JOHNSON & JOHNSON (JNJ)
SIC breadcrumb: Manufacturing > Chemicals And Allied Products > SIC 2834 Pharmaceutical Preparations
SEC company page: https://www.sec.gov/edgar/browse/?CIK=200406. Latest filing source: 0000200406-26-000016.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 94,193,000,000 | USD | 2025 | 2026-02-11 |
| Net income | 26,804,000,000 | USD | 2025 | 2026-02-11 |
| Assets | 199,210,000,000 | USD | 2025 | 2026-02-11 |
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
Latest 10-K MD&A
Item 7. Management’s discussion and analysis of results of operations and financial condition Organization and business segments Description of the company and business segments Johnson & Johnson and its subsidiaries (the Company) have approximately 138,200 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the healthcare field. The Company conducts business in virtually all countries of the world with the primary focus on products related to human health and well-being. The Company is organized into two business segments: Innovative Medicine and MedTech. The Innovative Medicine segment is focused on the following therapeutic areas: Oncology, Immunology, Neuroscience, Pulmonary Hypertension, Infectious Diseases, and Cardiovascular and Metabolism. Products in this segment are distributed directly to retailers, wholesalers, distributors, hospitals and healthcare professionals for prescription use. The MedTech segment includes a broad portfolio of products used in the Surgery, Orthopaedic, Cardiovascular and Vision fields. These products are distributed to wholesalers, hospitals and retailers, and used principally in the professional fields by physicians, nurses, hospitals, eye care professionals and clinics. In October 2025, the Company announced its intention to separate its Orthopaedics business. The Company intends to explore multiple paths to effect the planned separation with a targeted completion within 18 to 24 months after the initial announcement. The Chief Operating Decision Maker (CODM) is the Company's Chief Executive Officer (Principal Executive Officer). The Executive Committee is Johnson & Johnson’s senior leadership team responsible for setting the strategy and priorities of the Company and driving accountability at all levels. Within the strategic parameters provided by the Executive Committee, senior management groups at U.S. and international operating companies are each responsible for their own strategic plans and the day-to-day operations of those companies. In all of its product lines, the Company competes with other companies both locally and globally, throughout the world. Competition exists in all product lines without regard to the number and size of the competing companies involved. Competition in research, involving the development and the improvement of new and existing products and processes, is particularly significant. The development of new and innovative products, as well as protecting the underlying intellectual property of the Company's product portfolio, is important to the Company’s success in all areas of its business. The competitive environment requires substantial investments in continuing research. Management’s objectives With Our Credo as the foundation, the Company believes health is everything. The Company's strength in healthcare innovation empowers us to build a world where complex diseases are prevented, treated, and cured, where treatments are smarter and less invasive, and solutions are personal. Through the Company's expertise in Innovative Medicine and MedTech, the Company is uniquely positioned to innovate across the full spectrum of healthcare solutions today to deliver the breakthroughs of tomorrow, and profoundly impact health for humanity. New products introduced within the past five years accounted for approximately 25% of 2025 sales. In 2025, $14.7 billion was invested in research and development reflecting management’s commitment to create life-enhancing innovations and to create value through partnerships that will profoundly impact of health for humanity. Our approximately 138,200 employees are critical drivers of the Company’s success. Employees are empowered and inspired to lead with Our Credo and purpose as guides. This allows every employee to use the Company’s reach and size to advance the Company’s purpose, and to also lead with agility and urgency. Leveraging the extensive resources across the enterprise enables the Company to innovate and execute with excellence. This ensures the Company can remain focused on addressing the unmet needs of society every day and invest for an enduring impact, ultimately delivering value to its patients, consumers and healthcare professionals, employees, communities and shareholders. 22 Research & development Acquisitions* (net of cash acquired) Dividends paid per share * Includes business combinations and asset acquisitions Results of operations Analysis of consolidated sales For discussion on results of operations and financial condition pertaining to the fiscal years 2024 and 2023 see the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2024, Item 7. Management's discussion and analysis of results of operations and financial condition. In 2025, worldwide sales increased 6.0% to $94.2 billion as compared to an increase of 4.3% in 2024. These sales changes consisted of the following: Sales increase/(decrease) due to: 2025 2024 Volume 8.4 % 5.9 % Price (3.1) 0.0 Currency 0.7 (1.6) Total 6.0 % 4.3 % The net impact of acquisitions and divestitures on the worldwide sales growth was a positive impact of 1.1% in 2025, primarily related to CAPLYTA and Shockwave and a positive impact of 0.5% in 2024 primarily related to Shockwave. Sales by U.S. companies were $53.8 billion in 2025 and $50.3 billion in 2024. This represents increases of 6.9% in 2025 and 8.3% in 2024. In the fiscal year 2025, acquisitions and divestitures had a net positive impact of 2.0% on the U.S. sales growth primarily related to CAPLYTA and Shockwave. Sales by international companies were $40.4 billion in 2025 and $38.5 billion in 2024. This represents an increase of 5.0% in 2025, and a decrease of 0.5% in 2024. In fiscal 2025, acquisitions and divestitures had a net positive impact of 0.1% on the international operational* sales growth, primarily related to Shockwave. In the fiscal year 2025, the negative impact of the STELARA sales decline, due to biosimilar competition, was approximately 6.2%, 7.6% and 4.4% on worldwide, U.S. and international operational sales, respectively. The five-year compound annual growth rates for worldwide, U.S. and international sales were 6.7%, 7.9% and 5.2%, respectively. The ten-year compound annual growth rates for worldwide, U.S. and international sales were 5.2%, 5.8% and 4.5%, respectively. 2025 Annual Report 23 In 2025, sales by companies in Europe achieved growth of 6.5% as compared to the prior year, which included operational growth of 2.4% and a positive currency impact of 4.1%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved growth of 3.4% as compared to the prior year, which included operational growth of 8.4%, and a negative currency impact of 5.0%. Sales by companies in the Asia-Pacific, Africa region achieved growth of 3.2% as compared to the prior year, including operational growth of 3.1% and a positive currency impact of 0.1%. In 2025, the Company utilized three wholesalers distributing products for both segments that represented approximately 21.8%, 15.5% and 11.1% of the total gross revenues. In 2024, the Company had three wholesalers distributing products for both segments that represented approximately 20.5%, 15.6% and 12.3% of the total gross revenues. 