Johnson & Johnson (JNJ) Earnings Call Transcript & Summary

Okay. Good afternoon, everybody, and welcome to the next presentation. I'm Bob Hopkins, here with Geoff Meacham who covers large-cap pharma and devices. And this next section, we're thrilled to have J&J here with us for a fireside chat. Joe Wolk, J&J's well-known Executive Vice President, Chief Financial Officer, is on with us; as well as Chris and Lisa and Matt from the Investor Relations team. And just a quick plug for that team. They are a phenomenal resource for investors, and I encourage everybody to take advantage of the great resource that J&J gives to all investors. So Joe, I just want to thank you for joining us this afternoon. It's a pleasure to be with you virtually.

Bob, thanks for your time and your interest as well as that, that's extended by everybody on the phone. Certainly appreciate being invited by yourself and Geoff to talk a little bit about our company today.

Yes, that's great. And Geoff's here with us, and we'll chime in with a bunch of pharma biotech questions. And obviously, we want to cover a couple of topics that are of great interest to investors. And including COVID and your vaccine work and some of the comments you guys have been making on the state of the business. But before we got started with that, Joe, given that there is some news on the tape today on the litigation front in terms of the appeal, where there were some reduced damages but there was a ruling in favor of the plaintiff on the talc side. I was wondering if we could just kind of get J&J's take on that ruling today before we get into some of the other questions, and we may have one or two follow-ups, but just would love to get your take on the ruling today, Joe.

Sure, Bob. Thanks. And so, yes, let me start there with this morning's ruling with respect to the Ingham appeal. You may recall that was in a Missouri court. The damages there were reduced from almost $5 billion down to slightly over $2 billion. However, that is still very disappointing. We will be appealing this ruling to the Missouri Supreme Court. I would say that the initial verdict in this case was in our assessment, the product of fundamentally flawed legal process that inexplicably allowed plaintiffs to present a group of 22 women, most of who had no connection to the state of Missouri, all in a single case, alleging that they had developed ovarian cancer from talc. The verdict actually awarded an exact amount to all the plaintiffs, irrespective of their individual facts, irrespective of their medical backgrounds and the differences really in law, which to us demonstrates that the evidence in this case was simply overwhelmed by prejudice of a multi-plaintiff trial. So we're going to -- we will be continuing to go through the opinion, of course, but we have every intent to appeal this case for review by the Supreme Court of Missouri.

Okay. And then one just sort of procedural question. I assume that process of that appeal will take maybe a year. But then is there -- is that the sort of the end of the road as far as this case goes, the Missouri Supreme Court? Or could it be appealed further on to, I guess, the -- an even higher court? Or would that be the end of the line for this litigation?

Yes. So Bob, you're right, it would take probably at least a year for that appeal to probably hit the court or at least be heard. And from there, I hate to speculate as to what could happen. Certainly, you could see something going to the Supreme Court of the United States, but I think we're going to be focused on making sure we prevail at the Missouri Supreme Court in this initial first step.

Okay. And then just one other litigation question, just for the record, I guess. As we look forward over the course of the rest of this year, could you just remind us of some of the -- whatever key milestones you think are taking place on either talc or on the opioid front, things that we should just be aware of over the course of the rest of this year?

Yes. Sure. So with talc, we did have the recent multi-district litigation, where a number of, I'll call it, curtailments were put in place against the plaintiffs' evidence as well as those presenting the evidence on behalf of the plaintiffs. So we thought that, that was -- certainly, that was all upside for us. It wasn't a complete dismissal of cases being heard going forward, but that would have obviously been a tremendous bar to get over. But the restrictions that were put in place were restrictions that were levied against the plaintiffs' attorneys and the evidence was, I think, highly questioned in many of the cases. With opioids, I would say, we continue to be cautiously optimistic. I can tell you that our General Counsel has met regularly, even despite the pandemic in virtual mode to work with the state attorney generals as well as the plaintiff's executive council, which is really the acting body for the counties and municipalities and cities that are part of that lawsuit. We believe we've made a very fair and reasonable offer with the $4 billion that was noted last year. And we're hopeful that, that will see resolution. It's hard to say, other than just qualitatively, that we see a over time, a growing number of states willing to participate in the overall settlement as well as those represented by the plaintiffs' executive council. So we'll continue to stay posted there, but we do remain optimistic that the settlement that we made in principle or agreement in principle, I should say, could see some resolution sometime this year potentially.

