Johnson & Johnson (JNJ) J.P. Morgan 42nd Annual Healthcare Conference (Transcript)

Johnson & Johnson. (NYSE:JNJ) J.P. Morgan 42nd Annual Healthcare Conference January 8, 2024 12:45 PM ET

Company Participants

Joaquin Duato – Chairman and CEO of J&J

Conference Call Participants

Chris Schott – JPMorgan

Chris Schott

Good morning, everybody. I’m Chris Schott at JPMorgan, and it’s my pleasure to be hosting this fireside discussion today with Joaquin Duato, Chairman and CEO of J&J. So, Joaquin, Happy New Year. Great speaking with you today. I thought it might be a good way to start the conversation just with some of your reflections on 2023. It was obviously a very busy, very productive year for the company. So why don’t we kick off there and we can jump into some topics from there.

Question-and-Answer Session

A – Joaquin Duato

Thank you, Chris, and good morning, everybody. Yes, 2023 was a very productive year for Johnson & Johnson. We had our Enterprise Business Review Day back in December. And it was a very symbolic moment for us because for the first time, we presented what is the new Johnson & Johnson exclusively focused on innovation on R&D through medical technology and medicines. So, we had the opportunity to do that at the New York Stock Exchange. We rang the bell and it was a symbolic moment for us.

This new company, the new Johnson & Johnson, has the opportunity to play across the entire patient continuum. I always give the example of lung cancer. We can diagnose lung cancer with our robotic-assisted bronchoscopy system, MONARCH. We can perform surgery with our smart instruments, and then we can treat lung cancer with our medicines. So, I cannot think about any other company that can play across the entire patient continuum as Johnson & Johnson can do, and that is unique. At the same time, by being focused only on medical technology and medicines, we are going to be a company with a higher growth profile, with better margins, and more focused and more specialized. So it’s the beginning of a new phase for Johnson & Johnson, in which, while we are more focused or more specialized, we remain the largest and most diversified health care company in the world. Our sales are about $85 billion. And we have 25 platforms of more than $1 billion in annual sales. So we maintain our size, our scale, but yet we are more focused and simpler than we were before, now that we are a two-sector company. So 2023, it’s the beginning of that new phase and we have had a strong 2023. During the first nine months of 2023, our growth as a company was close to 7% and 8% when it operational and you count also a Abiomed there. So for a company our size this is a very significant growth. In pharmaceuticals in the first nine months of the year our adjusted operational growth excluding the COVID vaccine was 6.5%. And in MedTech, it was 7.5% adjusted operational, and more than 12% when it comes to the operational growth counting of Abiomed. So strong growth, top-tier growth in both of our franchises, and some strategic progress.

If I go to pharmaceuticals, we have the approval of TALVEY, our GPRC5D bispecific antibody in multiple myeloma. We had important filings like CARTITUDE-4, also in multiple myeloma in one to three prior lines, or our MARIPOSA studies in our chemo-free EGFR mutated non-small lung cancer combination. So important progress there in our filings in the pharmaceutical group. We also presented important data that Mosley will comment later, data connected with CARTITUDE-4. We also presented data in our new targeted oral peptide anti IL-23. We presented data on our new targeted release system TARIS in localized bladder cancer. So a rich year in our ability to present data to sustain our pipeline.

On the MedTech side, we also provided insight in our soft tissue robotic system, Ottava, and we announced that we would be filing for an IDE in the U.S. in the second half of this year. We made significant progress in our PFA suite of catheters, and we have already completed our inspIRE study with VARIPULSE Catheter. So we continue with the integration of a Abiomed, which as we can discuss later is running ahead of our models and it’s giving us a gateway into cardiology and especially into interventional cardiology. And we completed the acquisition of Laminar, which is an earlier stage deal, but it’s going to give us the opportunity to get into the left atrial appendage device.

