Johnson & Johnson

A N N U A L 

R E P O R T 

2018

M A R C H  2 0 1 9

To Our
Shareholders

Alex Gorsky
Chairman and Chief Executive Officer

I have the privilege of being the CEO of 
I have the privilege of being the CEO of 
I have the privilege of being the CEO of
I have the privilege of being the CEO of 
Johnson & Johnson during a remarkable time 
Johnson & Johnson during a remarkable time
Johnson & Johnson during a remarkable time 
Johnson & Johnson during a remarkable time 
in history. Throughout my seven years in this 
in history. Throughout my seven years in this 
in history. Throughout my seven years in this
in history. Throughout my seven years in this 
role, there have been many dramatic changes
role, there have been many dramatic changes
role, there have been many dramatic changes
role, there have been many dramatic changes
in global politics, the world economy, science,
in global politics, the world economy, science,
in global politics, the world economy, science,
in global politics, the world economy, science,
technology and culture. At the same time, there 
technology and culture. At the same time, there
technology and culture. At the same time, there 
technology and culture. At the same time, there 
has also been an accelerated pace of progress 
has also been an accelerated pace of progress 
has also been an accelerated pace of progress
has also been an accelerated pace of progress 
in human health: unlocking the possibilities of 
in human health: unlocking the possibilities of 
in human health: unlocking the possibilities of
in human health: unlocking the possibilities of 
the human genome, evolving and expanding the
the human genome, evolving and expanding the
the human genome, evolving and expanding the
the human genome, evolving and expanding the
use of robotics and micro surgery, extending 
use of robotics and micro surgery, extending
use of robotics and micro surgery, extending 
use of robotics and micro surgery, extending 
the life expectancy for people with HIV, and 
the life expectancy for people with HIV, and 
the life expectancy for people with HIV, and
the life expectancy for people with HIV, and 
continuing to wage and win the fight against
continuing to wage and win the fight against
continuing to wage and win the fight against
continuing to wage and win the fight against
cancer and other debilitating diseases that
cancer and other debilitating diseases that
cancer and other debilitating diseases that
cancer and other debilitating diseases that
have resisted treatment for generations.
have resisted treatment for generations.
have resisted treatment for generations.
have resisted treatment for generations.

What’s most exciting about this progress 
What’s most exciting about this progress 
What’s most exciting about this progress
What’s most exciting about this progress 
is that Johnson & Johnson has been at the
is that Johnson & Johnson has been at the
is that Johnson & Johnson has been at the
is that Johnson & Johnson has been at the
very forefront of many of these revolutionary
very forefront of many of these revolutionary
very forefront of many of these revolutionary
very forefront of many of these revolutionary
changes and expanding horizons—time
changes and expanding horizons—time
changes and expanding horizons—time
changes and expanding horizons—time
and time again, delivering life- saving 
and time again, delivering life- saving 
and time again, delivering life- saving
and time again, delivering life- saving 
medicines and life-changing solutions.
medicines and life-changing solutions.
medicines and life-changing solutions.
medicines and life-changing solutions.

It is an honor to lead an innovation-driven culture
It is an honor to lead an innovation-driven culture
It is an honor to lead an innovation-driven culture
It is an honor to lead an innovation-driven culture
that continues to demonstrate the energy, drive
that continues to demonstrate the energy, drive
that continues to demonstrate the energy, drive
that continues to demonstrate the energy, drive
and passion of a “start-up.” However, we also 
and passion of a “start-up.” However, we also
and passion of a “start-up.” However, we also 
and passion of a “start-up.” However, we also 
have the distinct advantage of our timeless
have the distinct advantage of our timeless
have the distinct advantage of our timeless
have the distinct advantage of our timeless
values, such as the strong influence of our 
values, such as the strong influence of our 
values, such as the strong influence of our
values, such as the strong influence of our 
long-term strategic view, the unwavering
long-term strategic view, the unwavering
long-term strategic view, the unwavering
long-term strategic view, the unwavering
guidance of Our Credo and the profound way
guidance of Our Credo and the profound way
guidance of Our Credo and the profound way
guidance of Our Credo and the profound way
in which we measure progress and success. 
in which we measure progress and success. 
in which we measure progress and success.
in which we measure progress and success. 
Our Credo challenges us to focus on improving
Our Credo challenges us to focus on improving
Our Credo challenges us to focus on improving
Our Credo challenges us to focus on improving
outcomes for patients and consumers globally, 
outcomes for patients and consumers globally, 
outcomes for patients and consumers globally,
outcomes for patients and consumers globally, 
while we also focus on improving revenue
while we also focus on improving revenue
while we also focus on improving revenue
while we also focus on improving revenue

and market share numbers. This philosophy
and market share numbers. This philosophy
and market share numbers. This philosophy
and market share numbers. This philosophy
allows us to lead with certainty even in the 
allows us to lead with certainty even in the
allows us to lead with certainty even in the 
allows us to lead with certainty even in the 
most challenging times, to drive performance
most challenging times, to drive performance
most challenging times, to drive performance
most challenging times, to drive performance
and purpose with equal commitment, and 
and purpose with equal commitment, and 
and purpose with equal commitment, and
and purpose with equal commitment, and 
enables us to maintain a leading role in
enables us to maintain a leading role in
enables us to maintain a leading role in
enables us to maintain a leading role in
defining the future of healthcare worldwide.
defining the future of healthcare worldwide.
defining the future of healthcare worldwide.
defining the future of healthcare worldwide.

It is an honor to lead an innovation-driven 
culture that continues to demonstrate the 
energy, drive and passion of a “start-up.”

In this letter, I share the highlights of our 
In this letter, I share the highlights of our
In this letter, I share the highlights of our 
In this letter, I share the highlights of our 
performance, our notable achievements and our 
performance, our notable achievements and our 
performance, our notable achievements and our
performance, our notable achievements and our 
aspirations for the years to come. My goal is to 
aspirations for the years to come. My goal is to 
aspirations for the years to come. My goal is to
aspirations for the years to come. My goal is to 
provide an aerial view of Johnson & Johnson
provide an aerial view of Johnson & Johnson
provide an aerial view of Johnson & Johnson
provide an aerial view of Johnson & Johnson
today—a Company that spans six continents 
today—a Company that spans six continents
today—a Company that spans six continents 
today—a Company that spans six continents 
and 60 countries, develops numerous innovative 
and 60 countries, develops numerous innovative 
and 60 countries, develops numerous innovative
and 60 countries, develops numerous innovative 
products and services and touches the lives 
products and services and touches the lives 
products and services and touches the lives
products and services and touches the lives 
of people all around the world every day.
of people all around the world every day.
of people all around the world every day.
of people all around the world every day.

Most importantly, I want to emphasize my 
Most importantly, I want to emphasize my 
Most importantly, I want to emphasize my
Most importantly, I want to emphasize my 
confidence in our expansive capabilities, express 
confidence in our expansive capabilities, express 
confidence in our expansive capabilities, express
confidence in our expansive capabilities, express 
my realistic optimism about our opportunities and 
my realistic optimism about our opportunities and 
my realistic optimism about our opportunities and
my realistic optimism about our opportunities and 
challenges, and offer my insights on how we will 
challenges, and offer my insights on how we will
challenges, and offer my insights on how we will 
challenges, and offer my insights on how we will 
continue to shape the future of healthcare today.
continue to shape the future of healthcare today.
continue to shape the future of healthcare today.
continue to shape the future of healthcare today.

Celebrating Our Credo
Celebrating Our Credo
Celebrating Our Credo
Celebrating Our Credo
In 2018, we celebrated the 75th anniversary 
In 2018, we celebrated the 75th anniversary
In 2018, we celebrated the 75th anniversary 
In 2018, we celebrated the 75th anniversary 
of Our Credo. Written and introduced in 1943 
of Our Credo. Written and introduced in 1943 
of Our Credo. Written and introduced in 1943
of Our Credo. Written and introduced in 1943 
by General Robert Wood Johnson, Our Credo
by General Robert Wood Johnson, Our Credo
by General Robert Wood Johnson, Our Credo
by General Robert Wood Johnson, Our Credo
has been the blueprint for shaping the role
has been the blueprint for shaping the role
has been the blueprint for shaping the role
has been the blueprint for shaping the role
that Johnson & Johnson plays in society.
that Johnson & Johnson plays in society.
that Johnson & Johnson plays in society.
that Johnson & Johnson plays in society.

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Although Our Credo is literally etched in 
Although Our Credo is literally etched in 
Although Our Credo is literally etched in
Although Our Credo is literally etched in 
stone, it is a living document that, on a very 
stone, it is a living document that, on a very
stone, it is a living document that, on a very 
stone, it is a living document that, on a very 
few select occasions, we have evolved to
few select occasions, we have evolved to
few select occasions, we have evolved to
few select occasions, we have evolved to
keep pace with the world in which we live.
keep pace with the world in which we live.
keep pace with the world in which we live.
keep pace with the world in which we live.

In fact, late last year we did exactly this by 
In fact, late last year we did exactly this by
In fact, late last year we did exactly this by 
In fact, late last year we did exactly this by 
introducing some enhancements to Our
introducing some enhancements to Our
introducing some enhancements to Our
introducing some enhancements to Our
Credo responsibilities that were inspired by 
Credo responsibilities that were inspired by 
Credo responsibilities that were inspired by
Credo responsibilities that were inspired by 
feedback from more than 2,000 of our diverse
feedback from more than 2,000 of our diverse
feedback from more than 2,000 of our diverse
feedback from more than 2,000 of our diverse
Johnson & Johnson employees, representing
Johnson & Johnson employees, representing
Johnson & Johnson employees, representing
Johnson & Johnson employees, representing
all regions, segments and functions.
all regions, segments and functions.
all regions, segments and functions.
all regions, segments and functions.

These enhancements:
These enhancements:
These enhancements:
These enhancements:

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at the center of our focus;
at the center of our focus;
at the center of our focus;
at the center of our focus;

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and a new generation of employees;
and a new generation of employees;
and a new generation of employees;
and a new generation of employees;

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diversity and inclusion; and
diversity and inclusion; and
diversity and inclusion; and
diversity and inclusion; and

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the health of humanity.
the health of humanity.
the health of humanity.
the health of humanity.

Our Credo remains as relevant today as when 
Our Credo remains as relevant today as when 
Our Credo remains as relevant today as when
Our Credo remains as relevant today as when 
it was first introduced 75 years ago, and I’m
it was first introduced 75 years ago, and I’m
it was first introduced 75 years ago, and I’m
it was first introduced 75 years ago, and I’m
confident that it will propel Johnson & Johnson 
confident that it will propel Johnson & Johnson
confident that it will propel Johnson & Johnson 
confident that it will propel Johnson & Johnson 
forward for the next 75 years and beyond.
forward for the next 75 years and beyond.
forward for the next 75 years and beyond.
forward for the next 75 years and beyond.

Innovation is Our Calling Card
Innovation is Our Calling Card
Innovation is Our Calling Card
Innovation is Our Calling Card
When we hear the term “start-up,” we think of an
When we hear the term “start-up,” we think of an
When we hear the term “start-up,” we think of an
When we hear the term “start-up,” we think of an
organization with high energy and creativity, one 
organization with high energy and creativity, one 
organization with high energy and creativity, one
organization with high energy and creativity, one 
that values agility and has a bold vision to change
that values agility and has a bold vision to change
that values agility and has a bold vision to change
that values agility and has a bold vision to change
the world. As I look at the technologies we are 
the world. As I look at the technologies we are 
the world. As I look at the technologies we are
the world. As I look at the technologies we are 
investing in, the companies we are partnering with 
investing in, the companies we are partnering with
investing in, the companies we are partnering with 
investing in, the companies we are partnering with 
and the people who come to work for us every 
and the people who come to work for us every 
and the people who come to work for us every
and the people who come to work for us every 
day, I believe those start-up attributes define our 
day, I believe those start-up attributes define our 
day, I believe those start-up attributes define our
day, I believe those start-up attributes define our 
Company too—driving a vision of change that will 
Company too—driving a vision of change that will 
Company too—driving a vision of change that will
Company too—driving a vision of change that will 
have long-lasting impact for people everywhere.
have long-lasting impact for people everywhere.
have long-lasting impact for people everywhere.
have long-lasting impact for people everywhere.

Sustaining our investment in innovation is 
central to our ability to create meaningful 
change and competitive differentiation.

However, the timeless values that support
However, the timeless values that support
However, the timeless values that support
However, the timeless values that support
these strategies also make us different
these strategies also make us different
these strategies also make us different
these strategies also make us different
from the typical start-up. Our 133 years of
from the typical start-up. Our 133 years of
from the typical start-up. Our 133 years of
from the typical start-up. Our 133 years of
success and achievement motivate us even 
success and achievement motivate us even
success and achievement motivate us even
success and achievement motivate us even 
more to bring new ideas and approaches to
more to bring new ideas and approaches to
more to bring new ideas and approaches to
more to bring new ideas and approaches to
market today and well into the future. 
market today and well into the future.
market today and well into the future. 
market today and well into the future. 

The diversity of our organization, which
The diversity of our organization, which
The diversity of our organization, which
The diversity of our organization, which
comprises a wide array of backgrounds, 
comprises a wide array of backgrounds,
comprises a wide array of backgrounds, 
comprises a wide array of backgrounds, 

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capabilities, experiences, opinions and 
capabilities, experiences, opinions and 
capabilities, experiences, opinions and
capabilities, experiences, opinions and 
approaches, enriches our collaborative 
approaches, enriches our collaborative
approaches, enriches our collaborative 
approaches, enriches our collaborative 
innovation process. And this collaboration 
innovation process. And this collaboration 
innovation process. And this collaboration
innovation process. And this collaboration 
reaches far beyond the walls of Johnson & 
reaches far beyond the walls of Johnson & 
reaches far beyond the walls of Johnson & 
reaches far beyond the walls of Johnson & 
Johnson. For instance, we are partnering with 
Johnson. For instance, we are partnering with 
Johnson. For instance, we are partnering with
Johnson. For instance, we are partnering with 
some of the world’s most respected universities,
some of the world’s most respected universities,
some of the world’s most respected universities,
some of the world’s most respected universities,
research institutions, technology giants and
research institutions, technology giants and
research institutions, technology giants and
research institutions, technology giants and
traditional start-ups as we support those who 
traditional start-ups as we support those who
traditional start-ups as we support those who 
traditional start-ups as we support those who 

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Johnson & Johnson Innovation incubators.
Johnson & Johnson Innovation incubators.
Johnson & Johnson Innovation incubators.
Johnson & Johnson Innovation incubators.

A key example is how we are harnessing the
A key example is how we are harnessing the
A key example is how we are harnessing the
A key example is how we are harnessing the
strength of all three of our business segments
strength of all three of our business segments
strength of all three of our business segments
strength of all three of our business segments

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scientists to identify ways to better detect 
scientists to identify ways to better detect 
scientists to identify ways to better detect
scientists to identify ways to better detect 
and treat the entire cycle of lung cancer. This 
and treat the entire cycle of lung cancer. This 
and treat the entire cycle of lung cancer. This
and treat the entire cycle of lung cancer. This 
disease is the leading cause of cancer mortality
disease is the leading cause of cancer mortality
disease is the leading cause of cancer mortality
disease is the leading cause of cancer mortality
around the globe—we recognize the need
around the globe—we recognize the need
around the globe—we recognize the need
around the globe—we recognize the need
and urgency, and we are responding to this 
and urgency, and we are responding to this 
and urgency, and we are responding to this
and urgency, and we are responding to this 
call to action with this exciting partnership.
call to action with this exciting partnership.
call to action with this exciting partnership.
call to action with this exciting partnership.

Powerful innovation has also been made possible
Powerful innovation has also been made possible
Powerful innovation has also been made possible
Powerful innovation has also been made possible
by the financial strength we’ve built over the
by the financial strength we’ve built over the
by the financial strength we’ve built over the
by the financial strength we’ve built over the

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is central to our ability to create meaningful
is central to our ability to create meaningful
is central to our ability to create meaningful
is central to our ability to create meaningful
change and competitive differentiation. In 2018,
change and competitive differentiation. In 2018,
change and competitive differentiation. In 2018,
change and competitive differentiation. In 2018,
we achieved a record-level of Research and
we achieved a record-level of Research and
we achieved a record-level of Research and
we achieved a record-level of Research and
Development (R&D) investment of approximately
Development (R&D) investment of approximately
Development (R&D) investment of approximately
Development (R&D) investment of approximately
$10.8 billion. In fact, across all industries, we
$10.8 billion. In fact, across all industries, we
$10.8 billion. In fact, across all industries, we
$10.8 billion. In fact, across all industries, we
are one of the top 10 companies that invested 
are one of the top 10 companies that invested 
are one of the top 10 companies that invested
are one of the top 10 companies that invested 
at the highest levels in innovation and R&D.
at the highest levels in innovation and R&D.
at the highest levels in innovation and R&D.
at the highest levels in innovation and R&D.

Last year, the Johnson & Johnson Family of 
Last year, the Johnson & Johnson Family of
Last year, the Johnson & Johnson Family of 
Last year, the Johnson & Johnson Family of 
Companies invested in a number of value-creating 
Companies invested in a number of value-creating
Companies invested in a number of value-creating 
Companies invested in a number of value-creating 
acquisitions and collaborations, which included 
acquisitions and collaborations, which included 
acquisitions and collaborations, which included
acquisitions and collaborations, which included 
Zarbee’s, Inc., a leader in naturally based over-the- 
Zarbee’s, Inc., a leader in naturally based over-the- 
Zarbee’s, Inc., a leader in naturally based over-the-
Zarbee’s, Inc., a leader in naturally based over-the- 
counter (OTC) remedies, Orthotaxy, a developer 
counter (OTC) remedies, Orthotaxy, a developer
counter (OTC) remedies, Orthotaxy, a developer 
counter (OTC) remedies, Orthotaxy, a developer 
of software-enabled orthopaedic surgery
of software-enabled orthopaedic surgery
of software-enabled orthopaedic surgery
of software-enabled orthopaedic surgery
technologies and Arrowhead Pharmaceuticals, 
technologies and Arrowhead Pharmaceuticals, 
technologies and Arrowhead Pharmaceuticals,
technologies and Arrowhead Pharmaceuticals, 
Inc., where we are working to bring a functional
Inc., where we are working to bring a functional
Inc., where we are working to bring a functional
Inc., where we are working to bring a functional
cure to patients with chronic hepatitis B. In 
cure to patients with chronic hepatitis B. In
cure to patients with chronic hepatitis B. In 
cure to patients with chronic hepatitis B. In 
total, we executed 12 acquisitions and licenses
total, we executed 12 acquisitions and licenses
total, we executed 12 acquisitions and licenses
total, we executed 12 acquisitions and licenses
of various sizes, including our acquisition of the
of various sizes, including our acquisition of the
of various sizes, including our acquisition of the
of various sizes, including our acquisition of the
company that markets the DR CI LABO line of
company that markets the DR CI LABO line of
company that markets the DR CI LABO line of
company that markets the DR CI LABO line of
skincare products, which officially closed in 2019. 
skincare products, which officially closed in 2019.
skincare products, which officially closed in 2019. 
skincare products, which officially closed in 2019. 
Additionally, we signed 74 innovation deals as well 
Additionally, we signed 74 innovation deals as well 
Additionally, we signed 74 innovation deals as well
Additionally, we signed 74 innovation deals as well 
as 29 new development deals, and we continue 
as 29 new development deals, and we continue 
as 29 new development deals, and we continue
as 29 new development deals, and we continue 
to make investments across all industries through 
to make investments across all industries through 
to make investments across all industries through
to make investments across all industries through 
Johnson & Johnson Innovation-JJDC, Inc. (JJDC).
Johnson & Johnson Innovation-JJDC, Inc. (JJDC).
Johnson & Johnson Innovation-JJDC, Inc. (JJDC).
Johnson & Johnson Innovation-JJDC, Inc. (JJDC).

As I just mentioned, we continue to innovate
As I just mentioned, we continue to innovate
As I just mentioned, we continue to innovate
As I just mentioned, we continue to innovate
in surgery. Over 100 years ago, we were the 
in surgery. Over 100 years ago, we were the 
in surgery. Over 100 years ago, we were the
in surgery. Over 100 years ago, we were the 
pioneers of sterile surgery, establishing an
pioneers of sterile surgery, establishing an
pioneers of sterile surgery, establishing an
pioneers of sterile surgery, establishing an

incredible heritage that today includes our 
incredible heritage that today includes our 
incredible heritage that today includes our
incredible heritage that today includes our 
leadership in minimally invasive surgery and 
leadership in minimally invasive surgery and
leadership in minimally invasive surgery and 
leadership in minimally invasive surgery and 
innovatively controlling surgical bleeding and 
innovatively controlling surgical bleeding and 
innovatively controlling surgical bleeding and
innovatively controlling surgical bleeding and 
infection globally. Our goal and commitment is 
infection globally. Our goal and commitment is 
infection globally. Our goal and commitment is
infection globally. Our goal and commitment is 
to now create the next frontier of surgery. That’s
to now create the next frontier of surgery. That’s
to now create the next frontier of surgery. That’s
to now create the next frontier of surgery. That’s
why I’m excited that we entered into a definitive
why I’m excited that we entered into a definitive
why I’m excited that we entered into a definitive
why I’m excited that we entered into a definitive
agreement to acquire Auris Health, Inc. Auris 
agreement to acquire Auris Health, Inc. Auris 
agreement to acquire Auris Health, Inc. Auris
agreement to acquire Auris Health, Inc. Auris 
Health is a developer of robotic technologies
Health is a developer of robotic technologies
Health is a developer of robotic technologies
Health is a developer of robotic technologies
that currently focuses on lung cancer. This
that currently focuses on lung cancer. This
that currently focuses on lung cancer. This
that currently focuses on lung cancer. This
acquisition will accelerate our entry into digitally
acquisition will accelerate our entry into digitally
acquisition will accelerate our entry into digitally
acquisition will accelerate our entry into digitally
enabled robotics procedures with the potential
enabled robotics procedures with the potential
enabled robotics procedures with the potential
enabled robotics procedures with the potential
for growth and expansion into other interventional 
for growth and expansion into other interventional 
for growth and expansion into other interventional
for growth and expansion into other interventional 
applications. In this new era of healthcare, we
applications. In this new era of healthcare, we
applications. In this new era of healthcare, we
applications. In this new era of healthcare, we
are aiming to simplify surgery, drive efficiency,
are aiming to simplify surgery, drive efficiency,
are aiming to simplify surgery, drive efficiency,
are aiming to simplify surgery, drive efficiency,
reduce complications, improve outcomes for 
reduce complications, improve outcomes for 
reduce complications, improve outcomes for
reduce complications, improve outcomes for 
patients and make surgery even safer. This 
patients and make surgery even safer. This 
patients and make surgery even safer. This
patients and make surgery even safer. This 
continues our surgical leadership that has been 
continues our surgical leadership that has been
continues our surgical leadership that has been 
continues our surgical leadership that has been 
in motion since the beginning of our Company.
in motion since the beginning of our Company.
in motion since the beginning of our Company.
in motion since the beginning of our Company.

Looking ahead, I am also very excited about our
Looking ahead, I am also very excited about our
Looking ahead, I am also very excited about our
Looking ahead, I am also very excited about our
collaboration with Apple, Inc. that we announced 
collaboration with Apple, Inc. that we announced
collaboration with Apple, Inc. that we announced 
collaboration with Apple, Inc. that we announced 
early in 2019. Together, we will be conducting a
early in 2019. Together, we will be conducting a
early in 2019. Together, we will be conducting a
early in 2019. Together, we will be conducting a
research study that analyzes whether a new heart 
research study that analyzes whether a new heart 
research study that analyzes whether a new heart
research study that analyzes whether a new heart 
health program using an app from the Johnson 
health program using an app from the Johnson 
health program using an app from the Johnson
health program using an app from the Johnson 
& Johnson Family of Companies, in combination 
& Johnson Family of Companies, in combination
& Johnson Family of Companies, in combination 
& Johnson Family of Companies, in combination 
i
with Apple Watch’s irregular rhythm notifications 
with Apple Watch’s irregular rhythm notifications
with Apple Watch’s irregular rhythm notifications 
and Electro Cardiogram (ECG) app, can 
and Electro Cardiogram (ECG) app, can 
and Electro Cardiogram (ECG) app, can
and Electro Cardiogram (ECG) app, can 
accelerate atrial fibrillation (AFib) diagnosis, and
accelerate atrial fibrillation (AFib) diagnosis, and
accelerate atrial fibrillation (AFib) diagnosis, and
accelerate atrial fibrillation (AFib) diagnosis, and
improve health outcomes including the prevention 
improve health outcomes including the prevention
improve health outcomes including the prevention 
improve health outcomes including the prevention 
of stroke for the 33 million people worldwide 
of stroke for the 33 million people worldwide 
of stroke for the 33 million people worldwide
of stroke for the 33 million people worldwide 
living with AFib. This is a condition that can
living with AFib. This is a condition that can
living with AFib. This is a condition that can
living with AFib. This is a condition that can
lead to stroke and other potentially devastating
lead to stroke and other potentially devastating
lead to stroke and other potentially devastating
lead to stroke and other potentially devastating

h h

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responsible for approximately 130,000 deaths
responsible for approximately 130,000 deaths
responsible for approximately 130,000 deaths
responsible for approximately 130,000 deaths
and 750,000 hospitalizations every year.
and 750,000 hospitalizations every year.
and 750,000 hospitalizations every year.
and 750,000 hospitalizations every year.

We are very optimistic about the potential
We are very optimistic about the potential
We are very optimistic about the potential
We are very optimistic about the potential
of this wearable technology. And, based on 
of this wearable technology. And, based on 
of this wearable technology. And, based on
of this wearable technology. And, based on 
the insights generated through this research
the insights generated through this research
the insights generated through this research
the insights generated through this research
program, in the future we may also be able
program, in the future we may also be able
program, in the future we may also be able
program, in the future we may also be able
to develop new ways to detect other health 
to develop new ways to detect other health
to develop new ways to detect other health 
to develop new ways to detect other health 
conditions sooner. Early diagnosis not only
conditions sooner. Early diagnosis not only
conditions sooner. Early diagnosis not only
conditions sooner. Early diagnosis not only
has the potential to save lives, but it may also
has the potential to save lives, but it may also
has the potential to save lives, but it may also
has the potential to save lives, but it may also
lower costs across the healthcare system. 
lower costs across the healthcare system.
lower costs across the healthcare system. 
lower costs across the healthcare system. 

Innovation is our calling card to the world of
Innovation is our calling card to the world of
Innovation is our calling card to the world of
Innovation is our calling card to the world of
science and technology. We remain open to the 
science and technology. We remain open to the 
science and technology. We remain open to the
science and technology. We remain open to the 
best ideas, no matter where they come from, 
best ideas, no matter where they come from, 
best ideas, no matter where they come from,
best ideas, no matter where they come from, 
as we relentlessly pursue transformational
as we relentlessly pursue transformational
as we relentlessly pursue transformational
as we relentlessly pursue transformational
innovation to benefit human health, internally
innovation to benefit human health, internally
innovation to benefit human health, internally
innovation to benefit human health, internally
and throughout our innovation ecosystem, 
and throughout our innovation ecosystem, 
and throughout our innovation ecosystem,
and throughout our innovation ecosystem, 
across our Innovation Centers, JLABs,
across our Innovation Centers, JLABs,
across our Innovation Centers, JLABs,
across our Innovation Centers, JLABs,
JJDC and many strategic partnerships. 
JJDC and many strategic partnerships.
JJDC and many strategic partnerships. 
JJDC and many strategic partnerships. 

Driving Long-term Shareholder Value
Driving Long-term Shareholder Value
Driving Long-term Shareholder Value
Driving Long-term Shareholder Value
Our free cash flow* for 2018 improved to $18.5
Our free cash flow* for 2018 improved to $18.5
Our free cash flow* for 2018 improved to $18.5
Our free cash flow* for 2018 improved to $18.5
billion, and employing our proven capital
billion, and employing our proven capital
billion, and employing our proven capital
billion, and employing our proven capital
allocation strategy, we are able to effectively 
allocation strategy, we are able to effectively 
allocation strategy, we are able to effectively
allocation strategy, we are able to effectively 
invest in our business and innovation to drive 
invest in our business and innovation to drive 
invest in our business and innovation to drive
invest in our business and innovation to drive
growth for long-term value, while also returning 
growth for long-term value, while also returning
growth for long-term value, while also returning 
growth for long-term value, while also returning 
value to shareholders. Our capital allocation
value to shareholders. Our capital allocation
value to shareholders. Our capital allocation
value to shareholders. Our capital allocation
strategy includes four key priorities: 
strategy includes four key priorities:
strategy includes four key priorities: 
strategy includes four key priorities: 

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marketing and administrative) initiatives.
marketing and administrative) initiatives.
marketing and administrative) initiatives.
marketing and administrative) initiatives.

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dividend to our shareholders, and in 2018
dividend to our shareholders, and in 2018
dividend to our shareholders, and in 2018
dividend to our shareholders, and in 2018
we paid $9.5 billion in dividends. We are 
we paid $9.5 billion in dividends. We are 
we paid $9.5 billion in dividends. We are
we paid $9.5 billion in dividends. We are 
very proud that our dividend has increased 
very proud that our dividend has increased 
very proud that our dividend has increased
very proud that our dividend has increased 
for the last 56 consecutive years. 
for the last 56 consecutive years.
for the last 56 consecutive years. 
for the last 56 consecutive years. 

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target mergers, acquisitions and licensing 
target mergers, acquisitions and licensing 
target mergers, acquisitions and licensing
target mergers, acquisitions and licensing 
agreements that we believe will add 
agreements that we believe will add 
agreements that we believe will add
agreements that we believe will add 
significant long-term value creation for our 
significant long-term value creation for our
significant long-term value creation for our 
significant long-term value creation for our 
shareholders and all other stakeholders.
shareholders and all other stakeholders.
shareholders and all other stakeholders.
shareholders and all other stakeholders.

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to return value to shareholders, such as share
to return value to shareholders, such as share
to return value to shareholders, such as share
to return value to shareholders, such as share
repurchase programs; and we are currently 
repurchase programs; and we are currently
repurchase programs; and we are currently 
repurchase programs; and we are currently 
executing against a $5 billion share repurchase 
executing against a $5 billion share repurchase 
executing against a $5 billion share repurchase
executing against a $5 billion share repurchase 
that we announced last December.
that we announced last December.
that we announced last December.
that we announced last December.

Given our financial strength, we can pursue all
Given our financial strength, we can pursue all
Given our financial strength, we can pursue all
Given our financial strength, we can pursue all
of these priorities simultaneously, as we did in
of these priorities simultaneously, as we did in
of these priorities simultaneously, as we did in
of these priorities simultaneously, as we did in
2018. Throughout Johnson & Johnson’s history,
2018. Throughout Johnson & Johnson’s history,
2018. Throughout Johnson & Johnson’s history,
2018. Throughout Johnson & Johnson’s history,
we have maintained a strong, consistent and
we have maintained a strong, consistent and
we have maintained a strong, consistent and
we have maintained a strong, consistent and
sustainable business. This is illustrated by:
sustainable business. This is illustrated by:
sustainable business. This is illustrated by:
sustainable business. This is illustrated by:

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operational earnings growth*
operational earnings growth*
operational earnings growth*
operational earnings growth*

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hold a Triple A credit rating; and 
hold a Triple A credit rating; and
hold a Triple A credit rating; and 
hold a Triple A credit rating; and 

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Top 10 Market Cap companies.
Top 10 Market Cap companies.
Top 10 Market Cap companies.
Top 10 Market Cap companies.

The Strategic AAAdvantage of Our Broad Base
The Strategic
The Strategic Advantage of Our Broad Base
dvantage of Our Broad Base
dvantage of Our Broad Base
The Strategic
Positioned across three vital aspects of 
Positioned across three vital aspects of 
Positioned across three vital aspects of
Positioned across three vital aspects of 
healthcare—Pharmaceutical, Consumer and 
healthcare—Pharmaceutical, Consumer and
healthcare—Pharmaceutical, Consumer and 
healthcare—Pharmaceutical, Consumer and 
Medical Devices—we have unique insight into
Medical Devices—we have unique insight into
Medical Devices—we have unique insight into
Medical Devices—we have unique insight into
challenges and opportunities whenever and
challenges and opportunities whenever and
challenges and opportunities whenever and
challenges and opportunities whenever and
wherever they emerge. We are structured to
wherever they emerge. We are structured to
wherever they emerge. We are structured to
wherever they emerge. We are structured to
meet the current and future needs of patients 
meet the current and future needs of patients
meet the current and future needs of patients 
meet the current and future needs of patients 
and consumers globally, and to address the 
and consumers globally, and to address the 
and consumers globally, and to address the
and consumers globally, and to address the 
challenges and opportunities that the world
challenges and opportunities that the world
challenges and opportunities that the world
challenges and opportunities that the world
of healthcare presents. We remain focused on 
of healthcare presents. We remain focused on 
of healthcare presents. We remain focused on
of healthcare presents. We remain focused on 
leveraging our broad-based capabilities to 
leveraging our broad-based capabilities to
leveraging our broad-based capabilities to 
leveraging our broad-based capabilities to 

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continue to drive the next generation of growth
continue to drive the next generation of growth
continue to drive the next generation of growth
continue to drive the next generation of growth
across our entire portfolio, both in markets 
across our entire portfolio, both in markets
across our entire portfolio, both in markets 
across our entire portfolio, both in markets 
where we have greater opportunity to compete,
where we have greater opportunity to compete,
where we have greater opportunity to compete,
where we have greater opportunity to compete,
as well as in the markets where we lead, which 
as well as in the markets where we lead, which 
as well as in the markets where we lead, which
as well as in the markets where we lead, which 
include our 26 platforms that each delivered
include our 26 platforms that each delivered
include our 26 platforms that each delivered
include our 26 platforms that each delivered
a billion dollars or more in sales last year.
a billion dollars or more in sales last year.
a billion dollars or more in sales last year.
a billion dollars or more in sales last year.

Our broad base is not just our heritage, it
Our broad base is not just our heritage, it
Our broad base is not just our heritage, it
Our broad base is not just our heritage, it
is a strategic choice, grounded and proven 
is a strategic choice, grounded and proven 
is a strategic choice, grounded and proven
is a strategic choice, grounded and proven 
in long-term performance and our broad 
in long-term performance and our broad
in long-term performance and our broad 
in long-term performance and our broad 
and deep understanding of the industry’s
and deep understanding of the industry’s
and deep understanding of the industry’s
and deep understanding of the industry’s
present and future. We clearly recognize the
present and future. We clearly recognize the
present and future. We clearly recognize the
present and future. We clearly recognize the
important role we play in leading responsibly
important role we play in leading responsibly
important role we play in leading responsibly
important role we play in leading responsibly
and representing our industry with integrity.
and representing our industry with integrity.
and representing our industry with integrity.
and representing our industry with integrity.

Our “Health for Humanity Report” underscores
Our “Health for Humanity Report” underscores
Our “Health for Humanity Report” underscores
Our “Health for Humanity Report” underscores
our commitment to help ensure that each new
our commitment to help ensure that each new
our commitment to help ensure that each new
our commitment to help ensure that each new
generation is healthier than the last. We believe
generation is healthier than the last. We believe
generation is healthier than the last. We believe
generation is healthier than the last. We believe
our broad base helps us better understand and 
our broad base helps us better understand and 
our broad base helps us better understand and
our broad base helps us better understand and 
positively impact human health at every age and 
positively impact human health at every age and 
positively impact human health at every age and
positively impact human health at every age and 
at every stage. In 2018 we were recognized as one 
at every stage. In 2018 we were recognized as one 
at every stage. In 2018 we were recognized as one
at every stage. In 2018 we were recognized as one 
of the top ten corporations for our environmental, 
of the top ten corporations for our environmental,
of the top ten corporations for our environmental, 
of the top ten corporations for our environmental, 
social and governance performance by 
social and governance performance by 
social and governance performance by
social and governance performance by 
Corporate Responsibility Magazine. 
Corporate Responsibility Magazine.
Corporate Responsibility Magazine. 
Corporate Responsibility Magazine. 

Our broad base is not just our heritage, 
it is a strategic choice, grounded and 
proven in long-term performance and 
our broad and deep understanding of 
the industry’s present and future. 

Business Performance and 2019 Outlook 
Business Performance and 2019 Outlook
Business Performance and 2019 Outlook 
Business Performance and 2019 Outlook

i h

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Pharmaceutical
Pharmaceutical
Pharmaceutical
Pharmaceutical
bli h d
With an industry-leading pipeline and established 
With an industry-leading pipeline and established
With an industry-leading pipeline and established 
commercial excellence, our Pharmaceutical 
commercial excellence, our Pharmaceutical 
commercial excellence, our Pharmaceutical
commercial excellence, our Pharmaceutical 
d
b i
business has delivered outstanding performance
business has delivered outstanding performance 
business has delivered outstanding performance 

l di

d li

di

d

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li

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i

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launches and strong growth in several of
launches and strong growth in several of
launches and strong growth in several of
launches and strong growth in several of
our blockbuster medicines created 11.8%
our blockbuster medicines created 11.8%
our blockbuster medicines created 11.8%
our blockbuster medicines created 11.8%
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operational growth*, and our Pharmaceutical
operational growth*, and our Pharmaceutical
operational growth*, and our Pharmaceutical
business continues to be an industry leader in 
business continues to be an industry leader in 
business continues to be an industry leader in
business continues to be an industry leader in 
all performance measures, including R&D.
all performance measures, including R&D.
all performance measures, including R&D.
all performance measures, including R&D.

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As we look toward 2019 and beyond, we remain
As we look toward 2019 and beyond, we remain
As we look toward 2019 and beyond, we remain
As we look toward 2019 and beyond, we remain
focused on bringing innovative solutions to 
focused on bringing innovative solutions to
focused on bringing innovative solutions to 
patients and healthcare providers globally,
patients and healthcare providers globally,
patients and healthcare providers globally,
patients and healthcare providers globally,
while driving strong growth and continuing
while driving strong growth and continuing
while driving strong growth and continuing
while driving strong growth and continuing
to advance our pipeline. Patent pressure is a 
to advance our pipeline. Patent pressure is a
to advance our pipeline. Patent pressure is a 
to advance our pipeline. Patent pressure is a 
feature of today’s pharmaceutical industry, and
feature of today’s pharmaceutical industry, and
feature of today’s pharmaceutical industry, and
d
we have deliberately and actively managed our
we have deliberately and actively managed our
we have deliberately and actively managed our
portfolio over the last few years to enable us 
portfolio over the last few years to enable us
portfolio over the last few years to enable us 
portfolio over the last few years to enable us 
to make the investments necessary to not only 
to make the investments necessary to not only
to make the investments necessary to not only 
y
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b
withstand this impact, but to grow at competitive
withstand this impact, but to grow at competitive
withstand this impact, but to grow at competitive
i
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rates in 2019. We remain focused on developing
rates in 2019. We remain focused on developing
rates in 2019. We remain focused on developing
medicines and solutions that deliver great value 
medicines and solutions that deliver great value
medicines and solutions that deliver great value 
medicines and solutions that deliver great value 
to the patients and consumers who depend 
to the patients and consumers who depend
to the patients and consumers who depend 
on our products to make their lives better. Our
on our products to make their lives better. Our
on our products to make their lives better. Our
on our products to make their lives better. Our
goal and expectation for 2020 and beyond is
goal and expectation for 2020 and beyond is
goal and expectation for 2020 and beyond is
goal and expectation for 2020 and beyond is
sustained, long-term, above-market growth. 
sustained, long-term, above-market growth.
sustained, long-term, above-market growth. 
sustained, long-term, above-market growth. 

y
d

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p

p

d

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k

i
We know that innovation drives our 
We know that innovation drives our
We know that innovation drives our
Pharmaceutical business’s success, and we
Pharmaceutical business’s success, and we
Pharmaceutical business’s success, and we
,

d i

h

i

Collaboration is fundamental to the work we do
Collaboration is fundamental to the work we do
Collaboration is fundamental to the work we do
Collaboration is fundamental to the work we do
every day and our presence in just about every
every day and our presence in just about every
every day and our presence in just about every
every day and our presence in just about every
area of healthcare. This level of engagement
area of healthcare. This level of engagement
area of healthcare. This level of engagement
area of healthcare. This level of engagement
allows us to maintain a continuous dialogue 
allows us to maintain a continuous dialogue
allows us to maintain a continuous dialogue 
allows us to maintain a continuous dialogue 
with healthcare professionals, business leaders, 
with healthcare professionals, business leaders,
with healthcare professionals, business leaders, 
with healthcare professionals, business leaders, 
academics, government officials, scientists, 
academics, government officials, scientists, 
academics, government officials, scientists,
academics, government officials, scientists, 
provider systems, customers, patients and
provider systems, customers, patients and
provider systems, customers, patients and
provider systems, customers, patients and
consumers. We remain committed to being a
consumers. We remain committed to being a
consumers. We remain committed to being a
consumers. We remain committed to being a
leader in the global healthcare space, to help drive
leader in the global healthcare space, to help drive
leader in the global healthcare space, to help drive
leader in the global healthcare space, to help drive
the change that people around the world want
the change that people around the world want
the change that people around the world want
the change that people around the world want
and need to see.
and need to see.
and need to see.
and need to see.

We see a vital and vibrant future for healthcare 
We see a vital and vibrant future for healthcare
We see a vital and vibrant future for healthcare
We see a vital and vibrant future for healthcare 
around the world that is being driven by the
around the world that is being driven by the
around the world that is being driven by the
around the world that is being driven by the
continuing expansion of the global middle 
continuing expansion of the global middle 
continuing expansion of the global middle
continuing expansion of the global middle 
class. It is the middle class that drives global 
class. It is the middle class that drives global
class. It is the middle class that drives global 
class. It is the middle class that drives global 
economic growth and with it, the demand for
economic growth and with it, the demand for
economic growth and with it, the demand for
economic growth and with it, the demand for
greater access to quality healthcare. I believe
greater access to quality healthcare. I believe
greater access to quality healthcare. I believe
greater access to quality healthcare. I believe
that no company on Earth is better positioned
that no company on Earth is better positioned
that no company on Earth is better positioned
that no company on Earth is better positioned
than Johnson & Johnson to capture this 
than Johnson & Johnson to capture this
than Johnson & Johnson to capture this 
than Johnson & Johnson to capture this 
opportunity and lead the healthcare industry. 
opportunity and lead the healthcare industry.
opportunity and lead the healthcare industry. 
opportunity and lead the healthcare industry. 

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Treatment Resistant Depression (TRD), who
Treatment Resistant Depression (TRD), who
Treatment Resistant Depression (TRD), who
Treatment Resistant Depression (TRD), who
have cycled through multiple treatments
have cycled through multiple treatments
have cycled through multiple treatments
have cycled through multiple treatments
without relief. TRD is a debilitating disease that 
without relief. TRD is a debilitating disease that 
without relief. TRD is a debilitating disease that
without relief. TRD is a debilitating disease that 
is associated with chronic health problems, and
is associated with chronic health problems, and
is associated with chronic health problems, and
is associated with chronic health problems, and
quite tragically, can lead to suicide if not treated
quite tragically, can lead to suicide if not treated
quite tragically, can lead to suicide if not treated
quite tragically, can lead to suicide if not treated

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breakthrough medicine in our product portfolio, 
breakthrough medicine in our product portfolio, 
breakthrough medicine in our product portfolio,
breakthrough medicine in our product portfolio, 
but also a new hope for adults who suffer from
but also a new hope for adults who suffer from
but also a new hope for adults who suffer from
but also a new hope for adults who suffer from
TRD. It also offers the first new mechanism
TRD. It also offers the first new mechanism
TRD. It also offers the first new mechanism
TRD. It also offers the first new mechanism
of action to address TRD. And importantly, in
of action to address TRD. And importantly, in
of action to address TRD. And importantly, in
of action to address TRD. And importantly, in
accordance with risk mitigation guidance from
accordance with risk mitigation guidance from
accordance with risk mitigation guidance from
accordance with risk mitigation guidance from

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by certified treatment centers and will not be 
by certified treatment centers and will not be
by certified treatment centers and will not be 
by certified treatment centers and will not be 
dispensed directly to patients to take at home.
dispensed directly to patients to take at home.
dispensed directly to patients to take at home.
dispensed directly to patients to take at home.

We have listened with great intent to the concerns
We have listened with great intent to the concerns
We have listened with great intent to the concerns
We have listened with great intent to the concerns
voiced by many stakeholders over the pricing and
voiced by many stakeholders over the pricing and
voiced by many stakeholders over the pricing and
voiced by many stakeholders over the pricing and
transparency of products and our healthcare
transparency of products and our healthcare
transparency of products and our healthcare
transparency of products and our healthcare

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world. We are committed to taking the lead, 
world. We are committed to taking the lead,
world. We are committed to taking the lead, 
world. We are committed to taking the lead, 
being responsible partners and doing our part to 
being responsible partners and doing our part to 
being responsible partners and doing our part to
being responsible partners and doing our part to 
not only treat patients, but also ensure they can 
not only treat patients, but also ensure they can 
not only treat patients, but also ensure they can
not only treat patients, but also ensure they can 
get access in an open and affordable manner.
get access in an open and affordable manner.
get access in an open and affordable manner.
get access in an open and affordable manner.

As a result of direct interaction with patients,
As a result of direct interaction with patients,
As a result of direct interaction with patients,
As a result of direct interaction with patients,
their families and healthcare professionals 
their families and healthcare professionals
their families and healthcare professionals 
their families and healthcare professionals 

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an important measure to help consumers gain a
an important measure to help consumers gain a
an important measure to help consumers gain a
an important measure to help consumers gain a
better picture of what they should expect to pay
better picture of what they should expect to pay
better picture of what they should expect to pay
better picture of what they should expect to pay
for their medicines. We have proposed including
for their medicines. We have proposed including
for their medicines. We have proposed including
for their medicines. We have proposed including
list-price information in direct-to-consumer TV
list-price information in direct-to-consumer TV
list-price information in direct-to-consumer TV
list-price information in direct-to-consumer TV
ads, starting with our most-prescribed medicine, 
ads, starting with our most-prescribed medicine, 
ads, starting with our most-prescribed medicine,
ads, starting with our most-prescribed medicine, 
XARELTO (rivaroxaban), an oral anti-coagulant. 
XARELTO (rivaroxaban), an oral anti-coagulant.
XARELTO (rivaroxaban), an oral anti-coagulant. 
XARELTO (rivaroxaban), an oral anti-coagulant. 
To ensure patients have clarity, we plan to
To ensure patients have clarity, we plan to
To ensure patients have clarity, we plan to
To ensure patients have clarity, we plan to
include both the list price and potential patient 
include both the list price and potential patient 
include both the list price and potential patient
include both the list price and potential patient 
out-of-pocket costs. We believe transparency is
out-of-pocket costs. We believe transparency is
out-of-pocket costs. We believe transparency is
out-of-pocket costs. We believe transparency is
a fundamental responsibility of this Company.
a fundamental responsibility of this Company.
a fundamental responsibility of this Company.
a fundamental responsibility of this Company.
It’s also another strong demonstration that
It’s also another strong demonstration that
It’s also another strong demonstration that
It’s also another strong demonstration that
our purpose, focused on helping patients, is 
our purpose, focused on helping patients, is 
our purpose, focused on helping patients, is
our purpose, focused on helping patients, is 
driving our business – just as it should be.
driving our business – just as it should be.
driving our business – just as it should be.
driving our business – just as it should be.

Our Pharmaceutical business has taken a strong 
Our Pharmaceutical business has taken a strong 
Our Pharmaceutical business has taken a strong
Our Pharmaceutical business has taken a strong 
leadership stance on increasing transparency
leadership stance on increasing transparency
leadership stance on increasing transparency
leadership stance on increasing transparency
in the industry. I am pleased to share we
in the industry. I am pleased to share we
in the industry. I am pleased to share we
in the industry. I am pleased to share we

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Transparency Report in late March. This report, 
Transparency Report in late March. This report, 
Transparency Report in late March. This report,
Transparency Report in late March. This report, 
reflective of our actions in 2018, shows that our
reflective of our actions in 2018, shows that our
reflective of our actions in 2018, shows that our
reflective of our actions in 2018, shows that our
net prices have decreased again, by 6.8%.
net prices have decreased again, by 6.8%.
net prices have decreased again, by 6.8%.
net prices have decreased again, by 6.8%.

Consumer
Consumer
Consumer
Consumer
In 2018, fueled by our iconic brands and deep 
In 2018, fueled by our iconic brands and deep 
In 2018, fueled by our iconic brands and deep
In 2018, fueled by our iconic brands and deep 
consumer insights, our Consumer business
consumer insights, our Consumer business
consumer insights, our Consumer business
consumer insights, our Consumer business
achieved above-market growth. As we look 
achieved above-market growth. As we look
achieved above-market growth. As we look 
achieved above-market growth. As we look 
ahead, we will work to enhance our leadership
ahead, we will work to enhance our leadership
ahead, we will work to enhance our leadership
ahead, we will work to enhance our leadership
in priority categories by focusing on critical 
in priority categories by focusing on critical 
in priority categories by focusing on critical
in priority categories by focusing on critical 
geographies and our mega-brands, while also 
geographies and our mega-brands, while also 
geographies and our mega-brands, while also
geographies and our mega-brands, while also 
continuing to expand into the fast-growing 
continuing to expand into the fast-growing
continuing to expand into the fast-growing 
continuing to expand into the fast-growing 
naturals category. Our acquisition of Zarbee’s, Inc. 
naturals category. Our acquisition of Zarbee’s, Inc. 
naturals category. Our acquisition of Zarbee’s, Inc.
naturals category. Our acquisition of Zarbee’s, Inc. 
in OTC is a key example of this expanding focus.
in OTC is a key example of this expanding focus.
in OTC is a key example of this expanding focus.
in OTC is a key example of this expanding focus.

We have the strategies in place to move with the
We have the strategies in place to move with the
We have the strategies in place to move with the
We have the strategies in place to move with the
agility required to address evolving market needs. 
agility required to address evolving market needs. 
agility required to address evolving market needs.
agility required to address evolving market needs. 
We have adopted a multichannel approach, 
We have adopted a multichannel approach, 
We have adopted a multichannel approach,
We have adopted a multichannel approach, 
from the big-box retailers to e-commerce
from the big-box retailers to e-commerce
from the big-box retailers to e-commerce
from the big-box retailers to e-commerce
channels, to better serve our consumers. 
channels, to better serve our consumers.
channels, to better serve our consumers. 
channels, to better serve our consumers. 

