Louise Mehrotra - Vice President-Investor Relations Alex Gorsky - Chairman & Chief Executive Officer Dominic J. Caruso - Executive Vice President, Chief Financial Officer

Michael Weinstein - JPMorgan Securities LLC Larry Biegelsen - Wells Fargo Securities LLC Kristen Stewart - Deutsche Bank Securities, Inc. Matt Miksic - UBS Securities LLC Joshua Jennings - Cowen & Co. LLC Joanne Karen Wuensch - BMO Capital Markets (United States) Glenn John Novarro - RBC Capital Markets LLC David Ryan Lewis - Morgan Stanley & Co. LLC Danielle J. Antalffy - Leerink Partners LLC Jami Rubin - Goldman Sachs & Co. Vamil K. Divan - Credit Suisse Securities (USA) LLC (Broker) Jayson T. Bedford - Raymond James & Associates, Inc.

Good morning and welcome to Johnson & Johnson's second quarter 2016 earnings conference call. All participants will be in a listen-only mode until the question-and-answer session of the conference. This call is being recorded. If anyone has any objections you may disconnect at this time. I would now like to turn the conference call over to Johnson & Johnson. You may begin, Louise Mehrotra - Vice President-Investor Relations: Good morning and welcome. I'm Louise Mehrotra, Vice-President of Investor Relations for Johnson & Johnson, and it is my pleasure this morning to review our business results for the second quarter of 2016. Joining me on the call today is Alex Gorsky, Chairman of the Board of Directors, and Chief Executive Officer, and Dominic Caruso, our Chief Financial Officer. A few logistics before we get into the details. This review is being made available via webcast accessible through the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. I'll begin by briefly reviewing the second quarter for the corporation, and for our three business segments. Following my remarks, Alex will comment on the 2016 results to date, and provide a strategic outlook for the company. Next Dominic will provide some additional commentary on the business, review the income statement, and update guidance for 2016. We will then open the call to your questions. We expect the call to last approximately 90 minutes. Included with the press release that was issued earlier this morning is a schedule of sales for key products and/or businesses to facilitate updating your models. These schedules are available on the Johnson & Johnson website, as is the press release. Please note we will be using a presentation to complement today's commentary. The presentation is also available on our website. Before we begin, let me remind you that some of the statements made during this review are or may be considered forward-looking statements. The 10-K for the fiscal year 2015 and the company's subsequent filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made today. The company does not undertake to update any forward-looking statements as a result of new information or future events or developments. Our SEC filings including the 10-K are available through the company and on our website. During the review, non-GAAP financial measures are used to provide information pertinent to evaluating business performance period over period. These non-GAAP financial measures should not be considered replacement for and should be read together with GAAP results. Tables reconciling these measures to the most comparable GAAP measures are available in the schedules accompanying the press release and on the Investor Relations section of the Johnson & Johnson website. A number of products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Also to assist you with your models, this slide provides you with a summary of important developments that occurred during the quarter. Now I would like to review our results for the second quarter of 2016. Worldwide sales to customers were $18.5 billion, up 3.9% versus second quarter 2015. On an operational basis, sales were up 5.3%, and currency had a negative impact of 1.4%. In the U.S., sales were up 7.4%. In regions outside the U.S., our operational growth was 3.1% while the effect of currency exchange rates negatively impacted our reported results by 2.7%. On an operational basis, the Western Hemisphere excluding the U.S. grew by 15.4% with approximately a third of the growth due to an inventory build that will reverse in the third quarter. Asia-Pacific Africa grew 2.1% while Europe declined 0.6%. Results in all regions were negatively impacted by hepatitis C competition and divestitures. The most significant one being Cordis. Excluding the net impact of acquisitions, divestitures and hepatitis C, underlying operational growth was 7.9% worldwide, 8.8% in the U.S., and 6.9% outside the U.S. In addition, operations in Venezuela negatively impacted worldwide and outside the U.S. operational growth by 30 basis points and 70 basis points, respectively. Turning now to earnings, net earnings were $4 billion, and earnings per share were $1.43 versus $1.61 a year ago. As a reference in the table reconciling non-GAAP measures, 2016 second quarter net earnings were adjusted to exclude after tax amortization expense of $238 million and charges for after tax special items of $631 million. 2015 second quarter net earnings were adjusted to exclude after tax amortization expense of $230 million, and charges for after tax special items of $66 million. Dominic will discuss special items in his remarks. Excluding amortization expense and special items for both periods, adjusted net earnings for the current quarter were $4.9 billion and diluted earnings per share were $1.74, representing increases of 1.1% and 1.8%, respectively as compared to the same period in 2015. On an operational basis, adjusted net earnings per share also grew 1.8%. Now turning to the highlights for the first six months of 2016. Consolidated sales to customers were $36 billion, an increase of 2.3% as compared to the same period a year ago. On a year to-date basis, sales grew 4.6% operationally, and currency had a negative impact of 2.3%. Excluding the net impact of acquisitions and divestitures and hepatitis C sales, underlying operational growth was approximately 7.4% worldwide, 9.3% in the U.S., and 5.4% outside the U.S. In addition, operations in Venezuela negatively impacted worldwide and outside the U.S. operational growth by 50 basis points and 90 basis points, respectively. Turning now to earnings, for the first six months of 2016, net earnings were $8.5 billion and diluted earnings per share were $3.02. Adjusted net earnings were $9.7 billion and adjusted earnings per share were $3.47, up 5.3% and 6.1%, respectively versus the same period last year. On an operational basis, adjusted net earnings per share grew 7.3%. Turning now to business segment highlights for the second quarter of 2016, please note percentages quoted represent operational sales change in comparison to the second quarter of 2015, unless otherwise stated and therefore exclude the currency translation impact. I'll begin with the Consumer segment. Worldwide Consumer segment sales of $3.4 billion increased 1.5% with U.S. sales up 2.1% while outside the U.S. sales were up 1%. Excluding the net impact of acquisitions and divestitures underlying operational sales growth was 3.9% worldwide, 6.8% in the U.S. and 2% outside the U.S. In addition, operations in Venezuela negatively impacted growth worldwide and outside the U.S. by 120 basis points and 200 basis points respectively, with the most significant impact to women's health, baby care, and oral care. Growth for the segment was driven primarily by skin care, OTC, and oral care. In skin care, market share increases in a growing market as well as timing of inventory builds drove double-digit growth for both NEUTROGENA and AVEENO. OTC sales growth was strong despite a weak allergy season. U.S. OTC sales growth was driven by analgesic and digestive health share growth. In the U.S., adult analgesic market share was approximately 14%, up from approximately 11% a year ago, while U.S. pediatric share was nearly 47%, up from nearly 44% a year ago. Major contributors to the growth outside the U.S. were the strong performance of anti-smoking aids, children's analgesics, and digestive health products. New product launches and successful marketing campaigns drove the results for LISTERINE in oral care. Moving now to our Pharmaceuticals segment, worldwide sales of $8.7 billion increased 9.7%, with U.S. sales up 13.2% and sales outside the U.S. up 4.9%, driven by both strong sales of new products as well as core growth products. Competitors in hepatitis C significantly impacted sales this quarter. Excluding sales of our hepatitis C products, OLYSIO and INCIVO, as well as the impact of acquisitions and divestitures, underlying sales growth worldwide, U.S., and outside the U.S. was 12.8%, 13.9%, and 11.2% respectively. As you know, there are discounts and rebates in the pharmaceutical industry that are reflected in net sales. These amounts are estimated until the related claims data is received and then they are actualized. We have adjusted our estimates to reflect the most current claims trends. U.S. Pharmaceutical results this quarter included a positive adjustment to sales reserves across many channels, which was approximately $140 million higher than the adjustment in the second quarter of 2015, and positively impacted second quarter 2016 worldwide growth by approximately 1.5 points and U.S. growth by approximately 2.5 points. On a product basis, REMICADE U.S. growth in the second quarter of 2016 was positively impacted by approximately eight points, STELARA by 11 points, SIMPONI by 13 points, ZYTIGA by eight points, and PROCRIT by 31 points. Significant contributors to growth were: immunology products REMICADE, STELARA, and SIMPONI, SIMPONI ARIA; oncology products IMBRUVICA and recently launched DARZALEX; as well as cardiovascular metabolic products XARELTO and INVOKANA. Within neuroscience, strong growth for INVEGA SUSTENNA TRINZA was partially offset by lower sales of INVEGA due to the impact of generic competition. The results for immunology were driven by strong double-digit market growth, share growth for STELARA and SIMPONI ARIA, as well as the gross-to-net adjustments to U.S. sales that I mentioned. The decline in REMICADE export sales to our distribution partners was due to the impact of biosimilars. Strong patient uptake with new indications, approvals, and demonstrated efficacy drove results for IMBRUVICA both in the U.S. and outside the U.S. In the U.S., IMBRUVICA remains the new patient share and total share leader in second-line CLL and MCL. IMBRUVICA is now launched in more than 70 countries. DARZALEX was approved in the U.S. in November 2015 and has achieved rapid uptake with strong underlying demand. DARZALEX contributed approximately two points to the U.S. Pharmaceutical growth rate. DARZALEX received European Commission conditional approval this quarter and was launched in certain European countries. XARELTO sales were up 25.8% and total prescription share or TRx for the quarter in the U.S. anticoagulant market grew to nearly 17%, up 1.5 points from a year ago. TRx in primary care was over 14% and in cardiology over 23%. XARELTO is broadly reimbursed, with approximately 95% of commercial and Medicare Part D patients covered at the lowest copay for a branded product. INVOKANA/INVOKAMET sales were up 21% on a worldwide basis and 15.2% in the U.S. In the U.S., INVOKANA/INVOKAMET TRx within the defined market of Type 2 diabetes excluding insulin and metformin was 6.3%, up from 6% in the second quarter of 2015. TRx with endocrinologists was approximately 11.5% and over 5.5% in primary care. INVOKANA access remains strong at nearly 70% preferred for commercial and over 90% for Medicare Part D. I'll now review the Medical Devices segment results. Worldwide Medical Devices segment sales of $6.4 billion increased 1.8%. U.S. sales increased 1% while sales outside the U.S. increased 2.6%. As a reminder, Cordis was divested in the fourth quarter of 2015. Excluding the net impact of acquisitions and divestitures, underlying operational sales growth was 3.9% worldwide, with the U.S. up 1.9% and growth of 5.8% outside the U.S. In addition, operations in Venezuela negatively impacted growth worldwide and outside the U.S. by 30 basis points and 50 basis points respectively. Growth was driven by Advanced Surgery, Electrophysiology, Orthopedics, and Vision Care. Strong results were achieved for Advanced Surgery products with endocutters growth of 13%, energy growth of 9%, and biosurgicals growth of 8%. The acquisition of NeuWave Medical also contributed to growth this quarter. Electrophysiology grew 18% worldwide due to strong market growth complemented by new product launches and increased penetration for both ultrasound and diagnostic catheters. Orthopedics sales growth was driven by U.S. trauma and worldwide hips and knees. Market growth and the success of product launches drove results for the U.S. Orthopedics business. Pricing pressure continued across the major categories, partially offset by positive mix for trauma and spine products. The success of the TFNA nailing system in trauma, the ATTUNE platform in knees, our primary stem platforms in hips, and ORTHOVISC/MONOVISC and new spine product introductions made important contributions to the results. Orthopedics sales outside the U.S. negatively impacted results in China due to continued reduction in inventory. Trauma and spine other were the categories most impacted. In addition, timing of tender business negatively impacted trauma growth for the quarter. Vision Care sales were driven by strong growth across the major regions, partially offset in the U.S. by a customer reward program. That concludes the segment highlights for Johnson & Johnson's second quarter of 2016. It is now my pleasure to turn the call over to Alex Gorsky. Alex? Alex Gorsky - Chairman & Chief Executive Officer: Thank you, Louise, and good morning, everyone, and thank all of you for joining us on the conference call or webcast today. As you just heard from Louise, our second quarter results have continued the momentum that began with our great start to 2016. And we're pleased that our shareholders are seeing above-average returns on their investment in Johnson & Johnson. Delivering a fair return to shareholders is the final line of our credo, which clearly defines our first responsibility is to the doctors, nurses and patients, the mothers and fathers, and all others who use our products. When we meet those responsibilities and when we continuously work to improve outcomes for patients around the world, we succeed with all of our stakeholders. Now over the last 130 years, the people of Johnson & Johnson have been helping people everywhere live longer, healthier, and happier lives. With that remarkable heritage, I'm excited and optimistic about the opportunities for the future of Johnson & Johnson and committed to continuing our long-term success. With our broad base of strong businesses, focus strategies, and comprehensive approach to innovation, we're well prepared to address the challenges of today's healthcare market and well positioned to lead in the movement towards healthier societies. As I've discussed before, we believe our broad base in human healthcare is vital to achieving that vision. Our broad base is a strategic choice based on performance, and it has helped us to deliver strong, consistent, and sustainable financial performance through various economic cycles, meeting our financial commitments in the midst of global events like the UK's vote to exit from the EU or the economic issues in Venezuela this year. Our broad base enables us to create and access growth opportunities wherever they may arise at the right time and in the right markets. Our deep healthcare expertise also makes Johnson & Johnson companies strategic partners of choice for many companies, whether that means with innovative startups, information technology giants, or large hospital systems looking to improve patient outcomes and reduce the cost of care. We also work with local governments and public health organizations, where we're collaborating more than ever to address the world's most pressing health challenges. Our broad base allows us to create product platforms and systems across categories and establish new sources of innovation through convergent combination products. And finally, our broad base is helping us to realize advantages of scale to achieve enterprise efficiencies and capabilities across all of our segments. All of these advantages of our broad base in human healthcare contribute to the long-term value we are able to create for our shareholders. And we continue to have a clear set of objectives for creating that long-term value. We expect global healthcare to grow at 3% to 5% over the next five years, and we have an objective to grow our sales organically at a faster rate than the market. We also intend to grow our earnings faster than sales. When we combine these objectives with our plans of continue creating value through strategic acquisitions and partnerships as well as our strong dividend yield, we believe the result to be a basis for compelling, long-term total shareholder returns. And that is our focus. We invest for the long-term success of our business. In fact, we have increased our spending on R&D every year for the last five years. We invest above industry average levels to build our robust pipelines and continue to nurture the investments we've already made. We also invest in innovative sales and marketing initiatives and consistently benchmark to ensure the return on our investments is as competitive and as efficient as possible. I'm proud that we are able to make these important investments in our business while also generating enterprise-adjusted net income margins that have increased in our above-industry benchmarks. After we've made the appropriate investments in our business, we look to capitalize on the right opportunities to create greater long-term value for our shareholders. Our capital allocation framework starts with paying dividends to our shareholders, which is why we have increased our dividend every year for the last 54 years. Next, we seek value-creating strategic acquisitions and partnership opportunities. And finally, we consider other prudent ways to return value to shareholders such as repurchase programs. In fact, over the last three-year, 10-year, and 20-year periods, Johnson & Johnson total shareholder return has exceeded our competitive composite. And as you can see in this chart, we're off to a very strong start in 2016 with total shareholder return of approximately 20% through the first half of the year. And while we manage our business for the long term, we also have a number of near-term priorities which I've shared with you before. As an enterprise, we're focused on delivering on our financial and quality commitments. Through the first six months, we generated sales of $36 billion, resulting in an operational growth of 4.6%. When you exclude the impact of acquisitions, divestitures, hepatitis C sales and operations in Venezuela, underlying growth was 7.9%. Through the first half of this year, we have delivered adjusted net earnings of $9.7 billion and adjusted EPS of $3.47. On an operational basis, adjusted EPS was $3.51, representing growth of 7.3%. In our Pharmaceutical business, we continue to deliver very strong results. On the same underlying basis, growth was 12.7% through the first half of 2016, and we are continuing to build momentum in our Consumer and Medical Device businesses, with first half underlying growth of 4.5% and 3.7% respectively. We also continue making progress with our quality system, including resolving a warning letter in our ASP business in completion of the Synthes corporate integrity agreement. In Pharmaceuticals, we're continuing to build on our launch excellence and robust pipeline. In the last several months, we have made significant advancements in our pipeline, including: conditional EU approval for DARZALEX for monotherapy of adults with relapsed and refractory multiple myeloma and presented positive Phase III data on the CASTOR and POLLUX studies, which are evaluating combination therapies for DARZALEX. We also received EU approval for front-line IMBRUVICA treatment in CLL as well as FDA expansion of the IMBRUVICA label to include new Phase III data on survival and in combination therapies. Phase III data on STELARA demonstrated maintain clinical remission after one year of treatment in patients with moderate to severe Crohn's disease. Clinical trial and real-world data was presented on INVOKANA, including Phase II data on Type 1 diabetes and chronic weight management. We received EU approval for TREVICTA, a once-every-three-months injection for maintenance treatment of schizophrenia as well as line extension approval for both INVOKAMET and SIMPONI. Positive Phase III data was presented on sirukumab for patients with moderately to severe active rheumatoid arthritis. And just recently, FDA granted a fourth breakthrough therapy designation for IMBRUVICA in graft-versus-host disease, GVHD, which makes six total breakthrough designations for our Pharmaceutical business so far. In addition to these pipeline milestones, as Louise pointed out, we also delivered strong growth with our in-market products, including IMBRUVICA, DARZALEX, XARELTO, STELARA and SIMPONI. In Consumer, our priority is expanding market leadership in key segments within OTC, oral care, baby and beauty. As part of our focus on the beauty space, we have just completed the strategic acquisition of Vogue International. The award-winning beauty products in this portfolio, including the OGX brand, enhance our existing position in the market and are highly complementary to our heritage of breakthrough innovations in this space. Vogue International has grown at double-digits over the last five years with a compound annual growth rate of about 25%, and the acquisition will take us