Great. That's super helpful. So now I want to move on to a couple of other topics. But before I do that, Joe, I kind of jumped right in there on the litigation front since there was the news. I suppose it's kind of -- by way of sort of a formal introduction to this session, kind of before we jump into all the issues that we talked about previously, if you kind of have any opening comments for the investor group here before we get into specific Q&A.

Yes. Maybe -- thanks for the opportunity, Bob, and I'll be brief because I know you have your questions that you and Geoff would like to get to. But it certainly -- it's -- I think most people had planned on being in Napa for this conference. So this is -- the fact that we're doing this by phone exclusively is surely a sign of the times. I think it's important that as Johnson & Johnson, being the world's largest health care company, that we do extend our compassion and empathy to all those people and families who have been impacted or suffered from the COVID-19 pandemic. We've seen some associates in our workforce be impacted. And we certainly know the toll that that can take. We've been working very hard towards mitigating and hopefully, ultimately ending the pandemic. We continue to bring forth our full complement of resources that is really relying upon our science, our scalability in terms of manufacturing production as well as support to the communities that have been most hard hit by the pandemic. And that's really consistent, we think, with our credo values. And in some ways, we humbly like to say that we were built for times like this. Clearly, the most pronounced effort there is the work that we've done to accelerate the development of a vaccine for COVID-19. So we also have screened a number of compounds within our library that could potentially treat those who have the virus. We continue to supply critical medicines and devices to patients around the world. And then we used even our procurement organization and our broad network of vendors to reach out to over 22 suppliers of personal protective equipment in the very, very early days of this pandemic and secured and procured them to offer them up to health care workers as a donation. So we'll continue to do things like that. It seems like a long time ago, but our first quarter results were, we think, a reflection of the sustainable business model that we have in place. And the reaffirmation that really the fundamentals of our company, we believe, are strong and the expectations that we have for the business over the long-term have not changed. So we're very proud of the work that's been done in our 3 segments. We look to lead in each of those, respectively. And we think that adds to a nice equation for investors when you throw in our dividend.

Great. So first thing I'd love to get your views on, Joe, if you don't mind, are on the vaccine front. You guys, just a couple of weeks ago, came out with some good news in terms of time lines on the vaccine and just would love to get your take, given that we have you here today on the progress that J&J is making on the vaccine front and kind of what's the next milestone there as well.

Yes. So Bob, I think that's -- you hit the nail on the head there that the most recent news is probably the most exciting. So in the fact that we were able to move up based on animal data, the first-in-human plan, which was originally targeted for some time in September. And I could tell you, being close to the program, it was late September, they moved up to early September, and I think that was out in the public in terms of early September. And now we're looking at the second half of July. So we're very pleased with the progress, we are ramping up and investing to manufacture at risk so that we have a run rate of about 1 billion doses by the time we leave 2021. We're working with governments across the globe, other organizations such as the Gates Foundation to ensure that should the science bear out in the clinical development program would produce a reliable vaccine that's efficacious, that we have the ability to disperse it to as many people as is going to need it. We think that will largely go in the early days to health care workers who are on the front lines as well as the elderly. We're also pleased, I'd say, Bob, that there are many approaches to the vaccine for COVID-19. I think it's been something that may change the industry a little bit in terms of the sharing of information. I'm often asked, well, point is, how important is it that you guys get there first? We'd like to be first. We always like to be first, just like any other company out there. But tell you the truth, we're rooting for everybody. We think that there are limitations to manufacturing, and we believe we've got one of the most robust plans in place in terms of the number of doses or regimens that can come out there. But we're at a point now where we realize it's good for all business if -- the sooner we find something. The nice thing about our vaccine program is it's levering -- leveraging our adenovector and PER.C6 technologies. So this is the same platform that we use and have used in other vaccines within our portfolio, such as Zika, Ebola, RSV and HIV. And so based on the World Health Organization criteria for key attributes for prioritizing vaccine platforms, we are very much in a leadership position if you think about the proven capability of the adeno 26 viral vector that it induces potent and long-lasting immune responses in humans. We know that from the previous applications that I mentioned just a moment ago. It's also important that this approach or this platform, we know, has very low to no risk on respiratory disease enhancement based on some of the immune responses that we've observed across all of our programs. About 60,000 people have been vaccinated under this platform and so we know that it's well tolerated as well. And then with the PER.C6 manufacturing cell line, it's a high-yielding manufacturing platform, which is fully industrialized, highly scalable and it provides us the ability to make hundreds of doses of vaccines per year. We've got an existing facility in Leiden, Netherlands. And we are contracting with a number of CMOs to ensure that we can again provide as many doses that are possible. The last thing I would say is the stability on this vaccine is maybe advantageous to some others that are out there. So we can transport it between 2 and 8 degrees Celsius. So it makes it very compatible with current vaccine distribution channels and doesn't require a whole new infrastructure to get it to the people who need it.