2025 Sales by geographic region (in billions) 2025 Sales by segment (in billions) Note: values may have been rounded *operational excludes the effect of translational currency Analysis of sales by business segments Innovative Medicine segment Innovative Medicine segment sales in 2025 were $60.4 billion, an increase of 6.0% from 2024, which included operational growth of 5.3% and a positive currency impact of 0.7%. U.S. sales were $36.3 billion, an increase of 7.0%. International sales were $24.1 billion, an increase of 4.6%, which included operational growth of 2.9% and a positive currency impact of 1.7%. In 2025, the net impact of acquisitions and divestitures on the worldwide Innovative Medicine segment operational sales growth was a positive 1.2%, related to CAPLYTA. In 2025, the negative impact of the STELARA sales decline, primarily due to biosimilar competition, was an approximate 10.4%, 12.3% and 7.9% on worldwide, U.S. and international Innovative Medicine segment operational sales, respectively. 24 Major Innovative Medicine therapeutic area sales: (Dollars in Millions) 2025 2024 Total Change Operations Change Currency Change Total Oncology $25,380 $20,781 22.1 % 20.9 % 1.2 % CARVYKTI 1,887 963 95.9 94.3 1.6 DARZALEX 14,351 11,670 23.0 22.0 1.0 ERLEADA 3,574 2,999 19.2 17.2 2.0 IMBRUVICA 2,823 3,038 (7.1) (8.6) 1.5 RYBREVANT/ LAZCLUZE(1) 734 327 * * * TALVEY(2) 463 287 61.3 60.3 1.0 TECVAYLI 670 549 22.1 21.5 0.6 ZYTIGA /abiraterone acetate 502 631 (20.4) (21.2) 0.8 Other Oncology 376 317 18.5 17.5 1.0 Total Immunology 15,728 17,828 (11.8) (12.0) 0.2 REMICADE 1,768 1,605 10.2 10.5 (0.3) SIMPONI/SIMPONI ARIA 2,668 2,190 21.8 21.7 0.1 STELARA 6,078 10,361 (41.3) (41.5) 0.2 TREMFYA 5,155 3,670 40.5 39.8 0.7 Other Immunology 61 3 * * * Total Neuroscience 7,837 7,115 10.1 9.9 0.2 CAPLYTA(3) 700 — * * — CONCERTA/methylphenidate 584 641 (9.0) (8.6) (0.4) INVEGA SUSTENNA/XEPLION/INVEGA TRINZA/TREVICTA 3,810 4,222 (9.8) (9.9) 0.1 SPRAVATO 1,696 1,077 57.4 57.0 0.4 Other Neuroscience 1,048 1,175 (10.9) (11.5) 0.6 Total Pulmonary Hypertension 4,437 4,282 3.6 3.2 0.4 OPSUMIT/OPSYNVI(4) 2,325 2,225 4.5 4.0 0.5 UPTRAVI 1,902 1,817 4.7 4.3 0.4 Other Pulmonary Hypertension 209 240 (12.7) (13.0) 0.3 Total Infectious Diseases 3,241 3,396 (4.6) (6.5) 1.9 EDURANT/rilpivirine 1,486 1,272 16.9 12.2 4.7 PREZISTA/PREZCOBIX/REZOLSTA/SYMTUZA 1,579 1,712 (7.7) (8.1) 0.4 Other Infectious Diseases(5) 175 412 (57.5) (57.7) 0.2 Total Cardiovascular / Metabolism / Other 3,778 3,562 6.1 6.0 0.1 XARELTO 2,633 2,373 11.0 11.0 — Other 1,145 1,189 (3.7) (4.0) 0.3 Total Innovative Medicine Sales $60,401 56,964 6.0 % 5.3 % 0.7 % 2025 Annual Report 25 (1)Previously in Other Oncology, Includes the sales of RYBREVANT and RYBREVANT + LAZCLUZE (2)Previously in Other Oncology (3)Acquired with Intra-Cellular Therapies on April 2, 2025 (4)OPSYNVI was previously in Other Pulmonary Hypertension (5)Includes the Covid-19 Vaccine in 2024 * Percentage greater than 100% or not meaningful Oncology products achieved sales of $25.4 billion in 2025, representing an increase of 22.1% as compared to the prior year. Strong sales of DARZALEX (daratumumab) were driven by continued share gains and market growth. Growth of ERLEADA (apalutamide) was primarily due to continued share gains and market growth partially offset by the impact of Medicare Part D redesign. Increased sales of CARVYKTI (ciltacabtagene autoleucel) were driven by continued share gains and capacity expansion. Additionally, sales from the ongoing launches and share gains of TECVAYLI (teclistamab-cqyv), TALVEY (talquetamab-tgvs) and RYBREVANT (amivantamab)/LAZCLUZE (lazertinib) contributed to the growth. Growth was partially offset by ZYTIGA (abiraterone acetate) due to loss of exclusivity and IMBRUVICA (ibrutinib) due to competitive pressures and the impact of Medicare Part D redesign. Immunology products sales were $15.7 billion in 2025, a decline of 11.8% as compared to the prior year primarily due to the decline of STELARA (ustekinumab) sales driven by the impact of biosimilar competition and Medicare Part D redesign. The growth of TREMFYA (guselkumab) was due to share gains and market growth. The increase in SIMPONI/SIMPONI ARIA sales was primarily driven by the Merck, Sharp & Dohme return of rights in Europe in the fiscal fourth quarter of 2024. The increase in REMICADE (infliximab) sales was due to favorable patient mix, market growth and the Merck, Sharp & Dohme return of rights in Europe in the fiscal fourth quarter of 2024, partially offset by continued biosimilar competition. Sales of STELARA in the United States were approximately $3.8 billion in fiscal 2025. Third parties have filed biologics license applications with the U.S. FDA, the European Medicines Agency, and other government authorities seeking approval to market biosimilar versions of STELARA around the globe. The Company expects continued launches of biosimilar versions of STELARA globally which will continue to negatively impact the Company’s sales of STELARA. At least two biosimilars are pursuing regulatory approval for a SIMPONI biosimilar in the United States, which would likely result in a significant reduction in future sales. Neuroscience products, which include sales of CAPLYTA (lumateperone) acquired with the Intra-Cellular Therapies (Intra-Cellular) acquisition on April 2, 2025, achieved sales of $7.8 billion in 2025, representing an increase of 10.1% as compared to the prior year. Growth of SPRAVATO (esketamine) was driven by continued increased physician and patient demand. Growth was partially offset by the sales decline of INVEGA SUSTENNA / XEPLION / INVEGA TRINZA / TREVICTA primarily due to the impact of Medicare Part D redesign. Pulmonary Hypertension products achieved sales of $4.4 billion, representing an increase of 3.6% as compared to the prior year. Sales growth of OPSUMIT (macitentan)/OPSYNVI (macitentan/tadalafil) was driven by share gains and market growth partially offset by the impact of Medicare Part D redesign and UPTRAVI (selexipag) was driven by market growth partially offset by the impact of Medicare Part D redesign. The Company expects generic competition for OPSUMIT in 2026, which would likely result in a significant reduction in future sales. Infectious disease products sales were $3.2 billion in 2025, a decline of 4.6% as compared to the prior year primarily driven by declines across the portfolio including COVID-19 vaccine revenue in Other Infectious Diseases. The decline was partially offset by growth of EDURANT/rilpivirine. Cardiovascular/Metabolism/Other products achieved sales were $3.8 billion, representing an increase of 6.1% as compared to the prior year. The growth of XARELTO (rivaroxaban) sales was primarily driven by the impact of Medicare Part D redesign and market growth partially offset by continued share loss. The Company maintains a policy that no end customer will be permitted direct delivery of product to a location other than the billing location. This policy impacts contract pharmacy transactions involving non-grantee 340B covered entities for most of the Company’s drugs, subject to multiple exceptions. Both grantee and non-grantee covered entities can maintain certain contract pharmacy arrangements under policy exceptions. The Company has been and will continue to offer 340B discounts to covered entities on all of its covered outpatient drugs, and it believes its policy will improve its ability to identify inappropriate duplicate discounts and diversion prohibited by the 340B statute. The 340B Drug Pricing Program is a U.S. federal government program requiring drug manufacturers to provide significant discounts on covered outpatient drugs to covered entities. 