.1 billion~~ in both the fiscal six months of 2020 and 2019, ~~and 2018,~~ respectively. ~~Includes litigation expense of $0.2 billion in the fiscal second quarter and fiscal six months of 2019.~~

⁽²⁾Includes ~~an unrealized gain on securities of $0.2 billion and Actelion acquisition related costs of $0.1 billion in the fiscal second quarter of 2019. Includes an unrealized gain on securities of $0.3 billion,~~ an in-process research and development expense of $0.9 billion related to the Alios asset in the fiscal six months of 2019. Includes litigation expense of $0.4 billion in the fiscal six months of 2019. Includes an unrealized gain on securities of $0.5 billion and $0.2 billion in the fiscal second quarter of 2020 and 2019, respectively. Includes an unrealized gain on securities of $0.2 billion and $0.3 billion in the fiscal six months of 2020 and 2019, respectively. Additionally, the fiscal six months of 2019 includes a research and development expense of $0.3 billion for an upfront payment related to ~~argenx, litigation~~argenx. Includes amortization expense of ~~$0.4~~$0.8 billion in both the fiscal second quarters of 2020 and ~~Actelion acquisition~~2019. Includes amortization expense of $1.6 billion in both the fiscal six months of 2020 and 2019. In the fiscal second quarter and early in the third quarter of 2020, the Company entered into a series of contract manufacturing arrangements for vaccine production with third party contract manufacturing organizations. These arrangements provide the Company with future supplemental commercial capacity for vaccine production and potentially transferable rights to such production if capacity is not required. Amounts paid and contractually obligated to be paid to these contract manufacturing organizations are reflected in the prepaid expenses and other and the accrued liabilities accounts in the Company's consolidated balance sheet upon execution of each agreement. Additionally, the Company has entered into certain vaccine development cost sharing arrangements with government related organizations. The costs associated with these arrangements have not been significant through the fiscal second quarter of ~~$0.1~~2020.

⁽³⁾Auris Health acquisition. Includes a gain of $2.0 billion from the divestiture of the ASP businessin the fiscal second quarter and six months of 2019. Includes a restructuring related charge of $0.1 billion and $0.1 billion in the fiscal second quarters of 2019 and 2018, respectively and $0.1 billion and $0.2 billion in the fiscal six months of 2019 and 2018, respectively. Includes litigation expense of $0.2 billion and $0.7 billion in the fiscal second quarters of 2019 and 2018, respectively and $0.3 billion and $0.7 billion in the fiscal six months of 2019 and 2018, respectively. Includes amortization expense of $0.2 billion and $0.3 billion in the fiscal second quarter and fiscal six months of 2019, respectively. Includes a restructuring related charge of $0.1 billion and


	Fiscal Second Quarter Ended								Fiscal Six Months Ended
(Dollars in Millions)	June 28, 2020		June 30, 2019	Percent Change		June 28, 2020		June 30, 2019	Percent Change
United States	$	9,539	10,403	(8.3)	%	$	20,238	20,532	(1.4)	%
Europe	4,063		4,733	(14.2)		8,890		9,342	(4.8)
Western Hemisphere, excluding U.S.	1,133		1,455	(22.1)		2,635		2,958	(10.9)
Asia-Pacific, Africa	3,601		3,971	(9.3)		7,264		7,751	(6.3)
Total	$	18,336	20,562	(10.8)	%	$	39,027	40,583	(3.8)	%

Fiscal Second Quarter Ended Fiscal Six Months Ended
(Dollars in Millions) June 30, 2019 July 1, 2018
Percent
Change
June 30, 2019 July 1, 2018 Percent Change
United States $ 10,403
10,640
(2.2 )% $ 20,532
20,591
(0.3 )%
Europe 4,733
4,810
(1.6 ) 9,342
9,607
(2.8 )
Western Hemisphere, excluding U.S. 1,455
1,540
(5.5 ) 2,958
3,107
(4.8 )
Asia-Pacific, Africa 3,971
3,840
3.4
7,751
7,534
2.9
Total $ 20,562
20,830
(1.3 )% $ 40,583
40,839
(0.6 )%

NOTE 10— BUSINESS COMBINATIONS AND DIVESTITURES

Subsequent to the quarter, on July 9, 2020, the Company sold 11.8 million shares of Idorsia LTD (“Idorsia”), or its 8.3% ownership in the company, via an accelerated bookbuild offering. The transaction resulted in gross proceeds of approximately CHF337 million ($357 million) based on a sales price of CHF 28.55/share.

The Company currently has rights to at least an additional 38.7 million shares (or approximately 20% of Idorsia equity) through a convertible loan with a principal amount of CHF 445 million (due June 2027). Idorsia also has access to an approximate CHF 243 million credit facility with the Company. As of June 28, 2020, Idorsia has not made any draw-downs under the credit facility.

During the fiscal first quarter of 2020, the Company completed the acquisition of all rights to the investigational compound bermekimab, which has multiple dermatological indications, along with certain employees from XBiotech Inc., for a purchase price of $0.8 billion. The fair value of the acquisition was allocated primarily to non-amortizable intangible assets, primarily IPR&D, for $0.8 billion. XBiotech may be eligible to receive additional payments upon the receipt of certain commercialization authorizations. The transaction was accounted for as a business combination and included in the Pharmaceutical segment. Additionally, the Company completed the acquisition of all outstanding shares in Verb Surgical Inc., a company with world-class robotics and data science capabilities, including those shares previously held by Verily. The transaction was accounted for as a business combination and included in the Medical Devices segment. The fair value of the acquisition was allocated primarily to non-amortizable intangible assets, primarily IPR&D, for $0.4 billion, goodwill for $0.2 billion, other assets of $0.2 billion and liabilities assumed of $0.3 billion. The fair value of the Company's previously held equity investment in Verb Surgical Inc. was $0.4 billion.

On April 1, 2019, the Company completed the divestiture of its ASP business to Fortive Corporation for an aggregate value of approximately $2.8 billion, consisting of $2.7 billion of cash proceeds and $0.1 billion of retained net receivables. The Company recognized a pre-tax gain recorded in Other (income) expense, net, of approximately $2.0 billion.

On April 1, 2019, the Company completed the acquisition of Auris Health, Inc. for approximately $3.4 billion, net of cash acquired. Additional contingent payments of up to $2.35 billion, in the aggregate, may be payable upon reaching certain predetermined milestones. Auris Health was a privately held developer of robotic technologies, initially focused in lung cancer, with an FDA-cleared platform currently used in bronchoscopic diagnostic and therapeutic procedures. The Company treated this transaction as a business combination and included it in the Medical Devices segment. The fair value of the acquisition was allocated primarily to amortizable and non-amortizable intangible assets, primarily IPR&D, for $3.0 billion, goodwill for $2.0 billion, marketable securities of $0.2 billion and liabilities assumed of $1.8 billion, which includes the fair value of the contingent payments mentioned ~~above, subject to any subsequent~~above. During the fiscal second quarter of 2020, the Company finalized the purchase price allocation. There were no valuation adjustments ~~within~~to the ~~measurement period. The~~assets acquired but during the fiscal first quarter of 2020, the Company recorded Other income of approximately $1.0 billion for the reversal of the contingent consideration related to the timing of certain developmental and commercial milestones, which are not expected to be met based on the Company’s current timelines. As of June 28, 2020, the fair value of the remaining contingent consideration ~~was $1.1~~is $0.2 billion. ~~A probability~~Further, the Company re-assessed the current value of ~~success factor ranging from 55% to 95% was used~~the Auris IPR&D assets in connection with the modified development timeline and determined the fair value ~~calculation to reflect inherent regulatory and commercial risk of~~still exceeds the contingent payments and IPR&D. The discount rate applied was approximately 10%. The goodwill is primarily attributable to synergies expected to arise from the business acquisition and is not expected to be deductible for tax purposes.carrying value.

On ~~April 1,~~January 17, 2019, the Company completed the divestiture of its ASP business to Fortive Corporation for an aggregate value of approximately $2.8 billion, consisting of $2.7 billion of cash proceeds and $0.1 billion of retained net receivables. The Company recognized a pre-tax gain recorded in Other (income) expense, net, of approximately $2.0 billion.

~~On October 23, 2018, the Company entered into an agreement to acquire Ci:z Holdings Co., Ltd., (DR.CI:LABO)~~acquired DR. CI:LABO, a Japanese company focused on the marketing, development and distribution of a broad range of dermocosmetic, cosmetic and skincare products for a total purchase price of approximately ¥230 billion, which equates to approximately $2.1 billion, using the exchange rate of 109.06 Japanese Yen to each U.S. Dollar on January 16, 2019. The acquisition was completed on January 17, 2019, through a series of transactions that included an all-cash tender offer to acquire the publicly held shares not already held by the Company for ¥5,900 per share. The Company previously held a 20% ownership in Ci:z Holdings Co., Ltd. As of June 2019, the Company became the legal owner of Ci:z Holdings with the completion of the tender offer procedure in Japan. The acquired company was then delisted from the Tokyo Stock Exchange. Additionally, in the fiscal first quarter of 2019, the Company recognized a pre-tax gain recorded in Other (income) expense, net, of approximately $0.3 billion related to the Company's previously held equity investment in ~~Ci:z Holdings Co., Ltd.~~DR. CI:LABO.

The Company treated this transaction as a business combination and included it in the Consumer Health segment. ~~On June 30, 2019,~~During the fiscal first quarter of 2020, the Company finalized the purchase price allocation. The fair value of the acquisition was allocated primarily to amortizable intangible assets for $1.5 billion, goodwill for $1.2 billion and liabilities assumed of ~~$0.5 billion subject to any subsequent valuation adjustments within the measurement period.~~$0.4 billion. The adjustments made since the date of acquisition were $0.1 billion to ~~the~~ intangible assets, accrued liabilities, deferred taxes on income and property, plant and equipment with the offset to goodwill. The amortizable intangible assets were comprised of brand/trademarks and customer relationships with a weighted average life of 15.3 years. The goodwill

is primarily attributable to synergies expected to arise from the business acquisition and is not expected to be deductible for tax purposes.

During the fiscal third quarter of 2018, the Company accepted a binding offer to form a strategic collaboration with Jabil Inc., one of the world’s leading manufacturing services providers for health care products and technology products. The Company is

expanding a 12-year relationship with Jabil Inc. to produce a range of products within the Ethicon Endo-Surgery and DePuy Synthes businesses. This transaction includes the transfer of certain employees and manufacturing sites. ~~Certain manufacturing sites~~The majority of the transfers were ~~transferred to Jabil~~completed in ~~the first fiscal six months of~~ 2019 ~~and additional sites are expected to transfer~~with a minor amount remaining in ~~the remainder of 2019.~~2020. As of June ~~30, 2019,~~28, 2020, the assets held for sale on the Consolidated Balance Sheet were ~~$0.2~~$0.1 billion of ~~inventory.~~inventory and property, plant and equipment, net. For additional details on the global supply chain restructuring see Note 12 to the Consolidated Financial Statements.

NOTE 11 — LEGAL PROCEEDINGS

Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability; intellectual property; commercial; supplier indemnification and other matters; governmental investigations; and other legal proceedings that arise from time to time in the ordinary course of their business. Due to the ongoing impacts of the COVID-19 pandemic, certain trials have been rescheduled or delayed. The Company continues to monitor its legal proceedings as the situation develops.

The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability will be incurred, and the amount of the loss can be reasonably estimated. As of June ~~30, 2019,~~28, 2020, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with ASC 450-20-25. For these and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company is unable to estimate the possible loss or range of loss beyond the amounts already accrued. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and ~~assumptions.~~assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; or there are numerous parties involved. To the extent adverse verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated.

In the Company's opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company's balance sheet, is not expected to have a material adverse effect on the Company's financial position. However, the resolution of, or increase in accruals for, one or more of these matters in any reporting period may have a material adverse effect on the Company's results of operations and cash flows for that period.

Johnson & Johnson and certain of its subsidiaries are involved in numerous product liability claims and lawsuits involving multiple products. Claimants in these cases seek substantial compensatory and, where available, punitive damages. While the Company believes it has substantial defenses, it is not feasible to predict the ultimate outcome of litigation. From time to time, even if it has substantial defenses, the Company considers isolated settlements based on a variety of circumstances. The Company has established accruals for product liability claims and lawsuits in compliance with ASC 450-20 based on currently available information, which in some cases may be limited. The Company accrues an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. For certain of these matters, the Company has accrued additional amounts such as estimated costs associated with settlements, damages and other losses. ~~To the extent adverse verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated.~~ Product liability accruals can represent projected product liability for thousands of claims around the world, each in different litigation environments and with different fact patterns. Changes to the accruals may be required in the future as additional information becomes available.

The most significant of these cases include: the DePuy ASR™ XL Acetabular System and DePuy ASR™ Hip Resurfacing System; the PINNACLE^® Acetabular Cup System; pelvic meshes; RISPERDAL^®; XARELTO^®; body powders containing talc,

primarily JOHNSONS^® Baby Powder; INVOKANA^®; and ETHICON PHYSIOMESH^®Flexible Composite Mesh. As of June ~~30, 2019,~~28, 2020, in the United States there were approximately ~~1,500~~800 plaintiffs with direct claims in pending lawsuits regarding injuries allegedly due to the DePuy ASR™ XL Acetabular System and DePuy ASR™ Hip Resurfacing System; ~~10,500~~8,600 with respect to the PINNACLE^® Acetabular Cup System; ~~24,800~~15,600 with respect to pelvic meshes; ~~13,400~~10,600 with respect to RISPERDAL^®; ~~31,700~~21,000 with respect to XARELTO^®; ~~15,500~~20,600 with respect to body powders containing talc; ~~1,000~~300 with respect to INVOKANA^®;and ~~2,900~~3,700 with respect to ETHICON PHYSIOMESH^® Flexible Composite Mesh.