Okay. Geoff, I want to see if you want to ask a follow-up there. But before I do that, Joe, can you just remind us of like maybe what's the next time we'd hear an update from J&J, whether that be a look at preliminary data later this year? Do you think those time lines can also be accelerated on that front, given that you're going into humans earlier? Just an update on the next milestone.

Yes. So Paul Stoffels will be on our second quarter earnings call on July 16. He'll provide a little bit further update. Again, we'll probably -- we might be a few days away from going into humans or maybe even just a few days into going into humans. But he'll be able to provide, at that point in time, a good dissertation of what the animal data had indicated. You might also see some of that between now and July 16 with respect to a general publication. I would say -- I wouldn't get overly aggressive at this time, Bob, in terms of accelerating the time lines. We're hopeful for data readout late fourth quarter and then going through the approval process. We want to make sure that safety is paramount for folks who may receive this vaccine in addition to efficacy. And so while we're very confident given the other applications that we have across, as I said, Zika, HIV, RSV and Ebola, I wouldn't get overly aggressive just because we're going a few weeks earlier in human.

Okay. And then, Geoff, did you have any follow-ups on the vaccine front?

Yes, Joe, I just had one. In a number of companies that we cover in major pharma and large-cap biotech, they've had sort of varying comments about the business model for a COVID vaccine. Some have said cost only, some have just purely donations, some have said we're not afraid to make a profit here given our investment. Joe, just remind us kind of what J&J's philosophy is towards this? I know it's pretty much a hot topic. It has some PR sensitivity to it as well, obviously, given the pandemic.

Yes. That's a great question, Geoff. And probably I was remiss in not mentioning this, but we are proceeding with the vaccine under the thought that we would distribute this on a not-for-profit basis. And so that could leave itself open to wide interpretation, but we will follow the Gates' model around not-for-profit pricing as to what costs should be captured. So we're not intending to make a profit during the pandemic period on this particular endeavor. If it's a sustainable platform that goes on for many years and we get out of an emergency phase, we may reevaluate that position. But right now, we've gone out with not-for-profit. And it's also a calculation that we're willing to have audited by an independent accounting firm.

Okay. That's good. Back to you, Bob.

Great. Thanks, Geoff. Important clarification there. So Joe, unless there's anything else you want to add on vaccines, I'll move on to a COVID-related question more broadly. I just -- given your vantage point and how broadly involved in health care J&J is across the world, I think it'd be great to get kind of your personal characterization on where you think we are right now in terms of kind of the recovery and just progress we're making? And maybe just some just general comments on where you think we are right now?