from number eight to number four in the U.S. hair care market. And as we discussed in May at our Analyst Day, we're continuing to see operating margin improvement in our Consumer business and plan to continue that trend for the next several years. And in Medical Devices, we're focused on accelerating growth through innovation and transforming our go-to-market models. In this segment, we're gaining momentum and accelerating growth through our unique and broad-based approach to innovation. Our performance this quarter was roughly in-line with market growth, and we're pleased with the progress here, but far from satisfied. Our goal, to be clear, is to grow above market overall. And while we're making strategic decisions in our portfolio to achieve that growth, like the recent acquisition of BioMedical Enterprises, Inc., which filled a key portfolio gap in elective foot and ankle surgery, we're also realigning our commercial models in-line with our near-term priority. Our innovation model in Hospital Medical Devices includes innovating our product offerings, but it also looks at innovation in terms of our commercial offerings and contracting. As we outlined during our Business Review Day, today about 25% of our U.S. orthopedic and surgery business is in multi-product line agreements. These agreements perform almost two times better than single product contract agreements. We see this percentage growing to 40% in the near future, which we believe will help us accelerate our business going forward. And finally, we're also serving customers in a more end-to-end manner with risk-sharing contracts and outcome-based patient solutions. We're also on track to deliver approximately $800 million to $1 billion in annual savings from our Medical Device restructuring, the majority of which we expect will be realized by the end of 2018. And also, we continue to make progress in launching new competitive entries in our Consumer Medical Device businesses like the ACUVUE VITA, a 30-day daily wear contact lens that provides superior comfort over leading monthly brands. With all of this progress in our Medical Devices segment, we are confident that we are poised to deliver above-market growth. Altogether, these near-term priorities will help drive success for each of our business segments while also enabling us to achieve the growth we expect for our company in the long-term. With the progress we've made on our near-term priorities, our businesses are strong, positioning us for above-market growth. With the combined strength of our end market portfolio, deep late-stage pipeline, and robust early-stage pipeline, we feel confident our Pharmaceutical business can successfully navigate through the launches of new competitive biosimilar or generic entrants and evolving market dynamics, and our objective is to continue delivering above-industry growth. Our Consumer business is positioned to grow above-market while also achieving benchmark profitability and investing for the future. And in Hospital Medical Devices, we are poised to grow above the market driven by our innovative pipelines, expanding global presence and novel commercial models. Our Consumer Medical Device businesses are holding leading positions and seeking opportunities to expand in large, growing markets with significant unmet needs. With the strength of each of our business segments, we feel optimistic about the future opportunities in healthcare and we are confident our long-term strategies have positioned us for continued growth. Our holistic approach to innovation going beyond products and solutions will allow us to address the evolving healthcare landscape, driving better outcomes and delivering long-term value. We have the right internal capabilities and are developing strategic partnerships in health tech to reshape the way healthcare is delivered, managed and experienced. And finally, our broad base across human healthcare uniquely positions Johnson & Johnson as a leader and partner of choice in the healthcare market. But perhaps most importantly of all, our continued strong performance means we are able to create better products, more valuable services and improve outcomes for patients, consumers and their families. So I'd like to thank you. I look forward to further dialog during the Q&A session. But first, I'd like to take a moment to recognize Louise Mehrotra, who as most of you know from our announcement last month, has decided to retire after more than 35 years with Johnson & Johnson and more than 10 years as Vice President of Investor Relations. I know many of you on the call today have gotten to know Louise pretty well over the last several years, a real testament to the strong relationship she's built in the investment community on behalf of Johnson & Johnson, and you may know that she is an incredibly committed credo-based leader who has had a remarkable career and impact on our company. I think I can speak for all of us at Johnson & Johnson in saying that we will miss her trusted, experienced, respected advice and her ever-present determination to do what is in the best interest of all of Our Credo stakeholders. Louise, we're so proud of the best-in-class investor relations function you've developed for us over the last decade, and we sincerely thank you for your many years of service and dedication to Johnson & Johnson. Now we know we'll all be in good hands with Joe Wolk, previously Vice President of Group Finance for our Pharmaceuticals Group will become Vice President, Investor Relations effective August 1, and transition with Louise over the next five months. We are confident that Joe will continue Louise's legacy of transparent, incredible communication with you, our investors. So now I'll turn it over to Dominic Caruso who will talk more about our results and expectations for the second half of 2016. Dominic? Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Thanks, Alex, and good morning, everyone. Before I get into our results, I'd like to echo Alex's sentiments and personally thank Louise for her significant contributions to Johnson & Johnson and for her valued support and friendship during my time as Chief Financial Officer. Over the last 10 years, Louise and the entire IR team has transformed our Investor Relations function, significantly developing our reputation with the investment community which has been recognized with several awards and recognitions, including those from Institutional Investor and IR Magazine. And through surveys of money managers conducted by Barron's magazine, Johnson & Johnson has been ranked at or near the top of the most respected companies list for 10 of the last 12 years. In fact, I'm also pleased to report that Johnson & Johnson was recognized this year by Barron's magazine as the number one most respected company for 2016. As Alex noted, Louise's outstanding leadership and dedication to advancing our reputation will continue with her successor, Joe Wolk, who we are happy to have joining us on our call next quarter. We all wish Louise well, and we are certainly going to miss her. With that, I will now turn our discussion back to the quarter. We're very pleased with our second quarter results, as we continue to see improved performance across the enterprise. And as Alex said, we remain confident in the strength of our business. As we previously discussed, in 2015 our underlying operational sales growth which excludes the impact of acquisitions, divestitures, as well as hepatitis C sales and the few extra shipping days in 2015 was about 5.5%. On this same basis, we continued to deliver strong underlying operational sales growth of approximately 7.9% for the second quarter and our sales results are above analyst estimates. Our second quarter earnings were also above analyst estimates, driven by strong sales performance and operating margin improvement. As you may remember, for 2016, our guidance from January included a 200 basis point increase in pre-tax operating margin on an adjusted basis. We were pleased to see progress towards this improvement during the second quarter, which I will discuss later, and we remain comfortable with that forecast as we continue to accelerate throughout the year with the restructuring activities in our Medical Device business, and lower levels of spending in the back half as compared to the prior year. Now, I'll take a few minutes to highlight some key points regarding our results, and then I'll provide some updates to our guidance for you to consider in refining your models for 2016. I will now turn to our consolidated statement of earnings for the second quarter of 2016. As we've mentioned, our operational sales growth this quarter was 5.3% and excluding the impact of acquisitions and divestitures, hepatitis C sales and also the impact of the devaluation that occurred in Venezuela last year, it was strong at more than 8%. If you will direct your attention to the box section of the schedule, you will see we have provided our earnings adjusted to exclude intangible amortization expense and special items. As referenced in the table of non-GAAP measures, the 2016 second quarter net earnings were adjusted to exclude intangible asset amortization expense and special items of approximately $900 million on an after tax basis, which consisted primarily of the following: intangible asset, asset amortization expense of about $200 million, litigation charges from ongoing legal matters of about $500 million, and additional charges as we continue to execute on the Medical Devices restructuring. Our adjusted earnings per share is therefore $1.74, exceeding the mean of the analyst estimates as published by First Call. This is an increase in adjusted EPS of 1.8% versus the prior year. And adjusted EPS on a constant currency basis was the same as the impact of currency was flat year-over-year. Now let's take a few moments to talk about the other items on the statement of earnings. Cost of goods sold decreased by 120 basis points, mostly due to favorable mix and manufacturing efficiencies, partially offset by transactional currency. Selling, marketing and administrative expenses were 28% of sales, or 230 basis points lower as compared to the second quarter 2015 due to good cost management. Our investment in research and development as a percent of sales was 12.2%, and higher than the prior year due to increased project spending as we advance our promising product pipelines. Our pre-tax operating margin, when excluding special items and intangible amortization expense, was 32.5% or 320 basis points higher than the second quarter of the prior year. As a reminder, pre-tax operating margin is defined as gross profit, less selling, marketing, and administrative, and R&D expenses. As we anticipated, we are seeing improvement as we progress throughout the year, and through six months we've achieved 180 basis point improvement in this measure of profitability. Interest expense, net of interest income, was slightly lower than last year due to slightly better rates in our investments. Other income and expense was a net expense of approximately $600 million in the quarter, compared to a net gain of approximately $900 million in the same period last year. Excluding the special items that are reflected in this line, other income and expense was a net gain of approximately $100 million compared to a net gain of approximately $1 billion in the prior year period. The significant decrease is due to the divestiture of NUCYNTA in the prior-year period. Excluding special items, the effective tax rate was 19.2% compared to 23% in the same period last year. This year's effective tax rate reflects the R&D credit, which was passed by Congress late last year. The current mix of our business and the impact of new accounting standards related to the tax benefit on share-based compensation, which I will discuss further in a moment. Turning to the next slide, I will now review adjusted income before tax by segment. In the second quarter of 2016, our adjusted income before tax margin for the enterprise declined by 250 basis points versus the second quarter of 2015. During the second quarter 2015, as I mentioned earlier, we recorded a gain from the divestiture of NUCYNTA. And this gain, which as you know from our discussions last year, was invested in various parts of the business, but those investments occurred later in the year. If the NUCYNTA divestiture gain is excluded, year-on-year adjusted income before tax margin would show an improvement of approximately 300 basis points. We're very pleased to see a significant improvement in our Consumer business adjusted income tax margin this quarter. As you may recall from our Business Review Day in May, we said that we are focused on improving our margins in the Consumer business to benchmark levels. We are confident that our Consumer business will show an improved adjusted income before tax margin for full year 2016 as compared to 2015. Overall, we expect income before tax margins for the enterprise to show an improvement over the prior year for all of 2016 as our increase in the pre-tax operating profit margin, which I noted earlier, more than offsets the lower level of divestiture gains in 2016 as compared to 2015. Now I will provide some guidance for you to consider as you refine your models for 2016. At the end of the quarter, we had approximately $16 billion of net cash, which consists of approximately $42 billion of cash and marketable securities and approximately $26 billion of debt. As you know, in May we took the opportunity to finance our share repurchase program and upcoming debt maturities at very attractive interest rates with a European debt issuance equivalent to $4.5 billion. Through the end of the second quarter, we've completed nearly 50% of our $10 billion share repurchase program, and we continue to expect to complete approximately 75% of the program by the end of this year. For purposes of your models and assuming no major acquisitions or other major uses of cash, I suggest you consider modeling net interest expense between $400 million and $500 million. This is a slight decrease from our prior guidance. Regarding other income and expense, as a reminder, this is the account where we record royalty income as well as gains and losses arising from such items as litigation, investments, prior development corporation, divestitures, asset sales and write-offs. We would be comfortable with your models for 2016 reflecting net other income and expense excluding special items as a net gain, ranging from approximately $900 million to $1 billion, a lower range than our previous guidance, related to the timing of underlying activity. This impact will be offset by the strength of our business, primarily due to our outlook for a higher level of sales, as noted in the increased sales guidance in our press release today. And now just a word on taxes, during the second quarter, the company elected for early adoption of a new accounting standard related to share-based compensation. With this update, increased tax benefits are recognized in earnings when the employee exercises options or receives shares. Previously, these tax benefits were recorded in equity. The first quarter impact was approximately $165 million or $0.05 per share, and is reflected in the year-to-date results and not in the second quarter when we adopted the standard. The second quarter impact is offset by additional tax costs reflected in this quarter. For adoption guidance, the first quarter does not need to be reissued. However, all future comparisons for the first quarter should reflect the recasted numbers. We have included a supplementary schedule on our website that includes the updated first quarter impact for the P&L. You will note that the first quarter recast number reflects a tax rate of 15.8%. The company issues shares related to employee stock compensation such as restricted stock awards or performance share units in the first quarter. Therefore, historically, a significant portion of the annual tax benefit is recognized in the first quarter. The tax benefit for stock options is recognized throughout the year as employees exercise their options, so timing is less predictable for stock options. We are comfortable with your models reflecting an effective tax rate for 2016 excluding special items of approximately 18.5% to 19%, lower than our previous guidance, primarily due to the accounting for share-based compensation tax benefits that I just described. Now, turning to sales and earnings, our sales and earnings guidance for 2016 takes into account several assumptions and key factors that I would like to highlight. As a reminder, our sales guidance for 2016 assumes no biosimilar entrants for PROCRIT or REMICADE in the U.S. And our assumption remains unchanged with the recent FDA approval of Inflectra. We also do not anticipate generic competition this year for ZYTIGA, RISPERDAL CONSTA, or INVEGA SUSTENNA. But as expected, there are generic entrants for INVEGA and ORTHO TRI-CYCLEN Lo. As Alex mentioned, we have now closed the acquisition of Vogue International, so our guidance now reflects six months of additional sales. This is a fast-growing business and will contribute to the profitability of our Consumer business beginning the first full year, as well as be accretive to our adjusted EPS beginning in the first full year. Also during the second quarter, we closed on our divestiture for the controlled substance raw material and API business, and therefore those sales will no longer be recorded. As we've done for several years, our guidance will be based first on a constant currency basis, reflecting our results from operations. This is the way we manage our business, and we believe this does provide a good understanding of the underlying performance of our business. We will also provide an estimate of our sales and adjusted EPS results for 2016 with the impact that current exchange rates could have on the translation of those results. As noted in our press release, we are increasing our operational sales guidance for 2016, primarily reflecting the strong results from the first half as well as six additional months of sales from the Vogue acquisition, partially offset by the divestiture of our controlled substance raw material and API business. We would therefore be comfortable with your models reflecting an operational sales increase on a constant currency basis of between 3% and 4% for the year. This would result in sales for 2016 on a constant currency basis of approximately $72.2 billion to $72.9 billion and higher than our previous guidance. Additionally, by way of comparison to how we described our sales results in 2015, our operational sales growth for 2016 excluding the impact of acquisitions, divestitures, and hepatitis C sales would be approximately 6%, a higher level of growth than we saw last year after adjusting for the extra shipping days in 2015, which we've mentioned earlier. Although we're not predicting the impact of currency movements, using the euro as of last week at $1.11, the negative impact of foreign currency translation would be approximately 1% on sales. This is consistent with our previous guidance, as other major currencies strengthened since our last update. We are watching the euro and other currencies closely, as it is uncertain how they will eventually settle out for the year. Of course, we're closely following the situation with the UK's vote to exit from the EU. We expect this will take time to fully determine what the impact will be, if any. To put it into perspective, though, the UK represents about 3% of our total sales. So after impacts of currency, we would expect reported sales to reflect a change in the range of 2% to 3% for a total expected level of reported sales of approximately $71.5 billion to $72.2 billion and higher than our previous guidance. And now, turning to earnings, as a reminder, we expect transaction currency impacts to be negative to our gross margin by about 60 to 80 basis points in 2016 as compared to 2015. We would be comfortable with adjusted operational EPS guidance in the range of between $6.66 to $6.76 per share on a constant currency basis, reflecting an operational constant currency growth rate of 7.4% to 9%. This is a narrower range as well as higher than our previous guidance and includes the first quarter impact from the tax accounting change we discussed earlier. If currency exchange rates for all of 2016 were to remain where they were as of last week, then our reported adjusted EPS would be negatively impacted by approximately $0.03 per share due to currency movements, and this is consistent with our guidance in April. Therefore, we would be comfortable with our reported adjusted EPS ranging from $6.63 to $6.73 per share, which is an increase from our previous guidance, due both to the continued strength of the business and a lower tax rate. And at this point in the year, we would be comfortable with your models reflecting the midpoint of this range. In closing, we are very pleased with our strong start for the first six months of this year, and we are optimistic with what we see ahead for the full year. Namely, we're expecting operational sales growth of 3% to 4% and underlying operational sales growth of 6%, or higher than we saw in 2015 on a comparable basis. Our adjusted pre-tax operating margin improvements are on track to meet the expectations we laid out in our guidance of more than a 200 basis point improvement over the prior year. Our adjusted operational EPS growth in our guidance improved and remains strong, in the range of $6.66 to $6.76 a share. That's a growth rate of between 7% and 9%. Our businesses are continuing to invest while over-delivering on our growth expectations. And now, I'd like to turn things back to Louise for the Q&A portion of the call. Louise? Louise Mehrotra - Vice President-Investor Relations: Thank you, Dominic. Michelle, could you please give the instructions for the Q&A session?