In August 2010, DePuy Orthopaedics, Inc. (DePuy) announced a worldwide voluntary recall of its ASR^™ XL Acetabular System and DePuy ASR^™ Hip Resurfacing System used in hip replacement surgery. Claims for personal injury have been made against DePuy and Johnson & Johnson. The number of pending lawsuits is expected to fluctuate as certain lawsuits are settled or dismissed and additional lawsuits are filed. Cases filed in federal courts in the United States have been organized as a multi-district litigation in the United States District Court for the Northern District of Ohio. Litigation has also been filed in countries outside of the United States, primarily in the United Kingdom, Canada, Australia, Ireland, Germany, India and Italy. In November 2013, DePuy reached an agreement with a Court-appointed committee of lawyers representing ASR Hip System plaintiffs to establish a program to settle claims with eligible ASR Hip patients in the United States who had surgery to replace their ASR Hips, known as revision surgery, as of August 31, 2013. DePuy reached additional agreements in February 2015 and March 2017, which further extended the settlement program to include ASR Hip patients who had revision surgeries after August 31, 2013 and prior to February 15, 2017. This settlement program has resolved more than 10,000 claims, therefore bringing to resolution significant ASR Hip litigation activity in the United States. However, lawsuits in the United States remain, and the settlement program does not address litigation outside of the United States. In Australia, a class action settlement was reached that resolved the claims of the majority of ASR Hip patients in that country. In Canada, the Company has reached agreements to settle two pending class actions which have been approved by the Québec Superior Court and the Supreme Court of British Columbia. The British Columbia order is currently the subject of ~~an appeal.~~the Company's appeal to broaden the scope of participants. The Company continues to receive information with respect to potential additional costs associated with this recall on a worldwide basis. The Company has established accruals for the costs associated with the United States settlement program and DePuy ASR^™ Hip-related product liability litigation.

Claims for personal injury have also been made against DePuy Orthopaedics, Inc. and Johnson & Johnson (collectively, DePuy) relating to the PINNACLE^® Acetabular Cup System used in hip replacement surgery. Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases. Cases filed in federal courts in the United States have been organized as a multi-district litigation in the United States District Court for the Northern District of Texas. Litigation has also been filed in some state courts and in countries outside of the United States. Several adverse verdicts have been rendered against DePuy, one of which was reversed on appeal and remanded for retrial. During the first quarter of 2019, DePuy established a United States settlement program to resolve these cases. As part of the settlement program, adverse verdicts have been settled. The Company has established an accrual for product liability litigation associated with the PINNACLE^® Acetabular Cup System and the related settlement program.

Claims for personal injury have been made against Ethicon, Inc. (Ethicon) and Johnson & Johnson arising out of Ethicon's pelvic mesh devices used to treat stress urinary incontinence and pelvic organ prolapse. The Company continues to receive information with respect to potential costs and additional cases. Cases filed in federal courts in the United States ~~have~~had been organized as a multi-district litigation (MDL) in the United States District Court for the Southern District of West Virginia. The MDL Court is remanding cases for trial to the jurisdictions where the case was originally filed and additional pelvic mesh lawsuits have been filed, and remain, outside of the MDL. The Company has settled or otherwise resolved a majority of the United States cases and the estimated costs associated with these settlements and the remaining cases are reflected in the Company's accruals. In addition, class actions and individual personal injury cases or claims have been commenced in various countries outside of the United States, including claims and cases in the United Kingdom, the Netherlands, and ~~Belgium, and~~ class actions in Israel, Australia and Canada, seeking damages for alleged injury resulting from Ethicon's pelvic mesh devices. In November 2019, the Federal Court of Australia issued a ~~trial~~judgment regarding its findings with respect to liability in relation to the three Lead Applicants and generally in relation to the design, manufacture, pre and post-market assessments and testing, and supply and promotion of the devices in Australia used to treat stress urinary incontinence and pelvic organ prolapse. In March 2020, the Court entered damages awards to the three Lead Applicants. With respect to other group members, there will be an individual case assessment process which will require proof of use and causally related loss. The class ~~action issues has been completed and the parties~~actions in Canada are ~~awaiting~~expected to be discontinued in 2020 as a ~~decision.~~result of a settlement of a group of cases. The Company has established accruals with respect to product liability litigation associated with Ethicon's pelvic mesh ~~products.~~products.

Following a June 2016 worldwide market withdrawal of ETHICON PHYSIOMESH^® Flexible Composite Mesh, claims for personal injury have been made against Ethicon, Inc. and Johnson & Johnson alleging personal injury arising out of the use of this hernia mesh device. Cases filed in federal courts in the United States have been organized as a multi-district litigation (MDL) in the United States District Court for the Northern District of Georgia. A multi-county litigation (MCL) has also been formed in New Jersey state court and assigned to Atlantic County for cases pending in New Jersey. In addition to the matters in the MDL and MCL, there are additional lawsuits pending in the United States District Court for the Southern District of Ohio, which are part of the MDL for polypropylene mesh devices manufactured by C.R. Bard, Inc., and lawsuits pending outside the United States.

Along with ETHICON PHYSIOMESH^® lawsuits, there were a number of filings related to the PROCEED^® Mesh and PROCEED^® Ventral Patch products. In March 2019, the New Jersey Supreme Court entered an order consolidating all

PROCEED^® and PROCEED^® Ventral Patch cases as an MCL in Atlantic County Superior Court. ~~Product liability lawsuits continue to be~~Additional cases have been filed in various federal and state courts in the

US, and in jurisdictions outside the US. The Company continues to receive information with respect to potential costs and the anticipated number of cases. The Company has established accruals with respect to product liability litigation associated with ETHICON PHYSIOMESH^®Flexible Composite Mesh, PROCEED^® Mesh and PROCEED^® Ventral Patch products. In September 2019, plaintiffs’ attorney filed an application with the New Jersey Supreme Court seeking centralized management of 107 PROLENE™ Polypropylene Hernia System cases. The New Jersey Supreme Court granted plaintiffs application in January 2020 and those cases have been transferred to an MCL in Atlantic County Superior Court.

Claims for personal injury have been made against Janssen Pharmaceuticals, Inc. and Johnson & Johnson arising out of the use of RISPERDAL^®, and related compounds, indicated for the treatment of schizophrenia, acute manic or mixed episodes associated with bipolar I disorder and irritability associated with ~~autism, and related compounds.~~autism. Lawsuits have been primarily filed in state courts in Pennsylvania, California, and Missouri. Other actions are pending in various courts in the United States and Canada. Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases. The Company has successfully defended a number of these cases but there have been verdicts against the Company, including a recent verdict in October 2019 of $8 billion of punitive damages related to one single plaintiff which was subsequently reduced in January 2020 to $6.8 million by the trial judge. The Company will appeal the final judgment. The Company has settled or otherwise resolved many of the United States cases and the costs associated with these settlements are reflected in the Company's accruals.

Claims for personal injury arising out of the use of XARELTO^®, an oral anticoagulant, have been made against Janssen Pharmaceuticals, Inc. (JPI); Johnson & ~~Johnson;~~Johnson (J&J); and ~~JPI's~~JPI’s collaboration partner for XARELTO^®, Bayer AG and certain of its affiliates. Cases filed in federal courts in the United States have been organized as a multi-district litigation in the United States District Court for the Eastern District of Louisiana. In addition, cases have been filed in state courts across the United States. Many of these cases have been consolidated into a state mass tort litigation in Philadelphia, Pennsylvania and in a coordinated proceeding in Los Angeles, California. Class action lawsuits also have been filed in Canada. In March 2019, ~~the Company~~JPI and J&J announced an agreement in principle to the settle the XARELTO^® cases in the United States; ~~such~~the settlement agreement was ~~finalized and~~ executed in May 2019, ~~establishing a~~the settlement became final in December 2019, and the settlement was funded in January 2020. This resolved the majority of cases pending in the United ~~States settlement program.~~States. The Company has established accruals for ~~the~~its costs associated with the United States settlement program and XARELTO^® related product liability litigation.

Personal injury claims alleging that talc causes cancer have been made against Johnson & Johnson Consumer Inc. and Johnson & Johnson arising out of the use of body powders containing talc, primarily JOHNSON’S^® Baby Powder. The number of pending ~~product liability~~personal injury lawsuits continues to increase, and the Company continues to receive information with respect to potential costs and the anticipated number of cases. Lawsuits have been primarily filed in state courts in Missouri, New Jersey and California, ~~as well as~~and suits have also been filed outside the United States. ~~Cases filed~~The majority of cases are pending in federal ~~courts in the United States have been~~court, organized asinto a multi-district litigation in the United States District Court for the District of New Jersey. In the multi-district litigation, the parties have ~~moved~~sought to exclude experts, ~~known as~~through Daubert motions. ~~The~~In April 2020, the Court ~~began conducting Daubert hearings in mid-July 2019. The~~issued rulings that limit the scope of testimony, including some theories and testing methods, for certain plaintiff expert witnesses and denied plaintiffs’ attempt to limit the scope of testimony of certain of the Company’s witnesses. With this ruling made, the court has now ordered case-specific discovery to proceed. In talc cases that have previously gone to trial, the Company has ~~successfully defended~~obtained defense verdicts in a number of these cases but there have also been verdicts against the Company, ~~including~~many of which have been reversed on appeal. Most recently, in June 2020, the Missouri Court of Appeals reversed in part and affirmed in part a ~~verdict in~~ July 2018 verdict of $4.7 billion, reducing the overall award to $2.1 billion. The Company believes that it has strong grounds onto seek further review and/or appeal ~~to overturn these verdicts.~~of this verdict, as well as other verdicts that it has appealed. Notwithstanding the Company’s confidence in the safety of its talc products, in certain circumstances the Company has and may settle cases. The Company has established an accrual primarily for defense costs, ~~only~~and reserves for potential settlement of currently pending mesothelioma cases, in connection with product liability litigation associated with body powders containing talc.

In February 2019, the Company’s talc supplier, Imerys Talc America, Inc. and two of its affiliates, Imerys Talc Vermont, Inc. and Imerys Talc Canada, Inc. (collectively, ~~“Imerys”)~~Imerys) filed a voluntary chapter 11 petition commencing a reorganization under the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware ~~("Imerys Bankruptcy")~~(Imerys Bankruptcy). The Imerys Bankruptcy relates to Imerys’ potential liability ~~on account of Imerys’s sales of talc, including~~for personal injury from exposure to ~~the Company for the Company’s body powders.~~talcum powder sold by Imerys (Talc Claims). In its bankruptcy filing, Imerys noted certain claims it ~~alleged~~alleges it ~~had~~has against the Company for indemnification and rights to joint insurance proceeds. Based on such claims as well as indemnity and insurance claims the Company has against Imerys, the Company ~~has~~ petitioned the United States District Court for the District of Delaware to establish federal jurisdiction of the state court talc lawsuits under ~~the “related to” jurisdictional provisions of~~ the Bankruptcy Code. The Company's petition was denied and the state court talc lawsuits that have been removed to federal court on such basis have been remanded. The Company previously proposed to resolve Imerys' (and the Company’s) obligations arising out of the Talc Claims by agreeing to assume the defense of litigation

of all Talc Claims involving the Company's products, waiving the Company’s indemnification claims against Imerys, and lifting the automatic stay to enable the Talc Claims to proceed outside the bankruptcy forum with the Company agreeing to settle or pay any judgment against Imerys. In May 2020, Imerys and the asbestos claimants’ committee filed their Plan of Reorganization and the Disclosure Statement related thereto agreeing to put its North American operations up for auction. The Bankruptcy Court will ~~be remanded.~~hold a hearing to consider approval of the Disclosure Statement on August 26, 2020 and the Company is disputing any indemnification objections and the scope of coverage in the reorganization plan. Additionally, in June 2020, Cyprus Mines Corporation and its parent filed an adversary proceeding against the Company as well as Imerys seeking a declaration of indemnity under certain contractual agreements. The Company denies such indemnification is owed and is in the process of responding to the complaint

In February 2018, a securities class action lawsuit was filed against Johnson & Johnson and certain named officers in the United States District Court for the District of New Jersey, alleging that Johnson & Johnson violated the federal securities laws by failing to ~~adequately~~ disclose ~~the~~ alleged asbestos contamination in body powders containing talc, primarily JOHNSON'S^® Baby Powder, and that purchasers of Johnson & Johnson’s shares suffered losses as a result. Plaintiffs are seeking damages. In ~~October 2018,~~April 2019, the Company moved to dismiss the complaint and briefing on the motion was complete as of August 2019. In December 2019, the Court denied, in part, the motion to dismiss. In March 2020, Defendants answered the complaint. Discovery is underway.

In June 2019, a shareholder filed a complaint initiating a summary proceeding in New Jersey state court for a books and records inspection. In August 2019, Johnson & Johnson responded to the books and records complaint and filed a cross motion to dismiss. In September 2019, Plaintiff replied and the Court heard oral argument. The Court has not yet ruled in the books and records action. In October 2019, December 2019, and January 2020, four shareholders filed four separate derivative ~~lawsuit was filed~~lawsuits against Johnson & Johnson as the nominal defendant and its current directors and certain officers as defendants in the United States District Court for the District of New Jersey, alleging a breach of fiduciary duties related to the alleged asbestos contamination in body powders containing talc, primarily JOHNSON’S^® Baby Powder, and that Johnson & Johnson has suffered damages as a result of those alleged breaches. ~~Plaintiff is seeking damages~~In February 2020, the four cases were consolidated into a single action under the caption In re Johnson & Johnson Talc Stockholder Derivative Litigation, and ~~an order for~~the shareholders have until August 2020 to file a consolidated complaint or identify a previously filed complaint as the operative complaint.

In July 2020, a report was delivered to the Company’s Board of Directors by independent counsel retained by the Board to investigate the allegations in the derivative lawsuits and in a series of shareholder letters that the Board received raising similar issues.The independent counsel recommended that the Company reject the shareholder demands and take the steps that are necessary or appropriate to ~~reform its internal policies and procedures.~~ secure dismissal of the derivative lawsuits.The Board unanimously adopted the recommendations of the independent counsel’s report.

In January 2019, two ERISA class action lawsuits were filed by participants in the Johnson & Johnson Savings Plan against Johnson & Johnson, its Pension and Benefits Committee, and certain named officers in the United States District Court for the District of New Jersey, alleging that the defendants breached their fiduciary duties by offering Johnson & Johnson stock as a Johnson & Johnson Savings Plan investment option when it was imprudent to do so because of failures to disclose alleged asbestos contamination in body powders containing talc, primarily JOHNSON’S^®Baby Powder. Plaintiffs are seeking damages and injunctive relief. In September 2019, Defendants filed a motion to dismiss. In April 2020, the Court granted Defendants’ motion but granted leave to amend. On June 15, 2020, Plaintiffs filed an amended complaint.