So a good year from a growth perspective and also from a strategic perspective. And when it comes to overall 2023, while we will provide you the final data in the fourth quarter earnings call, at this point I feel very confident that we are going to be able to deliver on the guidance that we provided. And as a reminder, we increase our guidance twice during the year. So we feel very confident that we’ll be able to deliver on the guidance that we provided.

Chris Schott

Excellent. I know we’re fresh off of the new J&J’s first Enterprise Business Review Day. As part of that, you gave company-wide growth targets for 5% to 7% annually. Maybe just elaborate a little bit on the drivers of that growth profile and what parts of the story you see as underappreciated by investors right now?

Joaquin Duato

Yes. So it’s been two years that I’m in the role of chairman of CEO of Johnson & Johnson. And I have commented with you guys many times what are my key priorities. One was to create the new Johnson & Johnson. We already completed the separation of our consumer business, so that’s ongoing. The second one was to make sure that our MedTech business is a best-in-class medical technology business. And the third one was to provide visibility and clarify our growth outlook for our pharmaceutical group post- biosimilars entry to STELARA, which was a common question. So we wanted to provide more visibility during our EBR to these last two priorities, best-in-class in MedTech and growth post-STELARA biosimilar entry. So let me start with the pharmaceutical group that now we call Innovative Medicines. We gave guidance overall for the enterprise in this meeting that in 2024 our revenue growth was going to be 5% to 6%.

In 2025 we provide guidance for the total enterprise of 3% and then specifically for the pharmaceutical group we said that in the second half of the decade from 25 to 2030 our growth was going to be as compounded average growth 5% to 7%. That is including the impact of the biosimilars of STELARA, the impact of IRA, and also the impact of the potential other patent expeditions that we may have at the end of the decade. And I will try to go into that for a second now. We also provided guidance for our MedTech group, and we commented that we plan to be able to grow at the upper end of the market that we compete.

So what are the drivers in the pharmaceutical group? Three main drivers. One is, continue to gain share and expanding to new patient populations with our existing portfolio. That’s a key one that sometimes get underestimated. That’s gaining share with DARZALEX in first line, while we think we still have 50% of the market to be able to expand. That is about TREMFYA in inflammatory bowel disease, which we plan to file in 2024. So those are important areas for us to continue to grow, as well as progressing with CARVYKTI, as you are seeing every quarter, we continue to progress with CARVYKTI. So that’s a very important component for our growth.

The second is to deliver in our pipeline of innovative medicines. So pretty soon, we are going to be in a position to have our Lazertinib plus RYBREVANT in the market, and it’s going to be the first chemo-free, first-line EGFR-mutated non-small cell lung cancer, so that’s an important opportunity that is in front of us. But we have others, like our TARIS platform, or our new oral IL-23 targeted peptide. So those are elements of our pipeline that we continue to deliver.

And then the third one, it’s about creating the next wave of innovation, not only for this decade, but for the next decade. We are a company that operates in multiple modalities in pharmaceuticals, in gene therapy, in cell therapy, by specific antibodies. So we have a significant breadth, and we have a number of facets that we think are going to be important, not only in this decade, but in the next decade.

For example, our anti-tau monoclonal antibody for Alzheimer’s disease, which is one of these assets that we think it’s going to be, and we projected that more than $5 billion in peak year sales. So those are the three drivers. When you think about our projections, 70% of the pipeline sales that we are considering are sales that are products that are already in Phase 3. So in that sense, it’s significantly risky. We also commented that we plan to have by 2030 10 assets with peak years sales potential of more than $5 billion. So the drivers of our confidence in the growth of our pharmaceutical group, it’s driven by the strength of our existing portfolio plus the pipeline what we described there.

So moving into MedTech, what are the drivers? I’m also going to use three again. So the first one is that we continue to improve our pipeline and our ability to move into higher growth markets. When you think about our existing sales, in 2018, 20% of our sales were in markets that were growing more than 5%. Today, in 2023, we have 50% of our sales in markets that are growing more than 5%. So it’s important for us to continue to move our portfolio to faster growth markets and to continue to deliver in our pipeline. The value of our pipeline compared to 2019 has more than doubled and we estimate that by 2027, a third of our sales will come from new products. So that’s the number one driver, how we are moving our portfolio to faster growth markets driven by innovation.

