Louise Mehrotra - VP of Investor Relations Dominic Caruso - VP, Finance and CFO.

Mike Weinstein - JP Morgan Matthew Dodds - Citigroup Kristen Stewart - Deutsche Bank Larry Biegelsen - Wells Fargo Jami Rubin - Goldman Sachs Glenn Novarro - RBC Capital Markets Derrick Sung - Sanford Bernstein Rick Wise - Stifel Matt Miksic - Piper Jaffray Jeff Holford - Jefferies Danielle Antalffy - Leerink Partners Josh Jennings - Cowen and Company David Lewis - Morgan Stanley Bob Hopkins - Bank of America Damien Conover - Morningstar.

Good morning and welcome to the Johnson & Johnson First Quarter 2014 Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer session of the conference. This call is being recorded. If anyone has any objections, you may disconnect at this time. (Operator Instructions).

I would now like to turn the call over to Johnson & Johnson. You may begin..

Good morning and welcome. I’m Louise Mehrotra, Vice President of Investor Relations for Johnson & Johnson and it is my pleasure this morning to review our business results for the first quarter of 2014. Joining me on the call today is Dominic Caruso, Vice President, Finance and Chief Financial Officer. A few logistics before we get into the details.

This review is being made available via webcast accessible through the Investor Relations section of the Johnson & Johnson website. I’ll begin by briefly reviewing first quarter results for the corporation and for our three business segments.

Following my remarks, Dominic will provide commentary on the results including some highlights for the quarter, a review of the income statement and guidance for 2014. We will then open the call to your questions.

Included with the press release that was issued earlier this morning is a schedule of sales for key products and/or businesses to facilitate updating your model. These schedules are available on the Johnson & Johnson website as is the press release. Also, please note that we will be using a brief presentation to complement today’s commentary.

The presentation is also available on our website. Before we begin, let me remind you that some of the statements made during this review may be considered forward-looking statements.

The 10-K for the fiscal year 2013 identifies certain factors that could cause the company’s actual results to differ materially from those projected in any forward-looking statements made today. The company does not undertake to update any forward-looking statements as a result of new information or future events or developments.

The 10-K is available through the company and online. During the review, non-GAAP financial measures are used to provide information pertinent to ongoing business performance. These non-GAAP financial measures should not be considered replacements for GAAP results.

Tables reconciling these measures to the most comparable GAAP measures are available in the press release and on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. A number of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies.

This slide lists acknowledgment of those relationships. Now, I would like to review our results for the first quarter of 2014. Worldwide sales to customers were $18.1 billion for the first quarter of 2014, up 3.5%. On an operational basis, sales were up 5.3% and currency had a negative impact of 1.8%. In the U.S., sales were up 2.2%.

In regions outside the U.S., our operational growth was 7.9%, while the effect of currency exchange rates negatively impacted our reported results by 3.4%. On an operational basis Asia Pacific, Africa region grew 10.3%, the western hemisphere, excluding the U.S., grew by 7.1% and Europe grew 6.6%.

The success of new product launches and continued growth of key products made strong contributions to the results in all regions. Turning now to earnings, our earnings were $4.7 billion, up 35.2% compared with the 2013 results. Earnings per share were $1.64 versus $1.22 a year ago.

As referenced in the table reconciling non-GAAP measures, 2014 first quarter net earnings were adjusted to exclude a net gain of approximately $300 million for after tax special items. First quarter 2013 net earnings included a net charge of approximately $600 million for after tax special items. Dominic will discuss special items in his remarks.

Excluding special items for both periods, net earnings for the current quarter were $4.4 billion and diluted earnings per share were $1.54, representing increases of 7.8% and 6.9% respectively as compared to the same period in 2013.

Turning now to business segment highlights, please note percentages quoted represent the operational sales change in comparison to the first quarter of 2013 unless otherwise stated and therefore exclude the translational impact of currency. I will begin with the consumer segment.

Worldwide consumer segment sales of $3.6 billion decreased 0.6% with U.S. sales down 2.9% while outside the U.S. sales grew 0.7%. Excluding the impact of divestitures net of acquisitions, both worldwide and U.S. growth were approximately 1%.

Major drivers of the results were skin care and oral care offset by the divestiture of the North America women’s health business. Skin care results were driven by AVEENO and DABAO new product launches supported by robust marketing campaigns.

Oral care results were driven by results for LISTERINE due to new product launches and successful marketing campaigns. OTC sales were negatively impacted by a weaker cold and flu season partially offset by strong sales of ZYRTEC with the U.S. launch of the Dissolve Tabs including sales related to the initial stocking.

Moving now to our pharmaceutical segment, worldwide net sales of $7.5 billion increased 12.2% with the U.S. up 7.7% and sales outside the U.S. up 16.9%. As a reminder, in the first quarter of 2013, U.S.

results included a positive adjustment to previous estimates for managed Medicaid rebates under the Affordable Care Act related to new data received from the states. The most significant impacts from the adjustment were in immunology, neuroscience and PROCRIT. Excluding this item, 2014 worldwide sales were up over 15%.

In addition, in the early part of last year, the company made certain supply chain changes for REMICADE, resulting in sales to distributors previously recorded as U.S. export sales now being recorded as international sales. Adjusting the 2013 base to reflect this impact as well as the U.S. managed Medicaid adjustment, the first quarter 2013 U.S.

pharmaceutical segment U.S. growth was over 19% and growth outside the U.S. was approximately 12%. Pharmaceutical growth was driven in part by a recently launched hepatitis C product called OLYSIO in the U.S. and SOVRIAD in Japan, contributing over 5% to the worldwide pharmaceutical growth versus the first quarter of 2013.

Other significant contributors to growth were ZYTIGA, XARELTO, STELARA, INVOKANA and INVEGA SUSTENNA or XEPLION partially offset by lower sales of CONCERTA and ACIPHEX due to generic competition. The strong results for ZYTIGA in the U.S.

were driven by increased market share in the combined metastatic, castrat-resistant prostate cancer market combined with estimated market growth of 10%. ZYTIGA has captured approximately 34% of that market. The expansion of the label to chemo-naïve patients and continued progress and reimbursement drove the strong results outside the U.S.

ZYTIGA is approved in more than 80 countries. XARELTO sales doubled compared with the same quarter last year and grew nearly 18% on a sequential basis. Total prescription share or TRx at the end of the quarter in the U.S. oral anticoagulant market grew to 12.5% with cardiology TRx estimated at nearly 22%. INVOKANA sales contributed 2.5 points to U.S.

pharmaceutical gross rate, and at the end of the quarter achieved 2.1% TRx within the defined market of type 2 diabetes excluding insulin and metformin, up from 1.5% in the fourth quarter of 2013. TRx with endocrinologists grew to 6.6% by the end of the quarter, up over 1% sequentially.