A lawsuit is pending in the Superior Court of California for the County of San Diego alleging violations of California’s Consumer Legal Remedies Act relating to JOHNSON’S^® Baby Powder. In that lawsuit, the plaintiffs allege that Johnson & Johnson violated the CLRA by failing to provide required Proposition 65 warnings. In July 2019, the Company filed a notice of removal to the United

States District Court for the ~~Central~~Southern District of California ~~alleging violations of Proposition 65, California’s Unfair Competition Law~~ and ~~False Advertising Law. In June 2019,~~ plaintiffs filed a second amended complaint shortly thereafter. In October 2019, the Company moved to dismiss the second amended complaint for failure to state a claim upon which relief may be granted. In response to those motions, plaintiffs filed a third amended complaint. In December 2019, the Company moved to dismiss the third amended complaint for failure to state a claim upon which relief may be granted. In April 2020, the Court granted the motion to dismiss but granted leave to amend. In May 2020, plaintiffs filed a Fourth Amended Complaint but indicated that they would be filing a motion for ~~voluntary dismissal of this~~leave to file a fifth amended complaint.

In January 2020, the Abtahi Law Group filed an action under Proposition 65 against Johnson & Johnson and Johnson & Johnson Consumer Inc. as well as a number of other alleged talcum powder manufacturers and distributors, including one California company. In that action, the plaintiff alleges contamination of talcum powder products with unsafe levels of arsenic, hexavalent chromium and ~~the Company opposed such motion to the extent it would allow plaintiffs’ counsel to refile such claims with new plaintiffs.~~lead. The plaintiff seeks civil penalties and injunctive relief.

In addition, the Company has received preliminary inquiries and subpoenas to produce documents regarding these matters from Senator Murray, a member of the Senate Committee on Health, Education, Labor and Pensions, the Department of Justice, the

Securities and Exchange Commission and the U.S. Congressional Subcommittee on Economic and Consumer Policy. The Company is cooperating with ~~these~~ government inquiries and continues to produce documents in response.

Claims for personal injury have been made against a number of Johnson & Johnson companies, including Janssen Pharmaceuticals, Inc. and Johnson & Johnson, arising out of the use of INVOKANA^®, a prescription medication indicated to improve glycemic control in adults with Type 2 diabetes. Lawsuits filed in federal courts in the United States have been organized as a multi-district litigation in the United States District Court for the District of New Jersey. Cases have also been filed in ~~various~~ state ~~courts including Pennsylvania and Louisiana.~~courts. Class action lawsuits have been filed in Canada. Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases. The Company has settled or otherwise resolved many of the cases and claims in the United States and the costs associated with these settlements are reflected in the Company's accruals.

Certain subsidiaries of Johnson & Johnson are subject, from time to time, to legal proceedings and claims related to patent, trademark and other intellectual property matters arising out of their businesses. Many of these matters involve challenges to the coverage and/or validity of the patents on various products and allegations that certain of the Company’s products infringe the patents of third parties. Although these subsidiaries believe that they have substantial defenses to these challenges and allegations with respect to all significant patents, there can be no assurance as to the outcome of these matters. A loss in any of these cases could adversely affect the ability of these subsidiaries to sell their products, result in loss of sales due to loss of market exclusivity, require the payment of past damages and future royalties, and may result in a non-cash impairment charge for any associated intangible asset. The most significant of these matters are described below.

In June 2009, Rembrandt Vision Technologies, L.P. (Rembrandt) filed a patent infringement lawsuit against Johnson & Johnson Vision Care, Inc. (JJVCI) in the United States District Court for the Eastern District of Texas alleging that JJVCI's manufacture and sale of its ACUVUE^® ~~ADVANCE and ACUVUE OASYS~~^® Hydrogel Contact Lenses infringed Rembrandt’s United States Patent No. 5,712,327 and seeking monetary relief. The case was transferred to the United States District Court for the Middle District of Florida, where a trial in May 2012 resulted in a verdict of non-infringement that was subsequently upheld on appeal. In July 2014, Rembrandt sought a new trial based on alleged new evidence, which the district court denied. In April 2016, the Court of Appeals overturned that ruling and remanded the case to the district court for a new trial. A new trial was held in August 2017, and the jury returned a verdict of non-infringement in favor of JJVCI. Rembrandt has appealed the verdict to the United States Court of Appeals for the Federal Circuit (CAFC). In February 2019, the CAFC affirmed the judgment in favor of JJVCI. In May 2019, the district court awarded costs in favor of JJVCI.

In March 2013, Medinol Ltd. (Medinol) filed a patent infringement lawsuit against Cordis Corporation (Cordis) and Johnson & Johnson in the United States District Court for the Southern District of New York alleging that Cordis’s sales of the CYPHER^™ and CYPHER SELECT^™ stents made in the United States since 2005 willfully infringed four of Medinol's patents directed to the geometry of articulated stents. ~~Medinol is seeking damages and attorneys’ fees.~~ Although Johnson & Johnson has since sold Cordis, it has retained liability for this case. After the trial in January 2014, the district court dismissed the case, finding Medinol unreasonably delayed bringing its claims (the laches defense). In September 2014, the district court denied a motion by Medinol to vacate the judgment and grant it a new trial. Medinol appealed the decision to the United States Court of Appeals for the Federal Circuit. In March 2017, the United States Supreme Court held that the laches defense is not available in patent cases. In April 2018, the United States Court of Appeals for the Federal Circuit remanded the case back to the district court to reconsider Medinol’s motion for a new trial. In March 2019, the district court denied Medinol’s motion for a new trial. ~~In April 2019,~~ Medinol ~~filed a notice~~appealed, and in June 2020, the United States Court of ~~appeal.~~Appeals for the Federal Circuit affirmed the district court’s decision.

In November 2016, MedIdea, L.L.C. (MedIdea) filed a patent infringement lawsuit against DePuy Orthopaedics, Inc. in the United States District Court for the Northern District of Illinois alleging infringement by the ATTUNE^® Knee System. In April 2017, MedIdea filed an amended complaint adding DePuy Synthes Products, Inc. and DePuy Synthes Sales, Inc. as named defendants (collectively, DePuy). MedIdea alleges infringement of United States Patent Nos. 6,558,426 (’426); 8,273,132 (’132); 8,721,730 (’730) and 9,492,280 (’280) relating to posterior stabilized knee systems. Specifically, MedIdea alleges that the SOFCAM^TM Contact feature of the ATTUNE^® posterior stabilized knee products infringes the patents-in-suit. MedIdea is

seeking monetary damages and injunctive relief. In June 2017, the case was transferred to the United States District Court for the District of Massachusetts. A claim construction hearing was held in October 2018, and a claim construction order was issued in November 2018. In December 2018, MedIdea stipulated to non-infringement of the ’132, ’730 and ’280 patents, based on the district court’s claim construction and reserving its right to appeal that construction, leaving only the ’426 patent at issue before the district court. In January 2019, the district court stayed the case pending a decision in the Inter Partes Review proceeding on the ’426 patent (see below). In December 2017, DePuy Synthes Products, Inc. filed a petition for Inter Partes Review with the United States Patent and Trademark Office (USPTO), seeking to invalidate the two claims of the ’426 patent asserted in the district court litigation, and in June 2018, the USPTO instituted review of those claims. A hearing was held in March 2019, an~~d in April 2019, the USPTO issued its decision upholding the validity of the patent. In~~ May 2019, DePuy filed a motion for summary judgment of non-infringement of the claims of the ’426 patent. In November 2019, judgment was entered in favor of DePuy. In December 2019, MedIdea filed a notice of appeal.

In December 2016, Ethicon Endo-Surgery, Inc. and Ethicon Endo-Surgery, LLC (now known as Ethicon LLC) sued Covidien, Inc. in the United States District Court for the District of Massachusetts seeking a declaration that United States Patent Nos. 6,585,735 (the ’735 patent); 7,118,587; 7,473,253; 8,070,748 and 8,241,284 (the ’284 patent), are either invalid or not infringed by Ethicon’s ENSEAL^® X1 Large Jaw Tissue Sealer product. In April 2017, Covidien LP, Covidien Sales LLC, and Covidien AG (collectively, Covidien) answered and counterclaimed, denying the allegations, asserting willful infringement of the ’735 patent, the ’284 patent and United States Patent Nos. 8,323,310 (the ’310 patent); 9,084,608; 9,241,759 (the ’759 patent) and 9,113,882, and seeking damages and an injunction. In June 2020, after a bench trial, the district court entered judgment in Ethicon’s favor. In July 2020, Covidien filed a motion for preliminary injunction, which was denied in October 2017. The parties have entered joint stipulations such that only the ’310 patent and the ’759 patent remain in dispute. The trial is scheduled to begin in September 2019.notice of appeal.

In December 2016, Dr. Ford Albritton sued Acclarent, Inc. (Acclarent) in United States District Court for the Northern District of Texas alleging that Acclarent’s RELIEVA^® Spin and RELIEVEA SpinPlus^® products infringe U.S. Patent No. 9,011,412 (the ’412 patent). Dr. Albritton also alleges breach of contract, fraud and that he is the true owner of Acclarent’s U.S. Patent No. 8,414,473. In December 2016, Acclarent filed a petition for Inter Partes Review (IPR) with the United States Patent and Trademark Office (USPTO) challenging the validity of the ’412 patent. The USPTO instituted the IPR in July 2017. In July 2018, the USPTO ruled in favor of Albritton in the IPR, finding that Acclarent had not met its burden of proof that the challenged claims were invalid. Acclarent appealed the IPR decision in September 2018. A second IPR petition was not instituted. The trialTrial is scheduled for October 2019. In June 2019, Albritton filed a motion for summary judgment that the asserted patent is not invalid. In June 2019, Acclarent filed a motion for summary judgment that the asserted claims are not infringed and that Albritton’s non-patent claims are barred by, among other things, the statute of limitations.to begin in March 2021.

In November 2017, Board of Regents, The University of Texas System and ~~Tissuegen,~~TissueGen, Inc. (collectively, UT) filed a lawsuit in the United States District Court for the Western District of Texas against Ethicon, Inc. and Ethicon US, LLC alleging the manufacture and sale of VICRYL^® Plus Antibacterial Sutures, MONOCRYL^® Plus Antibacterial Sutures, PDS^® Plus Antibacterial Sutures, STRATAFIX^® ~~POS~~PDS^® Antibacterial Sutures and STRATAFIX^® MONOCRYL^®Plus Antibacterial Sutures infringe plaintiffs’ United States Patent Nos. 6,596,296 (the ’296 patent) and 7,033,603 (the ’603 patent) directed to implantable polymer drug releasing biodegradable fibers containing a therapeutic agent.UT is seeking damages and an injunction.In December 2018, Ethicon filed petitions with the ~~USPTO,~~United States Patent and Trademark Office (USPTO), seeking Inter Partes Review (IPR) of both asserted patents. ~~Those petitions have been stayed by~~ In June 2020,the USPTO ~~pending a decision by~~denied institution of the ~~U.S. Court~~’296 patent IPR and granted institution of ~~Appeals for~~ the ~~Federal Circuit in an unrelated case. In June 2019, the stay on the IPRs was lifted, and a decision on institution is due in November 2019.~~ ’603 patent IPR.UT dismissed the ’603 patent from the ~~suit.~~suit and no longer accuses PDS^® Plus Antibacterial Sutures or STRATAFIX^® PDS^® Plus Antibacterial Sutures of infringement. The previously scheduled district court trial has been postponed.

In August ~~2016, Sandoz Ltd~~2018, Intuitive Surgical, Inc. and Hexal AG (collectively, Sandoz) filed a lawsuit in the English High Court against G.D. Searle LLC, a Pfizer company (Searle) and Janssen Sciences Ireland UC (JSI) alleging that Searle’s supplementary protection certificate SPC/GB07/038 (SPC), which is exclusively licensed to JSI, is invalid and should be revoked. Janssen-Cilag Limited sells PREZISTA^® (darunavir) in the United Kingdom pursuant to this license. In October 2016, Searle and JSI counterclaimed against Sandoz for threatened infringement of the SPC based on statements of its plans to launch generic darunavir in the United Kingdom. Sandoz admitted that its generic darunavir product would infringe the SPC if it is found valid. Searle and JSI are seeking an order enjoining Sandoz from marketing its generic darunavir before the expiration of the SPC. Following a trial in April 2017, the court entered a decision holding that the SPC is valid and granting a final injunction. Sandoz has appealed the court’s decision and the injunction is stayed pending the appeal. In January 2018, the court referred the issue on appeal to the Court of Justice for the European Union (CJEU) and stayed the proceedings pending the CJEU’s ruling on the issue.

~~In April 2018, Acerta Pharma B.V., AstraZeneca UK Ltd and AstraZeneca Pharmaceuticals LP~~Intuitive Surgical Operations, Inc. (“Intuitive”) filed a patent infringement ~~lawsuit~~suit against Auris Health, Inc. (“Auris”) in United States District Court for the District of Delaware. In the suit, Intuitive alleges willful infringement of U.S. Patent Nos. 6,246,200 (’200 patent); 6,491,701 (’701 patent); 6,522,906 (’906 patent); 6,800,056 (’056 patent); 8,142,447 (’447 patent); 8,620,473 (’473 patent); 8,801,601 (’601 patent); and 9,452,276 (’276 patent) based on Auris’ Monarch™ Platform. Auris filed IPR Petitions with the USPTO regarding the ’200, ’056, ’601 ’701, ’447, ’276 and ’906 patents. Intuitive subsequently dropped the ’200 and ’701 patents from the suit. In December 2019, the USPTO instituted review of the ’601 patent and denied review of the ’056 patent. In February and March 2020, the USPTO instituted review of the ’200, ’447, ’701 and ’906 patents and denied review of the ’276 patent. The district court trial is scheduled to begin in January 2021.

In August 2019, RSB Spine LLC (“RSB Spine”) filed a patent infringement suit against DePuy Synthes, Inc. in United States District Court for the District of Delaware. In October 2019, RSB Spine amended the complaint to change the named defendants to DePuy Synthes Sales, Inc. and DePuy Synthes Products, Inc. In the suit, RSB Spine alleges willful infringement of United States Patent Nos. 6,984,234 and 9,713, 537 by one or more of the following products: ZERO-P-VA™ Spacer, ZERO-P^® Spacer, ZERO-P NATURAL™ Plate, SYNFIX^® LR Spacer and SYNFIX^® Evolution System. RSB Spine seeks monetary damages and injunctive relief. In November 2019, the suit was consolidated for pre-trial purposes with other patent infringement suits brought by RSB Spine in the United States District Court for the District of Delaware against ~~Pharmacyclics~~Life Spine, Inc., Medacta USA, Inc., Precision Spine, Inc., and Xtant Medical Holdings, Inc. In June 2020, the case was stayed pending IPR proceedings involving the asserted patents.