Our first question comes from the line of Mike Weinstein with JPMorgan. Please proceed with your question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Mike. Michael Weinstein - JPMorgan Securities LLC: Thank you and good morning, everybody. Dominic, just a couple items that we can hopefully get you to clarify. So number one is, what's the impact for the full-year EPS of ASU 2016-109 adoption? The tax rate coming down as it did suggests a range of anywhere from $0.04 to $0.12. Maybe you can help with that. And then second, can you just walk through the net impact of the Vogue acquisition and then the API business divestiture on sales and earnings? Thanks. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Sure, Mike. With respect to the early adoption, I mentioned earlier that the first quarter impact was $0.05, and that's the most significant impact we expect for the year because that's where the majority of stock-based compensation is issued to employees. The second quarter impact was lower than that, but was almost entirely offset by other tax items. And the rest of the year will depend on when employees exercise stock options, so very difficult to predict. So for now, we've included in our effective tax rate for the year only the first quarter impact, which after we adopted in the second quarter, we're letting the first quarter impact flow through for the remainder of the year. Second quarter impact has already been offset by other items. And remaining quarterly impacts we think will either likely be offset by other items or very difficult to predict because it's timing of when employees exercise options. With respect to... Michael Weinstein - JPMorgan Securities LLC: So you're up – so your updated guidance, Dominic, doesn't assume any benefit in the second half of the year? Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Right, that's right. Only the first quarter flow-through that we experienced. And as I said, that's the largest single quarter of any stock-based compensation tax benefit. Sales with respect to Vogue and the API business, Vogue for the full year is in a $350 million range, so we have about half a year of sales added to our guidance. And the API business was an annual business of about $250 million, and we'll have half a year of those sales no longer included in our guidance. So that's part of the increase in our overall growth in sales of about 0.5 point. The rest of it is due to the underlying strength we saw in the first six months. Michael Weinstein - JPMorgan Securities LLC: Okay. And then on the Pharma business, can I get you just to comment on a couple of items? So one, this is obviously a very important quarter for DARZALEX with the data we saw at ASCO and EHA. And just would love to get some high-level commentary on where you think that gets positioned going forward in multiple myeloma? And then, second, would you talk about the competitiveness of sirukumab, given the Phase three data we just saw at EULAR and your expectations there on filing, timing, and approval? Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Sure. Let me say a few words on both and then, Alex, why don't you add a few and, Louise, also on the timing question. So DARZALEX, we're very pleased with the initial uptake of DARZALEX. The product is well received by the medical community. And the data, as you pointed out, continues to be very impressive. And we believe DARZALEX can be essentially backbone therapy for the treatment of multiple myeloma. So we expect that we'll get additional indications for DARZALEX. But it's already been quite well received by the investment community, having great results for patients and, as I said, likely to be backbone therapy, going forward. Sirukumab, also very positive data there. It's an important product in our autoimmune franchise. And, Alex, maybe you can comment a little bit more on that. And, Louise, on the timing of filing for sirukumab, I just don't have it handy, if you could give us that... Louise Mehrotra - Vice President-Investor Relations: 2016. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: 2016, so we'll file this year for sirukumab. Alex Gorsky - Chairman & Chief Executive Officer: Hey, Mike, Alex here. Look, we're excited about sirukumab on a number of fronts, first as an IL-6. We know in this category there's a lot of interpatient variability. And having another option for patients, and based upon the early data that we have seen in RA, some of that presented just recently at the EULAR conference, we're very encouraged by. We're going to be looking at it, obviously, in other areas. And I think what we're most enthusiastic about is, if you combine sirukumab along with the work that we're doing with guselkumab as well, the IL-23 being looked at in psoriasis, it's really going to help us build out an even stronger portfolio and platform in immunology as we go forward over the next several years. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Thanks, Alex. Louise Mehrotra - Vice President-Investor Relations: Next question, please.