Continued momentum and market share for STELARA complemented by strong market growth drove results in immunology while increased market share drove results for INVEGA, SUSTENNA or XEPLION. I’ll now review the medical devices and diagnostics segment results. Worldwide medical devices and diagnostics segment sales grew 1.8%. U.S.

sales declined 1.6%, while sales outside the U.S. increased 4.6%. Growth was driven by orthopedics, specialty surgery, vision care and cardiovascular care, partially offset by lower sales in diabetes care and Ortho-Clinical Diagnostics. Lower price primarily related to competitive bidding continued to impact the diabetes care business in the U.S.

Orthopedic sales growth was driven trauma, knees and hips. Trauma was up 7% with the U.S. up 10%. In the U.S., strong market growth and the positive impact of the recovery from the prior year nail recall was partially offset by pricing pressure. Knees worldwide increased 3%, with 2% growth in U.S.

and 6% growth outside U.S., driven by the successful launch of the ATTUNE Fixed Bearing Knee, partially offset by price pressure across the region and softness in the U.S. market. Hips growth of 2% worldwide was driven by nearly 4% growth in the U.S. due to strong results in primary stem platform sales, partially offset by continued pricing pressure.

Specialty surgery growth was driven by new products launched and market growth in our worldwide biosurgery business and energy business outside the U.S., as well as strong sales for both infection prevention and MENTOR products. Vision care sales growth is primarily due to a customer inventory build anticipated to reverse in the second quarter.

Cardiovascular growth was driven by 15% worldwide increase in our Biosense Webster business due to new catheter launches and continued market expansion. That concludes the segment highlights for Johnson & Johnson’s first quarter of 2014. I’ll now turn the call over to Dominic Caruso.

Dominic?.

Thanks Louise and good morning everyone. We are very pleased with our strong start to 2014 and I believe we are well positioned for continued growth in this dynamic healthcare environment. As Louise did, I have also added a few slides to accompany my remarks, which we hope you will find helpful as you are following along on the webcast.

I’ll take the next few minutes to review our financial performance and then provide our guidance for you to consider in refining your models for 2014. But before I do that, I want to comment on what we are seeing in the market for healthcare.

The early first quarter data we’ve seen so far shows continued softer utilization trends impacted by the severe winter conditions. The data we have shows continued slight declines in the rates of surgical and lab procedures in the United States, similar to what we saw over the past 12 months.

Additionally, the strong fourth quarter utilization in orthopedic procedures softened in the first quarter due to some seasonality as we and many of you had expected. Overall as economic conditions continue to recover and given the positive demographic trends, we remain confident about the long-term health of the market.

And at Johnson & Johnson we continue to make very good progress on our near-term priorities of achieving our financial targets, restoring and re-launching our U.S. OTC products, continuing to capitalize on the potential of DePuy Synthes and building on our strong momentum in pharmaceuticals.

At the same time, we also continue to make good progress on our long-term growth drivers, which we discussed in detail during our January meeting.

During the quarter, we had several key developments across our three business segments including key regulatory milestones in the pharmaceutical and medical device segments and I will mention a few of them here. In the pharmaceuticals segment, these included several CHP recommendations for approvals in Europe for simeprevir, siltuximab and VOKANAMET.

VOKANAMET is a fixed dose combination product of canagliflozin and metformin for the treatment of type 2 diabetes. As well, we received FDA approval for the use of IMBRUVICA in patients with chronic lymphocytic leukemia.

And in the MD&D segment Biosense Webster received FDA clearance for the THERMOCOOL SMARTTOUCH, the first catheter ablation therapy to feature direct contact force technology for the treatment of atrial fibrillation.

During the quarter, we accepted The Carlyle Group’s offer to purchase our clinical diagnostics business and we expect that transaction to close towards the middle of the year. We also made decisions regarding our consumer portfolio, as we have signed a definitive agreement to sell global rights for the K-Y brand to Reckitt Benckiser.

If you turn to the next slide, you can see our condensed consolidated statement of earnings for the first quarter. As Louise has already covered our sales results, I will review some other key points on the balance of the statement of earnings.

Please direct your attention to the boxed section of the schedule where we have provided earnings adjusted to exclude special items.

We are pleased to report adjusted net earnings of $4.4 billion, which are up 7.8% over the first quarter of 2013 and adjusted earnings per share of $1.54 versus $1.44 a year ago, up nearly 7%, which exceeded the mean of the analyst estimates that’s published by First Call.

As referenced in the table of non-GAAP measures, the 2014 first quarter net earnings were adjusted to exclude a net after-tax gain of approximately $300 million or special items, which consisted of the following.

A charge for in process research and development related to the discontinuation of the development program for PureTox, continued cost associated with the integration of Synthes and finally during the first quarter, a capital loss was realized for tax purposes on the sale of shares associated with Conor Medsystems, which resulted in a tax benefit of approximately $400 million.

The value of the Conor business was previously written down for books purposes. Now let’s take a few moments to talk about the other items on the statement of earnings. I am pleased to point out that we saw very good operating performance in our results. Cost of goods sold at 30.1% of sales was 160 basis points lower than the same period last year.

Included in last year’s cost of goods sold was the inventory step-up associated with the Synthes acquisition, which we characterized as a special item.

Excluding this, cost of goods sold was lower by 80 basis points, reflecting the mix of our results this quarter which were driven primarily by our pharmaceutical business as well as cost improvements across many businesses.

This was partially offset by the impact of the weakening of the Japanese yen, which we discussed as a headwind for 2014 although that negative impact of gross margin will increase throughout 2014.

Selling, marketing and administrative expenses were 28.6% of sales or 120 basis points lower as compared with the first quarter of 2013 again due to the growth in our pharmaceutical business of new products and overall good management of cost primarily our MD&D businesses.

Our investment in research and development as a percent of sales was 10.1% at a similar level as we saw in the prior year, as we continued to make important investments for the future.

Overall, our pre-tax operating margin when excluding special items was 31.2% or 200 basis points higher than the prior year, a strong performance early in the year, but not fully reflective of the investment plans we have for the remainder of the year, more of a headwind related to the weakening of the Japanese yen as I noted earlier.

Interest expense net of interest income of $118 million was slightly higher than the prior year period due impart the higher average debt levels. And other expenses net of other income was a net charge of $86 million in the quarter compared to a net charge of $515 million in the same period last year.

Excluding the special items that are reflected in this line item, other expenses net of other income was actually a gain of $32 million compared to a net gain of $83 million in the prior year period. Excluding special items the effective tax rate was 20.4% compared to 19% in the same period last year.