In March 2020, Osteoplastics, LLC filed a patent infringement suit against DePuy Synthes, Inc., DePuy Synthes Products, Inc., Medical Device Business Services, Inc., and ~~Abbvie~~Synthes, Inc. (collectively, ~~Abbvie), alleging that the manufacture and sale of IMBRUVICA~~^® ~~infringes U.S. Patent No. 7,459,554. Janssen~~

~~Biotech, Inc., which commercializes IMBRUVICA~~^® ~~jointly with Abbvie, intervened in the action in November 2018. A trial is scheduled to begin in January 2021.~~

~~REMICADE~~^® ~~Related Cases~~

In August 2014, Celltrion Healthcare Co. Ltd. and Celltrion Inc. (collectively, Celltrion) filed an application with the United States Food and Drug Administration (FDA) for approval to make and sell its own infliximab biosimilar. In March 2015, Janssen Biotech, Inc. (JBI) filed a lawsuitDePuy Synthes) in the United States District Court for the District of ~~Massachusetts against Celltrion~~Delaware. In the suit, Osteoplastics alleges willful infringement of U.S. Patent Nos. 8,781,557; 9,929,920; 9,330,206; 9,626,756; 9,672,617; 9,672,302; and ~~Hospira Healthcare Corporation (Hospira), which has exclusive marketing rights for Celltrion’s infliximab biosimilar in~~9,275,191 based on the ~~United States, seeking, among other things, a declaratory judgment that their biosimilar product infringes or potentially infringes several JBI patents, including United States~~PROPLAN CMF^®Virtual Surgical Planning Services and the TruMatch^® CMF Personalize Solutions. In April 2020, Osteoplastics filed an amended complaint to substitute U.S. Patent No. ~~6,284,471 relating to REMICADE~~^®~~(infliximab) (the ’471 patent) and United States~~9, 292,920 for U.S. Patent No. ~~7,598,083 (the ’083 patent) directed to the cell culture media used to make Celltrion’s biosimilar. In August 2016, the district court granted both Celltrion’s~~9,929,920. Osteoplastics seeks monetary damages and Hospira’s motions for summary judgment of invalidity of the ’471 patent. JBI appealed those decisions to the United States Court of Appeals for the Federal Circuit. In January 2018, the Federal Circuit dismissed the appeal as moot based on its affirmance of a decision by the USPTO’s Patent Trial and Appeal Board affirming invalidity of the ’471 patent.

injunctive relief. In June ~~2016, JBI~~2020, DePuy Synthes filed ~~two additional patent infringement lawsuits asserting~~a motion to dismiss the ’083 patent, one against Celltrion and Hospira in the United States District Court for the District of Massachusetts and the other against HyClone Laboratories, Inc., the manufacturer of the cell culture media that Celltrion uses to make its biosimilar product, in the United States District Court for the District of Utah. In July 2018 the district court granted Celltrion’s motion for summary judgment of non-infringement and entered an order dismissing the ’083 lawsuit against Celltrion and Hospira. JBI appealed to the United States Court of Appeals for the Federal Circuit. The litigation against HyClone in Utah is stayed pending the outcome of the Massachusetts actions.complaint.

In July 2015, Janssen Biotech, Inc., Janssen Oncology, Inc. and Janssen Research & Development, LLC (collectively, Janssen) and BTG International Ltd. (BTG) initiated a patent infringement lawsuit (the main action) in the United States District Court for the District of New Jersey against a number of generic companies (and certain of their affiliates and/or suppliers) who filed ANDAs seeking approval to market a generic version of ZYTIGA^® 250mg before the expiration of United States Patent No. 8,822,438 (the ’438 patent). The generic companies include Amneal Pharmaceuticals, LLC and Amneal Pharmaceuticals of New York, LLC (collectively, Amneal); Apotex Inc. and Apotex Corp. (collectively, Apotex); Citron Pharma LLC (Citron); Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (collectively, Dr. Reddy’s); Mylan Pharmaceuticals Inc. and Mylan Inc. (collectively, Mylan); Par Pharmaceuticals, Inc. and Par Pharmaceutical Companies, Inc. (collectively, Par); Teva Pharmaceuticals USA, Inc. (Teva); Wockhardt Bio A.G.; Wockhardt USA LLC and Wockhardt Ltd. (collectively, Wockhardt); West-Ward Pharmaceutical Corp. (West-Ward) and Hikma Pharmaceuticals, LLC (Hikma).

Janssen and BTG also initiated patent infringement lawsuits in the United States District Court for the District of New Jersey against Amerigen Pharmaceuticals Limited (Amerigen) in May 2016, and Glenmark Pharmaceuticals, Inc. (Glenmark) in June

~~2016, each of whom filed an ANDA seeking approval to market its generic version of ZYTIGA~~^® ~~before the expiration of the ’438 patent. These lawsuits were consolidated with the main action.~~

In August 2015, Janssen and BTG filed an additional jurisdictional protective lawsuit against the Mylan defendants in the United States District Court for the Northern District of West Virginia, which has been stayed.

In August 2017, Janssen and BTG initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Teva, who filed an ANDA seeking approval to market a generic version of ZYTIGA^® ~~500mg before the expiration of the ’438 patent. This lawsuit has been consolidated with the main action.~~

~~In December 2017, Janssen and BTG entered into a settlement agreement with Glenmark.~~

In February 2018, Janssen and BTG filed a patent infringement lawsuit against MSN Pharmaceuticals, Inc. and MSN Laboratories Private Limited (collectively, MSN) in United States District Court for the District of New Jersey based on its ANDA seeking approval for a generic version of ZYTIGA^® ~~prior to the expiration of the ’438 patent. In February 2019, the action was stayed pending the outcome of the main action.~~

~~In April 2018, Janssen and BTG entered into a settlement agreement with Apotex.~~

In October 2018, the United States District Court for the District of New Jersey issued a ruling invalidating all asserted claims of the ’438 patent. The court held that the patent claims would be infringed if the patent were valid. Janssen appealed the court’s decision.

In November 2018, Janssen and BTG initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Qilu Pharmaceutical Co., Ltd. and Qilu Pharma, Inc. (collectively, Qilu), who filed an ANDA seeking approval to market a generic version of ZYTIGA^® ~~before the expiration of the ’438 patent. Janssen is seeking an order enjoining Qilu from marketing its generic version of ZYTIGA~~^® ~~before the expiration of the ’438 patent.~~

~~In November 2018, the United States Court of Appeals for the Federal Circuit denied Janssen’s request for an injunction pending appeal. As a result, several generic versions of ZYTIGA~~^® ~~have entered the market.~~

Several generic companies including Amerigen, Argentum Pharmaceuticals LLC (Argentum), Mylan, Wockhardt, Actavis, Amneal, Dr. Reddy’s, Sun, Teva, West-Ward and Hikma filed Petitions for Inter Partes Review (IPR) with the USPTO, seeking to invalidate the ’438 patent. In January 2018, the USPTO issued decisions finding the ’438 patent claims unpatentable, and Janssen requested rehearing. In December 2018, the USPTO denied Janssen’s request for rehearing of the IPR decisions. Janssen filed an appeal, which was consolidated with the above-mentioned appeal of the decision of the United States District Court for the District of New Jersey. In May 2019, the Federal Circuit issued a decision affirming the USPTO's decision in the Wockhardt IPR that the ’438 patent claims are unpatentable and dismissed the remaining appeals as moot. Subsequently, Janssen dismissed its lawsuits against MSN and Qilu.

In November 2017, Janssen initiated a Notice of Application under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Apotex Inc. (Apotex) and the Minister of Health in Canada in response to Apotex’s filing of an Abbreviated New Drug Submission (ANDS) seeking approval to market a generic version of ZYTIGA^®before the expiration of Canadian Patent No. ~~2,661,422.~~2,661,422 (the ’422 patent). The ~~Final Hearing~~final hearing concluded in May 2019. In October 2019, the court issued an order prohibiting the Canadian Minister of Health from approving Apotex’s ANDS until the expiration of the ’422 patent. In November 2019, Apotex filed an appeal.

In January 2019, Janssen initiated a ~~Notice~~Statement of ~~Application~~Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Apotex ~~and the Minister of Health~~ in Canada in response to Apotex’s filing of an Abbreviated New Drug Submission (ANDS) seeking approval to market a film-coated generic version of ZYTIGA^® before the expiration of ~~Canadian Patent No. 2,661,422.~~the ’422 patent. The ~~Final Hearing~~final hearing is scheduled to begin in October 2020.

In January 2019, Janssen initiated a ~~Notice~~Statement of ~~Application~~Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Pharmascience Inc. (Pharmascience) ~~and the Minister of Health~~ in Canada in response to Pharmascience’s filing of an Abbreviated New Drug Submission (ANDS) seeking approval to market a generic version of ZYTIGA^®250 mg,before the expiration of ~~Canadian Patent No. 2,661,422.~~the ’422 patent. The ~~Final Hearing~~final hearing is scheduled to begin in October 2020.

In ~~January~~November 2019, Janssen initiated a ~~Notice~~Statement of ~~Application~~Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against ~~Sandoz Canada Inc. (Sandoz) and the Minister of Health~~Pharmascience in Canada in response to ~~Sandoz’s~~Pharmascience’s filing of an ~~Abbreviated New Drug Submission (ANDS)~~ANDS seeking approval to market a generic version of ZYTIGA^®, 500 mg, before the expiration of ~~Canadian Patent No. 2,661,422.~~the ’422 patent. The ~~Final Hearing~~final hearing is scheduled to begin in October 2020.

In June 2019, Janssen initiated a ~~Notice~~Statement of ~~Application~~Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Dr. Reddy's Laboratories Ltd. and Dr. Reddy's Laboratories, Inc. (collectively, DRL) ~~and the Minister of Health~~ in Canada in response to ~~Apotex’s~~DRL's filing of an Abbreviated New Drug Submission (ANDS) seeking approval to market a generic version of ZYTIGA^��® before the expiration of ~~Canadian Patent No. 2,661,422~~the ’422 patent. The final hearing is scheduled to begin in October 2020.

In each of these Canadian actions, Janssen is seeking an order ~~prohibiting~~enjoining the ~~Minister~~defendants from marketing their generic versions of ~~Health from issuing a Notice of Compliance with respect to the defendants’ ANDSs~~ZYTIGA^® before the expiration of ~~Janssen’s~~the ’422 patent.

B~~eginning~~Beginning in ~~October 2015,~~April 2017, Janssen Pharmaceuticals, Inc. (JPI) and Bayer Pharma AG and Bayer Intellectual Property GmbH (collectively, Bayer) filed patent infringement lawsuits in the United States District Court for the District of Delaware against ~~a number of generic companies~~Taro Pharmaceutical Industries Ltd. and Taro Pharmaceuticals U.S.A., Inc. (collectively, Taro) and InvaGen Pharmaceuticals Inc. (InvaGen) who filed ANDAs seeking approval to market generic versions of XARELTO^® ~~before expiration of Bayer’s United States Patent Nos. 7,157,456, 7,585,860 and 7,592,339 relating to XARELTO~~^®. JPI is the exclusive sublicensee of the asserted patents. The following generic companies are named defendants: Aurobindo Pharma Limited and Aurobindo Pharma USA, Inc. (collectively, Aurobindo); Breckenridge Pharmaceutical, Inc. (Breckenridge); InvaGen Pharmaceuticals Inc. (InvaGen); Micro Labs USA Inc. and Micro Labs Ltd (collectively, Micro); Mylan Pharmaceuticals Inc. (Mylan); Prinston Pharmaceuticals, Inc.; Sigmapharm Laboratories, LLC (Sigmapharm); Torrent Pharmaceuticals, Limited and Torrent Pharma Inc. (collectively, Torrent). The trial concluded in April 2018. In July 2018 the district court entered judgment against Mylan and Sigmapharm, holding that the asserted compound patent is valid and infringed. In September 2018, the district court entered judgment against the remaining defendants. None of the defendants appealed the judgment.

Beginning in April 2017, JPI and Bayer Intellectual Property GmbH and Bayer AG (collectively, Bayer AG) filed patent infringement lawsuits in the United States District Court for the District of Delaware against a number of generic companies who filed ANDAs seeking approval to market generic versions of XARELTO^® before expiration of Bayer AG’s United States Patent No. 9,539,218 (’218) relating to XARELTO^®. JPI is the exclusive sublicensee of the asserted patent. The ~~following generic companies are named defendants: Alembic Pharmaceuticals Limited, Alembic Global Holding SA~~case against InvaGen has been stayed.In May 2020, JPI and Alembic Pharmaceuticals, Inc. (Alembic); Aurobindo; Breckenridge; InvaGen; Lupin Limited and Lupin Pharmaceuticals, Inc. (collectively, Lupin); Micro; Mylan; Sigmapharm; Taro Pharmaceutical Industries Ltd. and Taro Pharmaceuticals U.S.A., Inc. (collectively, Taro) and Torrent. Lupin counterclaimed for declaratory judgment of noninfringement and invalidity of United States Patent No. 9,415,053, but Lupin dismissed its counterclaims after it was providedBayer AG entered into a covenant not to sue on that patent. Aurobindo, Taro, Torrent, Micro, Breckenridge, InvaGen, Sigmapharm, Lupin and Alembic have agreed to have their cases stayed and to be bound by the outcome of any final judgment rendered against any of the other defendants. The ’218 cases have been consolidated for discovery and trial. The trial began in April 2019 and closing arguments were heard in June 2019.settlement agreement with Taro.

In ~~December 2018,~~May 2020, JPI and Bayer AG filed a patent infringement lawsuit in the United States District Court for the District of ~~Delaware~~New Jersey against ~~Teva~~Unichem Inc. (a/k/a Unichem Laboratories, Ltd.) and Unichem Pharmaceuticals ~~USA,~~(USA), Inc. ~~and Teva Pharmaceutical Industries Ltd. (collectively, Teva)~~(collectively, Unichem) who filed an ANDA seeking approval to market a generic version of XARELTO^® before expiration of Bayer AG’s ’218 patent. The case against Teva has been consolidated with the other ’218 cases for all purposes, and Teva has agreed to have its case stayed and to be bound by the outcome of any final judgment rendered against any of the other defendants.