The second one, it’s our global scale. 50% of our sales of our MedTech business are outside of the U.S. We are the largest MedTech company in China. We have unparalleled brand equity, a hospital penetration everywhere. We have a very large professional education and clinical group that can support surgeons and clinicians and that helped us liberate that position. For example, with the acquisition of a Abiomed, then we can use the scale of Johnson & Johnson outside of the U.S. to be able to amplify that therapy.

And then finally, in MedTech, we continue to work in gaining operational resiliency in our supply chain, improving our margins, and focusing on the areas that we have more room for improvement. For example, in Orthopaedics, in which we have announced a restructuring program in order to be able to improve our margins. So those are the three drivers of our growth in MedTech moving into the second half of the decade.

Chris Schott

Lots of drivers around there, it’s good to see. Maybe just digging into the innovative medicines business a little bit, I thought it was interesting at the analyst meeting that you did highlight several assets where you saw major disconnects between J&J’s expectations and where the street is. Can you just elaborate on those products and what gave you confidence to, what do you think results in the disconnect we’re seeing?

Joaquin Duato

So the numbers of them that were presented there at the Enterprise Business Review, and for those of you, you can go back to our investor relations site and you have the full presentations of the Enterprise Business Review. So there were a number of products there. The first one our bio-specific antibodies in the treatment of multiple myeloma. So TECVAYLI, BCMA CD3, and TALVAY GPRC5D CD3. In the case of these antibodies, we plan to continue to develop them in combination, in sequencing, in combination also with DARZALEX, and we plan to move them as we are doing with CARVYKTI into first-line treatment.

So I think that is underestimated. In the case of TECVAYLI, what we said at that meeting is that we think our sales, and every number here that I’m going to say is anchored in 2027, that our sales, internal sales in 2027 are about 25% higher than the street numbers. And in the case of TALVAY, and I think that’s normal, our internal estimates are about double the street estimates. I think that’s normal because TALVAY just got introduced. So one time you told me that in Johnson & Johnson, you believe things when you see them, so I think you’re waiting to see that. But we see that TALVAY, it’s about double the estimates that we have.

Then continuing in our multiple myeloma franchise, CARVYKTI, in which we expect approval of CARTITUDE-4, which is one to three prior lines in multiple myeloma in 2024, CARVYKTI is also underestimated. It’s about 25% compared to our own estimates, 25% lower, as we see CARVYKTI moving into earlier lines, and we see CARVYKTI ultimately getting into first line, and eventually even replacing or being an alternative to transplant. So that’s another factor there.

Continuing there, in our chemo-free regimen for EGFR-mutated lung cancer, Lazertinib plus RYBREVANT, in which we file three indications in 2024 with MARIPOSA II and PAPILLON, they are, our estimates diverge even more significantly. We believe that in 2027, our estimates are about double than the STRIT-R [ph]. And keeping with oncology, in our targeted release system TARIS, that we, by the way, received breakthrough extension in December for one of the indications with TARIS-200, we continue to develop two platforms there, TARIS-200 and TARIS-210 with erdafitinib and gemcitabine. We see that these estimates are about 50% lower than our estimates.

And then closing, the other one is in neuroscience with SPRAVATO, which continues to do well and progress every quarter. We presented this year data in comparison to Quetapine in a study called ESCAPE-TRD that was published in the New England Journal of Medicine. There again, we see about 50% lower the estimates. So that can give you an idea of the difference between our estimates and the street [ph] estimates. I have to say, do you give credibility to Johnson & Johnson estimates? We have always delivered in our estimates.

In 2019, we said that we were going to be $50 billion in 2021 and we exceeded that. And in 2021, we said that we were going to get into $57 billion by 2025 and we plan and we are very confident of being able to exceed that. So for what it’s worth.