Yes, certainly. So I would say the overall recovery and the ramp of the recovery is the one thing that kind of kept me up at night, nights leading up to April 14, when we went out with the first quarter and the revised guidance. Certainly, that we knew -- because of this uncertainty that even at that point in time, a number of our competitive peers in the medtech space had withdrawn their guidance. But we thought, at the time, it was very important, again, as you noted, Bob, given our broad-based perspective and views across all of health care that we come out and just share with the investor community exactly how we were thinking about it, acknowledging that we were going to be precisely 100% wrong. But I would say it was a little bit over 2 months since that April 14 date. And we do expect that the second quarter will have the biggest impact. However, I would say, we're pleased in terms of the majority of states in the U.S. and in most major countries around the world, the pace at which they've reopened their economies. If you think about medical devices specifically and the framework we provided, let's call it a -- roughly, a weighted average across all procedures and markets, and that's a broad generalization, clearly. But we were looking at anywhere from a 40% to 60% decline from our original expectations on which we based our January guidance. If I look at performance thus far in the quarter, and you can probably assume this is about 2 months of data, that I would say we're either relatively in line if not a tick better than the midpoint of that range. It's -- we will provide our latest thinking on that in our call in July. And there's some key assumptions that I think, while we were explicit in April about, I think it's important to just give you a -- at the risk of being repetitive, just an underscoring of second waves and things like that. So our original assumptions did not assume a significant impact from a second wave. And our thinking continues to really rally around that. If it does happen, and I know there's been some uptake in terms of the number of cases, and you can argue as to why that is, in some recent days here, we just don't think that there's same level of global impact will be experienced going forward as was experienced in the months of, call it, March and April. This is assumption that's -- it's really just not our conjecture, but it's shared by a number of so-called experts out there in different forms that the world should be much better prepared. Testing is clearly more available, and that may be leading to some of the higher rates of diagnosis. There's now an adequate supply of PPE and ventilators. There's a good story that Paul Stoffels shared with me just yesterday, in terms of one of the pulmonologists we have on staff. That in the month of March, when this pulmonologist went to the hospitals, they would say about 80% of the people who are intubated were likely to die. By the time April came around, because of the knowledge they had of the disease, how to treat these patients, it was about 20% of a death rate. So still too high, but you can see the significant improvement in understanding folks have of the disease that make it suggest that the impact won't be as dire. I would also say the hospitals quickly realize the impact on their economic model. So just about every hospital administrator that we spoke to in the very early days had a large majority, if not their entire hospital setting set aside for COVID-19 treatment. A lot of those hospitals did not experience the wave or the influx of patients related to COVID-19. And weren't able to really perform anything during that time. I think hospitals now saw the impact on their financial equation with respect to not being able to do key elective surgeries, and you'll have a little bit of a pent-up demand there as well. So I would say, while we could see a return or a spike up, and again, that's not something I'm predicting. I just think the world as well as the hospital markets themselves will be better positioned to handle whatever impact that may take. So we think it's clearly in the second half of this year that elective procedures and doctor visits will be largely permissible out there. With pharm, I would say, we haven't seen a tremendous impact and I think you got to look at our portfolio, too, and look at some of the drugs that -- and therapeutics that we offer. They're usually for very severe diseases. Now we did see a lowering as most reports were accounting for. New prescriptions kind of went down. So telehealth, while it's been extremely valuable and clearly, a new service that's here to stay, doesn't make up for all the in-office visits that were planned in the diagnoses that were occurred. But we had pretty good strength coming out of, I'd say, the first 2 months before the pandemic hit in earnest. And we thought that that strength could make up for any small downturn we might see with respect to new Rxs. And so the pharmaceutical market for us is -- the pharmaceutical business for us is something we expect to beat when we look at our competitive peer set, beat the market as we did in 2019, we expect to do that again in 2020. And then lastly, with consumer, I would say, we saw, I'd say, pantry loading is a term we used for over-the-counter medicines, such as TYLENOL, MOTRIN. We saw a surge in LISTERINE because of some of the antibacterial qualities that, that has. We did see softness in Beauty and Skin Care, most notably sun care as vacation plans were halted. But all in all, it was a very, very strong first quarter. But this pantry loading effect was probably an overstatement of how good we did in the first quarter. And we'll see some of that bleed off as we get here through the summer months. I do think the pantry effect is something that will be here, though, for quite some time. So folks will want to be stocked with some of those medicines that became a little bit scarce at the end of the first quarter and early in the second quarter. For this year, probably not a material impact simply because if folks have a bottle or 2 of TYLENOL in their -- on their shelf or in their medicine cabinet, I don't think they're going to go to 4, but I do think that the phenomena of just I'll get it when I need it, is probably something that people will change their behavior patterns on. So again, with consumer, we think that, that bolus that we saw in the first quarter will last through the year. And consumer, we also anticipate that they'll be at our expectations, consistent with the guidance we issued in January.

Okay. That's great. I'm sure everyone appreciates them. And just to make sure I heard you correctly on the devices front, the first division you talked about. It sounds like first 2 months, slightly better than the midpoint in those 2 months, and we'll have to see what June brings.

Yes. The only caution I might give in terms of -- and I'm speaking for the J&J business here, though. So when we went out with our revised guidance, we did try to break it down as best we could based on what we did or didn't know back in April. And we did call for maybe, I'll call it, better than 100% run rate in the fourth quarter. Because the volume has come back maybe a little bit quicker than we anticipated, there's a possibility that, that may not be the case where hospitals or patients, quite frankly, need to run at that rate. So we -- right now, we are hearing of hospitals that are performing procedures later into the evening than what normal protocol would call for. We have heard about some hospitals going on weekends. And so we might not see that same overachievement in the fourth quarter. The good news, as I tell my team, is that we'll know early on here in the second and third quarter what normal will look like. And I'd much rather have it earlier rather than later.

