JNJ

JOHNSON & JOHNSON
FORM 10-Q
(Quarterly Report)
Filed 11/02/17 for the Period Ending 10/01/17
Address ONE JOHNSON & JOHNSON PLZ

NEW BRUNSWICK, NJ, 08933
Telephone 732-524-2455
CIK 0000200406
Symbol JNJ
SIC Code 2834 - Pharmaceutical Preparations
Industry Pharmaceuticals
Sector Healthcare
Fiscal Year 01/01
http://www.edgar-online.com
Copyright 2017, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended October 1, 2017
or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from to
Commission file number 1-3215
(Exactnameofregistrantasspecifiedinitscharter)
NEWJERSEY 22-1024240
(Stateorotherjurisdictionof (I.R.S.Employer
incorporationororganization) IdentificationNo.)
OneJohnson&JohnsonPlaza
NewBrunswick,NewJersey08933
(Addressofprincipalexecutiveoffices)
Registrantstelephonenumber,includingareacode(732)524-0400
Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934during
thepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthe
past90days.
Yeso
No
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredto
besubmittedandpostedpursuanttoRule405ofRegulationS-Tduringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredto
submitandpostsuchfiles).
Yeso
No
Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,asmallerreportingcompany,oran
emerginggrowthcompany.Seethedefinitionsoflargeacceleratedfiler,acceleratedfiler,smallerreportingcompany,and"emerginggrowthcompany"in
Rule12b-2oftheExchangeAct.
Largeacceleratedfiler Acceleratedfilero
Non-acceleratedfilero (Donotcheckifasmallerreportingcompany)
Smallerreportingcompanyo Emerginggrowthcompanyo
Ifanemerginggrowthcompany,indicatedbycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplying
withanyneworrevisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchangeAct.o
Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).o
Yes
No
Indicatethenumberofsharesoutstandingofeachoftheissuersclassesofcommonstock,asofthelatestpracticabledate.
OnOctober27,2017,2,686,520,050sharesofCommonStock,$1.00parvalue,wereoutstanding.
JOHNSON&JOHNSONANDSUBSIDIARIES
TABLEOFCONTENTS
Page
No.
PartIFinancialInformation 1

Item1.FinancialStatements(unaudited) 1

ConsolidatedBalanceSheetsOctober1,2017andJanuary1,2017 1

ConsolidatedStatementsofEarningsfortheFiscalThirdQuartersEndedOctober1,2017andOctober2,2016 2

ConsolidatedStatementsofEarningsfortheFiscalNineMonthsEndedOctober1,2017andOctober2,2016 3

ConsolidatedStatementsofComprehensiveIncomefortheFiscalThirdQuartersandFiscalNineMonthsEndedOctober1,2017and
October2,2016 4

ConsolidatedStatementsofCashFlowsfortheFiscalNineMonthsEndedOctober1,2017andOctober2,2016 5

NotestoConsolidatedFinancialStatements 6

Item2.ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations 35

Item3.QuantitativeandQualitativeDisclosuresAboutMarketRisk 46

Item4.ControlsandProcedures 47

PartIIOtherInformation 47

Item1-LegalProceedings 47

Item2-UnregisteredSalesofEquitySecuritiesandUseofProceeds 47

Item6-Exhibits 48

Signatures 49
EX-31.1
EX-32.1
EX-101INSTANCEDOCUMENT
EX-101SCHEMADOCUMENT
EX-101CALCULATIONLINKBASEDOCUMENT
EX-101LABELSLINKBASEDOCUMENT
EX-101PRESENTATIONLINKBASEDOCUMENT
EX-101DEFINITIONLINKBASEDOCUMENT
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
ThisQuarterlyReportonForm10-QandJohnson&Johnson'sotherpubliclyavailabledocumentscontainforward-lookingstatementswithinthemeaning
ofthesafeharborprovisionsoftheU.S.PrivateSecuritiesLitigationReformActof1995.ManagementandrepresentativesofJohnson&Johnsonandits
subsidiaries(theCompany)alsomayfromtimetotimemakeforward-lookingstatements.Forward-lookingstatementsdonotrelatestrictlytohistoricalor
currentfactsandreflectmanagementsassumptions,views,plans,objectivesandprojectionsaboutthefuture.Forward-lookingstatementsmaybeidentifiedbythe
useofwordssuchasplans,expects,will,anticipates,estimates,intends,andotherwordsofsimilarmeaninginconjunctionwith,amongotherthings,
discussionsof:futureoperatingresults,financialperformanceandliquidity;impactofplannedacquisitionsanddispositions;impactandtimingofrestructuring
initiativesincludingassociatedcostsavingsandotherbenefits;strategyforgrowth;productdevelopmentactivitiesincludingplannedresearchandclinicaltrials;
regulatoryfilingsandapprovals;marketposition;investmentandexpenditures;andimpactofpotentialandactualchangesintaxandotherlawsandpublicpolicy.
Becauseforward-lookingstatementsarebasedoncurrentbeliefs,expectationsandassumptionsregardingfutureevents,theyaresubjecttouncertainties,risks
andchangesthataredifficulttopredictandmanyofwhichareoutsideoftheCompany'scontrol.Investorsshouldrealizethatifunderlyingassumptionsprove
inaccurate,orknownorunknownrisksoruncertaintiesmaterialize,theCompanysactualresultsandfinancialconditioncouldvarymateriallyfromexpectations
andprojectionsexpressedorimpliedinitsforward-lookingstatements.Investorsarethereforecautionednottorelyontheseforward-lookingstatements.Risksand
uncertaintiesinclude,butarenotlimitedto:
Risks Related to Product Development, Market Success and Competition
ChallengesanduncertaintiesinherentininnovationanddevelopmentofnewandimprovedproductsandtechnologiesonwhichtheCompanyscontinued
growthandsuccessdepend,includinguncertaintyofclinicaloutcomes,obtainingregulatoryapprovals,healthplancoverageandcustomeraccess,andinitial
andcontinuedcommercialsuccess;
ChallengestotheCompanysabilitytoobtainandprotectadequatepatentandotherintellectualpropertyrightsfornewandexistingproductsandtechnologies
intheUnitedStatesandotherimportantmarkets;
Theimpactofpatentexpirations,typicallyfollowedbytheintroductionofcompetingbiosimilarsandgenericsandresultingrevenueandmarketsharelosses;
IncreasinglyaggressiveandfrequentchallengestotheCompanyspatentsbycompetitorsandothersseekingtolaunchcompetinggeneric,biosimilarorother
products,potentiallyresultinginlossofmarketexclusivityandrapiddeclineinsalesfortherelevantproduct;
Competitioninresearchanddevelopmentofnewandimprovedproducts,processesandtechnologies,whichcanresultinproductandprocessobsolescence;
Competitiontoreachagreementwiththirdpartiesforcollaboration,licensing,developmentandmarketingagreementsforproductsandtechnologies;
Competitiononthebasisofcost-effectiveness,productperformance,technologicaladvancesandpatentsattainedbycompetitors;and
AllegationsthattheCompanysproductsinfringethepatentsandotherintellectualpropertyrightsofthirdparties,whichcouldadverselyaffectthe
Companysabilitytoselltheproductsinquestionandrequirethepaymentofmoneydamagesandfutureroyalties.
Risks Related to Product Liability, Litigation and Regulatory Activity
Productefficacyorsafetyconcerns,whetherornotbasedonscientificevidence,potentiallyresultinginproductwithdrawals,recalls,regulatoryactiononthe
partoftheUnitedStatesFoodandDrugAdministration(orinternationalcounterparts),decliningsalesandreputationaldamage;
ImpactofsignificantlitigationorgovernmentactionadversetotheCompany,includingproductliabilityclaims;
Increasedscrutinyofthehealthcareindustrybygovernmentagenciesandstateattorneysgeneralresultingininvestigationsandprosecutions,whichcarrythe
riskofsignificantcivilandcriminalpenalties,including,butnotlimitedto,debarmentfromgovernmentbusiness;
FailuretomeetcomplianceobligationsintheMcNEIL-PPC,Inc.ConsentDecreeortheCorporateIntegrityAgreementsoftheJohnson&Johnson
PharmaceuticalAffiliates,oranyothercomplianceagreementswithgovernmentsorgovernmentagencies,whichcouldresultinsignificantsanctions;
PotentialchangestoapplicablelawsandregulationsaffectingUnitedStatesandinternationaloperations,includingrelatingto:approvalofnewproducts;
licensingandpatentrights;salesandpromotionofhealthcareproducts;accessto,andreimbursementandpricingfor,healthcareproductsandservices;
environmentalprotectionandsourcingofrawmaterials;
Changesintaxlawsorregulations,increasingauditscrutinybytaxauthoritiesaroundtheworldandexposurestoadditionaltaxliabilitiespotentiallyinexcess
ofexistingreservesorrequiringnewreserves;and
IssuanceofneworrevisedaccountingstandardsbytheFinancialAccountingStandardsBoardandtheSecuritiesandExchangeCommission.
Risks Related to the Companys Strategic Initiatives and Health Care Market Trends
Pricingpressuresresultingfromtrendstowardhealthcarecostcontainment,includingthecontinuedconsolidationamonghealthcareproviders,trendstoward
managedcareandtheshifttowardgovernmentsincreasinglybecomingtheprimarypayersofhealthcareexpenses;
Restrictedspendingpatternsofindividual,institutionalandgovernmentalpurchasersofhealthcareproductsandservicesduetoeconomichardshipand
budgetaryconstraints;
ChallengestotheCompanysabilitytorealizeitsstrategyforgrowthincludingthroughexternallysourcedinnovations,suchasdevelopmentcollaborations,
strategicacquisitions,licensingandmarketingagreements,andthepotentialheightenedcostsofanysuchexternalarrangementsduetocompetitivepressures;
ThepotentialthattheexpectedstrategicbenefitsandopportunitiesfromanyplannedorcompletedacquisitionordivestiturebytheCompany,includingthe
acquisitionofActelionLtd.,maynotberealizedormaytakelongertorealizethanexpected;and
ThepotentialthattheexpectedbenefitsandopportunitiesrelatedtotherestructuringactionsintheMedicalDevicesegmentmaynotberealizedormaytake
longertorealizethanexpected,includingduetoanyrequiredconsultationproceduresrelatingtorestructuringofworkforce.
Risks Related to Economic Conditions, Financial Markets and Operating Internationally
Impactofinflationandfluctuationsininterestratesandcurrencyexchangeratesandthepotentialeffectofsuchfluctuationsonrevenues,expensesand
resultingmargins;
Potentialchangesinexport/importandtradelaws,regulationsandpoliciesoftheUnitedStates,UnitedKingdomandothercountries,includinganyincreased
traderestrictionsandpotentialdrugreimportationlegislation;
Theimpactoninternationaloperationsfromfinancialinstabilityininternationaleconomies,sovereignrisk,possibleimpositionofgovernmentalcontrolsand
restrictiveeconomicpolicies,andunstableinternationalgovernmentsandlegalsystems;
Globalclimatechanges,extremeweatherandnaturaldisastersthatcouldaffectdemandfortheCompany'sproductsandservices,causedisruptionsin
manufacturinganddistributionnetworks,altertheavailabilityofgoodsandserviceswithinthesupplychain,andaffecttheoveralldesignandintegrityofthe
Company'sproductsandoperations;and
TheimpactofarmedconflictsandterroristattacksintheUnitedStatesandotherpartsoftheworldincludingsocialandeconomicdisruptionsandinstability
offinancialandothermarkets.
Risks Related to Supply Chain and Operations
Difficultiesanddelaysinmanufacturing,internallyorwithinthesupplychain,thatmayleadtovoluntaryorinvoluntarybusinessinterruptionsorshutdowns,
productshortages,withdrawalsorsuspensionsofproductsfromthemarket,andpotentialregulatoryaction;
InterruptionsandbreachesoftheCompany'sinformationtechnologysystems,andthoseoftheCompany'svendors,potentiallyresultinginreputational,
competitive,operationalorotherbusinessharmaswellasfinancialcostsandregulatoryaction;and
Relianceonglobalsupplychainsandproductionanddistributionprocessesthatarecomplexandsubjecttoincreasingregulatoryrequirementsthatmay
adverselyaffectsupply,sourcingandpricingofmaterialsusedintheCompanysproducts.
InvestorsalsoshouldcarefullyreadtheRiskFactorsdescribedinItem1AoftheCompany'sAnnualReportonForm10-KforthefiscalyearendedJanuary1,
2017,foradescriptionofcertainrisksthatcould,amongotherthings,causetheCompanysactualresultstodiffermateriallyfromthoseexpressedinitsforward-
lookingstatements.Investorsshouldunderstandthatitisnotpossibletoidentifyorpredictallpotentialrisksanduncertainties.TheCompanydoesnotundertaketo
publiclyupdateany
forward-lookingstatementthatmaybemadefromtimetotime,whetherasaresultofnewinformationorfutureeventsordevelopments.
TableofContents
PartIFINANCIALINFORMATION
Item1FINANCIALSTATEMENTS
CONSOLIDATEDBALANCESHEETS
(Unaudited;DollarsinMillionsExceptShareandPerShareData)
October1,2017 January1,2017
ASSETS
Currentassets:
Cashandcashequivalents $ 15,721 18,972
Marketablesecurities 510 22,935
Accountsreceivable,trade,lessallowancesfordoubtfulaccounts$332(2016,$252) 13,155 11,699
Inventories(Note2) 9,521 8,144
Prepaidexpensesandother 2,922 3,282
Totalcurrentassets 41,829 65,032
Property,plantandequipmentatcost 40,928 37,773
Less:accumulateddepreciation (24,300) (21,861)
Property,plantandequipment,net 16,628 15,912
Intangibleassets,net(Note3) 54,569 26,876
Goodwill(Note3) 31,308 22,805
Deferredtaxesonincome 6,303 6,148
Otherassets 5,021 4,435
Totalassets $ 155,658 141,208
LIABILITIESANDSHAREHOLDERSEQUITY
Currentliabilities:
Loansandnotespayable $ 8,491 4,684
Accountspayable 6,390 6,918
Accruedliabilities 5,897 5,635
Accruedrebates,returnsandpromotions 6,945 5,403
Accruedcompensationandemployeerelatedobligations 2,900 2,676
Accruedtaxesonincome 1,183 971
Totalcurrentliabilities 31,806 26,287
Long-termdebt(Note4) 26,675 22,442
Deferredtaxesonincome 4,410 2,910
Employeerelatedobligations 9,686 9,615
Otherliabilities 9,102 9,536
Totalliabilities 81,679 70,790
Shareholdersequity:
Commonstockparvalue$1.00pershare(authorized4,320,000,000shares;issued3,119,843,000shares) $ 3,120 3,120
Accumulatedothercomprehensiveincome(loss)(Note7) (12,747) (14,901)
Retainedearnings 114,805 110,551
Less:commonstockheldintreasury,atcost(434,861,000and413,332,000shares) 31,199 28,352
Totalshareholdersequity 73,979 70,418
Totalliabilitiesandshareholders'equity $ 155,658 141,208
SeeNotestoConsolidatedFinancialStatements
1
TableofContents
CONSOLIDATEDSTATEMENTSOFEARNINGS
(Unaudited;Dollars&SharesinMillionsExceptPerShareAmounts)
FiscalThirdQuartersEnded
October1, Percent October2, Percent
2017 toSales 2016 toSales
Salestocustomers(Note9) $ 19,650 100.0% $ 17,820 100.0%
Costofproductssold 6,902 35.1 5,486 30.8
Grossprofit 12,748 64.9 12,334 69.2
Selling,marketingandadministrativeexpenses 5,396 27.5 4,772 26.8
Researchanddevelopmentexpense 2,574 13.1 2,178 12.2
Interestincome (74) (0.4) (97) (0.5)
Interestexpense,netofportioncapitalized 229 1.2 192 1.0
Other(income)expense,net (236) (1.2) (54) (0.2)
Restructuring(Note12) 69 0.3 62 0.3
Earningsbeforeprovisionfortaxesonincome 4,790 24.4 5,281 29.6
Provisionfortaxesonincome(Note5) 1,026 5.2 1,009 5.6
NETEARNINGS $ 3,764 19.2% $ 4,272 24.0%