The results of our continual connection with 
The results of our continual connection with 
The results of our continual connection with
The results of our continual connection with
consumers can be seen in the global relaunch of 
consumers can be seen in the global relaunch of
consumers can be seen in the global relaunch of 
consumers can be seen in the global relaunch of 

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We are committed to disclosing 100% of our 
We are committed to disclosing 100% of our
We are committed to disclosing 100% of our 
We are committed to disclosing 100% of our 

fragrance ingredients above 100 parts per million 
fragrance ingredients above 100 parts per million 
fragrance ingredients above 100 parts per million
fragrance ingredients above 100 parts per million 
(ppm) in our shampoos, washes and lotions. 
(ppm) in our shampoos, washes and lotions.
(ppm) in our shampoos, washes and lotions. 
(ppm) in our shampoos, washes and lotions. 
And we’ve been recognized for this greater 
And we’ve been recognized for this greater 
And we’ve been recognized for this greater
And we’ve been recognized for this greater 
transparency by The Environmental Working
transparency by The Environmental Working
transparency by The Environmental Working
transparency by The Environmental Working
Group. Our relaunch also includes new packaging 
Group. Our relaunch also includes new packaging 
Group. Our relaunch also includes new packaging
Group. Our relaunch also includes new packaging 
and informational social media communications 
and informational social media communications
and informational social media communications
and informational social media communications 
tailored to the needs and wants of millennial 
tailored to the needs and wants of millennial
tailored to the needs and wants of millennial 
tailored to the needs and wants of millennial

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relaunch is off to a solid start and we will continue
relaunch is off to a solid start and we will continue
relaunch is off to a solid start and we will continue
relaunch is off to a solid start and we will continue
to launch across global markets throughout 2019.
to launch across global markets throughout 2019.
to launch across global markets throughout 2019.
to launch across global markets throughout 2019.

Additionally, in response to our consumers asking
Additionally, in response to our consumers asking
Additionally, in response to our consumers asking
Additionally, in response to our consumers asking
for personalized skincare solutions that address
for personalized skincare solutions that address
for personalized skincare solutions that address
for personalized skincare solutions that address
their skin’s unique needs, we are developing
their skin’s unique needs, we are developing
their skin’s unique needs, we are developing
their skin’s unique needs, we are developing
our most personalized skincare product to
our most personalized skincare product to
our most personalized skincare product to
our most personalized skincare product to

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3D-printed sheet mask is inspired by user data
3D-printed sheet mask is inspired by user data
3D-printed sheet mask is inspired by user data
3D-printed sheet mask is inspired by user data
and will deliver the clinical efficacy expected 
and will deliver the clinical efficacy expected
and will deliver the clinical efficacy expected 
and will deliver the clinical efficacy expected 
from the #1 dermatologist-recommended
from the #1 dermatologist-recommended
from the #1 dermatologist-recommended
from the #1 dermatologist-recommended

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is already globally recognized for delivering
is already globally recognized for delivering
is already globally recognized for delivering
is already globally recognized for delivering
topical skincare solutions at the intersection
topical skincare solutions at the intersection
topical skincare solutions at the intersection
topical skincare solutions at the intersection
of science and technology. This new product
of science and technology. This new product
of science and technology. This new product
of science and technology. This new product
will represent one further step toward a new 
will represent one further step toward a new 
will represent one further step toward a new
will represent one further step toward a new 
model of product development where we find 
model of product development where we find
model of product development where we find 
model of product development where we find 
creative uses for the latest technology, such as 
creative uses for the latest technology, such as 
creative uses for the latest technology, such as
creative uses for the latest technology, such as 
digital imaging, skin analysis and 3D printing,
digital imaging, skin analysis and 3D printing,
digital imaging, skin analysis and 3D printing,
digital imaging, skin analysis and 3D printing,
to give consumers new ways to achieve their 
to give consumers new ways to achieve their 
to give consumers new ways to achieve their
to give consumers new ways to achieve their 
best skincare possible. It is also a great example
best skincare possible. It is also a great example
best skincare possible. It is also a great example
best skincare possible. It is also a great example
of how we are leveraging innovation across 
of how we are leveraging innovation across 
of how we are leveraging innovation across
of how we are leveraging innovation across 
our business segments, as our 3D printing
our business segments, as our 3D printing
our business segments, as our 3D printing
our business segments, as our 3D printing
capability originated within Medical Devices.
capability originated within Medical Devices.
capability originated within Medical Devices.
capability originated within Medical Devices.

Medical Devices
Medical Devices
Medical Devices
Medical Devices
Our Medical Devices businesses are among the
Our Medical Devices businesses are among the
Our Medical Devices businesses are among the
Our Medical Devices businesses are among the
most diverse and successful in the healthcare
most diverse and successful in the healthcare
most diverse and successful in the healthcare
most diverse and successful in the healthcare
industry. At the same time, we fully recognize
industry. At the same time, we fully recognize
industry. At the same time, we fully recognize
industry. At the same time, we fully recognize
that our progress has not been uniform across
that our progress has not been uniform across
that our progress has not been uniform across
that our progress has not been uniform across
the Medical Devices portfolio. We have many 
the Medical Devices portfolio. We have many 
the Medical Devices portfolio. We have many
the Medical Devices portfolio. We have many 
areas of particularly strong performance such
areas of particularly strong performance such
areas of particularly strong performance such
areas of particularly strong performance such
as Electrophysiology, Vision Care, Wound
as Electrophysiology, Vision Care, Wound
as Electrophysiology, Vision Care, Wound
as Electrophysiology, Vision Care, Wound

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also areas where we must improve, specifically
also areas where we must improve, specifically
also areas where we must improve, specifically
also areas where we must improve, specifically
within Orthopaedics. We demonstrated progress
within Orthopaedics. We demonstrated progress
within Orthopaedics. We demonstrated progress
within Orthopaedics. We demonstrated progress
throughout 2018 with the performance of our 
throughout 2018 with the performance of our
throughout 2018 with the performance of our 
throughout 2018 with the performance of our 
knee and spine businesses and we believe 
knee and spine businesses and we believe 
knee and spine businesses and we believe
knee and spine businesses and we believe 
this positions us well for 2019 and beyond. 
this positions us well for 2019 and beyond.
this positions us well for 2019 and beyond. 
this positions us well for 2019 and beyond. 

In 2018 we improved operational growth
In 2018 we improved operational growth
In 2018 we improved operational growth
In 2018 we improved operational growth
excluding acquisitions and divestitures by 
excluding acquisitions and divestitures by 
excluding acquisitions and divestitures by
excluding acquisitions and divestitures by 
1.1%*, as compared to 2017. Additionally, 
1.1%*, as compared to 2017. Additionally, 
1.1%*, as compared to 2017. Additionally,
1.1%*, as compared to 2017. Additionally, 
we improved our cadence of innovation by
we improved our cadence of innovation by
we improved our cadence of innovation by
we improved our cadence of innovation by
delivering 21 major product launches in 2018.
delivering 21 major product launches in 2018.
delivering 21 major product launches in 2018.
delivering 21 major product launches in 2018.

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One example is the launch of the EMBOTRAP 
One example is the launch of the EMBOTRAP 
One example is the launch of the EMBOTRAP
One example is the launch of the EMBOTRAP 
II Revascularization Device, a next-generation 
II Revascularization Device, a next-generation
II Revascularization Device, a next-generation 
II Revascularization Device, a next-generation 
stent retriever used to capture and remove 
stent retriever used to capture and remove 
stent retriever used to capture and remove
stent retriever used to capture and remove 
life-threatening blood clots from the brain 
life-threatening blood clots from the brain 
life-threatening blood clots from the brain
life-threatening blood clots from the brain 
following an ischemic stroke. We received 
following an ischemic stroke. We received 
following an ischemic stroke. We received
following an ischemic stroke. We received 
FDA clearance to market the mechanical clot 
FDA clearance to market the mechanical clot
FDA clearance to market the mechanical clot
FDA clearance to market the mechanical clot 
removal, or thrombectomy device, last May.
removal, or thrombectomy device, last May.
removal, or thrombectomy device, last May.
removal, or thrombectomy device, last May.

In 2019, we plan to launch 20 to 25 major 
In 2019, we plan to launch 20 to 25 major
In 2019, we plan to launch 20 to 25 major 
In 2019, we plan to launch 20 to 25 major 

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a first-of-its-kind contact lens that was named 
a first-of-its-kind contact lens that was named 
a first-of-its-kind contact lens that was named
a first-of-its-kind contact lens that was named
one of TIME Magazine’s Best Inventions of 2018. 
one of TIME Magazine’s Best Inventions of 2018.
one of TIME Magazine’s Best Inventions of 2018. 
one of TIME Magazine’s Best Inventions of 2018. 

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to reduce complications in colorectal, gastric 
to reduce complications in colorectal, gastric 
to reduce complications in colorectal, gastric
to reduce complications in colorectal, gastric 
and thoracic cancer surgeries. Clearly, 
and thoracic cancer surgeries. Clearly, 
and thoracic cancer surgeries. Clearly,
and thoracic cancer surgeries. Clearly, 
advancing our strategy in digital surgery is a 
advancing our strategy in digital surgery is a
advancing our strategy in digital surgery is a 
advancing our strategy in digital surgery is a 
major investment for our future. Our digital
major investment for our future. Our digital
major investment for our future. Our digital
major investment for our future. Our digital
surgery platform is being designed to combine 
surgery platform is being designed to combine 
surgery platform is being designed to combine
surgery platform is being designed to combine 
robotics, advanced instrumentation and data 
robotics, advanced instrumentation and data 
robotics, advanced instrumentation and data
robotics, advanced instrumentation and data 
analytics to enable better patient outcomes by 
analytics to enable better patient outcomes by
analytics to enable better patient outcomes by 
analytics to enable better patient outcomes by 
improving access to minimally invasive surgery 
improving access to minimally invasive surgery 
improving access to minimally invasive surgery
improving access to minimally invasive surgery 
and helping to reduce the cost of care. 
and helping to reduce the cost of care.
and helping to reduce the cost of care. 
and helping to reduce the cost of care. 

As we capitalize on our comprehensive
As we capitalize on our comprehensive
As we capitalize on our comprehensive
As we capitalize on our comprehensive
portfolio and an accelerated growth strategy,
portfolio and an accelerated growth strategy,
portfolio and an accelerated growth strategy,
portfolio and an accelerated growth strategy,
we are committed to improving performance 
we are committed to improving performance 
we are committed to improving performance
we are committed to improving performance 
across our Medical Devices business.
across our Medical Devices business.
across our Medical Devices business.
across our Medical Devices business.

While we are pleased with our 2018 performance, 
While we are pleased with our 2018 performance, 
While we are pleased with our 2018 performance,
While we are pleased with our 2018 performance, 
we are never satisfied. Looking ahead, we are
we are never satisfied. Looking ahead, we are
we are never satisfied. Looking ahead, we are
we are never satisfied. Looking ahead, we are
committed to advancing the innovation pipeline
committed to advancing the innovation pipeline
committed to advancing the innovation pipeline
committed to advancing the innovation pipeline
in our Pharmaceutical business, broadening the 
in our Pharmaceutical business, broadening the
in our Pharmaceutical business, broadening the 
in our Pharmaceutical business, broadening the 
reach of our Consumer business and meeting the
reach of our Consumer business and meeting the
reach of our Consumer business and meeting the
reach of our Consumer business and meeting the
full potential of our Medical Devices business.
full potential of our Medical Devices business.
full potential of our Medical Devices business.
full potential of our Medical Devices business.

I want to emphasize that product quality  
and safety are not only top business priorities 
for Johnson & Johnson, they are also core 
obligations embodied in Our Credo. 

Leading With Certainty
Leading With Certainty
Leading With Certainty
Leading With Certainty
The volume and speed of change around the 
The volume and speed of change around the
The volume and speed of change around the 
The volume and speed of change around the 
world and across all business industries is 
world and across all business industries is 
world and across all business industries is
world and across all business industries is
the new normal. The velocity of this change 
the new normal. The velocity of this change 
the new normal. The velocity of this change
the new normal. The velocity of this change 
is apparent with circumstances like the
is apparent with circumstances like the
is apparent with circumstances like the
is apparent with circumstances like the
evolving geopolitical landscape, ongoing
evolving geopolitical landscape, ongoing
evolving geopolitical landscape, ongoing
evolving geopolitical landscape, ongoing
market volatility, rising pressure to reduce
market volatility, rising pressure to reduce
market volatility, rising pressure to reduce
market volatility, rising pressure to reduce
pricing, rapid entry of disruptive technologies, 
pricing, rapid entry of disruptive technologies, 
pricing, rapid entry of disruptive technologies,
pricing, rapid entry of disruptive technologies, 
a crowded competitive marketplace, and an
a crowded competitive marketplace, and an
a crowded competitive marketplace, and an
a crowded competitive marketplace, and an
expanding range of customer preferences, to 
expanding range of customer preferences, to
expanding range of customer preferences, to 
expanding range of customer preferences, to 

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name just a few. And litigation, unfortunately, is 
name just a few. And litigation, unfortunately, is 
name just a few. And litigation, unfortunately, is
name just a few. And litigation, unfortunately, is 
prevalent throughout the healthcare industry.
prevalent throughout the healthcare industry.
prevalent throughout the healthcare industry.
prevalent throughout the healthcare industry.

These kinds of external factors can impact any
These kinds of external factors can impact any
These kinds of external factors can impact any
These kinds of external factors can impact any
business’ brand, reputation, and business model,
business’ brand, reputation, and business model,
business’ brand, reputation, and business model,
business’ brand, reputation, and business model,
so in partnership with our Board of Directors,
so in partnership with our Board of Directors,
so in partnership with our Board of Directors,
so in partnership with our Board of Directors,
executive committee, and leadership teams 
executive committee, and leadership teams 
executive committee, and leadership teams
executive committee, and leadership teams 
across the Company, we look to mitigate these
across the Company, we look to mitigate these
across the Company, we look to mitigate these
across the Company, we look to mitigate these
kinds of external risk factors wherever possible. 
kinds of external risk factors wherever possible.
kinds of external risk factors wherever possible. 
kinds of external risk factors wherever possible. 

Additionally, I want to emphasize that product 
Additionally, I want to emphasize that product 
Additionally, I want to emphasize that product
Additionally, I want to emphasize that product 
quality and safety are not only top business 
quality and safety are not only top business 
quality and safety are not only top business
quality and safety are not only top business 
priorities for Johnson & Johnson, they are 
priorities for Johnson & Johnson, they are 
priorities for Johnson & Johnson, they are
priorities for Johnson & Johnson, they are 
also core obligations embodied in Our Credo.
also core obligations embodied in Our Credo.
also core obligations embodied in Our Credo.
also core obligations embodied in Our Credo.
Across every Johnson & Johnson business, we 
Across every Johnson & Johnson business, we 
Across every Johnson & Johnson business, we
Across every Johnson & Johnson business, we 
apply a scientific, evidence-based approach in 
apply a scientific, evidence-based approach in 
apply a scientific, evidence-based approach in
apply a scientific, evidence-based approach in 
decisions about the research, marketing and
decisions about the research, marketing and
decisions about the research, marketing and
decisions about the research, marketing and
use of our products. Many of our brands and
use of our products. Many of our brands and
use of our products. Many of our brands and
use of our products. Many of our brands and
products have been trusted by consumers for 
products have been trusted by consumers for 
products have been trusted by consumers for
products have been trusted by consumers for 
decades, and when the safety of our products
decades, and when the safety of our products
decades, and when the safety of our products
decades, and when the safety of our products
is challenged, we will continue to defend them.
is challenged, we will continue to defend them.
is challenged, we will continue to defend them.
is challenged, we will continue to defend them.
We have a legacy of working hard to earn our
We have a legacy of working hard to earn our
We have a legacy of working hard to earn our
We have a legacy of working hard to earn our
customers’ trust and working equally hard to keep
customers’ trust and working equally hard to keep
customers’ trust and working equally hard to keep
customers’ trust and working equally hard to keep
it—this commitment will always remain intact. 
it—this commitment will always remain intact.
it—this commitment will always remain intact. 
it—this commitment will always remain intact. 

We are confident in our ability to lead with
We are confident in our ability to lead with
We are confident in our ability to lead with
We are confident in our ability to lead with
certainty and to responsibly navigate our way 
certainty and to responsibly navigate our way 
certainty and to responsibly navigate our way
certainty and to responsibly navigate our way 
through these potential challenges. And because 
through these potential challenges. And because 
through these potential challenges. And because
through these potential challenges. And because 
we are committed to thriving in this change 
we are committed to thriving in this change 
we are committed to thriving in this change
we are committed to thriving in this change 
environment, our goal is not merely to adapt 
environment, our goal is not merely to adapt
environment, our goal is not merely to adapt 
environment, our goal is not merely to adapt 
to change, but to be the catalyst for needed 
to change, but to be the catalyst for needed 
to change, but to be the catalyst for needed
to change, but to be the catalyst for needed 
change. We also lead with certainty because 
change. We also lead with certainty because 
change. We also lead with certainty because
change. We also lead with certainty because 
we are in the business of caring for the world all
we are in the business of caring for the world all
we are in the business of caring for the world all
we are in the business of caring for the world all
day, every day. Guided by Our Credo, we have
day, every day. Guided by Our Credo, we have
day, every day. Guided by Our Credo, we have
day, every day. Guided by Our Credo, we have
a solid financial foundation, a strong strategic
a solid financial foundation, a strong strategic
a solid financial foundation, a strong strategic
a solid financial foundation, a strong strategic
framework, an innovation mindset, a performance
framework, an innovation mindset, a performance
framework, an innovation mindset, a performance
framework, an innovation mindset, a performance
driven culture and a very bright future focused 
driven culture and a very bright future focused
driven culture and a very bright future focused 
driven culture and a very bright future focused 
on advancing the health and well-being of all our 
on advancing the health and well-being of all our
on advancing the health and well-being of all our 
on advancing the health and well-being of all our 
stakeholders—today and for generations to come.
stakeholders—today and for generations to come.
stakeholders—today and for generations to come.
stakeholders—today and for generations to come.

Our People, Passion and Purpose
Our People, Passion and Purpose
Our People, Passion and Purpose
Our People, Passion and Purpose
I’ve often noted healthcare is an industry that
I’ve often noted healthcare is an industry that
I’ve often noted healthcare is an industry that
I’ve often noted healthcare is an industry that
attracts very special people. While they want
attracts very special people. While they want
attracts very special people. While they want
attracts very special people. While they want
the opportunity to build a meaningful career,
the opportunity to build a meaningful career,
the opportunity to build a meaningful career,
the opportunity to build a meaningful career,
they also want to be a part of something truly 
they also want to be a part of something truly
they also want to be a part of something truly 
they also want to be a part of something truly 
significant that makes an important difference in
significant that makes an important difference in
significant that makes an important difference in
significant that makes an important difference in
people’s lives. Fortunately, we have the very best
people’s lives. Fortunately, we have the very best
people’s lives. Fortunately, we have the very best
people’s lives. Fortunately, we have the very best
of these special people at the Johnson & Johnson
of these special people at the Johnson & Johnson
of these special people at the Johnson & Johnson
of these special people at the Johnson & Johnson
Family of Companies. And I believe our culture 
Family of Companies. And I believe our culture
Family of Companies. And I believe our culture 
Family of Companies. And I believe our culture 
of diversity and inclusion brings out the best that
of diversity and inclusion brings out the best that
of diversity and inclusion brings out the best that
of diversity and inclusion brings out the best that
our Johnson & Johnson colleagues have to offer. 
our Johnson & Johnson colleagues have to offer.
our Johnson & Johnson colleagues have to offer. 
our Johnson & Johnson colleagues have to offer. 

Today, we have approximately 135,000 global 
Today, we have approximately 135,000 global 
Today, we have approximately 135,000 global
Today, we have approximately 135,000 global 
employees, united by a shared commitment 
employees, united by a shared commitment
employees, united by a shared commitment 
employees, united by a shared commitment 

and a common purpose that aspires to create 
and a common purpose that aspires to create 
and a common purpose that aspires to create
and a common purpose that aspires to create 
a world without disease and with greater 
a world without disease and with greater
a world without disease and with greater 
a world without disease and with greater 
access to quality healthcare—life-saving
access to quality healthcare—life-saving
access to quality healthcare—life-saving
access to quality healthcare—life-saving
medicines, life-changing medical solutions and 
medicines, life-changing medical solutions and 
medicines, life-changing medical solutions and
medicines, life-changing medical solutions and 
life-enhancing consumer products. All of us 
life-enhancing consumer products. All of us 
life-enhancing consumer products. All of us
life-enhancing consumer products. All of us 
maintain a persistent focus on developing and
maintain a persistent focus on developing and
maintain a persistent focus on developing and
maintain a persistent focus on developing and
delivering quality and safe products and services. 
delivering quality and safe products and services. 
delivering quality and safe products and services.
delivering quality and safe products and services. 
Delivering on the promises of our brands is both
Delivering on the promises of our brands is both
Delivering on the promises of our brands is both
Delivering on the promises of our brands is both
a personal and professional commitment. 
a personal and professional commitment.
a personal and professional commitment. 
a personal and professional commitment. 

This is demonstrated in the tireless efforts 
This is demonstrated in the tireless efforts 
This is demonstrated in the tireless efforts
This is demonstrated in the tireless efforts
and relentless passion that drive our ambition 
and relentless passion that drive our ambition 
and relentless passion that drive our ambition
and relentless passion that drive our ambition 
to reach the next frontier of cancer care,
to reach the next frontier of cancer care,
to reach the next frontier of cancer care,
to reach the next frontier of cancer care,
continue to combat Ebola and HIV, bring healthy
continue to combat Ebola and HIV, bring healthy
continue to combat Ebola and HIV, bring healthy
continue to combat Ebola and HIV, bring healthy
vision to people everywhere, create a world
vision to people everywhere, create a world
vision to people everywhere, create a world
vision to people everywhere, create a world
free from tuberculosis, reduce our carbon 
free from tuberculosis, reduce our carbon 
free from tuberculosis, reduce our carbon
free from tuberculosis, reduce our carbon 
footprint, improve our product sustainability
footprint, improve our product sustainability
footprint, improve our product sustainability
footprint, improve our product sustainability
and reimagine the way that care is delivered, 
and reimagine the way that care is delivered,
and reimagine the way that care is delivered, 
and reimagine the way that care is delivered, 
while also expanding access for the world’s most 
while also expanding access for the world’s most 
while also expanding access for the world’s most
while also expanding access for the world’s most 
vulnerable populations. Johnson & Johnson
vulnerable populations. Johnson & Johnson
vulnerable populations. Johnson & Johnson
vulnerable populations. Johnson & Johnson
made Fortune’s “Change the World List” again 
made Fortune’s “Change the World List” again
made Fortune’s “Change the World List” again 
made Fortune’s “Change the World List” again 
in 2018, in recognition of our efforts to help train 
in 2018, in recognition of our efforts to help train
in 2018, in recognition of our efforts to help train 
in 2018, in recognition of our efforts to help train 
surgeons, paramedics and other healthcare
surgeons, paramedics and other healthcare
surgeons, paramedics and other healthcare
surgeons, paramedics and other healthcare
providers globally through our Johnson & 
providers globally through our Johnson & 
providers globally through our Johnson & 
providers globally through our Johnson & 
Johnson Institute and other care programs.
Johnson Institute and other care programs.
Johnson Institute and other care programs.
Johnson Institute and other care programs.

Our goal is to lead by example, by cultivating 
Our goal is to lead by example, by cultivating 
Our goal is to lead by example, by cultivating
Our goal is to lead by example, by cultivating 
the world’s healthiest, most productive and most
the world’s healthiest, most productive and most
the world’s healthiest, most productive and most
the world’s healthiest, most productive and most
engaged workforce. I believe this is critical for 
engaged workforce. I believe this is critical for
engaged workforce. I believe this is critical for 
engaged workforce. I believe this is critical for 
operating a healthy and successful business. And
operating a healthy and successful business. And
operating a healthy and successful business. And
operating a healthy and successful business. And
this is how we will deliver and ensure that another 
this is how we will deliver and ensure that another 
this is how we will deliver and ensure that another
this is how we will deliver and ensure that another
133 years of quality healthcare is within reach of 
133 years of quality healthcare is within reach of 
133 years of quality healthcare is within reach of
133 years of quality healthcare is within reach of 
everyone, everywhere.
everyone, everywhere.
everyone, everywhere.
everyone, everywhere.

uman HHHealthealthealth
n Education in HHHuman 
AAAn Education in
An Education in Human Health
uman
n Education in
I am as excited and encouraged today, as I was
I am as excited and encouraged today, as I was
I am as excited and encouraged today, as I was
I am as excited and encouraged today, as I was
on the day I started as CEO of this Company and
on the day I started as CEO of this Company and
on the day I started as CEO of this Company and
on the day I started as CEO of this Company and
accepted the responsibilities that come with it.
accepted the responsibilities that come with it.
accepted the responsibilities that come with it.
accepted the responsibilities that come with it.

Throughout my career at Johnson & Johnson, I 
Throughout my career at Johnson & Johnson, I 
Throughout my career at Johnson & Johnson, I
Throughout my career at Johnson & Johnson, I 
have been very fortunate to learn this business
have been very fortunate to learn this business
have been very fortunate to learn this business
have been very fortunate to learn this business
from the perspective of a company that is built 
from the perspective of a company that is built
from the perspective of a company that is built 
from the perspective of a company that is built 
on the belief in the transformative possibilities 
on the belief in the transformative possibilities 
on the belief in the transformative possibilities
on the belief in the transformative possibilities 
of human ingenuity and personal caring. The 
of human ingenuity and personal caring. The 
of human ingenuity and personal caring. The
of human ingenuity and personal caring. The 
world has been the campus for my education in 
world has been the campus for my education in
world has been the campus for my education in 
world has been the campus for my education in 
human health, as it has been for my Johnson & 
human health, as it has been for my Johnson & 
human health, as it has been for my Johnson & 
human health, as it has been for my Johnson & 
Johnson colleagues. I deeply appreciate the
Johnson colleagues. I deeply appreciate the
Johnson colleagues. I deeply appreciate the
Johnson colleagues. I deeply appreciate the

guiding support of our highly accomplished 
guiding support of our highly accomplished 
guiding support of our highly accomplished
guiding support of our highly accomplished 
Board of Directors and continue to be proud and
Board of Directors and continue to be proud and
Board of Directors and continue to be proud and
Board of Directors and continue to be proud and
humbled as I work side by side with this team of
humbled as I work side by side with this team of
humbled as I work side by side with this team of
humbled as I work side by side with this team of
impressive executive leaders, whose partnership
impressive executive leaders, whose partnership
impressive executive leaders, whose partnership
impressive executive leaders, whose partnership
and expertise motivate me and all our Johnson 
and expertise motivate me and all our Johnson 
and expertise motivate me and all our Johnson
and expertise motivate me and all our Johnson 
& Johnson colleagues every day in our shared
& Johnson colleagues every day in our shared
& Johnson colleagues every day in our shared
& Johnson colleagues every day in our shared
commitment to advance health for humanity.
commitment to advance health for humanity.
commitment to advance health for humanity.
commitment to advance health for humanity.

We have approximately 135,000 global 
employees, united by a shared commitment 
and a common purpose that aspires to 
create a world without disease and with 
greater access to quality healthcare.

My optimism for the future is inspired by the
My optimism for the future is inspired by the
My optimism for the future is inspired by the
My optimism for the future is inspired by the
rapid and continuous improvements in the 
rapid and continuous improvements in the
rapid and continuous improvements in the 
rapid and continuous improvements in the 
condition of human health and the increasing
condition of human health and the increasing
condition of human health and the increasing
condition of human health and the increasing
possibilities for healthcare in the world. Most
possibilities for healthcare in the world. Most
possibilities for healthcare in the world. Most
possibilities for healthcare in the world. Most
importantly, we have the amazing privilege 
importantly, we have the amazing privilege
importantly, we have the amazing privilege 
importantly, we have the amazing privilege 
of touching lives around the world every
of touching lives around the world every
of touching lives around the world every
of touching lives around the world every
day—from babies taking their first breath to
day—from babies taking their first breath to
day—from babies taking their first breath to
day—from babies taking their first breath to
baby boomers taking a breath after doing the 
baby boomers taking a breath after doing the 
baby boomers taking a breath after doing the
baby boomers taking a breath after doing the 
Johnson & Johnson Official 7 Minute Workout.
Johnson & Johnson Official 7 Minute Workout.
Johnson & Johnson Official 7 Minute Workout.
Johnson & Johnson Official 7 Minute Workout.

We also have the pleasure of serving patients 
We also have the pleasure of serving patients 
We also have the pleasure of serving patients
We also have the pleasure of serving patients 
and consumers everywhere on Earth—people
and consumers everywhere on Earth—people
and consumers everywhere on Earth—people
and consumers everywhere on Earth—people
who put their trust in our Johnson & Johnson
who put their trust in our Johnson & Johnson
who put their trust in our Johnson & Johnson
who put their trust in our Johnson & Johnson
brands. We never forget the responsibility that
brands. We never forget the responsibility that
brands. We never forget the responsibility that
brands. We never forget the responsibility that
comes with this trust. And we never forget our 
comes with this trust. And we never forget our 
comes with this trust. And we never forget our
comes with this trust. And we never forget our 
essential partnership with our shareholders
essential partnership with our shareholders
essential partnership with our shareholders
essential partnership with our shareholders
who support our mission and help us pursue
who support our mission and help us pursue
who support our mission and help us pursue
who support our mission and help us pursue
a noble purpose. While the challenges are 
a noble purpose. While the challenges are 
a noble purpose. While the challenges are
a noble purpose. While the challenges are 
great, the rewards are even greater. I can’t 
great, the rewards are even greater. I can’t 
great, the rewards are even greater. I can’t
great, the rewards are even greater. I can’t 
imagine a better or more fulfilling calling!
imagine a better or more fulfilling calling!
imagine a better or more fulfilling calling!
imagine a better or more fulfilling calling!

I offer my sincere thanks to all of you for this 
I offer my sincere thanks to all of you for this
I offer my sincere thanks to all of you for this 
I offer my sincere thanks to all of you for this 
great privilege, opportunity and experience.
great privilege, opportunity and experience.
great privilege, opportunity and experience.
great privilege, opportunity and experience.

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Alex Gorsky
Alex Gorsky
Alex Gorsky
Alex Gorsky
Chairman and Chief Executive Officer
Chairman and Chief Executive Officer
Chairman and Chief Executive Officer
Chairman and Chief Executive Officer
Johnson & Johnson
Johnson & Johnson
Johnson & Johnson
Johnson & Johnson

*Non-GAAP measures: Free cash flow is defined as operating cash flow less capital spending. Adjusted operational earnings growth excludes special items, intangible 
(cid:68)(cid:86)(cid:86)(cid:72)(cid:87) (cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72) (cid:68)(cid:81)(cid:71) (cid:87)(cid:75)(cid:72) (cid:72)(cid:609)(cid:72)(cid:70)(cid:87) (cid:82)(cid:73) (cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:17) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79) (cid:86)(cid:68)(cid:79)(cid:72)(cid:86) (cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75) (cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86) (cid:87)(cid:75)(cid:72) (cid:72)(cid:609)(cid:72)(cid:70)(cid:87) (cid:82)(cid:73) (cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:17) (cid:54)(cid:72)(cid:72) (cid:49)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51) (cid:53)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:76)(cid:68)-
tions of Free cash flow and Operational sales growth excluding acquisitions and divestitures for the Medical Devices segment in this Annual Report.

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This letter contains forward-looking statements relating to, among other things, future operating and financial performance, product development, market position
and business strategy. The reader is cautioned not to rely on these statements, which are based on current expectations of future events. For important information 
about these statements, including the risks, uncertainties and other factors that could cause actual results to vary materially from the assumptions, expectations and
projections expressed in any forward-looking statements, the readers should review the enclosed Annual Report on Form 10-K for the fiscal year ended December 30, 
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to update any forward-looking statement as a result of new information or future events or developments.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 30, 2018

Commission file number 1-3215

JOHNSON & JOHNSON

(Exact name of registrant as specified in its charter)

New Jersey
(State of incorporation)

22-1024240
(I.R.S. Employer Identification No.)

One Johnson & Johnson Plaza
New Brunswick, New Jersey
(Address of principal executive offices)

08933
(Zip Code)

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

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

Title of each class
Common Stock, Par Value $1.00
4.75% Notes Due November 2019
0.250% Notes Due January 2022
0.650% Notes Due May 2024
5.50% Notes Due November 2024
1.150% Notes Due November 2028
1.650% Notes Due May 2035

Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes Í No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes ‘ No Í
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes Í No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Í Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘
Emerging growth company ‘

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ‘ No Í
The aggregate market value of the Common Stock held by non-affiliates computed by reference to the price at which the
Common Stock was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter
was approximately $325 billion.
On February 15, 2019, there were 2,663,138,579 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Parts I and III:

Portions of registrant’s proxy statement for its 2019 annual meeting of shareholders filed within
120 days after the close of the registrant’s fiscal year (the “Proxy Statement”), are incorporated by
reference to this report on Form 10-K (this “Report”).

PART I

Item

1

Business
General
Segments of Business
Geographic Areas
Raw Materials
Patents
Trademarks
Seasonality
Competition
Environment
Regulation
Available Information

1A. Risk Factors
1B. Unresolved Staff Comments
2
3
4

Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant

5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

PART II

Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Results of Operations and Financial Condition

6
7
7A. Quantitative and Qualitative Disclosures About Market Risk
8
9
9A. Controls and Procedures
9B. Other Information

Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

10
11
12

13
14

15
16

PART III

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

PART IV

Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Exhibit Index

Page

1
1
1
2
2
2
3
3
3
3
3
4
4
9
9
10
10
11

13
14
15
35
35
102
102
102

103
103

103
104
104

105
105
106
107

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

Risks Related to Product Development, Market Success and Competition

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

• Challenges to the Company’s ability to obtain and protect adequate patent and other intellectual property rights for new

and existing products and technologies in the United States and other important markets;

• The impact of patent expirations, typically followed by the introduction of competing biosimilars and generics and

resulting revenue and market share losses;

• Increasingly aggressive and frequent challenges to the Company’s patents by competitors and others seeking to launch

competing generic, biosimilar or other products and increased receptivity of courts, the United States Patent and
Trademark Office and other decision makers to such challenges, potentially resulting in loss of market exclusivity and
rapid decline in sales for the relevant product sooner than expected;

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

in product and process obsolescence;

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

for products and technologies;

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

competitors; and

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

Risks Related to Product Liability, Litigation and Regulatory Activity

• Product efficacy or safety concerns, whether or not based on scientific evidence, potentially resulting in product

withdrawals, recalls, regulatory action on the part of the United States Food and Drug Administration (or international
counterparts), declining sales, reputational damage, increased litigation expense and share price impact;

• Impact, including declining sales and reputational damage, of significant litigation or government action adverse to the

Company, including product liability claims and allegations related to pharmaceutical marketing practices and
contracting strategies;

• Impact of an adverse judgment or settlement and the adequacy of reserves related to legal proceedings, including

patent litigation, product liability, personal injury claims, securities class actions, government investigations, employment
and other legal proceedings;

• Increased scrutiny of the health care industry by government agencies and state attorneys general resulting in

investigations and prosecutions, which carry the risk of significant civil and criminal penalties, including, but not limited
to, debarment from government business;

Johnson & Johnson 2018 Annual Report •

• Failure to meet compliance obligations in the McNEIL-PPC, Inc. Consent Decree or any other compliance agreements

with governments or government agencies, which could result in significant sanctions;

• Potential changes to applicable laws and regulations affecting United States and international operations, including

relating to: approval of new products; licensing and patent rights; sales and promotion of health care products; access
to, and reimbursement and pricing for, health care products and services; environmental protection and sourcing of raw
materials;

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

• Changes in domestic and international tax laws and regulations, including changes related to The Tax Cuts and Jobs

Act in the United States, the Federal Act on Tax Reform and AHV Financing in Switzerland, increasing audit scrutiny by
tax authorities around the world and exposures to additional tax liabilities potentially in excess of existing reserves; and
• Issuance of new or revised accounting standards by the Financial Accounting Standards Board and regulations by the

Securities and Exchange Commission.

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

• Pricing pressures resulting from trends toward health care cost containment, including the continued consolidation

among health care providers and other market participants, trends toward managed care, the shift toward governments
increasingly becoming the primary payers of health care expenses, significant new entrants to the health care markets
seeking to reduce costs and government pressure on companies to voluntarily reduce costs and price increases;
• Restricted spending patterns of individual, institutional and governmental purchasers of health care products and

services due to economic hardship and budgetary constraints;

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

• The potential that the expected strategic benefits and opportunities from any planned or completed acquisition or

divestiture by the Company may not be realized or may take longer to realize than expected; and

• The potential that the expected benefits and opportunities related to past and ongoing restructuring actions may not be

realized or may take longer to realize than expected.

Risks Related to Economic Conditions, Financial Markets and Operating Internationally

• Market conditions and the possibility that the Company’s share repurchase program may be delayed, suspended or

discontinued;

• Impact of inflation and fluctuations in interest rates and currency exchange rates and the potential effect of such

fluctuations on revenues, expenses and resulting margins;

• Potential changes in export/import and trade laws, regulations and policies of the United States and other countries,

including any increased trade restrictions or tariffs and potential drug reimportation legislation;

• The impact on international operations from financial instability in international economies, sovereign risk, possible

imposition of governmental controls and restrictive economic policies, and unstable international governments and legal
systems;

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

• The impact of armed conflicts and terrorist attacks in the United States and other parts of the world including social and

economic disruptions and instability of financial and other markets.

Risks Related to Supply Chain and Operations

• Difficulties and delays in manufacturing, internally through third party providers or otherwise within the supply chain, that

may lead to voluntary or involuntary business interruptions or shutdowns, product shortages, withdrawals or
suspensions of products from the market, and potential regulatory action;

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

• Reliance on global supply chains and production and distribution processes that are complex and subject to increasing

regulatory requirements that may adversely affect supply, sourcing and pricing of materials used in the Company’s
products; and

• Johnson & Johnson 2018 Annual Report

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

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

Johnson & Johnson 2018 Annual Report •

PART I

Item 1. BUSINESS

General

Johnson & Johnson and its subsidiaries (the Company) have approximately 135,100 employees worldwide engaged in the
research and development, manufacture and sale of a broad range of products in the health care field. Johnson & Johnson
is a holding company, which has more than 260 operating companies conducting business in virtually all countries of the
world. The Company’s primary focus is products related to human health and well-being. Johnson & Johnson was
incorporated in the State of New Jersey in 1887.

The Executive Committee of Johnson & Johnson is the principal management group responsible for the strategic
operations and allocation of the resources of the Company. This Committee oversees and coordinates the activities of the
Company’s three business segments: Consumer, Pharmaceutical and Medical Devices. Within the strategic parameters
provided by the Committee, senior management groups at U.S. and international operating companies are each
responsible for their own strategic plans and the day-to-day operations of those companies. Each subsidiary within the
business segments is, with limited exceptions, managed by residents of the country where located.

Segments of Business

The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices. Additional
information required by this item is incorporated herein by reference to the narrative and tabular descriptions of segments
and operating results under: Item 7. “Management’s Discussion and Analysis of Results of Operations and Financial
Condition” of this Report; and Note 18 “Segments of Business and Geographic Areas” of the Notes to Consolidated
Financial Statements included in Item 8 of this Report.

Consumer

The Consumer segment includes a broad range of products used in the baby care, oral care, beauty, over-the-counter
pharmaceutical, women’s health and wound care markets. Baby Care includes the JOHNSON’S® line of products. Oral
Care includes the LISTERINE® product line. Major brands in Beauty include the AVEENO®; CLEAN & CLEAR®;
DABAO™; JOHNSON’S® Adult; LE PETITE MARSEILLAIS®; NEUTROGENA® and OGX® product lines.
Over-the-counter medicines include the broad family of TYLENOL® acetaminophen products; SUDAFED® cold, flu and
allergy products; BENADRYL® and ZYRTEC® allergy products; MOTRIN® IB ibuprofen products; and the PEPCID® line
of acid reflux products. Major brands in Women’s Health outside of North America are STAYFREE® and CAREFREE®
sanitary pads and o.b.® tampon brands. Wound Care brands include the BAND-AID® Brand Adhesive Bandages and
NEOSPORIN® First Aid product lines. These products are marketed to the general public and sold both to retail outlets
and distributors throughout the world.

Pharmaceutical

The Pharmaceutical segment is focused on six therapeutic areas: Immunology (e.g., rheumatoid arthritis, inflammatory
bowel disease and psoriasis), Infectious Diseases and Vaccines (e.g., HIV/AIDS), Neuroscience (e.g., mood disorders,
neurodegenerative disorders and schizophrenia), Oncology (e.g., prostate cancer and hematologic malignancies),
Cardiovascular and Metabolism (e.g., thrombosis and diabetes) and Pulmonary Hypertension (e.g., Pulmonary Arterial
Hypertension). Medicines in this segment are distributed directly to retailers, wholesalers, hospitals and health care
professionals for prescription use. Key products in the Pharmaceutical segment include: REMICADE® (infliximab), a
treatment for a number of immune-mediated inflammatory diseases; SIMPONI® (golimumab), a subcutaneous treatment
for adults with moderate to severe rheumatoid arthritis, active psoriatic arthritis, active ankylosing spondylitis and
moderately active to severely active ulcerative colitis; SIMPONI ARIA® (golimumab), an intravenous treatment for adults
with moderate to severe rheumatoid arthritis, active psoriatic arthritis and active ankylosing spondylitis; STELARA®
(ustekinumab), a treatment for adults and children with moderate to severe plaque psoriasis, for adults with active psoriatic
arthritis, and for adults with moderately to severely active Crohn’s disease; TREMFYA® (guselkumab), a treatment for
adults with moderate to severe plaque psoriasis; EDURANT® (rilpivirine), INTELENCE® (etravirine), PREZISTA®

Johnson & Johnson 2018 Annual Report • 1

(darunavir) and PREZCOBIX® /REZOLSTA® (darunavir/cobicistat), antiretroviral medicines for the treatment of human
immunodeficiency virus (HIV-1) in combination with other antiretroviral products and SYMTUZA® (darunavir/cobicistat/
emtricitabine/tenofovir alafenamide), a once-daily single tablet regimen for the treatment of HIV; CONCERTA®
(methylphenidate HCl) extended-release tablets CII, a treatment for attention deficit hyperactivity disorder; INVEGA
SUSTENNA® /XEPLION® (paliperidone palmitate), for the treatment of schizophrenia and schizoaffective disorder in
adults; INVEGA TRINZA® /TREVICTA® (paliperidone palmitate), for the treatment of schizophrenia in patients after they
have been adequately treated with INVEGA SUSTENNA® for at least four months; RISPERDAL CONSTA® (risperidone
long-acting injection), for the treatment of schizophrenia and the maintenance treatment of Bipolar 1 Disorder in adults;
ZYTIGA® (abiraterone acetate), a treatment for metastatic castration-resistant prostate cancer (CRPC) and metastatic
high-risk castration-sensitive prostate cancer; IMBRUVICA® (ibrutinib), a treatment for certain B-cell malignancies, or
blood cancers, chronic graft versus host disease and Waldenström’s Macroglobulinemia; DARZALEX® (daratumumab), a
treatment for relapsed/refractory multiple myeloma; VELCADE® (bortezomib), a treatment for multiple myeloma mantle cell
lymphoma; PROCRIT® /EPREX® (epoetin alfa), a treatment for chemotherapy-induced anemia and patients with chronic
kidney disease; XARELTO® (rivaroxaban), an oral anticoagulant for the prevention of deep vein thrombosis (DVT), which
may lead to pulmonary embolism (PE) in patients undergoing hip or knee replacement surgery, to reduce the risk of stroke
and systemic embolism in patients with nonvalvular atrial fibrillation, and for the treatment and reduction of risk of
recurrence of DVT and PE; INVOKANA® (canagliflozin), for the treatment of adults with type 2 diabetes; INVOKAMET®
/VOKANAMET® (canagliflozin/metformin HCl), a combination therapy of fixed doses of canagliflozin and metformin
hydrochloride for the treatment of adults with type 2 diabetes; and INVOKAMET® XR (canagliflozin/metformin
hydrochloride extended-release), a once-daily, fixed-dose combination therapy of canagliflozin and metformin
hydrochloride extended-release, for the treatment of adults with type 2 diabetes; OPSUMIT® (macitentan), as
monotherapy or in combination, indicated for the long-term treatment of pulmonary arterial hypertension (PAH); UPTRAVI®
(selexipag), the only approved oral, selective IP receptor agonist targeting a prostacyclin pathway in PAH. Many of these
medicines were developed in collaboration with strategic partners or are licensed from other companies and maintain
active lifecycle development programs.

Medical Devices

The Medical Devices segment includes a broad range of products used in the orthopaedic, surgery, interventional
solutions (cardiovascular and neurovascular), diabetes care (divested in the fiscal fourth quarter of 2018) and eye health
fields. These products are distributed to wholesalers, hospitals and retailers, and used principally in the professional fields
by physicians, nurses, hospitals, eye care professionals and clinics. They include orthopaedic products; general surgery,
biosurgical, endomechanical and energy products; electrophysiology products to treat cardiovascular disease; sterilization
and disinfection products to reduce surgical infection; and vision products such as disposable contact lenses and
ophthalmic products related to cataract and laser refractive surgery.

Geographic Areas

The business of Johnson & Johnson is conducted by more than 260 operating companies located in more than
60 countries, including the U.S., which sell products in virtually all countries throughout the world. The products made and
sold in the international business include many of those described above under “ — Segments of Business — Consumer,”
“ — Pharmaceutical” and “ — Medical Devices.” However, the principal markets, products and methods of distribution in
the international business vary with the country and the culture. The products sold in international business include those
developed in the U.S. and by subsidiaries abroad.

Investments and activities in some countries outside the U.S. are subject to higher risks than comparable U.S. activities
because the investment and commercial climate may be influenced by financial instability in international economies,
restrictive economic policies and political and legal system uncertainties.

Raw Materials

Raw materials essential to the Company’s business are generally readily available from multiple sources. Where there are
exceptions, the temporary unavailability of those raw materials would not likely have a material adverse effect on the
financial results of the Company.

Patents

The Company’s subsidiaries have made a practice of obtaining patent protection on their products and processes where
possible. They own, or are licensed under, a significant number of patents in the U.S. and other countries relating to their

2 • Johnson & Johnson 2018 Annual Report

products, product uses, formulations and manufacturing processes, which in the aggregate are believed to be of material
importance to the Company in the operation of its businesses. The Company’s subsidiaries face patent challenges from
third parties, including challenges seeking to manufacture and market generic and biosimilar versions of the Company’s
key pharmaceutical products prior to expiration of the applicable patents covering those products. Significant legal
proceedings and claims involving the Company’s patent and other intellectual property are described in Note 21, “Legal
Proceedings — Intellectual Property” of the Notes to Consolidated Financial Statements included in Item 8 of this Report.

Sales of the Company’s 2nd largest product, STELARA® (ustekinumab), accounted for approximately 6.3% of the
Company’s total revenues for fiscal 2018. Accordingly, the patents related to this product are believed to be material to
the Company.

There is one set of granted patents related specifically to STELARA®. This set of patents is owned by Janssen Biotech,
Inc., a wholly-owned subsidiary of Johnson & Johnson. These patents are in force in the U.S. and many countries outside
the United States. In the U.S., the latest projected expiration date for patents in this set is 2023 due to a patent term
extension. In Europe, the latest projected expiration date for patents in this set is 2024 due to a Supplemental Patent
Certificate (patent term extension). In most other countries, the latest projected expiration date is 2021.

In addition to competing in the immunology market with STELARA®, the Company is currently marketing SIMPONI®
(golimumab) and SIMPONI ARIA® (golimumab), next generation immunology products with remaining patent lives of up to
six years. The Company also markets REMICADE® (infliximab) in the immunology market which is the Company’s largest
product. Patents on this product have expired and the Food and Drug Administration approved the first infliximab biosimilar
for sale in the U.S. in 2016, and a number of such products have been launched since then. For a more extensive
description of legal matters regarding the patents related to REMICADE®, see Note 21 “Legal Proceedings — Intellectual
Property — Pharmaceutical — REMICADE® Related Cases” of the Notes to Consolidated Financial Statements included
in Item 8 of this Report.

Trademarks

The Company’s subsidiaries have made a practice of selling their products under trademarks and of obtaining protection
for these trademarks by all available means. These trademarks are protected by registration in the U.S. and other countries
where such products are marketed. The Company considers these trademarks in the aggregate to be of material
importance in the operation of its businesses.

Seasonality

Worldwide sales do not reflect any significant degree of seasonality; however, spending has been heavier in the fourth
quarter of each year than in other quarters. This reflects increased spending decisions, principally for advertising and
research and development activity.

Competition

In all of their product lines, the Company’s subsidiaries compete with companies both locally and globally. Competition
exists in all product lines without regard to the number and size of the competing companies involved. Competition in
research, both internally and externally sourced, involving the development and the improvement of new and existing
products and processes, is particularly significant. The development of new and innovative products, as well as protecting
the underlying intellectual property of the Company’s product portfolio, is important to the Company’s success in all areas
of its business. The competitive environment requires substantial investments in continuing research. In addition, the
development and maintenance of customer demand for the Company’s consumer products involve significant
expenditures for advertising and promotion.

Environment

The Company is subject to a variety of U.S. and international environmental protection measures. The Company believes
that its operations comply in all material respects with applicable environmental laws and regulations. The Company’s
compliance with these requirements did not change during the past year, and is not expected to have a material effect
upon its capital expenditures, cash flows, earnings or competitive position.

Regulation

The Company’s businesses are subject to varying degrees of governmental regulation in the countries in which operations
are conducted, and the general trend is toward increasingly stringent regulation. In the U.S., the drug, device and cosmetic

Johnson & Johnson 2018 Annual Report • 3

industries have long been subject to regulation by various federal and state agencies, primarily as to product safety,
efficacy, manufacturing, advertising, labeling and safety reporting. The exercise of broad regulatory powers by the U.S.
Food and Drug Administration (the FDA) continues to result in increases in the amounts of testing and documentation
required for FDA approval of new drugs and devices and a corresponding increase in the expense of product introduction.
Similar trends are also evident in major markets outside of the U.S. The new medical device regulatory framework and the
new privacy regulations in Europe are examples of such increased regulation.

The costs of human health care have been and continue to be a subject of study, investigation and regulation by
governmental agencies and legislative bodies around the world. In the U.S., attention has been focused on drug prices
and profits and programs that encourage doctors to write prescriptions for particular drugs, or to recommend, use or
purchase particular medical devices. Payers have become a more potent force in the market place and increased attention
is being paid to drug and medical device pricing, appropriate drug and medical device utilization and the quality and costs
of health care generally.

U.S. government agencies continue to implement the extensive requirements of the Patient Protection and Affordable Care
Act (the ACA). These have both positive and negative impacts on the U.S. healthcare industry with much remaining
uncertain as to how various provisions of the ACA, and potential modification or repeal of ACA provisions, will ultimately
affect the industry.

The regulatory agencies under whose purview the Company operates have administrative powers that may subject it to
actions such as product withdrawals, recalls, seizure of products and other civil and criminal sanctions. In some cases, the
Company’s subsidiaries may deem it advisable to initiate product recalls.

In addition, business practices in the health care industry have come under increased scrutiny, particularly in the U.S., by
government agencies and state attorneys general, and resulting investigations and prosecutions carry the risk of significant
civil and criminal penalties.

Further, the Company relies on global supply chains, and production and distribution processes, that are complex, are
subject to increasing regulatory requirements, and may be faced with unexpected changes such as those resulting from
Brexit, that may affect sourcing, supply and pricing of materials used in the Company’s products. These processes also
are subject to lengthy regulatory approvals.

Available Information

The Company’s main corporate website address is www.jnj.com. All of the Company’s SEC filings are also available on the
Company’s website at www.investor.jnj.com/sec.cfm, as soon as reasonably practicable after having been electronically
filed or furnished to the SEC. All SEC filings are also available at the SEC’s website at www.sec.gov. In addition, the
written charters of the Audit Committee, the Compensation & Benefits Committee, the Nominating & Corporate
Governance Committee, the Regulatory Compliance Committee and the Science, Technology & Sustainability Committee
of the Board of Directors and the Company’s Principles of Corporate Governance, Code of Business Conduct (for
employees), Code of Business Conduct & Ethics for Members of the Board of Directors and Executive Officers, and other
corporate governance materials, are available at www.investor.jnj.com/gov.cfm on the Company’s website and will be
provided without charge to any shareholder submitting a written request, as provided above. The information on the
Company’s website is not, and will not be deemed, a part of this Report or incorporated into any other filings the Company
makes with the SEC.