This effective tax rate is higher than our guidance for two reasons. First, it does not yet reflect the benefit of the R&D tax credit as that legislation has not yet been passed. And secondly, the mix of our business this quarter, which reflects a higher portion of our earnings from the U.S.

driven primarily by the success of our new pharmaceutical product launches. Now I will provide some guidance for you to consider as you refine your models for 2014. Before I discuss sales and earnings, I will first give some guidance on items we know are difficult to forecast, beginning with cash and interest income and expense.

At the end of the quarter, we had approximately $12 billion of net cash, which consist of approximately $29 billion of cash and marketable securities and approximately $17 billion of debt.

For purposes of your models, assuming no major acquisitions or other major uses of cash, I suggest you consider modeling net interest expense of between $400 million and $500 million consistent with our previous guidance.

Regarding other income and expense, as a reminder this is the account where we record royalty income, as well as gains and losses arising from such items and litigation, investments by our development corporation, as well as divestitures, asset sales and write-offs.

We would be comfortable with your models reflecting 2014 other income and expense excluding special items as a net gain, ranging from approximately $600 million to $700 million, this is consistent with our previous guidance. And now a word on taxes.

Our guidance for 2014 anticipates that the R&D tax credit will be renewed by Congress, although that has not yet occurred. We would be comfortable with your models reflecting an effective tax rate for 2014 excluding special items of approximately 19% to 20%.

If the R&D tax credit is not approved, it will negatively impact the tax rate by approximately 0.5%. This guidance is higher than our previous guidance reflecting a change in the mix of our business resulting at a higher portion of our earnings in the United States.

As always, we will continue to pursue opportunities in this area to improve upon this rate throughout the year. Now turning to sales and earnings. As I noted earlier, we have received and accepted a binding offer for our Ortho-Clinical Diagnostics business of approximately $4 billion.

We expect the transaction to close mid-year that the resulting gain will be treated as a special item. As of today we are considering how to best allocate the net after-tax proceeds from the divestiture.

As is our practice with acquisitions and divestitures, we will update our guidance after the transaction closes to reflect the impact this divestiture could have on our sales and EPS excluding special items for the remainder of the year. Therefore, our guidance today will not include the impact of this transaction.

However, at this time we believe that any such impact will be certainly absorbed within the range of EPS guidance we are providing today. Our sales and earnings guidance for 2014 takes into account several assumptions that I highlighted to you in January. Let me just review those briefly now.

Those key assumptions are for sales our assumption for PROCRIT is that there will not be biosimilar competition in 2014 and for INVEGA SUSTENNA and RISPERDAL CONSTA we do not anticipate generic entries for these products this year. And as for earnings there are several factors to note.

First some comments about foreign currency fluctuations that impact real economic transactions as opposed to only translation, which I will discuss later. As we highlighted in January, the Japanese yen devalued by approximately 25% versus the U.S. dollar and the euro in 2013.

The impact of the yen devaluation on 2013 results was not significant because of our policy of hedging foreign currency transactions 12 to 18 months in advance.

However, the impact of the devaluation is a significant headwind in 2014 and our 2014 guidance reflects a negative impact to gross margin of approximately 60 basis points or a negative impact to EPS of approximately $0.11 per share.

In the event of a significant devaluation of any other major currency such as the Venezuelan bolivar, we will look to mitigate that impact depending on the magnitude of that impact. However, such a potential devaluation of the bolivar or any other currency is not reflected in our guidance.

We also expect continued pricing pressure in 2014 across many markets, particularly in Europe. The impact of this negative pricing pressure is expected to negatively impact our pre-tax operating margin by approximately 50 basis points.

So, as we’ve done for several years now, our guidance will be based first on a constant currency basis reflecting our results from operations. This is the way we manage our business and we believe this provides a good understanding of the underlying performance of our business.

We will also provide an estimate of our sales and EPS results for 2014 with the impact that current exchange rates could have on the translation of those results. As of last week the euro had strengthened versus the U.S. dollar as compared to 2013 average levels. However, many other currencies have weakened versus the U.S.

dollar such as the Canadian dollar and the Brazilian real as compared to their average levels for 2013. Considering the factors I just noted, we would be comfortable with your models reflecting an operational sales increase like constant currency basis of between 5% and 6% for the year.

This would result in sales for 2014 on a constant currency basis of approximately $74.9 billion to $75.7 billion. We’re not predicting the impact of currency movements, but to give you an idea of the potential impact on sales of currency exchange rates for all of 2014 were to remain where they were as of last week.

Our sales growth rate would decrease by nearly 0.5%, plus under this scenario we would expect reported sales growth to range between 4.5% and 5.5% for a total expected level of reported sales between $74.5 billion to $75.3 billion, which is higher than our previous guidance.

Now turning to earnings; our earnings guidance reflects the major assumptions I noted earlier and reflects the strong performance we saw in the first quarter and our plan to continue investing in future growth.

Considering those factors, we suggest that you consider full year 2014 EPS estimates, excluding the impact of special items of between $5.74 and $5.84 per share on an operational or constant currency basis.

And again we're not predicting the impact of currency movements, but to give you an idea of the potential impact on earnings per share if exchange rates for all of 2014 were to remain where they were as of last week then our reported EPS excluding special items would be positively impacted by approximately $0.06 per share due solely to exchange rate fluctuations.

We therefore suggest that you model our reported EPS excluding special items in the range between $5.80 and $5.90 per share or growth rate of between 5% and 7%. This is higher than our previous guidance.

As you update your models for the guidance that I just provided, you will see that we do expect that our pre-tax operating margins will show a stronger improvement in 2014 over 2013 levels than we have previously expected, although not at the level we saw in the first quarter, despite the negative impact of the devaluation of the yen on our gross margins and the expected pricing pressures.

This is due to the strong performance of our business, primarily driven by new product launches and continued management focus on our operating expenses. You should also see that our net income margin will expand, despite the increase in our effective tax rate. In closing, we are very pleased with our strong results for the first quarter of the year.

The breadth of our business, which provides balance and consistency to our overall performance, as well as the extraordinary achievements and dedication of our talented people around the world positions us well to sustain and drive growth throughout the year. Thank you.

And now I would like to turn things back to Louise for the Q&A portion of the program..

Thank you, Dominic.

Stephanie, could you please provide the instruction for the Q&A session?.

Thank you. (Operator Instructions). And your first question is from the line of Mike Weinstein with JP Morgan..

Good morning Mike..

Thank you and good morning. Thanks for taking the question.

So Dominic, if I take you back to three months ago at the analyst meeting and in also subsequent call on February, I firstly will get on the sales guidance for the year and I think I have talked at the call that you’re being conservative and now you've come in here and you reported a better than expected first quarter and you raised your guidance for the year.

So can you talk a little bit about from the January call to to-date what has increased your confidence? And how much of that is from OLYSIO which obviously had a much strong quarter this quarter? And can you talk about that product’s performance and ability? Thanks..