Yes. So okay. So I think I'm hearing you correctly that basically, perhaps relative to original expectations, that pace at which people were coming back to do rescheduled procedures is a little faster. And so that made impact pacing over the course of the year. But generally, things are a little ahead. I mean is that a fair summary?

That's a fair assessment, yes. And I think that's pretty consistent with some of the things that you've published, Bob, or your peers out there, in the sell-side community, has stated that there seems to be pretty good momentum in terms of elective procedures coming back from where they were at least in the month of March and early April.

Yes. It's hard to know because I'm not sure this data really exists because, of course, what everyone would like to see is how much of the action in the marketplace today is being driven by kind of rescheduled procedures or COVID-related procedures versus just normal underlying demand. It's probably pretty hard to tease that out. But -- and maybe that's a genesis for the comments. Although maybe I'll just ask the question. Do you guys feel like you've got a decent sense for that as to how much of what's coming back is kind of normalized demand versus rescheduled procedures?

I would say at this point, and this will be more qualitative, Bob, than quantitative, as you know, that we don't really get data in that way. But it's probably more rescheduled procedures at this point because the -- I'll say, the new patient visits or the office visits where those original diagnoses could take place has probably been a little bit slower than the procedures themselves.

Okay. And then one last question from me on this front. Your comment about second wave, and it's -- frankly, it's even hard to define what a second wave is. But right now, it sounds like what you're hearing from hospitals is that there's -- at this point, there's enough preparedness or separation that they can continue doing elective procedures in a scenario where things come -- things get a little tougher from a COVID perspective. Just it sounds like you're fairly confident that if there is a "second wave" that from your sense is that hospitals are just much better prepared than they were a couple of months ago.

Yes. I think it's more than hospitals. I think society at large is much better prepared. I think it's particularly relevant with respect to hospitals, though, because of the impact that they had on their economic models. I mean we were tracking just the number of furloughs and layoffs of unfortunately, health care workers in those first couple of weeks. And we quickly got to over 50,000 in the U.S. alone. I don't think that's a position that hospitals desire to be in. And if you think about the rapid pace at which the pandemic kind of hit us, right, there wasn't a lot known even as late as late January, and it was kind of in the communities by mid- to late February. Didn't have time to react. Now I think there would be certain wings, certain sections that would be quarantined off specifically to treat COVID, and you'd allow at least some portion of elective procedures or required procedures to carry on. And again, required procedures, I don't want anybody to misunderstand what I said there. It was probably careless language on my part, to be quite frank. But I don't think there were required procedures that did not occur during COVID-19. It's really more around the elective piece of it. The other thing that we haven't really talked about here, Bob, is just the patient psyche and how willing are some folks to go back into a hospital or a doctor's office for fear that they may contract COVID-19. So that's something that's also we're not going to be able to rely on a data source to figure out what that is. And I think it's just people living into it, seeing that things are being responsibly treated. The precautions are in place. And things should get back to normal, we would hope, throughout the course of this year.

So two last questions on this front, Joe, if you don't mind. One is, has anything sort of surprised you in terms of the pace of the recovery in different businesses within devices, anything that sort of sticks out as a little bit unexpected there, whether it's vision care versus orthopedics? And also, would love to get your view, and I admit it may be a little premature here because we're still in the thick of it. But again, given your vantage point, would love any preliminary views you have on potential long-term implications of COVID, either from a broad health care perspective, from a J&J perspective, from a medtech perspective? Any initial thoughts that might be forming on that front? I'm sure we would all love your initial views.