NETEARNINGSPERSHARE(Note8)
Basic $ 1.40 $ 1.56
Diluted $ 1.37 $ 1.53
CASHDIVIDENDSPERSHARE $ 0.84 $ 0.80
AVG.SHARESOUTSTANDING
Basic 2,684.6 2,731.6
Diluted 2,737.7 2,785.4
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CONSOLIDATEDSTATEMENTSOFEARNINGS
(Unaudited;Dollars&SharesinMillionsExceptPerShareAmounts)

FiscalNineMonthsEnded
October1, Percent October2, Percent
2017 toSales 2016 toSales
Salestocustomers(Note9) $ 56,255 100.0% $ 53,784 100.0%
Costofproductssold 18,111 32.2 16,151 30.0
Grossprofit 38,144 67.8 37,633 70.0
Selling,marketingandadministrativeexpenses 15,395 27.4 14,636 27.2
Researchanddevelopmentexpense 6,919 12.3 6,455 12.0
In-processresearchanddevelopment 29 0.1
Interestincome (300) (0.5) (268) (0.5)
Interestexpense,netofportioncapitalized 660 1.1 542 1.0
Other(income)expense,net 192 0.3 464 0.9
Restructuringexpense(Note12) 165 0.3 296 0.5
Earningsbeforeprovisionfortaxesonincome 15,113 26.9 15,479 28.8
Provisionfortaxesonincome(Note5) 3,100 5.5 2,753 5.1
NETEARNINGS $ 12,013 21.4% $ 12,726 23.7%

NETEARNINGSPERSHARE(Note8)
Basic $ 4.46 $ 4.64
Diluted $ 4.37 $ 4.55
CASHDIVIDENDSPERSHARE $ 2.48 $ 2.35
AVG.SHARESOUTSTANDING
Basic 2,694.4 2,744.9
Diluted 2,746.4 2,796.6

3
TableofContents
CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINCOME
(Unaudited;DollarsinMillions)
FiscalThirdQuartersEnded FiscalNineMonthsEnded
October1,2017 October2,2016 October1,2017 October2,2016

Netearnings $ 3,764 4,272 12,013 12,726

Othercomprehensiveincome(loss),netoftax
Foreigncurrencytranslation 359 (94) 1,597 490

Securities:
Unrealizedholdinggain(loss)arisingduringperiod 14 29 150 129
Reclassificationstoearnings (99) (42) (292) (136)
Netchange (85) (13) (142) (7)

Employeebenefitplans:
Priorservicecostamortizationduringperiod (4) (5) (13) (15)
Gain(loss)amortizationduringperiod 124 103 370 310
Netchange 120 98 357 295

Derivatives&hedges:
Unrealizedgain(loss)arisingduringperiod 62 4 (8) (437)
Reclassificationstoearnings 31 (3) 350 109
Netchange 93 1 342 (328)

Othercomprehensiveincome(loss) 487 (8) 2,154 450

Comprehensiveincome $ 4,251 4,264 14,167 13,176

Thetaxeffectsinothercomprehensiveincomeforthefiscalthirdquarterswereasfollowsfor2017and2016,respectively:Securities:$45millionand$7
million;EmployeeBenefitPlans:$61millionand$51million;Derivatives&Hedges:$50millionandlessthan$1million.

Thetaxeffectsinothercomprehensiveincomeforthefiscalninemonthswereasfollowsfor2017and2016,respectively:Securities:$76millionand$4
million;EmployeeBenefitPlans:$181millionand$155million;Derivatives&Hedges:$184millionand$177million.
4
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CONSOLIDATEDSTATEMENTSOFCASHFLOWS
(Unaudited;DollarsinMillions)
October1, October2,
2017 2016
CASHFLOWSFROMOPERATINGACTIVITIES
Netearnings $ 12,013 12,726
Adjustmentstoreconcilenetearningstocashflowsfromoperatingactivities:
Depreciationandamortizationofpropertyandintangibles 3,773 2,699
Stockbasedcompensation 758 704
Assetwrite-downs 309 187
Netgainonsaleofassets/businesses (527) (276)
Deferredtaxprovision (407) 215
Accountsreceivableallowances 59 (10)
Changesinassetsandliabilities,netofeffectsfromacquisitionsanddivestitures:
Increaseinaccountsreceivable (300) (736)
Increaseininventories (193) (408)
Increase(Decrease)inaccountspayableandaccruedliabilities 339 (1,220)
Increaseinothercurrentandnon-currentassets (555) (514)
Decreaseinothercurrentandnon-currentliabilities (318) (1,253)

NETCASHFLOWSFROMOPERATINGACTIVITIES 14,951 12,114

CASHFLOWSFROMINVESTINGACTIVITIES
Additionstoproperty,plantandequipment (2,039) (2,133)
Proceedsfromthedisposalofassets/businesses,net 726 873
Acquisitions,netofcashacquired (34,646) (4,050)
Purchasesofinvestments (5,798) (27,677)
Salesofinvestments 27,511 30,437
Other (117) (37)

NETCASHUSEDBYINVESTINGACTIVITIES (14,363) (2,587)

CASHFLOWSFROMFINANCINGACTIVITIES
Dividendstoshareholders (6,687) (6,451)
Repurchaseofcommonstock (5,543) (6,954)
Proceedsfromshort-termdebt 4,760 149
Retirementofshort-termdebt (936) (3,926)
Proceedsfromlong-termdebt,netofissuancecosts 4,465 11,951
Retirementoflong-termdebt (1,024) (953)
Proceedsfromtheexerciseofstockoptions/employeewithholdingtaxonstockawards,net 854 1,112
Other (25) (15)

NETCASHUSEDBYFINANCINGACTIVITIES (4,136) (5,087)

Effectofexchangeratechangesoncashandcashequivalents 297 33
(Decrease)/Increaseincashandcashequivalents (3,251) 4,473
CashandCashequivalents,beginningofperiod 18,972 13,732
CASHANDCASHEQUIVALENTS,ENDOFPERIOD $ 15,721 18,205

Acquisitions
Fairvalueofassetsacquired $ 36,494 4,094
Fairvalueofliabilitiesassumedandnoncontrollinginterests (1,848) (44)
Netcashpaidforacquisitions $ 34,646 4,050
Prioryearamountshavebeenreclassifiedtoconformtocurrentyearpresentation
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NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS
NOTE1TheaccompanyingunauditedinterimconsolidatedfinancialstatementsandrelatednotesshouldbereadinconjunctionwiththeauditedConsolidated
FinancialStatementsofJohnson&Johnsonanditssubsidiaries(theCompany)andrelatednotesascontainedintheCompanysAnnualReportonForm10-Kfor
thefiscalyearendedJanuary1,2017.Theunauditedinterimfinancialstatementsincludealladjustments(consistingonlyofnormalrecurringadjustments)and
accrualsnecessaryinthejudgmentofmanagementforafairstatementoftheresultsfortheperiodspresented.
New Accounting Standards
Adopted as of October 1, 2017
Duringthefiscalfirstquarterof2016,theFinancialAccountingStandardsBoard(FASB)issuedAccountingStandardsUpdate2016-07Investments-Equity
MethodandJointVentures:SimplifyingtheTransitiontotheEquityMethodofAccounting.Theamendmentsintheupdateeliminatetherequirementthatwhenan
investmentqualifiesfortheuseoftheequitymethodasaresultofanincreaseinthelevelofownershipinterestordegreeofinfluence,aninvestormustadjustthe
investment,resultsofoperations,andretainedearningsretroactivelyonastepbystepbasisasiftheequitymethodhadbeenineffectduringallpreviousperiods
thattheinvestmenthadbeenheld.Theamendmentsinthisupdateareeffectiveforallentitiesforfiscalyears,andinterimperiodswithinthosefiscalyears,
beginningafterDecember15,2016.Theamendmentsshouldbeappliedprospectivelyupontheireffectivedatetoincreasesinthelevelofownershipinterestor
degreeofinfluencethatresultintheapplicationoftheequitymethod.Theadoptionofthisstandarddidnothaveamaterialimpactonthepresentationofthe
Company'sconsolidatedfinancialstatements.
Duringthefiscalsecondquarterof2015,theFASBissuedAccountingStandardsUpdate2015-11:SimplifyingtheMeasurementofInventory.Thisupdate
requiresinventorytobemeasuredatthelowerofcostornetrealizablevalue.Netrealizablevalueistheestimatedsellingpricesintheordinarycourseofbusiness,
lessreasonablypredictablecostsofcompletion,disposalandtransportation.ThisupdateiseffectivefortheCompanyforallannualandinterimperiodsbeginning
afterDecember15,2016.Theamendmentsinthisupdateshouldbeappliedprospectively.ThisupdatedidnothaveanymaterialimpactontheCompanys
consolidatedfinancialstatements.
Recently Issued Accounting Standards

Not Adopted as of October 1, 2017
Duringthefiscalthirdquarterof2017,theFASBissuedAccountingStandardUpdate2017-12:TargetedImprovementstoAccountingforHedgingActivities.This
updatemakesmorefinancialandnonfinancialhedgingstrategieseligibleforhedgeaccounting.Italsoamendsthepresentationanddisclosurerequirementsand
changeshowcompaniesassesseffectiveness.ThisupdatewillbeeffectivefortheCompanyforfiscalyearsbeginningafterDecember15,2018,andinterim
periodswithinthosefiscalyears.Earlyadoptionispermitteduponitsissuance.Theamendmentsinthisupdateshouldbeappliedonamodifiedretrospectivebasis
exceptforthepresentationanddisclosureguidancewhichisrequiredprospectively.TheCompanyiscurrentlyassessingtheimpactofthefutureadoptionofthis
standardonitsfinancialstatements.
Duringthefiscalfirstquarterof2017,theFASBissuedAccountingStandardsUpdate2017-07:ImprovingthePresentationofNetPeriodicPensionCostandNet
PeriodicPostretirementBenefitCost.Thisupdaterequiresthatanemployerdisaggregatetheservicecostcomponentfromtheothercomponentsofnetperiodic
benefitcost(NPBC).Inaddition,onlytheservicecostcomponentwillbeeligibleforcapitalization.ThisupdateiseffectivefortheCompanyforallannualand
interimperiodsbeginningafterDecember15,2017.Earlyadoptionispermittedasofthebeginningofanannualperiodforwhichfinancialstatements(interimor
annual)havenotbeenissuedormadeavailableforissuance.TheCompanywilladoptthisnewstandardin2018.TheamendmentsinthisUpdateshouldbeapplied
retrospectivelyforthepresentationoftheservicecostcomponentandtheothercomponentsofNPBCintheincomestatementandprospectively,onandafterthe
effectivedate,forthecapitalizationoftheservicecostcomponentofNPBCinassets.TheCompanyisassessingtheretroactiverestatementmethodologyand
impacttotheindividuallineitemsonConsolidatedStatementofEarnings.TheCompanydoesnotexpecttheretobeamaterialimpacttonetearnings.
Duringthefiscalfirstquarterof2017,theFASBissuedAccountingStandardUpdate2017-05:OtherIncome-GainsandLossesfromtheDerecognitionof
NonfinancialAssets.Thisupdateclarifiesthescopeofassetderecognitionguidance,addsguidanceforpartialsalesofnonfinancialassetsandclarifiesrecognizing
gainsandlossesfromthetransferofnonfinancialassetsincontractswithnoncustomers.ThisupdatewillbeeffectivefortheCompanyforitsannualandinterim
reportingperiodsbeginningafterDecember15,2017,thesametimeastheamendmentsinUpdate2014-09RevenuefromContractswith
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Customers.ThisupdateallowstheCompanytochooseeitherafullretrospectivemethodormodifiedretrospectivemethoduponadoption.TheCompanydoesnot
expectthisstandardtohaveamaterialimpactontheCompany'sconsolidatedfinancialstatements.
Duringthefiscalfirstquarterof2017,theFASBissuedAccountingStandardUpdate2017-04:SimplifyingtheTestforGoodwillImpairment.Thisupdate
simplifieshowanentityisrequiredtotestgoodwillforimpairment.Agoodwillimpairmentwillnowbemeasuredbytheamountbywhichareportingunits
carryingvalueexceedsitsfairvalue,nottoexceedthecarryingamountofgoodwill.ThisupdatewillbeeffectivefortheCompanyforitsannualoranyinterim
goodwillimpairmenttestsinfiscalyearsbeginningafterDecember15,2019.Earlyadoptionispermitted.Thisupdateshouldbeappliedprospectively.The
CompanydoesnotexpectthisstandardtohaveamaterialimpactontheCompany'sconsolidatedfinancialstatements.
Duringthefiscalfirstquarterof2017,theFASBissuedAccountingStandardUpdate2017-01:ClarifyingtheDefinitionofaBusiness.Thisupdatenarrowsthe
definitionofabusinessbyprovidingascreentodeterminewhenanintegratedsetofassetsandactivitiesisnotabusiness.Thescreenspecifiesthatanintegrated
setofassetsandactivitiesisnotabusinessifsubstantiallyallofthefairvalueofthegrossassetsacquiredordisposedofisconcentratedinasingleoragroupof
similaridentifiableassets.ThisupdatewillbeeffectivefortheCompanyforannualperiodsbeginningafterDecember15,2017,includinginterimperiodswithin
thoseannualperiods.Earlyadoptionispermitted.Thisupdateshouldbeappliedprospectively.TheCompanydoesnotexpectthisstandardtohaveamaterial
impactontheCompany'sconsolidatedfinancialstatements.
Duringthefiscalfourthquarterof2016,theFASBissuedAccountingStandardsUpdate2016-16IncomeTaxes:Intra-EntityTransfersofAssetsOtherThan
Inventory.ThisupdateremovesthecurrentexceptioninUSGAAPprohibitingentitiesfromrecognizingcurrentanddeferredincometaxexpensesorbenefits
relatedtotransferofassets,otherthaninventory,withintheconsolidatedentity.Thecurrentexceptiontodefertherecognitionofanytaximpactonthetransferof
inventorywithintheconsolidatedentityuntilitissoldtoathirdpartyremainsunaffected.Theamendmentsinthisupdateareeffectiveforpublicentitiesfor
annualreportingperiodsbeginningafterDecember15,2017.TheCompanycontinuestoassesstheimpactofthefutureadoptionofthisstandardforfiscal2018.
TheresultsfromapreliminaryassessmentindicatethattheadoptionofthestandardwillnothaveasignificantimpactontheCompanysfinancialresults.Upon
adoption,andbasedoncurrenttaxandforeignexchangerates,theCompanyexpectstorecordadditionaldeferredtaxassetsintherangeof$2.2billionto$2.5
billionandanincreasetoretainedearningsbetween$1.2billionand$1.5billionatthebeginningof2018.
Duringthefiscalthirdquarterof2016,theFASBissuedAccountingStandardsUpdate2016-15StatementofCashFlows:ClassificationofCertainCashReceipts
andCashPayments.Thisupdateaddresseswhethertopresentcertainspecificcashflowitemsasoperating,investingorfinancingactivities.Theamendmentsin
thisupdateareeffectiveforpublicentitiesforfiscalyears,andinterimperiodswithinthosefiscalyears,beginningafterDecember15,2017.Earlyadoptionis
permitted,includingadoptioninaninterimperiod.TheCompanydoesnotexpectthisstandardtohaveamaterialimpactonitsconsolidatedStatementsofCash
Flows.
Duringthefiscalfirstquarterof2016,theFASBissuedAccountingStandardsUpdate2016-02Leases.Thisupdaterequirestherecognitionofleaseassetsand
leaseliabilitiesonthebalancesheetforallleaseobligationsanddisclosingkeyinformationaboutleasingarrangements.Thisupdaterequirestherecognitionof
leaseassetsandleaseliabilitiesbylesseesforthoseleasesclassifiedasoperatingleasesundercurrentgenerallyacceptedaccountingprinciples.Thisupdatewillbe
effectivefortheCompanyforallannualandinterimperiodsbeginningafterDecember15,2018,includinginterimperiodswithinthosefiscalyears.Early
applicationispermitted.Theupdateisrequiredtobeadoptedusingamodifiedretrospectiveapproach.TheCompanyanticipatesthatmostofitsoperatingleases
willresultintherecognitionofadditionalassetsandthecorrespondingliabilitiesonitsConsolidatedBalanceSheets,howeverdoesnotexpecttohaveamaterial
impactonthefinancialposition.TheactualimpactwilldependontheCompany'sleaseportfolioatthetimeofadoption.TheCompanycontinuestoassessall
implicationsofthestandardandrelatedfinancialdisclosures.
Duringthefiscalfirstquarterof2016,theFASBissuedAccountingStandardsUpdate2016-01FinancialInstruments:RecognitionandMeasurementofFinancial
AssetsandFinancialLiabilities.Theamendmentsinthisupdatesupersedetheguidancetoclassifyequitysecuritieswithreadilydeterminablefairvaluesinto
differentcategories(thatis,tradingoravailable-for-sale)andrequireequitysecuritiestobemeasuredatfairvaluewithchangesinthefairvaluerecognized
throughnetincome.Thestandardamendsfinancialreportingbyprovidingrelevantinformationaboutanentitysequityinvestmentsandreducingthenumberof
itemsthatarerecognizedinothercomprehensiveincome.ThisupdatewillbeeffectivefortheCompanyforannualperiodsbeginningafterDecember15,2017,
andinterimperiodswithinthoseannualperiods.The
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Companyisunabletoestimatetheimpactofthefutureadoptionofthisstandardonitsfinancialstatementsasitwilldependontheequityinvestmentsasofthe
adoptiondate.
Duringthefiscalsecondquarterof2014,theFASBissuedAccountingStandardsUpdate2014-09:RevenuefromContractswithCustomers,which,alongwith
amendmentsissuedin2015and2016,willreplacesubstantiallyallcurrentU.S.GAAPguidanceonthistopicandeliminateindustry-specificguidance.Early
adoptionofthisstandardispermittedbutnotbeforetheoriginaleffectivedateforallannualperiodsandinterimreportingperiodsbeginningafterDecember15,
2017.Theguidancepermitstwomethodsofadoption:fullretrospectivemethod(retrospectiveapplicationtoeachpriorreportingperiodpresented)ormodified
retrospectivemethod(retrospectiveapplicationwiththecumulativeeffectofinitiallyapplyingtheguidancerecognizedatthedateofinitialapplicationand
providingcertainadditionaldisclosures).TheCompanyplanstoadoptthestandardusingthemodifiedretrospectivemethod.WhiletheCompanycontinuesto
evaluatetheeffectofthestandard,preliminarily,itdoesnotanticipateamaterialimpactonitsfinancialstatementsincludingthepotentialimpactofadditional
disclosurerequirements.Tocompletetheassessmentoftheimpactofthestandard,theCompanycontinuestoassessallimplicationsofthestandardonitsfinancial
statementsanddisclosures.Additionally,theCompanycontinuestomonitormodifications,clarificationsandinterpretationsissuedbytheFASBthatmayaffect
currentconclusions.
NOTE2INVENTORIES
(DollarsinMillions) October1,2017 January1,2017