Chris Schott

Yes, absolutely, fair enough. One of the areas I think you might touch on a little bit here, multiple myeloma, the company seems incredibly well positioned. I guess one of the questions we get is how large of a franchise can this become for J&J when we kind of look at CARVYKTI plus what you’ve got with DARZALEX plus the Bi-Specifics. So can you just elaborate a little bit more on just how important of a franchise is that for the company?

Joaquin Duato

It’s the core of our pharmaceutical business. And the big change here in our multiple myeloma franchise is that we have the possibility with the four medicines that we have in multiple myeloma, DARZALEX, CARVYKTI, TECVAYLI, and TALVAY, to change the treatment paradigm. So to move from treatment to progression to treatment to cure, as we move these new medicines into first line. So in the enterprise business review, we said that we see our multiple myeloma franchise by 2030, $25 billion plus. And that we see that 50% of the patients will be treated with one of the Johnson & Johnson regimens. And it’s a relatively simple calculation if you look at where we are today. DARZALEX is almost already a $10 billion product today. And we see continuous expansion of DARZALEX in first line, as I explained before. I think some of you may be familiar with the PERSEUS data in Aqua that we presented in first line, which is very substantive. And there’s significant opportunity to continue to grow with DARZALEX. And then each of the other three, , CARVYKTI, TECVAYLI, and TALVAY, we have discussed already that we see them at peak year as $5 billion plus assets. So that’s the size that we see for our multiple myeloma franchise. And that’s the trajectory that we are into today.

Chris Schott

Yes, so a nice growth for every few. The other product where you increased peak sales was on J&J 2113, your Oral IL-23. Just describe what you’re seeing with that asset. I know you’ve got a very strong presence in immunology, but just think about the competitive landscape, the data you’re seeing. How do you see that product differentiating?

Joaquin Duato

Yes, so we presented data in 2023 on our new targeted oral peptide in psoriasis. And the data show efficacy comparable to injectable biologics, and also very good tolerability, which is based on the mechanism of action, which is focused on IL-23. So we believe that this has the potential to expand the market, differentiate significantly from the existing oral therapies, and compete directly with the injectable biologics with a patient preference that is going to go more towards an oral. So that’s why we move it from a $1 billion to $5 billion asset to a $5 billion asset. We are starting our Phase 3 program in psoriasis with two studies, and we plan to do two head-to-head studies also that will start in 2024. And the dose that we’re going to be using is 200 milligram once a day. We are also starting a Phase 2 study in ulcerative colitis, and we see our oral IL-23 being also an important mainstay of treatment in inflammatory bowel disease overall.

So clearly, this is going to be one of the assets that is going to transform the treatment in IBD and in psoriasis that, in our view, is going to gradually move into oral therapies. And we have the strength of our company and the critical mass in order to be able to execute that in the marketplace. Keep in mind that we combine the sales of Remicade, Stelara, Symphony, Tremfya, and in this case, the oral IL-23. So we have the critical mass in order to be able to execute this in the marketplace.

This is not our only asset in IBD and in psoriasis. As you know, in the enterprise review, we also presented the fact that we have an oral IL-17 already in the clinic, and we also show data of the combination of Tremfya and Symphony in IBD with the Vega study that show breakthrough efficacy. So the evolution is going to be into oral therapies and also into combination of biologics, and that’s what is going to drive the market into the second half of the decade.

Chris Schott

Maybe just shifting over to MedTech. I know improving the growth prospects of this part of the business was a key priority for your tenure as CEO. You’re two years into the seat now. Just get a sense of where we are in that process. So what inning of the transformation of MedTech would you say?