Yes. So that's a good question in terms of surprising with respect to the recovery. I almost want to, in a knee-jerk way, say the recovery of China and how fast that, that's come back. Had a chance to speak with our President and CFO over there just last week and they are seeing things come back pretty pronounced across Tier 1 and Tier 2 markets. As you probably are aware, Beijing and Shanghai were a little bit slower to open, but they seem to be coming back to very high percentages of normal volume. That's important for us because it's a high growth area, it has been specifically in Medical Devices. In terms of a specific platform, I wouldn't call anything out singularly. Certainly, if there's something to note, once we see the full quarter results, we will do that in our Medical Device commentary. In terms of going forward and what's going to change, that's a really important point. And probably what I missed at the outset with respect to how it's impacted our business. So clearly, we took down about $2 billion of our expenses. But I would emphasize that those are expenses that were going to naturally fall out as a result of the pandemic itself and shelter-in-place protocols. So think T&E, company meetings, things of that nature. We did not, and this was very purposeful, we did not cut any programs that were delivering long-term value. And we think that took a certain discipline. It really speaks to the financial strength of J&J. As you know, we took down our top line guidance by about $6.5 billion at the midpoint, but we really refrained from saying we've got to make up that income to manage short term. We wanted to make sure that those platforms of innovation, whether -- in any of our segments, we're still very much intact and we think that's a key to our business. The good news is on the pharma front, where it's about 50% of our business now, we have not experienced any delays, and we check in regularly with the health authorities regarding the status of our near-term filings here in 2021 as well as approvals. We've not received any notifications at this point from those authorities regarding any changes to our time line. And I would say, in recent weeks, we've had a number of, I would say, notable approvals and some of them were even earlier than expected. So clearly, DARZALEX FASPRO, the subcu formulation, which really comes at -- I think it's somewhat of a neat time in terms of -- people don't want to sit in an infusion share during a pandemic for 5 to 6 hours. Here, they can go into the office and with the subcu, really be treated in a matter of minutes, literally. We received the IMBRUVICA frontline CLL combination with rituximab, and then we received a new pediatric formulation for SIRTURO. So our pipeline continues to progress. The one thing I would say in pharmaceuticals is that we'll have some staying power. It will be this mix of both virtual and in-person engagements being essential to future promotional planning. It seems as if the physician community is very receptive to having virtual connections. I don't say -- I don't think in person goes away entirely, but I'm sure you're experiencing in all your businesses that there is a different way to work here. And this virtual engagements, they've become the norm, whether we like it or not, they seem to be pretty effective and the technology is there. We're seeing a rapid rise of engagements with telehealth professionals by the health care providers. So we think it's something that will be part of business going forward. And then lastly, I think there is this -- maybe it's even a political point of view around nationalism, where all countries are really seemingly more concerned about where they're getting their goods from and the supply chain related to key products. And I think the nice thing about Johnson & Johnson is we were never overly dependent on high-risk markets, where we were, we had backup plans. But I do think that is something that we could see some more onshoring or even, I'll call it, near-shoring with -- Puerto Rico was an island that had significant manufacturing about 5 to 10 years ago. That's kind of subsided with the repeal or expiration of some tax advantages there. There's a possibility that those could be revisited. So that would certainly be -- that would be good for the U.S. But I do think we're going to have to be much more resilient and agile in terms of where we manufacture product. We believe we have an advantage there. That doesn't mean some change might not be required in order to meet some of the government requirements that will be new going forward.

That's great. That's a really helpful summary. I'm curious on another potential change as a result of COVID. Does COVID, either short-term or long-term, impact the way you and J&J think about M&A for the company? Is it maybe not as much going on in the near-term because of all the complexities around COVID? Or just curious how, if at all, it changes your M&A strategy?

Yes. You said -- that's a good question, Bob. And I would like to think that we have more of an opportunity than most to act. Now listen, I -- in the April call, I did say pretty explicitly that we hope that this presents an opportunity for ourselves. Markets recover pretty quickly. And so here's how I kind of look at it. And I can tell you, as I have before, we're kind of agnostic as to where that next best opportunity may reside. So we have all of our business development leaders in Medical Devices, Pharmaceuticals and Consumer looking for opportunities. And we're not -- we don't wake up in the morning, overly concerned about the composition of revenue on any particular 1 or 2-year period. I would say in Medical Devices that, that could be slower to come back. I think as we entered the year, most people would have agreed that valuations were at historical highs. They didn't seem to be getting any softer. And while that took a hit, I would say the recovery has been pretty formidable in terms of coming back. It was even less time to recover for biopharmaceuticals. So I think we're going to continue to look for great opportunities that -- our strategic fit, that we have either scientific expertise or commercial capabilities where we can create more value than the current asset holder. And that makes sense from a financial perspective, so that we compensate shareholders for the risk that we're bearing on our behalf. So it doesn't change it. I was hoping for a little bit more opportunistic plays because of the credit rating we enjoy, the financial strength of our balance sheet. I would say that, that hasn't been as prolonged, but we continue to look for opportunities. The tough thing about medical devices, and I think, I don't want to make a blanket statement here. But just if I think about it theoretically, it's hard to look at even 2 or 3 quarters in the medical device space, let alone 2 to 3 years. And you really have to have a pretty solid foundation as to what the next couple of years are going to look like, as particularly for an existing business when you go to the Board of Directors. And so I would say there could be -- if I had to predict where is M&A going to come back in earnest, I'd probably put the lagging horse as medical devices. But all you need is one deal under the right scenario, where you've got some ability to look down the road, complement it with skills that you have that you think can create greater value, and it could work. So it's kind of my general thoughts, but fundamentally our thoughts around capital allocation where we prioritize the dividend and then look at M&A after we clearly invest in innovation really hasn't changed nor has our approach to specific M&A itself.