~~In May 2018, Mylan filed a Petition for Inter Partes Review with the USPTO, seeking to invalidate~~ the ’218 ~~patent. In December 2018, the USPTO issued a decision denying institution of Mylan’s Petition for Inter Partes Review.~~patent and United States Patent No. 7,157,456 relatingto XARELTO^®.

In May 2019, JPI and Bayer filed suit against Macleods Pharmaceuticals Ltd. and Macleods Pharma USA, Inc. (collectively, Macleods) alleging infringement of the ’218 patent. The case against Macleods has been consolidated with the other ’218 cases for all purposes, and Macleods has agreed to have its case stayed and to be bound by the outcome of any final judgment rendered against any of the other defendants.

~~In June 2019, JPI and Bayer filed suit against Accord Healthcare Inc., Accord Healthcare Ltd., and Intas Pharmaceuticals Ltd. (collectively, Accord) alleging infringement of the ’218 patent.~~

In each of these lawsuits, JPI is seeking an order enjoining the defendants from marketing their generic versions of XARELTO^® before the expiration of the relevant patents.

In ~~May 2018,~~January 2020, Janssen Products, L.P. and Janssen Sciences Ireland UCUnlimited Company (collectively, Janssen) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against ~~Dr. Reddys Laboratories,~~Zydus Pharmaceuticals (USA), Inc.~~, Dr. Reddys Laboratories, Ltd., Laurus Labs,~~ and Cadila Healthcare Ltd. ~~and Pharmaq, Inc.~~ (collectively, ~~DRL)~~Zydus), who filed an ANDA seeking approval to market a generic ~~versions~~version of PREZISTA^® before the expiration of United States Patent Nos. ~~8,518,987; 7,126,015; and 7,595,408. In February 2019, the parties entered into a settlement agreement.~~

In December 2018, Janssen initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Amneal Pharmaceuticals, LLC, Amneal Pharmaceuticals Company GmbH, Amneal Pharmaceuticals of New York, LLC, Amneal Pharmaceuticals Pvt Ltd., and Raks Pharma Pvt. Ltd. (collectively, Amneal), who filed an ANDA seeking approval to market generic versions of PREZISTA^® ~~before the expiration of United States Patent Nos. 8,518,987; 7,126,015;~~7,700,645, 8,518,987, 7,126,015 and 7,595,408. Janssen is was

seeking an order enjoining ~~Amneal~~Zydus from marketing its generic ~~versions~~version of PREZISTA^® before the expiration of the relevant patents. In ~~April 2019, the parties~~June 2020, Janssen entered into a ~~settlement.~~settlement agreement with Zydus.

In April 2020, Janssen initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Marcan Pharmaceuticals Inc. (Marcan) in Canada in response to Marcan’s filing of an ANDS seeking approval to market a generic version of Prezista before the expiration of Canadian Patent No. 2,485,834 (the ’834 patent). Janssen was seeking an order enjoining Marcan from marketing its generic version of PREZISTA^® before the expiration of the ’834 patent. In May 2020, Janssen discontinued the action against Marcan.

INVOKANA^®/INVOKAMET^®/INVOKAMET XR^®

Beginning in July 2017, Janssen Pharmaceuticals, Inc., Janssen Research & Development, LLC, Cilag GmbH International and Janssen Pharmaceutica NV (collectively, Janssen) and Mitsubishi Tanabe Pharma Corporation (MTPC) filed patent infringement lawsuits in the United States District Court for the District of New Jersey ~~the United States District Court for the District of Colorado and the United States District Court for the District of Delaware~~ against a number of generic companies who filed ANDAs seeking approval to market generic versions of INVOKANA^®, INVOKAMET^® and/or INVOKAMET^® XR before expiration of MTPC’s United States Patent Nos. 7,943,582 (the ’582 patent) and/or 8,513,202 (the ’202 patent) relating to INVOKANA^® ~~and~~, INVOKAMET^® and/or INVOKAMET^®. XR. Janssen is the exclusive licensee of the asserted patents. The following generic companies ~~are~~were named as defendants: Apotex Inc. and Apotex Corp. (Apotex); Aurobindo Pharma USA Inc. (Aurobindo); Macleods Pharmaceuticals Ltd. and Macleods Pharma USA, Inc.; InvaGen Pharmaceuticals, Inc. (InvaGen); Prinston Pharmaceuticals Inc.; Dr. Reddy’s Laboratories, Inc. and Dr. Reddy’s Laboratories ~~Ltd;~~Ltd (DRL); Hetero USA, Inc., Hetero Labs Limited ~~Unit-V~~Unit V and Hetero Labs Limited; MSN Laboratories Private Ltd. and MSN Pharmaceuticals, Inc. (MSN); Laurus Labs Ltd.; Indoco Remedies Ltd.; Zydus Pharmaceuticals (USA) Inc. (Zydus); Sandoz, Inc. (Sandoz); Teva Pharmaceuticals USA, Inc.; and Lupin Ltd. and Lupin Pharmaceuticals, Inc. (Lupin). These cases were consolidated into one action (Polymorph Main Action), which was scheduled for trial starting in June 2020 but is being rescheduled.

Beginning in July 2017, Janssen and MTPC filed patent infringement lawsuits in the United States District Court for the District of New Jersey ~~and the United States District Court for the District~~against a number of ~~Colorado against Sandoz and InvaGen,~~generic companies who filed ANDAs seeking approval to market generic versions of INVOKANA^®, INVOKAMET^® and/or INVOKAMET^® XRbefore expiration of MTPC’s United States Patent No. 7,943,788 (the ’788 patent), 8,222,219 (the ’219 patent) and/or 8,785,403 (the ’403 patent) relating to INVOKANA^® ~~and~~, INVOKAMET^®and/or INVOKAMET~~and against Zydus, who filed ANDAs seeking approval to market generic versions of INVOKANA~~^® ~~and INVOKAMET~~^®~~before expiration of the ’788 patent, MTPC's United States Patent No. 8,222,219 relating to INVOKANA~~^® ~~and INVOKAMET~~^®~~and MTPC’s United States Patent No. 8,785,403 relating to INVOKAMET~~^®~~, and against Aurobindo, who filed an ANDA seeking approval to market a generic version of INVOKANA~~^® ~~before expiration of the ’788 patent and the ’219 patent relating to INVOKANA~~^®.XR Janssen is the exclusive licensee of the asserted patents. ~~In October 2017, the Colorado lawsuits against~~The following generic companies were named as defendants: Sandoz, Zydus and Aurobindo. These cases were ~~dismissed. In December 2017, the Delaware lawsuits against Apotex and Teva were dismissed.~~consolidated into one action (Compound Main Action), which was scheduled for trial in May 2020 but is being rescheduled.

In April 2018, Janssen and MTPC filed a patent infringement lawsuit in the United States District Court for the District of New Jersey against Prinston, who filed an ANDA seeking approval to market a generic version of INVOKANA^® ~~before expiration of the ’788 patent relating to INVOKANA~~^®.

~~In February~~July 2019, Janssen and MTPC filed a patent infringement lawsuit in the United States District Court for the District of New Jersey against ~~Lupin,~~MSN, who filed an ANDA seeking approval to market a generic version of INVOKAMET XR^® before expiration of the ’582 patent and ’202 patent relating to INVOKAMET XR^®.

~~A trial on~~ In October 2019, Janssen and MTPC initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against MSN, who filed ANDAs seeking approval to market generic versions of INVOKANA^® and INVOKAMET XR^® before expiration of the ’788 patent. In October 2019, Janssen and MTPC initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against DRL, who filed an ANDA seeking approval to market a generic version of INVOKAMET^® before expiration of the ’788 patent. In March 2020, Janssen and MTPC initiated patent infringement lawsuits in the United States District Court for the District of New Jersey against Aurobindo, who filed an ANDA seeking approval to market a generic version of INVOKAMET XR^® before expiration of the ’788 patent, ’219 patent, ’403 patent, ’582 patent, and ’202 ~~patents is scheduled to begin in April~~patent. These lawsuits have not been consolidated with the Main Actions.

In May 2020, Janssen and MTPC entered into a ~~trial on the ’788, ’219~~settlement agreement with Aurobindo. In June 2020, Janssen and ~~’403 patents is scheduled to begin in May 2020.~~MTPC entered into a settlement agreement with Laurus.

In each of these lawsuits, Janssen and MTPC are seeking an order enjoining the defendants from marketing their generic versions of INVOKANA^®, INVOKAMET^® and/or, , INVOKAMET XR^®before the expiration of the relevant patents.

In January 2018, Actelion Pharmaceuticals Ltd (Actelion) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Zydus Pharmaceuticals (USA) Inc. (Zydus) ~~and Amneal Pharmaceuticals LLC~~

~~(Amneal), each of whom~~who filed an ANDA seeking approval to market a generic version of OPSUMIT^®before the expiration of United States Patent No. ~~7,094,781.~~7,094,781 (the ’781 patent). In the lawsuit, Actelion is seeking an order enjoining Zydus ~~and Amneal~~ from marketing generic versions of OPSUMIT^® before the expiration of the patent. ~~Amneal and Zydus have stipulated to infringement. The trial~~Trial is scheduled to commence in October 2020.

In July 2019, Actelion Pharmaceuticals Ltd. filed suit against Aurobindo Pharma USA Inc. and Aurobindo Pharma Limited (Aurobindo). Aurobindo filed an ANDA seeking approval to market a generic version of OPSUMIT^® before the expiration of the ’781 patent. Actelion was seeking an order enjoining Defendants from marketing a generic version of OPSUMIT^® before the expiration of the ’781 patent. In July 2020, Actelion and Aurobindo entered into a settlement agreement.

In May 2020, Janssen Inc. (Janssen) and Actelion initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Sandoz Canada Inc. (Sandoz) in Canada in response to Sandoz’s filing of an Abbreviated New Drug Submission (ANDS) seeking approval to market a generic version of OPSUMIT^®10 mg,before the expiration of Canadian Patent No. 2,659,770 (the ’770 patent). A final hearing has not yet been scheduled.

In May 2020, Janssen and Actelion initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Apotex Inc. (Apotex) in Canada in response to Apotex’s filing of an ANDS seeking approval to market a generic version of OPSUMIT^®10 mg,before the expiration of the ’770 patent. A final hearing has not yet been scheduled.

In July 2020, Janssen and Actelion initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against JAMP Pharma Corporation (JAMP) in Canada in response to JAMP’s filing of an ANDS seeking approval to market a generic version of OPSUMIT® 10 mg before the expiration of the ’770 patent and Canadian Patent No. 2,621,273. A final hearing has not yet been scheduled.

In each of these Canadian actions, Janssen and Actelion are seeking an order enjoining the defendants from marketing their generic versions of OPSUMIT® before the expiration of the ’770 patent.

In January 2018, Janssen Pharmaceutica NV and Janssen Pharmaceuticals, Inc. (collectively, Janssen) initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against Teva Pharmaceuticals USA, Inc. (Teva), who filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA^® before the expiration of United States Patent No. ~~9,439,906.~~ 9,439,906 (the ’906 patent). Trial is scheduled to begin in September 2020.

In August 2019, Janssen Pharmaceutica NV and Janssen Pharmaceuticals, Inc. (collectively, Janssen) initiated a patent infringement lawsuit in the ~~lawsuit, Janssen is~~United States District Court for the District of New Jersey against Mylan Laboratories Limited (Mylan), who filed an ANDA seeking ~~an order enjoining Teva from marketing~~approval to market a generic version of INVEGA SUSTENNA^® before the expiration of the ’906 patent. In February 2020, Mylan filed a Petition for Inter Partes Review with the USPTO seeking to invalidate the ’906 patent.

In December 2019, Janssen Pharmaceutica NV and Janssen Pharmaceuticals, Inc. (collectively, Janssen) initiated a patent infringement lawsuit in the United States District Courts for the Districts of New Jersey and Delaware against Pharmascience Inc., Mallinckrodt PLC and Specgx LLC (collectively, Pharmascience), who filed an ANDA seeking approval to market a generic version of INVEGA SUSTENNA^® before the expiration of the ’906 patent.

In February 2018, Janssen Inc. and Janssen Pharmaceutica NV (collectively, Janssen) initiated a ~~Notices~~Statement of ~~Application~~Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Teva Canada Limited (Teva) ~~and the Minister of Health~~ in response to Teva's filing of an Abbreviated New Drug Submission (ANDS) seeking approval to market a generic version of INVEGA SUSTENNA^® before the expiration of Canadian Patent Nos. 2,309,629 (the ’629 patent) and ~~2,655,335.~~2,655,335 (the ’335 patent).Janssen subsequently discontinued the portion of the lawsuit relating to the ’629 patent.In May 2020, the Canadian Federal Court issued a Public Judgment and Reasons declaring that Teva’s generic version of INVEGA SUSTENNA^®, if approved, would infringe claims of the ’335 patent and that the claims of the ’335 patent are not invalid for obviousness. Teva appealed the court’s decision.

In April 2020, Janssen Inc. and Janssen Pharmaceutica NV (together, Janssen) initiated a Statement of Claim under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Pharmascience Inc. (Pharmascience) in response to Pharmascience's filing of an Abbreviated New Drug Submission (ANDS) seeking approval to market a generic version of INVEGA SUSTENNA^® before the expiration of the ’335 patent.Trial is scheduled to begin in January 2022.

In each of these lawsuits, Janssen is seeking an order ~~prohibiting~~enjoining the ~~Minister~~defendant from marketing a generic version of ~~Health from issuing a Notice of Compliance with respect to Teva’s ANDS~~INVEGA SUSTENNA^® before the expiration of ~~these patents. The Final Hearing is scheduled to begin in September 2019.~~the patent.

Beginning in January 2018, Pharmacyclics LLC (Pharmacyclics) and Janssen Biotech, Inc. (JBI) filed patent infringement lawsuits in the United States District Court for the District of Delaware against a number of generic companies who filed ANDAs seeking approval to market generic versions of IMBRUVICA^®140 mg capsulesbefore expiration of Pharmacyclics’ United States Patent Nos. 8,008,309, 7,514,444, 8,697,711, 8,735,403, 8,957,079, 9,181,257, 8,754,091, 8,497,277, 8,925,015, 8,476,284, 8,754,090, 8,999,999, 9,125,889, 9,801,881, 9,801,883, 9,814,721, 9,795,604, 9,296,753, 9,540,382, 9,713,617 and/or 9,725,455 relating to IMBRUVICA^®. JBI is the exclusive licensee of the asserted patents. The named defendants include the following generic ~~companies are named defendants:~~companies: Cipla Limited and Cipla USA Inc. (Cipla); ~~Fresenius Kabi USA, LLC, Fresenius Kabi USA, Inc., and Fresenius Kabi Oncology Limited (Fresenius Kabi);~~ Sandoz Inc. and Lek Pharmaceuticals d.d. (Sandoz)~~; Shilpa Medicare Limited (Shilpa)~~; Sun Pharma Global FZE and Sun Pharmaceutical Industries Limited (Sun); ~~Teva Pharmaceuticals USA, Inc. (Teva);~~ and Zydus Worldwide DMCC and Cadila Healthcare Limited (Zydus).The trial is scheduled to begin in October 2020.