Our next question comes from the line of Larry Biegelsen with Wells Fargo. Please, proceed with your question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Larry. Alex Gorsky - Chairman & Chief Executive Officer: Hi, Larry. Larry Biegelsen - Wells Fargo Securities LLC: Good morning. Thanks for taking the question. And, Louise, congratulations on your retirement. I know you'll be missed. So one for Dominic, financials to start off with and then just one market-related question. So Dominic, just on the guidance, two clarification questions. So the $0.10 raise at the lower end on operational EPS and the $0.05 on the high end, is $0.05 due to the accounting change and the rest due to the underlying strength in the business? And then, it appears there's a lot of moving parts on the sales guidance as well. That 5.5% in 2015 that you raised to 6% for 2016, by my math, it implies that you're expecting a similar growth in the second half of 2016 compared to the first half of 2016, if one adjusts for the extra week in the year-ago period. So is that directionally accurate? Thanks. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Sure, Larry. Well, with respect to EPS guidance, you mentioned two of the items, which obviously was tax as well as the stronger sales performance. But I just wanted to remind you that we also lowered our other income and expense guidance for the year. So one way to think about it is that other income and expense guidance is lower, the tax rate is also lower, those two generally offset. And the midpoint of the guidance is up about $0.07, when I do the midpoint versus the two ends, and the $0.07 is primarily due to the overall increase in sales guidance that we provided today. Your observations with respect to the back-half of the year, you're right that if we exclude the extra shipping days in 2015 from the analysis, the back-half of 2016 would be similar to what we saw for the first half. Larry Biegelsen - Wells Fargo Securities LLC: Thanks. And then, just on the market. In the U.S., maybe, Alex, if you could comment a little bit, or Dominic, on what you're seeing on procedure volume in the U.S. in ortho and, more broadly, in med tech, that would be great. Thank you. Alex Gorsky - Chairman & Chief Executive Officer: Yeah. Thanks, Larry. Larry, we are seeing a pickup in terms of hospital admissions and surgical procedures. I think hospital admissions are up around 3%. We think the procedures are probably up around 3.5%. We continue to see some decrease overall in office physician visits, down 2%. And we think that that's just due to a more moderated utilization at the front-end due to increased co-pays and a number of other dynamics. But overall, if we look at the core growth rate in the medical hospital device area, we're encouraged by some of the recent trends that we're seeing. Larry Biegelsen - Wells Fargo Securities LLC: Thanks for taking the questions, guys. Louise Mehrotra - Vice President-Investor Relations: Next question, please.