Item 1A. RISK FACTORS

The Company faces a number of uncertainties and risks that are difficult to predict and many of which are outside of the
Company’s control. In addition to the other information in this report and the Company’s other filings with the SEC,
investors should consider carefully the factors set forth below. Investors should be aware that it is not possible to predict
or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or
uncertainties. If known or unknown risks or uncertainties materialize, the Company’s business, results of operations or
financial condition could be adversely affected, potentially in a material way.

Global sales in the Company’s Pharmaceutical and Medical Devices Segments may be negatively impacted
by healthcare reforms and increasing pricing pressures.

Sales of the Company’s pharmaceutical and medical device products are significantly affected by reimbursements by
third-party payers such as government healthcare programs, private insurance plans and managed care organizations. As

4 • Johnson & Johnson 2018 Annual Report

part of various efforts to contain healthcare costs, these payers are putting downward pressure on prices at which
products will be reimbursed. In the U.S., increased purchasing power of entities that negotiate on behalf of Medicare,
Medicaid, and private sector beneficiaries, in part due to continued consolidation among health care providers, could
result in further pricing pressures. In addition, increased political scrutiny could result in additional pricing pressures.
Outside the U.S., numerous major markets, including the EU and Japan, have pervasive government involvement in funding
healthcare and, in that regard, directly or indirectly impose price controls, limit access to, or reimbursement for, the
Company’s products, or reduce the value of its intellectual property protection.

The Company is subject to significant legal proceedings that can result in significant expenses, fines and
reputational damage.

In the ordinary course of business, Johnson & Johnson and its subsidiaries are subject to numerous claims and lawsuits
involving various issues such as patent disputes, product liability and claims that their product sales, marketing and pricing
practices violate various antitrust, unfair trade practices and/or consumer protection laws. The most significant of these
proceedings are described in Note 21, “Legal Proceedings” under Notes to the Consolidated Financial Statements
included in Item 8 of this Report. While the Company believes it has substantial defenses in these matters, it is not
feasible to predict the ultimate outcome of litigation. The Company could in the future be required to pay significant
amounts as a result of settlements or judgments in these matters, potentially in excess of accruals, including matters where
the Company could be held jointly and severally liable among other defendants. The resolution of, or increase in accruals
for, one or more of these matters in any reporting period could have a material adverse effect on the Company’s results of
operations and cash flows for that period. Furthermore, as a result of cost and availability factors, effective November 1,
2005, the Company ceased purchasing third-party product liability insurance.

Product reliability, safety and effectiveness concerns can have significant negative impacts on sales and
results of operations, lead to litigation and cause reputational damage.

Concerns about product safety, whether raised internally or by litigants, regulators or consumer advocates, and whether or
not based on scientific evidence, can result in safety alerts, product recalls, governmental investigations, regulatory action
on the part of the FDA (or its counterpart in other countries), private claims and lawsuits, payment of fines and settlements,
declining sales and reputational damage. These circumstances can also result in damage to brand image, brand equity
and consumer trust in the Company’s products. Product recalls have in the past, and could in the future, prompt
government investigations and inspections, the shutdown of manufacturing facilities, continued product shortages and
related sales declines, significant remediation costs, reputational damage, possible civil penalties and criminal prosecution.

Changes in tax laws or exposures to additional tax liabilities could negatively impact the Company’s
operating results.

Changes in tax laws or regulations around the world could negatively impact the Company’s effective tax rate and results
of operations. A change in statutory tax rate in any country would result in the revaluation of the Company’s deferred tax
assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change
would result in an expense or benefit recorded to the Company’s Consolidated Statement of Earnings. The Company
closely monitors these proposals as they arise in the countries where it operates. Changes to the statutory tax rate may
occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the
law change is enacted.

On December 22, 2017, the U.S. enacted The Tax Cuts and Jobs Act (the TCJA), which introduced significant changes to
U.S. corporate income tax law that will have a meaningful impact on the Company’s provision for income taxes. Accounting
for the income tax effects of the TCJA requires significant judgments to be made in interpreting its provisions. Anticipated
guidance from the U.S. Treasury about implementing the TCJA, which should be final by June 22, 2019 (18 months after
enactment), may result in adjustments that could materially affect the Company’s financial position and results of
operations as well as the effective tax rate in the period in which the adjustments are made.

On September 28, 2018, the Swiss Parliament approved the Federal Act on Tax Reform and AHV Financing (Swiss Tax
Reform). However, a referendum has been called and, as a result, a public vote on the Swiss Tax Reform will take place on
May 19th, 2019. If the Swiss Tax Reform passes, then the measures are expected to come into force in either January
2020 or January 2021. Prior to approval in the referendum and its subsequent cantonal implementation, the proposed
Swiss Tax Reform is not enacted and therefore the Company has not reflected any of the potential impacts in its fiscal
results. The Company is currently assessing the impact of the proposed Swiss Tax Reform, and when enacted, the law
may have a material impact on the Company’s operating results.

The Company conducts business and files tax returns in numerous countries and is addressing tax audits and disputes
with many tax authorities. In connection with the Organization for Economic Cooperation and Development Base Erosion

Johnson & Johnson 2018 Annual Report • 5

and Profit Shifting (BEPS) project, companies are required to disclose more information to tax authorities on operations
around the world, which may lead to greater audit scrutiny of profits earned in other countries. The Company regularly
assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves. However,
any tax authority could take a position on tax treatment that is contrary to the Company’s expectations, which could result
in tax liabilities in excess of reserves.

The Company may not be able to successfully secure and defend intellectual property rights essential to
the Company’s businesses.

The Company owns or licenses a significant number of patents and other proprietary rights, determined by patent offices,
courts and lawmakers in various countries, relating to its products and manufacturing processes. These rights are essential
to the Company’s businesses and materially important to the Company’s results of operations. Public policy, both within
and outside the U.S., has become increasingly unfavorable toward intellectual property rights. The Company cannot be
certain that it will obtain adequate patent protection for new products and technologies in the U.S. and other important
markets or that such protections, once granted, will last as long as originally anticipated.

Competitors routinely challenge the validity or extent of the Company’s owned or licensed patents and proprietary rights
through litigation, interferences, oppositions and other proceedings. These proceedings absorb resources and can be
protracted as well as unpredictable. In addition, challenges that the Company’s products infringe the patents of third
parties could result in the need to pay past damages and future royalties and adversely affect the competitive position and
sales of the products in question.

The Company has faced increasing patent challenges from third parties seeking to manufacture and market generic and
biosimilar versions of the Company’s key pharmaceutical products prior to expiration of the applicable patents covering
those products. In the U.S., manufacturers of generic versions of innovative human pharmaceutical products may
challenge the validity, or claim non-infringement, of innovator products through the Abbreviated New Drug Application, or
ANDA, process with the FDA. The Biologics Price Competition and Innovation Act (BPCIA), enacted in 2010, which
created a new regulatory pathway for the approval by the FDA of biosimilar alternatives to innovator-developed biological
products, also created mechanisms for biosimilar applicants to challenge the patents on the innovator biologics. The inter
partes review (IPR) process with the USPTO, created under the 2011 America Invents Act, is also being used by
competitors to challenge patents held by the Company’s subsidiaries.

In the event the Company is not successful in defending its patents against such challenges, or upon the “at-risk” launch
(despite pending patent infringement litigation) by the generic or biosimilar firm of its product, the Company can lose a
major portion of revenues for the referenced product in a very short period of time. Current legal proceedings involving the
Company’s patents and other intellectual property rights are described in Note 21, “Legal Proceedings — Intellectual
Property” of the Notes to the Consolidated Financial Statements included in Item 8 of this Report.

The Company’s businesses operate in highly competitive product markets and competitive pressures could
adversely affect the Company’s earnings.

The Company faces substantial competition in all three operating segments and in all geographic markets. The Company’s
businesses compete with companies of all sizes on the basis of cost-effectiveness, technological innovations, intellectual
property rights, product performance, real or perceived product advantages, pricing and availability and rate of
reimbursement. The Company also competes with other market participants in securing rights to acquisitions,
collaborations and licensing agreements with third parties. Competition for rights to product candidates and technologies
may result in significant investment and acquisition costs and onerous agreement terms for the Company. Competitors’
development of more effective or less costly products, and/or their ability to secure patent and other intellectual property
rights and successfully market products ahead of the Company, could negatively impact sales of the Company’s existing
products as well as its ability to bring new products to market despite significant prior investment in the related product
development.

For the Company’s pharmaceutical businesses, loss of patent exclusivity for a product often is followed by a substantial
reduction in sales as competitors gain regulatory approval for generic and other competing products and enter the market.
Similar competition can be triggered by the loss of exclusivity for a biological product. For the Company’s medical device
businesses, technological innovation, product quality, reputation and customer service are especially important to
competitiveness. Development by other companies of new or improved products, processes and technologies could
threaten to make the Company’s products or technologies less desirable, less economical or obsolete. The Company’s
consumer businesses face intense competition from other branded products and retailers’ private-label brands. If the
Company fails to sufficiently differentiate and market its brand name consumer products, this could adversely affect
revenues and profitability of those products.

6 • Johnson & Johnson 2018 Annual Report

Significant challenges or delays in the Company’s innovation and development of new products,
technologies and indications could have an adverse impact on the Company’s long-term success.

The Company’s continued growth and success depends on its ability to innovate and develop new and differentiated
products and services that address the evolving health care needs of patients, providers and consumers. Development of
successful products and technologies is also necessary to offset revenue losses when the Company’s existing products
lose market share due to various factors such as competition and loss of patent exclusivity. New products introduced
within the past five years accounted for approximately 25% of 2018 sales. The Company cannot be certain when or
whether it will be able to develop, license or otherwise acquire companies, products and technologies, whether particular
product candidates will be granted regulatory approval, and, if approved, whether the products will be commercially
successful.

The Company pursues product development through internal research and development as well as through collaborations,
acquisitions, joint ventures and licensing or other arrangements with third parties. In all of these contexts, developing new
products, particularly pharmaceutical and biotechnology products and medical devices, requires significant investment of
resources over many years. Only a very few biopharmaceutical research and development programs result in commercially
viable products. The process depends on many factors including the ability to discern patients’ and health care providers’
future needs; develop promising new compounds, strategies and technologies; achieve successful clinical trial results;
secure effective intellectual property protection; obtain regulatory approvals on a timely basis; and, if and when they reach
the market, successfully differentiate the Company’s products from competing products and approaches to treatment.
New products or enhancements to existing products may not be accepted quickly or significantly in the marketplace due
to product and price competition, changes in customer preferences or healthcare purchasing patterns, resistance by
healthcare providers or uncertainty over third-party reimbursement. Even following initial regulatory approval, the success
of a product can be adversely impacted by safety and efficacy findings in larger real world patient populations, as well as
market entry of competitive products.

The Company faces increasing regulatory scrutiny which imposes significant compliance costs and exposes
the Company to government investigations, legal actions and penalties.

Like other companies in the healthcare industry, the Company is subject to extensive regulation, investigations and legal
action, by national, state and local government agencies in the U.S. and other countries in which they operate. Regulatory
issues regarding compliance with Good Manufacturing Practices (cGMP) (and comparable quality regulations in foreign
countries) by manufacturers of drugs, devices and consumer products can lead to fines and penalties, product recalls,
product shortages, interruptions in production, delays in new product approvals and litigation. In addition, the marketing,
pricing and sale of the Company’s products are subject to regulation, investigations and legal actions including under the
Federal Food, Drug, and Cosmetic Act, the Medicaid Rebate Program, federal and state false claims acts, state unfair
trade practices acts and consumer protection laws. Increased scrutiny of health care industry business practices in recent
years by government agencies and state attorneys general in the U.S., and any resulting investigations and prosecutions,
carry risk of significant civil and criminal penalties including, but not limited to, debarment from participation in government
healthcare programs. Any such debarment could have a material adverse effect on the Company’s business and results of
operations. The most significant current investigations and litigation brought by government agencies are described in
Note 21, “Legal Proceedings-Government Proceedings” under Notes to the Consolidated Financial Statements included
in Item 8 of this Report.

The Company faces a variety of risks associated with conducting business internationally.

The Company’s extensive operations and business activity outside the U.S. are accompanied by certain financial,
economic and political risks, including those listed below.

Foreign Currency Exchange: In fiscal 2018, approximately 49% of the Company’s sales occurred outside of the U.S., with
approximately 23% in Europe, 8% in the Western Hemisphere, excluding the U.S., and 18% in the Asia-Pacific and Africa
region. Changes in non-U.S. currencies relative to the U.S. dollar impact the Company’s revenues and expenses. While
the Company uses financial instruments to mitigate the impact of fluctuations in currency exchange rates on its cash flows,
unhedged exposures continue to be subject to currency fluctuations. In addition, the weakening or strengthening of the
U.S. dollar may result in significant favorable or unfavorable translation effects when the operating results of the
Company’s non-U.S. business activity are translated into U.S. dollars.

Inflation and Currency Devaluation Risks: The Company faces challenges in maintaining profitability of operations in
economies experiencing high inflation rates. The Company has accounted for operations in Argentina (beginning in the
fiscal third quarter of 2018) and Venezuela as highly inflationary, as the prior three-year cumulative inflation rate surpassed
100%. While the Company strives to maintain profit margins in these areas through cost reduction programs, productivity

Johnson & Johnson 2018 Annual Report • 7

improvements and periodic price increases, it might experience operating losses as a result of continued inflation. In
addition, the impact of currency devaluations in countries experiencing high inflation rates or significant currency exchange
fluctuations could negatively impact the Company’s operating results.

Illegal Importation of Pharmaceutical Products: The illegal importation of pharmaceutical products from countries where
government price controls or other market dynamics result in lower prices may adversely affect the Company’s sales and
profitability in the U.S. and other countries in which the Company operates. With the exception of limited quantities of
prescription drugs for personal use, foreign imports of pharmaceutical products are illegal under current U.S. law.
However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-
priced imports has grown significantly.

Anti-Bribery and Other Regulations: The Company is subject to various federal and foreign laws that govern its international
business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt
Practices Act (FCPA), which prohibits U.S. publicly traded companies from promising, offering, or giving anything of value
to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain
or retain business or gain any improper advantage. The Company’s business is heavily regulated and therefore involves
significant interaction with foreign officials. Also, in many countries outside the U.S., the health care providers who
prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are
government entities; therefore, the Company’s interactions with these prescribers and purchasers are subject to regulation
under the FCPA. In addition to the U.S. application and enforcement of the FCPA, various jurisdictions in which the
Company operates have laws and regulations, including the U.K Bribery Act 2010, aimed at preventing and penalizing
corrupt and anticompetitive behavior. Enforcement activities under these laws could subject the Company to additional
administrative and legal proceedings and actions, which could include claims for civil penalties, criminal sanctions, and
administrative remedies, including exclusion from health care programs.

Other Legal, Social and Political Risks. Other risks inherent in conducting business globally include:
• protective economic policies taken by governments such as trade protection measures and import/export licensing

requirements;

• compliance with local regulations and laws including, in some countries, regulatory requirements restricting the

Company’s ability to manufacture or sell its products in the relevant market;

• diminished protection of intellectual property and contractual rights in certain jurisdictions;
• potential nationalization or expropriation of the Company’s foreign assets; and
• disruptions to markets due to war, armed conflict, terrorism, social upheavals or pandemics.

Interruptions and delays in manufacturing operations could adversely affect the Company’s business, sales
and reputation.

The Company’s manufacture of products requires the timely delivery of sufficient amounts of complex, high-quality
components and materials. The Company’s subsidiaries operate 111 manufacturing facilities as well as sourcing from
hundreds of suppliers around the world. The Company has in the past, and may in the future, face unanticipated
interruptions and delays in manufacturing through its internal or external supply chain. Manufacturing disruptions can occur
for many reasons including regulatory action, production quality deviations or safety issues, labor disputes, site-specific
incidents (such as fires), natural disasters such as hurricanes and other severe weather events, raw material shortages,
political unrest and terrorist attacks. Such delays and difficulties in manufacturing can result in product shortages, declines
in sales and reputational impact as well as significant remediation and related costs associated with addressing the
shortage.

The Company relies on third parties to manufacture certain of our products. Any failure by or loss of a third
party manufacturer could result in delays and increased costs, which may adversely affect our business.

The Company relies on third parties to manufacture certain of our products. We depend on these third party
manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products
of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at
acceptable prices. However, we cannot guarantee that these third party manufacturers will be able to meet our near-term
or long-term manufacturing requirements, which could result in lost sales and have an adverse effect on our business.

Other risks associated with our reliance on third parties to manufacture these products include, reliance on the third party
for regulatory compliance and quality assurance, misappropriation of the Company’s intellectual property, limited ability to
manage our inventory, possible breach of the manufacturing agreement by the third party and the possible termination or
nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us. Moreover, if

8 • Johnson & Johnson 2018 Annual Report

any of our third party manufacturers suffer any damage to facilities, lose benefits under material agreements, experience
power outages, encounter financial difficulties, are unable to secure necessary raw materials from their suppliers or suffer
any other reduction in efficiency, the Company may experience significant business disruption. In the event of any such
disruption, the Company would need to seek and source other qualified third party manufacturers, likely resulting in further
delays and increased costs which could affect our business adversely.

An information security incident, including a cybersecurity breach, could have a negative impact to the
Company’s business or reputation.

To meet business objectives, the Company relies on both internal information technology (IT) systems and networks, and
those of third parties and their vendors, to process and store sensitive data, including confidential research, business
plans, financial information, intellectual property, and personal data that may be subject to legal protection. The extensive
information security and cybersecurity threats, which affect companies globally, pose a risk to the security and availability
of these IT systems and networks, and the confidentiality, integrity, and availability of the Company’s sensitive data. The
Company continually assesses these threats and makes investments to increase internal protection, detection, and
response capabilities, as well as ensure the Company’s third party providers have required capabilities and controls, to
address this risk. To date, the Company has not experienced any material impact to the business or operations resulting
from information or cybersecurity attacks; however, because of the frequently changing attack techniques, along with the
increased volume and sophistication of the attacks, there is the potential for the Company to be adversely impacted. This
impact could result in reputational, competitive, operational or other business harm as well as financial costs and
regulatory action. The Company maintains cybersecurity insurance in the event of an information security or cyber incident,
however, the coverage may not be sufficient to cover all financial losses.

Item 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

Item 2. PROPERTIES

The Company’s subsidiaries operate 111 manufacturing facilities occupying approximately 20.5 million square feet of floor
space. The manufacturing facilities are used by the industry segments of the Company’s business approximately as
follows:

Segment

Consumer

Pharmaceutical

Medical Devices

Worldwide Total

Square Feet
(in thousands)

6,503

6,819

7,183

20,505

Within the U.S., five facilities are used by the Consumer segment, five by the Pharmaceutical segment and 27 by the
Medical Devices segment. Outside of the U.S., 25 facilities are used by the Consumer segment, 14 by the Pharmaceutical
segment and 35 by the Medical Devices segment.

The locations of the manufacturing facilities by major geographic areas of the world are as follows:

Geographic Area

United States

Europe

Western Hemisphere, excluding U.S.

Africa, Asia and Pacific

Worldwide Total

Number of Facilities

Square Feet
(in thousands)

37

34

12

28

111

5,855

7,587

2,800

4,263

20,505

In addition to the manufacturing facilities discussed above, the Company maintains numerous office and warehouse
facilities throughout the world. Research facilities are also discussed in Item 7. “Management’s Discussion and Analysis of
Results of Operations and Financial Condition” of this Report.

Johnson & Johnson 2018 Annual Report • 9

The Company’s subsidiaries generally seek to own, rather than lease, their manufacturing facilities, although some,
principally in non-U.S. locations, are leased. Office and warehouse facilities are often leased. The Company also engages
contract manufacturers.

The Company is committed to maintaining all of its properties in good operating condition.

McNEIL-PPC, Inc. (now Johnson & Johnson Consumer Inc.) (McNEIL-PPC) continues to operate under a consent decree,
signed in 2011 with the FDA, which governs certain McNeil Consumer Healthcare manufacturing operations, and requires
McNEIL-PPC to remediate the facilities it operates in Lancaster, Pennsylvania, Fort Washington, Pennsylvania, and Las
Piedras, Puerto Rico (the “Consent Decree”). Following FDA inspections in 2015, McNEIL-PPC received notifications
from the FDA that all three manufacturing facilities are in conformity with applicable laws and regulations, and commercial
production has restarted.

Under the Consent Decree, after receiving notice from the FDA of being in compliance with applicable laws and
regulations, each of the three facilities is subject to a five-year audit period by a third-party cGMP expert. Thus, a third-
party expert will continue to reassess the sites at various times until at least 2020.

For information regarding lease obligations, see Note 16 “Rental Expense and Lease Commitments” of the Notes to
Consolidated Financial Statements included in Item 8 of this Report. Segment information on additions to property, plant
and equipment is contained in Note 18 “Segments of Business and Geographic Areas” of the Notes to Consolidated
Financial Statements included in Item 8 of this Report.

Item 3. LEGAL PROCEEDINGS

The information called for by this item is incorporated herein by reference to the information set forth in Note 21 “Legal
Proceedings” of the Notes to Consolidated Financial Statements included in Item 8 of this Report.

In addition, Johnson & Johnson and its subsidiaries are also parties to a number of proceedings brought under the
Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and
comparable state, local or foreign laws in which the primary relief sought is the cost of past and/or future remediation.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

10 • Johnson & Johnson 2018 Annual Report

EXECUTIVE OFFICERS OF THE REGISTRANT

Listed below are the executive officers of the Company. There are no family relationships between any of the executive
officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to
which the executive officer was selected. At the annual meeting of the Board of Directors, the executive officers are
elected by the Board to hold office for one year and until their respective successors are elected and qualified, or until
earlier resignation or removal.

Information with regard to the directors of the Company, including information for Alex Gorsky, who is also an executive
officer, is incorporated herein by reference to the material captioned “Item 1. Election of Directors” in the Proxy Statement.

Name

Joaquin Duato

Peter M. Fasolo

Alex Gorsky

Ashley McEvoy

Jorge Mesquita

Thibaut Mongon

Michael E. Sneed

Paulus Stoffels

Jennifer L. Taubert

Michael H. Ullmann

Kathryn E. Wengel

Joseph J. Wolk

Age

56

56

58

48

57

49

59

56

55

60

53

52

Vice Chairman, Executive Committee(a)

Position

Member, Executive Committee; Executive Vice President, Chief Human
Resources Officer(b)

Chairman, Board of Directors; Chairman, Executive Committee; Chief Executive
Officer

Member, Executive Committee; Executive Vice President, Worldwide Chairman,
Medical Devices(c)

Member, Executive Committee; Executive Vice President, Worldwide Chairman,
Consumer(d)

Appointee, Member, Executive Committee, Executive Vice President, Worldwide
Chairman, Consumer(e)

Member, Executive Committee; Executive Vice President, Global Corporate
Affairs and Chief Communication Officer(f)

Vice Chairman, Executive Committee; Chief Scientific Officer(g)

Member, Executive Committee; Executive Vice President, Worldwide Chairman,
Pharmaceuticals(h)

Member, Executive Committee; Executive Vice President, General Counsel(i)

Member, Executive Committee; Executive Vice President, Chief Global Supply
Chain Officer(j)

Member, Executive Committee; Executive Vice President, Chief Financial
Officer(k)

(a) Mr. J. Duato joined the Company in 1989 with Janssen-Farmaceutica S.A. (Spain), a subsidiary of the Company, and held executive

positions of increasing responsibility in the Pharmaceutical sector. In 2009, he was named Company Group Chairman,
Pharmaceuticals, and in 2011, he was named Worldwide Chairman, Pharmaceuticals. In 2016, Mr. Duato became a member of the
Executive Committee and was named Executive Vice President, Worldwide Chairman, Pharmaceuticals. In July 2018, Mr. Duato was
promoted to Vice Chairman of the Executive Committee, with responsibility for the company’s Pharmaceutical and Consumer sectors,
supply chain, information technology, global services and the Health & Wellness groups.

(b) Dr. P. M. Fasolo joined the Company in 2004 as Vice President, Worldwide Human Resources for Cordis Corporation, a subsidiary

of the Company, and was subsequently named Vice President, Global Talent Management for the Company. He left
Johnson & Johnson in 2007 to join Kohlberg Kravis Roberts & Co. as Chief Talent Officer. Dr. Fasolo returned to the Company in
2010 as the Vice President, Global Human Resources, and in 2011, he became a member of the Executive Committee. In April
2016, he was named Executive Vice President, Chief Human Resources Officer. Dr. Fasolo has responsibility for global talent,
recruiting, diversity, compensation, benefits, employee relations and all aspects of the human resources agenda for the Company.

(c) Ms. A. McEvoy joined the Company in 1997 as Assistant Brand Manager of McNeil Consumer Health, a subsidiary of the Company,
advancing through positions of increasing responsibilities until she was appointed Company Group Chairman, Vision Care in 2012,
followed by Company Group Chairman, Consumer Medical Devices in 2014. In July 2018, Ms. McEvoy was promoted to Executive
Vice President, Worldwide Chairman, Medical Devices, and became a member of the Executive Committee. She has responsibility for
the surgery, orthopaedics, interventional solutions and eye health businesses across Ethicon, DePuy Synthes, Biosense Webster and
Johnson & Johnson Vision.

(d) Mr. J. Mesquita joined the Company in 2014 as Worldwide Chairman, Consumer. Prior to joining the Company, he served in various

marketing and leadership capacities across Latin America, including roles in Oral Care and Beauty at The Procter & Gamble

Johnson & Johnson 2018 Annual Report • 11

Company from 1984 to 2013. In April 2016, Mr. Mesquita became a member of the Executive Committee and was promoted to
Executive Vice President, Worldwide Chairman, Consumer. Mr. Mesquita plans to retire from the Company in March 2019.

(e) Mr. T. Mongon joined the Company in 2000 as Director of Marketing for the Vision Care group in France and subsequently held
general management positions as Country Manager France, Belgium and North Africa, Managing Director Latin America, and
President Asia-Pacific. Mr. Mongon transitioned to the Pharmaceutical sector in 2012 as the Global Commercial Strategy Leader for
the Neuroscience therapeutic area, before joining the consumer sector as Company Group Chairman Asia-Pacific. The Company has
announced that Mr. Mongon will be named Executive Vice President and Worldwide Chairman, Consumer, and a member of the
Executive Committee, upon the retirement of his predecessor, Mr. Mesquita, effective March 1, 2019. In addition to leading the
Consumer business, Mr. Mongon will have responsibility for Johnson & Johnson Southeast Asia.

(f) Mr. M. E. Sneed joined the Company in 1986 as Product Director for Personal Products, a subsidiary of the Company, and gained
increased responsibilities in executive positions across the global enterprise. In 2004, Mr. Sneed was appointed Company Group
Chairman, Consumer North America, followed by Company Group Chairman, Vision Care Franchise in 2007. In 2012, he became
the Vice President, Global Corporate Affairs and Chief Communications Officer. Mr. Sneed was appointed Executive Vice President,
Global Corporate Affairs and Chief Communications Officer in January 2018, and became a member of the Executive Committee in
July 2018, leading the corporation’s global marketing, communication, design and philanthropy functions.

(g) Dr. P. Stoffels joined the Company in 2002 with the acquisition of Tibotec Virco NV, where he was Chief Executive Officer of Virco
NV and Chairman of Tibotec NV. In 2005, he was appointed Company Group Chairman, Global Virology. In 2006, he assumed the
role of Company Group Chairman, Pharmaceuticals. Dr. Stoffels was appointed Global Head, Research & Development,
Pharmaceuticals in 2009, and in 2011, became Worldwide Chairman, Pharmaceuticals. In 2012, Dr. Stoffels was appointed Chief
Scientific Officer, and became a member of the Executive Committee. In 2016, Dr. Stoffels was named Executive Vice President,
Chief Scientific Officer. In 2018, Dr. Stoffels was promoted to Vice Chairman of the Executive Committee, Chief Scientific Officer. He
is responsible for the Company’s innovation agenda across the Pharmaceutical, Medical Devices and Consumer sectors, product
safety strategy, and the Company’s global public health strategy.

(h) Ms. J. L. Taubert joined the Company in 2005 as Worldwide Vice President at Johnson & Johnson Pharmaceutical Services, a

subsidiary of the Company. She held several executive positions in the Pharmaceutical sector until 2012 when she was appointed
Company Group Chairman, North America Pharmaceuticals, and in 2015 became Company Group Chairman, The Americas,
Pharmaceuticals. In July 2018, Ms. Taubert was promoted to Executive Vice President, Worldwide Chairman, Pharmaceuticals, and
became a member of the Executive Committee.

(i) Mr. M. H. Ullmann joined the Company in 1989 as a corporate attorney in the Law Department. He was appointed Corporate
Secretary in 1999 and served in that role until 2006. During that time, he also held various management positions in the Law
Department. In 2006, he was named General Counsel, Medical Devices and Diagnostics and was appointed Vice President, General
Counsel and became a member of the Executive Committee in 2012. In April 2016, Mr. Ullmann was named Executive Vice
President, General Counsel. Mr. Ullmann has worldwide responsibility for legal, government affairs & policy, global security, aviation
and health care compliance & privacy.

(j) Ms. K. E. Wengel joined the Company in 1988 as Project Engineer and Engineering Supervisor at Janssen, a subsidiary of the

Company. During her tenure with the Company, she has held a variety of strategic leadership and executive positions across the
global enterprise, in roles within operations, quality, engineering, new products, information technology, and other technical and
business functions. In 2010, Ms. Wengel became the first Chief Quality Officer of the Company. In 2014, she was promoted to Vice
President, Johnson & Johnson Supply Chain. In July 2018, she was promoted to Executive Vice President, Chief Global Supply Chain
Officer, and became a member of the Executive Committee.

(k) Mr. J. J. Wolk joined the Company in 1998 as Finance Manager, Business Development for Ortho-McNeil, a subsidiary of the

Company, and through the years held a variety of senior leadership roles in several segments and functions across the Company’s
subsidiaries, in Pharmaceuticals, Medical Devices and Supply Chain. From 2014 to 2016, he served as Vice President, Finance and
Chief Financial Officer of the Janssen Pharmaceutical Companies of Johnson & Johnson. In 2016, Mr. Wolk became the Vice
President, Investor Relations. In July 2018, he was appointed Executive Vice President, Chief Financial Officer and became a member
of the Executive Committee. Mr. Wolk is responsible for leading the development and execution of the Company’s global long-term
financial strategy.

12 • Johnson & Johnson 2018 Annual Report

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES

As of February 15, 2019, there were 142,029 record holders of common stock of the Company. Additional information
called for by this item is incorporated herein by reference to the following sections of this Report: Note 17 “Common
Stock, Stock Option Plans and Stock Compensation Agreements” of the Notes to Consolidated Financial Statements
included in Item 8; and Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters — Equity Compensation Plan Information”.

Issuer Purchases of Equity Securities

On December 17, 2018, the Company announced that its Board of Directors approved a share repurchase program,
authorizing the Company to purchase up to $5.0 billion of the Company’s Common Stock. Share repurchases take place
from time to time on the open market or through privately negotiated transactions. The repurchase program has no time
limit and may be suspended for periods or discontinued at any time.

The following table provides information with respect to common stock purchases by the Company during the fiscal fourth
quarter of 2018. Common stock purchases on the open market are made as part of a systematic plan to meet the needs
of the Company’s compensation programs. The repurchases below also include the stock-for-stock option exercises that
settled in the fiscal fourth quarter.

Period

October 1, 2018 through October 28,

2018

October 29, 2018 through November 25,

Total Number
of Shares
Purchased(1)

Avg. Price
Paid Per Share

2,192,500

$138.74

2018

6,849,298

143.27

Total Number of
Shares (or Units)
Purchased as Part
of Publicly
Announced Plans
or Programs(2)

Maximum Number (or
Approximate Dollar
Value) of Shares (or Units)
that May Yet Be
Purchased Under the
Plans or Programs(3)

—

—

—

—

November 26, 2018 through

December 30, 2018

Total

18,130,189

27,171,987

139.10

7,073,136

32,131,870

(1) During the fiscal fourth quarter of 2018, the Company repurchased an aggregate of 27,171,987 shares of Johnson & Johnson

Common Stock in open-market transactions, of which 7,073,136 shares were purchased pursuant to the repurchase program that
was publicly announced on December 17, 2018, and of which 20,098,851 shares were purchased in open-market transactions as
part of a systematic plan to meet the needs of the Company’s compensation programs.

(2) As of December 30, 2018, an aggregate of 7,073,136 shares were purchased for a total of $0.9 billion since the inception of the

repurchase program announced on December 17, 2018.

(3) As of December 30, 2018, the maximum number of shares that may yet be purchased under the plan is 32,131,870 based on the

closing price of Johnson & Johnson Common Stock on the New York Stock Exchange on December 28, 2018 of $127.27 per share.

Johnson & Johnson 2018 Annual Report • 13

Item 6. SELECTED FINANCIAL DATA

Summary of Operations and Statistical Data 2008-2018*

(Dollars in Millions Except
Per Share Amounts)
Sales to customers — U.S. $41,884
Sales to customers —

2018

International

Total sales
Cost of products sold
Selling, marketing and

administrative expenses
Research and development

expense

In-process research and

development
Interest income
Interest expense, net of
portion capitalized
Other (income) expense,

net

Restructuring

Earnings before provision
for taxes on income
Provision for taxes on

income

Net earnings
Add: Net loss attributable

to noncontrolling interest

Net earnings

attributable to
Johnson & Johnson

Percent of sales to

customers

Diluted net earnings per

share of common stock(1)

Percent return on average
shareholders’ equity

Percent increase
(decrease) over
previous year:
Sales to customers
Diluted net earnings per

share

Supplementary balance

sheet data:
Property, plant and
equipment, net

Additions to property, plant

and equipment

Total assets
Long-term debt
Operating cash flow
Common stock
information

Dividends paid per share
Shareholders’ equity per

share

Market price per share
(year-end close)

Average shares outstanding

(millions)
— basic
— diluted

Employees (thousands)

2017
39,863

36,587
76,450
25,439

2016
37,811

2015
35,687

2014
34,782

2013
31,910

2012
29,830

2011
28,908

2010
2009
29,450 30,889 32,309

2008

34,079
71,890
21,789

34,387
70,074
21,426

39,549
74,331
22,684

39,402
71,312
22,181

37,394
67,224
21,515

36,122
65,030
20,219

32,137 31,008 31,438
61,587 61,897 63,747
18,688 18,380 18,463

39,697
81,581
27,091

22,540

21,520

20,067

21,079

21,887

21,650

20,697

20,800

19,296 19,712 21,431

10,775

10,594

9,143

8,999

8,471

8,119

7,602

7,486

6,796

6,949

7,554

1,126
(611)

1,005

1,405
251
63,582

408
(385)

934

29
(368)

224
(128)

178
(67)

580
(74)

1,163
(64)

—
(91)

—
(107)

—
(90)

181
(361)

726

552

533

482

532

571

455

451

435

(42)
309
58,777

210
491
52,087

(1,783)
509
50,878

82
—
53,768

2,903
—
55,841

2,004
—
53,449

3,115
569
52,669

(488)

(333)
— 1,073

(885)
—
44,640 46,142 46,818

$17,999

17,673

19,803

19,196

20,563

15,471

13,775

12,361

16,947 15,755 16,929

2,702
15,297

16,373
1,300

3,263
16,540

3,787
15,409

4,240
16,323

1,640
13,831

3,261
10,514

2,689
9,672

3,613

3,489
3,980
13,334 12,266 12,949

—

—

—

—

—

—

339

—

—

—

—

15,297

1,300

16,540

15,409

16,323

13,831

10,853

9,672

13,334 12,266 12,949

18.8%

$5.61

25.5%

1.7

0.47

2.0

6.7%

6.3

N/M

(92.1)%

23.0

5.93

23.4

2.6

8.2

22.0

5.48

21.9

22.0

5.70

22.7

19.4

4.81

19.9

16.1

3.86

17.8

14.9

3.49

17.0

21.7

19.8

20.3

4.78

4.40

4.57

24.9

26.4

30.2

(5.7)

4.2

6.1

3.4

5.6

(0.5)

(2.9)

4.3

(3.9)

18.5

24.6

10.6

(27.0)

8.6

(3.7)

25.9

17,035

17,005

15,912

15,905

16,126

16,710

16,097

14,739

14,553 14,759 14,365

3,670
152,954
27,684
22,201

3,279
157,303
30,675
21,056

3,714

3,463

3,226

3,066
141,208 133,411 130,358 131,754 121,347 113,644 102,908 94,682 84,912
8,223
8,120
16,385 16,571 14,972

15,122
18,710

11,489
15,396

12,969
14,298

12,857
19,569

13,328
17,414

22,442
18,767

2,365

3,595

9,156

2,384

2,893

2,934

$3.54

3.32

3.15

2.95

2.76

2.59

2.40

2.25

2.11

1.93

1.795

22.44

22.43

26.02

25.82

25.06

26.25

23.33

20.95

20.66

18.37

15.35

$127.27

139.72

115.21

102.72

105.06

92.35

69.48

65.58

61.85

64.41

58.56

2,681.5
2,728.7
135.1

2,692.0
2,745.3
134.0

2,737.3 2,771.8 2,815.2 2,809.2 2,753.3 2,736.0 2,751.4 2,759.5 2,802.5
2,788.9 2,812.9 2,863.9 2,877.0 2,812.6 2,775.3 2,788.8 2,789.1 2,835.6
118.7

115.5

114.0

117.9

126.5

126.4

127.1

127.6

128.1

(1) Attributable to Johnson & Johnson
*

Per the adoption of ASU 2017-07 prior year amounts on the Consolidated Statement of Earnings have been reclassified to retroactively apply
classification of the service cost component and the other components of net periodic benefit cost

N/M = Not Meaningful

14 • Johnson & Johnson 2018 Annual Report

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

Organization and Business Segments

Description of the Company and Business Segments

Johnson & Johnson and its subsidiaries (the Company) have approximately 135,100 employees worldwide engaged in the
research and development, manufacture and sale of a broad range of products in the health care field. The Company
conducts business in virtually all countries of the world with the primary focus on products related to human health and
well-being.

The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices. The
Consumer segment includes a broad range of products used in the baby care, oral care, beauty, over-the-counter
pharmaceutical, women’s health and wound care markets. These products are marketed to the general public and sold
both to retail outlets and distributors throughout the world. The Pharmaceutical segment is focused on six therapeutic
areas, including immunology, infectious diseases, neuroscience, oncology, pulmonary hypertension, and cardiovascular
and metabolic diseases. Products in this segment are distributed directly to retailers, wholesalers, hospitals and health
care professionals for prescription use. The Medical Devices segment includes a broad range of products used in the
orthopaedic, surgery, interventional solutions (cardiovascular and neurovascular), diabetes care (divested in the fiscal
fourth quarter of 2018) and vision fields which are distributed to wholesalers, hospitals and retailers, and used principally
in the professional fields by physicians, nurses, hospitals, eye care professionals and clinics.

The Executive Committee of Johnson & Johnson is the principal management group responsible for the strategic
operations and allocation of the resources of the Company. This Committee oversees and coordinates the activities of the
Consumer, Pharmaceutical and Medical Devices business segments.

In all of its product lines, the Company competes with companies both locally and globally, throughout the world.
Competition exists in all product lines without regard to the number and size of the competing companies involved.
Competition in research, involving the development and the improvement of new and existing products and processes, is
particularly significant. The development of new and innovative products, as well as protecting the underlying intellectual
property of the Company’s product portfolio, is important to the Company’s success in all areas of its business. The
competitive environment requires substantial investments in continuing research. In addition, the development and
maintenance of customer demand for the Company’s consumer products involves significant expenditures for advertising
and promotion.

Johnson & Johnson 2018 Annual Report • 15

Management’s Objectives

With “Our Credo” as the foundation, the Company’s purpose is to blend heart, science and ingenuity to profoundly
change the trajectory of health for humanity. The Company is committed to bringing its full breadth and depth to ensure
health for people today and for future generations. United around this common ambition, the Company is poised to fulfill its
purpose and successfully meet the demands of the rapidly evolving markets in which it competes.

The Company is broadly based in human healthcare, and is committed to creating value by developing accessible, high
quality, innovative products and services. New products introduced within the past five years accounted for approximately
25% of 2018 sales. In 2018, $10.8 billion was invested in research and development and $0.9 billion spent on
acquisitions, reflecting management’s commitment to create life-enhancing innovations and to create value through
partnerships that will profoundly change the trajectory of health for humanity.

A critical driver of the Company’s success, is the 135,100 diverse employees that work across more than 260 operating
companies, which are located in more than 60 countries. Employees are empowered and inspired to lead with the
Company’s Our Credo and purpose as guides. This allows every employee to use the Company’s reach and size to
advance the Company’s purpose, and to also lead with agility and urgency. Leveraging the extensive resources across the
enterprise, enables the Company to innovate and execute with excellence. This ensures the Company can remain focused
on addressing the unmet needs of society every day and invest for an enduring impact, ultimately delivering value to its
patients, consumers and healthcare professionals, employees, communities and shareholders.

Research &
Development

10.8

10.6

9.1

s
n
o

i
l
l
i

B
n

I

$

Acquisi(cid:2)ons (net of cash
acquired)

Dividends Paid Per
Share

s
n
o

i
l
l
i

B
n

I

$

35.2

0.9

4.5

s
r
a

l
l

o
D
n

I

3.54 3.32 3.15

2018 2017 2016

2018 2017 2016

2018 2017 2016

Results of Operations

Analysis of Consolidated Sales

In 2018, worldwide sales increased 6.7% to $81.6 billion, compared to an increases of 6.3% and 2.6% in 2017 and
2016, respectively. These sales changes consisted of the following:

Sales increase/(decrease) due to:

Volume

Price

Currency

Total

2018

2017

2016

8.5%

8.0%

3.2%

(2.2)

0.4

(2.0)

0.3

0.7

(1.3)

6.7%

6.3%

2.6%

In 2018, the net impact of acquisitions and divestitures on the worldwide sales growth was a positive impact of 0.8%. In
2017, acquisitions and divestitures had a positive impact of 3.6% on the worldwide sales growth. In 2016, acquisitions
and divestitures had a negative impact of 1.1% on the worldwide sales growth and competitive products to the
Company’s Hepatitis C products, OLYSIO® /SOVRIAD® (simeprevir) and INCIVO® (telaprevir), had a negative impact of
0.8% on the worldwide sales growth. Operations in Venezuela negatively impacted the worldwide sales growth 0.3%.

Sales by U.S. companies were $41.9 billion in 2018, $39.9 billion in 2017 and $37.8 billion in 2016. This represents
increases of 5.1% in 2018, 5.4% in 2017 and 6.0% in 2016. Sales by international companies were $39.7 billion in 2018,
$36.6 billion in 2017 and $34.1 billion in 2016. This represents an increase of 8.5% in 2018, 7.4% in 2017, and a
decrease of 0.9% in 2016.

16 • Johnson & Johnson 2018 Annual Report

 
 
 
 
 
The five-year compound annual growth rates for worldwide, U.S. and international sales were 2.7%, 5.6% and 0.1%,
respectively. The ten-year compound annual growth rates for worldwide, U.S. and international sales were 2.5%, 2.6% and
2.4%, respectively.

In 2018, sales by companies in Europe achieved growth of 9.5% as compared to the prior year, including operational
growth of 6.2% and a positive currency impact of 3.3%. Sales by companies in the Western Hemisphere (excluding the
U.S.) achieved growth of 1.2% as compared to the prior year, including operational growth of 8.2% and a negative
currency impact of 7.0%. Sales by companies in the Asia-Pacific, Africa region achieved growth of 10.5% as compared to
the prior year, including operational growth of 9.4% and a positive currency impact of 1.1%.

In 2018, the Company had three wholesalers distributing products for all three segments that represented approximately
14.0%, 11.0% and 11.0% of the total consolidated revenues. In 2017, the Company had two wholesalers distributing
products for all three segments that represented approximately 14.0% and 10.0% of the total consolidated revenues. In
2016, the Company had two wholesalers distributing products for all three segments that represented approximately
13.5% and 10.7% of the total consolidated revenues.

2018 Sales by Geographic Region (in billions) 

2018 Sales by Segment (in billions) 

$41.9

$14.8

$6.1

$18.8

$40.7

$27.0

$13.9

Europe

Western Hemisphere

Consumer

Pharmaceutical

Asia-Pacific, Africa

U.S.

Medical Devices

Analysis of Sales by Business Segments

Consumer Segment

Consumer segment sales in 2018 were $13.9 billion, an increase of 1.8% from 2017, which included 2.2% operational
growth and a negative currency impact of 0.4%. U.S. Consumer segment sales were $5.8 billion, an increase of 3.5%.
International sales were $8.1 billion, an increase of 0.7%, which included 1.4% operational growth and a negative
currency impact of 0.7%. In 2018, acquisitions and divestitures had a net negative impact of 1.0% on the operational
sales growth of the worldwide Consumer segment.

Major Consumer Franchise Sales:

(Dollars in Millions)

Beauty

OTC

Baby Care

Oral Care

Women’s Health

Wound Care/Other

Total Consumer Sales

% Change

2016

’18 vs. ’17

’17 vs. ’16

2018

$4,382

4,334

1,858

1,555

1,049

675

2017

4,200

4,126

1,916

1,531

1,050

779

3,897

3,977

2,001

1,568

1,067

797

$13,853

13,602

13,307

4.3%

5.0

(3.0)

1.6

(0.1)

(13.4)

1.8%

7.8

3.7

(4.2)

(2.4)

(1.6)

(2.3)

2.2

Johnson & Johnson 2018 Annual Report • 17

The Beauty franchise sales of $4.4 billion increased 4.3% as compared to the prior year. Growth was primarily driven by
NEUTROGENA®, OGX® and AVEENO® products as well as strength of DR. CI: LABO and DABAO® products outside
the U.S. Growth was partially offset by the divestiture of NIZORAL®.

The Over-the-Counter (OTC) franchise sales of $4.3 billion increased 5.0% as compared to the prior year. Growth was
primarily driven by share, consumption and market growth across multiple brands including ZYRTEC®, TYLENOL® and
Children’s MOTRIN®, as well as digestive health products and anti-smoking aids. Additionally, sales from the recent U.S.
acquisition of Zarbee’s Inc. contributed approximately 0.9% to growth.

The Baby Care franchise sales were $1.9 billion in 2018, a decrease of 3.0% compared to the prior year, primarily due to
JOHNSON’s® share decline and increased trade promotions due to the JOHNSON’s® baby relaunch and the negative
impact of currency. This was partially offset by strong growth of AVEENO® baby driven by geographic expansion.

The Oral Care franchise sales of $1.6 billion increased 1.6% as compared to the prior year, primarily driven by strong
marketing campaigns and new product launches.

The Women’s Health franchise sales were $1.0 billion in 2018, a decrease of 0.1% as compared to the prior year. Growth
in Latin America was offset by the negative impact of currency.

The Wound Care/Other franchise sales were $0.7 billion in 2018, a decrease of 13.4% as compared to the prior year,
primarily due to the divestiture of COMPEED®.

Consumer segment sales in 2017 were $13.6 billion, an increase of 2.2% from 2016, which included 1.3% operational
growth and a positive currency impact of 0.9%. U.S. Consumer segment sales were $5.6 billion, an increase of 2.7%.
International sales were $8.0 billion, an increase of 1.9%, which included 0.4% operational growth and a positive currency
impact of 1.5%. In 2017, acquisitions and divestitures had a net positive impact of 1.8% on the operational sales growth
of the worldwide Consumer segment.

18 • Johnson & Johnson 2018 Annual Report

Pharmaceutical Segment

Pharmaceutical segment sales in 2018 were $40.7 billion, an increase of 12.4% from 2017, which included operational
growth of 11.8% and a positive currency impact of 0.6%. U.S. sales were $23.3 billion, an increase of 8.4%. International
sales were $17.4 billion, an increase of 18.0%, which included 16.5% operational growth and a positive currency impact
of 1.5%. In 2018, acquisitions and divestitures had a net positive impact of 3.4% on the operational sales growth of the
worldwide Pharmaceutical segment.

Major Pharmaceutical Therapeutic Area Sales:*

2018

2017

2016

’18 vs. ’17

’17 vs. ’16

% Change

(Dollars in Millions)

Total Immunology

REMICADE®

SIMPONI® /SIMPONI ARIA®

STELARA®

TREMFYA®

Other Immunology

Total Infectious Diseases

EDURANT® /rilpivirine

PREZISTA® / PREZCOBIX® /REZOLSTA® /SYMTUZA®

Other Infectious Diseases

Total Neuroscience

CONCERTA® /methylphenidate

INVEGA SUSTENNA® /XEPLION® /INVEGA TRINZA® /

TREVICTA®

RISPERDAL CONSTA®

Other Neuroscience

Total Oncology

DARZALEX®

IMBRUVICA®

VELCADE®

ZYTIGA® /abiraterone acetate

Other Oncology

Pulmonary Hypertension

OPSUMIT®

TRACLEER®

UPTRAVI®

Other

Cardiovascular / Metabolism / Other

XARELTO®

INVOKANA® / INVOKAMET®

PROCRIT® /EPREX®

Other

$13,120

12,244

11,968

5,326

2,084

5,156

544

10

3,304

816

1,955

533

6,077

663

2,928

737

1,749

9,844

2,025

2,615

1,116

3,498

590

2,573

1,215

546

663

149

5,816

2,477

881

988

1,470

6,315

1,833

4,011

63

22

3,154

714

1,821

619

5,986

791

2,569

805

1,821

7,258

1,242

1,893

1,114

2,505

504

1,327

573

403

263

88

6,287

2,500

1,111

972

1,704

6,966

1,745

3,232

—

25

3,208

573

1,851

784

6,085

863

2,214

893

2,115

5,807

572

1,251

1,224

2,260

500

—

—

—

—

—

6,396

2,288

1,407

1,105

1,596

7.2%

(15.7)

13.7

28.5

**

(54.5)

4.8

14.3

7.4

(13.9)

1.5

(16.2)

14.0

(8.4)

(4.0)

35.6

63.0

38.1

0.2

39.6

17.1

93.9

**

35.5

**

69.3

(7.5)

(0.9)

(20.7)

1.6

(13.7)

2.3

(9.3)

5.0

24.1

**

(12.0)

(1.7)

24.6

(1.6)

(21.0)

(1.6)

(8.3)

16.0

(9.9)

(13.9)

25.0

**

51.3

(9.0)

10.8

0.8

***

***

***

***

***

(1.7)

9.3

(21.0)

(12.0)

6.8

8.3

Total Pharmaceutical Sales

$40,734

36,256

33,464

12.4%

*

**

Prior year amounts have been reclassified to conform to current year presentation

Percentage greater than 100% or not meaningful

*** Products acquired from Actelion on June 16, 2017

Johnson & Johnson 2018 Annual Report • 19

Immunology products sales were $13.1 billion in 2018, representing an increase of 7.2% as compared to the prior year.
Growth was driven by strong uptake of STELARA® (ustekinumab) in Crohn’s disease, strong launch uptake of TREMFYA®
(guselkumab), expanded indications of SIMPONI® /SIMPONI ARIA® (golimumab), and the U.S. immunology market
growth. Immunology was negatively impacted by lower sales of REMICADE® (infliximab) due to increased discounts/
rebates and biosimilar competition.