Sure Mike. Well, you're right. You did challenge us on that presumed level of conservatism. I would say just as a way of background, we are trying to forecast new product sales in a dynamic healthcare environment and we are also trying to forecast various economic trends and utilization rates in the marketplace.

So we do our best to give you our sense for what we are seeing at the time. What we are seeing now is a better overall sense of the launch, particularly the launch of the new products within pharma. And OLYSIO as you pointed out has done remarkably well. Yes, it’s done better than we expected.

It’s primarily due to the fact that the Liver Society issued guidelines in January recommending the use of OLYSIO along with the product from Gilead, Sovaldi. And that has been adopted by the community, by the medical community as a standard of care based on the liver guidelines of the society of liver specialist guidelines.

So that’s something that we learned after our guidance. We saw it take off and we are very pleased with the results.

And if you look at the total increase in our sales guidance, which is about roughly $1 billion, I would say the majority of that is due to the fact that OLYSIO now is performing much better than our earlier expectations and we are very pleased with that. And obviously more patients are gaining the benefit of utilizing this new therapy.

As far as sustainability is concerned, I think you know that there are competitive products on the horizon. The goal of searching for interferon-free therapy seems like it will be a reality. And there are products that are expected to be approved later this year. So we’ll have to wait and see whether those products are in fact approved.

And then of course we’ll reassess the long-term outlook for OLYSIO given any new product or new competition. And just as a reminder, we are also studying OLYSIO in a Phase 3 clinical trial along with Sovaldi. So we’ll have that data after that trial is concluded and that will give us a better idea of the overall sustainability as well..

Okay. And Dominic just one follow-up on the EPS guidance for the year; it’s sighted to me what you were saying the FX line that there was going to be a $0.06 of earnings pushing your upside based on real time FX rate [if you’re able] to hold that you are not including in guidance.

[So I just wanted that] right? And two, I assume that would offset the impact of the OCD divestiture, is that [a very little up there]?.

No Mike, let me just reiterate that.

So the $0.06 that I referred to as the benefit from exchange rates versus last year is related to simply we gave guidance on an operational constant currency basis of $5.74 to $5.84, but then when you consider the uptick in exchange rates particularly the euro that will benefit that constant currency range by $0.06 and therefore we’ve increased our guidance by that $0.06 to $5.80 to $5.90 or a midpoint of say $5.85 compared to the midpoint in January of $5.80.

The overall increase in FX impact between those two guidance points is only about a penny, it was about $0.05 in the January discussion and just about $0.06 now..

Got you.

But the OCD piece is (inaudible) cadence absorb that dilution or do you expect to when that occurs?.

Yes.

We expect that given the strength of the business today and the range of guidance we’ve provided assuming that transaction closes at mid-year, we believe that any remaining negative impact from not having those earnings for the balance of the year would certainly be absorbed within the range of guidance we’ve now just provided for earnings per share..

Perfect. Thank you, guys..

Welcome..

Next question please?.

Your next question is from the line of Matthew Dodds with Citigroup..

Good morning Matt..

So Dominic on the SG&A, usually it looks like the first quarter does start low as a percent and then it gets higher during the year, but you are starting at a much lower base this year.

Is there anything particular this quarter or is the cost cutting and expense control going to be lower this year, as you move through the year, even though the percent goes up?.

Yes. I think a couple of things, one is we’re starting the first quarter with tremendous growth from new product launches in pharma. They don’t have a pro rata increase in SG&A from the prior year.

Secondly, we have implemented some cost reductions and combined some businesses in the MD&D sector of our business to better compete in the current dynamic marketplace.

And thirdly, we do have a number of programs as we’ve talked about before and Alex spoke about in January the overall streamlines of operations; and not only reduce some cost, but also get more focus and more simplicity and agility into our operations.

So I think all of those things will help and would result in SG&A being lower this year as compared to last year. Although, as you pointed out that we haven’t yet invested everything we would like to invest for the balance of the year.

So my guidance does include the fact that we would ramp up some investment in the balance of the year, which is not yet included in the first quarter results..

And just quickly on Europe, you grew it looks like organically around 7%.

Can you just say [probably] was that mostly driven by pharma or did MD&D consumer do okay in Europe; how is the Europe trending in those businesses or how was it in the first quarter?.

Yes. I think that we obviously benefited from strong growth of new product launches in Europe in the pharmaceutical business. I don’t think there was anything in particular to point out in any of the other businesses.

There is nothing like substantially positive or negative in the Europe business [that is] primarily driven by the pharmaceutical launches in Europe..

Thanks Dominic..

You’re welcome..

Next question please?.

Your next question is from the line of Kristen Stewart with Deutsche Bank..

Good morning, Kristen..

Good morning. I was just wondering if you could just explain the tax benefit associated with Conor Medsystems; what way that was I guess included within this quarter’s results? Did you do something (inaudible) part of that business or….

Sure. Kristen, well just to remind you, we excluded it from our ongoing operating results. So, it’s the earnings excluding special items of a $1.54 exclude this benefit, just to be clear. It’s reported in the overall GAAP results of a $1.64 that’s primarily why the GAAP results are higher.

So that business was the business we acquired for the next generation of drug eluting stents several years ago. And we pulled out of that business, we wrote down the assets associated with that business previously. And when we took that write down for book purposes, we also excluded that from our ongoing earnings and recorded it as a special item.

Now what happened in this past quarter is the underlying shares of the business that we bought, we bought the stock of that company, we sold that company along with its related intellectual property. And as part of that sale, we recognized for tax purposes a capital loss. That capital loss generates as you know a tax benefit.

And so we thought it would be prudent to record that tax benefit as a special item because it essentially offsets the previous write down for book purposes which was also special item..

And the sale was this quarter; and can you comment who you sold it to?.

We did sell this quarter; and no, we are not going to comment on who the sale was to..

Okay. And then can you maybe just provide a little bit more color just in terms of what you were seeing within the medical device business? I know you commented on lower utilization trends but then also commented on expectations I guess for things to improve within orthopedics but any additional color just on the U.S.

markets?.

Sure. So, what we saw in the U.S. markets, as I commented in my script was a similar type of year-over-year decline in the rate of utilization, particularly hospital admissions as well as lab procedure.

So, these have been trending now for the past year or so at minor downticks in quarter -- year-over-year growth in the quarter or depression in utilization from the prior year. So we saw that continue in the first quarter.

With respect to orthopedics in particular, we did expect, I think many of you all expected that the higher utilization in the fourth quarter was a result of seasonality, primarily related to the health plans and also probably some influence from the Affordable Care Act rush to get coverage in some, maybe some confusion over what was happening in the marketplace.