26 During 2025, the Company advanced its pipeline with several regulatory submissions and approvals for new drugs and additional indications for existing drugs as follows: Product Name (Chemical Name) Indication US Approval EU Approval US Filing EU Filing AKEEGA (niraparib/abiraterone) Treatment of patients with M1 Metastatic Castration-Sensitive Prostate Cancer (AMPLITUDE) • • CAPLYTA (lumateperone) Adjunctive treatment for Major Depressive Disorder • DARZALEX (daratumumab) Treatment for frontline multiple myeloma transplant ineligible (CEPHEUS) • • DARZALEX (daratumumab) Treatment as subcutaneous monotherapy for high-risk smoldering multiple myeloma (AQUILA) • • ICOTYDE (icotrokinra) Treatment for Psoriasis (ICONIC) • • INLEXZO (gemcitabine intravesical system) Treatment for non muscle invasive bladder cancer (SunRISe-1) • IMAAVY (nipocalimab) Treatment for Generalized Myasthenia Gravis (Vivacity MG3) • • IMAAVY (nipocalimab) Treatment for Generalized Myasthenia Gravis Pediatrics (VIBRANCE MG) • IMBRUVICA (ibrutinib) Treatment for frontline MCL (Triangle) • RYBREVANT (amivantamab) Treatment for subcutaneous (PALOMA-3) • • SIMPONI (golimumab) Treatment of Patients with Pediatric Ulcerative Colitis (PURSUIT 2) • • SPRAVATO (esketamine) Treatment of Patients with Treatment Resistant Depression monotherapy (TRD4005) • STELARA (ustekinumab) Treatment of Patients with Pediatric Crohn's Disease • • STELARA (ustekinumab) Treatment of Patients with Pediatric Ulcerative Colitis (UNIFI JR) • • TECVAYLI (teclistamab) Multiple Myeloma 1-3PLs (MajesTEC-3) • TREMFYA (guselkumab) Treatment of Patients with Ulcerative Colitis (QUASAR) • TREMFYA (guselkumab) Subcutaneous Induction for treatment of patients with Ulcerative Colitis (ASTRO) • • TREMFYA (guselkumab) Subcutaneous Induction for treatment of patients with Crohn's Disease (GRAVITI) • • TREMFYA (guselkumab) Treatment of Patients with Crohn's Disease (GALAXI) • • TREMFYA (guselkumab) Treatment of Patients with Pediatric Psoriasis (PROTOSTAR) • • TREMFYA (guselkumab) Treatment of patients with Psoriatic Arthritis Structural Damage (APEX) • TREMFYA (guselkumab) Treatment of Patients with Pediatric Juvenile Psoriatic Arthritis • 2025 Annual Report 27 MedTech segment The MedTech segment sales in 2025 were $33.8 billion, an increase of 6.1% from 2024, which included operational growth of 5.4% and a positive currency impact of 0.7%. U.S. sales were $17.4 billion, an increase of 6.6% as compared to the prior year. International sales were $16.4 billion, an increase of 5.5% as compared to the prior year, which included operational growth of 4.1% and a positive currency impact of 1.4%. In 2025, the net impact of acquisitions and divestitures on the MedTech segment worldwide operational sales growth was a positive 1.1% primarily related to the Shockwave acquisition. Major MedTech franchise sales: (Dollars in Millions) 2025 2024 Total Change Operations Change Currency Change Surgery $10,137 9,845 3.0 % 2.5 % 0.5 % Advanced 4,577 4,488 2.0 1.5 0.5 General 5,560 5,358 3.8 3.3 0.5 Orthopaedics 9,258 9,158 1.1 0.3 0.8 Hips 1,674 1,638 2.1 1.4 0.7 Knees 1,587 1,545 2.7 2.0 0.7 Trauma 3,146 3,049 3.2 2.4 0.8 Spine, Sports & Other 2,852 2,926 (2.5) (3.5) 1.0 Cardiovascular 8,928 7,707 15.8 15.2 0.6 Electrophysiology 5,634 5,267 7.0 6.4 0.6 Abiomed 1,751 1,496 17.1 16.2 0.9 Shockwave(1) 1,146 564 * * * Other Cardiovascular 397 380 4.3 3.8 0.5 Vision 5,468 5,146 6.3 5.3 1.0 Contact Lenses/Other 3,910 3,733 4.8 3.6 1.2 Surgical 1,558 1,413 10.2 9.9 0.3 Total MedTech Sales $33,792 31,857 6.1 % 5.4 % 0.7 % (1)Acquired on May 31, 2024 * Percentage greater than 100% or not meaningful The Surgery franchise achieved sales of $10.1 billion in 2025, representing an increase of 3.0% from 2024. Growth in Advanced Surgery was primarily due to the strength of the portfolio and commercial execution in Biosurgery as well as new products in Endocutters. This was partially offset by China volume-based procurement across all platforms and competitive pressures in Energy and Endocutters. Growth in General Surgery was primarily driven by technology penetration and upgrades within the differentiated Wound Closure portfolio. This growth was partially offset by the impact from divestitures. The Orthopaedics franchise achieved sales of $9.3 billion in 2025, representing an increase of 1.1% from 2024. All platforms were negatively impacted by revenue disruption from the previously announced Orthopaedics restructuring, which is now substantially complete, the negative impact of volume-based procurement in China and selling days. The growth in Hips was primarily due to new product launches. The growth in Knees was primarily driven by the ATTUNE portfolio, pull through related to the VELYS Robotic assisted solution. Growth in Trauma was driven by the adoption of recently launched products and commercial execution. The decline in Spine, Sports & Other was primarily driven by competitive pressures and price pressures in the U.S. Early Interventional segment partially offset by new product launches. In October 2025, the Company announced its intention to separate its Orthopaedics business. The Company intends to explore multiple paths to effect the planned separation with a targeted completion within 18 to 24 months after the initial announcement. 28 The Cardiovascular franchise achieved sales of $8.9 billion in 2025, representing an increase of 15.8% from 2024. Electrophysiology growth was driven by procedure growth, new product performance and commercial execution. This was partially offset by competitive pressures in Pulsed Field Ablation catheters. Abiomed sales reflect the continued strong adoption of Impella 5.5 and Impella CP. Shockwave sales growth was driven by Coronary and Peripheral portfolios and new product launches. The Vision franchise achieved sales of $5.5 billion in 2025, representing an increase of 6.3% from 2024. Contact Lenses/Other growth was primarily driven by market growth, continued strong performance in the ACUVUE OASYS 1-Day family of products (including recent launches) and strategic price actions. Surgical growth was primarily driven by the continued strength of recent product innovations, robust demand and commercial execution. Analysis of consolidated earnings before provision for taxes on income Consolidated earnings before provision for taxes on income was $32.6 billion and $16.7 billion for the years 2025 and 2024, respectively. As a percent to sales, consolidated earnings before provision for taxes on income was 34.6% and 18.8%, in 2025 and 2024, respectively. Earnings before provision for taxes (Dollars in billions. Percentages in chart are as a percent to total sales) Cost of products sold and selling, marketing and administrative expenses: Cost of products sold Selling, marketing & administrative (Dollars in billions. Percentages in chart are as a percent to total sales) 2025 Annual Report 29 Cost of products sold: Cost of products sold increased as a percent to sales driven by: •Unfavorable product mix driven by the decline of STELARA sales and unfavorable transactional currency in the Innovative Medicine business •Tariffs, unfavorable transactional currency and macroeconomic factors in the MedTech business partially offset by •Non-recurring, acquisition related fair value Inventory step-up of $0.1 billion in 2025 versus $0.4 billion in 2024 related to the business combination accounting associated with the Shockwave acquisition in the MedTech business The intangible asset amortization expense included in cost of products sold was $4.6 billion in fiscal 2025 and $4.5 billion in fiscal 2024. Selling, Marketing and Administrative expense: Selling, Marketing and Administrative Expenses decreased as a percent to sales driven by: •Corporate administrative expense rationalization •Planned leverage in the Innovative Medicine business partially offset by •Increased investment related to the acquisition of Intra-Cellular (CAPLYTA) Research and Development expense: Research and development expense by segment of business