Rawmaterialsandsupplies $ 1,141 952
Goodsinprocess 2,388 2,185
Finishedgoods 5,992 5,007
Totalinventories $ 9,521 8,144
Inventoryof$63millionwasclassifiedasheldforsale,andreportedinprepaidexpensesandotherontheConsolidatedBalanceSheet,relatedtothedivestitureof
theCodmanNeurosurgerybusinesswhichwaspendingasofOctober1,2017.
SeeNote10totheConsolidatedFinancialStatementsforadditionaldetailsoninventoryrelatedtotheActelionacquisition.
NOTE3INTANGIBLEASSETSANDGOODWILL
Intangibleassetsthathavefiniteusefullivesareamortizedovertheirestimatedusefullives.Thelatestannualimpairmentassessmentofgoodwillandindefinite
livedintangibleassetswascompletedinthefiscalfourthquarterof2016.Futureimpairmenttestsforgoodwillandindefinitelivedintangibleassetswillbe
performedannuallyinthefiscalfourthquarter,orsooner,ifwarranted.
(DollarsinMillions) October1,2017 January1,2017

Intangibleassetswithdefinitelives:
Patentsandtrademarksgross $ 36,342 10,521
Lessaccumulatedamortization 6,395 5,076
Patentsandtrademarksnet 29,947 5,445
Customerrelationshipsandotherintangiblesgross 20,241 17,615
Lessaccumulatedamortization 7,297 6,515
Customerrelationshipsandotherintangiblesnet 12,944 11,100
Intangibleassetswithindefinitelives:
Trademarks 7,093 6,888
Purchasedin-processresearchanddevelopment 4,585 3,443
Totalintangibleassetswithindefinitelives 11,678 10,331
Totalintangibleassetsnet $ 54,569 26,876
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GoodwillasofOctober1,2017wasallocatedbysegmentofbusinessasfollows:
(DollarsinMillions) Consumer Pharm MedDevices Total

Goodwill,netatJanuary1,2017 $ 8,263 2,840 11,702 22,805
Goodwill,relatedtoacquisitions* 102 5,757 2,140 7,999
Goodwill,relatedtodivestitures (74) (74)
(1)
Currencytranslation/Other 557 89 (68) 578
Goodwill,netatOctober1,2017 $ 8,848 8,686 13,774 31,308
(1)Netof$106millionclassifiedasheldforsale,reportedinotherassetsontheConsolidatedBalanceSheet,relatedtothedivestitureoftheCodmanNeurosurgerybusiness
whichwaspendingasofOctober1,2017.
*Includesmeasurementperiodadjustments
Theweightedaverageamortizationperiodsforpatentsandtrademarksandcustomerrelationshipsandotherintangibleassetsare12yearsand23years,
respectively.Theamortizationexpenseofamortizableintangibleassetsincludedincostofproductssoldwas$1,886millionand$895millionforthefiscalnine
monthsendedOctober1,2017andOctober2,2016,respectively.Theestimatedamortizationexpenseforthefivesucceedingyearsapproximates$4.3billion,
beforetax,peryear.Intangibleassetwrite-downsareincludedinOther(income)expense,net.
TheprimarydriveroftheincreasetointangibleassetsandgoodwillisrelatedtotheActelionacquisitioninthefiscalsecondquarterof2017,whichresultedinthe
recordingof$25.0billiontointangibleassetsandapproximately$5.8billiontogoodwill.Additionally,theAbbottMedicalOptics(AMO)acquisitioninthefiscal
firstquarterof2017,resultedintherecordingof$2.3billiontointangibleassetsand$1.8billiontogoodwill.Theintangibleassetsandgoodwillamountsrelatedto
theActelionandAMOacquisitionsarebasedonthepreliminarypurchasepriceallocation.SeeNote10totheConsolidatedFinancialStatementsforadditional
detailsrelatedtoacquisitionsanddivestitures.
NOTE4FAIRVALUEMEASUREMENTS
TheCompanyusesforwardforeignexchangecontractstomanageitsexposuretothevariabilityofcashflows,primarilyrelatedtotheforeignexchangerate
changesoffutureintercompanyproductsandthird-partypurchasesofmaterialsdenominatedinaforeigncurrency.TheCompanyusescrosscurrencyinterestrate
swapstomanagecurrencyriskprimarilyrelatedtoborrowings.
TheCompanyalsousesequitycollarcontractstomanageexposuretomarketriskassociatedwithcertainequityinvestments.
Allthreetypesofderivativesaredesignatedascashflowhedges.
Additionally,theCompanyusesinterestrateswapsasaninstrumenttomanageinterestrateriskrelatedtofixedrateborrowings.Thesederivativesaredesignated
asfairvaluehedges.TheCompanyusesforwardforeignexchangecontractsdesignatedasnetinvestmenthedges.Additionally,theCompanyusesforwardforeign
exchangecontractstooffsetitsexposuretocertainforeigncurrencyassetsandliabilities.Theseforwardforeignexchangecontractsarenotdesignatedashedges,
andtherefore,changesinthefairvaluesofthesederivativesarerecognizedinearnings,therebyoffsettingthecurrentearningseffectoftherelatedforeigncurrency
assetsandliabilities.
TheCompanydoesnotenterintoderivativefinancialinstrumentsfortradingorspeculativepurposes,orthatcontaincreditriskrelatedcontingentfeatures.During
thefiscalsecondquarterof2017,theCompanyenteredintocreditsupportagreements(CSA)withourderivativecounterpartiesestablishingcollateralthresholds
basedonrespectivecreditratingsandnettingagreements.AsofOctober1,2017thetotalamountofcollateralreceivedunderthecreditsupportagreements(CSA)
amountedto$43million.Forequitycollarcontracts,theCompanypledgedtheunderlyinghedgedmarketableequitysecuritiestothecounter-partyascollateral.
Onanongoingbasis,theCompanymonitorscounter-partycreditratings.TheCompanyconsiderscreditnon-performancerisktobelow,becausetheCompany
primarilyentersintoagreementswithcommercialinstitutionsthathaveatleastaninvestmentgradecreditrating.Refertothetableonsignificantfinancialassets
andliabilitiesmeasuredatfairvaluecontainedinthisfootnoteforreceivablesandpayableswiththesecommercialinstitutions.AsofOctober1,2017,the
Companyhadnotionalamountsoutstandingforforwardforeignexchangecontracts,crosscurrencyinterestrateswaps,interestrateswapsandequitycollar
contractsof$34.7billion,$2.3billion,$1.8billion,andlessthan$0.1billionrespectively.AsofJanuary1,2017,theCompanyhadnotionalamounts
outstandingforforwardforeignexchangecontracts,crosscurrencyinterestrateswaps,interestrateswapsandequitycollarcontractsof$36.0billion,$2.3billion,
$1.8billion,and$0.3billionrespectively.
Allderivativeinstrumentsarerecordedonthebalancesheetatfairvalue.Changesinthefairvalueofderivativesarerecordedeachperiodincurrentearningsor
othercomprehensiveincome,dependingonwhetherthederivativeisdesignatedaspartofahedgetransaction,andifso,thetypeofhedgetransaction.
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Thedesignationasacashflowhedgeismadeattheentrancedateofthederivativecontract.Atinception,allderivativesareexpectedtobehighlyeffective.
Changesinthefairvalueofaderivativethatisdesignatedasacashflowhedgeandishighlyeffectivearerecordedinaccumulatedothercomprehensiveincome
untiltheunderlyingtransactionaffectsearnings,andarethenreclassifiedtoearningsinthesameaccountasthehedgedtransaction.Gainsandlossesassociated
withinterestrateswapsandchangesinfairvalueofhedgeddebtattributabletochangesininterestratesarerecordedtointerestexpenseintheperiodinwhichthey
occur.Gainsandlossesonnetinvestmenthedgesareaccountedforthroughthecurrencytranslationaccount.Onanongoingbasis,theCompanyassesseswhether
eachderivativecontinuestobehighlyeffectiveinoffsettingchangesofhedgeditems.Ifandwhenaderivativeisnolongerexpectedtobehighlyeffective,hedge
accountingisdiscontinued.Hedgeineffectiveness,ifany,isincludedincurrentperiodearningsinOther(income)expense,netforforwardforeignexchange
contracts,crosscurrencyinterestrateswaps,netinvestmenthedgesandequitycollarcontracts.Forinterestrateswapsdesignatedasfairvaluehedges,hedge
ineffectiveness,ifany,isincludedincurrentperiodearningswithininterestexpense.Forthecurrentreportingperiod,hedgeineffectivenessassociatedwith
interestrateswapswasnotmaterial.
Duringthefiscalsecondquarterof2016,theCompanydesignateditsEurodenominatednotesissuedinMay2016withduedatesrangingfrom2022to2035asa
netinvestmenthedgeoftheCompany'sinvestmentsincertainofitsinternationalsubsidiariesthatusetheEuroastheirfunctionalcurrencyinordertoreducethe
volatilitycausedbychangesinexchangerates.
ThechangeinthecarryingvalueduetoremeasurementoftheseEuronotesresultedina$151millionand$529millionunrealizedpretaxlossforthefiscalthird
quarterandfiscalninemonthsendedOctober1,2017,respectively,reflectedinforeigncurrencytranslationadjustment,withintheConsolidatedStatementsof
ComprehensiveIncome.ThechangeinthecarryingvalueduetoremeasurementoftheseEuronotesresultedinacumulative$155millionunrealizedpretaxloss
fromhedgeinceptionthroughthefiscalninemonthsof2017,reflectedinforeigncurrencytranslationadjustment,withintheConsolidatedStatementsof
ComprehensiveIncome.
AsofOctober1,2017,thebalanceofdeferrednetgainsonderivativesincludedinaccumulatedothercomprehensiveincomewas$57millionafter-tax.For
additionalinformation,seetheConsolidatedStatementsofComprehensiveIncomeandNote7.TheCompanyexpectsthatsubstantiallyalloftheamountsrelated
toforwardforeignexchangecontractswillbereclassifiedintoearningsoverthenext12monthsasaresultoftransactionsthatareexpectedtooccuroverthat
period.ThemaximumlengthoftimeoverwhichtheCompanyishedgingtransactionexposureis18months,excludinginterestratecontracts,netinvestment
hedgesandequitycollarcontracts.Theamountultimatelyrealizedinearningsmaydifferasforeignexchangerateschange.Realizedgainsandlossesare
ultimatelydeterminedbyactualexchangeratesatmaturityofthederivative.
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Thefollowingtableisasummaryoftheactivityrelatedtoderivativesdesignatedascashflowhedgesforthefiscalthirdquartersin2017and2016:
Gain/(Loss) Gain/(Loss)
Recognized In Gain/(Loss) Reclassified From Recognized In
Accumulated Accumulated OCI Other
OCI (1) Into Income (1) Income/Expense (2)
(DollarsinMillions) FiscalThirdQuartersEnded
Cash Flow Hedges By Income Statement Caption October1,2017 October2,2016 October1,2017 October2,2016 October1,2017 October2,2016
Salestocustomers(3) $ 18 (12) 5 (8) (1)
Costofproductssold(3) (16) (4) (63) 13 5 (4)
Researchanddevelopmentexpense(3) (39) (5) (30) (2) (1) 1
Interest(income)/Interestexpense,net(4) 114 29 106 12
Other(income)expense,net(3)(5) (15) (4) (49) (12)
Total $ 62 4 (31) 3 4 (4)