The patents for REMICADE® (infliximab) in certain countries in Europe expired in February 2015. Biosimilar versions of
REMICADE® have been introduced in certain markets outside the U.S., resulting in a reduction in sales of REMICADE® in
those markets. Additional biosimilar competition will likely result in a further reduction in REMICADE® sales in markets
outside the United States. In the U.S., a biosimilar version of REMICADE® was introduced in 2016, and additional
competitors continue to enter the market. Continued infliximab biosimilar competition in the U.S. market will result in a
further reduction in U.S. sales of REMICADE®. See Note 21 to the Consolidated Financial Statements for a description of
legal matters regarding the REMICADE® patents.

Infectious disease products sales were $3.3 billion in 2018, representing an increase of 4.8% as compared to the prior
year. Sales growth of PREZCOBIX®/REZOLSTA® (darunavir/cobicistat), EDURANT®/rilpivirine, and the launch of
SYMTUZA® and JULUCA® (dolutegravir/rilpivirine) was partially offset by lower sales of PREZISTA® (darunavir).

Neuroscience products sales were $6.1 billion, representing an increase of 1.5% as compared to the prior year. Strong
sales of long-acting injectables INVEGA TRINZA®/TREVICTA® (paliperidone palmitate) and INVEGA SUSTENNA® /
XEPLION® were partially offset by cannibalization of RISPERDAL CONSTA® (risperidone) and generic competition for
CONCERTA® /methylphenidate.

Oncology products achieved sales of $9.8 billion in 2018, representing an increase of 35.6% as compared to the prior
year. Contributors to the growth were strong sales of DARZALEX® (daratumumab) with continued market growth and
share gain, IMBRUVICA® (ibrutinib) due to increased patient uptake globally and sales of ZYTIGA® (abiraterone acetate)
driven by LATITUDE data and market growth. Additionally, sales from the launch of ERLEADA™ (apalutamide) contributed
to the growth. A number of companies marketing generic pharmaceuticals have filed Abbreviated New Drug Applications
(ANDAs) with the FDA, or undertaken similar regulatory processes outside of the U.S., seeking to market generic forms of
ZYTIGA® prior to expiration of its applicable patents. These ANDAs include allegations of non-infringement and invalidity
of the applicable patents. In October 2018, the Court issued a ruling invalidating all asserted claims of the applicable
patent. Janssen has appealed the Court’s decision. In November 2018, the U.S. Court of Appeals for the Federal Circuit
denied Janssen’s request for an injunction pending appeal. As a result, several generic versions of ZYTIGA® have entered
the market, resulting in a decline in sales of ZYTIGA® in the United States. In 2018, the Company reported U.S. sales of
$1.8 billion for ZYTIGA®. See Note 21 to the Consolidated Financial Statements for a description of legal matters
regarding ZYTIGA®.

The Pulmonary Hypertension therapeutic area was established with the acquisition of Actelion Ltd on June 16, 2017.
Sales in 2018 represented a full year as compared to half a year in 2017. Sales of OPSUMIT® (macitentan) and
UPTRAVI® (selexipag) were positively impacted by market growth and share gains while sales of TRACLEER® (bosetan)
were negatively impacted by increased use of OPSUMIT® and generics.

Cardiovascular/Metabolism/Other products sales were $5.8 billion, a decline of 7.5% as compared to the prior year.
Lower sales of INVOKANA® /INVOKAMET® (canagliflozin) in the U.S. was primarily due to an increase in price discounts,
higher rebates and market share decline driven by competitive pressure. Lower sales of XARELTO® (rivaroxaban) were
driven by an increase in discounts and rebates, partially offset by an increase in market share.

20 • Johnson & Johnson 2018 Annual Report

During 2018, the Company advanced its pipeline with several regulatory submissions and approvals for new drugs and
additional indications for existing drugs as follows:

Product Name (Chemical
Name)
DARZALEX® (daratumumab)

erdafitinib
ERLEADA™ (apalutamide)

esketamine
IMBRUVICA® (ibrutinib)

INVOKANA® (canagliflozin)

JULUCA® (rilpivirine and
dolutegravir)
OPSUMIT® (macitentan)

Indication

Frontline multiple myeloma transplant ineligible patients in
combination with bortezomib, melphalan, and prednisone

Treatment of locally advanced or metastatic urothelial cancer
Treatment of non-metastatic castration-resistant prostate
cancer

Antidepressant for treatment-resistant depression in adults
Treatment of Waldenstrom’s macroglobulinemia used in
combination with rituximab

Treatment for previously untreated Chronic Lymphocytic
Leukemia in combination with obinutuzumab
Reduce the risk of death in type 2 diabetes with established,
or risk for, cardiovascular disease. (CANVAS/CANVAS-R )

Single-tablet, once-daily, two-drug regimen for the treatment
of HIV-1 infection
Treatment of adults with inoperable chronic thromboembolic
pulmonary hypertension to improve exercise capacity and
pulmonary vascular resistance

STELARA® (ustekinumab)

Treatment of adults with moderately to severely active
ulcerative colitis

SYMTUZA® (darunavir/
cobicistat/ emtricitabine/tenofovir
alafenamide)

TREMFYA® (guselkumab)

XARELTO® (rivaroxaban)

ZYTIGA® (abiraterone acetate)

A complete darunavir-based single-tablet regimen for the
treatment of HIV-1 infection

Patient controlled injector for the treatment of adults living with
moderate to severe plaque psoriasis
Treatment to reduce the risk of major cardiovascular events in
people with chronic coronary or peripheral artery disease

For the prevention of venous thromboembolism for medically ill
patients
Treatment of Hormone Naïve Metastatic Prostate Cancer

US
Approval

EU
Approval

US
Filing

EU
Filing

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

Pharmaceutical segment sales in 2017 were $36.3 billion, an increase of 8.3% from 2016, which included operational
growth of 8.0% and a positive currency impact of 0.3%. U.S. sales were $21.5 billion, an increase of 6.7%. International
sales were $14.8 billion, an increase of 10.8%, which included 10.1% operational growth and a positive currency impact
of 0.7%. In 2017, acquisitions and divestitures had a net positive impact of 3.8% on the operational sales growth of the
worldwide Pharmaceutical segment. Adjustments to previous reserve estimates, as compared to the prior year, negatively
impacted the reported Pharmaceutical segment operational growth by approximately 1.8%, primarily in the Immunology
and Cardiovascular/Metabolism/Other therapeutic areas.

Medical Devices Segment

The Medical Devices segment sales in 2018 were $27.0 billion, an increase of 1.5% from 2017, which included an
operational increase of 1.1% and a positive currency impact of 0.4%. U.S. sales were $12.8 billion, an increase of 0.1%
as compared to the prior year. International sales were $14.2 billion, an increase of 2.8% as compared to the prior year,
with an operational increase of 1.9% and a positive currency impact of 0.9%. In 2018, acquisitions and divestitures had a
net negative impact of 1.5% on the worldwide operational sales growth of the Medical Devices segment as compared to
2017.

Johnson & Johnson 2018 Annual Report • 21

Major Medical Devices Franchise Sales:*

(Dollars in Millions)

2018

2017

2016

’18 vs. ’17

’17 vs. ’16

% Change

Surgery

Advanced

General

Specialty

Orthopaedics

Hips

Knees

Trauma

Spine & Other

Vision

Contact Lenses/Other

Surgical

Interventional Solutions(1)

Diabetes Care

Diagnostics(2)

$9,901

4,002

4,557

1,342

8,885

1,418

1,502

2,699

3,266

4,553

3,302

1,251

2,646

1,009

—

9,559

3,756

4,463

1,340

9,058

1,394

1,523

2,616

3,525

4,063

3,036

1,027

2,296

1,615

1

9,296

3,517

4,362

1,417

9,128

1,361

1,524

2,569

3,674

2,785

2,785

—

2,055

1,789

66

Total Medical Devices Sales

$26,994

26,592

25,119

3.6%

6.5

2.1

0.1

(1.9)

1.7

(1.4)

3.2

(7.3)

12.1

8.8

21.8

15.2

(37.5)

***

1.5%

2.8

6.8

2.3

(5.4)

(0.8)

2.4

(0.1)

1.8

(4.1)

45.9

9.0

**

11.7

(9.7)

***

5.9

(1) Previously referred to as Cardiovascular

(2) On June 30, 2014, the Company divested the Ortho-Clinical Diagnostics business (the Diagnostics Franchise) and amounts

represent transitional service agreement that concluded in 2017.

*

**

Prior year amounts have been reclassified to conform to current year presentation

Products acquired from Abbott Medical Optics (AMO) on February 27, 2017

*** Percentage greater than 100% or not meaningful

The Surgery franchise sales were $9.9 billion in 2018, an increase of 3.6% from 2017. Growth in Advanced Surgery was
primarily driven by endocutter, biosurgery and energy products. Growth in General Surgery was primarily driven by wound
care products. Growth in Specialty Surgery was primarily driven by Advanced Sterilization Products.

The Orthopaedics franchise sales were $8.9 billion in 2018, a decrease of 1.9% from 2017. The decline in Spine & Other
was primarily due to the Codman Neurosurgery divestiture and share loss in Spine partially offset by new product
launches. The decline in knees was primarily due to competitive pressure in the U.S. partially offset by growth in Asia
Pacific. Growth in hips and trauma was due to continued uptake of new products.

The Vision franchise achieved sales of $4.6 billion in 2018, an increase of 12.1% from 2017. Growth was primarily driven
by strength of the astigmatism and daily disposable lenses in the OASYS® contact lenses category. Surgical growth was
driven by cataract performance primarily outside the U.S.

The Interventional Solutions franchise (includes the Cerenovus business previously included in Spine and Other in
Orthopaedics) sales were $2.6 billion, an increase of 15.2% from 2017. Strong growth in the electrophysiology business
was driven by Atrial Fibrillation procedure growth and continued uptake of the THERMOCOOL SMARTTOUCH® Contact
Force Sensing Catheter.

The Diabetes Care franchise sales were $1.0 billion, a decrease of 37.5% from 2017. The decline was primarily due to
divestiture of its LifeScan business in the fiscal fourth quarter of 2018 and the Company’s decision to exit the Animas
insulin pump business in the fiscal fourth quarter of 2017.

The Medical Devices segment sales in 2017 were $26.6 billion, an increase of 5.9% from 2016, which included an
operational increase of 5.7% and a positive currency impact of 0.2%. U.S. sales were $12.8 billion, an increase of 4.5%
as compared to the prior year. International sales were $13.8 billion, an increase of 7.1% as compared to the prior year,
with an operational increase of 6.7% and a positive currency impact of 0.4%. In 2017, acquisitions and divestitures had a
net positive impact of 4.2% on the worldwide operational sales growth of the Medical Devices segment as compared to
2016.

22 • Johnson & Johnson 2018 Annual Report

Analysis of Consolidated Earnings Before Provision for Taxes on Income

Consolidated earnings before provision for taxes on income was $18.0 billion, $17.7 billion and $19.8 billion for the fiscal
years ended 2018, 2017 and 2016, respectively. As a percent to sales, consolidated earnings before provision for taxes
on income was 22.1%, 23.1%, and 27.5% in 2018, 2017 and 2016, respectively.

Earnings Before Provision for Taxes

)
s
n
o

i
l
l
i

B
(
$

$18.0

22.1%

2018

$17.7

23.1%

2017

Period Ending

$19.8

27.5%

2016

Income Before Tax

Percent to sales

Cost of Products Sold and Selling, Marketing and Administrative Expenses: Cost of products sold and selling,
marketing and administrative expenses as a percent to sales were as follows:*

% of Sales

Cost of products sold*

Percent point increase/(decrease) over the prior year

Selling, marketing and administrative expenses*

Percent point increase/(decrease) over the prior year

2018

2017

33.2%

33.3

(0.1)

3.0

27.6%

28.1

(0.5)

0.2

2016

30.3

(0.3)

27.9

(2.2)

* Prior years amounts were reclassified to conform to current year presentation (adoption of ASU 2017-07)

In 2018, cost of products sold as a percent to sales decreased to 33.2% from 33.3% as compared to the same period a
year ago primarily due to lower inventory step-up costs related to the Actelion acquisition and favorable product and
segment mix driven by a higher percentage of sales from the Pharmaceutical segment. This was mostly offset by higher
amortization expense primarily related to the Actelion acquisition on June 16, 2017. Intangible asset amortization expense
of $4.4 billion was included in cost of products sold for 2018 as compared to $3.0 billion in 2017. There was a decrease
in the percent to sales of selling, marketing and administrative expenses in 2018 as compared to the prior year, primarily
due to lower costs relative to sales growth in the Pharmaceutical business and favorable segment mix.

In 2017, cost of products sold as a percent to sales increased to 33.3% from 30.3% as compared to the same period a
year ago. The unfavorable increase was primarily driven by $2.3 billion of higher amortization expense and charges for
inventory step-up related to the recent acquisitions, primarily Actelion. Intangible asset amortization expense of $3.0 billion
was included in cost of products sold for 2017 as compared to $1.2 billion in 2016. There was an increase in the percent
to sales of selling, marketing and administrative expenses in 2017 as compared to the prior year, primarily due to
investments in new product launches partially offset by favorable mix.

Johnson & Johnson 2018 Annual Report • 23

 
Research and Development Expense: Research and development expense by segment of business was as follows:*

2018

2017

2016

(Dollars in Millions)

Amount

% of Sales**

Amount

% of Sales**

Amount

% of Sales**

Consumer

Pharmaceutical

Medical Devices

$565

8,446

1,764

4.1%

20.7

6.5

586

8,392

1,616

Total research and development expense

$10,775

13.2%

10,594

Percent increase/(decrease) over the prior

year

1.7%

15.9

4.3

23.1

6.1

13.9

4.4

20.9

6.2

12.7

585

7,001

1,557

9,143

1.6

*

**

Prior years amounts were reclassified to conform to current year presentation (adoption of ASU 2017-07)

As a percent to segment sales

Research and development activities represent a significant part of the Company’s business. These expenditures relate to
the processes of discovering, testing and developing new products, upfront payments and milestones, improving existing
products, as well as ensuring product efficacy and regulatory compliance prior to launch. The Company remains
committed to investing in research and development with the aim of delivering high quality and innovative products. In
2018, worldwide costs of research and development activities increased by 1.7% compared to 2017 but decreased as a
percent of sales. The decrease as a percent of sales in the Pharmaceutical segment was attributable to lower costs
relative to sales growth. The increased dollar spend in the Medical Devices and Pharmaceutical segments was for
investment spending to advance the pipeline. In 2017, worldwide costs of research and development activities increased
by 15.9% compared to 2016. The increase as a percent of sales was primarily in the Pharmaceutical segment due to
general portfolio progression as well as collaborative agreements entered into with Idorsia Ltd. and Legend Biotech.
Research facilities are located in the U.S., Belgium, Brazil, China, France, Germany, India, Israel, the Netherlands, Poland,
Singapore, Sweden, Switzerland and the United Kingdom with additional R&D support in over 30 other countries.

In-Process Research and Development (IPR&D): In 2018, the Company recorded an IPR&D charge of $1.1 billion.
Of the $1.1 billion, a partial impairment charge of $0.8 billion related to the development program of AL-8176, an
investigational drug for the treatment of Respiratory Syncytial Virus (RSV) and human metapneumovirus (hMPV) acquired
with the 2014 acquisition of Alios Biopharma Inc. The impairment charge was calculated based on updated cash flow
projections discounted for the inherent risk in the asset development and reflects the impact of the phase 2b clinical trial
suspension, a decrease in the probability of success factors and the ongoing analysis of asset development activities. The
Company continues to evaluate information with respect to the development program and will monitor the remaining
$0.9 billion intangible asset for further impairment. In addition, an impairment charge of $0.3 billion was recorded for the
discontinuation of the development project for an anti-thrombin antibody associated with the 2015 acquisition of XO1
Limited.

In 2017, the Company recorded an IPR&D charge of $0.4 billion primarily for the discontinuation of certain development
projects related to Novira which was acquired in 2015. The product development was canceled due to safety concerns. In
2016, the Company recorded an IPR&D charge of $29 million for the discontinuation of a development program related to
Crucell.

Other (Income) Expense, Net: Other (income) expense, net is the account where the Company records gains and
losses related to the sale and write-down of certain investments in equity securities held by Johnson & Johnson
Innovation — JJDC, Inc. (JJDC), unrealized gains and losses on investments, gains and losses on divestitures, certain
transactional currency gains and losses, acquisition-related costs, litigation accruals and settlements, as well as royalty
income.

The change in other (income) expense, net for the fiscal year 2018 was an unfavorable change of $1.4 billion primarily due
to litigation expense of $2.0 billion in 2018 as compared to $1.3 billion in 2017. Additionally, 2018 included unrealized
losses on securities of $0.2 billion and lower realized gains of $0.4 billion related to investments in equity securities as
compared to the prior year. This was partially offset by a reversal of a contingent liability of $0.2 billion and lower costs of
$0.1 billion related to the Actelion and AMO acquisitions in 2018 as compared to 2017. The fiscal year of 2017 included
a gain of $0.2 billion related to monetization of future royalty receivables offset by an asset impairment charge of
$0.2 billion primarily related to the insulin pump business. Divestiture gains were approximately $1.2 billion in 2018 and
included the LifeScan business, NIZORAL®, RoC® and certain non-strategic Pharmaceutical products. Divestiture gains
were approximately $1.3 billion in 2017 and primarily included the Codman Neurosurgery and COMPEED® divestitures.
Additionally, restructuring related expense in 2018 was $0.3 billion as compared to $0.4 billion 2017.

24 • Johnson & Johnson 2018 Annual Report

The change in other (income) expense, net for the fiscal year 2017 was a favorable change of $0.3 billion due to higher
gains of $0.7 billion on the sale of assets/businesses, primarily the Codman Neurosurgery and COMPEED® divestitures, a
gain of $0.2 billion related to monetization of future royalty receivables and a higher gain of $0.3 billion related to the sale
of certain investments in equity securities as compared to the prior year. This was partially offset by higher litigation
expense of $0.4 billion, $0.3 billion of acquisition costs related to Actelion and AMO, an asset impairment charge of
$0.2 billion primarily related to the insulin pump business and a higher restructuring related charge of $0.2 billion as
compared to the fiscal year 2016.

Interest (Income) Expense: Interest income was higher in 2018 as compared to 2017 due to a higher average interest
rate and a benefit from net investment hedging partially offset by a lower average cash, cash equivalents and marketable
securities balance during the period. Cash, cash equivalents and marketable securities totaled $19.7 billion at the end of
2018, and averaged $19.0 billion as compared to the cash, cash equivalents and marketable securities total of
$18.3 billion and $30.1 billion average cash balance in 2017. The decrease in the average balance of cash, cash
equivalents and marketable securities was due to the use of cash for general corporate purposes, primarily the Actelion
acquisition for $29.6 billion, net of cash acquired late in the fiscal second quarter of 2017.

Interest expense in 2018 was higher as compared to 2017 due to a higher average debt balance. The average debt
balance was $32.5 billion in 2018 versus $30.9 billion in 2017. The total debt balance at the end of 2018 was
$30.5 billion as compared to $34.6 billion at the end of 2017.

Interest income in 2017 increased slightly as compared to 2016 due to higher average interest rates partially offset by
lower cash, cash equivalents and marketable securities balances during the period. Cash, cash equivalents and
marketable securities totaled $18.3 billion at the end of 2017, and averaged $30.1 billion as compared to the
$40.1 billion average cash balance in 2016. The decrease in the balance of cash, cash equivalents and marketable
securities was due to the use of cash for general corporate purposes including acquisitions, primarily the Actelion
acquisition for $29.6 billion, net of cash acquired.

Interest expense in 2017 was higher as compared to 2016. The average debt balance was $30.9 billion in 2017 versus
$23.5 billion in 2016. The total debt balance at the end of 2017 was $34.6 billion as compared to $27.1 billion at the end
of 2016. The higher debt balance of approximately $7.5 billion was primarily due to increased borrowings. The Company
increased borrowings in February and November of 2017, capitalizing on favorable terms in the capital markets. The
proceeds of the borrowings were used for general corporate purposes, including the completion of the stock repurchase
program.

Income Before Tax by Segment

Income before tax by segment of business were as follows:

(Dollars in Millions)

Consumer

Pharmaceutical

Medical Devices

Total (1)

Income Before Tax

Segment Sales

Percent of
Segment Sales

2018

2017

2018

2017

2018

2017

$2,320

2,524

13,853

13,602

16.7%

12,568

11,083

40,734

36,256

4,397

5,392

26,994

26,592

19,285

18,999

81,581

76,450

30.9

16.3

23.6

18.6

30.6

20.3

24.9

Less: Expenses not allocated to segments (2)

1,286

1,326

Earnings before provision for taxes on income

$17,999

17,673

81,581

76,450

22.1%

23.1

(1) See Note 18 to the Consolidated Financial Statements for more details.

(2) Amounts not allocated to segments include interest (income) expense and general corporate (income) expense.

Consumer Segment: In 2018, the Consumer segment income before tax as a percent to sales was 16.7%, versus
18.6% in 2017. The decrease in the income before tax as a percent of sales in 2018 as compared to 2017 was primarily
attributable to higher litigation expense of $0.3 billion in 2018 partially offset by slower increases in expenses relative to
the increase in sales. Divestiture gains for the fiscal year of 2018, which included the divestitures of NIZORAL® and RoC®
were comparable to fiscal year of 2017. A gain of $0.3 billion was recognized from the divestiture of NIZORAL®.

In 2017, the Consumer segment income before tax as a percent to sales was 18.6%, versus 18.3% in 2016. The increase
in the income before tax as a percent of sales in 2017 as compared to 2016 was attributable to higher gains on

Johnson & Johnson 2018 Annual Report • 25

divestitures, primarily the divestiture of COMPEED® in 2017. This was partially offset by higher selling, marketing and
administrative expenses as compared to the prior year due to increased advertising and promotional spending and slightly
higher amortization expense in 2017 related to acquisitions. Additionally, the fiscal year 2016 was negatively impacted by
operations in Venezuela.

Pharmaceutical Segment: In 2018, the Pharmaceutical segment income before tax as a percent to sales was 30.9%
versus 30.6% in 2017. The increase in the income before tax as a percent of sales was primarily due to lower inventory
step-up costs related to Actelion of $0.6 billion, favorable product mix and slower increases in expenses relative to the
increase in sales, a contingent liability reversal of $0.2 billion and higher divestiture gains of $0.2 billion from divestitures of
certain non-strategic Pharmaceutical products. This was partially offset by higher amortization expense of $1.3 billion
primarily related to the Actelion acquisition, a higher IPR&D charge of $0.7 billion and an unrealized loss on securities of
$0.2 billion as compared to the prior year. Additionally, 2017 included a gain of $0.2 billion related to monetization of
future royalty receivables and a higher gain of $0.3 billion related to the sale of certain investments in equity securities.

In 2017, the Pharmaceutical segment income before tax as a percent to sales was 30.6% versus 38.3% in 2016. The
decrease in the income before tax as a percent of sales was primarily due to $2.3 billion of higher amortization expense
and other costs related to the Actelion acquisition, higher research and development expense, a higher IPR&D charge of
$0.4 billion related to Novira and lower gains on divestitures as compared to the prior year. Additionally, the fiscal year
2016 included a positive adjustment of $0.5 billion to previous reserve estimates. This was partially offset by a gain of
$0.2 billion related to monetization of future royalty receivables, a higher gain of $0.2 billion related to the sale of certain
investments in equity securities and favorable product mix in 2017.

Medical Devices Segment: In 2018, the Medical Devices segment income before tax as a percent to sales was 16.3%
versus 20.3% in 2017. The decrease in the income before tax as a percent to sales was primarily due higher litigation
expense of $1.7 billion in 2018 as compared to $1.1 billion in 2017 and higher investments in the business in 2018.
Additionally, 2018 had lower divestiture gains of approximately $0.3 billion as compared to divestiture gains in 2017. In
2018 the Company recorded a gain of $0.5 billion related to the LifeScan divestiture. This was partially offset by lower
restructuring expense of $0.2 billion in 2018 as compared to 2017. Additionally, 2017 included an asset impairment
charge of $0.2 billion primarily related to the insulin pump business.

In 2017, the Medical Devices segment income before tax as a percent to sales was 20.3% versus 22.2% in 2016. The
decrease in the income before tax as a percent to sales was primarily due to $0.3 billion of higher amortization expense
and other acquisition costs related to AMO, $0.3 billion of higher litigation, an asset impairment charge of $0.2 billion
primarily related to the insulin pump business, $0.1 billion of higher restructuring and investments in new product launches
as compared to the fiscal year 2016. This was partially offset by $0.8 billion higher gains in 2017 related to divestitures,
primarily the divestiture of Codman Neurosurgery.

Restructuring: In the first quarter of 2016, the Company announced restructuring actions in its Medical Devices
segment. The Company has achieved approximately $0.7 billion of annualized pre-tax cost saving in 2018 and is on track
to achieve the annualized pre-tax cost savings of $0.8 billion to $1.0 billion as outlined in the restructuring actions. The
savings will provide the Company with added flexibility and resources to fund investment in new growth opportunities and
innovative solutions for customers and patients. In 2018, the Company recorded a pre-tax charge of $462 million, of
which $46 million is included in cost of products sold and $227 million is included in other (income) expense. Total
project costs of approximately $2.5 billion have been recorded since the restructuring was announced. This restructuring
program was completed in the fiscal fourth quarter of 2018.

In the second quarter of 2018, the Company announced plans to implement actions across its global supply chain that are
intended to enable the Company to focus resources and increase investments in critical capabilities, technologies and
solutions necessary to manufacture and supply its product portfolio of the future, enhance agility and drive growth. The
Company expects these supply chain actions will include expanding its use of strategic collaborations, and bolstering its
initiatives to reduce complexity, improving cost-competitiveness, enhancing capabilities and optimizing its
network. Discussions regarding specific future actions are ongoing and are subject to all relevant consultation
requirements before they are finalized. In total, the Company expects these actions to generate approximately $0.6 to
$0.8 billion in annual pre-tax cost savings that will be substantially delivered by 2022. The Company expects to record
pre-tax restructuring charges of approximately $1.9 to $2.3 billion. The Company estimates that approximately 70% of the
cumulative pre-tax costs will result in cash outlays. In 2018, the Company recorded a pre-tax charge of $238 million, of
which $59 million is included in cost of products sold and $117 million is included in other (income) expense.

See Note 22 to the Consolidated Financial Statements for additional details related to the restructuring programs.

26 • Johnson & Johnson 2018 Annual Report

Provision for Taxes on Income: The worldwide effective income tax rate was 15.0% in 2018, 92.6% in 2017 and
16.5% in 2016. The 2018 effective tax rate decreased by 77.6% as compared to 2017. The 2017 effective tax rate was
primarily driven by a provisional tax charge of approximately $13.0 billion as a result of the Tax Cuts and Jobs Act (TCJA)
recorded in the fourth quarter of 2017 and the impact of a Belgian statutory tax rate change which increased the 2017
effective rate by 3.4%. The Company also received a benefit in 2018 from a lower U.S. statutory tax rate vs. 2017 as well
as favorable adjustments to the 2017 provisional TCJA tax charge partially offset by unfavorable income tax mix and the
U.S. tax on global intangible low-taxed income (GILTI).

The 2017 effective tax rate increased by 76.1% as compared to 2016, primarily driven by the enactment of the Tax Cuts
and Jobs Act (TCJA) in the United States in December 2017. The enactment of the TCJA resulted in a provisional tax
charge in the fourth quarter of 2017, of approximately $13.0 billion or approximately 73.3 percentage point increase to the
effective tax rate. See Note 8 to the Consolidated Financial Statements for additional details related to the TCJA.

The remainder of the increase in the tax rate for 2017 was related to the remeasurement of the Company’s deferred tax
assets in Belgium, as a result of changes in the Belgian statutory corporate tax rate, enacted in December 2017, offset by
a tax benefit for the closure of the Company’s Animas insulin pump business.

The government in Switzerland is currently considering tax reform legislation, which could have a material impact on the
Company’s effective tax rate if enacted into law.

See Note 8 to the Consolidated Financial Statements for additional details related to the TCJA and income taxes.

Liquidity and Capital Resources

Liquidity & Cash Flows

Cash and cash equivalents were $18.1 billion at the end of 2018 as compared to $17.8 billion at the end of 2017. The
primary sources and uses of cash that contributed to the $0.3 billion increase were approximately $22.2 billion of cash
generated from operating activities. This was partially offset by $3.2 billion net cash used by investing activities,
$18.5 billion net cash used by financing activities and $0.2 billion due to the effect on exchange rate changes on cash
and cash equivalents. In addition, the Company had $1.6 billion in marketable securities at the end of 2018 and
$0.5 billion at the end of 2017. See Note 1 to the Consolidated Financial Statements for additional details on cash, cash
equivalents and marketable securities.

Cash flow from operations of $22.2 billion was the result of $15.3 billion of net earnings and $9.2 billion of non-cash
expenses and other adjustments for depreciation and amortization, stock-based compensation and assets write-downs,
offset by $2.3 billion from net gains on sale of assets/businesses, deferred tax provision and accounts receivable
allowances, $3.9 billion related to an increase in accounts receivable, inventories and other current and non-current assets
and a decrease in other current and non-current liabilities. Additional sources of operating cash flow of $4.0 billion
resulted from an increase in accounts payable and accrued liabilities. The decrease in current and non-current liabilities is
primarily due to the 2018 tax payment related to TCJA.

Investing activities use of $3.2 billion was for additions to property, plant and equipment of $3.7 billion, the net purchase
of investments primarily marketable securities of $1.3 billion, acquisitions, net of cash acquired of $0.9 billion (primarily the
acquisitions of Zarbee’s) and other uses of $0.5 billion. This was partially offset by $3.2 billion of proceeds from the
disposal of assets/businesses (primarily the divestiture of LifeScan).

Financing activities use of $18.5 billion was primarily for dividends to shareholders of $9.5 billion, $5.9 billion for the
repurchase of common stock, $3.9 billion for the net retirement of short and long-term debt and $0.2 billion of other
financing. Financing activities also included sources of $1.0 billion of proceeds from stock options exercised/employee
withholding tax on stock awards, net.

On December 17, 2018, the Company announced that its Board of Directors approved a share repurchase program,
authorizing the Company to purchase up to $5.0 billion of the Company’s shares of common stock. The repurchase
program has no time limit and may be suspended for periods or discontinued at any time. Any shares acquired will be
available for general corporate purposes. The Company intends to finance the share repurchase program through available
cash. As of December 30, 2018, $0.9 billion has been repurchased under the program.

As of December 30, 2018, the Company’s notes payable and long-term debt was in excess of cash, cash equivalents and
marketable securities. As of December 30, 2018, the net debt position was $10.8 billion as compared to the prior year of
$16.3 billion. There was a decrease in the net debt position due to retirement of debt. The debt balance at the end of

Johnson & Johnson 2018 Annual Report • 27

2018 was $30.5 billion as compared to $34.6 billion in 2017. Additionally there was a higher cash, cash equivalents and
marketable securities balance at the end of 2018. In 2018, the Company continued to have access to liquidity through the
commercial paper market. Additionally, as a result of the TCJA, the Company has access to its cash outside the U.S. at a
significantly reduced cost. The Company anticipates that operating cash flows, the ability to raise funds from external
sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will
continue to provide sufficient resources to fund operating needs for the next twelve months. The Company monitors the
global capital markets on an ongoing basis and from time to time may raise capital when market conditions are favorable.
The Company filed a new shelf registration on February 27, 2017 which will enable it to issue debt securities on a timely
basis. For additional details on borrowings, see Note 7 to the Consolidated Financial Statements.

Financing and Market Risk

The Company uses financial instruments to manage the impact of foreign exchange rate changes on cash flows.
Accordingly, the Company enters into forward foreign exchange contracts to protect the value of certain foreign currency
assets and liabilities and to hedge future foreign currency transactions primarily related to product costs. Gains or losses
on these contracts are offset by the gains or losses on the underlying transactions. A 10% appreciation of the U.S. Dollar
from the December 30, 2018 market rates would increase the unrealized value of the Company’s forward contracts by
$57 million. Conversely, a 10% depreciation of the U.S. Dollar from the December 30, 2018 market rates would decrease
the unrealized value of the Company’s forward contracts by $69 million. In either scenario, the gain or loss on the forward
contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no impact on future
anticipated earnings and cash flows.

The Company hedges the exposure to fluctuations in currency exchange rates, and the effect on certain assets and
liabilities in foreign currency, by entering into currency swap contracts. A 1% change in the spread between U.S. and
foreign interest rates on the Company’s interest rate sensitive financial instruments would either increase or decrease the
unrealized value of the Company’s swap contracts by approximately $226 million. In either scenario, at maturity, the gain or
loss on the swap contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no
impact on future anticipated cash flows.

The Company does not enter into financial instruments for trading or speculative purposes. Further, the Company has a
policy of only entering into contracts with parties that have at least an investment grade credit rating. The counter-parties
to these contracts are major financial institutions and there is no significant concentration of exposure with any one
counter-party. Management believes the risk of loss is remote. During the fiscal second quarter of 2017, the Company
entered into credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds
based on respective credit ratings and netting agreements.

The Company invests in both fixed rate and floating rate interest earning securities which carry a degree of interest rate
risk. The fair market value of fixed rate securities may be adversely impacted due to a rise in interest rates, while floating
rate securities may produce less income than predicted if interest rates fall. A 1% (100 basis points) change in spread on
the Company’s interest rate sensitive investments would either increase or decrease the unrealized value of cash
equivalents and current marketable securities by approximately $8 million.

The Company has access to substantial sources of funds at numerous banks worldwide. In September 2018, the
Company secured a new 364-day Credit Facility. Total credit available to the Company approximates $10 billion, which
expires on September 12, 2019. Interest charged on borrowings under the credit line agreement is based on either bids
provided by banks, the prime rate or London Interbank Offered Rates (LIBOR), plus applicable margins. Commitment fees
under the agreement are not material.

Total borrowings at the end of 2018 and 2017 were $30.5 billion and $34.6 billion, respectively. The decrease in
borrowings was due to the retirement of debt in 2018. In 2018, net debt (cash and current marketable securities, net of
debt) was $10.8 billion compared to net debt of $16.3 billion in 2017. Total debt represented 33.8% of total capital
(shareholders’ equity and total debt) in 2018 and 36.5% of total capital in 2017. Shareholders’ equity per share at the end
of 2018 was $22.44 compared to $22.43 at year-end 2017.

A summary of borrowings can be found in Note 7 to the Consolidated Financial Statements.

Contractual Obligations and Commitments

The Company’s contractual obligations are primarily for the recently enacted tax legislation, leases, debt and unfunded
retirement plans. There are no other significant obligations. To satisfy these obligations, the Company will use cash from

28 • Johnson & Johnson 2018 Annual Report

operations. The following table summarizes the Company’s contractual obligations and their aggregate maturities as of
December 30, 2018 (see Notes 7, 8, 10 and 16 to the Consolidated Financial Statements for further details):

(Dollars in Millions)

Tax
Legislation
(TCJA)

Debt
Obligations

Interest on
Debt
Obligations

Unfunded
Retirement
Plans

Operating
Leases

2019

2020

2021

2022

2023

After 2023

Total

$ —

531

812

812

1,522

4,565

$8,242

2,636

1,098

1,796

2,134

1,553

21,103

30,320

949

886

841

796

764

8,850

13,086

92

95

101

108

115

697

1,208

223

188

154

116

76

139

896

Total

3,900

2,798

3,704

3,966

4,030

35,354

53,752

For tax matters, see Note 8 to the Consolidated Financial Statements. For other retirement plan and post-employment
medical benefit information, see Note 10 to the Consolidated Financial Statements. The table does not include activity
related to business combinations.

Dividends

The Company increased its dividend in 2018 for the 56th consecutive year. Cash dividends paid were $3.54 per share in
2018 compared with dividends of $3.32 per share in 2017, and $3.15 per share in 2016.

Other Information

Critical Accounting Policies and Estimates

Management’s discussion and analysis of results of operations and financial condition are based on the Company’s
consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in
the U.S. (GAAP). The preparation of these financial statements requires that management make estimates and
assumptions that affect the amounts reported for revenues, expenses, assets, liabilities and other related disclosures.
Actual results may or may not differ from these estimates. The Company believes that the understanding of certain key
accounting policies and estimates are essential in achieving more insight into the Company’s operating results and
financial condition. These key accounting policies include revenue recognition, income taxes, legal and self-insurance
contingencies, valuation of long-lived assets, assumptions used to determine the amounts recorded for pensions and other
employee benefit plans and accounting for stock based awards.

Revenue Recognition: The Company recognizes revenue from product sales when obligations under the terms of a
contract with the customer are satisfied; generally, this occurs with the transfer of control of the goods to customers. The
Company’s global payment terms are typically between 30 to 90 days. Provisions for certain rebates, sales incentives,
trade promotions, coupons, product returns and discounts to customers are accounted for as variable consideration and
recorded as a reduction in sales. See Note 1 to the Consolidated Financial Statements for the Accounting Standards
Update related to revenue which was adopted in 2018.

Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as
well as market conditions, including consideration of competitor pricing. Rebates are estimated based on contractual
terms, historical experience, patient outcomes, trend analysis and projected market conditions in the various markets
served. The Company evaluates market conditions for products or groups of products primarily through the analysis of
wholesaler and other third-party sell-through and market research data, as well as internally generated information.

Sales returns are estimated and recorded based on historical sales and returns information. Products that exhibit unusual
sales or return patterns due to dating, competition or other marketing matters are specifically investigated and analyzed as
part of the accounting for sales return accruals.

Sales returns allowances represent a reserve for products that may be returned due to expiration, destruction in the field,
or in specific areas, product recall. The sales returns reserve is based on historical return trends by product and by market
as a percent to gross sales. In accordance with the Company’s accounting policies, the Company generally issues credit

Johnson & Johnson 2018 Annual Report • 29

to customers for returned goods. The Company’s sales returns reserves are accounted for in accordance with the
U.S. GAAP guidance for revenue recognition when right of return exists. Sales returns reserves are recorded at full sales
value. Sales returns in the Consumer and Pharmaceutical segments are almost exclusively not resalable. Sales returns for
certain franchises in the Medical Devices segment are typically resalable but are not material. The Company infrequently
exchanges products from inventory for returned products. The sales returns reserve for the total Company has been
approximately 1.0% of annual net trade sales during the fiscal reporting years 2018, 2017 and 2016.

Promotional programs, such as product listing allowances and cooperative advertising arrangements, are recorded in the
same period as related sales. Continuing promotional programs include coupons and volume-based sales incentive
programs. The redemption cost of consumer coupons is based on historical redemption experience by product and value.
Volume-based incentive programs are based on the estimated sales volumes for the incentive period and are recorded as
products are sold. These arrangements are evaluated to determine the appropriate amounts to be deferred or recorded as
a reduction of revenue. The Company also earns profit-share payments through collaborative arrangements of certain
products, which are included in sales to customers. For all years presented, profit-share payments were less than 2.0% of
the total revenues and are included in sales to customers.

In addition, the Company enters into collaboration arrangements that contain multiple revenue generating activities.
Amounts due from collaborative partners for these arrangements are recognized as each activity is performed or delivered,
based on the relative selling price. Upfront fees received as part of these arrangements are deferred and recognized over
the performance period. See Note 1 to the Consolidated Financial Statements for additional disclosures on collaborations.

Reasonably likely changes to assumptions used to calculate the accruals for rebates, returns and promotions are not
anticipated to have a material effect on the financial statements. The Company currently discloses the impact of changes
to assumptions in the quarterly or annual filing in which there is a material financial statement impact.

Below are tables that show the progression of accrued rebates, returns, promotions, reserve for doubtful accounts and
reserve for cash discounts by segment of business for the fiscal years ended December 30, 2018 and December 31,
2017.

Consumer Segment

(Dollars in Millions)

2018

Accrued rebates(1)

Accrued returns

Accrued promotions

Subtotal

Reserve for doubtful accounts

Reserve for cash discounts

Total

2017

Accrued rebates(1)

Accrued returns

Accrued promotions

Subtotal

Reserve for doubtful accounts

Reserve for cash discounts

Total

Balance at
Beginning
of Period

Accruals

Payments/
Credits

Balance at
End of
Period

$186

68

481

$735

31

23

836

98

2,233

3,167

10

204

(751)

(109)

(2,217)

(3,077)

(9)

(204)

$789

3,381

(3,290)

$136

65

358

$559

24

25

638

128

2,148

2,914

10

205

(588)

(125)

(2,025)

(2,738)

(3)

(207)

$608

3,129

(2,948)

271

57

497

825

32

23

880

186

68

481

735

31

23

789

(1)

Includes reserve for customer rebates of $57 million at December 30, 2018 and $48 million at December 31, 2017, recorded as a
contra asset.

30 • Johnson & Johnson 2018 Annual Report

Pharmaceutical Segment

(Dollars in Millions)

2018

Accrued rebates(1)

Accrued returns

Accrued promotions

Subtotal

Reserve for doubtful accounts

Reserve for cash discounts

Total

2017

Accrued rebates(1)

Accrued returns

Accrued promotions

Subtotal

Reserve for doubtful accounts

Reserve for cash discounts

Total

Balance at
Beginning
of Period

Accruals

Payments/
Credits(2)

Balance at
End of
Period

$4,862

22,644

(19,996)

7,510

362

35

385

46

(311)

(68)

436

13

$5,259

23,075

(20,375)

7,959

77

55

37

860

(67)

(862)

47

53

$5,391

23,972

(21,304)

8,059

$3,420

16,447

(15,005)

4,862

334

—

256

69

(228)

(34)

362

35

$3,754

16,772

(15,267)

5,259

38

58

40

714

(1)

(717)

77

55

$3,850

17,526

(15,985)

5,391

(1)

Includes reserve for customer rebates of $89 million at December 30, 2018 and $90 million at December 31, 2017, recorded as a
contra asset.

(2)

Includes adjustments

Medical Devices Segment

(Dollars in Millions)

2018

Accrued rebates(1)

Accrued returns

Accrued promotions

Subtotal

Reserve for doubtful accounts

Reserve for cash discounts

Total

2017

Accrued rebates(1)

Accrued returns

Accrued promotions

Subtotal

Reserve for doubtful accounts

Reserve for cash discounts

Total

Balance at
Beginning
of Period

Accruals

Payments/
Credits

Balance at
End of
Period

$1,620

6,344

(6,746)

1,218

152

83

362

116

(400)

(157)

114

42

$1,855

6,822

(7,303)

1,374

183

15

29

372

(43)

(387)

169

—

$2,053

7,223

(7,733)

1,543

$1,500

6,407

(6,287)

1,620

127

32

729

135

(704)

(84)

152

83

$1,659

7,271

(7,075)

1,855

190

16

27

389

(34)

(390)

183

15

$1,865

7,687

(7,499)

2,053

(1)

Includes reserve for customer rebates of $632 million at December 30, 2018 and $501 million at December 31, 2017, recorded as a
contra asset.

Johnson & Johnson 2018 Annual Report • 31

Income Taxes: Income taxes are recorded based on amounts refundable or payable for the current year and include the
results of any difference between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities.
The Company estimates deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in
tax laws and rates may affect recorded deferred tax assets and liabilities.

The Company has unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP, which
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Management believes that changes in these estimates would
not have a material effect on the Company’s results of operations, cash flows or financial position.

The Company has recorded deferred tax liabilities on all undistributed earnings prior to December 31, 2017 from its
international subsidiaries. The Company has not provided deferred taxes on the undistributed earnings subsequent to
January 1, 2018 from certain international subsidiaries where the earnings are considered to be indefinitely reinvested. The
Company intends to continue to reinvest these earnings in those international operations. If the Company decides at a
later date to repatriate these earnings to the U.S., the Company would be required to provide for the net tax effects on
these amounts. The Company estimates that the total tax effect of this repatriation would be approximately $0.7 billion
under current enacted tax laws and regulations and at current currency exchange rates.

See Note 8 to the Consolidated Financial Statements for further information regarding income taxes.

Legal and Self Insurance Contingencies: The Company records accruals for various contingencies, including legal
proceedings and product liability claims as these arise in the normal course of business. The accruals are based on
management’s judgment as to the probability of losses and, where applicable, actuarially determined estimates. The
Company has self insurance through a wholly-owned captive insurance company. In addition to accruals in the self
insurance program, claims that exceed the insurance coverage are accrued when losses are probable and amounts can be
reasonably estimated.

The Company follows the provisions of U.S. GAAP when recording litigation related contingencies. A liability is recorded
when a loss is probable and can be reasonably estimated. The best estimate of a loss within a range is accrued; however,
if no estimate in the range is better than any other, the minimum amount is accrued.

See Notes 1 and 21 to the Consolidated Financial Statements for further information regarding product liability and legal
proceedings.

Long-Lived and Intangible Assets: The Company assesses changes in economic conditions and makes assumptions
regarding estimated future cash flows in evaluating the value of the Company’s property, plant and equipment, goodwill
and intangible assets. As these assumptions and estimates may change over time, it may or may not be necessary for the
Company to record impairment charges.

Employee Benefit Plans: The Company sponsors various retirement and pension plans, including defined benefit,
defined contribution and termination indemnity plans, which cover most employees worldwide. These plans are based on
assumptions for the discount rate, expected return on plan assets, mortality rates, expected salary increases, health care
cost trend rates and attrition rates. See Note 10 to the Consolidated Financial Statements for further details on these rates
and the effect a rate change to the health care cost trend would have on the Company’s results of operations.

Stock Based Compensation: The Company recognizes compensation expense associated with the issuance of equity
instruments to employees for their services. Based on the type of equity instrument, the fair value is estimated on the date
of grant using either the Black-Scholes option valuation model or a combination of both the Black-Scholes option
valuation model and Monte Carlo valuation model, and is expensed in the financial statements over the service period. The
input assumptions used in determining fair value are the expected life, expected volatility, risk-free rate and expected
dividend yield. For performance share units the fair market value is calculated for each of the three component goals at the
date of grant. The fair values for the sales and earnings per share goals of each performance share unit were estimated on
the date of grant using the fair market value of the shares at the time of the award, discounted for dividends, which are not
paid on the performance share units during the vesting period. The fair value for the relative total shareholder return goal of
each performance share unit was estimated on the date of grant using the Monte Carlo valuation model. See Note 17 to
the Consolidated Financial Statements for additional information.

New Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently
issued accounting pronouncements not yet adopted as of December 30, 2018.

32 • Johnson & Johnson 2018 Annual Report

Economic and Market Factors

The Company is aware that its products are used in an environment where, for more than a decade, policymakers,
consumers and businesses have expressed concerns about the rising cost of health care. In response to these concerns,
the Company has a long-standing policy of pricing products responsibly. For the period 2008 - 2018, in the U.S., the
weighted average compound annual growth rate of the Company’s net price increases for health care products
(prescription and over-the-counter drugs, hospital and professional products) was below the U.S. Consumer Price Index
(CPI).

The Company operates in certain countries where the economic conditions continue to present significant challenges. The
Company continues to monitor these situations and take appropriate actions. Inflation rates continue to have an effect on
worldwide economies and, consequently, on the way companies operate. The Company has accounted for operations in
Argentina (beginning in the fiscal third quarter of 2018) and Venezuela as highly inflationary, as the prior three-year
cumulative inflation rate surpassed 100%. This did not have a material impact to the Company’s results in the period. In
the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs,
productivity improvements and periodic price increases.

In June 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the European Union
(E.U.), commonly referred to as “Brexit” and in March 2017 the U.K. formally started the process for the U.K. to leave the
E.U. Given the lack of comparable precedent, it is unclear what financial, trade, regulatory and legal implications the
withdrawal of the U.K. from the E.U. will have. Brexit creates global political and economic uncertainty, which may cause,
among other consequences, volatility in exchange rates and interest rates, additional cost containment by third-party
payors and changes in regulations. However, the Company currently does not believe that these and other related effects
will have a material impact on the Company’s consolidated financial position or operating results. As of December 30,
2018, the business of the Company’s U.K. subsidiaries represented less than 3% of both the Company’s consolidated
assets and fiscal twelve months revenues, respectively.

The Company is exposed to fluctuations in currency exchange rates. A 1% change in the value of the U.S. Dollar as
compared to all foreign currencies in which the Company had sales, income or expense in 2018 would have increased or
decreased the translation of foreign sales by approximately $390 million and net income by approximately $100 million.

Governments around the world consider various proposals to make changes to tax laws, which may include increasing or
decreasing existing statutory tax rates. A change in statutory tax rate in any country would result in the revaluation of the
Company’s deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is
enacted. This change would result in an expense or benefit recorded to the Company’s Consolidated Statement of
Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to the
statutory tax rate may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter
and year in which the law change is enacted. On September 28, 2018 the Swiss Parliament approved the Federal Act on
Tax Reform and AHV Financing (Swiss Tax Reform). However, a referendum has been called and, as a result, a public vote
on the Swiss Tax Reform will take place on May 19th, 2019. If the Swiss Tax Reform passes, then the measures are
expected to come into force in either January 2020 or January 2021. Prior to approval in the referendum and its
subsequent cantonal implementation, the proposed Swiss Tax Reform is not enacted and therefore the Company has not
reflected any of the potential impacts in its fiscal results. The Company is currently assessing the impact of the proposed
Swiss Tax Reform, and when enacted, the law may have a material impact on the Company’s operating results.

The Company faces various worldwide health care changes that may continue to result in pricing pressures that include
health care cost containment and government legislation relating to sales, promotions and reimbursement of health care
products.

Changes in the behavior and spending patterns of purchasers of health care products and services, including delaying
medical procedures, rationing prescription medications, reducing the frequency of physician visits and foregoing health
care insurance coverage, as a result of the current global economic downturn, may continue to impact the Company’s
businesses.

The Company also operates in an environment increasingly hostile to intellectual property rights. Firms have filed
Abbreviated New Drug Applications or Biosimilar Biological Product Applications with the FDA or otherwise challenged
the coverage and/or validity of the Company’s patents, seeking to market generic or biosimilar forms of many of the
Company’s key pharmaceutical products prior to expiration of the applicable patents covering those products. In the event
the Company is not successful in defending the patent claims challenged in the resulting lawsuits, generic or biosimilar
versions of the products at issue will be introduced to the market, resulting in the potential for substantial market share and

Johnson & Johnson 2018 Annual Report • 33

revenue losses for those products, and which may result in a non-cash impairment charge in any associated intangible
asset. There is also a risk that one or more competitors could launch a generic or biosimilar version of the product at issue
following regulatory approval even though one or more valid patents are in place. For further information, see the
discussion on “REMICADE® Related Cases” and “Litigation Against Filers of Abbreviated New Drug Applications” in
Note 21 to the Consolidated Financial Statements.

Legal Proceedings

Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability,
intellectual property, commercial and other matters; governmental investigations; and other legal proceedings that arise
from time to time in the ordinary course of business.