In October 2018, Pharmacyclics and JBI filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Sun asserting United States Patent No. 10,004,746.

~~In January 2019, Pharmacyclics and JBI amended their complaints against Fresenius Kabi, Zydus, Teva and Sandoz to further allege infringement of U.S. Patent Nos. 10,106,548, and 10,125,140.~~

In January 2019, Pharmacyclics and JBI filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Zydus, who filed an ANDA seeking approval to market a generic version of IMBRUVICA^® 70 mg before the expiration of U.S. Patent Nos. 7,514,444, 8,003,309, 8,476,284, 8,497,277, 8,697,711, 8,753,403, 8,754,090, 8,754,091, 8,952,015, 8,957,079, 9,181,257, 9,296,753, 9,540,382, 9,713,617, 9,725,455, 10,106,548, and 10,125,140.

In January 2019, Pharmacyclics and JBI filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Hetero asserting infringement of United States Patent No. 10,106,548.

In February 2019, Pharmacyclics and JBI amended their complaints against Cipla ~~Shilpa,~~ and Sun to allege infringement of United States Patent Nos. 10,106,548, and 10,125,140.

~~In February 2019, Pharmacyclics and JBI entered into settlement agreements with Teva and Hetero. In March 2019, Pharmacyclics and JBI entered into a settlement agreement with Shilpa.~~

In March 2019, Pharmacyclics and JBI filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Alvogen Pine Brook LLC and Natco Pharma Ltd. (Alvogen), who filed an ANDA seeking approval to market generic versions of IMBRUVICA^® tablets, asserting infringement of United States Patent Nos. 7,514,444, 8,003,309, 8,476,284, 8,497,277, 8,697,711, 8,753,403, 8,754,090, 8,754,091, 8,952,015, 8,957,079, 9,181,257, 9,296,753, 9,655,857, 9,725,455, 10,010,507, 10,106,548, and 10,125,140.

In May 2019, Pharmacyclics and JBI amended their ~~complaints~~complaint against Cipla to further allege infringement of United States Patent No. 10,016,435. In June 2019, Pharmacyclics and JBI amended their ~~complaints~~complaint against Alvogen to further allege infringement of United States Patent No. 10,213,386.

In August 2019, Pharmacyclics and JBI amended their complaints against Cipla, and Sandoz to further allege infringement of U.S. Patent Nos. 10,294,231 and 10,294,232 and amended their complaint against Sun to further allege infringement of U.S. Patent No. 10,294,232.

In March 2019, Sandoz filed anIPR Petition withthe USPTO, seeking to invalidate United States Patent No. 9,795,604.The IPR was instituted in September 2019, and a final written decision is expected by September 2020.

In March 2020, Pharmacyclics and JBI filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Alvogen, Zydus, Sun and Sandoz asserting infringement of United States Patent No. 10,478,439.In April 2020, Pharmacyclics and JBI amended their complaint against Sandoz to further allege infringement of U.S. Patent No. 10,463,668.

In April 2020, Pharmacyclics and JBI filed a patent infringement lawsuit in the United States District Court for the District of Delaware against Zydus, who filed an ANDA seeking approval to market generic versions of IMBRUVICA^® tablets, asserting infringement of United States Patent Nos. 7,514,444, 8,003,309, 8,476,284, 8,497,277, 8,697,711, 8,753,403, 8,754,090, 8,754,091, 8,952,015, 8,957,079, 9,181,257, 9,296,753, 9,655,857, 9,725,455, 10,010,507, 10,106,548, 10,125,140, 10,213,286 and 10,478,439.

In May 2020, Pharmacyclics and JBI entered into a settlement agreement with Sun Pharmaceuticals.

In each of the lawsuits, Pharmacyclics and JBI are seeking an order enjoining the defendants from marketing generic versions of IMBRUVICA^®before the expiration of the relevant patents.

~~In March 2019, Sandoz filed an Inter Partes Review (IPR) in the USPTO, seeking to invalidate United States Patent No. 9,795,604.~~

In ~~May~~December 2019, Actelion Pharmaceuticals Ltd and Actelion Pharmaceuticals US, Inc. initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against ~~Natco Pharma~~Zydus Pharmaceuticals (USA), Inc. and Cadila Healthcare Limited ~~and Syneos Health LLC~~ (collectively, ~~Natco)~~Zydus), who filed an ANDA seeking approval to market a generic version of TRACLEER^®, 32 mg, before the expiration of U.S. Patent No. 8,309,126 (the ’126 patent). ~~In the lawsuit,~~ Actelion iswas seeking an order enjoining ~~Natco~~Zydus from marketing its generic version of TRACLEER^® before the expiration of the ’126 patent. In July 2020, Actelion entered into a settlement agreement with Zydus.

In April 2020, Actelion Pharmaceuticals Ltd and Nippon Shinyaku Co., Ltd. initiated a patent infringement lawsuit in the United States District Court for the District of New Jersey against a number of generic companies who filed ANDAs seeking approval to market generic versions of UPTRAVI^®before expiration of Nippon Shinyaku’s United States Patent Nos. 7,205,302; 8,791,122; and 9,284,280 relating to UPTRAVI^®. Actelion is the exclusive licensee of the asserted patents. The following generics are named defendants in the complaint: Alembic Pharmaceuticals Limited and Alembic Pharmaceuticals Inc. (Alembic); MSN Laboratories Private Limited and MSN Pharmaceuticals Inc. (MSN); Aizant Drug Research Solutions Private Limited (Aizant); VGYAAN Pharmaceuticals LLC (VGYAAN); and Zydus Pharmaceuticals (USA), Inc. and Zydus Worldwide DMCC (Zydus). In June 2020, the court entered a joint stipulation dismissing Aizant from suit.

Actelion and Nippon Shinyaku are seeking an order enjoining the defendants from marketing generic versions of UPTRAVI^®before the expiration of the relevant patents.

Like other companies in the pharmaceutical, consumer and medical devices industries, Johnson & Johnson and certain of its subsidiaries are subject to extensive regulation by national, state and local government agencies in the United States and other countries in which they operate. As a result, interaction with government agencies is ongoing. The most significant litigation brought by, and investigations conducted by, government agencies are listed below. It is possible that criminal charges and substantial fines and/or civil penalties or damages could result from government investigations or litigation.

Johnson & Johnson and several of its pharmaceutical subsidiaries (the J&J AWP Defendants), along with numerous other pharmaceutical companies, were named as defendants in a series of lawsuits in state and federal courts involving allegations that the pricing and marketing of certain pharmaceutical products amounted to fraudulent and otherwise actionable conduct because, among other things, the companies allegedly reported an inflated Average Wholesale Price (AWP) for the drugs at issue. Payors alleged that they used those AWPs in calculating provider reimbursement levels. The plaintiffs in these cases included three classes of private persons or entities that paid for any portion of the purchase of the drugs at issue based on AWP, and state government entities that made Medicaid payments for the drugs at issue based on AWP. Many of these cases, both federal actions and state actions removed to federal court, were consolidated for pre-trial purposes in a multi-district litigation in the United States District Court for the District of Massachusetts, where all claims against the J&J AWP Defendants were ultimately dismissed. The J&J AWP Defendants also prevailed in a case brought by the Commonwealth of Pennsylvania. Other AWP cases have been resolved through court order or settlement. ~~Two cases remain pending. A~~The case brought by Illinois was ~~tried in May 2019 and post-trial briefing is underway.~~settled after trial. In New Jersey, a putative class action based upon AWP allegations is pending against Centocor, Inc. and Ortho Biotech Inc. (both now Janssen Biotech, Inc.), Johnson & Johnson and ALZA Corporation. All other cases have been resolved.

Beginning in 2014 and continuing to the present, Johnson & Johnson and Janssen Pharmaceuticals, Inc. (JPI), along with other pharmaceutical companies, have been named in more than ~~2,000~~2,900 lawsuits ~~brought by certain state and local governments~~ related to the marketing of opioids, including DURAGESIC^®, NUCYNTA^® and NUCYNTA^® ER. The suits also raise allegations related to previously owned active pharmaceutical ingredient supplier subsidiaries, Tasmanian Alkaloids Pty, Ltd. and Noramco, Inc. (both subsidiaries were divested in 2016). The majority of the cases have been filed by state and local governments. Similar lawsuits have also been filed by private plaintiffs and organizations, including but not limited to the following: individual plaintiffs on behalf of children suffering from Neonatal Abstinence Syndrome; hospitals; and health insurers/payors. To date, complaints against pharmaceutical companies, including Johnson & Johnson and JPI, have been filed ~~in state court~~ by the state Attorneys General in Arkansas, Florida, Idaho, Illinois, Kentucky, Louisiana, Mississippi, Missouri, New Hampshire, New Jersey, New Mexico, New York,

Ohio, Oklahoma, South Dakota, Texas, Washington and ~~South Dakota.~~

West Virginia. Complaints against the manufacturers also have been filed in state or federal court by city, county and local government agencies in the following states: ~~Alabama; Arkansas; California; Connecticut; Florida; Georgia; Illinois; Kentucky; Louisiana; Maine; Maryland; Massachusetts; Mississippi; Missouri; Nevada;~~Alabama, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, Nevada, New ~~Hampshire;~~Hampshire, New ~~Jersey;~~Jersey, New ~~Mexico;~~Mexico, New ~~York;~~York, North Carolina; ~~Ohio; Oklahoma; Oregon; Pennsylvania;~~Ohio, Oklahoma, Oregon, Pennsylvania, Rhode ~~Island;~~Island, South ~~Carolina;~~Carolina, South ~~Dakota; Tennessee; Texas; Utah; Virginia; Washington;~~Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin. The Government of Puerto Rico filed suit in Superior Court of San Juan. There are more than 370 cases pending in various state courts. There are over 2,700 federal cases coordinated in a federal Multi-District Litigation (MDL) pending in the U.S. District Court for the Northern District of Ohio (MDL No. 2804). In addition, the Province of British Columbia filed suit in Canada. In October 2019, an anti-trust complaint was filed by private plaintiffs in federal court in Tennessee and is pending transfer to the MDL. These actions allege a variety of claims related to ~~opioids~~opioid marketing practices, including false advertising, unfair competition, public nuisance, consumer fraud violations, deceptive acts and practices, false claims and unjust enrichment. The suits generally seek penalties and/or injunctive and monetary relief and, in some of the suits, the plaintiffs are seeking joint and several liability among the defendants. The case filed by the Oklahoma Attorney General started trial in May 2019. Additionally, over 2,000 federal cases have been coordinated in a federal Multi-District Litigation (MDL) pending in the U.S. District Court for the Northern District of Ohio (MDL No. 2804). The first trial date in the MDL has been set for October 2019. An adverse judgment in any of these lawsuits could result in the imposition of large monetary penalties and significant damages including, punitive damages, cost of abatement, substantial fines, equitable remedies and other sanctions.

The trial in the matter filed by the Oklahoma Attorney General resulted in a judgment against Johnson & Johnson and JPI in the amount of $572 million, subject to a final order to be issued by the court. The court issued a final judgment reducing the amount to $465 million. Johnson & Johnson and JPI have appealed the judgment. The Company believes that it has strong grounds to overturn this judgment. In October 2019 Johnson & Johnson and JPI announced a settlement of the first case set for trial in the MDL with two counties in Ohio.

Johnson & Johnson, JPI and other pharmaceutical companies have also received subpoenas or requests for information related to opioids marketing practices from the following state Attorneys General: Alaska, Indiana, Montana, New Hampshire, South Carolina, Tennessee, Texas and Washington. In September 2017, Johnson & Johnson and JPI were contacted by the Texas and Colorado Attorney General’s Offices on behalf of approximately 38 states regarding a multi-state Attorney General investigation. In October 2019, the Company announced a proposed agreement in principle that would include the Company paying $4 billion as settlement of these lawsuits, subject to various conditions and an agreement being finalized. This agreement in principle is not an admission of liability or wrong-doing and would resolve opioid lawsuits filed and future claims by states, cities and counties. The ~~multi-state coalition served~~Company cannot predict if or when the agreement will be finalized and individual cases are ongoing.

In August 2019, Johnson & Johnson received a grand jury subpoena from the United States Attorney’s Office for the Eastern District of New York for documents related to the Company’s anti-diversion policies and ~~JPI with~~procedures and distribution of its opioid medications, in what the Company understands to be part of a broader investigation into manufacturers’ and distributors’ monitoring programs and reporting under the Controlled Substances Act. In September 2019, Johnson & Johnson received subpoenas from the New York State Department of Financial Services (NYDFS) as part of an industry-wide inquiry into the ~~investigation.~~effect of opioid prescriptions on New York health insurance premiums. The Company is cooperating and producing documents in response to the various subpoenas and requests for information.

In November 2019, a shareholder filed a derivative complaint against Johnson & Johnson as the nominal defendant and certain current and former directors and officers as defendants in the Superior Court of New Jersey. The complaint alleges breaches of fiduciary duties related to the marketing of opioids, and that Johnson & Johnson has suffered damages as a result of those alleged breaches. In December 2019, two additional shareholders filed two separate derivative complaints making similar allegations against Johnson & Johnson as the nominal defendant and certain current and former directors and officers as defendants in the United States District for the District of New Jersey. In April 2020, the two federal cases were consolidated into a single action captioned In re Johnson & Johnson Opioid Stockholder Derivative Litigation. Pursuant to an agreed stipulation entered by the Court, the shareholders have until July 2020 to file a consolidated complaint or identify a previously filed complaint as the operative complaint. In July 2020, an additional shareholder filed a derivative complaint in the United States District Court for the District of New Jersey making similar allegations against the same defendants named in the consolidated action. Pursuant to an order in the consolidated action, the newly-filed case will be consolidated into the consolidated action.