Thefollowingtableisasummaryoftheactivityrelatedtoderivativesdesignatedascashflowhedgesforthefiscalninemonthsin2017and2016:
Gain/(Loss) Gain/(Loss)
Recognized In Gain/(Loss) Reclassified From Recognized In
Accumulated Accumulated OCI Other
OCI (1) Into Income (1) Income/Expense (2)
(DollarsinMillions) FiscalNineMonthsEnded
Cash Flow Hedges By Income Statement Caption October1,2017 October2,2016 October1,2017 October2,2016 October1,2017 October2,2016
Salestocustomers(3) $ 40 (39) (34) (29) (1) (1)
Costofproductssold(3) 105 (226) (162) 5 (11) (10)
Researchanddevelopmentexpense(3) (167) (100) (131) (98) 5
Interest(income)/Interestexpense,net(4) 73 38 63 27
Other(income)expense,net(3)(5) (59) (110) (86) (14) (3)
Total $ (8) (437) (350) (109) (7) (14)

Allamountsshowninthetableabovearenetoftax.
(1)Effectiveportion
(2)Ineffectiveportion
(3)Forwardforeignexchangecontracts
(4)Crosscurrencyinterestrateswaps
(5)Includesequitycollarcontracts
ForthefiscalthirdquartersendedOctober1,2017andOctober2,2016,alossof$12millionandgain$35million,respectively,wasrecognizedinOther
(income)expense,net,relatingtoforwardforeignexchangecontractsnotdesignatedashedginginstruments.
ForthefiscalninemonthsendedOctober1,2017andOctober2,2016,againof$22millionandalossof$6million,respectively,wasrecognizedinOther
(income)expense,net,relatingtoforwardforeignexchangecontractsnotdesignatedashedginginstruments.
Fairvalueistheexitpricethatwouldbereceivedtosellanassetorpaidtotransferaliability.Fairvalueisamarket-basedmeasurementdeterminedusing
assumptionsthatmarketparticipantswoulduseinpricinganassetorliability.Theauthoritativeliteratureestablishesathree-levelhierarchytoprioritizetheinputs
usedinmeasuringfairvalue.ThelevelswithinthehierarchyaredescribedbelowwithLevel1havingthehighestpriorityandLevel3havingthelowest.
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Thefairvalueofaderivativefinancialinstrument(i.e.forwardforeignexchangecontracts,interestratecontracts)istheaggregationbycurrencyofallfuturecash
flowsdiscountedtoitspresentvalueattheprevailingmarketinterestratesandsubsequentlyconvertedtotheU.S.Dollaratthecurrentspotforeignexchangerate.
TheCompanydoesnotbelievethatfairvaluesofthesederivativeinstrumentsmateriallydifferfromtheamountsthatcouldberealizeduponsettlementor
maturity,orthatthechangesinfairvaluewillhaveamaterialeffectontheCompanysresultsofoperations,cashflowsorfinancialposition.TheCompanyalso
holdsequityinvestmentswhichareclassifiedasLevel1anddebtsecuritieswhichareclassifiedasLevel2.TheCompanydidnothaveanyothersignificant
financialassetsorliabilitieswhichwouldrequirerevisedvaluationsunderthisstandardthatarerecognizedatfairvalue.
Thefollowingthreelevelsofinputsareusedtomeasurefairvalue:
Level1Quotedpricesinactivemarketsforidenticalassetsandliabilities.
Level2Significantotherobservableinputs.
Level3Significantunobservableinputs.
TheCompanyssignificantfinancialassetsandliabilitiesmeasuredatfairvalueasofOctober1,2017andJanuary1,2017wereasfollows:
October 1, 2017 January 1, 2017

(DollarsinMillions) Level 1 Level 2 Level 3 Total Total (1)
Derivatives designated as hedging instruments:
Assets:
Forwardforeignexchangecontracts(7) $ 556 556 747
Interestratecontracts(2)(4)(7) 16 16 31
Total 572 572 778
Liabilities:
Forwardforeignexchangecontracts(8) 292 292 723
Interestratecontracts(3)(4)(8) 210 210 382
Equitycollarcontracts(8) 6 6 57
Total 508 508 1,162
Derivatives not designated as hedging instruments:
Assets:
Liabilities:
Available For Sale Other Investments:
Equityinvestments(5) 920 920 1,209
Debtsecurities(6) $ 3,044 3,044 12,087
(1) 2016assetsandliabilitiesareallclassifiedasLevel2withtheexceptionofequityinvestmentsof$1,209million,whichareclassifiedasLevel1.
(2) Includes$10millionand$23millionofnon-currentotherassetsforOctober1,2017andJanuary1,2017,respectively.
(3) Includes$210millionand$382millionofnon-currentotherliabilitiesforOctober1,2017andJanuary1,2017,respectively.
(4) Includescrosscurrencyinterestrateswapsandinterestrateswaps.
(5) Classifiedasnon-currentotherassetswiththeexceptionof$46millionofcurrentassetsforOctober1,2017.Theoriginalcostoftheequityinvestmentswere
$506millionand$520millionasofOctober1,2017andJanuary1,2017,respectively.Theunrealizedgainswere$414millionand$757millionasof
October1,2017andJanuary1,2017,respectively.Theunrealizedlosseswerelessthan$1millionand$68millionasofOctober1,2017andJanuary1,2017,
respectively.
(6) Classifiedascashequivalentsandcurrentmarketablesecurities.
(7) Classifiedasothercurrentassets,includingtheneteffectoftheCSA
(8) Classifiedasaccountspayable,includingtheneteffectoftheCSA.
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TheCompany'scash,cashequivalentsandcurrentmarketablesecuritiesasofOctober1,2017comprised:
October1,2017
Current
Carrying Unrecognized Unrecognized Estimated Cash&Cash Marketable
(DollarsinMillions) Amount Gain Loss FairValue Equivalents Securities
Cash $ 2,813 2,813 2,813
U.S.Gov'tSecurities(1)
OtherSovereignSecurities(1) 1,109 1,109 799 310
U.S.Reverserepurchaseagreements 4,602 4,602 4,602
OtherReverserepurchaseagreements 491 491 491
Corporatedebtsecurities(1) 1,957 1,957 1,952 5
Moneymarketfunds 1,078 1,078 1,078
Timedeposits(1) 1,091 1,091 1,091
Subtotal 13,141 13,141 12,826 315
UnrealizedGain UnrealizedLoss
Gov'tsecurities 2,906 2,906 2,876 30
OtherSovereignSecurities 9 9 9
Corporatedebtsecurities 129 129 19 110
Equityinvestments 6 40 46 46
SubtotalAvailableforSale(2) $ 3,050 40 3,090 2,895 195
Totalcash,cashequivalentsandcurrent
marketablesecurities 15,721 510
(1)Heldtomaturityinvestmentsarereportedatamortizedcostandgainsorlossesarereportedinearnings.
(2)Availableforsalesecuritiesarereportedatfairvaluewithunrealizedgainsandlossesreportednetoftaxesinothercomprehensiveincome.
Fairvalueofgovernmentsecuritiesandobligationsandcorporatedebtsecuritieswasestimatedusingquotedbrokerpricesandsignificantotherobservableinputs.
TheCompanyclassifiesallhighlyliquidinvestmentswithstatedmaturitiesofthreemonthsorlessfromdateofpurchaseascashequivalentsandallhighlyliquid
investmentswithstatedmaturitiesofgreaterthanthreemonthsfromthedateofpurchaseascurrentmarketablesecurities.Availableforsalesecuritieswithstated
maturities of greater than one year from the date of purchase are available for current operations and are classified as cash equivalents and current marketable
securities.
Theexcessoftheestimatedfairvalueoverthecarryingvalueofcashequivalentsandcurrentmarketablesecuritieswas$0.2billionatJanuary1,2017.
ThecontractualmaturitiesoftheavailableforsalesecuritiesatOctober1,2017areasfollows:
(DollarsinMillions) CostBasis FairValue

Duewithinoneyear $ 2,974 2,974
Dueafteroneyearthroughfiveyears 70 70
Dueafterfiveyearsthroughtenyears
Totaldebtsecurities $ 3,044 3,044
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FinancialInstrumentsnotmeasuredatFairValue:
ThefollowingfinancialliabilitiesareheldatcarryingamountontheconsolidatedbalancesheetasofOctober1,2017:
Carrying Estimated
(DollarsinMillions) Amount FairValue

Financial Liabilities

Current Debt $ 8,491 8,491

Non-Current Debt
1.65%Notesdue2018 601 602
4.75%Notesdue2019(1BEuro1.1777) 1,175 1,299
1.875%Notesdue2019 501 506
0.89%Notesdue2019 300 301
1.125%Notesdue2019 699 696
3%ZeroCouponConvertibleSubordinatedDebenturesduein2020 68 121
2.95%Debenturesdue2020 547 567
3.55%Notesdue2021 448 480
2.45%Notesdue2021 349 358
1.65%Notesdue2021 998 991
0.250%Notesdue2022(1BEuro1.1777) 1,174 1,183
2.25%Notesdue2022 995 1,005
3.375%Notesdue2023 806 853
2.05%Notesdue2023 497 494
0.650%Notesdue2024(750MMEuro1.1777) 879 887
5.50%Notesdue2024(500MMGBP1.3415) 665 842
2.45%Notesdue2026 1,990 1,958
2.95%Notesdue2027 995 1,010
1.150%Notesdue2028(750MMEuro1.1777) 874 888
6.95%Notesdue2029 296 409
4.375%Notesdue2033 856 976
1.650%Notesdue2035(1.5BEuro1.1777) 1,748 1,798
3.55%Notesdue2036 987 1,024
5.95%Notesdue2037 991 1,348
3.625%Notesdue2037 1,485 1,558
4.85%Notesdue2041 296 357
4.50%Notesdue2043 495 570
3.70%Notesdue2046 1,971 2,058
3.75%Notesdue2047 990 1,038
Other 18 19
TotalNon-CurrentDebt $ 26,675 28,675
Theweightedaverageeffectiveinterestrateonnon-currentdebtis3.20%.
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Theexcessoftheestimatedfairvalueoverthecarryingvalueofdebtwas$1.6billionatJanuary1,2017.
Fairvalueofthenon-currentdebtwasestimatedusingmarketprices,whichwerecorroboratedbyquotedbrokerpricesandsignificantotherobservableinputs.
NOTE5INCOMETAXES
Theworldwideeffectiveincometaxratesforthefiscalninemonthsof2017and2016were20.5%and17.8%,respectively.TheCompanycompletedits
acquisitionofAMOinthefirstfiscalquarterof2017,andincurredincrementaltaxcoststhatwerediscretelyrecordedinthefirstquarter,whichhasincreasedthe
effectivetaxrateby1.4%forthefirstninemonthsof2017comparedtothesameperiodin2016.Additionally,theCompanyhadmoreincomeinhighertax
jurisdictionsrelativetolowertaxjurisdictionsascomparedto2016.Theseincreasestotheeffectivetaxratewerepartiallyoffsetbyadditionaltaxbenefits
receivedfromstock-basedcompensationthateithervestedorwereexercisedduringthefiscalninemonthsof2017and2016,whichreducedtheeffectivetaxrate
by2.1%and2.2%,respectively.
AsofOctober1,2017,theCompanyhadapproximately$3.3billionofliabilitiesfromunrecognizedtaxbenefits.TheCompanybelievesitispossiblethataudits
maybecompletedbytaxauthoritiesinsomejurisdictionsoverthenexttwelvemonths.TheCompanyisnotabletoprovideareasonablyreliableestimateofthe
timingofanyfuturetaxpaymentsrelatingtouncertaintaxpositions.
NOTE6PENSIONSANDOTHERPOSTRETIREMENTBENEFITS
ComponentsofNetPeriodicBenefitCost
NetperiodicbenefitcostfortheCompanysdefinedbenefitretirementplansandotherbenefitplansforthefiscalthirdquartersof2017and2016includethe
followingcomponents:
RetirementPlans OtherBenefitPlans
(DollarsinMillions) October1,2017 October2,2016 October1,2017 October2,2016
Servicecost $ 266 224 62 56
Interestcost 232 232 40 39
Expectedreturnonplanassets (514) (490) (2) (1)
Amortizationofpriorservicecost/(credit) 1 2 (8) (9)
Recognizedactuariallosses 154 123 34 33
Curtailmentsandsettlements 2 6
Netperiodicbenefitcost $ 141 97 126 118
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NetperiodicbenefitcostfortheCompanysdefinedbenefitretirementplansandotherbenefitplansforthefiscalninemonthsof2017and2016includethe
followingcomponents:
RetirementPlans OtherBenefitPlans
(DollarsinMillions) October1,2017 October2,2016 October1,2017 October2,2016
Servicecost $ 772 676 185 166
Interestcost 693 698 119 118
Expectedreturnonplanassets (1,528) (1,475) (5) (4)
Amortizationofpriorservicecost/(credit) 2 2 (23) (25)
Recognizedactuariallosses 456 371 103 101
Curtailmentsandsettlements 1 11
Netperiodicbenefitcost $ 396 283 379 356

CompanyContributions
ForthefiscalninemonthsendedOctober1,2017,theCompanycontributed$51millionand$30milliontoitsU.S.andinternationalretirementplans,
respectively.TheCompanyplanstocontinuetofunditsU.S.definedbenefitplanstocomplywiththePensionProtectionActof2006.Internationalplansare
fundedinaccordancewithlocalregulations.
NOTE7ACCUMULATEDOTHERCOMPREHENSIVEINCOME
Componentsofothercomprehensiveincome(loss)consistofthefollowing:
Foreign Gain/(Loss) Employee Gain/(Loss) TotalAccumulated

Currency On Benefit OnDerivatives OtherComprehensive
(DollarsinMillions) Translation Securities Plans &Hedges Income(Loss)
January1,2017 $ (9,047) 411 (5,980) (285) (14,901)
Netchange 1,597 (142) 357 342 2,154
October1,2017 $ (7,450) 269 (5,623) 57 (12,747)
Amountsinaccumulatedothercomprehensiveincomearepresentednetoftherelatedtaximpact.Foreigncurrencytranslationisnotadjustedforincometaxes
whereitrelatestopermanentinvestmentsininternationalsubsidiaries.ForadditionaldetailsoncomprehensiveincomeseetheConsolidatedStatementsof
ComprehensiveIncome.
DetailsonreclassificationsoutofAccumulatedOtherComprehensiveIncome:
Gain/(Loss)OnSecurities-reclassificationsreleasedtoOther(income)expense,net.
EmployeeBenefitPlans-reclassificationsareincludedinnetperiodicbenefitcost.SeeNote6foradditionaldetails.
Gain/(Loss)OnDerivatives&Hedges-reclassificationstoearningsarerecordedinthesameaccountastheunderlyingtransaction.SeeNote4for
additionaldetails.
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NOTE8EARNINGSPERSHARE
ThefollowingisareconciliationofbasicnetearningspersharetodilutednetearningspershareforthefiscalthirdquartersendedOctober1,2017andOctober2,
2016:
(SharesinMillions) October1,2017 October2,2016
Basicnetearningspershare $ 1.40 1.56
Averagesharesoutstandingbasic 2,684.6 2,731.6
Potentialsharesexercisableunderstockoptionplans 139.3 140.8
Less:shareswhichcouldberepurchasedundertreasurystockmethod (87.2) (88.4)
Convertibledebtshares 1.0 1.4
Averagesharesoutstandingdiluted 2,737.7 2,785.4
Dilutednetearningspershare $ 1.37 1.53
ThedilutednetearningspersharecalculationforboththefiscalthirdquartersendedOctober1,2017andOctober2,2016includedthedilutiveeffectof
convertibledebtthatwasoffsetbytherelatedreductionininterestexpense.
ThedilutednetearningspersharecalculationforboththefiscalthirdquartersendedOctober1,2017andOctober2,2016includedallsharesrelatedtostock
options,astherewerenooptionsorotherinstrumentswhichwereanti-dilutive.
ThefollowingisareconciliationofbasicnetearningspersharetodilutednetearningspershareforthefiscalninemonthsendedOctober1,2017andOctober2,
2016:
(SharesinMillions) October1,2017 October2,2016
Basicnetearningspershare $ 4.46 4.64
Averagesharesoutstandingbasic 2,694.4 2,744.9
Potentialsharesexercisableunderstockoptionplans 141.2 144.0
Less:shareswhichcouldberepurchasedundertreasurystockmethod (90.2) (93.7)
Convertibledebtshares 1.0 1.4
Averagesharesoutstandingdiluted 2,746.4 2,796.6
Dilutednetearningspershare $ 4.37 4.55