Our next question comes from the line of Kristen Stewart with Deutsche Bank. Please proceed with your question. Kristen Stewart - Deutsche Bank Securities, Inc.: Good morning. Thanks for taking the question. And I'll echo Louise, we'll definitely be missing you, but congratulations. I was wondering if you could just comment a little bit about just on the capital allocation side. Obviously we saw Vogue. Is that what we should be thinking going forward in terms of the type of acquisitions to look forward to smaller, more like a tuck-in for you guys in that range? Alex Gorsky - Chairman & Chief Executive Officer: Hi, Kristen. Thanks a lot for the question, and I couldn't agree with you more regarding Louise. But look, we were really happy that we were able to add Vogue to the J&J Consumer portfolio. As we've been talking about over the last several years, we felt that what was most important in the Consumer group was to actually ensure that we were able to get through the early stages of the remediation in a really high quality and effective way. And I think the team has done a great job at making it a little bit more broadly across that entire Consumer group. I think we see that in the core trends. And of course once we establish that, we continue to see Consumer as a great growth opportunity for the organization going forward. And, as Jorge and – as you saw when we did the Medical Device and Consumer Investor Relations Review now about a little over a month ago, I think they've got a really ambitious but also realistic plan for that, built on our existing brands. And we are really pleased to see performance, for example, LISTERINE up 7%, OTCs up 6%, analgesics within OTCs were up over 13%. And then in beauty, you saw about a 9% lift with really strong performance from NEUTROGENA and AVEENO. And when you take that and augment it, I think with thoughtful additions such as we saw over this last quarter, whether it was NeoStrata, whether it was HÍPOGLOS or with Vogue, we think that those are great additions to our existing portfolio and will likely be part of a continuous stream of additions to that part of the portfolio. And as we said for some time, whenever we're looking at inorganic growth opportunities, we look at, tuck-ins, we look at mid-size deals. We'll look at large deals. Of course, the tuck-in strategy, particularly in Pharma – actually in all of our segments, Medical Device and Consumer, are those that, where we feel that we can create the most value. But we do think that there's other opportunities to create value as well in, again, in mid and larger deals. But we're going to be very disciplined. We're going to be very decisive about how we do it, and ultimately try to better serve patients and consumers. Kristen Stewart - Deutsche Bank Securities, Inc.: And just I guess on a broader note, I guess now that Consumer has turned the corner and has done well with the remediations, is that now a platform that, as you said, is more ready for acquisitions? I know Medical Devices is in the midst of their restructuring. Is that how we should think about it? And I have a follow-up for Dominic. Alex Gorsky - Chairman & Chief Executive Officer: Sure. Look, we believe that, mission one was really focusing on the core business as we said. And I do feel that Consumer like all of our businesses we're pleased. We're never completely satisfied. And they made a lot of progress on the core, and so we would expect, again, in a very thoughtful, disciplined way to continue to do additions when we think they're right. But we would look for the same thing in our other segments, as well. And by the way, we're pleased with the progress that we've seen in our Medical Device group over the last quarter as well. I mean, if we look at the restructuring, I think overall that team is on track. They're doing actions to strengthen their go-to-market model to accelerate their pace of innovation. They're prioritizing some additional platforms and geographies and all while streamlining some operations but really keeping very high quality standards. We think they're on track with a plan that they articulated earlier in the year and we're confident that as they move through this, they will be not only a stronger but a more innovative and a more efficient business. Kristen Stewart - Deutsche Bank Securities, Inc.: And, Dominic, for the rebate from pharma, should we think about that as flowing through this quarter, or was that mainly reinvested? Because I know there was a higher rate of R&D this quarter? Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Well, the way to think about it maybe, Kristen, is that it's a year-over-year change in about $140 million sales level. So obviously some of that drops through to bottom line, and you're right, we do also take the opportunity to invest. Investments in R&D really are related to progress in the pipeline regardless of whether these gross-to-net adjustments would be available. But another way to think about it is that we're now at a point where these actualizations of prior estimates, our current reserves are – a significant portion of them are current because data has been coming in recently. So I wouldn't expect similar type of adjustments going forward. Kristen Stewart - Deutsche Bank Securities, Inc.: Okay, thanks very much, and again, Louise, congratulations. Louise Mehrotra - Vice President-Investor Relations: Thank you. Next question, please.