The Company records accruals for loss contingencies associated with these legal matters when it is probable that a
liability will be incurred and the amount of the loss can be reasonably estimated. The Company has accrued for certain
litigation matters and continues to monitor each related legal issue and adjust accruals for new information and further
developments in accordance with Accounting Standards Codification (ASC) 450-20-25. For these and other litigation
and regulatory matters currently disclosed for which a loss is probable or reasonably possible, the Company is unable to
estimate the possible loss or range of loss beyond the amounts already accrued. Amounts accrued for legal contingencies
often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and
assumptions. The ability to make such estimates and judgments can be affected by various factors, including whether
damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not
commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant
facts in dispute; or there are numerous parties involved.

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

See Note 21 to the Consolidated Financial Statements for further information regarding legal proceedings.

Common Stock

The Company’s Common Stock is listed on the New York Stock Exchange under the symbol JNJ. As of February 15,
2019, there were 142,029 record holders of Common Stock of the Company.

34 • Johnson & Johnson 2018 Annual Report

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

The information called for by this item is incorporated herein by reference to “Item 7. Management’s Discussion and
Analysis of Results of Operations and Financial Condition - Liquidity and Capital Resources - Financing and Market Risk”
of this Report; and Note 1 “Summary of Significant Accounting Policies - Financial Instruments” of the Notes to
Consolidated Financial Statements included in Item 8 of this Report.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Audited Consolidated Financial Statements

Consolidated Balance Sheets
36
Consolidated Statements of Earnings
37
Consolidated Statements of Comprehensive Income
38
Consolidated Statements of Equity
39
Consolidated Statements of Cash Flows
40
Notes to Consolidated Financial Statements
41
98
Report of Independent Registered Public Accounting Firm
100 Management’s Report on Internal Control Over Financial Reporting

Johnson & Johnson 2018 Annual Report • 35

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

At December 30, 2018 and December 31, 2017
(Dollars in Millions Except Share and Per Share Amounts) (Note 1)

Assets

Current assets

Cash and cash equivalents (Notes 1 and 2)

Marketable securities (Notes 1 and 2)

Accounts receivable trade, less allowances for doubtful accounts $248 (2017, $291)

Inventories (Notes 1 and 3)

Prepaid expenses and other receivables

Assets held for sale (Note 20)

Total current assets

Property, plant and equipment, net (Notes 1 and 4)

Intangible assets, net (Notes 1 and 5)

Goodwill (Notes 1 and 5)

Deferred taxes on income (Note 8)

Other assets

Total assets

Liabilities and Shareholders’ Equity

Current liabilities

Loans and notes payable (Note 7)

Accounts payable

Accrued liabilities

Accrued rebates, returns and promotions

Accrued compensation and employee related obligations

Accrued taxes on income (Note 8)

Total current liabilities

Long-term debt (Note 7)

Deferred taxes on income (Note 8)

Employee related obligations (Notes 9 and 10)

Long-term taxes payable (Note 8)

Other liabilities

Total liabilities

Shareholders’ equity

2018

2017

$18,107

17,824

1,580

14,098

8,599

2,699

950

46,033

17,035

47,611

30,453

7,640

4,182

472

13,490

8,765

2,537

—

43,088

17,005

53,228

31,906

7,105

4,971

$152,954

157,303

$2,796

7,537

7,601

9,380

3,098

818

31,230

27,684

7,506

9,951

8,242

8,589

3,906

7,310

7,304

7,210

2,953

1,854

30,537

30,675

8,368

10,074

8,472

9,017

93,202

97,143

Preferred stock — without par value (authorized and unissued 2,000,000 shares)

—

—

Common stock — par value $1.00 per share (Note 12) (authorized 4,320,000,000 shares; issued

3,119,843,000 shares)

Accumulated other comprehensive income (loss) (Note 13)

Retained earnings

Less: common stock held in treasury, at cost (Note 12) (457,519,000 shares and 437,318,000 shares)

Total shareholders’ equity

Total liabilities and shareholders’ equity

See Notes to Consolidated Financial Statements

36 • Johnson & Johnson 2018 Annual Report

3,120

3,120

(15,222)

(13,199)

106,216

101,793

94,114

34,362

59,752

91,714

31,554

60,160

$152,954

157,303

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars and Shares in Millions Except Per Share Amounts) (Note 1)*

Sales to customers

Cost of products sold

Gross profit

Selling, marketing and administrative expenses

Research and development expense

In-process research and development

Interest income

Interest expense, net of portion capitalized (Note 4)

Other (income) expense, net

Restructuring (Note 22)

Earnings before provision for taxes on income

Provision for taxes on income (Note 8)

Net earnings

Net earnings per share (Notes 1 and 15)

Basic

Diluted

Average shares outstanding (Notes 1 and 15)

Basic

Diluted

*Prior years amounts were reclassified to conform to current year presentation (adoption of ASU 2017-07)

See Notes to Consolidated Financial Statements

2018

2017

2016

$81,581

27,091

54,490

22,540

10,775

1,126

(611)

1,005

1,405

251

76,450

25,439

51,011

21,520

10,594

408

(385)

934

(42)

309

71,890

21,789

50,101

20,067

9,143

29

(368)

726

210

491

17,999

2,702

17,673

16,373

19,803

3,263

$15,297

1,300

16,540

$5.70

$5.61

0.48

0.47

6.04

5.93

2,681.5

2,692.0

2,737.3

2,728.7

2,745.3

2,788.9

Johnson & Johnson 2018 Annual Report • 37

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Millions) (Note 1)

Net earnings

Other comprehensive income (loss), net of tax

Foreign currency translation

Securities:(1)

Unrealized holding gain (loss) arising during period

Reclassifications to earnings

Net change

Employee benefit plans:

Prior service credit (cost), net of amortization

Gain (loss), net of amortization

Effect of exchange rates

Net change

Derivatives & hedges:

Unrealized gain (loss) arising during period

Reclassifications to earnings

Net change

Other comprehensive income (loss)

Comprehensive income

2018

2017

2016

$15,297

1,300

16,540

(1,518)

1,696

(612)

(1)

1

—

(44)

(56)

92

(8)

(73)

(192)

(265)

159

(338)

(179)

2

29

(201)

(170)

(4)

359

355

(52)

(141)

(193)

21

(862)

159

(682)

(359)

110

(249)

(1,791)

1,702

(1,736)

$13,506

3,002

14,804

(1)

2018 includes the impact from adoption of ASU 2016-01. For further details see Note 1 to the Consolidated Financial Statements

The tax effects in other comprehensive income for the fiscal years ended 2018, 2017 and 2016 respectively: Foreign
Currency Translation $236 million in 2018 due to the enactment of the U.S. Tax Cuts and Jobs Act; Securities: $0 million,
$96 million and $104 million, Employee Benefit Plans: $4 million, $83 million and $346 million, Derivatives & Hedges:
$70 million, $191 million and $134 million.

See Notes to Consolidated Financial Statements

38 • Johnson & Johnson 2018 Annual Report

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in Millions) (Note 1)

Balance, January 3, 2016

$71,150

103,879

(13,165)

3,120

(22,684)

Total

Retained
Earnings

Accumulated
Other
Comprehensive
Income

Common
Stock
Issued
Amount

Treasury
Stock
Amount

Net earnings

16,540

16,540

Cash dividends paid ($3.15 per share)

Employee compensation and stock option plans

Repurchase of common stock

Other

Other comprehensive income (loss), net of tax

(8,621)

2,130

(8,979)

(66)

(1,736)

(8,621)

(1,181)

(66)

Balance, January 1, 2017

70,418

110,551

Net earnings

Cash dividends paid ($3.32 per share)

Employee compensation and stock option plans

Repurchase of common stock

Other

Other comprehensive income (loss), net of tax

Balance, December 31, 2017

Cumulative adjustment

Net earnings

Cash dividends paid ($3.54 per share)

Employee compensation and stock option plans

Repurchase of common stock

Other

Other comprehensive income (loss), net of tax

1,300

(8,943)

2,077

(6,358)

(36)

1,702

1,300

(8,943)

(1,079)

(36)

60,160

101,793

(486)

(254)(1)

15,297

15,297

(9,494)

1,949

(5,868)

(15)

(1,791)

(9,494)

(1,111)

(15)

Balance, December 30, 2018

$59,752

106,216

3,311

(8,979)

(1,736)

(14,901)

3,120

(28,352)

3,156

(6,358)

1,702

(13,199)

(232)

3,120

(31,554)

3,060

(5,868)

(1,791)

(15,222)

3,120

(34,362)

(1) See Note 1 to Consolidated Financial Statements for additional details on the effect of cumulative adjustments to retained earnings.

See Notes to Consolidated Financial Statements

Johnson & Johnson 2018 Annual Report • 39

JOHNSON & JOHNSON AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Millions) (Note 1)

Cash flows from operating activities
Net earnings
Adjustments to reconcile net earnings to cash flows from operating activities:

Depreciation and amortization of property and intangibles
Stock based compensation
Asset write-downs
Gain on sale of assets/businesses
Deferred tax provision
Accounts receivable allowances

Changes in assets and liabilities, net of effects from acquisitions and divestitures:

Increase in accounts receivable
(Increase)/Decrease in inventories
Increase in accounts payable and accrued liabilities
Increase in other current and non-current assets
(Decrease)/Increase in other current and non-current liabilities

Net cash flows from operating activities
Cash flows from investing activities
Additions to property, plant and equipment
Proceeds from the disposal of assets/businesses, net
Acquisitions, net of cash acquired (Note 20)
Purchases of investments
Sales of investments
Other (primarily intangibles)
Net cash used by investing activities
Cash flows from financing activities
Dividends to shareholders
Repurchase of common stock
Proceeds from short-term debt
Retirement of short-term debt
Proceeds from long-term debt, net of issuance costs
Retirement of long-term debt
Proceeds from the exercise of stock options/employee withholding tax on stock awards, net
Other
Net cash used by financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase/(Decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year (Note 1)
Cash and cash equivalents, end of year (Note 1)
Supplemental cash flow data
Cash paid during the year for:

Interest
Interest, net of amount capitalized
Income taxes

Supplemental schedule of non-cash investing and financing activities
Treasury stock issued for employee compensation and stock option plans, net of cash proceeds/ employee

withholding tax on stock awards

Conversion of debt

Acquisitions
Fair value of assets acquired
Fair value of liabilities assumed and noncontrolling interests
Net cash paid for acquisitions

See Notes to Consolidated Financial Statements

40 • Johnson & Johnson 2018 Annual Report

2018

2017

2016

$15,297

1,300

16,540

6,929
978
1,258
(1,217)
(1,016)
(31)

(1,185)
(644)
3,951
(275)
(1,844)
22,201

(3,670)
3,203
(899)
(5,626)
4,289
(464)
(3,167)

(9,494)
(5,868)
80
(2,479)
5
(1,555)
949
(148)
(18,510)
(241)
283
17,824
$18,107

$1,049
963
4,570

$2,095
6

5,642
962
795
(1,307)
2,406
17

(633)
581
2,725
(411)
8,979
21,056

(3,279)
1,832
(35,151)
(6,153)
28,117
(234)
(14,868)

(8,943)
(6,358)
869
(1,330)
8,992
(1,777)
1,062
(188)
(7,673)
337
(1,148)
18,972
17,824

960
866
3,312

2,062
16

$1,047
(148)
$899

36,937
(1,786)
35,151

3,754
878
283
(563)
(341)
(11)

(1,065)
(249)
656
(529)
(586)
18,767

(3,226)
1,267
(4,509)
(33,950)
35,780
(123)
(4,761)

(8,621)
(8,979)
111
(2,017)
12,004
(2,223)
1,189
(15)
(8,551)
(215)
5,240
13,732
18,972

730
628
2,843

2,043
35

4,586
(77)
4,509

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Johnson & Johnson and its subsidiaries (the Company).
Intercompany accounts and transactions are eliminated.

Description of the Company and Business Segments

The Company has approximately 135,100 employees worldwide engaged in the research and development, manufacture
and sale of a broad range of products in the health care field. The Company conducts business in virtually all countries of
the world and its primary focus is on products related to human health and well-being.

The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices. The
Consumer segment includes a broad range of products used in the baby care, oral care, beauty, over-the-counter
pharmaceutical, women’s health and wound care markets. These products are marketed to the general public and sold
both to retail outlets and distributors throughout the world. The Pharmaceutical segment is focused on six therapeutic
areas, including immunology, infectious diseases, neuroscience, oncology, pulmonary hypertension, and cardiovascular
and metabolic diseases. Products in this segment are distributed directly to retailers, wholesalers, hospitals and health
care professionals for prescription use. The Medical Devices segment includes a broad range of products used in the
orthopaedic, surgery, interventional solutions (cardiovascular and neurovascular), diabetes care (divested in the fiscal
fourth quarter of 2018) and vision fields, which are distributed to wholesalers, hospitals and retailers, and used principally
in the professional fields by physicians, nurses, hospitals, eye care professionals and clinics.

New Accounting Standards
Recently Adopted Accounting Standards

ASU 2014-09 : Revenue from Contracts with Customers
On January 1, 2018, the Company adopted the new accounting standard, ASC 606, Revenue from Contracts with
Customers and all the related amendments (new revenue standard) to all contracts using the modified retrospective
method. The cumulative effect of initially applying the new revenue standard was recognized as an adjustment to the
opening balance of retained earnings. The comparative information has not been restated and continues to be reported
under the accounting standards in effect for those periods. The adoption of the new revenue standard has not had a
material impact to either reported Sales to customers or Net earnings. Additionally, the Company will continue to
recognize revenue from product sales as goods are shipped or delivered to the customer, as control of goods transfers at
the same time.

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on the Company’s
Consolidated Statement of Earnings and Balance Sheet was as follows:

Statement of Earnings—For the fiscal year ended December 30, 2018

(Dollars in millions)

Sales to customers

Net earnings

Balance Sheet – As of December 30, 2018

Assets

Liabilities

Equity

As Reported

Effect of change

Balance without adoption
of ASC 606

$81,581

15,297

(35)

(28)

81,546

15,269

As Reported

Effect of change

Balance without adoption
of ASC 606

152,954

93,202

$59,752

23

4

19

152,977

93,206

59,771

The Company made a cumulative effect adjustment to the 2018 opening balance of retained earnings upon adoption of
ASU 2014-09, which decreased beginning retained earnings by $47 million.

Johnson & Johnson 2018 Annual Report • 41

As part of the adoption of ASC 606 see Note 18 to the Consolidated Financial Statements for further disaggregation of
revenue.

ASU 2016-01 : Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities
The Company adopted this standard as of the beginning of the fiscal year 2018 on a modified retrospective basis. The
amendments in this update supersede the guidance to classify equity securities with readily determinable fair values into
different categories (that is, trading or available-for-sale) and require equity securities to be measured at fair value with
changes in the fair value recognized through net earnings. The standard amends financial reporting by providing relevant
information about an entity’s equity investments and reducing the number of items that are recognized in other
comprehensive income.

The Company made a cumulative effect adjustment to the opening balance of retained earnings upon adoption of ASU
2016-01 that increased retained earnings by $232 million net of tax and decreased accumulated other comprehensive
income for previously unrealized gains from equity investments. For additional details see Note 6 to the Consolidated
Financial Statements.

ASU 2016-16 : Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory
The Company adopted this standard as of the beginning of the fiscal year 2018. This update removes the current
exception in U.S. GAAP prohibiting entities from recognizing current and deferred income tax expenses or benefits related
to transfer of assets, other than inventory, within the consolidated entity. The current exception to defer the recognition of
any tax impact on the transfer of inventory within the consolidated entity until it is sold to a third party remains unaffected.
As discussed further in Note 8 to the Consolidated Financial Statements, in the fourth fiscal quarter of 2018 the Company
elected an accounting policy to treat the tax on global intangible low-taxed income (GILTI) under the deferred tax
accounting model. As a result, the Company is required to record an additional deferred tax liability related to the basis
difference of these intra-entity asset transfers. The Company recorded net adjustments including an increase to deferred
tax assets of approximately $2.0 billion, an increase to deferred tax liabilities of approximately $1.7 billion, related to the
GILTI accounting policy election in the fourth fiscal quarter of 2018, a decrease to Other Assets of approximately
$0.7 billion and a decrease to retained earnings of approximately $0.4 billion. The adoption of this standard did not have a
material impact on the Company’s consolidated financial statements.

ASU 2017-01 : Clarifying the Definition of a Business
The Company adopted this standard as of the beginning of the fiscal year 2018. This update narrows the definition of a
business by providing a screen to determine when an integrated set of assets and activities is not a business. The screen
specifies that an integrated set of assets and activities is not a business if substantially all of the fair value of the gross
assets acquired or disposed of is concentrated in a single or a group of similar identifiable assets. This update was applied
prospectively. The adoption of this standard did not have a material impact on the Company’s consolidated financial
statements.

ASU 2017-07 : Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
The Company adopted this standard as of the beginning of the fiscal year 2018. This update requires that an employer
disaggregate the service cost component from the other components of net periodic benefit cost (NPBC). In addition, only
the service cost component will be eligible for capitalization. The amendments in this update are required to be applied
retrospectively for the presentation of the service cost component and the other components of NPBC in the
Consolidated Statement of Earnings and prospectively, on and after the adoption date, for the capitalization of the service
cost component of NPBC in assets. As required by the transition provisions of this update, the following table shows the
impact of the adoption on the respective line items in the Consolidated Statement of Earnings for 2018 and the
reclassifications to the 2017 and 2016 fiscal year Consolidated Statement of Earnings to retroactively apply classification
of the service cost component and the other components of NPBC:

(Dollars In millions)

Cost of products sold

Selling, marketing and administrative expenses

Research and development expense

Other (income) expense, net

Earnings before provision for taxes on income

42 • Johnson & Johnson 2018 Annual Report

Increase (Decrease)
to Net Expense

2018

$ 51

55

21

2017

2016

85

100

40

104

122

48

(127)

(225)

(274)

$ —

—

—

The following table summarizes the cumulative effect adjustments made to the 2018 opening balance of retained earnings
upon adoption of the new accounting standards mentioned above:

(Dollars in Millions)

ASU 2014-09—Revenue from Contracts with Customers

ASU 2016-01—Financial Instruments

ASU 2016-16—Income Taxes: Intra-Entity Transfers

Total

Cumulative Effect
Adjustment Increase
(Decrease) to
Retained Earnings

$(47)

232

(439)

$(254)

ASU 2017-12 : Targeted Improvements to Accounting for Hedging Activities
The Company elected to early adopt this standard as of the beginning of the fiscal second quarter of 2018. This update
makes more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation
and disclosure requirements and changes how companies assess effectiveness. The adoption of this standard did not
have a material impact on the Company’s consolidated financial statements. For additional required disclosures see Note
6 to the Consolidated Financial Statements.

Recently Issued Accounting Standards
Not Adopted as of December 30, 2018

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

ASU 2018-16: Derivatives and Hedging (Topic ASC 815)
This update adds the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as an
eligible benchmark interest rate permitted in the application of hedge accounting. This update will be effective for the
Company for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption
is permitted if an entity has adopted ASU 2017-12. The Company is currently assessing the impact of this update on the
Company’s consolidated financial statements and related disclosures.

ASU 2018-02 : Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
This update allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax
effects resulting from the Tax Cuts and Job Act enacted in December 2017. This update will be effective for the Company
for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company does not
expect this standard to have a material impact on the Company’s consolidated financial statements.

ASU 2016-13 : Financial Instruments—Credit Losses
This update introduces the current expected credit loss (CECL) model, which will require an entity to measure credit
losses for certain financial instruments and financial assets, including trade receivables. Under this update, on initial
recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s
current estimate of credit losses expected to be incurred over the life of the financial instrument. This update will be
effective for the Company for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.
Early adoption is permitted. The Company is currently assessing the impact of this update on the Company’s consolidated
financial statements and related disclosures.

ASU 2016-02 : Leases
This update requires the recognition of lease assets and lease liabilities on the balance sheet for all lease obligations and
disclosing key information about leasing arrangements. This update requires the recognition of lease assets and lease
liabilities by lessees for those leases classified as operating leases under current generally accepted accounting

Johnson & Johnson 2018 Annual Report • 43

principles. This update will be effective for the Company for all annual periods beginning after December 15, 2018,
including interim periods within those fiscal years. The Company will apply the new standard at its adoption date rather
than at the earliest comparative period presented in the financial statements. The Company’s operating leases will result in
the recognition of additional assets and the corresponding liabilities on its Consolidated Balance Sheets. The adoption of
this standard will not have a material impact on the Company’s consolidated financial statements.

Cash Equivalents

The Company classifies all highly liquid investments with stated maturities of three months or less from date of purchase
as cash equivalents and all highly liquid investments with stated maturities of greater than three months from the date of
purchase as current marketable securities. The Company has a policy of making investments only with commercial
institutions that have at least an investment grade credit rating. The Company invests its cash primarily in government
securities and obligations, corporate debt securities, money market funds and reverse repurchase agreements (RRAs).

RRAs are collateralized by deposits in the form of Government Securities and Obligations for an amount not less than
102% of their value. The Company does not record an asset or liability as the Company is not permitted to sell or
repledge the associated collateral. The Company has a policy that the collateral has at least an A (or equivalent) credit
rating. The Company utilizes a third party custodian to manage the exchange of funds and ensure that collateral received is
maintained at 102% of the value of the RRAs on a daily basis. RRAs with stated maturities of greater than three months
from the date of purchase are classified as marketable securities.

Investments

Investments classified as held to maturity investments are reported at amortized cost and realized gains or losses are
reported in earnings. Investments classified as available-for-sale are carried at estimated fair value with unrealized gains
and losses recorded as a component of accumulated other comprehensive income. Available-for-sale securities available
for current operations are classified as current assets otherwise, they are classified as long term. Management determines
the appropriate classification of its investment in debt and equity securities at the time of purchase and re-evaluates such
determination at each balance sheet date. The Company reviews its investments in equity securities for impairment and
adjusts these investments to fair value through earnings, as required.

Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost. The Company utilizes the straight-line method of depreciation over the
estimated useful lives of the assets:

Building and building equipment

Land and leasehold improvements

Machinery and equipment

20 -30 years

10 -20 years

2 - 13 years

The Company capitalizes certain computer software and development costs, included in machinery and equipment, when
incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are
amortized over the estimated useful lives of the software, which generally range from 3 to 8 years.

The Company reviews long-lived assets to assess recoverability using undiscounted cash flows. When certain events or
changes in operating or economic conditions occur, an impairment assessment may be performed on the recoverability of
the carrying value of these assets. If the asset is determined to be impaired, the loss is measured based on the difference
between the asset’s fair value and its carrying value. If quoted market prices are not available, the Company will estimate
fair value using a discounted value of estimated future cash flows.

Revenue Recognition

The Company recognizes revenue from product sales when obligations under the terms of a contract with the customer
are satisfied; generally, this occurs with the transfer of control of the goods to customers. The Company’s global payment
terms are typically between 30 to 90 days. Provisions for certain rebates, sales incentives, trade promotions, coupons,
product returns and discounts to customers are accounted for as variable consideration and recorded as a reduction in
sales.

Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as
well as market conditions, including consideration of competitor pricing. Rebates are estimated based on contractual

44 • Johnson & Johnson 2018 Annual Report

terms, historical experience, patient outcomes, trend analysis and projected market conditions in the various markets
served. The Company evaluates market conditions for products or groups of products primarily through the analysis of
wholesaler and other third-party sell-through and market research data, as well as internally generated information.

Sales returns are estimated and recorded based on historical sales and returns information. Products that exhibit unusual
sales or return patterns due to dating, competition or other marketing matters are specifically investigated and analyzed as
part of the accounting for sales return accruals.

Sales returns allowances represent a reserve for products that may be returned due to expiration, destruction in the field,
or in specific areas, product recall. The sales returns reserve is based on historical return trends by product and by market
as a percent to gross sales. In accordance with the Company’s accounting policies, the Company generally issues credit
to customers for returned goods. The Company’s sales returns reserves are accounted for in accordance with the
U.S. GAAP guidance for revenue recognition when right of return exists. Sales returns reserves are recorded at full sales
value. Sales returns in the Consumer and Pharmaceutical segments are almost exclusively not resalable. Sales returns for
certain franchises in the Medical Devices segment are typically resalable but are not material. The Company infrequently
exchanges products from inventory for returned products. The sales returns reserve for the total Company has been
approximately 1.0% of annual net trade sales during the fiscal reporting years 2018, 2017 and 2016.

Promotional programs, such as product listing allowances and cooperative advertising arrangements, are recorded in the
same period as related sales. Continuing promotional programs include coupons and volume-based sales incentive
programs. The redemption cost of consumer coupons is based on historical redemption experience by product and value.
Volume-based incentive programs are based on the estimated sales volumes for the incentive period and are recorded as
products are sold. These arrangements are evaluated to determine the appropriate amounts to be deferred or recorded as
a reduction of revenue. The Company also earns profit-share payments through collaborative arrangements for certain
products, which are included in sales to customers. For all years presented, profit-share payments were less than 2.0% of
the total revenues and are included in sales to customers.

Shipping and Handling

Shipping and handling costs incurred were $1,090 million, $1,042 million and $974 million in 2018, 2017 and 2016,
respectively, and are included in selling, marketing and administrative expense. The amount of revenue received for
shipping and handling is less than 0.5% of sales to customers for all periods presented.

Inventories

Inventories are stated at the lower of cost or net realizable value determined by the first-in, first-out method.

Intangible Assets and Goodwill

The authoritative literature on U.S. GAAP requires that goodwill and intangible assets with indefinite lives be assessed
annually for impairment. The Company completed the annual impairment test for 2018 in the fiscal fourth quarter. Future
impairment tests will be performed annually in the fiscal fourth quarter, or sooner if warranted. Purchased in-process
research and development is accounted for as an indefinite lived intangible asset until the underlying project is completed,
at which point the intangible asset will be accounted for as a definite lived intangible asset, or abandoned, at which point
the intangible asset will be written off or partially impaired.

Intangible assets that have finite useful lives continue to be amortized over their useful lives, and are reviewed for
impairment when warranted by economic conditions. See Note 5 for further details on Intangible Assets and Goodwill.

Financial Instruments

As required by U.S. GAAP, all derivative instruments are recorded on the balance sheet at fair value. Fair value is the exit
price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement
determined using assumptions that market participants would use in pricing an asset or liability. The authoritative literature
establishes a three-level hierarchy to prioritize the inputs used in measuring fair value, with Level 1 having the highest
priority and Level 3 having the lowest. Changes in the fair value of derivatives are recorded each period in current earnings
or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if
so, the type of hedge transaction.

Johnson & Johnson 2018 Annual Report • 45

The Company documents all relationships between hedged items and derivatives. The overall risk management strategy
includes reasons for undertaking hedge transactions and entering into derivatives. The objectives of this strategy are: (1)
minimize foreign currency exposure’s impact on the Company’s financial performance; (2) protect the Company’s cash
flow from adverse movements in foreign exchange rates; (3) ensure the appropriateness of financial instruments; and (4)
manage the enterprise risk associated with financial institutions. See Note 6 for additional information on Financial
Instruments.

Product Liability

Accruals for product liability claims are recorded, on an undiscounted basis, when it is probable that a liability has been
incurred and the amount of the liability can be reasonably estimated based on existing information and actuarially
determined estimates where applicable. The accruals are adjusted periodically as additional information becomes
available. The Company accrues an estimate of the legal defense costs needed to defend each matter when those costs
are probable and can be reasonably estimated. To the extent adverse verdicts have been rendered against the Company,
the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated.

As a result of cost and availability factors, effective November 1, 2005, the Company ceased purchasing third-party
product liability insurance. The Company has self insurance through a wholly-owned captive insurance company. In
addition to accruals in the self insurance program, claims that exceed the insurance coverage are accrued when losses are
probable and amounts can be reasonably estimated.

Research and Development

Research and development expenses are expensed as incurred in accordance with ASC 730, Research and
Development. Upfront and milestone payments made to third parties in connection with research and development
collaborations are expensed as incurred up to the point of regulatory approval. Payments made to third parties subsequent
to regulatory approval are capitalized and amortized over the remaining useful life of the related product. Amounts
capitalized for such payments are included in other intangibles, net of accumulated amortization.

The Company enters into collaborative arrangements, typically with other pharmaceutical or biotechnology companies, to
develop and commercialize drug candidates or intellectual property. These arrangements typically involve two (or more)
parties who are active participants in the collaboration and are exposed to significant risks and rewards dependent on the
commercial success of the activities. These collaborations usually involve various activities by one or more parties,
including research and development, marketing and selling and distribution. Often, these collaborations require upfront,
milestone and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the
success of the asset in development. Amounts due from collaborative partners related to development activities are
generally reflected as a reduction of research and development expense because the performance of contract
development services is not central to the Company’s operations. In general, the income statement presentation for these
collaborations is as follows:

Nature/Type of Collaboration

Statement of Earnings Presentation

Third-party sale of product & profit share payments received

Sales to customers

Royalties/milestones paid to collaborative partner (post-
regulatory approval)*

Cost of products sold

Royalties received from collaborative partner

Other income (expense), net

Upfront payments & milestones paid to collaborative partner
(pre-regulatory approval)

Research and development expense

Research and development payments to collaborative
partner

Research and development payments received from
collaborative partner

Research and development expense

Reduction of Research and development expense

* Milestones are capitalized as intangible assets and amortized to cost of products sold over the useful life.

For all years presented, there was no individual project that represented greater than 5% of the total annual consolidated
research and development expense.

46 • Johnson & Johnson 2018 Annual Report

The Company has a number of products and compounds developed in collaboration with strategic partners including
XARELTO®, co-developed with Bayer HealthCare AG and IMBRUVICA®, developed in collaboration and co-marketed
with Pharmacyclics LLC, an AbbVie company.

The Company has a number of licensing arrangements for products and compounds including DARZALEX®, licensed
from Genmab A/S.

Advertising

Costs associated with advertising are expensed in the year incurred and are included in selling, marketing and
administrative expenses. Advertising expenses worldwide, which comprised television, radio, print media and Internet
advertising, were $2.6 billion, $2.5 billion and $2.4 billion in 2018, 2017 and 2016, respectively.

Income Taxes

Income taxes are recorded based on amounts refundable or payable for the current year and include the results of any
difference between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. The Company
estimates deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in tax laws and
rates may affect recorded deferred tax assets and liabilities in the future.

The Company has unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP which
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Management believes that changes in these estimates would
not have a material effect on the Company’s results of operations, cash flows or financial position.

In the fourth fiscal quarter of 2018, the Company has elected to account for the GILTI tax under the deferred method. The
deferred tax amounts recorded are based on the evaluation of temporary differences that are expected to reverse as GILTI
is incurred.

The Company has recorded deferred tax liabilities on all undistributed earnings prior to December 31, 2017 from its
international subsidiaries. The Company has not provided deferred taxes on the undistributed earnings subsequent to
January 1, 2018 from certain international subsidiaries where the earnings are considered to be indefinitely reinvested. The
Company intends to continue to reinvest these earnings in those international operations. If the Company decides at a
later date to repatriate these earnings to the U.S., the Company would be required to provide for the net tax effects on
these amounts. The Company estimates that the total tax effect of this repatriation would be approximately $0.7 billion
under current enacted tax laws and regulations and at current currency exchange rates.

See Note 8 for further information regarding income taxes.

Net Earnings Per Share

Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could
occur if securities were exercised or converted into common stock using the treasury stock method.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when
accounting for sales discounts, rebates, allowances and incentives, product liabilities, income taxes, withholding taxes,
depreciation, amortization, employee benefits, contingencies and intangible asset and liability valuations. Actual results
may or may not differ from those estimates.

The Company follows the provisions of U.S. GAAP when recording litigation related contingencies. A liability is recorded
when a loss is probable and can be reasonably estimated. The best estimate of a loss within a range is accrued; however,
if no estimate in the range is better than any other, the minimum amount is accrued.

Annual Closing Date

The Company follows the concept of a fiscal year, which ends on the Sunday nearest to the end of the month of
December. Normally each fiscal year consists of 52 weeks, but every five or six years the fiscal year consists of 53 weeks,
and therefore includes additional shipping days, as was the case in 2015, and will be the case again in 2020.

Reclassification

Certain prior period amounts have been reclassified to conform to current year presentation.

Johnson & Johnson 2018 Annual Report • 47

2. Cash, Cash Equivalents and Current Marketable Securities

At the end of 2018 and 2017, cash, cash equivalents and current marketable securities were comprised of:

(Dollars in Millions)

Cash

U.S. Reverse repurchase agreements

Other Reverse repurchase agreements

Money market funds

Time deposits(1)

Subtotal

Gov’t Securities

Corporate debt securities

Subtotal available for sale(2)

Total cash, cash equivalents and current marketable securities

Carrying
Amount

$2,619

3,009

443

3,397

485

$9,953

$9,474

260

$9,734

2018

Estimated
Fair Value

Cash &
Cash
Equivalents

Current
Marketable
Securities

2,619

3,009

443

3,397

485

9,953

9,474

260

9,734

2,619

3,009

443

3,397

485

9,953

8,144

10

8,154

$18,107

—

—

—

—

—

—

1,330

250

1,580

1,580

In 2018, the carrying amount was the same as the estimated fair value.
In 2017, the carrying amount was the same as the estimated fair value.

(Dollars in Millions)

Cash

Other Sovereign Securities(1)

U.S. Reverse repurchase agreements

Corporate debt securities(1)

Money market funds

Time deposits(1)

Subtotal

Gov’t Securities

Other Sovereign Securities

Corporate debt securities

Subtotal available for sale(2)

Total cash, cash equivalents and current marketable securities

2017

Estimated
Fair
Value

Cash &
Cash
Equivalents

Current
Marketable
Securities

Carrying
Amount

$2,929

279

4,025

289

4,288

1,176

$12,986

$4,864

186

260

2,929

279

4,025

289

4,288

1,176

12,986

4,864

186

260

$5,310

5,310

2,929

219

4,025

244

4,288

1,175

12,880

4,833

80

31

4,944

$17,824

—

60

—

45

—

1

106

31

106

229

366

472

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

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

comprehensive income.

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

48 • Johnson & Johnson 2018 Annual Report

The contractual maturities of the available for sale debt securities at December 30, 2018 are as follows:

(Dollars in Millions)

Due within one year

Due after one year through five years

Due after five years through ten years

Total debt securities

Cost
Basis

$9,670

64

—

Fair
Value

9,670

64

—

$9,734

9,734

The Company invests its excess cash in both deposits with major banks throughout the world and other high-quality
money market instruments. The Company has a policy of making investments only with commercial institutions that have at
least an investment grade credit rating.

3. Inventories

At the end of 2018 and 2017, inventories were comprised of:

(Dollars in Millions)

Raw materials and supplies

Goods in process

Finished goods

Total inventories

2018

$1,114

2,109

5,376

2017

1,140

2,317

5,308

$8,599(1)

8,765

(1) Net of assets held for sale on the Consolidated Balance Sheet for approximately $0.2 billion related to the divestiture of the

Advanced Sterilization Products business and $0.3 billion related to the strategic collaboration with Jabil Inc., both of which were
pending as of December 30, 2018.

4. Property, Plant and Equipment

At the end of 2018 and 2017, property, plant and equipment at cost and accumulated depreciation were:

(Dollars in Millions)

Land and land improvements

Buildings and building equipment

Machinery and equipment

Construction in progress

Total property, plant and equipment, gross

Less accumulated depreciation

Total property, plant and equipment, net

2018

2017

$807

829

11,176

11,240

25,992

25,949

3,876

3,448

$41,851

41,466

24,816

24,461

$17,035(1)

17,005

(1) Net of assets held for sale on the Consolidated Balance Sheet for approximately $0.1 billion related to the divestiture of the

Advanced Sterilization Products business and $0.1 billion related to the strategic collaboration with Jabil Inc., both of which were
pending as of December 30, 2018.

The Company capitalizes interest expense as part of the cost of construction of facilities and equipment. Interest expense
capitalized in 2018, 2017 and 2016 was $86 million, $94 million and $102 million, respectively.

Depreciation expense, including the amortization of capitalized interest in 2018, 2017 and 2016 was $2.6 billion,
$2.6 billion and $2.5 billion, respectively.

Upon retirement or other disposal of property, plant and equipment, the costs and related amounts of accumulated
depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively. The
difference, if any, between the net asset value and the proceeds are recorded in earnings.

Johnson & Johnson 2018 Annual Report • 49

5. Intangible Assets and Goodwill

At the end of 2018 and 2017, the gross and net amounts of intangible assets were:

(Dollars in Millions)

Intangible assets with definite lives:

Patents and trademarks — gross

Less accumulated amortization

Patents and trademarks — net

Customer relationships and other intangibles — gross

Less accumulated amortization

Customer relationships and other intangibles — net

Intangible assets with indefinite lives:

Trademarks

Purchased in-process research and development(1)

Total intangible assets with indefinite lives

Total intangible assets — net

2018

2017

$35,194

36,427

9,784

7,223

$25,410

29,204

$21,334

20,204

8,323

7,463

$13,011

12,741

$6,937

2,253

$9,190

$47,611

7,082

4,201

11,283

53,228

(1)

The decrease was primarily attributable to the write-down of $1.1 billion related to the assets acquired in the acquisitions of Alios
Biopharma Inc. (Alios) and XO1 Limited (XO1). Of the $1.1 billion, the Company recorded a partial impairment charge of $0.8 billion
related to the development program of AL-8176, an investigational drug for the treatment of Respiratory Syncytial Virus (RSV) and
human metapneumovirus (hMPV) acquired with the 2014 acquisition of Alios. The impairment charge was calculated based on
updated cash flow projections discounted for the inherent risk in the asset development and reflects the impact of the phase 2b
clinical trial suspension, a decrease in the probability of success factors and the ongoing analysis of asset development activities. In
addition, an impairment charge of $0.3 billion was recorded for the discontinuation of the development project for an anti-thrombin
antibody associated with the 2015 acquisition of XO1. Additionally, $0.8 billion of IPR&D related to ERLEADA ™ was reclassified to
definite lived intangible assets upon commercialization.

Goodwill as of December 30, 2018 and December 31, 2017, as allocated by segment of business, was as follows:

(Dollars in Millions)

Goodwill at January 1, 2017

Goodwill, related to acquisitions(1)

Goodwill, related to divestitures

Currency translation/other

Goodwill at December 31, 2017

Goodwill, related to acquisitions

Goodwill, related to divestitures

Currency translation/other

Goodwill at December 30, 2018

Consumer

Pharmaceutical

Medical Devices

Total

$8,263

102

(74)

584

$8,875

168

—

(373)

2,840

6,161

(1)

109

9,109

51

—

(97)

$8,670

9,063

11,702

2,200

(102)

122

13,922

184

(1,348)(2)

(38)

12,720

22,805

8,463

(177)

815

31,906

403

(1,348)

(508)

30,453

(1) Goodwill of $6.2 billion related to the Actelion acquisition acquired in the fiscal second quarter of 2017, within the Pharmaceutical
segment and $1.7 billion related to the AMO acquisition acquired in the fiscal first quarter of 2017, within the Medical Devices
segment.

(2) Goodwill of $1.0 billion is related to the divestiture of the LifeScan business. Goodwill of $0.3 billion is related to the divestiture of

the Advanced Sterilization Products business, which was pending and classified as assets held for sale on the Consolidated Balance
Sheet as of December 30, 2018.

The weighted average amortization periods for patents and trademarks and customer relationships and other intangible
assets are 11 years and 22 years, respectively. The amortization expense of amortizable assets included in cost of
products sold was $4.4 billion, $3.0 billion and $1.2 billion before tax, for the fiscal years ended December 30, 2018,
December 31, 2017 and January 1, 2017, respectively. The estimated amortization expense for the five succeeding years
approximates $4.3 billion before tax, per year. Intangible asset write-downs are included in Other (income) expense, net.

See Note 20 to the Consolidated Financial Statements for additional details related to acquisitions and divestitures.

50 • Johnson & Johnson 2018 Annual Report

6. Fair Value Measurements

The Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily
related to the foreign exchange rate changes of future intercompany products and third-party purchases of materials
denominated in a foreign currency. The Company uses cross currency interest rate swaps to manage currency risk
primarily related to borrowings. Both types of derivatives are designated as cash flow hedges.

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

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

The Company does not enter into derivative financial instruments for trading or speculative purposes, or that contain credit
risk related contingent features. During the fiscal second quarter of 2017, the Company entered into credit support
agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit
ratings and netting agreements. As of December 30, 2018, the total amount of collateral paid under the credit support
agreements (CSA) amounted to $182 million net. On an ongoing basis, the Company monitors counter-party credit
ratings. The Company considers credit non-performance risk to be low, because the Company primarily enters into
agreements with commercial institutions that have at least an investment grade credit rating. Refer to the table on
significant financial assets and liabilities measured at fair value contained in this footnote for receivables and payables with
these commercial institutions. As of December 30, 2018, the Company had notional amounts outstanding for forward
foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $41.1 billion, $7.3 billion, and
$0.5 billion respectively. As of December 31, 2017, the Company had notional amounts outstanding for forward foreign
exchange contracts, cross currency interest rate swaps and interest rate swaps of $34.5 billion, $2.3 billion, and
$1.1 billion respectively.

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

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

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

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

As of December 30, 2018, the balance of deferred net loss on derivatives included in accumulated other comprehensive
income was $195 million after-tax. For additional information, see the Consolidated Statements of Comprehensive Income
and Note 13. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will
be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that
period. The maximum length of time over which the Company is hedging transaction exposure is 18 months, excluding
interest rate contracts, net investment hedges and equity collar contracts. The amount ultimately realized in earnings may
differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at
maturity of the derivative.

Johnson & Johnson 2018 Annual Report • 51

The following table is a summary of the activity related to derivatives and hedges for the fiscal years ended December 30,
2018 and December 31, 2017 :

December 30, 2018

December 31, 2017

Cost of
Products
Sold

R&D
Expense

Interest
(Income)
Expense

Other
(Income)
Expense Sales

Cost of
Products
Sold

R&D
Expense

Interest
(Income)
Expense

Other
(Income)
Expense

Sales

(Dollars in Millions)

The effects of fair value, net investment

and cash flow hedging:

Gain (Loss) on fair value hedging

relationship:

Interest rate swaps contracts:

Hedged items

Derivatives designated as hedging

instruments

Gain (Loss) on net investment

hedging relationship:

Cross currency interest rate swaps

contracts:

$ —

—

Amount of gain or (loss) recognized in

income on derivative amount
excluded from effectiveness testing

Amount of gain or (loss) recognized in

AOCI

—

—

—

—

—

—

—

—

—

—

Gain (Loss) on cash flow hedging

relationship:

Forward foreign exchange

contracts:

Amount of gain or (loss) reclassified

from AOCI into income(1)

Amount of gain or (loss) recognized in

47

200

(220)

AOCI(1)

(32)

(17)

(193)

5

(5)

56

56

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(24)

(31)

(159)

(165)

(4)

49

96

(199)

5

(5)

—

—

—

—

—

—

—

—

(87)

(60)

—

—

Cross currency interest rate swaps

contracts:

Amount of gain or (loss) reclassified

from AOCI into income

Amount of gain or (loss) recognized in

AOCI

—

$ —

—

—

—

—

133

117

—

—

—

—

—

—

—

—

83

110

(1)

Includes equity collar contracts. The equity collar contracts expired in December of 2017.

For the fiscal years ended December 30, 2018 and December 31, 2017, the following amounts were recorded on the
Consolidated Balance Sheet

Line item in the Consolidated Balance
Sheet in which the hedged item is
included

Carrying Amount of the Hedged Liability

Cumulative Amount of Fair Value
Hedging Adjustment
Included in the Carrying
Amount of the Hedged Liability

(Dollars in Millions)

December 30, 2018

December 31, 2017

December 30, 2018

December 31, 2017

Current Portion of Long-term Debt

Long-term Debt

$494

—

597

496

5

—

2

3

The following table is the effect of derivatives not designated as hedging instrument for the fiscal years ended
December 30, 2018 and December 31, 2017:

(Dollars in Millions)

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

Gain/(Loss)
Recognized In
Income on Derivative

Derivatives Not Designated as Hedging Instruments

December 30, 2018

December 31, 2017

Foreign Exchange Contracts

Other (income) expense

(68)

(5)

52 • Johnson & Johnson 2018 Annual Report

The following table is the effect of net investment hedges for the fiscal years ended December 30, 2018 and
December 31, 2017:

(Dollars in Millions)

Debt

Gain/(Loss)
Recognized In
Accumulated OCI

Location of Gain or (Loss) Reclassified
from Accumulated Other Comprehensive
Income Into Income

2018

2017

$218

(597)

Other (income) expense

Cross Currency interest rate swaps

$150

—

Other (income) expense

Gain/(Loss)
Reclassified From
Accumulated OCI
Into Income

2018

2017

—

—

—

—

The Company adopted ASU 2016-01: Financial Instruments: Recognition and Measurement of Financial Assets and
Financial Liabilities as of the beginning of the fiscal year 2018. This ASU amends prior guidance to classify equity
investments with readily determinable market values into different categories (that is, trading or available-for-sale) and
require equity investments to be measured at fair value with changes in fair value recognized through net earnings. The
Company made a cumulative effect adjustment to the opening balance of retained earnings upon adoption of ASU
2016-01 which increased retained earnings by $232 million, net of tax, and decreased accumulated other comprehensive
income for previously net unrealized gains from equity investments.

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

The following table is a summary of the activity related to equity investments as of December 30, 2018 :

December 31, 2017 Changes in Fair Value

Reflected in Net
Income(1)

Sales/
Purchases/Other(2)

December 30, 2018

Carrying Value

Non Current Other
Assets

(247)

13

7

158

511

681

511

681

(Dollars in Millions)

Carrying Value

Equity Investments with readily
determinable value

Equity Investments without readily
determinable value

$751

$510

(1) Recorded in Other Income/Expense
(2) Other includes impact of currency

For equity investments without readily determinable market values, $54 million of the changes in fair value reflected in net
income were the result of impairments. There were $67 million of changes in fair value reflected in net income due to
changes in observable prices.

For the fiscal years ended December 31, 2017, changes in fair value reflected within other comprehensive income due to
previously unrealized gains on equity investments with readily determinable fair values net of tax was a net gain of
$232 million.

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

The fair value of a derivative financial instrument (i.e., forward foreign exchange contracts, interest rate contracts) is the
aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and
subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The Company does not believe that
fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or
maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or
financial position. The Company also holds equity investments which are classified as Level 1 and debt securities which
are classified as Level 2. The Company did not have any other significant financial assets or liabilities which would require
revised valuations under this standard that are recognized at fair value.

Johnson & Johnson 2018 Annual Report • 53

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

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

Level 2 — Significant other observable inputs.

Level 3 — Significant unobservable inputs.

The Company’s significant financial assets and liabilities measured at fair value as of December 30, 2018 and
December 31, 2017 were as follows:

(Dollars in Millions)

Level 1

Level 2

Level 3

Total

Total(1)

2018

2017

Derivatives designated as hedging instruments:

Assets:

Forward foreign exchange contracts

Interest rate contracts(2)(4)

Total

Liabilities:

Forward foreign exchange contracts

Interest rate contracts(3)(4)

Total

Derivatives not designated as hedging instruments:

Assets:

Forward foreign exchange contracts

Liabilities:

Forward foreign exchange contracts

Available For Sale Other Investments:

Equity investments(5)

Debt securities(6)

Gross to Net Derivative Reconciliation

(Dollars in Millions)

Total Gross Assets

Credit Support Agreement (CSA)

Total Net Asset

Total Gross Liabilities

Credit Support Agreement (CSA)

Total Net Liabilities

$ —

—

—

—

—

—

—

—

511

501

161

662

548

292

840

32

32

—

$ —

9,734

—

—

—

—

—

—

—

—

—

—

501

161

662

548

292

840

32

32

418

7

425

402

165

567

38

38

511

751

9,734

5,310

2018

2017

$694

(423)

271

872

(605)

$267

463

(76)

387

605

(238)

367

(1)

(2)

(3)

2017 assets and liabilities are all classified as Level 2 with the exception of equity investments of $751 million, which are classified as
Level 1.

Includes $6 million and $7 million of non-current assets for the fiscal years ending December 30, 2018 and December 31, 2017,
respectively.

Includes $3 million and $9 million of non-current liabilities for the fiscal years ending December 30, 2018 and December 31, 2017,
respectively.

(4)

Includes cross currency interest rate swaps and interest rate swaps.

(5) Classified as non-current other assets. The carrying amount of the equity investments were $511 million and $751 million as of

December 30, 2018 and December 31, 2017, respectively.
(6) Classified as cash equivalents and current marketable securities.

See Notes 2 and 7 for financial assets and liabilities held at carrying amount on the Consolidated Balance Sheet.

54 • Johnson & Johnson 2018 Annual Report

7. Borrowings

The components of long-term debt are as follows:

(Dollars in Millions)

5.15% Debentures due 2018

1.65% Notes due 2018

4.75% Notes due 2019 (1B Euro 1.14) (2) /(1B Euro 1.1947)(3)

1.875% Notes due 2019

0.89% Notes due 2019

1.125% Notes due 2019

3% Zero Coupon Convertible Subordinated Debentures due 2020

2.95% Debentures due 2020

1.950% Notes due 2020

3.55% Notes due 2021

2.45% Notes due 2021

1.65% Notes due 2021

2018

$

—

—

1,139(2)

494

300

699

51

548

499

449

349

998

0.250% Notes due 2022 (1B Euro 1.14) (2) /(1B Euro 1.1947)(3)

1,137(2)

2.25% Notes due 2022

6.73% Debentures due 2023

3.375% Notes due 2023

2.05% Notes due 2023

0.650% Notes due 2024 (750MM Euro 1.14) (2) /(750MM Euro 1.1947)(3)

5.50% Notes due 2024 (500MM GBP 1.2636) (2) /(500MM GBP 1.3444)(3)

2.625% Notes due 2025

2.45% Notes due 2026

2.95% Notes due 2027

1.150% Notes due 2028 (750MM Euro 1.14) (2) /(750MM Euro 1.1947)(3)

2.900% Notes due 2028

6.95% Notes due 2029

4.95% Debentures due 2033

4.375% Notes due 2033

1.650% Notes due 2035 (1.5B Euro 1.14) (2) /(1.5B Euro 1.1947)(3)

3.55% Notes due 2036

5.95% Notes due 2037

3.625% Notes due 2037

5.85% Debentures due 2038

3.400% Notes due 2038

4.50% Debentures due 2040

4.85% Notes due 2041

4.50% Notes due 2043

3.70% Notes due 2046

3.75% Notes due 2047

3.500% Notes due 2048

Other

Subtotal

Less current portion

Total long-term debt

Effective
Rate %

5.83

1.93

1.32

1.13

3.00

3.15

1.99

3.67

2.48

1.65

0.26

2.31

6.73

3.17

2.09

0.68

6.75

2.63

2.47

2.96

1.21

2.91

7.14

4.95

4.24

1.68

3.59

5.99

3.64

5.85

3.42

4.63

4.89

4.52

3.74

3.76

3.52

–

2017

900

597

1,192(3)

496

300

699

60

547

499

448

349

998

1,191(3)

995

250

806

498

891(3)

666(3)

747

1,990

995

887(3)

1,492

296

498

856

1,774(3)

987

991

1,486

696

990

538

296

495

1,971

990

742

75

Effective
Rate %

5.18

1.70

5.83

1.93

1.75

1.13

3.00

3.15

1.99

3.67

2.48

1.65

0.26

2.31

6.73

3.17

2.09

0.68

6.75

2.63

2.47

2.96

1.21

2.91

7.14

4.95

4.24

1.68

3.59

5.99

3.64

5.85

3.42

4.63

4.89

4.52

3.74

3.76

3.52

–

996

250

805

498

851(2)

627(2)

748

1,992

996

847(2)

1,493

297

498

856

1,693(2)

988

991

1,486

696

990

538

297

495

1,972

991

742

24

30,320(4)

3.19%(1)

32,174(4)

3.19(1)

2,636

$27,684

1,499

30,675

Johnson & Johnson 2018 Annual Report • 55

(1) Weighted average effective rate.