I think in the past, you've said the bar is just a little -- always a little higher for a larger transaction. But what are the kind of things you would need to see if J&J were to once again do a larger deal, which you don't do very often? And it's been a couple of years now since you've done one, but what do you need to see if you were to pull the trigger on a larger transaction?

Yes. So again, it comes back to, Bob, just making sure it's a strategic fit. So it's something within our core competencies, where our skills lend to what that current business has. And the reason large transactions, I would say, are a little bit more difficult to get done is because they're usually fairly well valued, right? You're talking about larger companies who have coverage. You guys do a great job assessing what the opportunities are out there, and they're well known. And therefore, they're, I would say, reasonably valued. On top of that, you probably have an established or a very good management team that is exploiting opportunities in their own right and bringing in skills necessary to make sure that those opportunities are optimized. But it really comes back to the same core fundamentals, large or small, and we're not averse to doing large deals. It's really about what can we bring to the party and then making sure that we compensate the shareholders for the risk that we're bearing on their behalf. And we just don't use weighted cost of capital, we apply a hurdle rate. So if you think about a consumer business that's already on the market that we might acquire, not a lot of technical risk, it's really about execution. We're willing to bet on ourselves there. That hurdle rate, if you will, is going to be a little bit lower than, let's say, a Phase II pharmaceutical product in a new space. But where our scientific experts can kind of either accelerate the clinical development program or expand it into other indications, that's going to have a little bit higher hurdle rate for us to overcome. We -- personally, I think, I'm like all of you on the phone here today, I'd much rather do 10 $3 billion deals than 1 $30 billion deal, spread the bets out a little bit. Because we know that our pharmaceutical unit over the last decade has been a really good testament to this. If a couple of them hit, they usually hit in a very, very big way, given some of the markets and unmet need that we go after.

Right. That's a great summary. Okay, just one more kind of medtech-related question. And then I wanted to ask Geoff to ask a couple of pharma questions or see if you wanted to ask a couple of additional pharma questions. But two quick things on the medtech front. One, have you guys given any more thought to rescheduling of the Medtech Analyst Day? And then since I think the Medtech Analyst Day was going to be a venue for providing an update on kind of your soft tissue robotic surgery time lines, just curious if there's any kind of commentary you can make today on the robotic time lines? And any thoughts on if and when you'll reschedule that analyst day?

Yes. So those are all good questions that are being discussed internally as we speak. We do think there's some value to -- especially with the Med Device Day. Folks seem to like the opportunity to come in and touch and feel. It's much -- it's very different in a Pharmaceutical Analyst Day in terms of it just doesn't lend to that type of breakout. We are discussing what may make sense, where people would feel comfortable. We will have likely some update in some form or fashion, even if virtual by the end of the year. We will likely announce something in terms of what that update will be during our July 2nd quarter earnings call. In terms of the digital robotic surgery, certainly not in a position today to announce any new time lines of what we're thinking. We continue to work with the FDA and other regulatory authorities really around the world on a regulatory pathway. We're thrilled with the progress we've made in terms of closing ours about a year ago. I think it was exactly the second quarter, which accelerated our entry into robotics with Monarch platform, and we think that's the beginning of a strong cadence of digital surgery launches. We also completed the acquisition of Verb, as you know, which, I'd say, really complements the digital aspect of this portfolio. We've got Dr. Fred Moll, who is really leading the team on our robotics program. We coupled that with some of our advanced instrumentation team from the Ethicon unit. And then with Verb's, as I said, digital and robotic capabilities, we feel really good that we've partnered all those up with some key opinion leaders around the world. And we think about even just with Monarch, we're building a pipeline there, too. So it's not just going to be for lung biopsies. We're currently looking into lung treatment via ablation and oncolytic viruses as well as expanding the applications of Monarch into urology for kidney stones. So we feel really good about the program. It's not on the time line we originally committed to a number of years ago. But we think we've strengthened the portfolio offering and put all of the, I'll say, assets in place to have a very differentiated product. We don't look at this as -- we want to come out as soon as we can, clearly. But we also realize that in -- I think all of you appreciate this as well, it's in the very early innings. We think this is a market that will be of high-growth for the next decade or more, and we want to make sure we've got a differentiated product when we enter.