Joaquin Duato

So I would say we’re doing it already. I mean, we went from 2017 with global 1.5% to 2023, the first nine months, in which we grew 7.5% adjusted operationally. So we are doing that already, and our goal, as I commented, is to grow in the upper end of our markets. How we are doing it, first, we are improving our commercial execution, and we have, as I commented before, 12 platforms that are more than a billion dollars, and in most of those platforms, we are gaining or maintaining share. So we have a strong position in the areas that we compete and in all of them we are number one or number two.

Second, we are improving the value of our pipeline. And as I commented earlier, the value tower pipeline has doubled. Since 2018 we have a large number of new products introductions and we plan to have a list a third of our sales by 2027 in products at that [Indiscernible]. And then finally, we continue to progress and move into faster growth markets. The Abiomed acquisition is some example of that. It’s a gateway into cardiology into heart failure. We are making progress in robotics and in digital we are the only company progressing three different robots. One, is robotics with Ottava and the Luminal with MONARCH and also [Indiscernible] in orthopedics and that innovation combined with our global scale, it’s going to continue to drive our success in MedTech. So we remain confident that we are going to be able to grow in our top end of our markets in MedTech.

Chris Schott

And I know you had a leadership change with Tim Schmid taking over. Should we think about any major strategic shifts with that leadership change?

Joaquin Duato

No. What we have this, exactly what you call it is a leadership change not a strategy change. Tim is a trident really did in our MedTech group. He’s been in the company for close to 30 years He has worked in Europe, in the U.S. in Asia Pacific in multiple franchises He’s going to be an exceptional leader of our of our medical technology franchise and I want to reemphasize, this is a Leadership change not a strategy change.

Chris Schott

I’m — the team commented and you mentioned earlier on Abiomed that the deal the business is exceeding your deal models so far. Just elaborate a little bit more on the dynamics that you’re seeing with that business and what’s enabled the better performance.

Joaquin Duato

Yes, first of all Abiomed is a high-quality company. So that’s one thing that that we found when we started to work with them and when we when we decided to move on with an acquisitions high quality company very competent mission-driven with a culture which is very similar to Johnson & Johnson. So there is a very nice intersection between Johnson & Johnson and Abiomed and they have come writing. We have maintained Abiomed as a standalone company and they continue to be based in numbers Massachusetts. For us Abiomed is a gateway back into the interventional cardiology space. We were there and we left and we have come back with Abiomed and most importantly, it’s a gateway into her failure, which is the end stage of all cardiovascular disease So it is strategically a perfect fit for us. Now they are in a space of heart failure with high risk PCI and Cardio gnomic shock with the Impella pump in which they are the market leaders They have a significant advantage versus any other competitor. They have a great integration into the workflow of the cardiologist. And they have a number of innovations that I believe are going to help us continue to deliver in that promise of growing Abiomed.

There are innovations in multiple areas in Abiomed pipeline. One is in improvements to our existing Impella pump with Impella ECP which is 35% smaller than Impella CP and it’s going to help in ease of use and we finish the clinical studies already and we plan to file Impella ECP in 2024. The other ones in expanding the use of Impella into broader patient populations or fortifying the clinical benefits. There’s 3 PMA studies ongoing in Abiomed, one is a STEM ID to you in patients with high risk heart attacks measuring the size of the infarct that can give us a broader patient population there. And then two on label studies that will potentially give us class one, Indic class one designation for the existing indications, they are protect for and recover for.

So through that we believe we’re going to be able to continue to fortify the position of Abiomed in her failure But Abiomed is also working in expanding into two other areas; one is chronic heart failure with a new device called bridge to recovery, which has the potential to replace Televac. And the other one it’s with another device called preCARDIA which is going to operate in the area of acute decompensated congestive heart failure that has already received breakthrough designation by the U.S. FDA. So we see significant potential of Abiomed of reaching new patients populations and continue to provide data to substantiate the use that together with the ability that Johnson and Johnson has to move Abiomed globally portents very well for us to be able to continue to grow this business and to give us a basecamp in interventional and cardiology from which we can continue to expand.