(2)

(3)

(4)

Translation rate at December 30, 2018.

Translation rate at December 31, 2017.

The excess of the fair value over the carrying value of debt was $0.3 billion in 2018 and $2.0 billion in 2017.

Fair value of the long-term debt was estimated using market prices, which were corroborated by quoted broker prices and
significant other observable inputs.(Level 2)

The Company has access to substantial sources of funds at numerous banks worldwide. In September 2018, the
Company secured a new 364-day Credit Facility. Total credit available to the Company approximates $10 billion, which
expires on September 12, 2019. Interest charged on borrowings under the credit line agreements is based on either bids
provided by banks, the prime rate or London Interbank Offered Rates (LIBOR), plus applicable margins. Commitment fees
under the agreements are not material.

Throughout 2018, the Company continued to have access to liquidity through the commercial paper market. Short-term
borrowings and the current portion of long-term debt amounted to approximately $2.8 billion at the end of 2018, of which
$2.6 billion is the current portion of the long term debt, and the remainder principally represents local borrowing by
international subsidiaries.

Throughout 2017, the Company continued to have access to liquidity through the commercial paper market. Short-term
borrowings and the current portion of long-term debt amounted to approximately $3.9 billion at the end of 2017, of which
$2.3 billion was borrowed under the Commercial Paper Program, $1.5 billion is the current portion of the long-term debt,
and the remainder principally represents local borrowing by international subsidiaries.

Aggregate maturities of long-term obligations commencing in 2019 are:

(Dollars in Millions)

2019

$2,636

2020

1,098

2021

1,796

2022

2,134

2023

1,553

After 2023

21,103

8. Income Taxes

The provision for taxes on income consists of:

(Dollars in Millions)

Currently payable:

U.S. taxes

U.S. taxes on international operations

International taxes

Total currently payable

Deferred:

U.S. taxes

U.S. taxes on international operations

International taxes

Total deferred

Provision for taxes on income

56 • Johnson & Johnson 2018 Annual Report

2018

2017

2016

$1,081

11,969

1,896

203

2,434

3,718

126

1,872

13,967

49

1,659

3,604

(148)

(1,956)

294

1,358

(2,226)

(1,016)

4,362

2,406

(635)

(341)

$2,702

16,373

3,263

A comparison of income tax expense at the U.S. statutory rate of 21% in 2018 and 35% in 2017 and 2016, to the
Company’s effective tax rate is as follows:

(Dollars in Millions)

U.S.

International

Earnings before taxes on income:

Tax rates:

U.S. statutory rate

International operations(1)

Research and orphan drug tax credits

U.S. state and local

U.S. manufacturing deduction

U.S. tax on international income(2)

Tax benefits on share-based compensation

U.S. tax benefit on asset/business disposals

All other

TCJA and related impacts(3)

Effective Rate

2018

$5,575

2017

4,865

2016

7,457

12,424

12,808

12,346

$17,999

17,673

19,803

21.0%

(3.7)

(1.0)

0.8

—

1.4

(1.5)

0.5

(0.6)

35.0

(12.8)

35.0

(17.2)

(0.4)

0.6

(0.8)

0.7

(2.1)

(0.8)

(0.1)

(0.4)

(0.1)

(0.6)

1.3

(1.8)

—

0.3

—

(1.9)(3)

73.3(4)

15.0%

92.6

16.5

(1)

For all periods presented the Company has subsidiaries operating in Puerto Rico under various tax incentives. International
operations reflects the impacts of operations in jurisdictions with statutory tax rates different than the U.S., particularly Ireland,
Switzerland and Puerto Rico, which is a favorable impact on the effective tax rate as compared with the U.S. statutory rate. The 2017
amount also includes tax cost related to the revaluation of deferred tax balances related to the change in the Belgian statutory tax rate
increasing the tax provision by approximately 3.4%.

(2)

Includes the impact of the GILTI tax, the Foreign-Derived Intangible Income deduction and other foreign income that is taxable under
the U.S. tax code.

(3) Represents impact of adjustments to the 2017 TCJA provisional tax charge. This also includes a net tax benefit from the reduction of
a deferred tax liability related to foreign withholding taxes originally accrued as part of the provisional charge. This benefit reduced the
Company’s effective tax rate by approximately 11%. Further description is included below.

(4)

Includes U.S. state and local taxes provisionally recorded as part TCJA provisional charge which was approximately 0.6% of the total
effective tax rate.

On December 22, 2017, the United States enacted into law new U.S. tax legislation, the Tax Cuts and Jobs Act (TCJA).
This law included provisions for a comprehensive overhaul of the corporate income tax code, including a reduction of the
statutory corporate tax rate from 35% to 21%, effective on January 1, 2018. This legislation also eliminated or reduced
certain corporate income tax deductions as well as introduced new provisions that taxed certain foreign income not
previously taxed by the United States. The TCJA also included a provision for a tax on all previously undistributed earnings
of U.S. companies located in foreign jurisdictions. Undistributed earnings in the form of cash and cash equivalents were
taxed at a rate of 15.5% and all other earnings are taxed at a rate of 8.0%. This tax is payable over 8 years and will not
accrue interest and these payments began in 2018 and will continue through 2025. The remaining balance at the end of
the fiscal year 2018 was approximately $8.2 billion.

In December 2017, the SEC provided regulatory guidance for accounting of the impacts of the TCJA, referred to as SAB
118. Under the guidance in SAB 118, the income tax effects, which the accounting under ASC 740 is incomplete, are
reported as a provisional amount based on a reasonable estimate. The reasonable estimate is subject to adjustment during
a “measurement period”, not to exceed one year, until the accounting is complete. The estimate is also subject to the
finalization of management’s analysis related to certain matters, such as developing interpretations of the provision of the
TCJA, changes to certain estimates and amounts related to the earnings and profits of certain subsidiaries and the filing of
tax returns.

In the fourth quarter of 2017, the Company recorded a provisional tax cost of approximately $13.0 billion which consisted
primarily of the following components:

• a $10.1 billion charge on previously undistributed foreign earnings as of December 31, 2017

Johnson & Johnson 2018 Annual Report • 57

• a $4.5 billion deferred tax liability for foreign local and withholding taxes, offset by a $1.1 billion deferred tax asset for

U.S. foreign tax credits, for repatriation of substantially all those earnings

• a $0.6 billion tax benefit relating to the remeasurement of U.S. deferred tax assets and liabilities and the impact of the

TCJA on unrecognized tax benefits

• a $0.1 billion charge for U.S. state and local taxes on the repatriation of these foreign earnings

During the fourth quarter of 2018, the Company completed its full assessment and finalized the accounting for the impact
of TCJA. The Company recorded net adjustments to the above components of the provisional charge of approximately
$0.2 billion. These revisions were based on updated estimates and additional analysis by management as well as applying
interpretative guidance issued by the U.S. Department of Treasury to the facts and circumstances that existed as of the
TCJA enactment date. This charge was primarily related to additional deferred tax liabilities for foreign local and
withholding taxes for the remaining balance of undistributed foreign earnings as of December 31, 2017 that were not
provided for in the provisional charge in the fourth quarter of 2017.

The TCJA also includes provisions for a tax on global intangible low-taxed income (GILTI). GILTI is described as the
excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets, as provided by the TCJA.
In January 2018, the FASB issued guidance that allows companies to elect as an accounting policy whether to record the
tax effects of GILTI in the period the tax liability is generated (i.e., “period cost”) or provide for deferred tax assets and
liabilities related to basis differences that exist and are expected to effect the amount of GILTI inclusion in future years
upon reversal (i.e., “deferred method”). Through the third fiscal quarter of 2018, the Company had provisionally elected to
treat GILTI as a period expense. Upon further analysis of this new tax provision, the Company has elected to account for
GILTI under the deferred method. The deferred tax amounts recorded are based on the evaluation of temporary
differences that are expected to reverse as GILTI is incurred. As a result of this election, the Company recorded a deferred
tax cost related to GILTI of approximately $1.4 billion in the fourth fiscal quarter of 2018 related to facts and
circumstances that existed on the date of TCJA enactment.

As a result of the GILTI deferred tax charge and the other adjustments to the provisional amount, the Company recorded a
total of $1.6 billion of adjustments to the 2017 provisional charge increasing the Company’s annual effective tax rate by
approximately 9%.

During 2018, the Company reorganized the ownership structure of certain foreign subsidiaries which resulted in a
reduction of certain foreign withholding taxes that it had recognized as part of the provisional TCJA tax charge in the fourth
quarter of 2017. Following the completion of this restructuring in the fourth quarter 2018, and as a result of clarification by
Swiss tax authorities regarding the applicability of withholding tax to repatriation of certain earnings, the Company
reversed a deferred tax liability of $2.8 billion and a related deferred tax asset of $0.9 billion for U.S. foreign tax credits, for
a net deferred tax benefit of $1.9 billion. As this restructuring occurred after the TCJA enactment date, the benefit is not
considered an adjustment to the provisional amount recorded in 2017 under SAB118. This benefit with the SAB 118
adjustments has been reflected as “TCJA and related impacts” on the Company’s effective tax rate reconciliation.

As described in Note 1 to the Consolidated Financial Statements, in 2018 the Company adopted ASU 2016-16: Income
Taxes: Intra-Entity Transfers of Assets Other Than Inventory. This standard requires entities to recognize deferred tax assets
and liabilities related to transfer of assets, other than inventory, within the consolidated entity. At the beginning of fiscal
2018, the Company recorded a net adjustment to deferred tax assets of approximately $2.0 billion. In the fourth quarter of
2018, as a result of the election to record GILTI on the deferred method, the Company recorded a GILTI deferred tax
liability of $1.7 billion related to the adoption provisions of ASU 2016-16 as an adjustment to retained earnings.

The 2018 effective tax rate decreased by 77.6% compared to 2017. The 2017 effective tax rate was primarily driven by the
approximately $13 billion provisional tax charge recorded in the fourth quarter of 2017 and the impact of a Belgian statutory
tax rate change which increased the 2017 effective rate by 3.4%. Additional drivers of the 2018 annual effective tax were:

• the reduction of the U.S. statutory corporate tax rate including the effects of tax elections which resulted in the

acceleration of certain deductions into the 2017 tax return. The impact of these accelerated deductions decreased the
annual effective tax rate by approximately 1.7%

• the impact of the adjustments to the 2017 provisional TCJA charge, including both SAB 118 adjustments and the

internal restructuring, decreased the effective tax rate by approximately 1.9%

• GILTI tax which increased the annual effective tax rate by approximately 1.6%, which excludes the impact of the SAB

118 adjustment for the adoption of the deferred method for GILTI

• tax benefits received from stock-based compensation during fiscal 2018 and 2017, reduced the effective tax rate by

1.5% and 2.0%, respectively

58 • Johnson & Johnson 2018 Annual Report

• in the fourth quarter of 2018, the Company completed the divestiture of its LifeScan business (Note 20), which

increased the Company annual effective tax rate by approximately 0.8%

• more income in higher tax jurisdictions relative to lower tax jurisdictions as compared to 2017

The 2017 effective tax rate increased by 76.1% as compared to 2016, primarily driven by the enactment of the TCJA in
the U.S. in December 2017. The enactment of the TCJA resulted in a provisional tax charge in the fourth quarter of 2017,
of approximately $13.0 billion or approximately 73.3 percentage point increase to the effective tax rate.

The remainder of the increase in the tax rate for 2017 was related to the remeasurement of the Company’s deferred tax
assets in Belgium, as a result of changes in the Belgian statutory corporate tax rate enacted in December 2017, offset by
a tax benefit for the closure of the Company’s Animas insulin pump business.

Temporary differences and carryforwards for 2018 and 2017 were as follows:

2018
Deferred Tax

2017
Deferred Tax

(Dollars in Millions)

Employee related obligations

Stock based compensation

Depreciation & amortization

Non-deductible intangibles

International R&D capitalized for tax

Reserves & liabilities

Income reported for tax purposes

Net operating loss carryforward international

Undistributed foreign earnings

Global intangible low-taxed income

Miscellaneous international

Miscellaneous U.S.

Total deferred income taxes

Liability

(9)

(6,506)

Asset

2,259

507

1,307

1,718

1,316

762

Asset

Liability

(5,967)

$2,398

639

1,784

1,282

1,647

1,104

786

693

603

469

(2,240)

1,101

(4,457)

(2,971)

(93)

755

177

(194)

$11,405

(11,271)

9,902

(11,166)

The Company has wholly-owned international subsidiaries that have cumulative net losses. The Company believes that it is
more likely than not that these subsidiaries will generate future taxable income sufficient to utilize these deferred tax assets.

The following table summarizes the activity related to unrecognized tax benefits:

(Dollars in Millions)

Beginning of year

Increases related to current year tax positions

Increases related to prior period tax positions

Decreases related to prior period tax positions

Settlements

Lapse of statute of limitations

End of year

2018

2017

2016

$3,151

3,041

3,080

242

145

332

232

348

11

(137)

(416)(1)

(338)

(40)

(35)

(2)

(36)

(37)

(23)

$3,326

3,151

3,041

(1)

In 2017, $347 million of this decrease is related to the TCJA

The unrecognized tax benefits of $3.3 billion at December 30, 2018, if recognized, would affect the Company’s annual
effective tax rate. The Company conducts business and files tax returns in numerous countries and currently has tax audits
in progress with a number of tax authorities. The IRS has completed its audit for the tax years through 2009 and is
currently auditing the tax years 2010-2012. The Company currently expects completion of this audit during 2019. Final
conclusion of the tax audit may result in an outcome that is different than the Company’s estimates and may result in a
material impact on the Company’s current and future operating results or cash flows in the period that the audit is
concluded. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go

Johnson & Johnson 2018 Annual Report • 59

back to the year 2006. The Company believes it is possible that audits may be completed by tax authorities in some
jurisdictions over the next twelve months. However, the Company is not able to provide a reasonably reliable estimate of
the timing of any other future tax payments relating to uncertain tax positions.

The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities.
Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense. The Company
recognized after tax interest expense of $53 million, $60 million and $7 million in 2018, 2017 and 2016, respectively. The
total amount of accrued interest was $503 million and $436 million in 2018 and 2017, respectively.

9. Employee Related Obligations

At the end of 2018 and 2017, employee related obligations recorded on the Consolidated Balance Sheets were:

(Dollars in Millions)

Pension benefits

Postretirement benefits

Postemployment benefits

Deferred compensation

Total employee obligations

Less current benefits payable

Employee related obligations — non-current

2018

$5,327

2,283

2,330

410

2017

5,343

2,331

2,250

475

10,350

10,399

399

325

$9,951

10,074

Prepaid employee related obligations of $475 million and $526 million for 2018 and 2017, respectively, are included in
Other assets on the Consolidated Balance Sheets.

10. Pensions and Other Benefit Plans

The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and
termination indemnity plans, which cover most employees worldwide. The Company also provides post-retirement
benefits, primarily health care, to all eligible U.S. retired employees and their dependents.

Many international employees are covered by government-sponsored programs and the cost to the Company is not
significant.

Retirement plan benefits for employees hired before January 1, 2015 are primarily based on the employee’s compensation
during the last three to five years before retirement and the number of years of service. In 2014, the Company announced
that the U.S. Defined Benefit Plan was amended to adopt a new benefit formula, effective for employees hired on or after
January 1, 2015. The benefits are calculated using a new formula based on employee compensation over total years of
service.

International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased under group
contracts, or reserves are provided.

The Company does not typically fund retiree health care benefits in advance, but may do so at its discretion. The Company
also has the right to modify these plans in the future.

In 2018 and 2017 the Company used December 31, 2018 and December 31, 2017, respectively, as the measurement
date for all U.S. and international retirement and other benefit plans.

60 • Johnson & Johnson 2018 Annual Report

Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans for 2018, 2017 and
2016 include the following components:

Retirement Plans

Other Benefit Plans

(Dollars in Millions)

Service cost

Interest cost

Expected return on plan assets

Amortization of prior service cost (credit)

Recognized actuarial losses

Curtailments and settlements

Net periodic benefit cost

2016

2018

2017

2016

2018

$1,283

996

2017

1,080

927

949

927

(2,212)

(2,041)

(1,962)

3

852

1

$923

2

609

17

594

1

496

11

422

269

148

(7)

(31)

123

—

502

247

159

(6)

(30)

138

—

508

224

158

(6)

(34)

135

—

477

In 2018, as per the adoption of ASU 2017-07, the service cost component of net periodic benefit cost was presented in
the same line items on the Consolidated Statement of Earnings where other employee compensation costs are reported.
All other components of net periodic benefit cost are presented as part of Other (income) expense, net on the
Consolidated Statement of Earnings.

Amounts expected to be recognized in net periodic benefit cost in the coming year for the Company’s defined benefit
retirement plans and other post-retirement plans:

(Dollars in Millions)

Amortization of net transition obligation

Amortization of net actuarial losses

Amortization of prior service credit

$ —

656

27

Unrecognized gains and losses for the U.S. pension plans are amortized over the average remaining future service for each
plan. For plans with no active employees, they are amortized over the average life expectancy. The amortization of gains
and losses for the other U.S. benefit plans is determined by using a 10% corridor of the greater of the market value of
assets or the accumulated postretirement benefit obligation. Total unamortized gains and losses in excess of the corridor
are amortized over the average remaining future service.

Prior service costs/benefits for the U.S. pension plans are amortized over the average remaining future service of plan
participants at the time of the plan amendment. Prior service cost/benefit for the other U.S. benefit plans is amortized over
the average remaining service to full eligibility age of plan participants at the time of the plan amendment.

The following table represents the weighted-average actuarial assumptions:

Worldwide Benefit Plans

Net Periodic Benefit Cost

Service cost discount rate

Interest cost discount rate

Rate of increase in compensation levels

Expected long-term rate of return on plan assets

Benefit Obligation

Discount rate

Rate of increase in compensation levels

Retirement Plans

Other Benefit Plans

2018

2017

2016

2018

2017

2016

3.20%

3.60%

3.98%

8.46%

3.76%

3.97%

3.59

3.98

4.01

8.43

3.30

3.99

3.98

4.24

4.02

8.55

3.78

4.02

3.85

3.62

4.29

4.63

3.94

4.31

4.77

4.10

4.32

4.40

4.29

3.78

4.30

4.42

4.29

The Company’s discount rates are determined by considering current yield curves representing high quality, long-term
fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. In the fiscal year
2016, the Company changed its methodology in determining service and interest cost from the single weighted average
discount rate approach to duration specific spot rates along that yield curve to the plans’ liability cash flows, which
management has concluded is a more precise estimate. Prior to this change in methodology, the Company measured

Johnson & Johnson 2018 Annual Report • 61

service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure
the plan obligations. The Company has accounted for this change as a change in accounting estimate and, accordingly,
has accounted for it on a prospective basis. This change does not impact the benefit obligation and did not have a
material impact to the 2016 full year results.

The expected rates of return on plan asset assumptions represent the Company’s assessment of long-term returns on
diversified investment portfolios globally. The assessment is determined using projections from external financial sources,
long-term historical averages, actual returns by asset class and the various asset class allocations by market.

The following table displays the assumed health care cost trend rates, for all individuals:

Health Care Plans

Health care cost trend rate assumed for next year

Rate to which the cost trend rate is assumed to decline (ultimate trend)

Year the rate reaches the ultimate trend rate

2018

2017

6.12%

6.33%

4.55%

4.55%

2038

2038

A one-percentage-point change in assumed health care cost trend rates would have the following effect:

(Dollars in Millions)

Health Care Plans

Total interest and service cost

Post-retirement benefit obligation

One-Percentage-
Point Increase

One-Percentage-
Point Decrease

$28

$340

(22)

(280)

62 • Johnson & Johnson 2018 Annual Report

The following table sets forth information related to the benefit obligation and the fair value of plan assets at year-end
2018 and 2017 for the Company’s defined benefit retirement plans and other post-retirement plans:

(Dollars in Millions)

Change in Benefit Obligation

Retirement Plans

Other Benefit
Plans

2018

2017

2018

2017

Projected benefit obligation — beginning of year

$33,221

28,116

4,582

4,605

Service cost

Interest cost

Plan participant contributions

Amendments

Actuarial (gains) losses

Divestitures & acquisitions

Curtailments, settlements & restructuring

Benefits paid from plan

Effect of exchange rates

Projected benefit obligation — end of year

Change in Plan Assets

Plan assets at fair value — beginning of year

Actual return on plan assets

Company contributions

Plan participant contributions

Settlements

Divestitures & acquisitions

Benefits paid from plan assets

Effect of exchange rates

Plan assets at fair value — end of year

Funded status — end of year

Amounts Recognized in the Company’s Balance Sheet consist of the following:

Non-current assets

Current liabilities

Non-current liabilities

Total recognized in the consolidated balance sheet — end of year

Amounts Recognized in Accumulated Other Comprehensive Income consist of

the following:

Net actuarial loss

Prior service cost (credit)

Unrecognized net transition obligation

Total before tax effects

1,283

996

66

26

1,080

927

60

(7)

269

148

—

—

(2,326)

2,996

(119)

(29)

(21)

201

(35)

(1,018)

(1,050)

(528)

933

—

—

(383)

(17)

$31,670

33,221

4,480

$28,404

23,633

(1,269)

1,140

66

(13)

(17)

4,274

664

60

(32)

173

281

—

282

—

—

—

247

159

—

(17)

(166)

88

2

(351)

15

4,582

75

12

545

—

—

—

(1,018)

(1,050)

(383)

(351)

(475)

682

$26,818

28,404

—

180

—

281

$(4,852)

(4,817)

(4,300)

(4,301)

$475

(98)

(5,229)

$(4,852)

526

(92)

(5,251)

(4,817)

—

(281)

(4,019)

(4,300)

—

(228)

(4,073)

(4,301)

$8,323

8,140

2

—

(25)

—

1,263

(106)

—

1,500

(137)

—

$8,325

8,115

1,157

1,363

Accumulated Benefit Obligations — end of year

$28,533

29,793

Johnson & Johnson 2018 Annual Report • 63

(Dollars in Millions)

Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive

Income

Net periodic benefit cost

Net actuarial (gain) loss

Amortization of net actuarial loss

Prior service cost (credit)

Amortization of prior service (cost) credit

Effect of exchange rates

Total loss/(income) recognized in other comprehensive income, before tax

Total recognized in net periodic benefit cost and other comprehensive income

Retirement Plans

Other Benefit
Plans

2018

2017

2018

2017

$923

1,153

594

740

(852)

(609)

26

(3)

(114)

$210

$1,133

(7)

(2)

256

378

972

502

(111)

(123)

–

31

(3)

(206)

296

508

(169)

(138)

(17)

30

3

(291)

217

The Company plans to continue to fund its U.S. Qualified Plans to comply with the Pension Protection Act of 2006.
International Plans are funded in accordance with local regulations. Additional discretionary contributions are made when
deemed appropriate to meet the long-term obligations of the plans. For certain plans, funding is not a common practice, as
funding provides no economic benefit. Consequently, the Company has several pension plans that are not funded.

In 2018, the Company contributed $679 million and $461 million to its U.S. and international pension plans, respectively.

The following table displays the funded status of the Company’s U.S. Qualified & Non-Qualified pension plans and
international funded and unfunded pension plans at December 31, 2018 and December 31, 2017, respectively:

U.S. Plans

International Plans

Qualified Plans

Non-Qualified Plans

Funded Plans

Unfunded Plans

(Dollars in Millions)

2018

2017

2018

2017

Plan Assets

$17,725

18,681

Projected Benefit Obligation

18,609

19,652

Accumulated Benefit Obligation

16,851

17,654

—

2,176

1,793

—

2,257

1,849

2018

9,093

2017

9,723

10,467

10,863

9,510

9,893

2018

2017

—

418

379

—

449

397

Over (Under) Funded Status

Projected Benefit Obligation

$(884)

(971)

(2,176)

(2,257)

(1,374)

(1,140)

Accumulated Benefit Obligation

874

1,027

(1,793)

(1,849)

(417)

(170)

(418)

(379)

(449)

(397)

Plans with accumulated benefit obligations in excess of plan assets have an accumulated benefit obligation, projected
benefit obligation and plan assets of $7.5 billion, $8.8 billion and $4.3 billion, respectively, at the end of 2018, and
$3.8 billion, $4.6 billion and $0.7 billion, respectively, at the end of 2017.

The following table displays the projected future benefit payments from the Company’s retirement and other benefit plans:

(Dollars in Millions)

2019

2020

2021

2022

2023

2024-2028

Projected future benefit payments

Retirement plans

Other benefit plans

$1,062

1,104

1,182

1,257

1,332

$375

397

411

428

413

7,679

2,273

The following table displays the projected future minimum contributions to the unfunded retirement plans. These amounts
do not include any discretionary contributions that the Company may elect to make in the future.

(Dollars in Millions)

Projected future contributions

2019

$92

2020

95

2021

101

2022

108

2023

115

2024-
2028

697

Each pension plan is overseen by a local committee or board that is responsible for the overall administration and
investment of the pension plans. In determining investment policies, strategies and goals, each committee or board

64 • Johnson & Johnson 2018 Annual Report

considers factors including, local pension rules and regulations; local tax regulations; availability of investment vehicles
(separate accounts, commingled accounts, insurance funds, etc.); funded status of the plans; ratio of actives to retirees;
duration of liabilities; and other relevant factors including: diversification, liquidity of local markets and liquidity of base
currency. A majority of the Company’s pension funds are open to new entrants and are expected to be on-going plans.
Permitted investments are primarily liquid and/or listed, with little reliance on illiquid and non-traditional investments such
as hedge funds.

The Company’s retirement plan asset allocation at the end of 2018 and 2017 and target allocations for 2019 are as
follows:

Worldwide Retirement Plans

Equity securities

Debt securities

Total plan assets

Percent of
Plan Assets

Target
Allocation

2018

2017

2019

71%

29

76%

24

70%

30

100%

100%

100%

Determination of Fair Value of Plan Assets

The Plan has an established and well-documented process for determining fair values. Fair value is based upon quoted
market prices, where available. If listed prices or quotes are not available, fair value is based upon models that primarily
use, as inputs, market-based or independently sourced market parameters, including yield curves, interest rates, volatilities,
equity or debt prices, foreign exchange rates and credit curves.

While the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different
estimate of fair value at the reporting date.

Valuation Hierarchy

The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels
within the hierarchy are described in the table below with Level 1 having the highest priority and Level 3 having the lowest.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is
significant to the fair value measurement.

Following is a description of the valuation methodologies used for the investments measured at fair value.
• Short-term investment funds — Cash and quoted short-term instruments are valued at the closing price or the amount
held on deposit by the custodian bank. Other investments are through investment vehicles valued using the Net Asset
Value (NAV) provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned
by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is a quoted price in a
market that is not active and classified as Level 2.

• Government and agency securities — A limited number of these investments are valued at the closing price reported on
the major market on which the individual securities are traded. Where quoted prices are available in an active market,
the investments are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available for the
specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar
characteristics or discounted cash flows. When quoted market prices for a security are not available in an active market,
they are classified as Level 2.

• Debt instruments — A limited number of these investments are valued at the closing price reported on the major market
on which the individual securities are traded. Where quoted prices are available in an active market, the investments are
classified as Level 1. If quoted market prices are not available for the specific security, then fair values are estimated by
using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are classified
as Level 2. Level 3 debt instruments are priced based on unobservable inputs.

• Equity securities — Equity securities are valued at the closing price reported on the major market on which the individual

securities are traded. Substantially all common stock is classified within Level 1 of the valuation hierarchy.

Johnson & Johnson 2018 Annual Report • 65

• Commingled funds — These investment vehicles are valued using the NAV provided by the fund administrator. The NAV
is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of
shares outstanding. Assets in the Level 2 category have a quoted market price.

• Insurance contracts — The instruments are issued by insurance companies. The fair value is based on negotiated value
and the underlying investments held in separate account portfolios as well as considering the credit worthiness of the
issuer. The underlying investments are government, asset-backed and fixed income securities. In general, insurance
contracts are classified as Level 3 as there are no quoted prices nor other observable inputs for pricing.

• Other assets — Other assets are represented primarily by limited partnerships and real estate investments, as well as

commercial loans and commercial mortgages that are not classified as corporate debt. Other assets that are exchange
listed and actively traded are classified as Level 1, while inactively traded assets are classified as Level 2.

The following table sets forth the Retirement Plans’ investments measured at fair value as of December 31, 2018 and
December 31, 2017:

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs (a)
(Level 3)

Investments
Measured at
Net Asset
Value

Total Assets

(Dollars in Millions)

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

Short-term investment funds

$122

429

529

427

Government and agency securities

Debt instruments

Equity securities

Commingled funds

Insurance contracts

Other assets

—

—

— 3,595

3,094

— 3,105

2,013

11,298

13,848

4

—

—

—

—

— 2,304

1,780

—

—

—

33

—

121

—

—

—

—

133

193

—

—

—

—

—

—

—

—

—

—

—

—

651

856

3,595

3,094

3,105

2,013

— 11,302

13,848

57

5,201

6,158

7,638

7,995

199

—

—

301

—

278

193

334

199

399

Investments at fair value

$11,420

14,277

9,570

7,435

326

256

5,502

6,436

26,818

28,404

(a)

The activity for the Level 3 assets is not significant for all years presented.

The Company’s Other Benefit Plans are unfunded except for U.S. commingled funds (Level 2) of $72 million and
$81 million and U.S. short-term investment funds (Level 2) of $108 million and $200 million at December 31, 2018 and
December 31, 2017, respectively.

The fair value of Johnson & Johnson Common Stock directly held in plan assets was $876 million (3.3% of total plan
assets) at December 31, 2018 and $938 million (3.3% of total plan assets) at December 31, 2017.

11. Savings Plan

The Company has voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible
employees. The Company matches a percentage of each employee’s contributions consistent with the provisions of the
plan for which he/she is eligible. Total Company matching contributions to the plans were $242 million, $214 million and
$191 million in 2018, 2017 and 2016, respectively.

66 • Johnson & Johnson 2018 Annual Report

12. Capital and Treasury Stock

Changes in treasury stock were:

(Amounts in Millions Except Treasury Stock Shares in Thousands)

Balance at January 3, 2016

Employee compensation and stock option plans

Repurchase of common stock

Balance at January 1, 2017

Employee compensation and stock option plans

Repurchase of common stock

Balance at December 31, 2017

Employee compensation and stock option plans

Repurchase of common stock

Balance at December 30, 2018

Treasury Stock

Shares

Amount

364,681

$22,684

(30,839)

(3,311)

79,490

8,979

413,332

28,352

(25,508)

(3,156)

49,494

6,358

437,318

31,554

(22,082)

(3,060)

42,283

5,868

457,519

$34,362

Aggregate shares of common stock issued were approximately 3,119,843,000 shares at the end of 2018, 2017 and
2016.

Cash dividends paid were $3.54 per share in 2018, compared with dividends of $3.32 per share in 2017, and $3.15 per
share in 2016.

On December 17, 2018, the Company announced that its Board of Directors approved a share repurchase program,
authorizing the Company to purchase up to $5.0 billion of the Company’s shares of common stock. The repurchase
program has no time limit and may be suspended for periods or discontinued at any time. Any shares acquired will be
available for general corporate purposes. The Company intends to finance the share repurchase program through available
cash. As of December 30, 2018, $0.9 billion has been repurchased under the program.

On October 13, 2015, the Company announced that its Board of Directors approved a share repurchase program,
authorizing the Company to purchase up to $10.0 billion of the Company’s shares of common stock. This share
repurchase program was completed as of July 2, 2017.

13. Accumulated Other Comprehensive Income (Loss)

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

(Dollars in Millions)

January 3, 2016

Net 2016 changes

January 1, 2017

Net 2017 changes

December 31, 2017

Cumulative adjustment to retained earnings

Net 2018 changes

December 30, 2018

Foreign
Currency
Translation

$(8,435)

(612)

(9,047)

1,696

(7,351)

(1,518)

$(8,869)

Gain/(Loss)
On
Securities

Employee
Benefit
Plans

Gain/(Loss)
On
Derivatives
& Hedges

Total
Accumulated
Other
Comprehensive
Income (Loss)

604

(193)

411

(179)

232

(232)(1)

—

—

(5,298)

(682)

(5,980)

(170)

(6,150)

(8)

(6,158)

(36)

(249)

(285)

355

70

(265)

(195)

(13,165)

(1,736)

(14,901)

1,702

(13,199)

(232)

(1,791)

(15,222)

(1) See Note 1 to Consolidated Financial Statements for additional details on the adoption of ASU 2016-01

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

Johnson & Johnson 2018 Annual Report • 67

Details on reclassifications out of Accumulated Other Comprehensive Income:

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

Employee Benefit Plans — reclassifications are included in net periodic benefit cost. See Note 10 for additional

details.

Gain/(Loss) On Derivatives & Hedges — reclassifications to earnings are recorded in the same account as the

hedged transaction. See Note 6 for additional details.

14. International Currency Translation

For translation of its subsidiaries operating in non-U.S. Dollar currencies, the Company has determined that the local
currencies of its international subsidiaries are the functional currencies except those in highly inflationary economies, which
are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years,
or where a substantial portion of its cash flows are not in the local currency. Beginning in the fiscal third quarter of 2018,
the Company accounted for operations in Argentina as highly inflationary. For the majority of the Company’s subsidiaries
the local currency is the functional currency.

In consolidating international subsidiaries, balance sheet currency effects are recorded as a component of accumulated
other comprehensive income. This equity account includes the results of translating certain balance sheet assets and
liabilities at current exchange rates and some accounts at historical rates, except for those located in highly inflationary
economies. The translation of balance sheet accounts for highly inflationary economies are reflected in the operating
results.

A rollforward of the changes during 2018, 2017 and 2016 for foreign currency translation adjustments is included in
Note 13.

Net currency transaction gains and losses included in Other (income) expense were losses of $265 million, $216 million
and $289 million in 2018, 2017 and 2016, respectively.

15. Earnings Per Share

The following is a reconciliation of basic net earnings per share to diluted net earnings per share for the fiscal years ended
December 30, 2018, December 31, 2017 and January 1, 2017:

(In Millions Except Per Share Amounts)

Basic net earnings per share

Average shares outstanding — basic

Potential shares exercisable under stock option plans

Less: shares repurchased under treasury stock method

Convertible debt shares

Adjusted average shares outstanding — diluted

Diluted net earnings per share

2018

$5.70

2017

2016

0.48

6.04

2,681.5

2,692.0

2,737.3

139.0

(92.5)

0.7

139.7

(87.3)

0.9

142.4

(92.1)

1.3

2,728.7

2,745.3

2,788.9

$5.61

0.47

5.93

The diluted net earnings per share calculation included the dilutive effect of convertible debt that is offset by the related
reduction in interest expense of $1 million after-tax for 2018 and 2017, and $2 million for 2016.

The diluted net earnings per share calculation for 2018, 2017 and 2016 included all shares related to stock options, as
the exercise price of all options was less than the average market value of the Company’s stock.

16. Rental Expense and Lease Commitments

Rentals of space, vehicles, manufacturing equipment and office and data processing equipment under operating leases
were approximately $332 million, $372 million and $330 million in 2018, 2017 and 2016, respectively.

68 • Johnson & Johnson 2018 Annual Report

The approximate minimum rental payments required under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year at December 30, 2018 are:

(Dollars in Millions)

2019

$223

2020

188

2021

154

2022

116

2023

76

After
2023

139

Total

896

Commitments under capital leases are not significant.

17. Common Stock, Stock Option Plans and Stock Compensation Agreements

At December 30, 2018, the Company had 2 stock-based compensation plans. The shares outstanding are for contracts
under the Company’s 2005 Long-Term Incentive Plan and the 2012 Long-Term Incentive Plan. The 2005 Long-Term
Incentive Plan expired April 26, 2012. All options and restricted shares granted subsequent to that date were under the
2012 Long-Term Incentive Plan. Under the 2012 Long-Term Incentive Plan, the Company may issue up to 650 million
shares of common stock, plus any shares canceled, expired, forfeited, or not issued from the 2005 Long-Term Incentive
Plan subsequent to April 26, 2012. Shares available for future grants under the 2012 Long-Term Incentive Plan were
351 million at the end of 2018.

The compensation cost that has been charged against income for these plans was $978 million, $962 million and
$878 million for 2018, 2017 and 2016, respectively. The total income tax benefit recognized in the income statement for
share-based compensation costs was $192 million, $275 million and $256 million for 2018, 2017 and 2016,
respectively. An additional tax benefit of $353 million was recognized in 2016 due to the adoption of a new accounting
standard for the reporting of additional tax benefits on share-based compensation. The total unrecognized compensation
cost was $827 million, $798 million and $749 million for 2018, 2017 and 2016, respectively. The weighted average
period for this cost to be recognized was 1.73 years, 1.76 years and 1.09 years for 2018, 2017, and 2016, respectively.
Share-based compensation costs capitalized as part of inventory were insignificant in all periods.

The Company settles employee benefit equity issuances with treasury shares. Treasury shares are replenished throughout
the year for the number of shares used to settle employee benefit equity issuances.

Stock Options

Stock options expire 10 years from the date of grant and vest over service periods that range from 6 months to 4 years. All
options are granted at the average of the high and low prices of the Company’s Common Stock on the New York Stock
Exchange on the date of grant.

The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model
that uses the assumptions noted in the following table. For 2018, 2017 and 2016 grants, expected volatility represents a
blended rate of 10-year weekly historical overall volatility rate, and a 5-week average implied volatility rate based on
at-the-money traded Johnson & Johnson options with a life of 2 years. For all grants, historical data is used to determine
the expected life of the option. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant.

The average fair value of options granted was $17.98, $13.38 and $10.01, in 2018, 2017 and 2016, respectively. The
fair value was estimated based on the weighted average assumptions of:

Risk-free rate

Expected volatility

Expected life (in years)

Expected dividend yield

2018

2017

2016

2.77%

2.25%

1.51%

15.77% 15.30% 15.76%

7.0

7.0

7.0

2.70%

2.90%

3.10%

Johnson & Johnson 2018 Annual Report • 69

A summary of option activity under the Plan as of December 30, 2018, December 31, 2017 and January 1, 2017, and
changes during the years ending on those dates is presented below:

(Shares in Thousands)

Shares at January 3, 2016

Options granted

Options exercised

Options canceled/forfeited

Shares at January 1, 2017

Options granted

Options exercised

Options canceled/forfeited

Shares at December 31, 2017

Options granted

Options exercised

Options canceled/forfeited

Shares at December 30, 2018

Outstanding
Shares

Weighted
Average
Exercise Price

116,517

22,491

(22,547)

(3,006)

113,455

19,287

(18,975)

(2,461)

111,306

17,115

(16,228)

(2,541)

109,652

$76.41

101.87

65.66

92.83

83.16

115.67

70.87

101.40

90.48

129.51

75.44

112.90

$98.29

Aggregate
Intrinsic
Value
(Dollars in
Millions)

$3,065

3,636

5,480

$3,214

The total intrinsic value of options exercised was $1,028 million, $1,060 million and $980 million in 2018, 2017 and
2016, respectively.

The following table summarizes stock options outstanding and exercisable at December 30, 2018 :

(Shares in Thousands)

Outstanding

Exercisable

Exercise Price Range

$52.13-$65.62

$66.07-$72.54

$90.44-$100.48

$101.87-$115.67

$115.68-$129.51

Options

13,466

12,710

29,162

37,877

16,437

109,652

Average
Life(1)

1.8

4.0

5.6

7.6

9.1

6.2

Average
Exercise
Price

$62.67

$72.53

$95.34

$108.33

$129.51

Options

13,466

12,710

28,537

111

38

Average
Exercise
Price

$62.67

$72.53

$95.23

$108.04

$129.51

$98.29

54,862

$82.03

(1) Average contractual life remaining in years.

Stock options outstanding at December 31, 2017 and January 1, 2017 were 111,306 and an average life of 6.3 years and
113,455 and an average life of 6.2 years, respectively. Stock options exercisable at December 31, 2017 and January 1,
2017 were 52,421 at an average price of $73.61 and 50,414 at an average price of $65.77, respectively.

Restricted Share Units and Performance Share Units

The Company grants restricted share units which vest over service periods that range from 6 months to 3 years. The
Company also grants performance share units, which are paid in shares of Johnson & Johnson Common Stock after the
end of a three -year performance period. Whether any performance share units vest, and the amount that does vest, is tied
to the completion of service periods that range from 6 months to 3 years and the achievement, over a three -year period,
of three equally-weighted goals that directly align with or help drive long-term total shareholder return: operational sales,
adjusted operational earnings per share, and relative total shareholder return. The number of shares actually earned at the
end of the three -year period will vary, based only on actual performance, from 0% to 200% of the target number of
performance share units granted. In the fourth quarter of 2017, the Company modified the restricted share units that are
scheduled to vest between January 1, 2018 and March 15, 2018. This modification guaranteed a minimum aggregate

70 • Johnson & Johnson 2018 Annual Report

value, below the market value of the total expected payout amount, for all awards expected to vest during this period. The
amount that was committed was not material to the Company’s overall financial position.

A summary of the restricted share units and performance share units activity under the Plans as of December 30, 2018 is
presented below:

(Shares in Thousands)

Shares at December 31, 2017

Granted

Issued

Canceled/forfeited/adjusted

Shares at December 30, 2018

Outstanding
Restricted
Share Units

Outstanding
Performance
Share Units

20,161

6,074

(6,684)

(1,091)

18,460

2,625

1,142

(1,151)

(122)

2,494

The average fair value of the restricted share units granted was $119.67, $107.69 and $92.45 in 2018, 2017 and 2016,
respectively, using the fair market value at the date of grant. The fair value of restricted share units was discounted for
dividends, which are not paid on the restricted share units during the vesting period. The fair value of restricted share units
issued was $613.7 million, $596.5 million and $587.7 million in 2018, 2017 and 2016, respectively.

The weighted average fair value of the performance share units granted was $120.64, $114.13 and $105.30 in 2018,
2017 and 2016, calculated using the weighted average fair market value for each of the three component goals at the
date of grant.

The fair values for the sales and earnings per share goals of each performance share unit were estimated on the date of
grant using the fair market value of the shares at the time of the award discounted for dividends, which are not paid on the
performance share units during the vesting period. The fair value for the relative total shareholder return goal of each
performance share unit was estimated on the date of grant using the Monte Carlo valuation model. The fair value of
performance share units issued was $128.8 million, $132.5 million and $127.7 million in 2018, 2017 and 2016,
respectively.

Johnson & Johnson 2018 Annual Report • 71

18. Segments of Business and Geographic Areas

(Dollars in Millions)

2018

2017

2016

’18 vs. ’17

’17 vs. ’16

Sales to Customers

% Change

CONSUMER

Baby Care

U.S.

International

Worldwide

Beauty

U.S.

International

Worldwide

Oral Care

U.S.

International

Worldwide

OTC

U.S.

International

Worldwide

Women’s Health

U.S.

International

Worldwide

Wound Care/Other

U.S.

International

Worldwide

TOTAL CONSUMER

U.S.

International

Worldwide

PHARMACEUTICAL

Immunology

U.S.

International

Worldwide

REMICADE®

U.S.

U.S. Exports

International

Worldwide

SIMPONI / SIMPONI ARIA®

U.S.

International

72 • Johnson & Johnson 2018 Annual Report

$422

1,436

1,858

2,403

1,979

4,382

637

918

449

1,467

1,916

2,335

1,865

4,200

616

915

488

1,513

2,001

2,135

1,762

3,897

648

920

1,555

1,531

1,568

1,850

2,484

4,334

13

1,036

1,049

436

239

675

1,716

2,410

4,126

12

1,038

1,050

437

342

779

1,675

2,302

3,977

19

1,048

1,067

455

342

797

5,761

8,092

5,565

8,037

5,420

7,887

13,853

13,602

13,307

9,073

4,047

8,871

3,373

8,846

3,122

13,120

12,244

11,968

3,664

436

1,226

5,326

1,051

1,033

4,525

563

1,227

6,315

954

879

4,842

782

1,342

6,966

959

786

(6.0)%

(2.1)

(3.0)

2.9

6.1

4.3

3.4

0.3

1.6

7.8

3.1

5.0

8.3

(0.2)

(0.1)

(0.2)

(30.1)

(13.4)

3.5

0.7

1.8

2.3

20.0

7.2

(19.0)

(22.6)

(0.1)

(15.7)

10.2

17.5

(8.0)

(3.0)

(4.2)

9.4

5.8

7.8

(4.9)

(0.5)

(2.4)

2.4

4.7

3.7

(36.8)

(1.0)

(1.6)

(4.0)

0.0

(2.3)

2.7

1.9

2.2

0.3

8.0

2.3

(6.5)

(28.0)

(8.6)

(9.3)

(0.5)

11.8

(Dollars in Millions)

Worldwide

STELARA®

U.S.

International

Worldwide

TREMFAYA®

U.S.

International

Worldwide

OTHER IMMUNOLOGY

U.S.

International

Worldwide

Infectious Diseases

U.S.

International

Worldwide

EDURANT® / rilpivirine

U.S.

International

Worldwide

PREZISTA® / PREZCOBIX® / REZOLSTA® / SYMTUZA®

U.S.

International

Worldwide

OTHER INFECTIOUS DISEASES

U.S.

International

Worldwide

Neuroscience

U.S.

International

Worldwide

CONCERTA® / Methylphenidate

U.S.

International

Worldwide

INVEGA SUSTENNA® / XEPLION® / INVEGA TRINZA® /

TREVICTA®

U.S.

International

Worldwide

Sales to Customers

% Change

2018

2,084

3,469

1,687

5,156

453

91

544

—

10

10

1,378

1,926

3,304

58

758

816

1,169

786

1,955

151

382

533

2,574

3,503

6,077

229

434

663

1,791

1,137

2,928

2017

1,833

2,767

1,244

4,011

62

1

63

—

22

22

1,358

1,796

3,154

58

656

714

1,109

712

1,821

191

428

619

2,630

3,356

5,986

384

407

791

1,590

979

2,569

2016

’18 vs. ’17

’17 vs. ’16

1,745

13.7

5.0

2,263

969

3,232

—

—

—

—

25

25

1,461

1,747

3,208

52

521

573

1,143

708

1,851

266

518

784

2,628

3,457

6,085

468

395

863

1,343

871

2,214

25.4

35.6

28.5

*

*

*

—

(54.5)

(54.5)

1.5

7.2

4.8

0.0

15.5

14.3

5.4

10.4

7.4

(20.9)

(10.7)

(13.9)

(2.1)

4.4

1.5

(40.4)

6.6

(16.2)

12.6

16.1

14.0

22.3

28.4

24.1

*

*

*

—

(12.0)

(12.0)

(7.0)

2.8

(1.7)

11.5

25.9

24.6

(3.0)

0.6

(1.6)

(28.2)

(17.4)

(21.0)

0.1

(2.9)

(1.6)

(17.9)

3.0

(8.3)

18.4

12.4

16.0

Johnson & Johnson 2018 Annual Report • 73

(Dollars in Millions)

RISPERDAL CONSTA®

U.S.

International

Worldwide

OTHER NEUROSCIENCE

U.S.

International

Worldwide

Oncology

U.S.

International

Worldwide

DARZALEX®

U.S.

International

Worldwide

IMBRUVICA®

U.S.

International

Worldwide

VELCADE®

U.S.

International

Worldwide

ZYTIGA® / abiraterone acetate

U.S.

International

Worldwide

OTHER ONCOLOGY

U.S.

International

Worldwide

Pulmonary Hypertension

U.S.

International

Worldwide

OPSUMIT®

U.S.

International

Worldwide

TRACLEER®

U.S.

International

74 • Johnson & Johnson 2018 Annual Report

Sales to Customers

% Change

2018

2017

2016

’18 vs. ’17

’17 vs. ’16

315

422

737

239

1,510

1,749

4,331

5,513

9,844

1,203

822

2,025

1,129

1,486

2,615

—

1,116

1,116

1,771

1,727

3,498

228

362

590

1,651

922

2,573

700

515

1,215

268

278

360

445

805

296

1,525

1,821

3,098

4,160

7,258

884

358

1,242

841

1,052

1,893

—

1,114

1,114

1,228

1,277

2,505

145

359

504

773

554

1,327

320

253

573

161

242

381

512

893

436

1,679

2,115

2,335

3,472

5,807

471

101

572

613

638

1,251

—

1,224

1,224

1,089

1,171

2,260

162

338

500

—

—

—

—

—

—

—

—

(12.5)

(5.2)

(8.4)

(19.3)

(1.0)

(4.0)

39.8

32.5

35.6

36.1

*

63.0

34.2

41.3

38.1

—

0.2

0.2

44.2

35.2

39.6

57.2

0.8

17.1

*

66.4

93.9

*

*

*

66.5

14.9

(5.5)

(13.1)

(9.9)

(32.1)

(9.2)

(13.9)

32.7

19.8

25.0

87.7

*

*

37.2

64.9

51.3

—

(9.0)

(9.0)

12.8

9.1

10.8

(10.5)

6.2

0.8

*

*

*

*

*

*

*

*

(Dollars in Millions)

2018

2017

2016

’18 vs. ’17

’17 vs. ’16

Sales to Customers

% Change

Worldwide

UPTRAVI®

U.S.

International

Worldwide

OTHER

U.S.

International

Worldwide

Cardiovascular / Metabolism / Other

U.S.

International

Worldwide

XARELTO®

U.S.

International

Worldwide

INVOKANA® / INVOKAMET®

U.S.

International

Worldwide

PROCRIT® / EPREX®

U.S.

International

Worldwide

OTHER

U.S.

International

Worldwide

TOTAL PHARMACEUTICAL

U.S.

International

Worldwide

MEDICAL DEVICES

Diabetes Care

U.S.

International

Worldwide

Diagnostics

U.S.

International

Worldwide

546

403

598

65

663

85

64

149

238

25

263

54

34

88

—

—

—

—

—

—

—

4,279

1,537

5,816

4,744

1,543

6,287

4,855

1,541

6,396

2,477

2,500

2,288

—

—

—

2,477

2,500

2,288

711

170

881

674

314

988

417

1,053

1,470

944

167

1,111

675

297

972

625

1,079

1,704

1,273

134

1,407

767

338

1,105

527

1,069

1,596

23,286

21,474

20,125

17,448

14,782

13,339

40,734

36,256

33,464

371

638

1,009

—

—

—

612

1,003

1,615

—

1

1

739

1,050

1,789

—

66

66

35.5

*

*

*

57.4

88.2

69.3

(9.8)

(0.4)

(7.5)

(0.9)

—

(0.9)

(24.7)

1.8

(20.7)

(0.1)

5.7

1.6

(33.3)

(2.4)

(13.7)

8.4

18.0

12.4

(39.4)

(36.4)

(37.5)

—

*

*

*

*

*

*

*

*

*

(2.3)

0.1

(1.7)

9.3

—

9.3

(25.8)

24.6

(21.0)

(12.0)

(12.1)

(12.0)

18.6

0.9

6.8

6.7

10.8

8.3

(17.2)

(4.5)

(9.7)

—

*

*

Johnson & Johnson 2018 Annual Report • 75

(Dollars in Millions)

Interventional Solutions

Sales to Customers

% Change

2018

2017

2016

’18 vs. ’17

’17 vs. ’16

U.S.