ThedilutednetearningspersharecalculationforboththefiscalninemonthsendedOctober1,2017andOctober2,2016includedthedilutiveeffectofconvertible
debtthatwasoffsetbytherelatedreductionininterestexpense.
ThedilutednetearningspersharecalculationforboththefiscalninemonthsendedOctober1,2017andOctober2,2016includedallsharesrelatedtostock
options,astherewerenooptionsorotherinstrumentswhichwereanti-dilutive.
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NOTE9SEGMENTSOFBUSINESSANDGEOGRAPHICAREAS
SALESBYSEGMENTOFBUSINESS
October1, October2, Percent
(DollarsinMillions) 2017 2016 Change

Consumer
UnitedStates $ 1,285 1,291 (0.5)%
International 2,071 1,970 5.1
Total 3,356 3,261 2.9
Pharmaceutical
UnitedStates 5,816 5,042 15.4
Total 9,695 8,400 15.4
Medical Devices
Total 6,599 6,159 7.1
Worldwide
Total $ 19,650 17,820 10.3%


Consumer
UnitedStates $ 4,186 4,033 3.8%
Total 10,062 9,875 1.9
Pharmaceutical
Total 26,575 25,232 5.3
Medical Devices
Total 19,618 18,677 5.0
Worldwide
Total $ 56,255 53,784 4.6%
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INCOMEBEFORETAXBYSEGMENT
Consumer(1) $ 878 679 29.3%
Pharmaceutical(2) 2,857 3,309 (13.7)
MedicalDevices(3) 1,383 1,526 (9.4)
Segmentsoperatingprofit 5,118 5,514 (7.2)
Less:Expensenotallocatedtosegments(4) 328 233
Worldwideincomebeforetax $ 4,790 5,281 (9.3)%

Percent
(DollarsinMillions) October1,2017 October2,2016 Change
Consumer(1) $ 2,132 1,816 17.4%
Pharmaceutical(2) 9,934 10,340 (3.9)
MedicalDevices(3) 3,938 4,041 (2.5)
Segmentsoperatingprofit 16,004 16,197 (1.2)
Less:Expensenotallocatedtosegments(4) 891 718
Worldwideincomebeforetaxes $ 15,113 15,479 (2.4)%
(1)Includesagainof$0.4billionfromthedivestitureofCOMPEED
(2)Includesapositiveadjustmentof$0.5billiontopreviousreserveestimatesinthefiscalninemonthsof2016.IncludesacquisitioncostsrelatedtotheActelion
acquisitionof$0.4billionand$0.6billioninthefiscalthirdquarterandfiscalninemonthsof2017,respectively.Includesagainof$0.2billionrelatedto
monetizationoffutureroyaltyreceivablesinthefiscalninemonthsof2017.Includesagainof$0.3billionand$0.2billioninthefiscalninemonthsof2017and
2016,respectively,relatedtothesaleofcertaininvestmentsinequitysecuritiesheldbyJohnson&JohnsonInnovation-JJDC,Inc.
(3)Includesarestructuringrelatedchargeof$0.2billionand$0.1billioninthefiscalthirdquartersof2017and2016,respectively.Includesarestructuringrelated
chargeof$0.5billionand$0.4billioninthefiscalninemonthsof2017and2016,respectively.Includeslitigationexpenseof$0.1billionand$0.1billioninthe
fiscalthirdquarterof2017and2016,respectively.Includeslitigationexpenseof$0.5billionand$0.7billioninthefiscalninemonthsof2017and2016,
respectively.Includesanassetimpairmentof$0.2billionprimarilyrelatedtotheinsulinpumpbusinessinthefiscalninemonthsof2017.
(4)Amountsnotallocatedtosegmentsincludeinterestincome/expenseandgeneralcorporateincome/expense.
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SALESBYGEOGRAPHICAREA
Percent
UnitedStates $ 10,290 9,381 9.7%
Europe 4,308 3,832 12.4
WesternHemisphere,excludingU.S. 1,569 1,396 12.4
Asia-Pacific,Africa 3,483 3,211 8.5
Total $ 19,650 17,820 10.3%

Percent
UnitedStates $ 29,394 28,274 4.0%
Europe 12,398 11,769 5.3
WesternHemisphere,excludingU.S. 4,522 4,269 5.9
Asia-Pacific,Africa 9,941 9,472 5.0
Total $ 56,255 53,784 4.6%
NOTE10BUSINESSCOMBINATIONSANDDIVESTITURES
Subsequenttothequarter,onOctober2,2017theCompanycompletedthedivestitureoftheCodmanNeurosurgerybusiness,toIntegraLifeSciencesHoldings
Corporationforapproximately$1.0billion.AsofOctober1,2017,theassetsheldforsalewere$63millionofinventory,classifiedasprepaidexpensesandother
ontheConsolidatedBalanceSheet.Thenon-currentassetsclassifiedasheldforsalewere$33millionofproperty,plantandequipment,netand$106millionof
goodwill,classifiedasotherassetsontheConsolidatedBalanceSheet.
Duringthefiscalthirdquarterof2017,theCompanycompletedtheacquisitionsofTearScienceInc.,amanufacturerofproductsdedicatedtotreatingmeibomian
glanddysfunctionandSightbox,Inc.,aprivately-heldcompanythatdevelopedasubscriptionvisioncareservicethatconnectsconsumerswitheyecare
professionalsandasupplyofcontactlenses.Additionally,duringthefiscalthirdquarterof2017,theCompanycompletedthedivestitureofCOMPEEDtoHRA
Pharma.
OnJune16,2017,theCompanycompletedtheacquisitionofActelionLtdthroughanallcashtenderofferinSwitzerlandfor$280pershare,payableinU.S.
dollars.AsofOctober1,2017,theCompanypaid$29.1billion,netofcashacquired,representing98.4%ofthesharestowhichtheofferwasextended.The
Companyrecordedacurrentliabilityof$0.5billionforthesharesnottenderedasofOctober1,2017,whichtheCompanyexpectstopaybytheendof2017asit
takesstepstoacquiretheremainingoutstandingsharesofActelion.Theliabilitydecreasedbyapproximately$0.2billionfromthesecondquarterbasedonthe
tenderedsharesinthethirdquarter.Aspartofthetransaction,immediatelypriortothecompletionoftheacquisition,Actelionspunoutitsdrugdiscovery
operationsandearly-stageclinicaldevelopmentassetsintoanewlycreatedSwissbiopharmaceuticalcompany,IdorsiaLtd.ThesharesofIdorsiaarelistedon
theSIXSwissExchange(SIX).TheCompanycurrentlyholds9.9%ofthesharesofIdorsiaandhasrightstoanadditional22.1%ofIdorsiaequitythrougha
convertibleloanwithaprincipalamountofapproximately$0.5billion.TheconvertibleloanmaybeconvertedintoIdorsiasharesasfollows:(i)uptoan
aggregateshareholdingof16%ofIdorsiasharesasaresultofcertainshareholdersholdingmorethan20%oftheissuedIdorsiashares,and(ii)uptothebalanceof
theremainingamountwithin20businessdaysofthematuritydateoftheconvertibleloan,whichhasatenyearterm,orifIdorsiaundergoesachangeofcontrol
transaction.TheinvestmentinIdorsiawasrecordedasacostmethodinvestmentinOtherassetsintheCompany'sconsolidatedBalanceSheet.TheCompanyalso
acquiredanoptiononACT-132577,aproductwithinIdorsiabeingdevelopedforresistanthypertensioncurrentlyinphase2ofclinicaldevelopment.The
CompanyhasalsoenteredintoanagreementtoprovideIdorsiawithaSwissfrancdenominatedcreditfacilityofapproximately$250million.AsofOctober1,
2017,Idorsiahasnotmadeanydraw-downsunderthecreditfacility.ActelionhasenteredintoatransitionalservicesagreementwithIdorsia.Actelionhas
establishedaleadingfranchiseofdifferentiated,innovativeproductsforpulmonaryarterialhypertension(PAH)thatarehighlycomplementarytotheexisting
portfoliooftheCompany.TheadditionofActelionsspecialtyin-marketmedicinesandlate-stageproductsisconsistentwiththeCompany'seffortstogrowin
attractiveandcomplementarytherapeuticareasandservepatientswithseriousillnessesandsignificantunmetmedicalneed.
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TheCompanyisstillfinalizingtheallocationofthepurchasepricetotheindividualassetsacquiredandliabilitiesassumed.Theallocationofthepurchaseprice
includedinthecurrentperiodbalancesheetisbasedonthebestestimateofmanagementandispreliminaryandsubjecttochange.Toassistmanagementinthe
allocation,theCompanyengagedvaluationspecialiststoprepareappraisals.TheCompanywillfinalizetheamountsrecognizedastheinformationnecessaryto
completetheanalysisisobtained.TheCompanyexpectstofinalizetheseamountsassoonaspossiblebutnolaterthanoneyearfromtheacquisitiondate.
Thefollowingtablepresentsthepreliminaryamountsrecognizedforassetsacquiredandliabilitiesassumedasoftheacquisitiondateaswellastheadjustments
madeuptoOctober1,2017:
(DollarsinMillions) June16,2017 October1,2017

Cash&Cashequivalents $ 469 469
Inventory(1) 759 759
AccountsReceivable 485 485
Othercurrentassets 93 93
Property,plantandequipment 104 104
Goodwill 5,986 5,757
Intangibleassets 25,010 25,010
DeferredTaxes 3 3
Othernon-currentassets 19 19
Total Assets Acquired 32,928 32,699

Currentliabilities 531 531
DeferredTaxes 1,960 1,731
Othernon-currentliabilities 383 383
Total Liabilities Assumed 2,874 2,645

Net Assets Acquired $ 30,054 30,054
(1)Includesadjustmentof$642milliontowrite-uptheacquiredinventorytoitsestimatedfairvalue.
Subsequenttothedateofacquisitiontherewasanadjustmentof$0.2billiontothedeferredtaxeswiththeoffsettogoodwill.
TheassetsacquiredarerecordedinthePharmaceuticalsegment.TheacquisitionofActelionresultedinapproximately$5.8billionofgoodwill.Thegoodwillis
primarilyattributabletosynergiesexpectedtoarisefromtheacquisition.Thegoodwillisnotexpectedtobedeductiblefortaxpurposes.
Thepurchasepriceallocationtotheidentifiableintangibleassetsisasfollows:
(DollarsinMillions)
Intangibleassetswithdefinitelives:
Patentsandtrademarks $ 24,230
Totalamortizableintangibles 24,230

In-processresearchanddevelopment 780
Totalintangibleassets $ 25,010
Thepatentsandtrademarksacquiredarecomprisedofdevelopedtechnologywithaweightedaveragelifeof9yearsandwasprimarilybasedonthepatentlifeof
themarketedproducts.Theintangibleassetswithdefiniteliveswereassignedassetlivesrangingfrom4to10years.Thein-processresearchanddevelopment
intangibleassetswerevaluedfortechnologyprogramsforunapprovedproducts.
ThevalueoftheIPR&Dwascalculatedusingprobabilityadjustedcashflowprojectionsdiscountedfortheriskinherentinsuchprojects.Thediscountrateapplied
was9%.
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Theacquisitionwasaccountedforusingtheacquisitionmethodand,accordingly,theresultsofoperationsofActelionwerereportedintheCompany'sfinancial
statementsbeginningonJune16,2017,thedateofacquisition.TotalsalesandanetlossforActelionforthethirdquarterendedOctober1,2017were$670million
and$552million,respectively.TotalsalesandanetlossforActelionsincethedateofacquisitionwere$761millionand$668million,respectively.
ThefollowingtableprovidesproformaresultsofoperationsforthefiscalthirdquartersandthefiscalninemonthsendedOctober1,2017andOctober2,2016,as
ifActelionhadbeenacquiredasofJanuary4,2016.Theproformaresultsincludetheeffectofcertainpurchaseaccountingadjustmentssuchastheestimated
changesindepreciationandamortizationexpenseontheacquiredtangibleandintangibleassets.However,proformaresultsdonotincludeanyanticipatedcost
savingsorothereffectsoftheplannedintegrationofActelion.Accordingly,suchamountsarenotnecessarilyindicativeoftheresultsiftheacquisitionhad
occurredonthedatesindicatedorwhichmayoccurinthefuture.
UnauditedProformaConsolidatedResults
FiscalNineMonthsEnded FiscalThirdQuartersEnded
(DollarsinMillionsExceptPerShareData) October1,2017 October2,2016 October1,2017 October2,2016