was as follows: 2025 2024 (Dollars in Millions) Amount % of Sales* Amount % of Sales* Innovative Medicine $11,827 19.6 % $13,529 23.8 % MedTech 2,838 8.4 3,703 11.6 Total research and development expense $14,665 15.6 % $17,232 19.4 % Percent increase/(decrease) over the prior year (14.9 %) 14.2 % *As a percent to segment sales Research and development activities represent a significant part of the Company's business. These expenditures relate to the processes of discovering, testing and developing new products, upfront payments and developmental milestones, improving existing products, as well as ensuring product efficacy and regulatory compliance prior to launch. The Company remains committed to investing in research and development with the aim of delivering high quality and innovative products. Research and Development decreased as a percent to sales primarily driven by: •Acquired in-process research & development expense of $1.25 billion to secure the global rights to the NM26 bispecific antibody (Yellow Jersey acquisition) in the Innovative Medicine business in 2024 •Acquired in-process research & development expense of $0.5 billion from the V-Wave acquisition and a Laminar milestone of $0.3 billion in the MedTech business in 2024 •Leverage resulting from investment prioritization in the Innovative Medicine business In-Process Research and Development Impairments (IPR&D): In the fiscal year 2025, the Company recorded a charge of approximately $0.1 billion primarily related to a non-strategic asset acquired with Abiomed in 2022. In the fiscal year 2024, the Company recorded a charge of approximately $0.2 billion primarily associated with the M710 (biosimilar) asset acquired as part of the acquisition of Momenta Pharmaceuticals in 2020. There was also a partial impairment of this asset for $0.2 billion in the fiscal 2023. This asset is fully impaired. 30 Other (Income) Expense, Net: Other (income) expense, net is the account where the Company records gains and losses related to the sale and write-down of certain investments in equity securities held by Johnson & Johnson Innovation - JJDC, Inc. (JJDC), changes in the fair value of securities, investment (income)/loss related to employee benefit programs, gains and losses on divestitures, certain transactional currency gains and losses, acquisition and divestiture related costs, litigation accruals and settlements, as well as royalty income. Other (income) expense, net for the fiscal year 2025 reflected an increase in income of $11.9 billion as compared to the prior year primarily due to the following: (Dollars in Billions)(Income)/Expense 2025 2024 Change Litigation related(1) $ (6.0) 5.5 (11.5) Employee benefit plan related (0.5) (0.9) 0.4 Changes in the fair value of securities(2) (0.4) 0.3 (0.7) Acquisition, Integration and Divestiture related(3) 0.2 0.8 (0.6) Monetization of royalty rights 0.0 (0.3) 0.3 Other (0.5) (0.7) 0.2 Total Other (Income) Expense, Net $ (7.2) 4.7 (11.9) (1)The fiscal year 2025 includes the reversal of approximately $7.0 billion, a significant portion of the previously accrued talc reserve and an expense of $0.8 billion for the Auris shareholder litigation. The fiscal year 2024 includes charges of approximately $5.1 billion for talc matters (See Note 19 to the Consolidated Financial Statements for additional details). (2)The fiscal year 2024 includes the loss of $0.4 billion on the completion of the debt for equity exchange of the retained stake in Kenvue. (3)The fiscal year 2025 is primarily related to the acquisitions of Intra-Cellular (CAPLYTA) and Halda Therapeutics partially offset by the reduction of the Abiomed contingent value right (CVR) liability. The fiscal year 2024 is primarily related to the acquisition of Shockwave. Interest (Income) Expense: Interest income in the fiscal year 2025 was $1.1 billion as compared to $1.3 billion in 2024. Interest income decreased as compared to the prior year driven by lower interest rates earned on cash balances. Interest expense in the fiscal year 2025 was $1.0 billion as compared to $0.8 billion in 2024. Interest expense was higher as compared to the prior year due to a higher average debt balance. Cash, cash equivalents and marketable securities totaled $20.1 billion at the end of 2025, and averaged $22.3 billion as compared to the cash, cash equivalents and marketable securities total of $24.5 billion and $23.7 billion average balance in 2024. The total debt balance at the end of 2025 was $47.9 billion with an average debt balance of $42.3 billion as compared to $36.6 billion at the end of 2024 and an average debt balance of $33.0 billion. The higher debt balance was due to the senior unsecured notes issued by the Company in the fiscal first quarter of 2025. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition which closed on April 2, 2025 and for general corporate purposes. Income before tax by segment Income before tax by segment of business was as follows: Income Before Tax Segment Sales Percent of Segment Sales (Dollars in Millions) 2025 2024 2025 2024 2025 2024 Innovative Medicine $ 22,266 18,919 60,401 56,964 36.9 % 33.2 MedTech 4,113 3,740 33,792 31,857 12.2 11.7 Segment earnings before tax(1) 26,379 22,659 94,193 88,821 28.0 25.5 (Income) Expenses not allocated to segments(2) (6,202) 5,972 Worldwide income before tax $ 32,581 16,687 94,193 88,821 34.6 % 18.8 (1)See Note 17 to the Consolidated Financial Statements for more details. (2)Amounts not allocated to segments include interest (income) expense and general corporate (income) expense. The fiscal year 2025 includes the reversal of approximately $7.0 billion, a significant portion of the previously accrued talc reserve. The fiscal year 2024 includes charges for talc matters of approximately $5.1 billion and a loss of approximately $0.4 billion related to the debt to equity exchange of the Company's remaining shares of Kenvue Common Stock. 2025 Annual Report 31 Innovative Medicine segment: In 2025, the Innovative Medicine segment income before tax as a percent to sales was 36.9% versus 33.2% in 2024. The increase in the income before tax as a percent of sales was primarily driven by the following: •Acquired in-process research and development expense of $1.25 billion to secure the global rights to the NM26 bispecific antibody (Yellow Jersey acquisition) in 2024 •Litigation income of $0.1 billion in 2025 versus expense of $0.4 billion in 2024, primarily related to Risperdal Gynecomastia •Research & development leverage resulting from investment prioritization partially offset by •Acquisition, integration and divestiture related net expense of $0.4 billion in 2025 primarily related to Intra-Cellular and Halda Therapeutics and $0.1 billion in 2024 •Monetization of royalty rights of $0.3 billion in 2024 •Unfavorable Product mix, the impact of Medicare Part D redesign and unfavorable transactional currency •Increased investment related to the acquisition of Intra-Cellular (CAPLYTA) MedTech segment: In 2025, the MedTech segment income before tax as a percent to sales was 12.2% versus 11.7% in 2024. The increase in the income before tax as a percent to sales was primarily driven by the following: •Acquisition, integration and divestiture related net income of $0.2 billion in 2025 primarily driven by a contingent value right liability reduction associated with Abiomed versus net costs of $1.0 billion in 2024 primarily related to the Shockwave acquisition •Acquired in-process research and development expense of $0.5 billion from the V-Wave acquisition and $0.3 billion for a Laminar milestone in 2024 •Gain on the sale of securities of $0.2 billion in 2025 partially offset by •Litigation expense of $0.9 billion in 2025, primarily related to Auris shareholder litigation •Higher restructuring related costs of $0.5 billion