Great. And I think in the past, you've said that if appropriate, you would take some technology learnings from Morris and incorporate them into Verb. Is that a fair characterization of things you've said in the past?

Yes. I think that's fair. We're looking to kind of get best-of-breed across so that we can have as comprehensive an offering that has, again, a differentiated profile from what's out there today.

Great. And then, Geoff, I don't know if you want to -- in the time we have left, to ask a couple on the pharma side. If not, I can take a shot at it, but I just wanted to give you the opportunity since you're the expert.

Yes, yes. I just wanted to -- maybe just one, Joe, you mentioned M&A. And obviously, the Actelion deal is a pretty big one. But wanted to ask you more on the technology side. So your partnership with Legend on this BCMA CAR-T is going to be pretty dramatically differentiated in the myeloma field and -- is this a technology base that you feel like J&J could really leverage going forward? Or is it responding just to the way a certain paradigm is going though? Other words, does J&J view say, gene therapy or cell therapy probably as a platform that can be rolled out across the board in oncology, hematology, maybe even other indications?

Yes. Thanks for the question, Geoff. I would say -- well, first off, we were excited when we signed the CAR-T license with Legend back in, I think it was December of 2017 for relapsed/refractory multiple myeloma. But the data that we continue to generate there and some of the data that's been shared most recently at ASCO, really emboldens our position there. I would say it's not a plug-in. I do think we are trying to build the skill sets and the scientific expertise for cell therapy and gene therapy. If I think about, again, the CAR-T with the CARTITUDE study, 86% of the patients have a complete response at 11.5 months, 86% were progression-free at 9 months. Just very, very strong data. And we're looking at a number of approaches, likely combination approaches that utilize different targets and may prove even more effective and difficult-to-treat segments. We just received -- I don't know if you saw the news this morning, but antitrust clearance for the Fate Therapeutics agreement, which is an off-the-shelf allogeneic CAR-T. So think of it almost as a synthetic CAR-T, which will really be an advantage for both CAR-T centers as well as patients themselves. So we're very excited about that. And then with respect to gene therapy, we have a collaboration, it's a worldwide collaboration with MeiraGTx for various retinal diseases. So we are learning about some of the space here. We -- I would say, Geoff, we're not thinking about this as well. We're just behind and we need to catch up. I think you're seeing, with some of the CAR-T data, we didn't just catch up there. We're in position to potentially win and we're going to look for other ways to build the necessary scientific expertise. So we can evaluate these assets more fully and more informed, and then complement those into our portfolio within our current therapeutic areas or if the need occurs, just like we did with Actelion, to go outside our therapeutic area where we can acquire that expertise.

Right. I think that's time for our question here.

Yes. Yes, I just wanted to, Joe, say, thank you very much for your time today. We've run a little bit over. I apologize, but a lot of great content here. So we really appreciate it. Geoff, thank you for the conference, and to Chris and Matt and Lisa and Joe, we really appreciate your time today. Thanks so much.

Bob and Geoff, thank you for -- as well as the investors on the phone, thank you for your interest in Johnson & Johnson. We certainly appreciate that and your support. And Geoff and Bob, it's always a pleasure. Certainly, Bob, appreciate the comments you had about our IR team at the outset. I can't tell you how many times they bail me out and brought me up. So it's really nice to hear those type of comments for that team. They are a special group.

Yes. No, absolutely. And again, thank you, everybody, and be safe, stay well, and we'll look forward to talking to you again soon.

Thank you.

Thank you. That concludes the call.