So in particular, the orthopedic trends did slowdown in the first quarter compared to the fourth quarter. And we saw this very same phenomenon a year ago. So, it’s now become quite a seasonal business from that perspective that we see a real uptick at the back end of the year and then a slowdown in the early part of the year.

The only other thing I would say that in the medical device business more broadly we did see some softer trends in elective procedures we think in the U.S.

that’s probably due to the severe winter conditions, so we don’t have any exact data on that fact but anecdotally that’s what it appears, has impacted utilization rates in the first quarter or slightly as far as the data we have is concerned..

Okay. Thanks very much..

You’re welcome..

Next question please?.

Your next question is from the line of Larry Biegelsen, Wells Fargo..

Good morning Larry..

Hi Larry..

Good morning. Thanks for taking the question. So, maybe for Dominic or Louise, you guys have a pretty robust late-stage pharma pipeline again, I count 6 phase, 3 products right now.

Could you maybe talk about the key pipeline milestones we should look for in 2014 on the pharma side?.

Sure. Well Louise, maybe you can help me with any particular milestones we have. So, we have -- well we obviously have IMBRUVICA for example has a number of new indications that we’re studying, some have already been approved as you know.

But there is a series of new indications being studied for IMBRUVICA and hopefully we’ll hear some of that this year. Simeprevir is also being studied as I mentioned earlier in the Phase III trial along with Sovaldi.

And I don’t know that there is anything in particular that’s a data or a conference where data will be disclosed or provided in the near-term, but Louise, you might have more on that?.

Yes. So we’ve announced that the [resonated] data from IMBRUVICA should be shown in this quarter at ASCO. There is also a significant number of abstracts scheduled to be shown for INVOKANA, but at this point I’m not going to be able to give you the specific confer, because still they haven’t been published at this point in time.

We are also leaving for the fixed dose combination with for INVOKANA that would be something to watch out for this year as well..

Right. Thanks that’s very helpful. And then one last question, emerging market growth this quarter, Dominic can you talk about what you saw there or BRIC growth? Thanks and I will drop..

Sure. Yes, so for BRIC growth this quarter, we saw about 13% growth in the BRIC markets and for the broader emerging markets about 7% growth..

Thank you very much..

You are welcome..

Next question please?.

Your next question is from the line of Jami Rubin, Goldman Sachs..

Good morning Jami..

Thank you..

Hey Jami..

Good morning.

Just a couple of follow-up questions, the OLYSIO numbers, was there stocking in that $350 million or $354 million? And I don’t know if you disclose the IMBRUVICA numbers? And then just a question on sort of general pricing that we’ve seen in MD&D, I think you said several times during your prepared remarks that growth in orthopedics was offset by pricing pressure particularly in hips and knees.

So, I guess sounds like utilization trends have worsened a bit, have pricing trends worsened and what are your expectations for pricing for the remainder of the year? Thanks..

Okay. Well, Louise has all the facts in front of her. So, I'll let her take that question..

Okay. So, for OLYSIO in the U.S. they only have data for in the U.S. it's about 20% of the sales were inventory build. So the majority of it was certainly flowing throughout out to the patients, which is good news for the patients. Regarding the hips and knees pricing, I can get that number to you. In the -- this is again U.S.

commentary, the price change for hips was negative 4.1% in the first quarter, offset by a very modest positive mix to net of the 3.7% negative that is slightly negative versus the fourth quarter of ‘13.

We also, for the knees, we have a 2.4% negative price offset by about a 2% positive mix for net of 0.6% negative for knees, which is very similar to the first quarter, the fourth quarter of 2013..

And what about IMBRUVICA?.

So, IMBRUVICA we did report a little modest bit of sales on that, but we are going to leave the IMBRUVICA comment for Pharmacyclics in their call, because it's actually from the U.S..

Okay. And just Dominic, can you comment on pricing expectations going forward.

Do you expect this to stabilize, worsen, get better?.

Yes. So in January, when we provide the guidance in January, we said that we thought negative pricing pressures particularly in Europe would impact our pre-tax operating margin by about 50 basis points, we still see that. So, we don't think it's gotten any worse.

So we're consistently seeing same type of pricing pressure we saw, but we developed our plans for 2014, so no change in our expectation..

So, thank you. Next question please..

Your next question is from the line of Glenn Novarro with RBC Capital Markets..

Good morning Glenn..

Hi, good morning guys. I just wanted to follow-up on the comment about U.S. knee softness. So, in February here in the U.S. we did have bad weather and that may have contributed given the fact that you’re still having a very strong rollout. So, I am wondering did you see your volumes even hits to did they improve throughout the quarter.

So, in other words February was hit because of weather and then these patients came back in March or if there is a weather impact are we are going to have these patients come back more in the second quarter? That’s my first question..

So, to frame the weather impact I also want to pick up the additional selling days. So in recon, we have one additional selling day, it’s very specific to recon it does not include trauma. And that pretty much offset the impact of the harsh weather. So net-net there was no impact we believe to the knees and hips because of that combination.

But when you look back at when you look at last year seasonality, in knees we had about a 5% seasonality, and in hips we had about a 2% seasonality which is very similar trends to what we are seeing in this quarter. As far as January, February and March we don’t go into that detail of the monthly sales..

Okay. And sticking on ortho, can you give us the spine results, you didn’t give us the spine results in your commentary, maybe U.S.

and global spine revenues and any pricing commentary?.

Okay. So spine in the U.S. on an operational basis is down about 3%, o-U.S. is up about 4% for a flat on a worldwide basis and in terms of price it’s down, again this is U.S. only, it’s down 3% in price, slight positive mix for a net of down 0.8% in terms of price mix and that’s much less negative than it was in the fourth quarter..

Yes, okay, that’s great. And then let me put in one question just on the fixed dose combination of INVOKANA because I believe you had a complete response letter recently. So, what’s changed in terms of it sounds like you’re a little bit more confident that we may get approval this year.

So, I am just curious, was there more data or what’s changed in your view on the fixed dose combo?.

For the U.S. we actually resubmitted the response to the complete response in February and we have a PDUFA date in August..

Right. And we did get a recommendation for approval of that fixed dose combination in Europe..

That’s correct..

Okay. Thanks guys..

You’re welcome Glenn..

Next question please?.

Your next question is from line of Derrick Sung, Sanford Bernstein..

Good morning Derrick..

Hi Derrick..

Hi. Thanks for taking the question. Going back to gross margins I appreciate some of the qualitative commentary you gave there Dominic on the increase in the impact from the yen moving out to the year.

I was just wondering if you can maybe give us a better sense this quarter of what the impacts from the devaluation of the yen was? And also how much of the strength is coming from OLYSIO in the pharma product launches that might sort of carry through the rest of the year?.