in 2025 versus $0.2 billion in 2024 •Tariffs, unfavorable transactional currency and macroeconomic factors in Cost of products sold Restructuring: In fiscal 2025, the company initiated a restructuring program of its Surgery franchise within the MedTech segment to simplify and focus operations by exiting certain non-strategic product lines and optimize select sites across the network. The pre-tax restructuring expense was $205 million in the fiscal year 2025, of which $76 million was recorded in Restructuring, $122 million in Other income and expense and $7 million in Cost of products sold on the Consolidated Statement of Earnings. The pre-tax restructuring expense in the fiscal year 2025 primarily included costs related to asset impairments as well as product exits. The estimated costs of the total program are between $0.9 billion - $1.0 billion and is expected to be substantially completed by the end of fiscal year 2026. In fiscal 2023, the Company initiated a restructuring program of its Orthopaedics franchise within its MedTech segment to streamline operations by exiting certain markets, product lines and distribution network arrangements. The pretax restructuring expense was $307 million in the fiscal year 2025, of which $152 million was recorded in Restructuring, $84 million in Cost of products sold and $71 million in Other (Income)/Expense on the Consolidated Statement of Earnings primarily for costs related to asset impairments as well as market and product exits. The pre-tax restructuring expense was $167 million in the fiscal year 2024, of which $132 million was recorded in Restructuring and $35 million was recorded in Cost of products sold on the Consolidated Statement of Earnings, primarily included costs related to market and product exits. The pre-tax restructuring expense was $319 million in the fiscal year 2023, of which $40 million was recorded in Restructuring and $279 million was recorded in Cost of products sold on the Consolidated Statement of Earnings, primarily included inventory and instrument charges related to market and product exits. Total project costs of approximately $0.8 billion have been recorded since the restructuring was announced and the program has been substantially completed in the fiscal year 2025. 32 In fiscal 2023, the Company completed a prioritization of its research and development (R&D) investment within the Innovative Medicine segment to focus on the most promising medicines with the greatest benefit to patients. This resulted in the exit of certain programs within therapeutic areas. The pre-tax restructuring charge of $102 million in the fiscal year 2024 was recorded in Restructuring on the Consolidated Statement of Earnings, and included the termination of partnered and non-partnered development program costs, asset impairments and asset divestments. The pre-tax restructuring expense was $479 million in the fiscal year 2023, of which $449 million was recorded in Restructuring and $30 million was recorded in Cost of products sold on the Consolidated Statement of Earnings included the termination of partnered and non-partnered program costs and asset impairments. Total project costs of approximately $0.6 billion have been recorded since the restructuring was announced and the program was completed in the fiscal fourth quarter of 2024. See Note 20 to the Consolidated Financial Statements for additional details related to the restructuring programs. Provision for Taxes on Income: The worldwide effective income tax rate from continuing operations was 17.7% in 2025 and 15.7% in 2024. For discussion related to the fiscal year 2025 provision for taxes refer to Note 8 to the Consolidated Financial Statements. On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework that was supported by over 130 countries worldwide. Several EU and non-EU countries have enacted Pillar Two legislation with an initial effective date of January 1, 2024, with other aspects of the law effective in 2025 or later. While countries continue to enact new provisions or issue new regulations this could have an impact to the Company’s effective tax rate. The Company will continue to monitor further developments to determine any potential impact in the countries in which we operate, such as the recently issued administrative guidance on the side-by-side system that will fully exclude U.S. parented groups from certain provisions of the Pillar Two Framework. Liquidity and capital resources Liquidity & cash flows Cash and cash equivalents were $19.7 billion at the end of 2025 as compared to $24.1 billion at the end of 2024. The primary sources and uses of cash that contributed to the $4.4 billion decrease were: (Dollars in billions) $24.1 Q4 2024 Cash and cash equivalents balance 24.5 cash generated from operating activities (23.6) net cash used for investing activities (5.5) net cash used for financing activities 0.2 effect of exchange rate and rounding $19.7 Q4 2025 Cash and cash equivalents balance In addition, the Company had $0.4 billion in marketable securities at the end of fiscal year 2025 and $0.4 billion at the end of fiscal year 2024. See Note 1 to the Consolidated Financial Statements for additional details on cash, cash equivalents and marketable securities. 2025 Annual Report 33 Cash flow from operations of $24.5 billion was the result of: (Dollars In billions) $26.8 Net Earnings 10.4 non-cash expenses and other adjustments primarily for depreciation and amortization, stock-based compensation, asset write-downs, charges for acquired in-process research and development and deferred tax provision partially offset by net gain on sale of assets/businesses (6.2) an increase in other current and non-current assets (5.7) a decrease in other current and non-current liabilities 2.4 an increase in accounts payable and accrued liabilities (3.2) an increase in accounts receivable and inventories $24.5 Cash flow from operations Cash flow used for investing activities of $23.6 billion was primarily due to: (Dollars in billions) $(4.8) additions to property, plant and equipment (17.5) acquisitions, net of cash acquired 0.7 proceeds from the disposal of assets/businesses, net (0.4) acquired in-process research and development /related milestones 0.7 net sales of investments (2.1) credit support agreements activity, net (0.2) other (including capitalized licenses and milestones) $(23.6) Net cash used for investing activities Cash flow used for financing activities of $5.5 billion was primarily due to: (Dollars in billions) $(12.4) dividends to shareholders (6.0) repurchase of common stock 9.6 net proceeds from short and long-term debt 3.4 proceeds from stock options exercised/employee withholding tax on stock awards, net (0.2) credit support agreements activity, net 0.1 other and rounding $(5.5) Net cash used for financing activities As of December 28, 2025, the Company's notes payable and long-term debt was in excess of cash, cash equivalents and marketable securities. As of December 28, 2025, the net debt position was $27.8 billion as compared to the prior year of $12.1 billion. The debt balance at the end of 2025 was $47.9 billion as compared to $36.6 billion in 2024. In the fiscal first quarter of 2025, the Company issued senior unsecured notes for a total of $9.2 billion. For additional details on borrowings, see Note 7 to the Consolidated Financial Statements. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition for approximately $14.5 billion which closed on April 2, 2025, and for general corporate purposes. Considering recent market conditions, the Company has re-evaluated its operating cash flows and liquidity profile and does not foresee any significant incremental risk. The Company anticipates that operating cash flows, the ability to raise funds from external sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will continue to provide sufficient resources to fund operating needs, including the Company’s reserve balance of approximately $3.4 billion related to talc matters, $2.0 billion related to the current portion of Corporate bonds due and the remaining 34 approximately $1.1 billion to settle opioid litigation (See Note 19 to the Consolidated Financial Statements for additional details). In addition, the Company monitors the global capital markets on an ongoing basis and from time to time may raise capital when market conditions are favorable. The following table summarizes the Company’s material contractual obligations and their aggregate maturities as of December 28, 2025: To satisfy these obligations, the Company intends to use cash from operations. (Dollars in Millions) Debt Obligations Interest on Debt Obligations Total 2026 2,000 1,458 3,458 2027 3,216 1,368 4,584 2028 3,128 1,273 4,401 2029 2,153 1,208 3,361 2030 2,689 1,118 3,807 After 2030 28,252 10,306 38,558 Total 41,438 16,731 58,169 For tax matters, see Note 8 to the Consolidated Financial Statements. For talc matters, see Note 19 to the Consolidated Financial Statements. Financing and market risk The Company uses financial instruments to manage the impact of foreign exchange rate changes on cash flows. Accordingly, the Company enters into forward foreign exchange contracts to protect the value of certain foreign currency assets and liabilities and to hedge future foreign currency transactions primarily related to product costs. Gains or losses on these contracts are offset by the gains or losses on the underlying transactions. A 10% appreciation of the U.S. Dollar from the December 28, 2025 market rates would increase the unrealized value of the Company’s forward contracts by approximately $0.2 billion. Conversely, a 10% depreciation of the U.S. Dollar from the December 28, 2025 market rates would decrease the unrealized value of the Company’s forward contracts by approximately $0.3 billion. In either scenario, the gain or loss on the forward contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no impact on future anticipated earnings and cash flows. The Company hedges the exposure to fluctuations in currency exchange rates, and the effect on certain assets and liabilities in foreign currency, by entering into currency swap contracts. A 1% change in the spread between U.S. and foreign interest rates on the Company’s interest rate sensitive financial instruments would either increase or decrease the unrealized value of the Company’s swap contracts by approximately $1.5 billion. In either scenario, at maturity, the gain or loss on the swap contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no impact on future anticipated cash flows. The Company does not enter into financial instruments for trading or speculative purposes. Further, the Company has a policy of only entering into contracts with parties that have at least an investment grade credit rating. The counterparties to these contracts are major financial institutions and there is no significant concentration of exposure with any one counterparty. Management believes the risk of loss is remote. The Company entered into credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. See Note 6 to the Consolidated Financial Statements for additional details on credit support agreements. The Company invests in both fixed rate and floating rate interest earning securities which carry a degree of interest rate risk. The fair market value of fixed rate securities may be adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than predicted if interest rates fall. A 1% (100 basis points) change in spread on the Company’s interest rate sensitive investments would either increase or decrease the unrealized value of cash equivalents and current marketable securities by less than $5.0 million. The Company has access to substantial sources of funds at numerous banks worldwide. In June 2025, the Company secured a new 364-day Credit Facility of $10 billion, which expires on June 24, 2026. Interest charged on borrowings under the credit line agreement is based on either Secured Overnight Financing Rate (SOFR) Reference Rate or other applicable market rate as allowed plus applicable margins. Commitment fees under the agreement are not material. 2025 Annual Report 35 Total borrowings at the end of 2025 and 2024 were $47.9 billion and $36.6 billion, respectively. The increase in the borrowings was primarily due to the issuance of new debt in the fiscal first quarter of 2025. The Company issued senior unsecured notes for approximately $9.2 billion. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition for approximately $14.5 billion which closed on April 2, 2025, and for general corporate purposes. In 2025, net debt (cash and current marketable securities, net of debt) was $27.8 billion compared to net debt of $12.1 billion in 2024. Total debt represented 37.0% of total capital (shareholders’ equity and total debt) in 2025 and 34.0% of total capital in 2024. Shareholders’ equity per share at the end of 2025 was $33.86 compared to $29.70 at year-end 2024. A summary of borrowings can be found in Note 7 to the Consolidated Financial Statements. Dividends The Company increased its dividend in 2025 for the 63rd consecutive year. Cash dividends paid were $5.14 per share in 2025 and $4.91 per share in 2024. On January 2, 2026, the Board of Directors declared a regular cash dividend of $1.30 per share, payable on March 10, 2026 to shareholders of record as of February 24, 2026. Other information Critical accounting policies and estimates Management’s discussion and analysis of results of operations and financial condition are based on the Company’s consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). The preparation of these financial statements requires that management make estimates and assumptions that affect the amounts reported for revenues, expenses, assets, liabilities and other related disclosures. Actual results may or may not differ from these estimates. The Company believes that the understanding of certain key accounting policies and estimates are essential in achieving more insight into the Company’s operating results and financial condition. These key accounting policies include revenue recognition, income taxes, legal and self-insurance contingencies, valuation of long-lived assets, assumptions used to determine the amounts recorded for pensions and other employee benefit plans and accounting for stock based awards. Revenue Recognition: The Company recognizes revenue from product sales when obligations under the terms of a contract with the customer are satisfied; generally, this occurs with the transfer of control of the goods to customers. The Company's global payment terms are typically between 30 to 90 days. Provisions for certain rebates, sales incentives, trade promotions, coupons, product returns, discounts to customers and governmental clawback provisions are accounted for as variable consideration and recorded as a reduction in sales. Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including consideration of competitor pricing. Rebates and discounts are estimated based on contractual terms, historical experience, patient outcomes, trend analysis and projected market conditions in the various markets served. The Company evaluates market conditions for products or groups of products primarily through the analysis of wholesaler and other third-party sell-through and market research data, as well as internally generated information. Sales returns are estimated and recorded based on historical sales and returns information. Products that have lost patent exclusivity, or that otherwise exhibit unusual sales or return patterns due to dating, competition or other marketing matters are specifically investigated and analyzed as part of the accounting for sales return accruals. Sales returns allowances represent a reserve for products that may be returned due to expiration, destruction in the field, or in specific areas, product recall. In accordance with the Company’s accounting policies, the Company generally issues credit to customers for returned goods. The Company’s sales returns reserves are accounted for in accordance with the U.S. GAAP guidance for revenue recognition when right of return exists. Sales returns reserves are recorded at full sales value. Sales returns in the Innovative Medicine segment are almost exclusively not resalable. Sales returns for certain franchises in the MedTech segment are typically resalable but are not material. The Company infrequently exchanges products from inventory for returned products. The sales returns reserve for the total Company has been approximately 1.0% of annual net trade sales during the fiscal years 2025, 2024 and 2023. 36 Promotional programs are recorded in the same period as related sales and include volume-based sales incentive programs. Volume-based incentive programs are based on the estimated sales volumes for the incentive period and are recorded as products are sold. These arrangements are evaluated to determine the appropriate amounts to be deferred or recorded as a reduction of revenue. The Company also earns profit-share payments through collaborative arrangements of certain products, which are included in sales to customers. Profit-share payments were less than 2.0% of the total revenues in the fiscal year 2025, 2024 and 2023. In addition, the Company enters into collaboration arrangements that contain multiple performance obligations. Amounts due from collaborative partners for these arrangements are recognized as each performance obligation is satisfied, based on the relative selling price. Upfront fees received as part of these arrangements are generally deferred and recognized over the performance period. See Note 1 to the Consolidated Financial Statements for additional disclosures on collaborations. Reasonably likely changes to assumptions used to calculate the accruals for rebates, returns and promotions are not anticipated to have a material effect on the financial statements. The Company currently discloses the impact of changes to assumptions in the quarterly or annual filing in which there is a material financial statement impact. Below are tables that show the progression of accrued rebates, returns, promotions, reserve for doubtful accounts and reserve for cash discounts by segment of business for the fiscal years ended December 28, 2025 and December 29, 2024. Innovative Medicine segment (Dollars in Millions) Balance at Beginning of Period Accruals Payments/ Credits(2) Balance at End of Period 2025 Accrued rebates(1) $15,780 56,819 (55,071) 17,528 Accrued returns 1,124 197 (341) 980 Accrued promotions 3 1 (4) 0 Subtotal $16,907 57,017 (55,416) 18,508 Reserve for doubtful accounts 41 0 (3) 38 Reserve for cash discounts 109 1,314 (1,300) 123 Total $17,057 58,331 (56,719) 18,669 2024 Accrued rebates(1) $14,661 52,786 (51,667) 15,780 Accrued returns 634 845 (355) 1,124 Accrued promotions 6 3 (6) 3 Subtotal $15,301 53,634 (52,028) 16,907 Reserve for doubtful accounts 33 14 (6) 41 Reserve for cash discounts 111 1,493 (1,495) 109 Total $15,445 55,141 (53,529) 17,057 (1)Includes reserve for customer rebates of $262 million at December 28, 2025 and $187 million at December 29, 2024, recorded as a contra asset. (2)Includes adjustments to revenue recognized as a result of changes in estimates for prior year transactions 2025 Annual Report 37 MedTech segment (Dollars in Millions) Balance at Beginning of Period Accruals Payments/ Credits Balance at End of Period 2025 Accrued rebates(1) $1,424 6,446 (6,377) 1,493 Accrued returns 118 548 (538) 128 Accrued promotions 22 88 (86) 24 Subtotal $1,564 7,082 (7,001) 1,645 Reserve for doubtful accounts 126 33 (14) 145 Reserve for cash discounts 6 89 (88) 7 Total $1,696 7,204 (7,103) 1,797 2024 Accrued rebates(1) $1,455 5,955 (5,986) 1,424 Accrued returns 125 543 (550) 118 Accrued promotions 25 62 (65) 22 Subtotal $1,605 6,560 (6,601) 1,564 Reserve for doubtful accounts 133 31 (38) 126 Reserve for cash discounts 5 92 (91) 6 Total $1,743 6,683 (6,730) 1,696 (1)Includes reserve for customer rebates of $767 million at December 28, 2025 and $704 million at December 29, 2024, recorded as a contra asset. Income Taxes: Income taxes are recorded based on amounts refundable or payable for the current year and include the results of any difference between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. The Company estimates deferred tax assets and liabilities based on enacted tax law and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities in the future. The Company records unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Management believes that changes in these estimates would not have a material effect on the Company's results of operations, cash flows or financial position. The Company has not provided deferred taxes on the undistributed earnings on certain international subsidiaries where the earnings are considered to be indefinitely reinvested. The Company intends to continue to reinvest these earnings in those international operations. If the Company decides at a later date to repatriate these earnings to the U.S., the Company would be required to record the net tax effects on these amounts. The Company estimates that the tax effect of this repatriation would be approximately $0.6 billion under currently enacted tax laws and regulations and at current currency exchange rates. This amount does not include the possible benefit of U.S. foreign tax credits, which may substantially offset this cost. See Note 1 and Note 8 to the Consolidated Financial Statements for further information regarding income taxes. Legal and Self Insurance Contingencies: The Company records accruals for various contingencies, including legal proceedings and product liability claims as these arise in the normal course of business. The accruals are based on management’s judgment as to the probability of losses and, where applicable, actuarially determined estimates. The Company has self insurance through a wholly-owned captive insurance company. In addition to accruals in the self insurance program, claims that exceed the insurance coverage are accrued when losses are probable and amounts can be reasonably estimated. See Notes 1 and 19 to the Consolidated Financial Statements for further information regarding product liability and legal proceedings. 