NetSales 57,486 55,606 19,650 18,441
NetEarnings 11,909 10,760 4,019 3,885
DilutedNetEarningsperCommonShare 4.34 3.85 1.47 1.39
Inthefiscalthirdquarterandfiscalninemonthsof2017,theCompanyrecordedacquisitionrelatedcosts,ofapproximately$0.4billionand$0.6billionbeforetax,
whichwasrecordedinOther(income)/expenseandCostofproductssold.
Additionally,duringthefiscalsecondquarterof2017,theCompanycompletedtheacquisitionofNeuraviLimited,aprivately-heldmedicaldevicecompanythat
developsandmarketsmedicaldevicesforneurointerventionaltherapy.
Duringthefiscalfirstquarterof2017,theCompanyacquiredAbbottMedicalOptics(AMO),awholly-ownedsubsidiaryofAbbottLaboratories,for$4.3billion,
netofcashacquired.Theacquisitionincludedophthalmicproductsrelatedto:cataractsurgery,laserrefractivesurgeryandconsumereyehealth.Thenetpurchase
pricewasprimarilyrecordedasamortizableintangibleassetsfor$2.3billionandgoodwillfor$1.8billion.Theweightedaveragelifeoftotalamortizable
intangibles,themajoritybeingcustomerrelationships,isapproximately14.4years.Thegoodwillisprimarilyattributabletosynergiesexpectedtoarisefromthe
businessacquisitionandisnotdeductiblefortaxpurposes.Theintangibleassetsandgoodwillamountsarebasedonthepreliminarypurchasepriceallocation
whichisunderreviewbytheCompanyandissubjecttochange.TheassetsacquiredwererecordedintheMedicalDevicessegment.
Additionally,duringthefiscalfirstquarterof2017,theCompanycompletedtheacquisitionsofToraxMedical,Inc.,aprivately-heldmedicaldevicecompanythat
manufacturesandmarketstheLINXRefluxManagementSystemforthesurgicaltreatmentofgastroesophagealrefluxdiseaseandMegadyneMedicalProducts,
Inc.,aprivately-heldmedicaldevicecompanythatdevelops,manufacturesandmarketselectrosurgicaltools.
Duringthefiscalfirstquarterof2017,theCompanyannounceditisengaginginaprocesstoevaluatepotentialstrategicoptionsfortheJohnson&Johnson
DiabetesCareCompanies,specificallyLifeScan,Inc.,AnimasCorporation,andCalibraMedical,Inc.Strategicoptionsmayincludetheformationofoperating
partnerships,jointventuresorstrategicalliances,asaleofthebusinesses,orotheralternativeseitherseparatelyortogether.Duringthefiscalsecondquarterof
2017,theCompanyrecordedanimpairmentchargeof$0.2billion,primarilyrelatedtotheinsulinpumpbusiness.Subsequenttothefiscalthirdquarterof2017,
theCompanyannounceditsdecisiontoexittheAnimasinsulinpumpbusiness.TheCompanyiscontinuingtoevaluatepotentialstrategicoptionsforLifeScan,
Inc.anddeterminethebestopportunitytodrivefuturegrowthandmaximizeshareholdervalue.TherewerenoassetsheldforsaleasofOctober1,2017relatedto
theannouncement.
Duringthefiscalthirdquarterof2016,theCompanycompletedtheacquisitionofVogueInternationalLLC,aprivately-heldcompanyfocusedonthemarketing,
developmentanddistributionofsalon-influencedandnatureinspiredhaircareandotherpersonalproductsfor$3.3billionincash.Thenetpurchasepriceof$3.3
billionwasprimarilyrecordedasamortizableintangibleassetsfor$2.3billionandgoodwillfor$1.1billion.Theweightedaveragelifeforthe$2.3billionoftotal
amortizableintangiblesisapproximately22years.Thetrademarkassetvaluesweredeterminedtohavedefinitelivesrangingfrom10to22years,withthe
majoritybeing22years.Thecustomerrelationshipassetvaluesweredeterminedtohavedefinite
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livesof15years.Thegoodwillisprimarilyattributabletosynergiesexpectedtoarisefromthebusinessacquisitionandisexpectedtobedeductiblefortax
purposes.TheassetsacquiredwererecordedintheConsumersegment.
Duringthefiscalsecondquarterof2016,theCompanycompletedtheacquisitionsofNeuWaveMedical,Inc.,aprivately-heldmedicaldevicecompanythat
manufacturesandmarketsminimallyinvasivesofttissuemicrowaveablationsystemsandNeoStrataCompany,Inc.,agloballeaderindermocosmetics.
Additionally,duringthefiscalsecondquarterof2016,theCompanycompletedthedivestitureofitscontrolledsubstancerawmaterialandactivepharmaceutical
ingredient(API)business.Theproceedsfromthedivestiturewere$0.6billion.
NOTE11LEGALPROCEEDINGS
Johnson&Johnsonandcertainofitssubsidiariesareinvolvedinvariouslawsuitsandclaimsregardingproductliability,intellectualproperty,commercialand
othermatters;governmentalinvestigations;andotherlegalproceedingsthatarisefromtimetotimeintheordinarycourseoftheirbusiness.
TheCompanyrecordsaccrualsforlosscontingenciesassociatedwiththeselegalmatterswhenitisprobablethataliabilitywillbeincurredandtheamountofthe
losscanbereasonablyestimated.AsofOctober1,2017,theCompanyhasdeterminedthattheliabilitiesassociatedwithcertainlitigationmattersareprobableand
canbereasonablyestimated.TheCompanyhasaccruedforthesemattersandwillcontinuetomonitoreachrelatedlegalissueandadjustaccrualsasmightbe
warrantedbasedonnewinformationandfurtherdevelopmentsinaccordancewithASC450-20-25.Fortheseandotherlitigationandregulatorymattersdiscussed
belowforwhichalossisprobableorreasonablypossible,theCompanyisunabletoestimatethepossiblelossorrangeoflossbeyondtheamountsalready
accrued.Amountsaccruedforlegalcontingenciesoftenresultfromacomplexseriesofjudgmentsaboutfutureeventsanduncertaintiesthatrelyheavilyon
estimatesandassumptions.Theabilitytomakesuchestimatesandjudgmentscanbeaffectedbyvariousfactors,includingwhetherdamagessoughtinthe
proceedingsareunsubstantiatedorindeterminate;scientificandlegaldiscoveryhasnotcommencedorisnotcomplete;proceedingsareinearlystages;matters
presentlegaluncertainties;therearesignificantfactsindispute;ortherearenumerouspartiesinvolved.
IntheCompany'sopinion,basedonitsexaminationofthesematters,itsexperiencetodateanddiscussionswithcounsel,theultimateoutcomeoflegal
proceedings,netofliabilitiesaccruedintheCompany'sbalancesheet,isnotexpectedtohaveamaterialadverseeffectontheCompany'sfinancialposition.
However,theresolutionof,orincreaseinaccrualsfor,oneormoreofthesemattersinanyreportingperiodmayhaveamaterialadverseeffectontheCompany's
resultsofoperationsandcashflowsforthatperiod.
PRODUCT LIABILITY
Johnson&Johnsonandcertainofitssubsidiariesareinvolvedinnumerousproductliabilityclaimsandlawsuitsinvolvingmultipleproducts.Claimantsinthese
casesseeksubstantialcompensatoryand,whereavailable,punitivedamages.WhiletheCompanybelievesithassubstantialdefenses,itisnotfeasibletopredict
theultimateoutcomeoflitigation.TheCompanyhasestablishedaccrualsforproductliabilityclaimsandlawsuitsincompliancewithASC450-20basedon
currentlyavailableinformation,whichinsomecasesmaybelimited.TheCompanyaccruesanestimateofthelegaldefensecostsneededtodefendeachmatter
whenthosecostsareprobableandcanbereasonablyestimated.Forcertainofthesematters,theCompanyhasaccruedadditionalamountssuchasestimatedcosts
associatedwithsettlements,damagesandotherlosses.TotheextentadverseverdictshavebeenrenderedagainsttheCompany,theCompanydoesnotrecordan
accrualuntilalossisdeterminedtobeprobableandcanbereasonablyestimated.Productliabilityaccrualscanrepresentprojectedproductliabilityforthousands
ofclaimsaroundtheworld,eachindifferentlitigationenvironmentsandwithdifferentfactpatterns.Changestotheaccrualsmayberequiredinthefutureas
additionalinformationbecomesavailable.
Themostsignificantofthesecasesinclude:theDePuyASRXLAcetabularSystemandDePuyASRHipResurfacingSystem;thePINNACLEAcetabular
CupSystem;pelvicmeshes;RISPERDAL;XARELTO;bodypowderscontainingtalc,primarilyJOHNSONSBabyPowder;andINVOKANA.Asof
October1,2017,intheU.S.therewereapproximately2,000plaintiffswithdirectclaimsinpendinglawsuitsregardinginjuriesallegedlyduetotheDePuyASR
XLAcetabularSystemandDePuyASRHipResurfacingSystem;9,900withrespecttothePINNACLEAcetabularCupSystem;54,300withrespecttopelvic
meshes;13,900withrespecttoRISPERDAL;21,400withrespecttoXARELTO;5,500withrespecttobodypowderscontainingtalc;and1,100withrespectto
INVOKANA.
InAugust2010,DePuyOrthopaedics,Inc.(DePuy)announcedaworldwidevoluntaryrecallofitsASRXLAcetabularSystemandDePuyASRHip
ResurfacingSystemusedinhipreplacementsurgery.ClaimsforpersonalinjuryhavebeenmadeagainstDePuyandJohnson&Johnson.Thenumberofpending
lawsuitsisexpectedtofluctuateascertainlawsuitsaresettled
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ordismissedandadditionallawsuitsarefiled.CasesfiledinfederalcourtsintheUnitedStateshavebeenorganizedasamulti-districtlitigationintheUnitedStates
DistrictCourtfortheNorthernDistrictofOhio.LitigationhasalsobeenfiledincountriesoutsideoftheUnitedStates,primarilyintheUnitedKingdom,Canada,
Australia,Ireland,GermanyandItaly.InNovember2013,DePuyreachedanagreementwithaCourt-appointedcommitteeoflawyersrepresentingASRHip
SystemplaintiffstoestablishaprogramtosettleclaimswitheligibleASRHippatientsintheUnitedStateswhohadsurgerytoreplacetheirASRHips,knownas
revisionsurgery,asofAugust31,2013.DePuyreachedadditionalagreementsinFebruary2015andMarch2017,whichfurtherextendedthesettlementprogram
toincludeASRHippatientswhohadrevisionsurgeriesafterAugust31,2013andpriortoFebruary15,2017.Thissettlementprogramhasresolvedmorethan
10,000claims,withmoreexpectedfromtherecentextension,thereforebringingtoresolutionsignificantASRHiplitigationactivityintheUnitedStates.However,
lawsuitsintheUnitedStatesremain,andthesettlementprogramdoesnotaddresslitigationoutsideoftheUnitedStates.InAustralia,aclassactionsettlementwas
reachedthatresolvedtheclaimsofthemajorityofASRHippatientsinthatcountry.TheCompanycontinuestoreceiveinformationwithrespecttopotential
additionalcostsassociatedwiththisrecallonaworldwidebasis.TheCompanyhasestablishedaccrualsforthecostsassociatedwiththeUnitedStatessettlement
programandDePuyASRHip-relatedproductliabilitylitigation.
ClaimsforpersonalinjuryhavealsobeenmadeagainstDePuyOrthopaedics,Inc.andJohnson&JohnsonrelatingtothePINNACLEAcetabularCupSystem
usedinhipreplacementsurgery.Thenumberofpendingproductliabilitylawsuitscontinuestoincrease,andtheCompanycontinuestoreceiveinformationwith
respecttopotentialcostsandtheanticipatednumberofcases.CasesfiledinfederalcourtsintheUnitedStateshavebeenorganizedasamulti-districtlitigationin
theUnitedStatesDistrictCourtfortheNorthernDistrictofTexas.LitigationhasalsobeenfiledinsomestatecourtsandincountriesoutsideoftheUnitedStates,