In April 2020, a report was delivered to the Company’s Board of Directors by independent counsel retained by the Board to investigate the allegations in the derivative lawsuits and in a series of shareholder letters that the Board received raising similar issues.The independent counsel recommended that the Company reject the shareholder demands and take the steps that are necessary or appropriate to secure dismissal of the derivative litigation. The Board unanimously adopted the recommendations of the independent counsel’s report.

In August 2012, DePuy Orthopaedics, Inc., DePuy, Inc. (now known as DePuy Synthes, Inc.), and Johnson & Johnson Services, Inc. (collectively DePuy) received an informal request from the United States Attorney's Office for the District of Massachusetts and the Civil Division of the United States Department of Justice (the United States) for the production of materials relating to the DePuy ASR™ XL Hip device. In July 2014, the United States notified the United States District Court for the District of Massachusetts that it had declined to intervene in a qui tam case filed pursuant to the False Claims Act against the companies. In February 2016, the district court granted the companies’ motion to dismiss with prejudice, unsealed the qui tam complaint, and denied the qui tam relators’ request for leave to file a further amended complaint. The qui tam relators appealed the case to the United States Court of Appeals for the First Circuit. In July 2017, the First Circuit affirmed the district court’s dismissal in part, reversed in part, and affirmed the decision to deny the relators’ request to file a third amended complaint. The relators’ remaining claims are now pending before the district ~~court, and fact~~court. In July 2020, the Court ordered the relators to complete discovery ~~is currently scheduled to close in September 2019.~~by August 2020.

In October 2012, Johnson & Johnson was contacted by the California Attorney General's office regarding a multi-state Attorney General investigation of the marketing of surgical mesh products for hernia and urogynecological purposes by Johnson & Johnson's subsidiary, Ethicon, Inc. (Ethicon). Johnson & Johnson and Ethicon have since entered into a series of tolling agreements with the 47 states and the District of Columbia participating in the multi-state investigation and have responded to Civil Investigative Demands served by certain of the participating states. The states are seeking monetary and injunctive relief. In May 2016, California and Washington filed civil complaints against Johnson & Johnson, Ethicon and Ethicon US, LLC alleging violations of their consumer protection statutes. Similar complaints were filed against the companies by the following states: Kentucky, Mississippi, West Virginia and Oregon. In April 2019, Johnson & Johnson and Ethicon settled the Washington case. The California case started trial in July ~~2019. Similar complaints were filed against the companies by Kentucky~~2019 and concluded in ~~August 2016 and by Mississippi in October 2017.~~September 2019. The trial date for the Kentucky case was scheduled for September 2019 but has been adjourned and no new trial date has been scheduled. The trial date for the Mississippi case is scheduled for April 2021. In October 2019, Johnson & Johnson and Ethicon ~~have entered into a new tolling agreement~~settled the multi-state investigation with ~~the remaining 43~~41 other states and the District of Columbia. In January 2020, the Court in California issued a statement of decision, finding in favor of the State of California, and awarded civil penalties in the amount of $344 million. The Company intends to appeal the decision. In April 2020, the Company settled the West Virginia case. In April 2020, the Court in California denied the Company's motion for a new trial. In June 2020, the Court denied the Attorney General's request for injunctive relief. In June 2020 the Court in Oregon denied the Company's motion to dismiss. Trial in Oregon is set for February 2022. The Attorney General of Mississippi filed a second amended complaint in April 2020 and the Company filed a motion to dismiss in May 2020. The motion to dismiss argument will be heard in August 2020.

In December 2012, Therakos, Inc. (Therakos), formerly a subsidiary of Johnson & Johnson and part of the Ortho-Clinical Diagnostics, Inc. (OCD) franchise, received a letter from the civil division of the United States Attorney's Office for the Eastern District of Pennsylvania informing Therakos that the United States Attorney's Office was investigating the sales and marketing of Uvadex^® (methoxsalen) and the Uvar Xts^® and Cellex^® Systems during the period 2000 to the present. The United States Attorney's Office requested that OCD and Johnson & Johnson preserve documents that could relate to the investigation. Therakos was subsequently acquired by an affiliate of Gores Capital Partners III, L.P. in January 2013, and OCD was divested in June 2014. Following the divestiture of OCD, Johnson & Johnson retains OCD’s portion of any liability that may result from the investigation for activity that occurred prior to the sale of Therakos. In March 2014 and March 2016, the United States Attorney’s Office requested that Johnson & Johnson produce certain documents, and Johnson & Johnson is cooperating with those requests.

In June 2014, the Mississippi Attorney General filed a complaint in Chancery Court of The First Judicial District of Hinds County, Mississippi against Johnson & Johnson and Johnson & Johnson Consumer Companies, Inc. (now known as Johnson & Johnson Consumer Inc.) (JJCI). The complaint alleges that defendants ~~failed~~violated the Mississippi Consumer Protection Act by

failing to disclose alleged health risks associated with female consumers' use of talc contained in JOHNSON'S^® Baby Powder and JOHNSON'S^® Shower to Shower (a product divested in 2012) and seeks injunctive and monetary relief. The ~~trial~~matter is stayed pending interlocutory appeal of a December 2018 denial of Johnson & Johnson and JJCI's motion for summary judgment. The Mississippi Supreme Court granted J&J and JJCI's request to file an interlocutory appeal of the denial of the motion for summary judgment in late 2019.

In January 2020, the State of New Mexico filed a consumer protection case alleging that the Company deceptively marketed and sold its talcum powder products by making misrepresentations about the safety of the products and the presence of carcinogens, including asbestos. The State of New Mexico filed an Amended Complaint in March 2020. The Company has filed a motion to dismiss certain of the claims in the Amended Complaint.

Forty-one states have commenced a joint investigation into the Company’s marketing of its talcum powder products. At this time, the multi-state group has not asserted any claims against the Company. Several states have issued Civil Investigative Demands seeking documents and other information.

In March 2016, Janssen Pharmaceuticals, Inc. (JPI) received a Civil Investigative Demand from the United States Attorney’s Office for the Southern District of New York related to JPI’s contractual relationships with pharmacy benefit managers over the

period from January 1, 2006 to the present with regard to certain of JPI's pharmaceutical products. The demand was issued in connection with an investigation under the False Claims Act.

In July 2016, Johnson & Johnson and Janssen Products LP were served with a qui tam complaint pursuant to the False Claims Act filed in the United States District Court for the District of New Jersey alleging the off-label promotion of two HIV products, PREZISTA^® and INTELENCE^®, and anti-kickback violations in connection with the promotion of these products. The complaint was filed under seal in December 2012. The federal and state governments have declined to intervene, and the lawsuit is being prosecuted by the relators.

In January 2017, Janssen Pharmaceuticals, Inc. (JPI) received a Civil Investigative Demand from the United States Department of Justice relating to allegations concerning the sales and marketing practices of OLYSIO^®. In December 2017, Johnson & Johnson and JPI were served with a whistleblower lawsuit filed in the United States District Court for the Central District of California alleging the off-label promotion of OLYSIO^® ~~and additional products, including NUCYNTA~~^®~~, XARELTO~~^®~~, LEVAQUIN~~^® ~~and REMICADE~~^®. At this time, the federal and state governments have declined to intervene and the lawsuit, which is related to the Civil Investigative Demand, is being prosecuted by a former company employee. The United States District Court for the Central District of California dismissed the claim in April 2018. In May 2018, the relator filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit.

In November 2018, a second whistleblower lawsuit was unsealed in the United States District Court for the Central District of California. The lawsuit was substantially similar to the lawsuit under appeal but was brought in the name of the original relator. The federal and state governments declined to intervene in the second suit, and the relator moved to dismiss the lawsuit without prejudice. In April 2019, the court granted the relator's motion and dismissed the complaint without prejudice.

In March 2017, Janssen Biotech, Inc. received a Civil Investigative Demand from the United States Department of Justice regarding a False Claims Act investigation concerning management and advisory services provided to rheumatology and gastroenterology practices that purchased REMICADE^® or SIMPONI ARIA^®. In August 2019, the Unites States Department of Justice notified Janssen Biotech, Inc. that it was closing the investigation. Subsequently, the United States District Court for the District of Massachusetts unsealed a qui tam False Claims Act complaint, which was served on the Company. The Department of Justice had declined to intervene in the qui tam lawsuit in August 2019. The Company has filed a motion to dismiss the relator’s complaint.

In April and September 2017, Johnson & Johnson received subpoenas from the United States Attorney for the District of Massachusetts seeking documents broadly relating to pharmaceutical copayment support programs for DARZALEX^®, OLYSIO^®, REMICADE^®, SIMPONI^®, STELARA^®and ZYTIGA^®. The subpoenas also seek documents relating to Average Manufacturer Price and Best Price reporting to the Center for Medicare and Medicaid Services related to those products, as well as rebate payments to state Medicaid agencies.

In June 2017, Johnson & Johnson received a subpoena from the United States Attorney's Office for the District of Massachusetts seeking information regarding practices pertaining to the sterilization of DePuy Synthes, Inc. spinal implants at three hospitals in Boston as well as interactions of employees of Company subsidiaries with physicians at these hospitals. Johnson & Johnson and DePuy Synthes, Inc. have produced documents in response to the subpoena and are fully cooperating with the government’s investigation.

In July 2018 the Public Prosecution Service in Rio de Janeiro and representatives from the Brazilian antitrust authority CADE inspected the offices of more than 30 companies including Johnson & Johnson do Brasil Indústria e Comércio de Produtos para Saúde Ltda. The authorities appear to be investigating allegations of possible anti-competitive behavior and possible improper payments in the medical device industry. ~~The~~We continue to actively respond to inquiries regarding the Foreign Corrupt Practices Act from the United States Department of Justice and the United States Securities and Exchange ~~Commission have made additional preliminary inquiries about the inspection in Brazil, and Johnson & Johnson do Brasil Indústria e Comércio de Produtos para Saúde Ltda.is cooperating with those requests.~~Commission.

From time to time, the Company has received requests from a variety of United States Congressional Committees to produce information relevant to ongoing congressional inquiries. It is the policy of Johnson & Johnson to cooperate with these inquiries by producing the requested information.

In May 2014, two purported class actions were filed in federal court, one in the United States District Court for the Central District of California and one in the United States District Court for the Southern District of Illinois, against Johnson & Johnson and Johnson & Johnson Consumer Companies, Inc. (now known as Johnson & Johnson Consumer Inc.) (JJCI) alleging violations of state consumer fraud statutes based on nondisclosure of alleged health risks associated with talc contained in JOHNSON'S^®Baby Powder and JOHNSON'S^® Shower to Shower (a product no longer sold by JJCI). Both cases seek injunctive relief and monetary damages; neither includes a claim for personal injuries. In October 2016, both cases were transferred to the United States District Court for the District Court of New Jersey as part of a newly created federal multi-district litigation. In July 2017, the district court granted Johnson & Johnson's and JJCI’s motion to dismiss one of the cases. In September 2018, the United States Court of Appeals for the Third Circuit affirmed this dismissal. In September 2017, the plaintiff in the second case voluntarily dismissed the complaint. In March 2018, the plaintiff in the second case refiled in Illinois State Court.

In August 2014, United States Customs and Border Protection (US CBP) issued a Penalty Notice against Janssen Ortho LLC (Janssen Ortho), assessing penalties for the alleged improper classification of darunavir ethanolate (the active pharmaceutical ingredient in PREZISTA^®) in connection with its importation into the United States. In October 2014, Janssen Ortho submitted a Petition for Relief in response to the Penalty Notice. In May 2015, US CBP issued an Amended Penalty Notice assessing substantial penalties and Janssen Ortho filed a Petition for Relief in July 2015. In May 2019, US CBP issued its Mitigation Decision and determined that Janssen Ortho had negligently misrepresented that darunavir ethanolate is entitled to duty free

treatment. In June 2019, Janssen Ortho filed a Supplemental Petition for Relief. The Penalties Proceeding will be impacted by the related Classification Litigation pending in the United States Court of International Trade. The Classification Litigation will determine whether darunavir ethanolate was properly classified as exempt from duties upon importation into the United States. The trial in the Classification Litigation ~~commenced~~was held in July 2019. In February 2020, the Court ruled that darunavir ethanolate is eligible for duty free treatment. In April 2020, the United States filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit.

In May 2017, Lonza Sales AG (Lonza) filed a Request for Arbitration with the London Court of International Arbitration against Janssen Research & Development, LLC (Janssen R&D). Lonza alleges that Janssen R&D breached a 2005 agreement between the parties by sublicensing certain Lonza technology used in the manufacture of daratumumab without Lonza’s consent. Lonza seeks monetary damages. In May 2019, the arbitration award was issued and the matter has been resolved.

In September 2017, Pfizer, Inc. (Pfizer) filed an antitrust complaint against Johnson & Johnson and Janssen Biotech, Inc. (collectively, Janssen) in United States District Court for the Eastern District of Pennsylvania. Pfizer alleges that Janssen has violated federal antitrust laws through its contracting strategies for REMICADE^®. The complaint seeks damages and injunctive relief. Discovery is ongoing.

Beginning in September 2017, multiple purported class actions of direct and indirect purchasers were filed against Johnson & Johnson and Janssen Biotech, Inc. (collectively, Janssen) alleging that Janssen’s REMICADE^® contracting strategies violated federal and state antitrust and consumer laws and seeking damages and injunctive relief. In November 2017, the cases were consolidated for pre-trial purposes in United States District Court for the Eastern District of Pennsylvania as In re Remicade Antitrust Litigation. ~~A motion to compel arbitration of the direct purchaser case was denied and is on appeal to the United States Court of Appeals for the Third Circuit.~~ Motions to dismiss were denied in both the direct and indirect purchaser cases. A motion to compel arbitration of the direct purchaser case was denied by the district court. The United States Court of Appeals for the Third Circuit reversed the district court's ruling.

In June 2018, Walgreen Co. and Kroger Co, filed an antitrust complaint against Johnson & Johnson and Janssen Biotech, Inc. (collectively, Janssen) in the United States District Court for the Eastern District of Pennsylvania. The complaint alleges that Janssen has violated federal antitrust laws through its contracting strategies for REMICADE^®. The complaint seeks damages and injunctive relief. In March 2019, summary judgment was granted in favor of Janssen. ~~This ruling is on appeal to~~In February 2020, the United States Court of Appeals for the Third ~~Circuit.~~Circuit reversed the District Court’s decision.