Our next question comes from the line of Matt Miksic with UBS. Please proceed with your question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Matt. Alex Gorsky - Chairman & Chief Executive Officer: Hi, Matt. Matt Miksic - UBS Securities LLC: Thanks to everybody for taking the questions. A lot of folks on the call. I'll try to keep it to one and one follow-up. Alex, while we've got you here, just one strategic question. And I don't know if this is consistent with what you're seeing or where you think things are going, but on Devices, what we've seen is a lot of these new innovations in structural heart in particular, some of the bundled payment initiatives seem to be driving more volumes to sort of higher volume centers, larger networks, potentially augmented by outpatient centers. It's early in some of these initiatives, but that seems to be directionally where things are headed. And first, love to get your sense as to whether you think that's where things are going as well? And if so, how J&J is positioned on the Device side to better support these kinds of trends. And then I had one follow-up. Alex Gorsky - Chairman & Chief Executive Officer: Sure, Matt. Thank you very much for the question. Over the past three years or four years, I think we've been pretty consistent in our thinking and in our projections about the likely increase in consolidation among providers and hospitals, particularly here in the United States, and just broader healthcare systems. And as systems feel continuing pricing pressure, we think that will manifest itself by them having consolidation. I think we've seen those trends. And I think they're clearly starting an effort to try and be as effective and as efficient as possible. So we do believe that that will be a longer secular trend that's going to continue. That's why we believe having a diverse and enough critical mass in our Medical Device portfolio is so important going forward. We see it in the way that expectations are changing among decision makers, including not only surgeons but also people in procurement and other C-suite executives and administrators in hospital systems. And we think as a result of that, we'll be very well-positioned. Particularly when you think about our Surgical franchise, our Orthopedics franchise. We've also been consistently saying that we're extremely pleased with the performance of our Cardiovascular unit, particularly our EP Group, Biosense Webster. I mean, once again this quarter they delivered over 18.5% growth with great innovation and great execution. But we also realize that that's an area where we'll continue to look for the right kind of additions, organically and inorganically, to ensure that we're properly positioned going forward. Matt Miksic - UBS Securities LLC: That's great. Thank you. And then on another topic that we spent a lot of time on I guess over the past year and we're now a quarter away from what looks like the competitive launch in the U.S., biosimilar side on REMICADE. Without asking you to tip your hand, of course, – I'd love to get a sense as to, can you – are there steps you can take – given your portfolio and your relationship with these payers and networks, are there steps you can take to sort of stop – I don't know what the right word is – potentially offset some of the potential impact or get ahead of some of the potential impact through some of the contracts that you're talking with these folks about? And I think you know the question I'm asking, and I'm sure you're not going to get into a ton of detail. But any color would be helpful as to the extent your ability to contract around that event. Alex Gorsky - Chairman & Chief Executive Officer: Matt. Look, as we look at the landscape going forward, we fully predict that generics in biosimilars are going to be part of the competitive landscape. And look, we think that that is essential for the healthcare system. We think in the long run, it's actually a benefit for very innovative-focused companies because that's the only way you can relieve pressure over the long term. Of course, that's predicated upon the market and companies respecting intellectual property. It's very important to produce the right scientific information, so that we're guaranteeing patient safety and understanding the important clinical differences between some of these compounds, as they may or may not manifest themselves. And so we projected them. As we look at our strategic plan, we think they will be there. But we also feel that's why it's so important to keep innovating with new product launches going forward. And it's also critical to establish a strong critical mass in terms of products but also expertise and clinical data and information in certain platforms. And so for us in the immunology platform, we're very proud of the extensive track record that REMICADE, the TNF-alpha compound has had, and what it continues to do. We'll continue to defend our intellectual property around it. But at the same time if you look at compounds like STELARA and SIMPONI; not only have they both generated in excess of 30% growth this quarter, but we've also produced additional data that we think is going to be very important to patients and physicians in how they adopt these products. And these are already multi-billion-dollar platforms for Janssen and Johnson & Johnson. And then when you compound that with sirukumab and guselkumab again an IL-6 and IL-23 approach where we know there's a lot of patient variability, we think that's important. Also as we look at REMICADE itself, we know that there's about 2.4 million patients who've been treated with the compound. We know that about 70% of them in fact are getting good relief and good effects. We know that they're unlikely to be switched when they're getting a positive response from the therapy. And we also know that when we contract across the Janssen and Johnson & Johnson portfolio that it provides us a very important position with larger healthcare systems and networks. So that's the way we think about it, and that's the way we plan for it going forward. Matt Miksic - UBS Securities LLC: Thanks, Alex. Louise Mehrotra - Vice President-Investor Relations: Thank you. Next question, please?

Our next question comes from the line of Josh Jennings with Cowen and Company. Please proceed with your question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Josh. Joshua Jennings - Cowen & Co. LLC: Hi. Good morning. Good morning, and thanks for all the help over the years, Louise, and congratulations. Louise Mehrotra - Vice President-Investor Relations: Thank you. Joshua Jennings - Cowen & Co. LLC: I wanted to ask a question to Dominic first. Just the operating margin performance again kind of beat our expectations. You reiterated your guidance for the year on the operating margin on expansion side of things. But I just wanted – there're multiple drivers of operating margin expansion, and there is – you had a program in place, I think you announced a couple of years ago, and just started to ramp last year of about $1 billion in cost savings by 2018 that was exclusive of the Medical Device restructuring plan. I just wanted to get a sense of the contribution to operating margin expansion this year, and if we're still in the very early innings and whether we should see stronger benefit from that cost savings plan as well as the Medical Device restructuring initiative in 2017 and 2018. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Josh, you're right. There are many factors that contribute. I mean, GP is one, so we continue to see good manufacturing efficiencies and cost improvements across the supply chain. That's a major initiative we've had ongoing for quite some time. So we saw some of that benefit this quarter, and we expect that we'll see it going forward as well. In the selling, marketing, administrative line, that's where you see the benefits of the program you're referring to where we anticipate about $1 billion of savings through 2018. That program is on track. We're seeing the savings. We're also making some investments. As the investments tail off, the savings will be more significant and more impactful in that line item going forward. So we're beginning to see the savings now. They're somewhat partially offset by some investments we need to make to continue the program, but in the future, those investments tail off and the savings ramp up, and they'll have more of an impact. And then also as you mentioned, the Medical Device restructuring is a whole another area that's unrelated to the two that I just mentioned earlier, and we expect to see continued improvements there, although that's a business where we want to also accelerate the pace of innovation with those savings. So some of those will be reinvested in the business. So it's across those three areas, and we're committed to the operating margin improvement that I mentioned earlier, greater than 200 basis points, and halfway through the year we feel very good about our ability to achieve that. Joshua Jennings - Cowen & Co. LLC: Excellent. I just wanted to ask a follow-up maybe for Alex and Louise. Just you commented on utilization levels in the U.S. and procedure volumes, and you experienced just a modest apples-to-apples in selling days from sequentially modest deceleration in knees and hips and spine in the Ortho segment. Is there anything specific to Q2 that you're seeing in the marketplace that you can comment on? Thanks for taking the questions. Alex Gorsky - Chairman & Chief Executive Officer: No, look, overall – and thank you for the question. Overall I think we saw solid growth in both knees and hips. I think we were at about 4.5% in knees, about 5%, 5.5% in hips. And we think that that's continued pickup from the ATTUNE launch, and the Corail Hip. So I would say that, consistent with what we're seeing in the broader market, consistent with what we're seeing in our business, we're seeing positive growth in that area. Louise Mehrotra - Vice President-Investor Relations: And for the O-U.S. business, there was about an additional 1.5 days of selling days in the second quarter. And in the first quarter we had additional selling days in the U.S. business, as a reminder on that one. Next question, please?

Our next question comes from the line of Joanne Wuensch with BMO Capital markets. Please proceed with our question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Joanne. Joanne Karen Wuensch - BMO Capital Markets (United States): Thank you very much for taking the question. I appreciate the commentary on the volumes, but I was curious if you can give us commentary on pricing, and also with the April 1 implementation of the bundled payment program in the United States, if you're seeing any impact from that. Louise Mehrotra - Vice President-Investor Relations: Okay. So we talk about pricing on a Johnson & Johnson basis, and overall pricing is modest in the quarter. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: I would say, Joanne, that we haven't seen the impact yet in the particular new mechanism that you just described. As Louise pointed out, pricing overall for the quarter, year-over-year growth due to pricing is very, very modest in our results. Louise Mehrotra - Vice President-Investor Relations: And I can provide some further color on hips and knees in the U.S. price mix, if you'd like. Joanne Karen Wuensch - BMO Capital Markets (United States): That would be wonderful, thank you so much. Louise Mehrotra - Vice President-Investor Relations: So the second quarter for the hips was about 2.2% negative price mix together, and this is U.S. only. And for knees it was about 2.6% negative. And that's similar trends to what we've seen consistently over time. Joanne Karen Wuensch - BMO Capital Markets (United States): Thank you. And then my second question had to do more with Vision Care. We saw a real difference between what was happening in the U.S. and what's OUS sales, and you commented on rebates. Is that the replacement program for UPP that we're seeing in that U.S. impact? Thanks for taking the questions. Louise Mehrotra - Vice President-Investor Relations: So it's a customer reward program that we have implemented. And what we have booked in the second quarter is the year to date because it was implemented in the second quarter but it applies to the full year sales. So in the U.S., if you normalize it for the half that applied to the first half, the U.S. is up about 6% on a like basis. Alex Gorsky - Chairman & Chief Executive Officer: Look, we continue to be very pleased with what we're seeing in the turnaround in our Vision Care business as well. If we look at the early demand signals that we're seeing, it continues to give us confidence that we're gaining share. We continue to launch into beauty, astigmatism, reusables, along with a number of other new launches and line extensions. And frankly, the team is also really executing well. So we're encouraged by the opportunity that we see in Vision Care as we move through the rest of 2016. Louise Mehrotra - Vice President-Investor Relations: Thank you. Joanne Karen Wuensch - BMO Capital Markets (United States): Thank you so much. Louise Mehrotra - Vice President-Investor Relations: And next question, please.