primarilyintheUnitedKingdom.TheCompanyhasestablishedanaccrualfordefensecostsinconnectionwithproductliabilitylitigationassociatedwiththe
PINNACLEAcetabularCupSystem.
ClaimsforpersonalinjuryhavebeenmadeagainstEthicon,Inc.(Ethicon)andJohnson&JohnsonarisingoutofEthicon'spelvicmeshdevicesusedtotreatstress
urinaryincontinenceandpelvicorganprolapse.Thenumberofpendingproductliabilitylawsuitscontinuestoincrease,andtheCompanycontinuestoreceive
informationwithrespecttopotentialcostsandtheanticipatednumberofcases.CasesfiledinfederalcourtsintheUnitedStateshavebeenorganizedasamulti-
districtlitigationintheUnitedStatesDistrictCourtfortheSouthernDistrictofWestVirginia.Inaddition,classactionsandindividualpersonalinjurycasesor
claimshavebeencommencedinvariouscountriesoutsideoftheUnitedStates,includingclaimsandcasesintheUnitedKingdom,theNetherlandsandBelgium,
andclassactionsinIsrael,AustraliaandCanada,seekingdamagesforallegedinjuryresultingfromEthicon'spelvicmeshdevices.InAustralia,atrialofclass
actionissueshascommencedandadecisionisexpectedin2018.TheCompanyhasestablishedanaccrualwithrespecttoproductliabilitylitigationassociated
withEthicon'spelvicmeshproducts.
ClaimsforpersonalinjuryhavebeenmadeagainstJanssenPharmaceuticals,Inc.andJohnson&JohnsonarisingoutoftheuseofRISPERDAL,indicatedfor
thetreatmentofschizophrenia,acutemanicormixedepisodesassociatedwithbipolarIdisorderandirritabilityassociatedwithautism,andrelatedcompounds.
LawsuitshavebeenprimarilyfiledinstatecourtsinPennsylvania,California,andMissouri.OtheractionsarependinginvariouscourtsintheUnitedStatesand
Canada.Productliabilitylawsuitscontinuetobefiled,andtheCompanycontinuestoreceiveinformationwithrespecttopotentialcostsandtheanticipatednumber
ofcases.TheCompanyhasestablishedanaccrualwithrespecttoproductliabilitylitigationassociatedwithRISPERDAL.
ClaimsforpersonalinjuryarisingoutoftheuseofXARELTO,anoralanticoagulant,havebeenmadeagainstJanssenPharmaceuticals,Inc.(JPI);Johnson&
Johnson;andJPI'scollaborationpartnerforXARELTOBayerAGandcertainofitsaffiliates.Thenumberofpendingproductliabilitylawsuitscontinuesto
increase,andtheCompanycontinuestoreceiveinformationwithrespecttopotentialcostsandtheanticipatednumberofcases.Casesfiledinfederalcourtsinthe
UnitedStateshavebeenorganizedasamulti-districtlitigationintheUnitedStatesDistrictCourtfortheEasternDistrictofLouisiana.Inaddition,caseshavebeen
filedinstatecourtsacrosstheUnitedStates.ManyofthesecaseshavebeenconsolidatedintoastatemasstortlitigationinPhiladelphia,Pennsylvania;andthere
arecoordinatedproceedingsinDelaware,CaliforniaandMissouri.ClassactionlawsuitsalsohavebeenfiledinCanada.TheCompanyhasestablishedanaccrual
fordefensecostsinconnectionwithproductliabilitylitigationassociatedwithXARELTO.
ClaimsforpersonalinjuryhavebeenmadeagainstJohnson&JohnsonConsumerInc.andJohnson&Johnsonarisingoutoftheuseofbodypowderscontaining
talc,primarilyJOHNSONSBabyPowder.Thenumberofpendingproductliabilitylawsuitscontinuestoincrease,andtheCompanycontinuestoreceive
informationwithrespecttopotentialcostsandtheanticipatednumberofcases.LawsuitshavebeenprimarilyfiledinstatecourtsinMissouri,NewJerseyand
California.CasesfiledinfederalcourtsintheUnitedStateshavebeenorganizedasamulti-districtlitigationintheUnitedStatesDistrictCourtfortheDistrictof
NewJersey.TheCompanyhasestablishedanaccrualfordefensecostsinconnectionwithproductliabilitylitigationassociatedwithbodypowderscontaining
talc.
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ClaimsforpersonalinjuryhavebeenmadeagainstanumberofJohnson&Johnsoncompanies,includingJanssenPharmaceuticals,Inc.andJohnson&Johnson,
arisingoutoftheuseofINVOKANA,aprescriptionmedicationindicatedtoimproveglycemiccontrolinadultswithType2diabetes.Thenumberofpending
productliabilitylawsuitscontinuestoincrease,andtheCompanycontinuestoreceiveinformationwithrespecttopotentialcostsandtheanticipatednumberof
cases.CasesfiledinfederalcourtsintheUnitedStateshavebeenorganizedasamulti-districtlitigationintheUnitedStatesDistrictCourtfortheDistrictofNew
Jersey.CaseshavealsobeenfiledinstatecourtsinPennsylvania,CaliforniaandNewJersey.ClassactionlawsuitshavebeenfiledinCanada.TheCompanyhas
establishedanaccrualwithrespecttoproductliabilitylitigationassociatedwithINVOKANA.
INTELLECTUAL PROPERTY
CertainsubsidiariesofJohnson&Johnsonaresubject,fromtimetotime,tolegalproceedingsandclaimsrelatedtopatent,trademarkandotherintellectual
propertymattersarisingoutoftheirbusinesses.Manyofthesemattersinvolvechallengestothecoverageand/orvalidityofthepatentsonvariousproductsand
allegationsthatcertainoftheCompanysproductsinfringethepatentsofthirdparties.Althoughthesesubsidiariesbelievethattheyhavesubstantialdefensesto
thesechallengesandallegationswithrespecttoallsignificantpatents,therecanbenoassuranceastotheoutcomeofthesematters.Alossinanyofthesecases
couldadverselyaffecttheabilityofthesesubsidiariestoselltheirproducts,resultinlossofsalesduetolossofmarketexclusivity,requirethepaymentofpast
damagesandfutureroyalties,andmayresultinanon-cashimpairmentchargeforanyassociatedintangibleasset.Themostsignificantofthesemattersare
describedbelow.
MedicalDevices
InJune2009,RembrandtVisionTechnologies,L.P.(Rembrandt)filedapatentinfringementlawsuitagainstJohnson&JohnsonVisionCare,Inc.(JJVCI)inthe
UnitedStatesDistrictCourtfortheEasternDistrictofTexasallegingthatJJVCI'smanufactureandsaleofitsACUVUEADVANCEandACUVUEOASYS
HydrogelContactLensesinfringedRembrandtsU.S.PatentNo.5,712,327andseekingmonetaryrelief.ThecasewastransferredtotheUnitedStatesDistrict
CourtfortheMiddleDistrictofFlorida,whereatrialinMay2012resultedinaverdictofnon-infringementthatwassubsequentlyupheldonappeal.InJuly2014,
Rembrandtsoughtanewtrialbasedonallegednewevidence,whichtheDistrictCourtdenied.InApril2016,theCourtofAppealsoverturnedthatrulingand
remandedthecasetotheDistrictCourtforanewtrial.AnewtrialwasheldinAugust2017,andthejuryreturnedaverdictofnon-infringementinfavorofJJVCI.
InMarch2013,MedinolLtd.(Medinol)filedapatentinfringementlawsuitagainstCordisCorporation(Cordis)andJohnson&JohnsonintheUnitedStates
DistrictCourtfortheSouthernDistrictofNewYorkallegingthatCordisssalesoftheCYPHERandCYPHERSELECTstentsmadeintheUnitedStates
since2005willfullyinfringedfourofMedinol'spatentsdirectedtothegeometryofarticulatedstents.Medinolisseekingdamagesandattorneysfees.Aftertrialin
January2014,theDistrictCourtdismissedthecase,findingMedinolunreasonablydelayedbringingitsclaims(thelachesdefense).InSeptember2014,theDistrict
CourtdeniedamotionbyMedinoltovacatethejudgmentandgrantitanewtrial.MedinolappealedthedecisiontotheUnitedStatesCourtofAppealsforthe
FederalCircuit,thendismissedtheappealinordertofileapetitionforreviewwiththeUnitedStatesSupremeCourt.InMarch2017,theUnitedStatesSupreme
CourtheldthatthelachesdefenseisnotavailableinpatentcasesandremandedthiscasetotheUnitedStatesCourtofAppealsfortheFederalCircuittoconsider
Medinol'sappealofwhetherMedinolisentitledtoseekanewtrial.Cordiswasdivestedin2015,andtheCompanyretainedanyliabilitythatmayresultfromthis
case.
InNovember2016,MedIdea,L.L.C.(MedIdea)filedapatentinfringementlawsuitagainstDePuyOrthopaedics,Inc.intheUnitedStatesDistrictCourtforthe
NorthernDistrictofIllinoisalleginginfringementbytheATTUNEKneeSystem.MedIdeaallegesinfringementofUnitedStatesPatentNos.6,558,426;
8,273,132;8,721,730and9,492,280relatingtoposteriorstabilizedkneesystems.Specifically,MedIdeaallegesthattheSOFCAMTMContactfeatureofthe
ATTUNEposteriorstabilizedkneeproductsinfringesthepatents-in-suit.MedIdeaisseekingmonetarydamagesandinjunctiverelief.InJune2017,thecasewas
transferredtotheUnitedStatesDistrictCourtfortheDistrictofMassachusetts.
InDecember2016,EthiconEndo-Surgery,Inc.andEthiconEndo-Surgery,LLC(nowknownasEthiconLLC)suedCovidien,Inc.intheUnitedStatesDistrict
CourtfortheDistrictofMassachusettsseekingadeclarationthatUnitedStatesPatentNos.6,585,735(the735patent);7,118,587;7,473,253;8,070,748and
8,241,284(the284patent),areeitherinvalidornotinfringedbyEthiconsENSEALX1LargeJawTissueSealerproduct.InApril2017,CovidienLP,Covidien
SalesLLC,andCovidienAG(collectively,Covidien)answeredandcounterclaimed,denyingtheallegations,assertingwillfulinfringementofthe735patent,the
284patentandUnitedStatesPatentNos.8,323,310;9,084,608;9,241,759and9,113,882,andseekingdamagesandaninjunction.Covidienfiledamotionfor
preliminaryinjunction,whichwasdeniedinOctober2017.
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Pharmaceutical
InApril2016,MorphoSysAG,aGermanbiotechcompany,filedapatentinfringementlawsuitagainstJanssenBiotech,Inc.(JBI),GenmabU.S.Inc.andGenmab
A/S(collectively,Genmab)intheUnitedStatesDistrictCourtfortheDistrictofDelaware.MorphoSysallegesthatJBIsmanufactureandsaleofDARZALEX
(daratumumab)willfullyinfringesMorphoSysUnitedStatesPatentNos.8,263,746,9,200,061and9,578,590.MorphoSysisseekingmoneydamages.JBIlicenses
patentsandthecommercialrightstoDARZALEXfromGenmab.TrialinthecaseisscheduledtocommenceinFebruary2019.
InAugust2016,SandozLtdandHexalAG(collectively,Sandoz)filedalawsuitintheEnglishHighCourtagainstG.D.SearleLLC(aPfizercompany)and
JanssenSciencesIrelandUC(JSI)allegingthatSearlessupplementaryprotectioncertificateSPC/GB07/038(SPC),whichisexclusivelylicensedtoJSI,isinvalid
andshouldberevoked.Janssen-CilagLimitedsellsPREZISTA(darunavir)intheUnitedKingdompursuanttothislicense.InOctober2016,SearleandJSI
counterclaimedagainstSandozforthreatenedinfringementoftheSPCbasedonstatementsofitsplanstolaunchgenericdarunavirintheUnitedKingdom.Sandoz
admittedthatitsgenericdarunavirproductwouldinfringetheSPCifitisfoundvalid.SearleandJSIareseekinganorderenjoiningSandozfrommarketingits
genericdarunavirbeforetheexpirationoftheSPC.FollowingatrialinApril2017,theCourtenteredadecisionholdingthattheSPCisvalidandgrantingafinal
injunction.SandozhasappealedtheCourtsdecisionandtheinjunctionwillbestayedpendingtheappeal.
REMICADERelatedCases
United States Proceedings