In June 2019, the United States Federal Trade Commission ~~(“FTC”)~~(FTC) issued a Civil Investigative Demand to Johnson & Johnson in connection with its investigation of whether Janssen’s REMICADE^® contracting practices violate federal antitrust laws. The Company has produced documents and information responsive to the Civil Investigative Demand.

In October 2017, certain United States service members and their families brought a complaint against a number of pharmaceutical and medical devices companies, including Johnson & Johnson and certain of its subsidiaries, alleging that the defendants violated the United States Anti-Terrorism Act. The complaint alleges that the defendants provided funding for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the Iraqi Ministry of Health. In January ~~2019, plaintiffs' motion to file~~2020, plaintiffs filed a ~~Second~~Third Amended Complaint adding further plaintiffs to the ~~lawsuit was granted.~~lawsuit. In ~~April 2019,~~July 2020, the ~~Company moved to dismiss~~District Court dismissed the ~~Second~~Third Amended Complaint.



New Jersey						22-1024240
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



	June 30, 2019			December 30, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	14,376		18,107
Marketable securities	902			1,580
Accounts receivable, trade, less allowances for doubtful accounts $251 (2018, $248)	14,653			14,098
Inventories (Note 2)	9,263			8,599
Prepaid expenses and other	2,411			2,699
Assets held for sale (Note 10)	194			950
Total current assets	41,799			46,033
Property, plant and equipment at cost	42,905			41,851
Less: accumulated depreciation	(25,657		)	(24,816	)
Property, plant and equipment, net	17,248			17,035
Intangible assets, net (Note 3)	49,332			47,611
Goodwill (Note 3)	33,661			30,453
Deferred taxes on income	7,647			7,640
Other assets	5,430			4,182
Total assets	$	155,117		152,954
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	1,719		2,796
Accounts payable	6,912			7,537
Accrued liabilities	8,297			7,601
Accrued rebates, returns and promotions	10,433			9,380
Accrued compensation and employee related obligations	2,291			3,098
Accrued taxes on income	1,701			818
Total current liabilities	31,353			31,230
Long-term debt (Note 4)	27,699			27,684
Deferred taxes on income	7,725			7,506
Employee related obligations	9,910			9,951
Long-term taxes payable	7,543			8,242
Other liabilities	10,102			8,589
Total liabilities	94,332			93,202
Commitments and Contingencies (Note 11)
Shareholders’ equity:
Common stock — par value $1.00 per share (authorized 4,320,000,000 shares; issued 3,119,843,000 shares)	$	3,120		3,120
Accumulated other comprehensive income (loss) (Note 7)	(14,969		)	(15,222	)
Retained earnings	109,809			106,216
Less: common stock held in treasury, at cost (477,778,000 and 457,519,000 shares)	37,175			34,362
Total shareholders’ equity	60,785			59,752
Total liabilities and shareholders' equity	$	155,117		152,954



(Dollars in Millions)	Operating Leases
2019 (for the remainder of fiscal 2019)	$	185
2020	245
2021	201
2022	156
2023	98
After 2023	214
Total lease payments	1,099
Less: Interest	88
Present Value of lease liabilities	$	1,011



(Dollars in Millions)
Non-current operating lease right-of-use assets	$	980
Current operating lease liabilities	262
Non-current Operating lease liabilities	749
Total operating lease liabilities	$	1,011



(Dollars in Millions)	Consumer			Pharm	Med Devices	Total
Goodwill, net at December 30, 2018	$	8,670		9,063	12,720	30,453
Goodwill, related to acquisitions	1,196			—	2,019	3,215
Currency translation/Other	(49		)	41	1	(7	)
Goodwill, net at June 30, 2019	$	9,817		9,104	14,740	33,661



Line item in the Consolidated Balance Sheet in which the hedged item is included	Carrying Amount of the Hedged Liability			Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
(Dollars in Millions)	June 30, 2019		December 30, 2018	June 30, 2019	December 30, 2018
Current Portion of Long-term Debt	$	498	494	1	5
Long-term Debt	—		—	—	—



Pulmonary Hypertension
U.S.	439	429	2.2		869	790	10.0
International	251	236	6.7		477	460	3.7
Worldwide	690	665	3.8		1,346	1,250	7.7
OPSUMIT^®
U.S.	203	180	12.8		375	329	14.2
International	146	131	11.5		279	253	10.3
Worldwide	348	311	12.3		654	582	12.5
TRACLEER^®
U.S.	41	71	(41.8)		102	139	(26.3	)
International	62	72	(14.5)		118	144	(18.7	)
Worldwide	103	143	(28.0)		220	283	(22.4	)
UPTRAVI^®
U.S.	175	155	13.4		351	279	25.9
International	28	16	62.5		50	32	53.1
Worldwide	203	171	18.2		401	311	28.7
OTHER
U.S.	20	23	(18.2)		41	43	(8.4	)
International	16	17	3.7		31	31	4.1
Worldwide	37	40	(9.6)		72	74	(3.4	)

Cardiovascular / Metabolism / Other
U.S.	902	1,101	(18.1	)	1,849	2,204	(16.1	)
International	373	417	(10.5	)	771	831	(7.2	)
Worldwide	1,275	1,518	(16.0	)	2,620	3,035	(13.7	)
XARELTO^®
U.S.	549	679	(19.2	)	1,091	1,257	(13.2	)
International	—	—	—		—	—	—
Worldwide	549	679	(19.2	)	1,091	1,257	(13.2	)
INVOKANA^® / INVOKAMET^®
U.S.	132	169	(21.2	)	286	373	(23.2	)
International	43	46	(6.0	)	92	90	2.6
Worldwide	177	215	(17.9	)	379	463	(18.2	)
PROCRIT^® / EPREX^®
U.S.	113	156	(27.5	)	261	345	(24.3	)
International	70	80	(13.4	)	148	167	(11.7	)
Worldwide	183	236	(22.7	)	409	512	(20.2	)
OTHER
U.S.	107	97	9.3		211	229	(8.2	)
International	260	291	(10.5	)	531	574	(7.5	)
Worldwide	368	388	(5.5	)	742	803	(7.7	)

TOTAL PHARMACEUTICAL
U.S.	5,783	5,899	(2.0	)	11,365	11,253	1.0
International	4,746	4,455	6.5		9,408	8,945	5.2
Worldwide	10,529	10,354	1.7		20,773	20,198	2.8



MEDICAL DEVICES
Diabetes Care
U.S.	—	129	*		—	246	*
International	—	226	*		—	448	*
Worldwide	—	355	*		—	694	*
Interventional Solutions
U.S.	366	323	13.7		709	627	13.2
International	385	344	11.6		774	680	13.7
Worldwide	750	667	12.6		1,482	1,307	13.4
Orthopaedics
U.S.	1,331	1,332	(0.1	)	2,649	2,639	0.4
International	894	930	(3.8	)	1,779	1,873	(5.0	)
Worldwide	2,224	2,262	(1.6	)	4,428	4,512	(1.9	)
HIPS
U.S.	216	211	2.1		429	420	2.1
International	147	149	(0.7	)	295	303	(2.3	)
Worldwide	364	360	0.9		725	723	0.3
KNEES
U.S.	218	229	(4.8	)	441	457	(3.5	)
International	153	153	0.4		299	312	(4.0	)
Worldwide	372	382	(2.8	)	741	769	(3.7	)
TRAUMA
U.S.	407	394	3.3		824	801	2.9
International	265	281	(5.9	)	533	570	(6.5	)
Worldwide	672	675	(0.6	)	1,357	1,371	(1.0	)
SPINE & OTHER
U.S.	490	498	(1.5	)	955	961	(0.6	)
International	328	347	(5.3	)	651	688	(5.4	)
Worldwide	818	845	(3.1	)	1,606	1,649	(2.6	)
Surgery
U.S.	926	1,022	(9.5	)	1,927	2,015	(4.4	)
International	1,427	1,493	(4.4	)	2,821	2,923	(3.5	)
Worldwide	2,353	2,515	(6.5	)	4,748	4,938	(3.9	)
ADVANCED
U.S.	396	402	(1.7	)	800	795	0.6
International	633	603	5.0		1,209	1,176	2.8
Worldwide	1,029	1,005	2.3		2,009	1,971	1.9
GENERAL
U.S.	443	436	1.6		868	859	1.0
International	674	733	(7.9	)	1,339	1,437	(6.8	)
Worldwide	1,119	1,169	(4.3	)	2,208	2,296	(3.9	)
SPECIALTY
U.S.	87	184	(53.1	)	259	361	(28.3	)
International	120	157	(23.7	)	273	310	(12.1	)
Worldwide	206	341	(39.6	)	531	671	(20.8	)


(Dollars in Millions)	Severance		Asset Write-offs	Other⁽²⁾		Total
Reserve balance, December 29, 2019	$	164	—	16		180

Current year activity:
Charges	—		27	206		233
Cash payments	(12)		—	(197)		(209)
Settled non cash	—		(27)	(17)	(3)	(44)


Reserve balance, June 28, 2020⁽¹⁾	$	152	—	8		160


Fiscal Six Months
(Dollars in Billions)(Income)/Expense	2020		2019	Change
Litigation expense	$	0.7	0.8	(0.1)
Acquisition and Integration related⁽¹⁾	(0.9)		0.1	(1.0)
Unrealized (gains)/losses on securities	(0.2)		(0.3)	0.1
Equity step-up gain related to DR. CI:LABO	0.0		(0.3)	0.3
Divestiture Gains⁽²⁾	(0.1)		(2.1)	2.0
Restructuring related	0.1		0.1	0.0
Other	(0.2)		0.0	(0.2)
Total Other (Income) Expense, Net	$	(0.6)	(1.7)	1.1


Fiscal Second Quarter
(Dollars in Billions)(Income)/Expense	2020		2019	Change
Litigation expense	$	0.6	0.4	0.2
Acquisition and Integration related	0.0		0.1	(0.1)
Unrealized (gains)/losses on securities	(0.5)		(0.2)	(0.3)
Divestiture Gains⁽¹⁾	0.0		(2.0)	2.0
Other	(0.1)		0.0	(0.1)
Total Other (Income) Expense, Net	$	0.0	(1.7)	1.7


	Income Before Tax				Segment Sales				Percent of Segment Sales					Income Before Tax						Segment Sales						Percent of Segment Sales
(Dollars in Millions)	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018		(Dollars in Millions)	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Consumer	$	1,147	$	1,377	$	6,862	$	6,902	16.7	%	20.0	%
Consumer Health													Consumer Health	$	802	$	1,147	$	6,921	$	6,862	11.6	%	16.7	%
Pharmaceutical	6,008		7,317		20,773		20,198		28.9		36.2		Pharmaceutical	8,348		6,008		21,886		20,773		38.1		28.9
Medical Devices	4,686		2,375		12,948		13,739		36.2		17.3		Medical Devices	1,671		4,686		10,220		12,948		16.4		36.2
Segment total	11,841		11,069		40,583		40,839		29.2		27.1
Segment earnings before tax													Segment earnings before tax	10,821		11,841		39,027		40,583		27.7		29.2
Less: Expenses not allocated to segments ⁽¹⁾	378		615										Less: Expenses not allocated to segments ⁽¹⁾	372		378
Worldwide total	$	11,463	$	10,454	$	40,583	$	40,839	28.2	%	25.6	%
Worldwide income before tax													Worldwide income before tax	$	10,449	$	11,463	$	39,027	$	40,583	26.8	%	28.2	%


(Dollars In Billions)
$	17.3	Q4 2019 Cash and cash equivalents balance
6.8		cash generated from operating activities
(8.1)		net cash used by investing activities
(4.7)		net cash used by financing activities
(0.1)		effect of exchange rate and rounding
$	11.2	Q2 2020 Cash and cash equivalents balance


(Dollars In Billions)
$	9.4	Net Earnings
3.7		non-cash expenses and other adjustments primarily for depreciation and amortization, stock-based compensation and accounts receivable allowances and credit losses partially offset by the deferred tax provision and net gain on sale of assets/businesses
(3.1)		decrease in accounts payable and accrued liabilities and other current and non-current liabilities
(2.2)		an increase in accounts receivable, inventories and other current and non-current assets

(1.0)		contingent consideration reversal (related to the timing of certain developmental milestones associated with the Auris Health acquisition)
$	6.8	Cash Flow from operations


(Dollars In Billions)
$	(0.9)	primarily related to the acquisitions of bermekimab and related assets from XBiotech Inc. as well as the acquisition of all outstanding shares in Verb Surgical Inc.
(1.3)		additions to property, plant and equipment
(6.1)		net purchases of investments
0.7		proceeds from credit support agreements, net

(0.5)		other (primarily licenses and milestones)
$	(8.1)	Net cash used for investing activities


(Dollars In Billions)
$	(5.2)	dividends to shareholders
(2.4)		repurchase of common stock
2.7		net proceeds from short and long term debt
0.7		proceeds from stock options exercised/employee withholding tax on stock awards, net
(0.5)		other
$	(4.7)	Net cash used for financing activities


Fiscal Month Period	Total Number of Shares Purchased⁽¹⁾	Avg. Price Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
March 30, 2020 through April 26, 2020	352,899	150.60		—
April 27, 2020 through May 24, 2020	3,474,619	150.35		—
May 25, 2020 through June 28, 2020	901,712	145.16		—
Total	4,729,230


⁽²⁾	~~As of June 30, 2019, an aggregate of 27,739,317 shares were purchased for a total of $3.8 billion since the inception of the repurchase program announced on December 17, 2018.~~


⁽³⁾	As of June 30, 2019, the maximum number of shares that may yet be purchased under the plan is 8,827,270 based on the closing price of Johnson & Johnson Common Stock on the New York Stock Exchange on June 28, 2019 of $139.28 per share.



EX-101.INS						Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
EX-101.SCH						Inline XBRL Taxonomy Extension Schema
EX-101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase
EX-101.LAB						Inline XBRL Taxonomy Extension Label Linkbase
EX-101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase
EX-101.DEF						Inline XBRL Taxonomy Extension Definition Document

Exhibit 104:						Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


		JOHNSON & JOHNSON (Registrant)

		~~JOHNSON & JOHNSON~~ ~~(Registrant)~~

Date: July ~~29, 2019~~24, 2020	By /s/ J. J. WOLK
		J. J. WOLK
		Executive Vice President, Chief Financial Officer (Principal Financial Officer)

Date: July ~~29, 2019~~24, 2020		By /s/ R. ~~A. KAPUSTA~~ J. DECKER Jr.
		R. ~~A. KAPUSTA~~ J. DECKER Jr.
		Controller (Principal Accounting Officer)