Our next question comes from the line of Glenn Novarro with RBC Capital Markets. Please proceed with your question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Glenn. Glenn John Novarro - RBC Capital Markets LLC: Hi, good morning. Good morning. And, Louise, I echo the sentiments, so best of luck in the future. My question is for Alex and for Dominic. And I asked a similar question on the last quarterly call because I continue to be surprised that J&J is not doing more with its cash, particularly on the M&A front. You've done both, but we haven't seen much in the way of meaningful acquisitions on devices and on pharma. And so my question is, the targets that you're having discussions with today, do they still have very unrealistic valuation expectations, and is that the reason why we haven't seen deals in devices and pharma? And then as a follow-up, you still have a bulk of your cash sitting outside the United States. Is that another reason why we haven't seen any meaningful acquisitions? Thank you. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Sure, Glenn. Consistent with what we said last time when you asked a very similar question, as you know, we're very disciplined in our approach to acquisitions. And although we're actively involved in considering them, valuations come into play, and willingness of the other party to do an acquisition at certain valuations come into play. So that's regardless of how much money we have available to spend. So we don't really look at that as the main driver of how we're going to do acquisitions. We look at what value we're going to create for shareholders by doing the acquisition at the right value, so we can improve returns for our shareholders. There are some expectations that are still not, in our opinion, normalized for appropriate valuations in the market, so that's a factor, and that will take time and we're patient with that. And then we'll see how the market evolves over time, or as we learn more about the acquisition candidates and their progress in various areas. And then finally, whether or not the cash is trapped overseas or not is not at all an impediment to our ability to do any acquisitions. We'll either obviously try to find a way to do it in a tax-efficient basis as we've done with other acquisitions and utilize that cash as much as possible, only if it's tax efficient. But then obviously we can continue to borrow, and we have the ability to borrow to do the acquisitions that we think are value-creating for our shareholders. So we wouldn't let that hold us back. Should the acquisition be value-creating, we'd exercise our ability to borrow and do that acquisition. Glenn John Novarro - RBC Capital Markets LLC: And just as a follow-up – oh, go ahead, Alex. Did you want to add something? Alex Gorsky - Chairman & Chief Executive Officer: Yes, Glenn. I guess what I would also say is look, I think that the M&A approach that we talked about in the past is a balanced one. If you look over the last 20 years, I think we've done about 124 deals. I think there's been about 13 or so that have been over $1 billion. The majority of these have been smaller. And frankly if you look at our Pharmaceutical performance, whether it's the partnerships that we have on a compound like IMBRUVICA, DARZALEX, or others, I think the strategy has worked really well, and it's something that we'll continue to pursue. I think we have a lot of examples of that in Medical Devices and also Consumer. There's nothing that we would like more than to take a several hundred million dollar platform like Vogue and create the next multibillion-dollar platform as we see in things like NEUTROGENA and others. So all that being said, if/when we see larger opportunities present an opportunity to really create longer-term shareholder value, those are things we'd certainly be interested in, but we'll be particularly thoughtful about those. Glenn John Novarro - RBC Capital Markets LLC: And just one quickly on REMICADE. I know Matt had asked a question on REMICADE, but you remain very confident that a biosimilar won't be launched in 2016. Has anything changed that you can reveal to us on the litigation front that gives you more confidence? Thank you. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Glenn, what we said is that our guidance does not assume any biosimilar launch in 2016. There are ongoing developments in the litigation. There's a hearing scheduled for August related to the 471 patents. We'll have to see what the results of that hearing are, so we don't know that yet. There was also a ruling issued in relation to another biosimilar, not our biosimilar, which made it very clear when the 180-day waiting period applies. And for us, that 180-day waiting period extends to October 6. So obviously, there cannot be any launch before that date. And then as we've mentioned, we're continuously and vigorously defending our patent and will continue to do that. So whether or not a biosimilar launch happens is uncertain. But we have not included it in our guidance estimates. But as you know, our guidance of course is a range and between certain ranges of 3% to 4% in overall growth. So we feel confident about that in any event. Glenn John Novarro - RBC Capital Markets LLC: Thank you. Louise Mehrotra - Vice President-Investor Relations: Next question, please?

Our next question comes from the line of David Lewis with Morgan Stanley. Please proceed with your question. Louise Mehrotra - Vice President-Investor Relations: Good morning, David. David Ryan Lewis - Morgan Stanley & Co. LLC: Good morning and congrats, Louise. Once again. I echo others' sentiments. Just two quick questions, I know we're near the end. So, Dominic, I'm trying to reconcile revenue guidance just on the margin. So if I take the upside in the quarter plus the net impact of M&A, Vogue minus the API business, I get guidance should have come up $700 million, it's coming up around $300 million. Is that difference in the back half of the year largely an expectation for lower or minimal gross-to-net adjustments in the back half versus the first half? Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Certainly as I mentioned earlier, the gross-to-net adjustments that we saw in the first half have now resulted in our overall estimates for these amounts as being largely current, greater than 90% current. So therefore, we wouldn't expect to have the same level of those kinds of adjustments going forward, David. That's right. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay, that's helpful, and maybe two questions on Consumer, one for Alex and one for Dominic. Dominic, just to start with you on margins, I think we left the Analyst Day feeling that Consumer margin outlook was probably conservative. But if I look at the reported results in the quarter, you're well ahead of expectations in pursuing that pure base 20% Consumer margin. So how do we think about that? Is that simply one-time in nature, or is it much more likely now you reasonably exceed your targets either in time or magnitude here in Consumer? And then a quick follow-up for Alex in Consumer. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Sure. As you know, we were committed to this. And as Jorge Mesquita said in the Business Review Day, he was personally committed to making it happen, and we're very pleased to see that they're off to a great start. Whether they exceed the overall benchmark level in a shorter amount of time, we'll wait to see because obviously we want to see them invest behind brands and keep the momentum up in the business as well. But they're obviously off to a great start. We were confident that they would be able to do it and they've done a great job and we're confident they'll continue to do a great job in improving margins. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. Alex, I think many investors have felt that Consumer was sort of kept in the closet here the last several years and clearly the last six months. The company's working hard to sort of show the Consumer franchise to a greater extent both margins and growth. My question's more on growth. If I ex-out Venezuela in the quarter, Consumer did about 5% growth. I felt like the messaging from Jorge and others was that this business could be sort of an upper single-digit grower with obviously expanding margins. What is your sense on that 5% number ex-Venezuela? I mean, do you feel confident here that Consumer is stable and can improve from these levels? Thank you. Alex Gorsky - Chairman & Chief Executive Officer: David, thank you very much. And again let me reiterate. We're really pleased with the performance that we continue to see in the Consumer group. And literally from quarter to quarter, it continues to improve in not only its core performance but market share and a number of other areas. We feel like the majority of the platforms right now we're actually gaining share. At the same time, we realize we've got some areas such as baby, such as China, where we need to do a better job and the team is focusing on that in addition to the margin improvement that Dominic was talking about earlier. But overall, our goal is to grow faster than the market. We think we currently are. It's something that we want to do and accelerate as we go forward. And I'm very confident that Jorge and his team have got the strategies and are now executing in a manner that's going to allow them to do just that. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Thank you. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay, thank you very much. Louise Mehrotra - Vice President-Investor Relations: Next question, please.

Our next question comes from the line of Danielle Antalffy with Leerink Partners. Please proceed with your question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Danielle. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Hi, Danielle. Alex Gorsky - Chairman & Chief Executive Officer: Hi, Danielle. Danielle J. Antalffy - Leerink Partners LLC: Good morning. Thanks so much for taking the question. Louise, we're really going to miss you. Question for you, Alex, just higher level. Sorry to do this, but following up on the M&A commentary, some of your competitors have been acquiring scale, most recently, Abbott and St. Jude. And I know J&J is already in a competitively advantageous position given your current product lines, but cardiovascular is an area where you're specifically under-scaled relative to some of those other competitors, and I was just wondering if you could comment on whether you think it's important to build scale within cardiology to continue to be a major competitor in med tech, or if you think there's other areas where J&J is already positioned and will continue to focus on? I'm just trying to think about the different subsectors within med tech, where you'll focus most. Alex Gorsky - Chairman & Chief Executive Officer: Thanks, Danielle. Look, consistent with what we said previously, we do think that there's an opportunity for expansion in cardiovascular. And for us, really it started several years ago when we made the decision to exit the stent business. We did the divestment of Cordis, which I think the team executed really well. And we think now the greater focus that we have, what you're seeing as a result of that, frankly, is better growth not only in our cardiovascular business, the Biosense Webster, but across the greater medical – Hospital Medical Device business that we have. But we know that going forward, other areas in cardiovascular ranging from valves to structural heart to others could definitely be opportunities. But we're going to continue to see how the technology evolves, how the markets evolve. And fortunately, I think we're positioned in a way that gives us a lot of different opportunities. At the same time, I would say that there are other areas in Medical Devices that we remain interested in. We talked about the vision care area. It's one where we have a very strong contact lens platform, but we think that there's opportunities, be it back of the eye, surgery and other spaces, that business could be augmented. And we'll continue to look for other thoughtful plays in orthopedics as well as in general surgery that offer growth opportunities and help us better address areas of unmet medical need as well. Louise Mehrotra - Vice President-Investor Relations: Thank you. Danielle J. Antalffy - Leerink Partners LLC: Okay, great. That's so helpful. Louise Mehrotra - Vice President-Investor Relations: Next question, please.