38 Long-Lived and Intangible Assets: The Company assesses changes, both qualitatively and quantitatively, in economic conditions and makes assumptions regarding estimated future cash flows in evaluating the value of the Company’s property, plant and equipment, goodwill and intangible assets. As these assumptions and estimates may change over time, it may or may not be necessary for the Company to record impairment charges. Employee Benefit Plans: The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. These plans are based on assumptions for the discount rate, expected return on plan assets, mortality rates, expected salary increases, healthcare cost trend rates and attrition rates. See Note 10 to the Consolidated Financial Statements for further details on these rates. Stock Based Compensation: The Company recognizes compensation expense associated with the issuance of equity instruments to employees for their services. Based on the type of equity instrument, the fair value is estimated on the date of grant using either the Black-Scholes option valuation model or a combination of both the Black-Scholes option valuation model and Monte Carlo valuation model, and is expensed in the financial statements over the service period. The input assumptions used in determining fair value are the expected life, expected volatility, risk-free rate and expected dividend yield. For performance share units, the fair market value is calculated for the two component goals at the date of grant: adjusted operational earnings per share and relative total shareholder return. The fair values for the earnings per share goal of each performance share unit was estimated on the date of grant using the fair market value of the shares at the time of the award, discounted for dividends, which are not paid on the performance share units during the vesting period. The fair value for the relative total shareholder return goal of each performance share unit was estimated on the date of grant using the Monte Carlo valuation model. See Note 16 to the Consolidated Financial Statements for additional information. New accounting pronouncements Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of December 28, 2025. Economic and market factors The Company is aware that its products are used in an environment where, for more than a decade, policymakers, consumers and businesses have expressed concerns about the rising cost of healthcare. In response to these concerns, the Company has a long-standing policy of pricing products responsibly. For the period 2015 - 2025, in the U.S., the weighted average compound annual growth rate of the Company’s net price increases for healthcare products (prescription and over-the-counter drugs, hospital and professional products) was below the U.S. Consumer Price Index (CPI). The Company operates in certain countries where the economic conditions continue to present significant challenges. The Company continues to monitor these situations and take appropriate actions. Inflation rates continue to have an effect on worldwide economies and, consequently, on the way companies operate. The Company has accounted for operations in Argentina, Venezuela, Turkey and Egypt (beginning in the fiscal fourth quarter of 2024) as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%. This did not have a material impact to the Company's results in the period. In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and periodic price increases. In July 2023, Janssen Pharmaceuticals, Inc. (Janssen) filed litigation against the U.S. Department of Health and Human Services as well as the Centers for Medicare and Medicaid Services challenging the constitutionality of the IRA's Medicare Drug Price Negotiation Program. The litigation requests a declaration that the IRA violates Janssen’s rights under the First Amendment and the Fifth Amendment to the Constitution and therefore that Janssen is not subject to the IRA’s mandatory pricing scheme. While the impact of the IRA on our business and the broader pharmaceutical industry remains uncertain, as litigation filed by Janssen and other pharmaceutical companies remains ongoing, CMS has publicly announced the maximum fair price for each of the selected drugs and has recently begun implementing the program. In December 2025, Janssen sought review by the U.S. Supreme Court of the Third Circuit's majority affirmance of the district court’s ruling in favor of the government. The long-term implications of regional conflicts on the Company are difficult to predict. The financial impact of known existing conflicts in the fiscal 2025 was not material. 2025 Annual Report 39 The Company is exposed to fluctuations in currency exchange rates. A 1% change in the value of the U.S. Dollar as compared to all foreign currencies in which the Company had sales, income or expense in 2025 would have increased or decreased the translation of foreign sales by approximately $0.4 billion and net income by approximately $0.2 billion. Governments around the world consider various proposals to make changes to tax laws, which may include increasing or decreasing existing statutory tax rates. In connection with various government initiatives, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. A change in statutory tax rate in any country would result in the revaluation of the Company’s deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change would result in an expense or benefit recorded to the Company’s Consolidated Statement of Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to the statutory tax rate may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted. The Company may be further impacted by the imposition of tariffs, trade protection measures or other policies adopted by any jurisdiction that favor domestic companies and technologies over foreign competitors. The Company faces various worldwide healthcare changes that may continue to result in pricing pressures that include healthcare cost containment and government legislation relating to sales, promotions, pricing and reimbursement of healthcare products. Changes in the behavior and spending patterns of purchasers of healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and foregoing healthcare insurance coverage may continue to impact the Company’s businesses. The Company also operates in an environment increasingly hostile to intellectual property rights. Firms have filed Abbreviated New Drug Applications or Biosimilar Biological Product Applications with the U.S. FDA or otherwise challenged the coverage and/or validity of the Company's patents, seeking to market generic or biosimilar forms of many of the Company’s key pharmaceutical products prior to expiration of the applicable patents covering those products. In the event the Company is not successful in defending the patent claims challenged in the resulting lawsuits, generic or biosimilar versions of the products at issue will be introduced to the market, resulting in the potential for substantial market share and revenue losses for those products, and which may result in a non-cash impairment charge in any associated intangible asset. There is also a risk that one or more competitors could launch a generic or biosimilar version of the product at issue following regulatory approval even though one or more valid patents are in place. Legal proceedings Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability, intellectual property, commercial, employment, indemnification and other matters; governmental investigations; and other legal proceedings that arise from time to time in the ordinary course of business. The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. As of December 28, 2025, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with ASC 450-20-25, Contingencies. For these and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company is unable to estimate the possible loss or range of loss beyond the amounts accrued. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to achieve comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are numerous parties involved. To the extent adverse awards, judgments or verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated. 40 In the Company's opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company's balance sheet, is not expected to have a material adverse effect on the Company's financial position. However, the resolution of, or increase in accruals for, one or more of these matters in any reporting period may have a material adverse effect on the Company's results of operations and cash flows for that period. See Note 19 to the Consolidated Financial Statements included in Item 8 of this report for further information regarding legal proceedings. Common stock The Company’s Common Stock is listed on the New York Stock Exchange under the symbol JNJ. As of February 4, 2026, there were 108,358 record holders of Common Stock of the Company.