Yes. Sure Derrick. Well, as we said in our overall guidance both in January and today, we expect the impact of the devaluation of the yen to impact gross margins for the year about 60 basis points and I said that it would accelerate through the balance of the year, just because of the way the transactions were hedged.

In the first quarter alone we estimate that that impact was only about 20 basis points negative to gross margin. So we haven’t yet seen the full impact of the yen devaluation.

And with respect to overall gross margin performance even excluding that primarily driven by the mix of the business because of course our pharmaceutical business is our highest gross margin business and that’s delivered most of the growth this quarter. And yes in fact that growth in gross margin has been positively impacted by the sales of OLYSIO..

Thank you. And in the consumer business, that was one area that came in a little weaker than we expected, particularly OTC baby care, wound care were the kind of three categories that just kind of missed our estimates.

Just more broadly speaking, I was wondering if you could kind of talk to us strategically about plans to accelerate growth in that business.

Can you get that business back up to sort of market growth? And also how can we think about the margins in that business now that it seems that most of the OTC products are back on the market, can we expect to see any sort of margin leverage from that business?.

Sure, Derrick. Well, just to give you an overall perspective on the consumer business, as Louise mentioned, the business was impacted by tough comparisons because of the women’s health products that we divested. So, the overall growth excluding divestitures and even excluding some acquisitions that we did was about 1% in the quarter.

Couple of things to note about that 1% that last year’s first quarter of the year 2013 was a very strong cold and flu season and despite the severe winter conditions, this was actually a very weak cold and flu season. We think that has overall a point or a point and half of growth impact between the two periods.

So, the underlying business excluding those impacts is about 2.5%. We did in fact as you know, launched the products back into the marketplace in early 2013. We’re very pleased with the uptake. It was showing double-digit consumption growth in the products. And of course we’ve launched some new products such as ZYRTEC quick dissolving tablets.

So, overall we’re pleased with the progress that the consumer business is making overall. We have great plans in place to launch new products. And overall, the margins as you pointed out, should improve as we complete the work with the consent decree, which we expect will approach completion towards the end of this year or early next year.

So after that, we would then expect to see the overall margins improve as the business recovers from that activity and obviously the new products take hold in the marketplace..

Okay. Thank you very much..

Next question please?.

Your next question is from the line of Rick Wise with Stifel..

Good morning Rick..

Hey Rick..

Hi Louise, hi Dominic. Couple of questions, Dominic just one bigger picture question political turmoil trade issues rising in Russia.

Can you remind us what percentage of your sales are in Russia are in that region of the world? And are you concerned -- is this an incremental concern for the rest of the year at all?.

Sure. So, let me give you sort of a sense for Russia. So, we said that growth for the BRIC markets overall was about 13% this quarter and the growth within Russia was at mid single-digit growth. Now, if I look back first quarter of 2013, our Russia growth was actually negative in the first quarter of 2013.

And that has to do with the timing of tenders within the Russian market. So, there is lots of fluctuations. The only thing we have seen so far that’s a little bit of a concern is that, there does appear to be some funding restrictions in governmental buying patterns of respected capital budgets in the hospitals.

But overall, it’s not a very significant piece of the overall business. With respect to our total BRIC business, it’s relatively small piece of the business. Obviously China and Brazil drive the majority of our growth and the majority of our business in the BRIC markets..

Okay. And one other question Dominic, I mean with the sale of diagnostics, it’s hard not to reflect on the rest of the portfolio and look around for other underperformers and I know you are doing that all the time.

But diabetes comes quickly to mind, I appreciate that you are going to anniversary the price cut in this summer, maybe in the third quarter. But maybe talk about the diabetes outlook, what changes as we get pass that anniversary? And are you taking a harder look at underperformers like diabetes.

Do you need to be in this business longer term for the rest of the franchise or is this something that maybe you could carve out at some point? Thanks Dominic..

Okay. Sure Rick. Well, just a few comments on diabetes overall and our approach to portfolio analysis. Alex, as you may remember has been very clear about some of the criteria we use to analyze the portfolio.

One criteria is are you number one or number two in your market or do you have the technological wherewithal, the technology et cetera, new products that could propel you to that number one or number two spot; and lastly, are you complementary to any of our other businesses.

So, with respect to diabetes, despite the significant pricing pressure in the market overall, all companies have faced this, diabetes business is a market leader. They have very strong market share positions, the business is doing very well outside the U.S., continues to grow nicely, and also it is very complementary to other parts of our business.

We attribute the successful launch of INVOKANA partly to the fact that we have very good relationships with the endocrinologists as a result of our Life Scan business already.

So, at this point, we haven’t made any decisions with respect to any other portfolio of choices, but the diabetes business is well positioned overall in the marketplace and it is complementary to significant part of our other business..

Okay. Maybe just to follow-up Dominic, I apologize, with $3 billion in cash and significantly more likely all things equal by year-end, any updated thoughts on capital allocation, acquisition or share buyback? Thanks so much..

Sure, Rick. So, just to correct you, I think you said $3 billion in cash; it’s actually nearly 30..

30..

Yes..

Okay..

Well, no change in the way we look at it. We’ve been very consistent with this approach. We think that looking first at our dividend and we’ll obviously know more about the dividend at the Annual Shareholders’ Meeting in a couple of weeks.

After that, we look to invest for growth and for value creation so that we’re appropriately generating returns commensurate with the risk associated with putting our investors’ capital to work. And then finally after exhausting those possibilities, we then look to share repurchases if they’re at the right time.

So no change in our overall approach, we think it’s a very good approach. We consistently follow it; it’s proved to be successful in overall balance of both returns to shareholders and investing in growth over the long-term. So as of now no changes in our approach and nothing else to report..

Thanks..

Next question please?.

Your next question is from the line of Matt Miksic with Piper Jaffray..

Hey Matt..

Hi, thanks. So, just one follow-up detailed question here that I don’t think you’ve provided and then I have a question on consumer. So, in your remarks Louise, I think you had not covered the trauma detail, I’d love to get some color as to exactly to what happened there..

Okay. So, the U.S. growth is 10%; the OUS growth is 4% for a total of 7% operational growth. In terms of the pricing, pricing was about 0.7 negative in the quarter and that’s the first time we’ve actually seen that. It was more than offset by a positive mix of about 2.5%. So net-net, the pricing mix in the U.S.

was about 1.8% stable, which was slightly favorable versus the fourth quarter 2013..

Now, one thing I would like to add to that is I think that the trauma team has done a remarkable job recovering from the nail recall that happened. And so they deserve to be congratulated for bringing the product back to the market.

And of course patients are better forward and our customers should have the confidence in us to be able to do that and we’ve demonstrated that their confidence is well earned..