Chris Schott

Great. Maybe just turning to 2024 for a second, you provided guidance last month. But just maybe talk a little bit about the pushes and pulls that Investors should think about it for change a space as we go through this year.

Joaquin Duato

Thank you. So we provided guidance last month from 2024. And our guidance as a refresher was 5% to 6% adjusted operational revenue growth and also 7.3% in terms of EPS growth. So what are the push and pulls as a reminder? We don’t expect the STELARA Biosimilars entry in the U.S. until 2025. Although we may see them in Europe in the second half of 2024. So just as a reminder.

So what do we see there on the positives? Then we see on the pharmaceutical side continued expansion of DARZALEX, ERLEADA our core brands plus the filing of the RYBREVANT Lazertinib, the potential for seeing results of Nipocalimab in Myasthenia Gravis, so a number of data reads that are going to be significant in 2024. On the MedTech side, we see the filing of our IDE for Ottava, the introduction of our VARIPULSE Catheter potentially in Europe and the completion of our studies in PFA and the start of our restructuring program in Orthopedics that we have already talked about that.

So those are the puts and pulls. Based on the way that we are ending 2023 We feel confident on how things will look for Johnson & Johnson to be able to deliver in that guidance in 2024.

Chris Schott

As part of the Analyst day, you also provided things some longer term comments and margins and guys been a debate for folks of how to manage through these next few years with STELARA L.O.E. So can you just talk a little bit about how investors should think about J&J’s margin progression maybe in the next couple years through STELARA and then as we look beyond STELARA what that could start to look like?

Joaquin Duato

So first let me take you back to 2023 and the first nine months We’ve been able to operationally improve despite of the fact that we had the headwind of the delivery gene created by the consumer company separation. And we expect very little deleveraging through the consumer company separation in 2024, so that shows that we can execute quickly in eliminating these stranded costs. During 2024 we already you’re already commented. I mean we expect EPS growth higher than sales growth and then for the rest of that what Joe commented there our CFO at the EBR is that we expect overall margin growth and EPS growth commensurate with our sales growth. It’s difficult for us to project our EPS growth that long, but we’ll see despite of the push and pulls and the STELARA Biosimilar entry we see margin and operational growth commensurate with our sales growth.

Chris Schott

As I think about that, is it — is it reasonable to think about when we look out to let’s say 26 and beyond where you’re getting back to 5% or 7% top line that there could be a component of margin expansion coming back into J&J.

Joaquin Duato

It’s reasonable that you’re going to see periods in which margins are going to be more temper and then it’s reasonable to think that you’re going to see margin expansion once we have a better overall situation. Overall we see as I told you commensurate with our sales growth, but it’s reasonable to believe that you’re going to have some variations as we move through the through the second half of the decade.

Chris Schott

Okay, that makes sense. Excuse me on TALC, just help us a little bit about how you think about kind of balancing the desire to maybe get some finality to this process versus making sure whatever resolution is kind of fair to all parties So just how do you think about that kind of anyone’s not as core to the business, but just that element of the story.

Joaquin Duato

So first on TALC. Look we’ve been a long time. I mean we have a 138 years of history of a company of doing the right thing. And look when they when the facts the law and the science is with us, we defend our products. And that’s what we are doing with TALC. Nevertheless, as we have commented many times, we are clearly determined to look for a resolution and put TALC behind us in order to be able to focus on what we do best which is developing medical technologies and pharmaceuticals. And I can assure everybody here that 99.9% of the people at Johnson & Johnson is doing that. I mean, only our litigation department is working on the TALC side.

So yes, I mean we have multiple strategies and multifaceted strategy in order to try to put this behind and you said it very well. I mean there’s a push and pull between being able to say to find a resolution and making sure that that resolution is balanced and appropriate. So we are navigating that balance, but our intention to be clear is to put an end to this.

Chris Schott

Great. Shifting to BD. I know we had an announcement this morning so we’d love to just hear a little bit more about the transaction announced, kind of what brought you this asset? How does it strategically fit into the portfolio?

