Johnson and Johnson 3Q16 Earnings Call Notes

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Johnson & Johnson (JNJ) Q3 2016 Results

Dominic Caruso

September hospital admissions are a little better

“In Medical Devices, consistent with some recent analyst reports about the market, we believe the industry experienced lower hospital admissions and procedure rates during the mid summer months. Late in the quarter, several reports showed higher levels of activity, and in fact the data that we recently saw published for September looked encouraging…once September hit, the data showed quite a rebound from the summer months, and the rate of growth in September was actually faster than what we saw in the first quarter, which was the highest growth quarter year-over-year in terms of penetration. Now whether that remains at that level or whether it’s a rebound effect from the summer, we’ll have to see. But I think this is all well-chronicled in the multiple reports that many of you I’m sure have seen. So overall, I’d say we’re now in a stable environment in hospital procedures.”

There is probably going to be some international tax reform after the election

“With respect to international tax reform and what we’re hearing, I can tell you that I visit in Washington often and speak with members of the House Ways and Means Committee and the Senate Finance Committee and the tax staffs are busily working and working very collaboratively with U.S. multinationals on an appropriate tax reform package. We think there is more [by-parts] [ph] to support now than there has been in the past. We think that often we hear, as you mentioned, the benefit of investing in U.S. infrastructure as a result of those repatriated earnings coming back into the U.S. So that would be a positive. And we think that overall the climate for international tax reform post the election, quite frankly, is more positive than it’s been in the last year or so.”

Proposition 61 is “misguided”

“Thank you. I mean as you were saying, Dominic, despite of the rhetoric about pharmaceutical pricing, it’s always good to take some perspective on that. Pharmaceuticals represent 14% of total expenditures and we understand that we need to work with different stakeholders in order to try to manage our healthcare cost and we have advanced different ideas in that area as you were describing, Dominic, such as value-based contracting, and we need to work there in order to try to eliminate the regulatory barriers that do not help in that area. As far as Proposition 61, as an example of that rhetoric, as Dominic said, there are different groups that oppose that measure that includes even veteran groups and seniors and unions, the reason being it’s unclear what the effects of Proposition 61 would be. It is clear that it would be difficult to operationalize and also would create some access barriers to patients. So overall, we don’t see Proposition 61 as the right way to try to work on pharmaceutical pricing. We think it’s a misguided action.”