Great, thank you for that. And then on consumer, I guess we didn’t spend much time here in Q&A talking about it, but that had been topic of some discussion over the past couple of years. And you made some changes there and then you announced this licensing arrangement around K-Y.

I’d love to get a sense may be strategically how you are thinking about that business particularly as it relates to that $30 billion and obviously $30 billion in cash that you have outstanding there..

Sure Matt. Well, just to clarify with consumer, we basically -- we did enter into an agreement to sell the K-Y brand to Reckitt, and that transaction should close in the second quarter. That was a strategic portfolio decision.

We’re looking at the portfolio and consumer as we look at the portfolio in each of our businesses and obviously through the filters that I just described earlier. And with respect to the utilization of our cash, the consumer business like any of our other businesses, MD&D or consumer competes for capital in the same way.

We look at strategically where we should be investing the capital and then of course whether or not that allocation of capital will give us an appropriate rate of return given the risk involved.

So, it doesn’t -- we don’t treat the businesses any differently except for a change in the risk adjusted rate of return that’s required based on the obvious risk involved that’s different between the businesses. So, there is no specific plans with respect to the $30 billion as I mentioned earlier in answer to Rick’s question..

Can I push you just a little bit on that Dominic?.

Sure..

I thought I remember there was a time when we thought of consumer pharma, MD&D as kind of a three legged stool and consumer kind of being the shorter leg of that stool.

Is there still thinking that you will work to try to make this some more balanced divisional portfolio?.

So, let me just comment a little bit on that Matt. When we look at the three-legged stool, we’re thinking of a broadly based healthcare business across many aspects of the healthcare marketplace both consumer medical devices and pharma.

The relative percent that each of those businesses represents as a percentage of the total and the pie if you will is really the result of decisions previously made. There is no forward looking predetermined mix that we think is appropriate.

Each and every investment is evaluated on its own merits and the mix today is 40-40-20 is the result of making the investment decisions we’ve already made. So, as we make other investment decisions with appropriate risk return profile, that mix might change, but there is no predetermined picture of the pie that we think is ideal..

Helpful. Thank you..

Okay. You are welcome..

Next question please?.

Your next question is from the line of Jeff Holford with Jefferies..

Good morning Jeff..

Hey, thanks for taking my questions. So just a bit more color on OLYSIO.

Can you just give us a bit more color on the usage of this product, do you have any information about how much of it is being used in combination with which products? Secondly, I don’t know if I have heard you breakout INVOKANA sales yet, if you can give us any color either on the actual sales or how much it contributed to growth as you have done previously? And then just lastly, if you can update us on the reexamination of the REMICADE patent and just what kind of visibility you might have out there on a potential timeline for biosimilar introductions? Thank you..

Sure Jeff. Well with OLYSIO as I mentioned earlier, the guidelines from the Liver Society was very clear that recommended usage in conjunction with Sovaldi, the new product from Gilead. We did see sales tick up right after those guidelines were issued.

So we don’t have all the specific information that I could share with you now but we do believe a large majority of the sales are in combination with Sovaldi and apparently in an interferon free regimen. I am going to skip INVOKANA and let Louise talk about that.

There is nothing we can report on the examination of the REMICADE patent, no new information. And with respect to biosimilars, we don’t really see any biosimilar impact in the U.S. And we have seen biosimilar impact outside the U.S.

but it’s been very modest with REMICADE from the product that has been approved to-date which is called what, Louise?.

Ready (inaudible)..

Yes. But it’s very, very modest. And I think that has to do with generally speaking, biosimilars are not expected to have the dramatic impact of change in the marketplace as you see in small molecules for a number of reasons that I am sure you’re aware of.

And with respect to INVOKANA, Louise?.

So, in my prepared remarks, I said it contributed 2.5 points to the U.S. growth rate..

Okay. Thank you very much..

You’re welcome Jeff..

Next question please?.

Your next question is from the line of Danielle Antalffy with Leerink Partners..

Good morning Danielle..

Good morning everyone. Thanks so much for taking the question. I just wanted to if I could follow-up on Rick’s question regarding capital allocation and more specifically focus on M&A. Dominic, I know you’ve touched on it a few times this morning.

But I guess specifically, not really related to predetermined mix of businesses but where do you see the most meaningful areas of interest for J&J, the highest growth profiles of markets where you’re not currently participating and how do you see deals going down from here on out, knowing that Synthes was the largest acquisition ever but it looks like you’re largely integrated at this point.

So, any more color there, what markets are interesting to J&J that you’re not participating in and sort of how big of an acquisition would you guys make from here on now?.

Yes. Well Danielle, let me just comment a little bit on our strategy. So again, we want to participate in the fastest growing segments of healthcare and we want to do so in a meaningful way where the asset would be better in our hands as opposed to the hands of the current owner.

But having said that, regardless of the growth trajectory of the market or the asset, evaluations have to be right. So today for me to give you any indication on which markets we’d be more interested than others, we sort of leave out the corresponding equally important characterization of whether or not evaluations are appropriate.

So, I can’t really comment today on that very specifically. And also with respect to size of transactions, we’ve done hundreds of acquisitions over the last 15 or 20 years and just about a dozen or so have been over $1 billion and very few Pfizer Consumer Healthcare and Synthes of course have been in excess of $10 billion.

So, it is pretty rare for us to do a large acquisition like that not because we have any particular pre-disposition to not doing it, but because as I said earlier, the valuation has to be right, the asset has to be better in our hands than in the hands of the previous owner and therefore and obviously the premium to be paid has to be sensible.

And then we are already broadly based in human healthcare. So, there are very few areas that we need tremendously significantly greater presence. Having said that, a lot of our capital is in fact allocated to pharmaceutical licensing and collaborations, which we think is an enormous benefit to us because it’s the most efficient allocation of capital.

We take some risk afterwards, but we don’t put the capital out on day one. Obviously we do it through the development program that we control. So that’s the way we think about it. I’m sorry; I can’t give you any more specifics today with respect to any markets or specifics beyond what I just said..

No, that’s helpful. Thanks Dominic. I guess just a follow-up on that specifically to medical device business as you mentioned, recently you’ve allocated a lot of capital to the pharma business, I know that you acquired Synthes that was a big acquisition for you guys.

How do we think about the outlook for the medical device business relative to pharma? I mean pharma has really been the engine driving growth for J&J.

Is that sort of how the future for the company looks, as pharma will be the engine going forward and devices are there to sort of generate cash or how do we think about how the med-tech business continues to set into broader change J&J’s business?.

Yes. Okay. So, that’s a great question. So, as you know, we think of ourselves as a broadly based company in healthcare. And you think of the MD&D business we have, we’re the largest MD&D player in the market. So, we obviously have quite a significant presence in the hospitals.