Joaquin Duato

So on the transaction acquiring Ambrx, which is a company that has a proprietary platform in conjugation in antibody drug conjugates We believe that ADCs are going to be an important tool an important modality in solid tumors. We’ve been creating a platform in ADCs. It is not new, we did it. We have an agreement with Mersana in which we’re working with them in ADC’s another one with Hanzo, that we’re working with them with ADCs We also announced a deal at the end of the year with Lovolkem [ph] with a drop to ADC. So we are working in building an ADC platform in Johnson & Johnson and this is culminated with the agreement with Ambrx. The agreement with Ambrx brings an asset, a PCMA directed ADC in prostate cancer that we think could be best a first-in-class in that particular setting of Metastatic cancer, which is a very big one today, and we — this is a market that we know well because we have Arliga [ph] and we have Sitega [ph] and for patients that fail and the androgen reset of therapy there’s not a good alternative today. There is 185,000 patients in that segment, so it’s a big market. It’s a big medical need and we believe that the prostate cancer ADC that Ambrx has could be first-in-class and best-in-class in that segment. They have other a pipeline of ADCs in development one is [indiscernible] and they have a proprietary conjugation technology that we think would be applied to more areas. So it’s really a win-win situation for both of us highlighted by the potential of having a significant product with the PCMA detected ADC. So we are very happy with the deal.

Chris Schott

Great. On that asset, I guess could you just talk a little bit about just the financial impact we should think about that as we think about 2024.

Joaquin Duato

Thank you. So we’ll provide more more clarity there at or before closing.

Chris Schott

Okay.

Joaquin Duato

That’s the point in time that we will be able to provide more clarity on that.

Chris Schott

And then just kind of bigger picture, as we think about the deal now today. Just talk more broadly about the BD strategy within the pharmaceutical division. It seems like you’ve got a really nice portfolio of assets internally companies obviously been successful historically bringing an external but where’s that? Where’s the focus at this point?

Joaquin Duato

Yes, so and this reads both for pharmaceutical and metrics. I mean we put different lenses in BD. The first one is the strategy one and we try to go to areas where we have already capabilities and know how. In our experience the closer we are to areas in which we have capabilities and know how they hire the probability of success. So what are those areas that we have capability and know how in the case of pharmaceuticals? It’s oncology both in hematology and in solid tumors. It is immunology and it is also Neuroscience, so those are the three areas in which we put our effort. People sometimes ask me would you go into a different area if there were a breakthrough potentially. But that’s not where we are focus let’s say. In the case of MedTech it is in cardiovascular. It is in robotics when it comes to surgery. It is in vision and it’s also in segments of orthopedics that we think are faster growing, so those are the universe of areas that we go in which we think we have internal capabilities.

The second thing we look for the scientific breakthrough potential and how it’s addressing a medical need. Case in point Ambrx with Metastatic prostate cancer which will be leave is an important medical need and we think it could be a breakthrough therapy there And the third one is a financial one, the bigger the ticket the more financial discipline we have to put in other instances we have to put financial discipline, but we are willing to take a higher risk, so that’s how we operate.

In pharmaceuticals specifically. we have been very successful in going to the areas which are around proof of concept, like we have known now with Ambrx. So and what is the benefit of doing deals that are around proof-of-concept? The benefit is that we can use our scale in clinical development in manufacturing in commercialization in order to maximize the value of those assets and then create more value for our shareholders than if we work for assets that are already marketed. So we have tried to stay in that area. Again the question could be would you consider a marketed asset? It’s not our main area of focus, but potentially if the all the considerations were there, but our main area of focus and we have been very successful there And I can give you a long list of products in which we have been very successful is assets that are in this pre or post proof-of-concept the stage and this a very capital efficient way of building our pipeline.

Chris Schott

I think we’re just about time. Really appreciate the — joining us today.

Joaquin Duato

Thank you very much.

Chris Schott

Thanks a lot. Appreciate that.