International

Worldwide

Orthopaedics

U.S.

International

Worldwide

HIPS

U.S.

International

Worldwide

KNEES

U.S.

International

Worldwide

TRAUMA

U.S.

International

Worldwide

SPINE & OTHER

U.S.

International

Worldwide

Surgery

U.S.

International

Worldwide

ADVANCED

U.S.

International

Worldwide

GENERAL

U.S.

International

Worldwide

SPECIALTY

U.S.

International

Worldwide

76 • Johnson & Johnson 2018 Annual Report

1,283

1,363

2,646

5,281

3,604

8,885

841

577

1,148

1,148

2,296

5,404

3,654

9,058

827

567

1,031

1,024

2,055

5,438

3,690

9,128

798

563

1,418

1,394

1,361

911

591

948

575

943

581

1,502

1,523

1,524

1,599

1,100

2,699

1,930

1,336

3,266

4,125

5,776

9,901

1,657

2,345

4,002

1,751

2,806

4,557

717

625

1,576

1,040

2,616

2,053

1,472

3,525

4,085

5,474

9,559

1,620

2,136

3,756

1,728

2,735

4,463

737

603

1,545

1,024

2,569

2,152

1,522

3,674

4,026

5,270

9,296

1,524

1,993

3,517

1,669

2,693

4,362

833

584

1,342

1,340

1,417

11.8

18.7

15.2

(2.3)

(1.4)

(1.9)

1.7

1.8

1.7

(3.9)

2.8

(1.4)

1.5

5.8

3.2

(6.0)

(9.2)

(7.3)

1.0

5.5

3.6

2.3

9.8

6.5

1.3

2.6

2.1

(2.7)

3.6

0.1

11.3

12.1

11.7

(0.6)

(1.0)

(0.8)

3.6

0.7

2.4

0.5

(1.0)

(0.1)

2.0

1.6

1.8

(4.6)

(3.3)

(4.1)

1.5

3.9

2.8

6.3

7.2

6.8

3.5

1.6

2.3

(11.5)

3.3

(5.4)

(Dollars in Millions)

2018

2017

2016

’18 vs. ’17

’17 vs. ’16

Sales to Customers

% Change

Vision

U.S.

International

Worldwide

CONTACT LENSES / OTHER

U.S.

International

Worldwide

SURGICAL

U.S.

International

Worldwide

TOTAL MEDICAL DEVICES

U.S.

International

Worldwide

WORLDWIDE

U.S.

International

Worldwide

*

Percentage greater than 100% or not meaningful

(Dollars in Millions)

Consumer

Pharmaceutical

Medical Devices

Total

1,777

2,776

4,553

1,237

2,065

3,302

540

711

1,575

2,488

4,063

1,122

1,914

3,036

453

574

1,251

1,027

1,032

1,753

2,785

1,032

1,753

2,785

—

—

—

12,837

12,824

12,266

14,157

13,768

12,853

26,994

26,592

25,119

41,884

39,863

37,811

39,697

36,587

34,079

12.8

11.6

12.1

10.2

7.9

8.8

19.2

23.9

21.8

0.1

2.8

1.5

5.1

8.5

$81,581

76,450

71,890

6.7%

52.6

41.9

45.9

8.7

9.2

9.0

*

*

*

4.5

7.1

5.9

5.4

7.4

6.3

Income Before Tax

Identifiable Assets

2018 (3)

2017 (4)

2016 (5)

2018

$2,320

12,568

4,397

2,524

2,441

$25,877

11,083

12,827

5,392

5,578

56,636

46,254

2017

25,030

59,450

45,413

19,285

18,999

20,846

128,767

129,893

Less: Expense not allocated to segments(1)

1,286

1,326

1,043

General corporate(2)

Worldwide total

(Dollars in Millions)

Consumer

Pharmaceutical

Medical Devices

Segments total

General corporate

Worldwide total

$17,999

17,673

19,803

$152,954

157,303

24,187

27,410

Additions to Property,
Plant & Equipment

Depreciation and
Amortization

2018

$438

1,012

1,843

3,293

377

$3,670

2017

2016

2018

485

936

1,566

2,987

292

3,279

486

927

1,472

2,885

341

3,226

$688

3,802

2,103

6,593

336

$6,929

2017

674

2,416

2,216

5,306

336

5,642

2016

608

886

1,928

3,422

332

3,754

Johnson & Johnson 2018 Annual Report • 77

(Dollars in Millions)

United States

Europe

Western Hemisphere excluding U.S.

Asia-Pacific, Africa

Segments total

General corporate

Other non long-lived assets

Worldwide total

Sales to Customers

Long-Lived Assets(6)

2018

2017

2016

2018

$41,884

39,863

37,811

$37,117

18,753

17,126

15,770

51,433

6,113

6,041

5,734

14,831

13,420

12,575

2,752

2,733

2017

38,556

56,677

2,990

2,773

81,581

76,450

71,890

94,035

100,996

$81,581

76,450

71,890

$152,954

157,303

1,064

1,143

57,855

55,164

See Note 1 for a description of the segments in which the Company operates.

Export sales are not significant. In 2018, the Company had three wholesalers distributing products for all three segments
that represented approximately 14.0%, 11.0% and 11.0% of the total consolidated revenues. In 2017, the Company had
two wholesalers distributing products for all three segments that represented approximately 14.0% and 10.0% of the total
consolidated revenues. In 2016, the Company had two wholesalers distributing products for all three segments that
represented approximately 13.5% and 10.7% of the total consolidated revenues.

(1) Amounts not allocated to segments include interest (income) expense and general corporate (income) expense.

(2) General corporate includes cash, cash equivalents and marketable securities.

(3)

(4)

(5)

(6)

The Consumer segment includes a gain of $0.3 billion from the divestiture of NIZORAL® and litigation expense of $0.3 billion. The
Pharmaceutical segment includes an in-process research and development charge of $1.1 billion related to the Alios and XO1
assets and the corresponding XO1 contingent liability reversal of $0.2 billion, Actelion acquisition related costs of $0.2 billion,
unrealized loss on securities of $0.2 billion and a gain of $0.2 billion from the divestiture of certain non-strategic Pharmaceutical
products. The Medical Devices segment includes net litigation expense of $1.7 billion, a restructuring related charge of $0.6 billion,
AMO acquisition related costs of $0.1 billion and a gain of $0.5 billion from the divestiture of the LifeScan business in the fiscal
fourth quarter.

The Pharmaceutical segment includes $0.8 billion for Actelion acquisition related costs, an in-process research and development
expense of $0.4 billion and litigation expense of $0.1 billion. The Medical Devices segment includes litigation expense of $1.1 billion,
a restructuring related charge of $0.8 billion, an asset impairment of $0.2 billion primarily related to the insulin pump business and
$0.1 billion for AMO acquisition related costs. The Medical Devices segment includes a gain of $0.7 billion from the divestiture of
Codman Neurosurgery. The Consumer segment includes a gain of $0.5 billion from the divestiture of COMPEED®.

Includes net litigation expense of $0.8 billion and a restructuring related charge of $0.7 billion in the Medical Devices segment. The
Pharmaceutical segment includes a positive adjustment of $0.5 billion to previous reserve estimates and gains from the divestitures
of the controlled substance raw material and active pharmaceutical ingredient (API) business and certain anesthetic products in
Europe.

Long-lived assets include property, plant and equipment, net for 2018, and 2017 of $17,035 and $17,005, respectively, and
intangible assets and goodwill, net for 2018 and 2017 of $78,064 and $85,134, respectively.

78 • Johnson & Johnson 2018 Annual Report

19. Selected Quarterly Financial Data (unaudited)

Selected unaudited quarterly financial data for the years 2018 and 2017 are summarized below:

(Dollars in Millions Except Per Share
Data)

First
Quarter(1)

Second
Quarter(2)

Third
Quarter(3)

Fourth
Quarter(4)

First
Quarter(5)

Second
Quarter(6)

Third
Quarter(7)

Fourth
Quarter(8)

2018

2017

Segment sales to customers

Consumer

Pharmaceutical

Medical Devices

Total sales

Gross profit

Earnings before provision for taxes on

income

Net earnings (loss)

Basic net earnings (loss) per share

Diluted net earnings (loss) per share

$3,398

3,504

3,415

3,536

9,844

6,767

10,354

10,346

10,190

6,972

6,587

6,668

3,228

8,245

6,293

3,478

8,635

6,726

3,356

9,695

6,599

3,540

9,681

6,974

20,009

20,830

20,348

20,394

17,766

18,839

19,650

20,195

13,395

13,903

13,759

13,433

12,357

12,993

12,725

12,936

5,481

4,367

$1.63

$1.60

4,973

3,954

1.47

1.45

4,423

3,934

1.47

1.44

3,122

3,042

1.14

1.12

5,575

4,422

1.63

1.61

4,748

3,827

1.42

1.40

4,790

2,560

3,764

(10,713)

1.40

1.37

(3.99)

(3.99)

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

The first quarter of 2018 includes an Actelion acquisition related cost of $92 million after-tax ($96 million before-tax) and a
restructuring related charge of $81 million after-tax ($107 million before-tax).

The second quarter of 2018 includes a litigation expense of $609 million after-tax ($703 million before-tax) and a restructuring
related charge of $152 million after-tax ($176 million before-tax).

The third quarter of 2018 includes an in-process research and development expense of $859 million after-tax ($1,126 million
before-tax) related to the Alios and XO1 assets and the corresponding XO1 contingent liability reversal of $184 million after and
before tax, a restructuring related charge of $162 million after-tax ($190 million before-tax) and a $265 million benefit after-tax from
the impact of tax legislation.

The fourth quarter of 2018 includes a litigation expense of $1,113 million after-tax ($1,288 million before-tax), a restructuring related
charge of $190 million after-tax ($227 million before-tax) and a $137 million benefit after-tax from the impact of tax legislation.

The first quarter of 2017 includes a restructuring charge of $121 million after-tax ($161 million before-tax) and an AMO acquisition
related cost of $251 million after-tax ($38 million before-tax).

The second quarter of 2017 includes a litigation expense of $352 million after-tax ($493 million before-tax), Actelion acquisition
related costs of $199 million after-tax ($213 million before-tax) a restructuring charge of $101 million after-tax ($128 million
before-tax) and an asset impairment charge of $125 million after-tax ($182 million before-tax).

The third quarter of 2017 includes a litigation expense of $97 million after-tax ($118 million before-tax), Actelion acquisition related
costs of $255 million after-tax ($367 million before-tax) and a restructuring charge of $136 million after-tax ($187 million before-tax).

The fourth quarter of 2017 includes a litigation expense of $506 million after-tax ($645 million before-tax), Actelion acquisition related
costs of $313 million after-tax ($217 million before-tax), a restructuring charge of $237 million after-tax ($284 million before-tax), an
in-process research and development expense of $266 million after-tax ($408 million before-tax) and an after-tax benefit of
$116 million related to the insulin pump business. Additionally, the fourth quarter of 2017 includes a provisional charge of
$13.6 billion for recently enacted tax legislation.

Johnson & Johnson 2018 Annual Report • 79

20. Business Combinations and Divestitures

Certain businesses were acquired for $0.9 billion in cash and $0.1 billion of liabilities assumed during 2018. These
acquisitions were accounted for using the acquisition method and, accordingly, results of operations have been included
in the financial statements from their respective dates of acquisition.

The 2018 acquisitions primarily included: Zarbee’s, Inc., a privately held company that is a leader in naturally-based
consumer healthcare products; Medical Enterprises Distribution LLC, a privately held healthcare technology firm focused
on surgical procedure innovation; BeneVir Biopharm, Inc. (BeneVir), a privately-held, biopharmaceutical company
specializing in the development of oncolytic immunotherapies and Orthotaxy, a privately-held developer of software-
enabled surgery technologies, including a differentiated robotic-assisted surgery solution.

The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $1.0 billion and has
been assigned to identifiable intangible assets, with any residual recorded to goodwill.

On October 23, 2018, the Company entered into an agreement to acquire Ci:z Holdings Co., Ltd., a Japanese company
focused on the marketing, development and distribution of a broad range of dermocosmetic, cosmetic and skincare
products for a total purchase price of approximately ¥230 billion, which equates to approximately $2.1 billion, using the
exchange rate of 109.06 Japanese Yen to each U.S. Dollar on January 16, 2019. The acquisition was completed on
January 17, 2019, through a series of transactions that included an all-cash tender offer to acquire the publicly held shares
not already held by the Company for ¥5,900 per share. Upon completion of the tender offer and the related transactions,
the Company acquired 89% of the outstanding shares. The Company plans to acquire the remaining shares that were not
tendered in the tender offer through a share consolidation under Japanese law during the first half of 2019 and take
appropriate actions to delist from the Tokyo Stock Exchange. The acquisition will include the range of brands comprising
DR.CI:LABO, LABO LABO and GENOMER line of skincare products. The Company expects to treat this transaction as a
business combination and will include it in the Consumer segment.

On February 13, 2019, the Company entered into a definitive agreement to acquire Auris Health, Inc. for approximately
$3.4 billion in cash. Additional contingent payments of up to $2.35 billion, in the aggregate, may be payable upon
reaching certain predetermined milestones. Auris Health is a privately held developer of robotic technologies, initially
focused in lung cancer, with an FDA-cleared platform currently used in bronchoscopic diagnostic and therapeutic
procedures. The closing is subject to antitrust clearance and other customary closing conditions. The transaction is
expected to close by the end of the second quarter of 2019. The Company expects to treat this transaction as a business
combination and will include it in the Medical Devices segment.

During 2017 certain businesses were acquired for $35.2 billion in cash and $1.8 billion of liabilities assumed. These
acquisitions were accounted for using the acquisition method and, accordingly, results of operations have been included
in the financial statements from their respective dates of acquisition.

The 2017 acquisitions primarily included: Actelion Ltd, an established leading franchise of differentiated, innovative
products for pulmonary arterial hypertension (PAH); Abbott Medical Optics (AMO), a wholly-owned subsidiary of Abbott
Laboratories, which included ophthalmic products related to: cataract surgery, laser refractive surgery and consumer eye
health; Neuravi Limited, a privately-held medical device company that develops and markets medical devices for
neurointerventional therapy; TearScience Inc., a manufacturer of products dedicated to treating meibomian gland
dysfunction; Sightbox, Inc., a privately-held company that developed a subscription vision care service that connects
consumers with eye care professionals and a supply of contact lenses; Torax Medical, Inc., a privately-held medical device
company that manufactures and markets the LINX™ Reflux Management System for the surgical treatment of
gastroesophageal reflux disease and Megadyne Medical Products, Inc., a privately-held medical device company that
develops, manufactures and markets electrosurgical tools.

The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $34.4 billion and has
been assigned to identifiable intangible assets, with any residual recorded to goodwill. Of this amount, approximately
$1.1 billion has been identified as the value of IPR&D, primarily associated with the acquisition of Actelion Ltd. The value
of the IPR&D was calculated using cash flow projections discounted for the inherent risk in the projects.

During 2017, the Company completed the acquisition of Actelion Ltd through an all cash tender offer in Switzerland for
$280 per share, amounting to $29.6 billion, net of cash acquired. As part of the transaction, immediately prior to the
completion of the acquisition, Actelion spun out its drug discovery operations and early-stage clinical development assets
into a newly created Swiss biopharmaceutical company, Idorsia Ltd. The shares of Idorsia are listed on the SIX Swiss
Exchange (SIX). In 2017 the Company held 9.9% of the shares of Idorsia and had rights to an additional 22.1% of Idorsia
equity through a convertible loan with a principal amount of approximately $0.5 billion. As a result of Idorsia raising

80 • Johnson & Johnson 2018 Annual Report

additional capital in July 2018, the Company currently holds 9.0% of the shares of Idorsia and has rights to an additional
20.8% of Idorsia equity through a convertible loan with a principal amount of approximately $0.5 billion. The convertible
loan may be converted into Idorsia shares as follows: (i) up to an aggregate shareholding of 16% of Idorsia shares as a
result of certain shareholders holding more than 20% of the issued Idorsia shares, and (ii) up to the balance of the
remaining amount within 20 business days of the maturity date of the convertible loan, which has a 10 year term, or if
Idorsia undergoes a change of control transaction. The investment in Idorsia was recorded as a cost method investment in
Other assets in the Company’s consolidated Balance Sheet. The Company also exercised the option acquired on
ACT-132577, a product within Idorsia being developed for resistant hypertension currently in phase 2 of clinical
development. The Company has also entered into an agreement to provide Idorsia with a Swiss franc denominated credit
facility of approximately $250 million. As of December 30, 2018, Idorsia has not made any draw-downs under the credit
facility. Actelion has entered into a transitional services agreement with Idorsia. Actelion has established a leading
franchise of differentiated, innovative products for pulmonary arterial hypertension (PAH) that are highly complementary to
the existing portfolio of the Company. The addition of Actelion’s specialty in-market medicines and late-stage products is
consistent with the Company’s efforts to grow in attractive and complementary therapeutic areas and serve patients with
serious illnesses and significant unmet medical need.

During the fiscal second quarter of 2018, the Company finalized the purchase price allocation to the individual assets
acquired and liabilities assumed using the acquisition method. The following table presents the amounts recognized for
assets acquired and liabilities assumed as of the acquisition date with adjustments made through the second quarter of
2018:

(Dollars in Millions)

Cash & Cash equivalents

Inventory(1)

Accounts Receivable

Other current assets

Property, plant and equipment

Goodwill

Intangible assets

Deferred Taxes

Other non-current assets

Total Assets Acquired

Current liabilities

Deferred Taxes

Other non-current liabilities

Total Liabilities Assumed

Net Assets Acquired

$469

759

485

93

104

6,161

25,010

99

19

33,199

956

1,776

413

3,145

$30,054

(1)

Includes adjustment of $642 million to write-up the acquired inventory to its estimated fair value.

The adjustments made since the date of acquisition were $0.2 billion to the deferred taxes and $0.4 billion to the current
liabilities with the offset to goodwill. The assets acquired are recorded in the Pharmaceutical segment. The acquisition of
Actelion resulted in approximately $6.2 billion of goodwill. The goodwill is primarily attributable to synergies expected to
arise from the acquisition. The goodwill is not expected to be deductible for tax purposes.

Johnson & Johnson 2018 Annual Report • 81

The purchase price allocation to the identifiable intangible assets is as follows:

(Dollars in Millions)

Intangible assets with definite lives:

Patents and trademarks*

Total amortizable intangibles

In-process research and development

Total intangible assets

$24,230

24,230

780

$25,010

*

Includes $0.4 billion related to VALCHLOR®, one of the acquired products, which was divested in the fiscal second quarter of 2018.

The patents and trademarks acquired are comprised of developed technology with a weighted average life of 9 years and
was primarily based on the patent life of the marketed products. The intangible assets with definite lives were assigned
asset lives ranging from 4 to 10 years. The in-process research and development intangible assets were valued for
technology programs for unapproved products.

The value of the IPR&D was calculated using probability adjusted cash flow projections discounted for the risk inherent in
such projects. The discount rate applied was 9%.

The acquisition was accounted for using the acquisition method and, accordingly, the results of operations of Actelion
were reported in the Company’s financial statements beginning on June 16, 2017, the date of acquisition. For the year
ended December 31, 2017, total sales and a net loss for Actelion from the date of acquisition were $1.4 billion and
$1.4 billion, respectively.

The following table provides pro forma results of operations for the fiscal year ended December 31, 2017 and January 1,
2017, as if Actelion had been acquired as of January 4, 2016. The pro forma results include the effect of certain purchase
accounting adjustments such as the estimated changes in depreciation and amortization expense on the acquired tangible
and intangible assets. However, pro forma results do not include any anticipated cost savings or other effects of the
planned integration of Actelion. Accordingly, such amounts are not necessarily indicative of the results if the acquisition
had occurred on the dates indicated or which may occur in the future.

(Dollars in Millions Except Per Share Data)

Net Sales

Net Earnings

Diluted Net Earnings per Common Share

Unaudited Pro forma Consolidated Results

2017

$77,681

1,509

0.55

2016

74,339

13,916

4.99

The Company recorded Actelion acquisition related costs before tax of approximately $0.2 billion and $0.8 billion in 2018
and 2017, respectively, which was recorded in Other (income)/expense and Cost of products sold.

During 2017, the Company acquired Abbott Medical Optics (AMO), a wholly-owned subsidiary of Abbott Laboratories, for
$4.3 billion, net of cash acquired. The acquisition included ophthalmic products related to: cataract surgery, laser
refractive surgery and consumer eye health. The net purchase price was primarily recorded as amortizable intangible
assets for $2.3 billion and goodwill for $1.7 billion. The weighted average life of total amortizable intangibles, the majority
being customer relationships, is approximately 14.4 years. The goodwill is primarily attributable to synergies expected to
arise from the business acquisition and is not deductible for tax purposes. The intangible assets and goodwill amounts are
based on the final purchase price allocation. The assets acquired were recorded in the Medical Devices segment.

Certain businesses were acquired for $4.5 billion in cash and $0.1 billion of liabilities assumed during 2016. These
acquisitions were accounted for using the acquisition method and, accordingly, results of operations have been included
in the financial statements from their respective dates of acquisition.

The 2016 acquisitions primarily included: Vogue International LLC, a privately-held company focused on the marketing,
development and distribution of salon-influenced and nature inspired hair care and other personal products; NeuWave
Medical, Inc., a privately-held medical device company that manufactures and markets minimally invasive soft tissue
microwave ablation systems; NeoStrata Company, Inc., a global leader in dermocosmetics; and the global rights for the
commercialization of RHINOCORT® allergy spray outside the United States.

82 • Johnson & Johnson 2018 Annual Report

The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $4.1 billion and has
been assigned to identifiable intangible assets, with any residual recorded to goodwill.

The net purchase price for Vogue International LLC of $3.3 billion was primarily recorded as amortizable intangible assets
for $2.3 billion and goodwill for $1.1 billion. The weighted average life for the $2.3 billion of total amortizable intangibles is
approximately 22 years. The trademark asset values were determined to have definite lives ranging from 10 to 22 years,
with the majority being 22 years. The goodwill is primarily attributable to synergies expected to arise from the business
acquisition and is expected to be deductible for tax purposes. The assets acquired were recorded in the Consumer
segment.

In 2012, the Company completed the acquisition of Synthes, Inc. for a purchase price of $20.2 billion in cash and stock.
In connection with the acquisition of Synthes, Inc. the Company entered into two accelerated share repurchase (ASR)
agreements. In 2013, the Company settled the remaining liabilities under the ASR agreements. While the Company
believes that the transactions under each ASR agreement and a series of related internal transactions were consummated
in a tax efficient manner in accordance with applicable law, it is possible that the Internal Revenue Service could assert
one or more contrary positions to challenge the transactions from a tax perspective. If challenged, an amount up to the
total purchase price for the Synthes shares could be treated as subject to applicable U.S. tax at approximately the
statutory rate to the Company, plus interest.

With the exception of the Actelion Ltd acquisition, supplemental pro forma information for 2018, 2017 and 2016 in
accordance with U.S. GAAP standards related to business combinations, and goodwill and other intangible assets, is not
provided, as the impact of the aforementioned acquisitions did not have a material effect on the Company’s results of
operations, cash flows or financial position.

During 2018, the Company divested the LifeScan Inc business for approximately $2.1 billion and retained certain net
liabilities. Other divestitures in 2018 included: NIZORAL®, RoC® and certain non-strategic Pharmaceutical products. In
2018, the pre-tax gains on the divestitures were approximately $1.2 billion. Additionally, in 2018, the Company accepted
the binding offer from Fortive Corporation to acquire its Advanced Sterilization Products (ASP) business for approximately
$2.7 billion, subject to customary adjustments. The transaction is expected to close in 2019. As of December 30, 2018,
the assets held for sale on the Consolidated Balance Sheet were $0.2 billion of inventory, $0.1 billion of property, plant
and equipment and $0.3 billion of goodwill. The Company will retain certain net receivables of approximately $0.1 billion
associated with the ASP business.

In 2018, the Company accepted a binding offer to form a strategic collaboration with Jabil Inc., one of the world’s leading
manufacturing services providers for health care products and technology products. The Company is expanding a 12-year
relationship with Jabil to produce a range of products within the Ethicon Endo-Surgery and DePuy Synthes businesses.
This transaction includes the transfer of employees and manufacturing sites. As of December 30, 2018, the assets held for
sale on the Consolidated Balance Sheet were $0.3 billion of inventory and $0.1 billion of property, plant and equipment,
net. For additional details on the global supply chain restructuring see Note 22 to the Consolidated Financial Statements.

During 2017, the Company divestitures primarily included: the Codman Neurosurgery business, to Integra LifeSciences
Holdings Corporation and the divestiture of COMPEED® to HRA Pharma. In 2017, the pre-tax gains on the divestitures
were approximately $1.3 billion.

During 2016, the Company divestitures included: the controlled substance raw material and active pharmaceutical
ingredient (API) business; certain anesthetic products in Europe; and certain non-strategic Consumer brands. In 2016, the
pre-tax gains on the divestitures were approximately $0.6 billion.

21. Legal Proceedings

Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability,
intellectual property, commercial, supplier indemnification and other matters; governmental investigations; and other legal
proceedings that arise from time to time in the ordinary course of their business.

The Company records accruals for loss contingencies associated with these legal matters when it is probable that a
liability will be incurred and the amount of the loss can be reasonably estimated. As of December 30, 2018, the Company
has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated.
The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as
might be warranted based on new information and further developments in accordance with ASC 450-20-25. For these
and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the
Company is unable to estimate the possible loss or range of loss beyond the amounts already accrued. Amounts accrued

Johnson & Johnson 2018 Annual Report • 83

for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely
heavily on estimates and assumptions. The ability to make such estimates and judgments can be affected by various
factors, including whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal
discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties;
there are significant facts in dispute; or there are numerous parties involved.

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

PRODUCT LIABILITY

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

The most significant of these cases include: the DePuy ASR™ XL Acetabular System and DePuy ASR™ Hip Resurfacing
System; the PINNACLE® Acetabular Cup System; pelvic meshes; RISPERDAL®; XARELTO®; body powders containing
talc, primarily JOHNSONS® Baby Powder; INVOKANA®; and ETHICON PHYSIOMESH® Flexible Composite Mesh. As of
December 30, 2018, in the United States there were approximately 1,800 plaintiffs with direct claims in pending lawsuits
regarding injuries allegedly due to the DePuy ASR™ XL Acetabular System and DePuy ASR™ Hip Resurfacing System;
10,500 with respect to the PINNACLE® Acetabular Cup System; 34,800 with respect to pelvic meshes; 13,400 with
respect to RISPERDAL®; 25,600 with respect to XARELTO®; 13,000 with respect to body powders containing talc;
1,050 with respect to INVOKANA®; and 2,100 with respect to ETHICON PHYSIOMESH® Flexible Composite Mesh.

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

Claims for personal injury have also been made against DePuy Orthopaedics, Inc. and Johnson & Johnson (collectively,
DePuy) relating to the PINNACLE® Acetabular Cup System used in hip replacement surgery. The number of pending
product liability lawsuits continues to increase, and the Company continues to receive information with respect to potential

84 • Johnson & Johnson 2018 Annual Report

costs and the anticipated number of cases. Cases filed in federal courts in the United States have been organized as a
multi-district litigation in the United States District Court for the Northern District of Texas. Litigation has also been filed in
some state courts and in countries outside of the United States. Several adverse verdicts have been rendered against
DePuy, one of which was reversed on appeal and remanded for retrial, the second remains under appeal and the third is
pending decision on post-trial motions in the district court. The Company has established an accrual for product liability
litigation associated with the PINNACLE® Acetabular Cup System. The Company is negotiating settlements of these
cases and the related costs are reflected in the Company’s accruals.

Claims for personal injury have been made against Ethicon, Inc. (Ethicon) and Johnson & Johnson arising out of Ethicon’s
pelvic mesh devices used to treat stress urinary incontinence and pelvic organ prolapse. The Company continues to
receive information with respect to potential costs and additional cases. Cases filed in federal courts in the United States
have been organized as a multi-district litigation in the United States District Court for the Southern District of West
Virginia. The Company has settled or otherwise resolved a majority of the United States cases and the costs associated
with these settlements are reflected in the Company’s accruals. In addition, class actions and individual personal injury
cases or claims have been commenced in various countries outside of the United States, including claims and cases in the
United Kingdom, the Netherlands and Belgium, and class actions in Israel, Australia and Canada, seeking damages for
alleged injury resulting from Ethicon’s pelvic mesh devices. In Australia, a trial of class action issues has been completed
and the parties are awaiting a decision. The Company has established accruals with respect to product liability litigation
associated with Ethicon’s pelvic mesh products.

Following a June 2016 worldwide market withdrawal of ETHICON PHYSIOMESH® Flexible Composite Mesh, claims for
personal injury have been made against Ethicon, Inc. and Johnson & Johnson alleging personal injury arising out of the use
of this hernia mesh device. Cases filed in federal courts in the United States have been organized as a multi-district
litigation (MDL) in the United States District Court for the Northern District of Georgia. A multi county litigation (MCL) has
also been formed in New Jersey state court and assigned to Atlantic County for cases pending in New Jersey. Product
liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and
the anticipated number of cases. The Company has established accruals with respect to product liability litigation
associated with ETHICON PHYSIOMESH® Flexible Composite Mesh.

Claims for personal injury have been made against Janssen Pharmaceuticals, Inc. and Johnson & Johnson arising out of the
use of RISPERDAL®, indicated for the treatment of schizophrenia, acute manic or mixed episodes associated with bipolar I
disorder and irritability associated with autism, and related compounds. Lawsuits have been primarily filed in state courts in
Pennsylvania, California, and Missouri. Other actions are pending in various courts in the United States and Canada.
Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential
costs and the anticipated number of cases. The Company has settled or otherwise resolved many of the United States
cases and the costs associated with these settlements are reflected in the Company’s accruals.

Claims for personal injury arising out of the use of XARELTO®, an oral anticoagulant, have been made against Janssen
Pharmaceuticals, Inc. (JPI); Johnson & Johnson; and JPI’s collaboration partner for XARELTO® Bayer AG and certain of its
affiliates. The number of pending product liability lawsuits continues to increase, and the Company continues to receive
information with respect to potential costs and the anticipated number of cases. Cases filed in federal courts in the United
States have been organized as a multi-district litigation in the United States District Court for the Eastern District of
Louisiana. In addition, cases have been filed in state courts across the United States. Many of these cases have been
consolidated into a state mass tort litigation in Philadelphia, Pennsylvania; and there are coordinated proceedings in
Delaware, California and Missouri. Class action lawsuits also have been filed in Canada. The Company has established an
accrual for defense costs only in connection with product liability litigation associated with XARELTO®.

Personal injury claims alleging that talc causes cancer have been made against Johnson & Johnson Consumer Inc. and
Johnson & Johnson arising out of the use of body powders containing talc, primarily JOHNSONS® Baby Powder. The
number of pending product liability lawsuits continues to increase, and the Company continues to receive information with
respect to potential costs and the anticipated number of cases. Lawsuits have been primarily filed in state courts in
Missouri, New Jersey and California. Cases filed in federal courts in the United States have been organized as a multi-
district litigation in the United States District Court for the District of New Jersey. The Company has successfully defended
a number of these cases but there have been verdicts against the Company, including a verdict in July 2018 of
$4.7 billion. The Company believes that it has strong grounds on appeal to overturn these verdicts. The Company has
established an accrual for defense costs only in connection with product liability litigation associated with body powders
containing talc.

In February 2018, a securities class action lawsuit was filed against Johnson & Johnson and certain named officers in the
United States District Court for the District of New Jersey, alleging that Johnson & Johnson violated the federal securities

Johnson & Johnson 2018 Annual Report • 85

laws by failing to adequately disclose the alleged asbestos contamination in body powders containing talc, primarily
JOHNSON’S® Baby Powder, and that purchasers of Johnson & Johnson’s shares suffered losses as a result. Plaintiffs are
seeking damages. In October 2018, a shareholder derivative lawsuit was filed against Johnson & Johnson as the nominal
defendant and its current directors as defendants in the United States District Court for the District of New Jersey, alleging
a breach of fiduciary duties related to the alleged asbestos contamination in body powders containing talc, primarily
JOHNSON’S® Baby Powder, and that Johnson & Johnson has suffered damages as a result of those alleged
breaches. Plaintiff is seeking damages and an order for the Company to reform its internal policies and procedures. In
January 2019, two ERISA class action lawsuits were filed by participants in the Johnson & Johnson Savings Plan against
Johnson & Johnson, its Pension and Benefits Committee, and certain named officers in the United States District Court for
the District of New Jersey, alleging that the defendants breached their fiduciary duties by offering Johnson & Johnson
stock as a Johnson & Johnson Savings Plan investment option when it was imprudent to do so because of failures to
disclose alleged asbestos contamination in body powders containing talc, primarily JOHNSON’S® Baby Powder. Plaintiffs
are seeking damages and injunctive relief. Each of these matters will be adjudicated in conjunction with the multi-district
litigation referenced in the prior paragraph. In addition, the Company has received preliminary inquiries and subpoenas to
produce documents regarding these matters from Senator Murray, a member of the Senate Committee on Health,
Education, Labor and Pensions, the Department of Justice and the Securities and Exchange Commission. The Company is
cooperating with these government inquiries and will be producing documents in response.

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

INTELLECTUAL PROPERTY

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

Medical Devices

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

In March 2013, Medinol Ltd. (Medinol) filed a patent infringement lawsuit against Cordis Corporation (Cordis) and
Johnson & Johnson in the United States District Court for the Southern District of New York alleging that Cordis’s sales of
the CYPHER™ and CYPHER SELECT™ stents made in the United States since 2005 willfully infringed four of Medinol’s
patents directed to the geometry of articulated stents. Medinol is seeking damages and attorneys’ fees. Although
Johnson & Johnson has since sold Cordis, it has retained liability for this case. After trial in January 2014, the district court
dismissed the case, finding Medinol unreasonably delayed bringing its claims (the laches defense). In September 2014,

86 • Johnson & Johnson 2018 Annual Report

the district court denied a motion by Medinol to vacate the judgment and grant it a new trial. Medinol appealed the
decision to the United States Court of Appeals for the Federal Circuit. In March 2017, the United States Supreme Court
held that the laches defense is not available in patent cases. In April 2018, the United States Court of Appeals for the
Federal Circuit remanded the case back to the district court to reconsider Medinol’s motion for a new trial, and briefing in
the district court was completed in June 2018.

In November 2016, MedIdea, L.L.C. (MedIdea) filed a patent infringement lawsuit against DePuy Orthopaedics, Inc. in the
United States District Court for the Northern District of Illinois alleging infringement by the ATTUNE® Knee System. In
April 2017, MedIdea filed an amended complaint adding DePuy Synthes Products, Inc. and DePuy Synthes Sales, Inc. as
named defendants. MedIdea alleges infringement of United States Patent Nos. 6,558,426 (’426); 8,273,132 (’132);
8,721,730 (’730) and 9,492,280 (’280) relating to posterior stabilized knee systems. Specifically, MedIdea alleges that the
SOFCAM TM Contact feature of the ATTUNE® posterior stabilized knee products infringes the patents-in-suit. MedIdea is
seeking monetary damages and injunctive relief. In June 2017, the case was transferred to the United States District Court for
the District of Massachusetts. A claim construction hearing was held in October 2018, and a claim construction order was
issued in November 2018. In December 2018, MedIdea stipulated to non-infringement of the ’132, ’730 and ’280 patents,
based on the district court’s claim construction and reserving its right to appeal that construction, leaving only the ’426 patent
at issue before the district court. In January 2019, the district court stayed the case pending a decision in the Inter Partes
Review proceeding on the ’426 patent (see below). In December 2017, DePuy Synthes Products, Inc. filed a Petition for Inter
Partes Review with the United States Patent and Trademark Office (USPTO), seeking to invalidate the two claims of the
’426 patent asserted in the district court litigation, and in June 2018, the USPTO instituted review of those claims. A hearing
trial is scheduled for March 2019, and a decision in the proceeding is due by June 2019.

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

In November 2017, Board of Regents, The University of Texas System and Tissuegen, Inc. (collectively, UT) filed a lawsuit
in the United States District Court for the Western District of Texas against Ethicon, Inc. and Ethicon US, LLC alleging the
manufacture and sale of VICRYL® Plus Antibacterial Sutures, MONOCRYL® Plus Antibacterial Sutures, PDS® Plus
Antibacterial Sutures, STRATAFIX® POS® Antibacterial Sutures and STRATAFIX® MONOCRYL® Plus Antibacterial
Sutures infringe plaintiffs’ United States Patent Nos. 6,596,296 and 7,033,603 directed to implantable polymer drug
releasing biodegradable fibers containing a therapeutic agent. UT is seeking damages and an injunction. In December
2018, Ethicon filed petitions with the USPTO, seeking Inter Partes Review (IPR) of both asserted patents. Those petitions
have been stayed by the USPTO pending a decision by the U.S. Court of Appeals for the Federal Circuit in an unrelated
case.

Pharmaceutical

In April 2016, MorphoSys AG, a German biotech company, filed a patent infringement lawsuit against Janssen Biotech,
Inc. (JBI), Genmab U.S. Inc. and Genmab A/S (collectively, Genmab) in the United States District Court for the District of
Delaware. MorphoSys alleged that JBI’s manufacture and sale of DARZALEX® (daratumumab) willfully infringed
MorphoSys’ United States Patent Nos. 8,263,746, 9,200,061 and 9,785,590. MorphoSys sought money damages. JBI
licenses patents and the commercial rights to DARZALEX® from Genmab. In January 2019, the district court granted
summary judgment in JBI and Genmab’s favor, invalidating the asserted claims of the patents-in-suit, and the parties filed a
joint stipulation of dismissal of the action.

In August 2016, Sandoz Ltd and Hexal AG (collectively, Sandoz) filed a lawsuit in the English High Court against G.D.
Searle LLC, a Pfizer company (Searle) and Janssen Sciences Ireland UC (JSI) alleging that Searle’s supplementary
protection certificate SPC/GB07/038 (SPC), which is exclusively licensed to JSI, is invalid and should be revoked.
Janssen-Cilag Limited sells PREZISTA® (darunavir) in the United Kingdom pursuant to this license. In October 2016,
Searle and JSI counterclaimed against Sandoz for threatened infringement of the SPC based on statements of its plans to
launch generic darunavir in the United Kingdom. Sandoz admitted that its generic darunavir product would infringe the

Johnson & Johnson 2018 Annual Report • 87

SPC if it is found valid. Searle and JSI are seeking an order enjoining Sandoz from marketing its generic darunavir before
the expiration of the SPC. Following a trial in April 2017, the court entered a decision holding that the SPC is valid and
granting a final injunction. Sandoz has appealed the court’s decision and the injunction is stayed pending the appeal. In
January 2018, the court referred the issue on appeal to the Court of Justice for the European Union (CJEU) and stayed the
proceedings pending the CJEU’s ruling on the issue.

In April 2018, Acerta Pharma B.V., AstraZeneca UK Ltd and AstraZeneca Pharmaceuticals LP filed a patent infringement
lawsuit in the United States District Court for the District of Delaware against Pharmacylics LLC and Abbvie Inc.
(collectively, Abbvie), alleging that the manufacture and sale of IMBRUVICA® infringes U.S. Patent No. 7,459,554.
Janssen Biotech, Inc., which commercializes IMBRUVICA® jointly with Abbvie, intervened in the action in November 2018.
A trial is scheduled to begin in January 2021.

REMICADE® Related Cases

In August 2014, Celltrion Healthcare Co. Ltd. and Celltrion Inc. (collectively, Celltrion) filed an application with the United
States Food and Drug Administration (FDA) for approval to make and sell its own infliximab biosimilar. In March 2015,
Janssen Biotech, Inc. (JBI) filed a lawsuit in the United States District Court for the District of Massachusetts against
Celltrion and Hospira Healthcare Corporation (Hospira), which has exclusive marketing rights for Celltrion’s infliximab
biosimilar in the United States, seeking, among other things, a declaratory judgment that their biosimilar product infringes or
potentially infringes several JBI patents, including United States Patent No. 6,284,471 relating to REMICADE® (infliximab)
(the ’471 patent) and United States Patent No. 7,598,083 (the ’083 patent) directed to the cell culture media used to make
Celltrion’s biosimilar. In August 2016, the district court granted both Celltrion’s and Hospira’s motions for summary
judgment of invalidity of the ’471 patent. JBI appealed those decisions to the United States Court of Appeals for the Federal
Circuit. In January 2018, the Federal Circuit dismissed the appeal as moot based on its affirmance of a decision by the
USPTO’s Patent Trial and Appeal Board affirming invalidity of the ’471 patent.

In June 2016, JBI filed two additional patent infringement lawsuits asserting the ’083 patent, one against Celltrion and
Hospira in the United States District Court for the District of Massachusetts and the other against HyClone Laboratories,
Inc., the manufacturer of the cell culture media that Celltrion uses to make its biosimilar product, in the United States
District Court for the District of Utah. On July 30, 2018 the district court granted Celltrion’s motion for summary judgment
of non-infringement and entered an order dismissing the ’083 lawsuit against Celltrion and Hospira. JBI appealed to the
United States Court of Appeals for the Federal Circuit. The litigation against HyClone in Utah is stayed pending the
outcome of the Massachusetts actions.

The FDA approved the first infliximab biosimilar for sale in the United States in 2016, and a number of such products have
been launched.

Litigation Against Filers of Abbreviated New Drug Applications (ANDAs)

The following summarizes lawsuits pending against generic companies that have filed Abbreviated New Drug Applications
(ANDAs) with the FDA or undertaken similar regulatory processes outside of the United States, seeking to market generic
forms of products sold by various subsidiaries of Johnson & Johnson prior to expiration of the applicable patents covering
those products. These ANDAs typically include allegations of non-infringement and invalidity of the applicable patents. In
the event the subsidiaries are not successful in an action, or the automatic statutory stay of the ANDAs expires before the
United States District Court rulings are obtained, the third-party companies involved would have the ability, upon approval
of the FDA, to introduce generic versions of their products to the market, resulting in the potential for substantial market
share and revenue losses for the applicable products, and which may result in a non-cash impairment charge in any
associated intangible asset. In addition, from time to time, subsidiaries may settle these types of actions and such
settlements can involve the introduction of generic versions of the products at issue to the market prior to the expiration of
the relevant patents. The Inter Partes Review (IPR) process with the United States Patent and Trademark Office (USPTO),
created under the 2011 America Invents Act, is also being used at times by generic companies in conjunction with ANDAs
and lawsuits, to challenge the applicable patents.

ZYTIGA®

In July 2015, Janssen Biotech, Inc., Janssen Oncology, Inc. and Janssen Research & Development, LLC (collectively,
Janssen) and BTG International Ltd. (BTG) initiated a patent infringement lawsuit in the United States District Court for the
District of New Jersey against a number of generic companies (and certain of their affiliates and/or suppliers) who filed
ANDAs seeking approval to market a generic version of ZYTIGA® 250mg before the expiration of United States Patent
No. 8,822,438 (the ’438 patent). The generic companies include Amneal Pharmaceuticals, LLC and

88 • Johnson & Johnson 2018 Annual Report

Amneal Pharmaceuticals of New York, LLC (collectively, Amneal); Apotex Inc. and Apotex Corp. (collectively, Apotex);
Citron Pharma LLC (Citron); Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (collectively, Dr. Reddy’s);
Mylan Pharmaceuticals Inc. and Mylan Inc. (collectively, Mylan); Par Pharmaceuticals, Inc. and Par Pharmaceutical
Companies, Inc. (collectively, Par); Sun Pharmaceutical Industries Ltd. and Sun Pharmaceuticals Industries, Inc.
(collectively, Sun); Teva Pharmaceuticals USA, Inc. (Teva); Wockhardt Bio A.G.; Wockhardt USA LLC and Wockhardt
Ltd. (collectively, Wockhardt); West-Ward Pharmaceutical Corp. (West-Ward) and Hikma Pharmaceuticals, LLC (Hikma).

Janssen and BTG also initiated patent infringement lawsuits in the United States District Court for the District of New
Jersey against Amerigen Pharmaceuticals Limited (Amerigen) in May 2016, and Glenmark Pharmaceuticals, Inc. (Glenmark) in
June 2016, each of whom filed an ANDA seeking approval to market its generic version of ZYTIGA® before the expiration of
the ’438 patent. These lawsuits have been consolidated with the lawsuit filed in July 2015.

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

In August 2017, Janssen and BTG initiated a patent infringement lawsuit in the United States District Court for the District
of New Jersey against Teva, who filed an ANDA seeking approval to market a generic version of ZYTIGA® 500mg before
the expiration of the ’438 patent. This lawsuit has been consolidated with the lawsuit filed in July 2015.

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

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

In December 2017, Janssen and BTG entered into a settlement agreement with Glenmark. In January 2018, Janssen
dismissed its lawsuit against Sun after it withdrew its ANDA. In April 2018, Janssen and BTG entered into a settlement
agreement with Apotex.

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

In November 2018, the United States Court of Appeals for the Federal Circuit denied Janssen’s request for an injunction
pending appeal. As a result, several generic versions of ZYTIGA® have entered the market. Janssen has appealed the
decision of the United States District Court for the District of New Jersey, and the oral argument on the appeal is
scheduled for March 2019.

The lawsuits against MSN and Qilu remain pending in the district courts. In each of these lawsuits, Janssen is seeking an
order enjoining the defendants from marketing their generic versions of ZYTIGA® before the expiration of the ’438 patent.

Several generic companies including Amerigen, Argentum Pharmaceuticals LLC (Argentum), Mylan, Wockhardt, Actavis,
Amneal, Dr. Reddy’s, Sun, Teva, West-Ward and Hikma filed Petitions for Inter Partes Review (IPR) with the USPTO,
seeking to invalidate the ’438 patent. In January 2018, the USPTO issued decisions finding the ’438 patent claims
unpatentable, and Janssen requested rehearing. In December 2018, the USPTO denied Janssen’s request for rehearing of
the IPR decisions. Janssen filed an appeal, which was consolidated with the above-mentioned appeal of the decision of
the United States District Court for the District of New Jersey.

In October 2017, Janssen Inc. and Janssen Oncology, Inc. (collectively, Janssen) initiated two Notices of Application
under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Teva Canada Limited (Teva) and
the Minister of Health in Canada in response to Teva’s filing Abbreviated New Drug Submissions (ANDS) and seeking
approval to market generic versions of ZYTIGA® 250mg and ZYTIGA® 500mg before the expiration of Canadian Patent
No. 2,661,422. In June 2018, the parties entered into a settlement agreement.

In November 2017, Janssen initiated a Notice of Application under Section 6 of the Patented Medicines (Notice of
Compliance) Regulations against Apotex Inc. (Apotex) and the Minister of Health in Canada in response to Apotex’s filing
of an Abbreviated New Drug Submission (ANDS) seeking approval to market a generic version of ZYTIGA® before the
expiration of Canadian Patent No. 2,661,422. The federal court of Canada scheduled the Final Hearing for April 2019.
Janssen is seeking an order prohibiting the Minister of Health from issuing a Notice of Compliance with respect to
Apotex’s ANDS before the expiration of Janssen’s patent.

Johnson & Johnson 2018 Annual Report • 89

In January 2019, Janssen initiated a Notice of Application under Section 6 of the Patented Medicines (Notice of
Compliance) Regulations against Apotex and the Minister of Health in Canada in response to Apotex’s filing of an
Abbreviated New Drug Submission (ANDS) seeking approval to market a film-coated generic version of ZYTIGA® before
the expiration of Canadian Patent No. 2,661,422. Janssen is seeking an order prohibiting the Minister of Health from
issuing a Notice of Compliance with respect to Apotex’s ANDS before the expiration of Janssen’s patent.

XARELTO®

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

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

In December 2018, JPI and Bayer AG filed a patent infringement lawsuit in the United States District Court for the District
of Delaware against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. (collectively, Teva) who filed
an ANDA seeking approval to market a generic version of XARELTO® before expiration of Bayer AG’s ’218 patent.

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

In May 2018, Mylan filed a Petition for Inter Partes Review with the USPTO, seeking to invalidate the ’218 patent. In
December 2018, the USPTO issued a decision denying institution of Mylan’s Petition for Inter Partes Review.

PREZISTA®

In May 2018, Janssen Products, L.P. and Janssen Sciences Ireland UC (collectively, Janssen) initiated a patent
infringement lawsuit in the United States District Court for the District of New Jersey against Dr. Reddys Laboratories, Inc.,
Dr. Reddys Laboratories, Ltd., Laurus Labs, Ltd. and Pharmaq, Inc. (collectively, DRL) who filed an ANDA seeking approval
to market generic versions of PREZISTA® before the expiration of United States Patent Nos. 8,518,987; 7,126,015; and
7,595,408. Trial is scheduled to begin in May 2020.

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

In each of these lawsuits, Janssen is seeking an order enjoining the defendants from marketing its generic versions of
PREZISTA® before the expiration of the relevant patents.

90 • Johnson & Johnson 2018 Annual Report

INVOKANA® /INVOKAMET®

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

Beginning in July 2017, Janssen and MTPC filed patent infringement lawsuits in the United States District Court for the
District of New Jersey and the United States District Court for the District of Colorado against Sandoz and InvaGen, who
filed ANDAs seeking approval to market generic versions of INVOKANA® and/or INVOKAMET® before expiration of
MTPC’s United States Patent No. 7,943,788 (the ’788 patent) relating to INVOKANA® and INVOKAMET® and against
Zydus, who filed ANDAs seeking approval to market generic versions of INVOKANA® and INVOKAMET® before expiration
of the ’788 patent, MTPC’s United States Patent No. 8,222,219 relating to INVOKANA® and INVOKAMET® and MTPC’s
United States Patent No. 8,785,403 relating to INVOKAMET®, and against Aurobindo, who filed an ANDA seeking
approval to market a generic version of INVOKANA® before expiration of the ’788 patent and the ’219 patent relating to
INVOKANA®.

Janssen is the exclusive licensee of the asserted patents. In October 2017, the Colorado lawsuits against Sandoz were
dismissed. In December 2017, the Delaware lawsuits against Apotex and Teva were dismissed.

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

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

OPSUMIT®

In January 2018, Actelion Pharmaceuticals Ltd (Actelion) initiated a patent infringement lawsuit in the United States
District Court for the District of New Jersey against Zydus Pharmaceuticals (USA) Inc. (Zydus) and Amneal
Pharmaceuticals LLC (Amneal), each of whom filed an ANDA seeking approval to market a generic version of OPSUMIT®
before the expiration of United States Patent No. 7,094,781. In the lawsuit, Actelion is seeking an order enjoining Zydus
and Amneal from marketing generic versions of OPSUMIT® before the expiration of the patent. In December 2018, the
district court entered an order wherein one of the defendants, Amneal, stipulated to infringement. Trial is scheduled to
commence in October 2020.