Our next question comes from the line of Jami Rubin with Goldman Sachs. Please proceed with your question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Jami. Jami Rubin - Goldman Sachs & Co.: Thank you very much for the question. And, Louise, I'm really going to miss talking to you. You've been extremely helpful over the years. Dominic, I'm sorry to belabor the gross to net adjustment, but I'm unclear as to how it occurred and what it means. And I think more importantly, these are all categories, REMICADE, STELARA, SIMPONI, ZYTIGA, which are crowded categories. And can you comment on what's happening with respect to gross to net, the gap between gross to net and how it's changed over the last year or two? If it has changed at all, are you able to take the same sort of list price that you had before without having to pay a higher rebate? If you could just kind of comment on that generally. And then also my follow-up question relates to INVOKANA. Sales again were continuing to be very strong. You're showing nice improvements in market share. What are your expectations for the whole SGLT2 class? I'm sure you've paid attention to the FDA panel meeting on Jardiance and whether or not Jardiance will get a superior label with respect to CV mortality reduction. And if it does get that label update, what that might mean to INVOKANA going forward? Thanks very much. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Sure. Jami, let me take the first question on gross to net, and then Alex will cover the SGLT2 commentary. So you asked how does it occur and what's going on with list price versus net price and those sorts of things. So just to put it in perspective, this is not unusual in our industry, as you know. Everyone in the pharmaceutical industry is estimating what the rebates might be, and then of course we'll actualize them once actual data is submitted. Recently, that actual data has been more timely, and in that more timely data from the payers, we're able to see trends, so we're able to not only actualize prior period amounts, but we're also able to estimate better, what the ultimate gross to net variation will be going forward. With respect to list price net of rebates, as you probably know, we've said this before, we price – we think we price our products responsibly and our overall list price increases have been relatively below, substantially below, the average industry. But in the end, the net price that's achieved is far from the gross price increase that happens. So rebates continue to be an increasing part of the business, and the overall realization of gross price to net price, that delta is expanding, I would say, over time. And therefore, as I said, now we're much more current with our ability to predict these estimates, and that's what's going on. And as I mentioned, we don't expect to see significant adjustments to this magnitude. Jami Rubin - Goldman Sachs & Co.: So you're saying the gap is going to continue to grow but you overestimated the growth of that gap and that, therefore, is the adjustment, but big picture you expect the gap to grow? Dominic J. Caruso - Executive Vice President, Chief Financial Officer: That's right. Jami Rubin - Goldman Sachs & Co.: Okay. Alex Gorsky - Chairman & Chief Executive Officer: And, Jami, regarding INVOKANA and the class, look first of all, we are pleased with the performance, the continued performance of INVOKANA in the market. I mean, it remains the number one SGLT2 in the U.S., both in new and total scripts. I think we've got between 9 million and 10 million prescriptions that have already gone out since launch. That being said, we still think that there is a good opportunity for growth in INVOKANA. It's got a very strong clinical profile that's well documented, strong access across managed care, and look we're confident that given the experience that HCPs have had with it, combined with its profile, it's going to continue to grow. Regarding the broader issues around class, look we think that it's really good news, frankly, for Type 2 patients given some of the news that's coming out about CV benefits and really regardless of the eventual decision by the FDA regarding potential claims for other agents, we're looking forward to seeing the results of our CANVAS program that'll be coming out in about a year. And we'll have to see if these ongoing CV outcome trials validate some of the current perceptions of KOLs regarding the cardiovascular effects of SGLT2 inhibitors across the drug class. We'll see. But overall, we think it's good news for patients. Jami Rubin - Goldman Sachs & Co.: Thank you. Louise Mehrotra - Vice President-Investor Relations: Thank you. And we'll take two more questions and then have some closing remarks from Alex. Next question, please.

Our next question comes from the line of Vamil Divan with Credit Suisse. Please proceed with your question. Vamil K. Divan - Credit Suisse Securities (USA) LLC (Broker): Great, thanks so much for taking the questions. Congrats again to you, Louise. Just following up on Jami's question on the gross to net commentary, just I don't think you touched on this, but specifically on immunology it seems like a lot of those products, in particular, saw that benefit. Is there anything that you're seeing in that specific market? And maybe causing the difference there to be greater than what you see in the other therapeutic areas? And then one other unrelated just on IMBRUVICA, came in a little bit lighter than what we were expecting, obviously a lot of good data and a lot of growth ahead. But maybe if you could just comment on the trends you're seeing there? And also, I guess it's been about a year now since a new partner on that product with Pharmacyclics and AbbVie. Just the dynamics in that partnership and how you see that relative to what you're seeing previously with Pharmaceuticals. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Let me take – Vamil, there's nothing substantially different between biologics and others, other than the biologics products tend to have a longer delay in terms of receiving the information. So therefore, there may be more adjustments related to those products in any particular period. But other than that, there's no other significant trend that we're seeing that's any different than what we see overall in the market. Alex Gorsky - Chairman & Chief Executive Officer: And look, regarding IMBRUVICA, we're very pleased with the continued launch uptake that we see with it. It continues to be strong, good increase versus last year. And look, IMBRUVICA is also maintaining really good total patient market leadership in CLL, line two plus, mantle cell lymphoma as well as WM in the U.S. We've had additional approvals of line indications done in other markets as well. So we continue to be pleased with the performance and look forward to getting out additional information and additional indications on the compound. Louise Mehrotra - Vice President-Investor Relations: Yeah, and just on the quarter, there's additional – we have a patient assistance program and there's a little bit of a bump in that. So that's probably the trend difference that you see. Last question, please.

Our final question comes from the line of Jayson Bedford with Raymond James. Please proceed with our question. Louise Mehrotra - Vice President-Investor Relations: Good morning, Jayson. Jayson T. Bedford - Raymond James & Associates, Inc.: Good morning. Hi, Louise. Thanks for squeezing me in here. I'll be quick. Just to clarify and kind of follow up on an earlier question, U.S. Med Device growth in the quarter decelerated from first quarter levels. International growth accelerated. There was quite a big difference in growth in these two geographies. It sounds like this is more a function of selling days with no real change in the operating environment. Is that a fair characterization? Louise Mehrotra - Vice President-Investor Relations: So in the OUS, we have an additional 1.5 selling days on average. That contributes to the OUS growth about 220 basis points. But on top of that, we're seeing strong market growth in China. We have some strong markets in Russia, Australia in the hip. We're seeing nice growth in the Corail, also seeing some nice growth in ATTUNE. So it's a combination of both the selling days, but if you strip out the 220 basis points for selling days O-U.S., you're really seeing really nice strong growth in both hips and knees O-U.S. Dominic J. Caruso - Executive Vice President, Chief Financial Officer: Jayson, one thing I would add to that is when we're talking about the Medical Device business, obviously there's some dynamics in diabetes and some dynamics that we've talked about earlier with Vision Care with customer loyalty program. So if you look at the hospital-based medical device business and you exclude the impact of acquisitions and divestitures, that growth did accelerate. So second quarter growth at about 4.7% and first quarter growth at about 4.2%. So on the base Hospital Medical Device business, overall we're seeing accelerated growth. Louise Mehrotra - Vice President-Investor Relations: Thank you. We'll have some final remarks from Alex. Alex Gorsky - Chairman & Chief Executive Officer: Okay, thank you very much, everyone, for joining us this morning. And as I noted earlier, look, we're really pleased with the continued momentum as evidenced by our increased guidance for both sales and earnings for the full year 2016. Look, I really believe that some of the clear strategic choices that we've been making, a really strong focus on execution, combined with an incredibly-talented group of leaders that I'm honored and humbled to be able to work with every day at Johnson & Johnson are enabling us to really deliver extraordinary achievements and results that we've just been able to share with you and to really build on the success of Johnson & Johnson going forward. So thank you for your time this morning. I look forward to updating you on the progress throughout the year and I hope everybody has a great day. Thank you.

Thank you. This concludes today's Johnson & Johnson Second Quarter 2016 Earnings Conference Call. You may now disconnect.