And that as you know is a very important part of the overall healthcare system. So, Johnson & Johnson is best positioned in medical device as I believe than any other medical device player given what’s happening in the market with respect to hospitals and specifically speaking the U.S.

with the advantage of Affordable Care Act and the accountable care organizations, we’re working to not only remain the largest player in medical devices, but to take advantage of that position in the hospital setting with respect to providing total solutions to the marketplace. So, it’s a very important part of our business.

It does drive substantial cash flows to the business. In the past, it’s been a significant contributor to growth from new products. I’m confident it will also be a significant contributor of growth from new products in the future as well.

And we have an upcoming Medical Device Business Review coming up May 22 and you’ll hear Gary Pruden and Michel Orsinger specifically talk about the surgery and the orthopedics business and the plans there. And I look forward to sharing that information with you then..

Thanks so much..

Next question please?.

Your next question is from the line of Josh Jennings with Cowen and Company..

Good morning Josh..

Good morning. Thanks for taking the questions. Dominic, it’s clear that the pharma was the driver for the margin performance in Q1 and also for your updated guidance. And it sounds like consumer; there is some room here as you work through the consent decree and for some margin expansion as well in that unit.

Can you speak specifically to the device business and particularly on margins; was it a drag in Q1 or a contributor and then also the outlook for the year here for the device business in terms of margin contribution?.

Yes, Josh. Well, we don’t give outlooks or forecasts by business of margin, but I did say that we expect to have overall margin improvement both pre-tax operating margin greater than what we expected when we gave guidance in January, but not to the extent that we saw in the first quarter.

And with respect to the first quarter, the SG&A line showed very nice leveraging year-over-year and that was due in part to the pharmaceutical business, but also very much due to the MD&D business. The MD&D business has done a very good job of consolidating businesses, of streamlining operations et cetera.

And also in the supply chain, the medical device business has even further opportunity, streamlined footprint et cetera in the supply chain. So, we do think that medical devices will continue to be a contributor to margin. Although I must say that the business does operate at a relatively high margin already.

And as a leader in the marketplace I think we should operate at that higher margin. So, that’s the way I would characterize it for now, but I can’t give you an outlook by sector at this time..

Thanks Dominic..

Next question please?.

The next question is from the line of David Lewis with Morgan Stanley..

Good morning David..

Good morning.

Dominic, I just want to -- it sounds like the operational strength of the business is going to offset any pressure from OCD, but can you just remind us on an annual basis, we had OCD potentially a $0.10 to $0.15 impact to the business, is that in kind of the rough ballpark?.

Yes. On an annual basis that’s a rough ballpark in terms of its contribution to earnings, $0.10 to $0.15 on an annual basis. That’s right..

Okay. And this, I don’t want to put words in your mouth.

But it did sound I do think operational upside of the business can offset that number this year, not $0.10 to $0.15, but obviously the annual impact and you don’t necessarily need to rely on a buyback to do so?.

Well, right now we have no buyback planned. And I did say that the current guidance that we’re giving, the guidance range that we’re giving is sufficient to absorb any impact from the loss of profitability of the diagnostic business for the balance of the year..

Okay, very helpful. And Dominic, I don’t want to take anyone’s thunder from next month, but as relates to cardiovascular and Cordis , and it comes to mind that there has been a new management team in place there I think for 12 to 15 months and it doesn’t really come up much on these calls last couple of quarters.

Can you share with us sort of any strategic or operational changes that are happening in the cardiovascular franchise that perhaps we are unaware of that you find interesting? Thank you..

Well, one thing I would say about our cardiovascular business is the Biosense Webster business is just fantastic. I mean it has been growing year-after-year in double-digit growth rates, launching new products, making meaningful innovations for patients et cetera.

And I am sure that at the MD&D Day on May 22, you’ll hear much more about that business in particular in new innovations there..

Thanks Dominic. Two more questions and then we’ll close the call.

Next question, please?.

Your next question is from the line of Bob Hopkins with Bank of America..

Good morning Bob..

Can you hear me okay? Good morning..

Yes. Hi Bob..

So thanks. I’ll go back into the weeds a little bit here after going big picture for a while. So, I was wondering if you guys could just talk a little bit about what the divisions were telling you in the quarter as it relates to general surgery trends. It didn’t look to me like those softened at all unlike what you saw in orthopedic.

So I was just wondering if there is any commentary from the divisions on general surgery that you think we might find relevant?.

The one comment that the teams told us was that with respect to elective procedures in the U.S. given the severe weather conditions, we did see some slowdown in those types of procedures. Anything else Louise that you want to….

Yes. So when we went back and talked to our surgical care team, they did tell us there is some normal seasonality within the surgical care business. And then there was some competitive pressure in the endomechanical, but there is some seasonality actually in the surgical care business as Dominic referenced.

Okay?.

And then one last one, just again, did the guys give you any indication on why pricing in hips got a little bit worse and just general comments on pricing within the device franchise for the quarter?.

I don’t think we have any specifics on pricing within the quarter that we could talk about, but I think the numbers Louise gave earlier, just give you an indication. And it was a little bit worse in hips, but….

Slightly higher rebate that was basically what it is, but it’s not such a significant change, okay? Next question please?.

Okay. Thank you..

Thank you..

Your next question is from the line of Damien Conover, Morningstar..

Good morning Damien..

Good morning. Thanks for squeezing me in here.

Just a quick question on the non-biologic injectable business, just let me get a sense of both with INVEGA SUSTENNA and RISPERDAL CONSTA, kind of what you are seeing longer term with generics entering the market? I think you mentioned INVEGA SUSTENNA; SUSTENNA not seeing any generic competition this year, but just kind of want to get a sense of when you think that generic competition might comment some of the complexities here that the generic firms have to deal with? Thanks..

Okay. So, the patent on INVEGA SUSTENNA in the U.S. expires April 2014 and then there are certain other patents that go out to 2017 and ‘18 related to formulations. We are not aware at this time of any applications in the U.S. for either INVEGA SUSTENNA or RISPERDAL CONSTA. RISPERDAL CONSTA is May 2014 that particular patent on it.

And as far as the international, INVEGA SUSTENNA in Europe is about June 2018 and RISPERDAL CONSTA is November 2014. And again, we’re not aware of any filings on it. Both of them are protected by formulation patents well beyond the composition of patent [life]. So, with that we will close the call and I’ll ask Dominic to make some final remarks..

Sure. Thanks Louise and thanks everyone for joining us today. Obviously, we’re very pleased with our strong results for the first quarter and I think we’re very well positioned to drive growth throughout the year. We do look forward to seeing you all at the Medical Device Business Review on May 22. So, thank you again and have a nice day..

Thank you. This concludes today’s Johnson & Johnson first quarter earnings conference call. You may now disconnect..