INVEGA SUSTENNA®

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

In February 2018, Janssen Inc. and Janssen Pharmaceutica NV (collectively, Janssen) initiated a Notices of Application
under Section 6 of the Patented Medicines (Notice of Compliance) Regulations against Teva Canada Limited (Teva) and
the Minister of Health in response to Teva’s filing of an Abbreviated New Drug Submission (ANDS) seeking approval to
market a generic version of INVEGA SUSTENNA® before the expiration of Canadian Patent Nos. 2,309,629 and
2,655,335. Janssen is seeking an order prohibiting the Minister of Health from issuing a Notice of Compliance with
respect to Teva’s ANDS before the expiration of these patents. The Final Hearing is scheduled to begin in September
2019.

Johnson & Johnson 2018 Annual Report • 91

IMBRUVICA®

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

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

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

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

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

GOVERNMENT PROCEEDINGS

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

Average Wholesale Price (AWP) Litigation

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

Opioids Litigation

Beginning in 2014 and continuing to the present, Johnson & Johnson and Janssen Pharmaceuticals, Inc. (JPI), along with
other pharmaceutical companies, have been named in more than 1,600 lawsuits brought by certain state and local
governments related to the marketing of opioids, including DURAGESIC®, NUCYNTA® and NUCYNTA® ER. To date,
complaints against pharmaceutical companies, including Johnson & Johnson and JPI, have been filed in state court by the

92 • Johnson & Johnson 2018 Annual Report

state Attorneys General in Arkansas, Florida, Kentucky, Louisiana, Mississippi, Missouri, New Hampshire, New Jersey, New
Mexico, Ohio, Oklahoma and South Dakota. Complaints against the manufacturers also have been filed in state or federal court
by city, county and local government agencies in the following states: Alabama; Arkansas; California; Connecticut; Florida;
Georgia; Illinois; Kentucky; Louisiana; Maine; Maryland; Massachusetts; Mississippi; Missouri; Nevada; New Hampshire; New
Jersey; New Mexico; New York; North Carolina; Ohio; Oklahoma; Oregon; Pennsylvania; Rhode Island; South Carolina; South
Dakota; Tennessee; Texas; Utah; Virginia; Washington; West Virginia and Wisconsin. The Government of Puerto Rico filed suit
in Superior Court of San Juan. In addition, the Province of British Columbia filed suit in Canada. These actions allege a variety
of claims related to opioids marketing practices, including false advertising, unfair competition, public nuisance, consumer fraud
violations, deceptive acts and practices, false claims and unjust enrichment. The suits generally seek penalties and/or injunctive
and monetary relief and, in some of the suits, the plaintiffs are seeking joint and several liability among the defendants. These
cases are in early stages of litigation. In October 2017, Johnson & Johnson and JPI were both served with a motion to
consolidate 66 pending matters into a federal Multi District Litigation (MDL) in the Southern District of Ohio. In
December 2017, the MDL was approved in the Northern District of Ohio and there are over 1,400 cases that have been
transferred to the MDL.

Johnson & Johnson, JPI and other pharmaceutical companies have also received subpoenas or requests for information
related to opioids marketing practices from the following state Attorneys General: Alaska, Indiana, Montana, New
Hampshire, South Carolina, Tennessee, Texas and Washington. In September 2017, Johnson & Johnson and JPI were
contacted by the Texas and Colorado Attorney General’s Offices on behalf of approximately 38 states regarding a multi-
state Attorney General investigation. The multi-state coalition served Johnson & Johnson and JPI with subpoenas as part of
the investigation. Johnson & Johnson and JPI have also received requests for information from the ranking minority member
of the United States Senate Committee on Homeland Security and Governmental Affairs regarding the sales, marketing,
and educational strategies related to the promotion of opioids use.

Other

In August 2012, DePuy Orthopaedics, Inc., DePuy, Inc. (now known as DePuy Synthes, Inc.), and Johnson & Johnson
Services, Inc. (collectively DePuy) received an informal request from the United States Attorney’s Office for the District of
Massachusetts and the Civil Division of the United States Department of Justice (the United States) for the production of
materials relating to the DePuy ASR™ XL Hip device. In July 2014, the United States notified the United States District
Court for the District of Massachusetts that it had declined to intervene in a qui tam case filed pursuant to the False
Claims Act against the companies. In February 2016, the district court granted the companies’ motion to dismiss with
prejudice, unsealed the qui tam complaint, and denied the qui tam relators’ request for leave to file a further amended
complaint. The qui tam relators appealed the case to the United States Court of Appeals for the First Circuit. In July 2017,
the First Circuit affirmed the district court’s dismissal in part, reversed in part, and affirmed the decision to deny the
relators’ request to file a third amended complaint. The relators’ remaining claims are now pending before the district court,
and fact discovery is currently scheduled to close in September 2019. Additionally, DePuy filed a petition for certiorari with
the United States Supreme Court, seeking review of the First Circuit’s decision. The Supreme Court denied the petition in
April 2018.

Since October 2013, a group of State Attorneys General have issued Civil Investigative Demands relating to the
development, sales and marketing of several of DePuy Orthopaedics, Inc.‘s hip products. In July 2014, the Oregon
Department of Justice, which was investigating these matters independently of the other states, announced a settlement of
its ASR™ XL Hip device investigation with the State of Oregon. In December 2018, the Company, the remaining states
and the District of Columbia agreed to settle all of the investigations, and on January 22, 2019, the states and the
Company filed consent judgments resolving the matter.

In October 2012, Johnson & Johnson was contacted by the California Attorney General’s office regarding a multi-state
Attorney General investigation of the marketing of surgical mesh products for hernia and urogynecological purposes by
Johnson & Johnson’s subsidiary, Ethicon, Inc. (Ethicon). Johnson & Johnson and Ethicon have since entered into a series
of tolling agreements with the 47 states and the District of Columbia participating in the multi-state investigation and have
responded to Civil Investigative Demands served by certain of the participating states. The states are seeking monetary
and injunctive relief. In May 2016, California and Washington filed civil complaints against Johnson & Johnson, Ethicon and
Ethicon US, LLC alleging violations of their consumer protection statutes. Similar complaints were filed against the
companies by Kentucky in August 2016 and by Mississippi in October 2017. Johnson & Johnson and Ethicon have
entered into a new tolling agreement with the remaining 43 states and the District of Columbia.

In December 2012, Therakos, Inc. (Therakos), formerly a subsidiary of Johnson & Johnson and part of the Ortho-Clinical
Diagnostics, Inc. (OCD) franchise, received a letter from the civil division of the United States Attorney’s Office for the

Johnson & Johnson 2018 Annual Report • 93

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

In June 2014, the Mississippi Attorney General filed a complaint in Chancery Court of The First Judicial District of Hinds
County, Mississippi against Johnson & Johnson and Johnson & Johnson Consumer Companies, Inc. (now known as
Johnson & Johnson Consumer Inc.) (JJCI). The complaint alleges that defendants failed to disclose alleged health risks
associated with female consumers’ use of talc contained in JOHNSON’S® Baby Powder and JOHNSON’S® Shower to
Shower (a product divested in 2012) and seeks injunctive and monetary relief. Trial is stayed pending interlocutory appeal
of a denial of JJCI’s motion for summary judgment.

In March 2016, Janssen Pharmaceuticals, Inc. (JPI) received a Civil Investigative Demand from the United States
Attorney’s Office for the Southern District of New York related to JPI’s contractual relationships with pharmacy benefit
managers over the period from January 1, 2006 to the present with regard to certain of JPI’s pharmaceutical products. The
demand was issued in connection with an investigation under the False Claims Act.

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

In November 2018, a second whistleblower lawsuit was unsealed in the United States District Court for the Central
District of California. The lawsuit is substantially similar to the lawsuit under appeal but is brought in the name of the
original relator. The federal and state governments have declined to intervene in the second suit at this time.

In February 2017, Johnson & Johnson received a subpoena from the United States Attorney’s Office for the District of
Massachusetts seeking the production of records pertaining to payments to any 501(c)(3) charitable organization that
provides financial assistance to Medicare patients. Multiple pharmaceutical companies have publicly reported receipt of
subpoenas and ongoing inquiries similar to this one and the one described below. The government has represented that it
will not be pursuing action against the company in this matter.

Actelion Pharmaceuticals US, Inc. (Actelion US), received a subpoena in May 2016, with follow-up requests for
documents from the United States Attorney’s Office for the District of Massachusetts. The subpoena seeks the production
of records pertaining to Actelion US’ payments to 501(c)(3) charitable organizations that provide financial assistance to
Medicare patients. In December 2018, the Company and the United States Department of Justice agreed to a settlement
in this matter.

In March 2017, Janssen Biotech, Inc. received a Civil Investigative Demand from the United States Department of Justice
regarding a False Claims Act investigation concerning management and advisory services provided to rheumatology and
gastroenterology practices that purchased REMICADE® or SIMPONI ARIA®.

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

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

94 • Johnson & Johnson 2018 Annual Report

In July 2018, Advanced Sterilization Products (ASP) received a Civil Investigative Demand from the United States
Department of Justice regarding a False Claims Act investigation concerning the pricing, quality, marketing and promotion
of EvoTech ECR, Tyvek Peel Pouches, or Sterrad Cyclesure 24 biological indicators.

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

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

GENERAL LITIGATION

In April 2016, a putative class action was filed against Johnson & Johnson, Johnson & Johnson Sales and Logistics
Company, LLC and McNeil PPC, Inc. (now known as Johnson & Johnson Consumer, Inc.) in New Jersey Superior Court,
Camden County on behalf of persons who reside in the state of New Jersey who purchased various McNeil
over-the-counter products from December 2008 through the present. The complaint alleges violations of the New Jersey
Consumer Fraud Act. Following the grant of a motion to dismiss and the filing of an amended complaint, in May 2017, the
court denied a motion to dismiss the amended complaint. In December 2018, a settlement was reached and the matter
has been dismissed.

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

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

In March and April 2015, over 30 putative class action complaints were filed by contact lens patients in a number of courts
around the United States against Johnson & Johnson Vision Care, Inc. (JJVCI) and other contact lens manufacturers,
distributors, and retailers, alleging vertical and horizontal conspiracies to fix the retail prices of contact lenses. The
complaints allege that the manufacturers reached agreements with each other and certain distributors and retailers
concerning the prices at which some contact lenses could be sold to consumers. The plaintiffs are seeking damages and
injunctive relief. All of the class action cases were transferred to the United States District Court for the Middle District of
Florida in June 2015. The plaintiffs filed a consolidated class action complaint in November 2015. In June 2016, the
district court denied motions to dismiss filed by JJVCI and other defendants. Discovery is ongoing. In March 2017, the
plaintiffs filed a motion for class certification. The district court held a hearing on the motion for class certification in August
2018. In December 2018, the district court granted the plaintiffs motion for class certification.

In August 2015, two third-party payors filed a purported class action in the United States District Court for the Eastern
District of Louisiana against Janssen Research & Development, LLC, Janssen Ortho LLC, Janssen Pharmaceuticals, Inc.,
Ortho-McNeil-Janssen Pharmaceuticals, Inc. and Johnson & Johnson (as well as certain Bayer entities), alleging that the
defendants improperly marketed and promoted XARELTO® as safer and more effective than less expensive alternative
medications while failing to fully disclose its risks. The complaint seeks damages.

Johnson & Johnson 2018 Annual Report • 95

In May 2017, Lonza Sales AG (Lonza) filed a Request for Arbitration with the London Court of International Arbitration
against Janssen Research & Development, LLC (Janssen R&D). Lonza alleges that Janssen R&D breached a 2005
agreement between the parties by sublicensing certain Lonza technology used in the manufacture of daratumumab
without Lonza’s consent. Lonza seeks monetary damages. The arbitration hearing was held in September 2018. Post
hearing briefing is complete, and the parties are awaiting a decision.

In May 2017, a purported class action was filed in the United States District Court for the Western District of Washington against
LifeScan Inc., Johnson & Johnson, other diabetes test strip manufacturers and certain Pharmacy Benefit Managers (PBMs). The
complaint alleges that consumers paid inflated prices for glucose monitor test strips as a consequence of undisclosed rebates and
other incentives paid by manufacturers to PBMs. The complaint includes RICO, ERISA, and state consumer protection claims. The
complaint seeks equitable relief and damages. In November 2017, the case was ordered transferred to United States District
Court for the District of New Jersey. The LifeScan business was divested in October 2018 and Johnson & Johnson retained liability
that may result from these claims prior to the closing of the divestiture.

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

Beginning in September 2017, multiple purported class actions were filed against Johnson & Johnson and Janssen
Biotech, Inc. (collectively, Janssen) alleging that Janssen’s REMICADE® contracting strategies violated federal and state
antitrust and consumer laws and seeking damages and injunctive relief. In November 2017, the cases were consolidated
for pre-trial purposes in United States District Court for the Eastern District of Pennsylvania as In re Remicade Antitrust
Litigation.

In June 2018, Walgreen Co. and Kroger Co, filed an antitrust complaint against Johnson & Johnson and Janssen Biotech,
Inc. (collectively, Janssen) in the United States District Court for the Eastern District of Pennsylvania. The complaint
alleges that Janssen has violated federal antitrust laws through its contracting strategies for REMICADE®. The complaint
seeks damages and injunctive relief.

In October 2017, certain United States service members and their families brought a complaint against a number of
pharmaceutical and medical devices companies, including Johnson & Johnson and certain of its subsidiaries, alleging that
the defendants violated the United States Anti-Terrorism Act. The complaint alleges that the defendants provided funding
for terrorist organizations through their sales practices pursuant to pharmaceutical and medical device contracts with the
Iraqi Ministry of Health.

Andover Healthcare, Inc. (Andover) filed a Lanham act case against Johnson & Johnson Consumer Inc. in April 2017 in the
United States District Court for the District of Massachusetts. Andover asserts that the claim “not made with natural
rubber latex” on COACH® Sports Wrap, BAND-AID® Brand SECURE-FLEX® Wrap and BAND-AID® Brand HURT-
FREE® Wrap is false. Andover seeks actual damages and pre-judgment interest thereon, disgorgement of profits, treble
damages, attorney’s fees and injunctive relief. In December 2018, the parties entered into a settlement agreement.

In October 2018, two separate putative class actions were filed against Actelion Pharmaceutical Ltd., Actelion
Pharmaceuticals US, Inc., and Actelion Clinical Research, Inc. (collectively, Actelion) in United States District Court for the
District of Maryland and United States District Court for the District of Columbia. The complaints allege that Actelion
violated state and federal antitrust and unfair competition laws by allegedly refusing to supply generic pharmaceutical
manufacturers with samples of TRACLEER®. TRACLEER® is subject to a Risk Evaluation and Mitigation Strategy, which
imposes restrictions on distribution of the product. In January 2019, the plaintiffs dismissed the District of Columbia case
and filed a consolidated complaint in federal court in Maryland.

In December 2018, Janssen Biotech, Inc., Janssen Oncology, Inc, Janssen Research & Development, LLC, and Johnson &
Johnson (collectively, Janssen) were served with a qui tam complaint filed on behalf of the United States, 28 states, and
the District of Columbia. The complaint, which was filed in December 2017 in United States District Court for the Northern
District of California, alleges that Janssen violated the federal False Claims Act and state law when providing pricing
information for ZYTIGA® to the government in connection with direct government sales and government-funded drug
reimbursement programs. At this time, the federal and state governments have declined to intervene.

Johnson & Johnson or its subsidiaries are also parties to a number of proceedings brought under the Comprehensive
Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state, local or
foreign laws in which the primary relief sought is the cost of past and/or future remediation.

96 • Johnson & Johnson 2018 Annual Report

22. Restructuring

In the first quarter of 2016, the Company announced restructuring actions in its Medical Devices segment to better serve
the needs of patients and customers in today’s evolving healthcare marketplace. The Company has undertaken actions to
strengthen its go-to-market model, accelerate the pace of innovation, further prioritize key platforms and geographies, and
streamline operations while maintaining high quality standards.

In 2018, the Company recorded a pre-tax charge of $462 million, of which $46 million was included in cost of products
sold and $227 million was included in other (income) expense. Total project costs of $2.5 billion have been recorded
since the restructuring has been announced. This restructuring program was completed in the fiscal fourth quarter of
2018.

On April 17, 2018, the Company announced plans to implement a series of actions across its Global Supply Chain that
are intended to focus resources and increase investments in the critical capabilities, technologies and solutions necessary
to manufacture and supply its product portfolio, enhance agility and drive growth. The Global Supply Chain actions will
include expanding the use of strategic collaborations and bolstering initiatives to reduce complexity, improve cost-
competitiveness, enhance capabilities and optimize the Supply Chain network. For additional details on the global supply
chain restructuring strategic collaborations see Note 20 to the Consolidated Financial Statements. In 2018, the Company
recorded a pre-tax charge of $238 million, of which $59 million was included in cost of products sold and $117 million
was included in other (income) expense. See the following table for additional details on the restructuring programs.

In total, the Company expects the Global Supply Chain actions to generate approximately $0.6 billion to $0.8 billion in
annual pre-tax cost savings that will be substantially delivered by 2022. The Company expects to record pre-tax
restructuring charges of approximately $1.9 billion to $2.3 billion, over the 4 to 5 year period of this activity. These costs
are associated with network optimizations, exit costs and accelerated depreciation and amortization.

The following table summarizes the severance charges and the associated spending under these initiatives through the
fiscal year ended 2018:

(Dollars in Millions)

Reserve balance, January 3, 2016

2016 activity

Reserve balance, January 1, 2017

2017 activity

Reserve balance, December 31, 2017

Current year activity:

Charges

Cash payments

Settled non cash

Reserve balance, December 30, 2018*

Severance

Asset Write-offs

Other**

Total

$484

(104)

380

(151)

229

—

(35)

—

$194

—

—

—

—

—

132

—

(132)

—

17

(16)

1

37

38

568

(558)

—

48

501

(120)

381

(114)

267

700

(593)

(132)

242

*

Cash outlays for severance are expected to be substantially paid out over the next 2 years in accordance with the Company’s plans
and local laws.

** Other includes project expense such as salaries for employees supporting the initiative and consulting expenses.

Although the Medical Devices restructuring program was completed in 2018, the Company expects that severance
charges will continue beyond that date. The Company continuously reevaluates its severance reserves related to
restructuring and the timing of payments has extended due to the planned release of associates regarding several longer-
term projects. The Company believes that the existing severance reserves are sufficient to cover the Global Supply Chain
plans given the period over which the actions will take place. The Company will continue to assess and make adjustments
as necessary if additional amounts become probable and estimable. Approximately 2,375 individuals received separation
payments since these restructuring announcements.

Johnson & Johnson 2018 Annual Report • 97

Report of Independent Registered Public
Accounting Firm

To the Board of Directors and Shareholders of Johnson & Johnson

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Johnson & Johnson and its subsidiaries (the
“Company”) as of December 30, 2018 and December 31, 2017, and the related consolidated statements of earnings, of
comprehensive income, of equity, and of cash flows for each of the three years in the period ended December 30, 2018
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company’s internal control over financial reporting as of December 30, 2018, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 30, 2018 and December 31, 2017, and the results of its operations and its cash
flows for each of the three years in the period ended December 30, 2018 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 30, 2018, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting

98 • Johnson & Johnson 2018 Annual Report

principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Florham Park, New Jersey
February 20, 2019

We have served as the Company’s auditor since at least 1920. We have not been able to determine the specific year we
began serving as auditor of the Company.

Johnson & Johnson 2018 Annual Report • 99

Management’s Report on Internal Control
Over Financial Reporting

Under Section 404 of the Sarbanes-Oxley Act of 2002, management is required to assess the effectiveness of the
Company’s internal control over financial reporting as of the end of each fiscal year and report, based on that assessment,
whether the Company’s internal control over financial reporting is effective.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance as to the
reliability of the Company’s financial reporting and the preparation of external financial statements in accordance with
generally accepted accounting principles.

Internal controls over financial reporting, no matter how well designed, have inherent limitations. Therefore, internal control
over financial reporting determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as
of December 30, 2018. In making this assessment, the Company used the criteria established by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework (2013).”
These criteria are in the areas of control environment, risk assessment, control activities, information and communication,
and monitoring. The Company’s assessment included extensive documenting, evaluating and testing the design and
operating effectiveness of its internal controls over financial reporting.

Based on the Company’s processes and assessment, as described above, management has concluded that, as of
December 30, 2018, the Company’s internal control over financial reporting was effective.

The effectiveness of the Company’s internal control over financial reporting as of December 30, 2018 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears
herein.

/s/ Alex Gorsky
Alex Gorsky
Chairman, Board of Directors
Chief Executive Officer

/s/ Joseph J. Wolk
Joseph J. Wolk
Executive Vice President,
Chief Financial Officer

100 • Johnson & Johnson 2018 Annual Report

Shareholder Return Performance Graphs

Set forth below are line graphs comparing the cumulative total shareholder return on the Company’s Common Stock for
periods of five years and ten years ending December 31, 2018, against the cumulative total return of the Standard &
Poor’s 500 Stock Index, the Standard & Poor’s Pharmaceutical Index and the Standard & Poor’s Health Care Equipment
Index. The graphs and tables assume that $100 was invested on December 31, 2013 and December 31, 2008 in each of
the Company’s Common Stock, the Standard & Poor’s 500 Stock Index, the Standard & Poor’s Pharmaceutical Index and
the Standard & Poor’s Health Care Equipment Index and that all dividends were reinvested.

5 Year Shareholder Return
Performance J&J vs. Indices

$220

Johnson & Johnson

S&P 500 Index

S&P Pharmaceu(cid:2)cal Index

S&P Healthcare Equipment
Index

5-Year CAGR

J&J
S&P 500
S&P Pharm
S&P H/C Equip

10.1%
8.5%
9.1%
16.6%

Johnson & Johnson

S&P 500 Index

$200

$180

$160

$140

$120

$100

2013

2014

2015

2016

2017

2018

2013

2014

2015

2016

2017

2018

$100.00

$117.34

$118.69

$136.88

$170.29

$161.54

$100.00

$113.68

$115.24

$129.02

$157.17

$150.27

S&P Pharmaceutical Index

$100.00

$122.22

$129.29

$127.27

$143.27

$154.86

S&P Healthcare Equipment Index

$100.00

$126.28

$133.82

$142.50

$186.53

$216.82

10 Year Shareholder Return
Performance J&J vs. Indices

$450

Johnson & Johnson

S&P 500 Index

S&P Pharmaceu(cid:2)cal Index

$400

$350

$300

S&P Healthcare Equipment
Index

$250

10-Year CAGR

J&J
S&P 500
S&P Pharm
S&P H/C Equip

11.3%
13.1%
12.9%
15.0%

$200

$150

$100

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Johnson & Johnson

S&P 500 Index

$100.00 $111.28 $110.63 $121.57 $134.73 $181.37 $212.81 $215.28 $248.26 $308.85 $292.99

$100.00 $126.45 $145.49 $148.55 $172.31 $228.09 $259.29 $262.86 $294.28 $358.50 $342.75

S&P Pharmaceutical Index

$100.00 $118.62 $119.54 $140.77 $161.07 $217.82 $266.21 $281.62 $277.21 $312.06 $337.32

S&P Healthcare Equipment Index

$100.00 $128.79 $125.30 $124.30 $145.76 $186.12 $235.04 $249.08 $265.23 $347.17 $403.55

Johnson & Johnson 2018 Annual Report • 101

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

Item 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. At the end of the period covered by this Report, the Company evaluated the
effectiveness of the design and operation of its disclosure controls and procedures. The Company’s disclosure controls
and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal
executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure. Alex Gorsky, Chairman and Chief Executive Officer, and Joseph J. Wolk, Executive Vice
President, Chief Financial Officer, reviewed and participated in this evaluation. Based on this evaluation, Messrs. Gorsky
and Wolk concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and
procedures were effective

Reports on Internal Control Over Financial Reporting. The information called for by this item is incorporated herein by
reference to “Management’s Report on Internal Control Over Financial Reporting”, and the attestation regarding internal
controls over financial reporting included in the “Report of Independent Registered Public Accounting Firm” included in
Item 8 of this Report.

Changes in Internal Control Over Financial Reporting. During the fiscal quarter ended December 30, 2018, there were no
changes in the Company’s internal control over financial reporting identified in connection with the evaluation required
under Rules 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.

The Company is implementing a multi-year, enterprise-wide initiative to integrate, simplify and standardize processes and
systems for the human resources, information technology, procurement, supply chain and finance functions. These are
enhancements to support the growth of the Company’s financial shared service capabilities and standardize financial
systems. This initiative is not in response to any identified deficiency or weakness in the Company’s internal control over
financial reporting. In response to this initiative, the Company has and will continue to align and streamline the design and
operation of its financial control environment.

Item 9B. OTHER INFORMATION

Not applicable.

102 • Johnson & Johnson 2018 Annual Report

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

The information called for by this item is incorporated herein by reference to the discussion of the Audit Committee under
the caption “Item 1. Election of Directors — Board Committees”; and the material under the captions “Item 1. Election of
Directors” and “Stock Ownership and Section 16 Compliance — Section 16(a) Beneficial Ownership Reporting
Compliance” in the Proxy Statement; and the material under the caption “Executive Officers of the Registrant” in Part I of
this Report.

The Company’s Code of Business Conduct, which covers all employees (including the Chief Executive Officer, Chief
Financial Officer and Controller), meets the requirements of the SEC rules promulgated under Section 406 of the
Sarbanes-Oxley Act of 2002. The Code of Business Conduct is available on the Company’s website at www.jnj.com/
code-of-business-conduct, and copies are available to shareholders without charge upon written request to the Secretary
at the Company’s principal executive offices. Any substantive amendment to the Code of Business Conduct or any waiver
of the Code granted to the Chief Executive Officer, the Chief Financial Officer or the Controller will be posted on the
Company’s website at www.investor.jnj.com/gov.cfm within five business days (and retained on the website for at least one
year).

In addition, the Company has adopted a Code of Business Conduct & Ethics for Members of the Board of Directors and
Executive Officers. The Code of Business Conduct & Ethics for Members of the Board of Directors and Executive Officers
is available on the Company’s website at www.investor.jnj.com/gov/boardconduct.cfm, and copies are available to
shareholders without charge upon written request to the Secretary at the Company’s principal executive offices. Any
substantive amendment to the Code or any waiver of the Code granted to any member of the Board of Directors or any
executive officer will be posted on the Company’s website at www.investor.jnj.com/gov.cfm within five business days (and
retained on the website for at least one year).

Item 11. EXECUTIVE COMPENSATION

The information called for by this item is incorporated herein by reference to the material under the captions “Item 1.
Election of Directors — Director Compensation,” and “Item 2. Compensation Committee Report,” “Compensation
Discussion and Analysis” and “Executive Compensation Tables” in the Proxy Statement.

The material incorporated herein by reference to the material under the caption “Compensation Committee Report” in the
Proxy Statement shall be deemed furnished, and not filed, in this Report and shall not be deemed incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, as a result of this furnishing, except to the extent that the Company specifically incorporates it by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information called for by this item is incorporated herein by reference to the material under the caption “Item 1. Stock
Ownership and Section 16 Compliance” in the Proxy Statement; and Note 17 “Common Stock, Stock Option Plans and
Stock Compensation Agreements” of the Notes to Consolidated Financial Statements in Item 8 of this Report.

Johnson & Johnson 2018 Annual Report • 103

Equity Compensation Plan Information

The following table provides certain information as of December 30, 2018 concerning the shares of the Company’s
Common Stock that may be issued under existing equity compensation plans.

Plan Category

Equity Compensation Plans Approved by Security

Holders(1)

Equity Compensation Plans Not Approved by Security

Holders

Total

Number of
Securities to
be Issued Upon
Exercise of
Outstanding
Options and Rights

130,605,768

—

130,605,768

Weighted Average
Exercise Price of
Outstanding
Options and Rights

Number of Securities
Remaining Available for
Future Issuance Under Equity
Compensation Plans(2)(3)

$82.52

—

$82.52

351,079,202

—

351,079,202

(1)

(2)

(3)

Included in this category are the following equity compensation plans which have been approved by the Company’s shareholders:
2005 Long-Term Incentive Plan and 2012 Long-Term Incentive Plan.

This column excludes shares reflected under the column “Number of Securities to be Issued Upon Exercise of Outstanding Options
and Rights.”

The 2005 Long-Term Incentive Plan expired April 26, 2012. All options and restricted shares granted subsequent to that date were
under the 2012 Long-Term Incentive Plan.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

The information called for by this item is incorporated herein by reference to the material under the captions “Item 1.
Election of Directors — Director Independence” and “Related Person Transactions” in the Proxy Statement.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by this item is incorporated herein by reference to the material under the caption “Item 3.
Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.

104 • Johnson & Johnson 2018 Annual Report

PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

1.

Financial Statements

Consolidated Balance Sheets at end of Fiscal Years 2018 and 2017

Consolidated Statements of Earnings for Fiscal Years 2018, 2017 and 2016

Consolidated Statements of Comprehensive Income for Fiscal Years 2018, 2017 and 2016

Consolidated Statements of Equity for Fiscal Years 2018, 2017 and 2016

Consolidated Statements of Cash Flows for Fiscal Years 2018, 2017 and 2016

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

All schedules are omitted because they are not applicable or the required information is included in the financial
statements or notes.

2.

Exhibits Required to be Filed by Item 60l of Regulation S-K

The information called for by this item is incorporated herein by reference to the Exhibit Index in this Report.

Item 16. FORM 10-K SUMMARY

Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. The Company has
elected not to include such summary information.

Johnson & Johnson 2018 Annual Report • 105

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 20, 2019

JOHNSON & JOHNSON

(Registrant)

By

/s/ A. Gorsky

A. Gorsky, Chairman, Board of Directors,
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ A. Gorsky
A. Gorsky

/s/ J. J. Wolk
J. J. Wolk

/s/ R. A. Kapusta
R. A. Kapusta

/s/ M. C. Beckerle
M. C. Beckerle

/s/ D. S. Davis
D. S. Davis

/s/ I. E. L. Davis
I. E. L. Davis

/s/ J. A. Doudna
J. A. Doudna

/s/ M. B. McClellan
M. B. McClellan

/s/ A. M. Mulcahy
A. M. Mulcahy

/s/ W. D. Perez
W. D. Perez

/s/ C. Prince
C. Prince

/s/ A. E. Washington
A. E. Washington

/s/ R. A. Williams
R. A. Williams

106 • Johnson & Johnson 2018 Annual Report

Chairman, Board of Directors
Chief Executive Officer
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial Officer)

February 20, 2019

February 20, 2019

Controller and Chief Accounting Officer
(Principal Accounting Officer)

February 20, 2019

Director

Director

Director

Director

Director

Director

Director

Director

Director

Director

February 20, 2019

February 20, 2019

February 20, 2019

February 20, 2019

February 20, 2019

February 20, 2019

February 20, 2019

February 20, 2019

February 20, 2019

February 20, 2019

EXHIBIT INDEX

Reg. S-K

Exhibit Table
Item No.

Description of Exhibit

3(i)

3(ii)

4(a)

10(a)

10(b)

10(c)

10(d)

10(e)

10(f)

10(g)

10(h)

10(i)

10(j)

10(k)

10(l)

10(m)

10(n)**

10(o)

10(p)

10(q)**

10(r)

10(s)

10(t)

Restated Certificate of Incorporation effective February 19, 2016 — Incorporated herein by reference to Exhibit 3(i) of the
Registrant’s Form 10-K Annual Report for the fiscal year ended January 3, 2016.

By-Laws of the Company, as amended effective January 26, 2016 — Incorporated herein by reference to Exhibit 3.1 the
Registrant’s Form 8-K Current Report filed January 26, 2016.

Upon the request of the Securities and Exchange Commission, the Registrant will furnish a copy of all instruments defining the
rights of holders of long-term debt of the Registrant.

2005 Long-Term Incentive Plan — Incorporated herein by reference to Exhibit 4 of the Registrant’s S-8 Registration Statement
filed with the Commission on May 10, 2005 (file no. 333-124785).*

Form of Stock Option Certificate under the 2005 Long-Term Incentive Plan — Incorporated herein by reference to Exhibit 10.1 of
the Registrant’s Form 8-K Current Report filed January 13, 2012.*

2012 Long-Term Incentive Plan — Incorporated herein by reference to Appendix A of the Registrant’s Proxy Statement filed with
the Commission on March 15, 2017.*

Form of Stock Option Certificate, Restricted Share Unit Certificate and Performance Share Unit Certificate under the 2012
Long-Term Incentive Plan — Incorporated herein by reference to Exhibits 10.2, 10.3 and 10.4 of the Registrant’s Form 10-Q
Quarterly Report filed May 7, 2012.*

Global NonQualified Stock Option Award Agreement, Global Restricted Share Unit Award Agreement and Global Performance
Share Unit Award Agreement under the 2012 Long-Term Incentive Plan — Incorporated herein by reference to Exhibits 10.1,
10.2 and 10.3 of the Registrant’s Form 10-Q Quarterly Report filed May 1, 2018.*

Johnson & Johnson Executive Incentive Plan (as amended) — Incorporated herein by reference to Exhibit 10(f) of the Registrant’s
Form 10-K Annual Report for the fiscal year ended December 31, 2000.*

Domestic Deferred Compensation (Certificate of Extra Compensation) Plan — Incorporated herein by reference to Exhibit 10(g)
of the Registrant’s Form 10-K Annual Report for the year ended December 28, 2003.*

Amendments to the Certificate of Extra Compensation Plan effective as of January 1, 2009 — Incorporated herein by reference to
Exhibit 10(j) of the Registrant’s Form 10-K Annual Report for the year ended December 28, 2008.*

2009 Certificates of Long-Term Performance Plan — Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form
10-Q Quarterly Report for the quarter ended September 27, 2009.*

Amended and Restated Deferred Fee Plan for Directors (Amended as of January 17, 2012) — Incorporated herein by reference
to Exhibit 10(k) of the Registrant’s Form 10-K Annual Report for the fiscal year ended January 1, 2012.*

The Johnson & Johnson Executive Income Deferral Plan (Amended and Restated Effective January 1, 2010) — Incorporated
herein by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended September 30, 2012.*

Excess Savings Plan (Effective as of January 1, 1996) — Incorporated herein by reference to Exhibit 10(j) of the Registrant’s
Form 10-K Annual Report for the fiscal year ended December 29, 1996.*

Amendments to the Johnson & Johnson Excess Savings Plan effective as of January 1, 2009 — Incorporated herein by reference
to Exhibit 10(p) of the Registrant’s Form 10-K Annual Report for the fiscal year ended December 28, 2008.*

Excess Benefit Plan (Supplemental Retirement Plan) — Incorporated herein by reference to Exhibit 10(h) of the Registrant’s Form
10-K Annual Report for the fiscal year ended January 3, 1993.*

Amendments to the Excess Benefit Plan of Johnson & Johnson and Affiliated Companies effective as of January 1, 2009 —
Incorporated herein by reference to Exhibit 10(r) of the Registrant’s Form 10-K Annual Report for the fiscal year ended
December 28, 2008.*

Amendment to the Excess Benefit Plan of Johnson & Johnson and Affiliated Companies, effective as of January 1, 2015 —
Incorporated herein by reference to Exhibit 10(q) of the Registrant’s Form 10-K Annual Report for the fiscal year ended
December 28, 2014.*

Executive Life Plan Agreement — Incorporated herein by reference to Exhibit 10(i) of the Registrant’s Form 10-K Annual Report
for the fiscal year ended January 3, 1993.*

Executive Life Plan Agreement Closure Letter — Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 10-Q
Quarterly Report for the quarter ended March 29, 2015.*

Employment Agreement for Dr. Paulus Stoffels— Incorporated herein by reference to Exhibit 10.2 of the Registrant’s Form 10-Q
Quarterly Report for the quarter ended September 30, 2012.*

Summary of Employment Arrangements for Sandra E. Peterson — Incorporated herein by reference to Exhibit 10(t) of the
Registrant’s Form 10-K Annual Report for the year ended December 30, 2012.*

Johnson & Johnson 2018 Annual Report • 107

10(u)

10(v)

10(w)

21

23

31.1

31.2

32.1

32.2

101

Severance Pay Plan of Johnson & Johnson and U.S. Affiliated Companies, Amended and Restated as of October 1, 2014 —
Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended
September 28, 2014.*

First Amendment to the Severance Pay Plan of Johnson & Johnson and U.S. Affiliated Companies (as amended and restated
effective October 1, 2014) — Incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report
for the quarter ended June 28, 2015.*

Second Amendment to the Severance Pay Plan of Johnson & Johnson and U.S. Affiliated Companies (as amended and restated
effective October 1, 2014) — Incorporated herein by reference to Exhibit 10(x) of the Registrant’s Form 10-K Annual Report for
the fiscal year ended January 3, 2016.*

Subsidiaries - Filed with this document.

Consent of Independent Registered Public Accounting Firm — Filed with this document.

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act — Filed with this document.

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act — Filed with this document.

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act — Furnished with this document.

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act — Furnished with this document.

XBRL (Extensible Business Reporting Language) The following materials from this Report for the fiscal year ended December 30,
2018, formatted in Extensive Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated
Statements of Earnings, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Equity,
(v) Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements.

* Management contract or compensatory plan.

** Paper filing.

A copy of any of the Exhibits listed above will be provided without charge to any shareholder submitting a written request
specifying the desired exhibit(s) to the Secretary at the principal executive offices of the Company. Pursuant to Item
601(b)(4)(iii)(A) of Regulation S-K, the Company has not filed as exhibits to this Form 10-K certain long-term debt
instruments, including indentures, under which the total amount of securities authorized does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis. The Company hereby agrees to furnish a copy of any
such instrument to the SEC upon request.

The following Exhibits, indicated as being filed with this document, are omitted from the printed version of this 2018
Annual Report.

Exhibit 21

Exhibit 23

108 • Johnson & Johnson 2018 Annual Report

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Alex Gorsky, certify that:

1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 30, 2018 (the “report”) of
Johnson & Johnson (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the Company as of, and
for, the periods presented in this report;

4. The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures

to be designed under our supervision, to ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this

report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that
occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting; and

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over

financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant

role in the Company’s internal control over financial reporting.

Date: February 20, 2019

/s/ Alex Gorsky

Alex Gorsky
Chief Executive Officer

Johnson & Johnson 2018 Annual Report

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Joseph J. Wolk certify that:

1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 30, 2018 (the “report”) of
Johnson & Johnson (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the Company as of, and
for, the periods presented in this report;

4. The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures

to be designed under our supervision, to ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this

report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that
occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting; and

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over

financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant

role in the Company’s internal control over financial reporting.

Date: February 20, 2019

/s/ Joseph J. Wolk

Joseph J. Wolk
Chief Financial Officer

Johnson & Johnson 2018 Annual Report

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

The undersigned, Alex Gorsky, the Chief Executive Officer of Johnson & Johnson, a New Jersey corporation (the
“Company”), pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
hereby certifies that, to the best of my knowledge:

(1)

(2)

the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2018 (the “Report”) fully
complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

/s/ Alex Gorsky

Alex Gorsky
Chief Executive Officer

Dated: February 20, 2019

This certification is being furnished to the SEC with this Report on Form 10-K pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of
that section.

Johnson & Johnson 2018 Annual Report

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

The undersigned, Joseph J. Wolk, the Chief Financial Officer of Johnson & Johnson, a New Jersey corporation (the
“Company”), pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
hereby certifies that, to the best of my knowledge:

(1)

(2)

the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2018 (the “Report”) fully
complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

/s/ Joseph J. Wolk

Joseph J. Wolk
Chief Financial Officer

Dated: February 20, 2019

This certification is being furnished to the SEC with this Report on Form 10-K pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of
that section.

Johnson & Johnson 2018 Annual Report

[THIS PAGE INTENTIONALLY LEFT BLANK]

[THIS PAGE INTENTIONALLY LEFT BLANK]

[THIS PAGE INTENTIONALLY LEFT BLANK]

Reconciliation of Non-GAAP Financial Measures

(Dollars in Millions Except Per Share Data)

Earnings before provision for taxes on income - as reported

Twelve Months

% Incr. /

2018

2017

(Decr.)

$17,999

17,673

1.8%

Intangible asset amortization expense

Litigation expense, net

Actelion acquisition related cost

Restructuring/Other (1)

In-process research and development

Diabetes asset impairment

AMO acquisition related cost

Contingent liability reversal

Unrealized loss on securities

Impact of tax legislation

Other

4,357

1,991

243

700

1,126

4

109

(184)

179

72

102

2,963

1,256

797

760

408

215

140

–

–

–

–

Earnings before provision for taxes on income - as adjusted

$26,698

24,212

Net Earnings - as reported

Intangible asset amortization expense

Litigation expense, net

Actelion acquisition related cost

Restructuring/Other

In-process research and development

Diabetes asset impairment

AMO acquisition related cost

Contingent liability reversal

Unrealized loss on securities

Impact of tax legislation (2)

Other

Net Earnings - as adjusted

Diluted Net Earnings per share - as reported

Intangible asset amortization expense

Litigation expense, net

Actelion acquisition related cost

Restructuring/Other

In-process research and development

AMO acquisition related cost

Contingent liability reversal

Unrealized loss on securities

Impact of tax legislation

Other

Diluted Net Earnings per share - as adjusted

Operational Diluted Net Earnings per share - as adjusted at 2016 foreign currency exchange

rates

Impact of currency at 2017 foreign currency exchange rates

Operational Diluted Net Earnings per share - as adjusted at 2017 foreign currency exchange

rates

$15,297

3,888

1,722

232

585

859

3

89

(184)

141

1,300

2,481

955

767

595

266

4

116

–

–

(390)

13,556

73

–

$22,315

20,040

$5.61

1.42

0.63

0.09

0.21

0.32

0.03

(0.07)

0.05

(0.14)

0.03

$8.18

(0.12)

$8.06

0.47

0.90

0.35

0.28

0.22

0.10

0.04

–

–

4.94

–

7.30

7.24

0.06

7.30

10.3%

N/M%

11.4%

N/M%

12.1%

10.4%

(1)

Includes $105 million recorded in cost of products sold and $344 million recorded in other (income) expense in 2018, and
$88 million recorded in cost of products sold and $363 million recorded in other (income) expense in 2017.
Includes foreign currency translation

(2)
N/M = Not Meaningful

Johnson & Johnson 2018 Annual Report

The Company provides earnings before provision for taxes on income, net earnings and net earnings per share (diluted) on
an adjusted basis because management believes that these measures provide useful information to investors. Among other
things, these measures may assist investors in evaluating the Company’s results of operations period over period. In
various periods, these measures may exclude such items as intangible asset amortization expense, significant costs
associated with acquisitions, restructuring, litigation, and changes in applicable laws and regulations (including significant
accounting or tax matters). These special items may be highly variable, difficult to predict, and of a size that sometimes has
substantial impact on the Company’s reported results of operations for a period. Management uses these measures
internally for planning, forecasting and evaluating the performances of the Company’s businesses, including allocating
resources and evaluating results relative to employee performance compensation targets. Unlike earnings before provision
for taxes on income, net earnings and net earnings per share (diluted) prepared in accordance with GAAP, adjusted
earnings before provision for taxes on income, adjusted net earnings and adjusted net earnings per share (diluted) may not
be comparable with the calculation of similar measures for other companies. The limitations of using these non-GAAP
financial measures as performance measures are that they provide a view of the Company’s results of operations without
including all events during a period, such as intangible asset amortization expense, the effects of an acquisition,
restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters) and
do not provide a comparable view of the Company’s performance to other companies in the health care industry. Investors
should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of
financial performance prepared in accordance with GAAP.

The tables below are provided to reconcile certain non-GAAP financial disclosures in the 2018 Chairman’s Letter.

(Dollars in Millions)

Net cash flows from operating activities

Additions to property, plant and equipment

Free cash flow

Medical Devices

Worldwide as reported:

Impact of acquisitions/divestitures

Worldwide operational growth excluding acquisitions/divestitures

2018

$22,201

(3,670)

$18,531

Incr. /

(Decr.)

1.1

Operational Growth

2018

1.1%

1.5

2.6%

2017

5.7

(4.2)

1.5

Operational sales growth excluding the net impact of acquisitions and divestitures is a non-GAAP financial measure.
Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to,
measures of financial performance prepared in accordance with GAAP. Due to the variable nature of acquisitions and
divestitures, and the impact they may have on the analysis of underlying business performance and trends,
management believes that providing this measure enhances an investor’s understanding of the Company’s
performance and may assist in the evaluation of ongoing business operations period over period. This non-GAAP
financial measure is presented to permit investors to more fully understand how management assesses the
performance of the Company, including for internal evaluation of the performance of the Company’s businesses and
planning and forecasting for future periods. The use of this non-GAAP financial measure as a performance measure is
limited in that it provides a view of the Company’s results of operations without including all events during a period and
may not provide a comparable view of the Company’s performance to that of other companies in the health care
industry.

Johnson & Johnson 2018 Annual Report

Board of Directors

Senior Management

ALEX GORSKY
Chairman, Board of Directors

MARY C. BECKERLE
Chief Executive Officer, Huntsman Cancer Institute
at the University of Utah;
Distinguished Professor of Biology,
College of Science, University of Utah

D. SCOTT DAVIS
Former Chairman and Chief Executive Officer,
United Parcel Service, Inc.

IAN E. L. DAVIS
Chairman, Rolls-Royce Holdings plc;
Former Chairman and Worldwide Managing Director,
McKinsey & Company

JENNIFER A. DOUDNA
Professor of Chemistry; Professor of Biochemistry &
Molecular Biology;
Li Ka Shing Chancellor’s Professor in Biomedical
and Health, University of California, Berkeley

MARK B. McCLELLAN
Director, Duke-Robert J. Margolis, MD,
Center for Health Policy

ANNE M. MULCAHY
Former Chairman and Chief Executive Officer,
Xerox Corporation

WILLIAM D. PEREZ
Retired President and Chief Executive Officer,
Wm. Wrigley Jr. Company

CHARLES PRINCE
Retired Chairman and Chief Executive Officer,
Citigroup Inc.

A. EUGENE WASHINGTON
Duke University’s Chancellor for Health Affairs;
President and Chief Executive Officer,
Duke University Health System

RONALD A. WILLIAMS
Former Chairman and Chief Executive Officer,
Aetna Inc.

ALEX GORSKY*
Chief Executive Officer;
Chairman, Executive Committee

JOAQUIN DUATO*
Vice Chairman, Executive Committee

PAULUS STOFFELS*
Vice Chairman, Executive Committee; Chief Scientific Officer

PETER M. FASOLO*
Executive Vice President, Chief Human Resources Officer

RONALD A. KAPUSTA
Corporate Controller; Chief Accounting Officer

ASHLEY McEVOY*
Executive Vice President, Worldwide Chairman,
Medical Devices

THIBAUT MONGON*
Executive Vice President, Worldwide Chairman, Consumer

MICHELLE R. RYAN
Treasurer

MICHAEL E. SNEED*
Executive Vice President, Global Corporate Affairs;
Chief Communications Officer

THOMAS J. SPELLMAN III
Corporate Secretary; Assistant General Counsel

JENNIFER TAUBERT*
Executive Vice President, Worldwide Chairman,
Pharmaceuticals

MICHAEL H. ULLMANN*
Executive Vice President, General Counsel

KATHRYN E. WENGEL*
Executive Vice President, Chief Global Supply Chain Officer

JOSEPH J. WOLK*
Executive Vice President, Chief Financial Officer

* Member, Executive Committee

Johnson & Johnson 2018 Annual Report

PRINCIPAL OFFICE

STOCK LISTING

JOHNSON & JOHNSON ONLINE

One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
(732) 524-0400

Johnson & Johnson Common Stock
Listed on New York Stock Exchange
Stock Symbol: JNJ

2019 ANNUAL MEETING OF SHAREHOLDERS

SHAREHOLDER RELATIONS CONTACT

Thursday, April 25, 2019
10:00 a.m. (Eastern); Doors open to meeting at
9:15 a.m.
Hyatt Regency New Brunswick
Two Albany Street
New Brunswick, New Jersey
All shareholders as of the record date of
February 26, 2019 are invited to attend.
A formal Notice of Annual Meeting,
Proxy Statement and Proxy have been
made available to shareholders.

2018 ANNUAL REPORT ON FORM 10-K AND
2019 PROXY STATEMENT

Johnson & Johnson’s Annual Report on Form 10-K
for the fiscal year ended December 30, 2018 is
included in this Annual Report in its entirety, with
the exception of certain exhibits. The Form 10-K,
complete with all of its exhibits, is available on our
website at www.investor.jnj.com/sec.cfm, and the
SEC’s website at www.sec.gov.

Shareholders may also obtain copies of the
exhibits, our 2018 Annual Report on
Form 10-K and our 2019 Proxy Statement,
without charge, upon written request to the
Office of the Corporate Secretary at our
principal office address, or by calling
(800) 950-5089.

ELECTRONIC DELIVERY NOTIFICATION

The 2019 Proxy Statement and our 2018 Annual
Report are available on our website
www.investor.jnj.com/gov/
annualmeetingmaterials.cfm. Shareholders who
receive paper copies of our Proxy Statement and
Annual Report by mail can elect to receive instead
an e-mail message with a link to those documents
on the Internet. Registered shareholders may
enroll in electronic delivery at:
www.computershare-na.com/green. Beneficial
shareholders (who hold shares of Johnson &
Johnson Common Stock through a bank, broker or
other holder of record) generally can enroll for
electronic delivery at: enroll.icsdelivery.com/jnj.

Thomas J. Spellman III
Corporate Secretary
(732) 524-2455

INVESTOR RELATIONS CONTACT

Christopher DelOrefice
Vice President, Investor Relations
(800) 950-5089
(732) 524-2955
Investor Relations website:
www.investor.jnj.com

STOCK TRANSFER AGENT AND REGISTRAR

Questions regarding stock holdings,
certificate replacement/transfer, dividends
and address changes should be directed to
our stock transfer agent and registrar at:
Computershare Trust Company, N.A.
P.O. Box 505000
Louisville, KY 40233
Overnight mail:
Computershare Trust Company, N.A.
462 South 4th Street, Suite 1600
Louisville, KY 40202
(800) 328-9033 or (781) 575-2718
Shareholder website:
www.computershare.com/investor

Dividend Reinvestment Plan

The Plan allows for full or partial dividend
reinvestment and additional weekly cash
investments up to $50,000 per year in
Johnson & Johnson Common Stock without
per share or service charges on stock
purchases. If you are interested in
participating in the Plan and need an
enrollment form and/or more information,
please call the Plan administrator,
Computershare Trust Company, N.A. at
(800) 328-9033 or (781) 575-2718
(outside the U.S.) or access online at
www.computershare.com/investor.

Hearing Impaired

Shareholders who have inquiries regarding
stock-related matters can communicate
directly with Computershare Trust Company,
N.A. via a telecommunications device (TDD).
The telephone number for this service is
(800) 952-9245 or (781) 575-2692
(outside the U.S.).

Our website: www.jnj.com

http://www.jnj.com/media-center

www.facebook.com/jnj

www.twitter.com/JNJNews
www.twitter.com/JNJCares

www.youtube.com/jnj

http://www.linkedin.com/company/
johnson-&-johnson

The Johnson & Johnson 2018 Year in
Review is available on our website at
https://www.jnj.com/2018-year-in-review.

The information on these websites should
not be deemed to be part of this Annual
Report.

C132107

The Johnson & Johnson 2018 Annual Report
contains many of the valuable trademarks
and trade names owned and used by the
Johnson & Johnson Family of Companies in
the United States and internationally to
distinguish products and services of
outstanding quality.
©Johnson & Johnson 2019

We blend heart, science and ingenuity
to profoundly change the trajectory 
of health for humanity.