InSeptember2013,JanssenBiotech,Inc.(JBI)andNYULangoneMedicalCenter(NYU)receivedanOfficeActionfromtheUnitedStatesPatentandTrademark
Office(USPTO)rejectingtheclaimsinUnitedStatesPatentNo.6,284,471relatingtoREMICADE(infliximab)(the471patent)inareexaminationproceeding
institutedbyathirdparty.The471patentexpiresinSeptember2018andisco-ownedbyJBIandNYU,withNYUhavinggrantedJBIanexclusivelicenseto
NYUsrightsunderthepatent.Followingseveralofficeactionsbythepatentexaminer,includingtwofurtherrejections,andresponsesbyJBI,theUSPTOissueda
furtheractionmaintainingitsrejectionofthe471patent.JBIfiledanoticeofappealtotheUSPTOsPatentTrialandAppealBoard,whichissuedadecisionin
November2016upholdingtheexaminer'srejection.JBIfiledanappealtotheUnitedStatesCourtofAppealsfortheFederalCircuit,andoralargumentwasheard
inOctober,2017.
InAugust2014,CelltrionHealthcareCo.Ltd.andCelltrionInc.(collectively,Celltrion)filedanapplicationwiththeUnitedStatesFoodandDrugAdministration
(FDA)forapprovaltomakeandsellitsowninfliximabbiosimilar.InMarch2015,JBIfiledalawsuitintheUnitedStatesDistrictCourtfortheDistrictof
MassachusettsagainstCelltrionandHospiraHealthcareCorporation(Hospira),whichhasexclusivemarketingrightsforCelltrion'sinfliximabbiosimilarinthe
UnitedStates,seeking,amongotherthings,adeclaratoryjudgmentthattheirbiosimilarproductinfringesorpotentiallyinfringesseveralJBIpatents,includingthe
471patentandUnitedStatesPatentNo.7,598,083(the083patent).InAugust2016,theDistrictCourtgrantedbothCelltrion'sandHospira'smotionsfor
summaryjudgmentofinvalidityofthe471patent.JBIappealedthosedecisionstotheUnitedStatesCourtofAppealsfortheFederalCircuit.Thiscasehasbeen
designatedacompanioncasetotheappealofthereexaminationofthe471patentdescribedabove,andwereheardbythesamepanelofjudgesattheFederal
CircuitinOctober,2017.
InJune2016,JBIfiledtwoadditionalpatentinfringementlawsuitsassertingthe083patent,oneagainstCelltrionintheUnitedStatesDistrictCourtforthe
DistrictofMassachusettsandtheotheragainstHyCloneLaboratories,Inc.,themanufacturerofthecellculturemediathatCelltrionusestomakeitsbiosimilar
product,intheUnitedStatesDistrictCourtfortheDistrictofUtah.Althoughthe083patentisalreadyassertedintheexistinglawsuitagainstCelltrion,the
additionallawsuitexpandstheclaimstoincludethesaleintheUnitedStatesofCelltrion'sbiosimilarproductmanufacturedwithcellculturemediamadeinthe
UnitedStates.ThisadditionallawsuitagainstCelltrionhasbeenconsolidatedwiththeexistinglawsuitdiscussedabove.Hospirahasmovedtodismissallcountsof
thelawsuitrelatedtothe083patentastoit.Celltrion'smotiontodismissallcountsofthelawsuitrelatedtothe083patentforfailuretojoinalltheco-ownersof
the'083patentasplaintiffswasdeniedinOctober2017.Thetrialhasbeenpostponedpendingresolutionofthesemotions.ThelitigationagainstHyCloneinUtah
isstayedpendingtheoutcomeoftheMassachusettsactions.
TheFDAapprovedCelltrionsinfliximabbiosimilarforsaleintheUnitedStatesinApril2016.Hospira'sparentcompany,PfizerInc.,launchedCelltrion's
infliximabbiosimilarintheUnitedStatesinlate2016.
InApril2017,JBIreceivednoticethattheFDAapprovedamarketingapplicationsubmittedbySamsungBioepisCo.Ltd.(Samsung)forthesaleofitsinfliximab
biosimilarintheUnitedStates.InMay2017,JBIfiledapatentinfringementlawsuitagainstSamsungintheUnitedStatesDistrictCourtfortheDistrictofNew
Jerseyallegingthatthesaleofitsbiosimilarproduct
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mayinfringethreeofJBIspatents.InJuly2017,Samsunglauncheditsbiosimilarproduct(commercializedbyMerck)intheUnitedStates.
LitigationAgainstFilersofAbbreviatedNewDrugApplications(ANDAs)
ThefollowingsummarizeslawsuitspendingagainstgenericcompaniesthathavefiledAbbreviatedNewDrugApplications(ANDAs)withtheFDA,orundertaken
similarregulatoryprocessesoutsideoftheUnitedStates,seekingtomarketgenericformsofproductssoldbyvarioussubsidiariesofJohnson&Johnsonpriorto
expirationoftheapplicablepatentscoveringthoseproducts.TheseANDAstypicallyincludeallegationsofnon-infringement,invalidityandunenforceabilityofthe
applicablepatents.Intheeventthesubsidiariesarenotsuccessfulintheseactions,orthestatutory30-monthstaysoftheANDAsexpirebeforetheUnitedStates
DistrictCourtrulingsareobtained,thethird-partycompaniesinvolvedwillhavetheability,uponapprovaloftheFDA,tointroducegenericversionsofthe
productsatissuetothemarket,resultinginthepotentialforsubstantialmarketshareandrevenuelossesforthoseproducts,andwhichmayresultinanon-cash
impairmentchargeinanyassociatedintangibleasset.Inaddition,fromtimetotime,subsidiariesmaysettletheseactionsandsuchsettlementscaninvolvethe
introductionofgenericversionsoftheproductsatissuetothemarketpriortotheexpirationoftherelevantpatents.Theinterpartesreview(IPR)processwiththe
UnitedStatesPatentandTrademarkOffice(USPTO),createdunderthe2011AmericaInventsAct,isalsobeingusedbygenericcompaniesinconjunctionwith
theseANDAsandlawsuitstochallengepatentsheldbytheCompanyssubsidiaries.
ZYTIGA
InJuly2015,JanssenBiotech,Inc.,JanssenOncology,Inc.andJanssenResearch&Development,LLC(collectively,Janssen)andBTGInternationalLtd.(BTG)
initiatedapatentinfringementlawsuitintheUnitedStatesDistrictCourtfortheDistrictofNewJerseyagainstanumberofgenericcompanies(andcertainoftheir
affiliatesand/orsuppliers)whofiledANDAsseekingapprovaltomarketagenericversionofZYTIGAbeforetheexpirationofUnitedStatesPatentNo.
8,822,438(the438patent).ThegenericcompaniescurrentlyincludeActavisLaboratories,FL,Inc.(Actavis);AmnealPharmaceuticals,LLCandAmneal
PharmaceuticalsofNewYork,LLC(collectively,Amneal);ApotexInc.andApotexCorp.(collectively,Apotex);CitronPharmaLLC(Citron);Dr.Reddys
Laboratories,Ltd.andDr.ReddysLaboratories,Inc.(collectively,Dr.Reddys);MylanPharmaceuticalsInc.andMylanInc.(collectively,Mylan);Par
Pharmaceuticals,Inc.andParPharmaceuticalCompanies,Inc.(collectively,Par);SunPharmaceuticalIndustriesLtd.andSunPharmaceuticalsIndustries,Inc.
(collectively,Sun);TevaPharmaceuticalsUSA,Inc.(Teva);WockhardtBioA.G.;WockhardtUSALLCandWockhardtLtd.(collectively,Wockhardt);West-
WardPharmaceuticalCorp.(West-Ward)andHikmaPharmaceuticals,LLC(Hikma).TheOctober2017trialdatehasbeenpostponedpendingcontinuedpretrial
activitiesthroughthefirstquarter2018.
JanssenandBTGalsoinitiatedpatentinfringementlawsuitsintheUnitedStatesDistrictCourtfortheDistrictofNewJerseyagainstAmerigenPharmaceuticals
Limited(Amerigen)inMay2016,andGlenmarkPharmaceuticals,Inc.inJune2016,eachofwhomfiledanANDAseekingapprovaltomarketitsgenericversion
ofZYTIGAbeforetheexpirationofthe438patent.
InAugust2015,JanssenandBTGfiledanadditionaljurisdictionalprotectivelawsuitagainsttheMylandefendantsintheUnitedStatesDistrictCourtforthe
NorthernDistrictofWestVirginia,whichhasbeenstayed.
InAugust2017,JanssenandBTGinitiatedapatentinfringementlawsuitintheUnitedStatesDistrictCourtfortheDistrictofNewJerseyagainstTeva,whofiled
anANDAseekingapprovaltomarketagenericversionofZYTIGAbeforetheexpirationofthe'438patent.
Ineachoftheabovelawsuits,JanssenisseekinganorderenjoiningthedefendantsfrommarketingtheirgenericversionsofZYTIGAbeforetheexpirationofthe
438patent.
SeveralgenericcompaniesincludingAmerigen,ArgentumPharmaceuticalsLLC(Argentum),Mylan,Wockhardt,Actavis,Amneal,Dr.Reddys,Sun,Teva,
West-WardandHikmahavefiledPetitionsforInterPartesReview(IPR)withtheUSPTO,seekingtoinvalidatethe438patent.TheCompanyisawaitingfinal
writtendecisionsinalloftheIPRs.
InOctober2017,JanssenInc.andJanssenOncology,Inc.(collectively,Janssen)initiatedaNoticeofApplicationunderSection6ofthePatentedMedicines
(NoticeofCompliance)RegulationsagainstTevaCanadaLimited(Teva)andtheMinisterofHealthinCanadainresponsetoTeva'sfilinganAbbreviatedNew
DrugSubmission(ANDS)andseekingapprovaltomarketagenericversionofZYTIGAbeforetheexpirationofCanadianPatentNo.2,661,422.Janssenis
seekinganorderprohibitingtheMinisterofHealthfromissuingaNoticeofCompliancewithrespecttoTeva'sANDSbeforetheexpirationofJanssen'spatent.
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COMPLERA
InAugustandSeptember2015,JanssenPharmaceuticaNVandJanssenSciencesIrelandUC(collectively,Janssen)andGileadSciences,Inc.andGileadSciences
IrelandUC(collectively,Gilead)initiatedpatentinfringementlawsuitsintheUnitedStatesDistrictCourtsfortheDistrictofDelawareandtheDistrictofWest
Virginia,respectively,againstMylan,Inc.andMylanPharmaceuticals,Inc.(collectively,Mylan),whofiledanANDAseekingapprovaltomarketageneric
versionofCOMPLERAbeforetheexpirationofUnitedStatesPatentNos.8,841,310,7,125,879and8,101,629.InJuly2017,theWestVirginialawsuitwas
dismissedwithoutprejudicebystipulationoftheparties.
IntheDelawarelawsuit,JanssenandGileadamendedtheircomplainttoaddclaimsforpatentinfringementwithrespecttoUnitedStatesPatentNos.8,080,551;
7,399,856;7,563,922;8,101,752and8,618,291.AtrialintheDelawareactionhasbeenscheduledforFebruary2018.
Ineachoftheselawsuits,JanssenisseekinganorderenjoiningthedefendantsfrommarketingtheirgenericversionsofCOMPLERAbeforetheexpirationofthe
relevantpatents.
XARELTO
BeginninginOctober2015,JanssenPharmaceuticals,Inc.(JPI)andBayerPharmaAGandBayerIntellectualPropertyGmbH(collectively,Bayer)filedpatent
infringementlawsuitsintheUnitedStatesDistrictCourtfortheDistrictofDelawareagainstanumberofgenericcompanieswhofiledANDAsseekingapprovalto
marketgenericversionsofXARELTObeforeexpirationofBayersUnitedStatesPatentNos.7,157,456,7,585,860and7,592,339relatingtoXARELTO.JPI
istheexclusivesublicenseeoftheassertedpatents.Thefollowinggenericcompaniesarenameddefendants:AurobindoPharmaLimitedandAurobindoPharma
USA,Inc.(collectively,Aurobindo);BreckenridgePharmaceutical,Inc.(Breckenridge);InvaGenPharmaceuticalsInc.(InvaGen);MicroLabsUSAInc.and
MicroLabsLtd(collectively,Micro);MylanPharmaceuticalsInc.(Mylan);PrinstonPharmaceuticals,Inc.;SigmapharmLaboratories,LLC(Sigmapharm);
TorrentPharmaceuticals,LimitedandTorrentPharmaInc.(collectively,Torrent).AlldefendantsexceptMylanandSigmapharmhaveagreedtohavetheircases
stayedandtobeboundbytheoutcomeofanyfinaljudgmentrenderedagainstanyoftheotherdefendants.TrialisscheduledforMarch2018.
BeginninginApril2017,JPIandBayerIntellectualPropertyGmbHandBayerAG(collectively,BayerAG)filedpatentinfringementlawsuitsintheUnitedStates
DistrictCourtfortheDistrictofDelawareagainstanumberofgenericcompanieswhofiledANDAsseekingapprovaltomarketgenericversionsofXARELTO
beforeexpirationofBayerAGsUnitedStatesPatentNo.9,539,218relatingtoXARELTO.Thefollowinggenericcompaniesarenameddefendants:Alembic
PharmaceuticalsLimited,AlembicGlobalHoldingSAandAlembicPharmaceuticals,Inc.;Aurobindo;Breckenridge;InvaGen;LupinLimitedandLupin
Pharmaceuticals,Inc.(collectively,Lupin);Micro;Mylan;Sigmapharm;TaroPharmaceuticalIndustriesLtd.andTaroPharmaceuticalsU.S.A.,Inc.(collectively,
Taro)andTorrent.LupinhascounterclaimedforadeclaratoryjudgmentofnoninfringementandinvalidityofUnitedStatesPatentNo.9,415,053.
Ineachoftheselawsuits,JPIisseekinganorderenjoiningthedefendantsfrommarketingtheirgenericversionsofXARELTObeforetheexpirationofthe
relevantpatents.
PREZISTA
InSeptember2017,JanssenSciencesIrelandUCandJanssenProducts,L.P.(collectively,Janssen)initiatedapatentinfringementlawsuitintheUnitedStates
DistrictCourtfortheDistrictofNewJerseyagainstAurobindoPharmaLtd.andAurobindoPharmaUSAInc.(collectively,Aurobindo),whofiledanANDA
seekingapprovaltomarketagenericversionofPREZISTAbeforetheexpirationofUnitedStatesPatentNos.8,518,987;7,700,645;7,126,015;and7,595,408.
JanssenisalsoseekinganorderenjoiningAurobindofrommarketingitsgenericversionofPREZISTAbeforetheexpirationofthepatents.
RISPERDALCONSTA
InNovember2016,theUnitedStatesPatentandTrademarkOffice(USPTO)institutedanInterPartesReviewfiledbyLuyePharmaGroupLtd.,LuyePharma
(USA)Ltd.,SandongLuyePharmaceuticalCo.,Ltd.andNanjingLuyePharmaceuticalCo.,Ltd.,seekingtoinvalidateUnitedStatesPatentNo.6,667,061relating
toRISPERDALCONSTA.JanssenPharmaceuticals,Inc.marketsRISPERDALCONSTApursuanttoalicensefromAlkermesPharmaIrelandLtd.A
decisionbytheUSPTOisexpectedinNovember2017.
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INVOKANA/INVOKAMET
BeginninginJuly2017,JanssenPharmaceuticals,Inc.,JanssenResearch&Development,LLC,CilagGmbHInternationalandJanssenPharmaceuticaNV
(collectively,Janssen)andMitsubishiTanabePharmaCorporation(MTPC)filedpatentinfringementlawsuitsintheUnitedStatesDistrictCourtfortheDistrictof
NewJersey,theUnitedStatesDistrictCourtfortheDistrictofColoradoandtheUnitedStatesDistrictCourtfortheDistrictofDelawareagainstanumberof
genericcompanieswhofiledANDAsseekingapprovaltomarketgenericversionsofINVOKANAand/orINVOKAMETbeforeexpirationofMTPCsUnited
StatesPatentNos.7,943,582and/or8,513,202relatingtoINVOKANAandINVOKAMET.Janssenistheexclusivelicenseeoftheassertedpatents.The
followinggenericcompaniesarenameddefendants:ApotexInc.andApotexCorp.;AurobindoPharmaUSAInc.;MacleodsPharmaceuticalsLtd.;InvaGen
Pharmaceuticals,Inc.(InvaGen);PrinstonPharmaceuticalsInc.;Dr.ReddysLaboratories,Inc.andDr.ReddysLaboratoriesLtd;HeteroUSA,Inc.,HeteroLabs
LimitedUnit-VandHeteroLabsLimited;MSNLaboratoriesPrivateLtd.andMSNPharmaceuticals,Inc.;LaurusLabsLtd.;IndocoRemediesLtd.;Zydus
Pharmaceuticals(USA)Inc.(Zydus);Sandoz,Inc.(Sandoz)andTevaPharmaceuticalsUSA,Inc.
BeginninginJuly2017,JanssenandMTPCfiledpatentinfringementlawsuitsintheUnitedStatesDistrictCourtfortheDistrictofNewJerseyandtheUnited
StatesDistrictCourtfortheDistrictofColoradoagainstSandozandInvaGen,whofiledANDAsseekingapprovaltomarketgenericversionsofINVOKANA
and/orINVOKAMETbeforeexpirationofMTPCsUnitedStatesPatentNo.7,943,788(the'788patent)relatingtoINVOKANAandINVOKAMETand
againstZydus,whofiledANDAsseekingapprovaltomarketgenericversionsofINVOKANAandINVOKAMETbeforeexpirationofthe'788patent,MTPC's
UnitedStatesPatentNo.8,222,219relatingtoINVOKANAandINVOKAMETandMTPCsUnitedStatesPatentNo.8,785,403relatingtoINVOKAMET.
Janssenistheexclusivelicenseeoftheassertedpatents.
Ineachoftheselawsuits,JanssenandMTPCareseekinganorderenjoiningthedefendantsfrommarketingtheirgenericversionsofINVOKANAand/or
INVOKAMETbeforetheexpirationoftherelevantpatents.
VELETRI
InJuly2017,ActelionPharmaceuticalsLtd.(Actelion)initiatedapatentinfringementlawsuitintheUnitedStatesDistrictCourtfortheDistrictofNewJersey
againstSunPharmaceuticalIndustries,Inc.andSunPharmaceuticalIndustriesLimited(collectively,SunPharmaceutical),whofiledanANDAseekingapproval
tomarketagenericversionofVELETRIbeforetheexpirationofUnitedStatesPatentNo.8,598,227.ActelionisseekinganorderenjoiningSunPharmaceutical
frommarketingitsgenericversionofVELETRIbeforetheexpirationofthepatent.
GOVERNMENT PROCEEDINGS
Likeothercompaniesinthepharmaceuticalandmedicaldevicesindustries,Johnson&Johnsonandcertainofitssubsidiariesaresubjecttoextensiveregulationby
national,stateandlocalgovernmentagenciesintheUnitedStatesandothercountriesinwhichtheyoperate.Asaresult,interactionwithgovernmentagenciesis
ongoing.Themostsignificantlitigationbroughtby,andinvestigationsconductedby,governmentagenciesarelistedbelow.Itispossiblethatcriminalchargesand
substantialfinesand/orcivilpenaltiesordamagescouldresultfromgovernmentinvestigationsorlitigation.
AverageWholesalePrice(AWP)Litigation
Johnson&Johnsonandseveralofitspharmaceuticalsubsidiaries(theJ&JAWPDefendants),alongwithnumerousotherpharmaceuticalcompanies,werenamed
asdefendantsinaseriesoflawsuitsinstateandfederalcourtsinvolvingallegationsthatthepricingandmarketingofcertainpharmaceuticalproductsamountedto
fraudulentandotherwiseactionableconductbecause,amongotherthings,thecompaniesallegedlyreportedaninflatedAverageWholesalePrice(AWP)forthe
drugsatissue.PayorsallegedthattheyusedthoseAWPsincalculatingproviderreimbursementlevels.Theplaintiffsinthesecasesincludedthreeclassesof
privatepersonsorentitiesthatpaidforanyportionofthepurchaseofthedrugsatissuebasedonAWP,andstategovernmententitiesthatmadeMedicaid
paymentsforthedrugsatissuebasedonAWP.Manyofthesecases,bothfederalactionsandstateactionsremovedtofederalcourt,wereconsolidatedforpre-trial
purposesinamulti-districtlitigationintheUnitedStatesDistrictCourtfortheDistrictofMassachusetts,whereallclaimsagainsttheJ&JAWPDefendantswere
ultimatelydismissed.TheJ&JAWPDefendantsalsoprevailedinacasebroughtbytheCommonwealthofPennsylvania.OtherAWPcaseshavebeenresolved
throughcourtorderorsettlement.Twocasesremainpending.InacasebroughtbyIllinois,thepartiesareawaitingassignmentofatrialdate.InNewJersey,a
putativeclassactionbaseduponAWPallegationsispendingagainstCentocor,Inc.andOrthoBiotechInc.(bothnowJanssenBiotech,Inc.),Johnson&Johnson
andALZACorporation.
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OpioidsLitigation
Beginningin2014andcontinuingtothepresent,Johnson&JohnsonandJanssenPharmaceuticals,Inc.(JPI),alongwithotherpharmaceuticalcompanies,have
beennamedinnumerouslawsuitsbroughtbycertainstateandlocalgovernmentsrelatedtothemarketingofopioids,includingDURAGESIC,NUCYNTAand
NUCYNTAER.Todate,complaintsagainstpharmaceuticalcompanies,includingJohnson&JohnsonandJPI,havebeenfiledinstatecourtbythestate
AttorneysGeneralinMississippi,Missouri,NewMexico,OhioandOklahoma.Complaintsagainstthemanufacturersalsohavebeenfiledinstateorfederalcourt
byover75city,countyandlocalgovernmentagenciesinthefollowingstates:California;Connecticut;Illinois;Kentucky;Louisiana;Mississippi;Missouri;New
Hampshire;NewMexico;NewYork;Ohio;Oklahoma;Oregon;Pennsylvania;Texas;WashingtonandWestVirginia.Theseactionsallegeavarietyofclaims
relatedtoopioidsmarketingpractices,includingfalseadvertising,unfaircompetition,publicnuisance,consumerfraudviolations,deceptiveactsandpractices,
falseclaimsandunjustenrichment.Thesuitsgenerallyseekpenaltiesand/orinjunctiveandmonetaryrelief.Thesecasesareinearlystagesoflitigation.InOctober
2017,Johnson&JohnsonandJPIwerebothservedwithamotiontoconsolidate66pendingmattersintoafederalMultiDistrictLitigationintheSouthernDistrict
ofOhio.
Johnson&Johnson,JPIandotherpharmaceuticalcompanieshavealsoreceivedsubpoenasorrequestsforinformationrelatedtoopioidsmarketingpracticesfrom
fourstateAttorneysGeneral:NewHampshire,NewJersey,TennesseeandWashington.InSeptember2017,Johnson&JohnsonandJPIwerecontactedbythe
TexasandColoradoAttorneyGeneralsOfficesonbehalfofapproximately38statesregardingamulti-stateAttorneyGeneralinvestigation.Themulti-state
coalitionservedJohnson&JohnsonandJPIwithsubpoenasaspartoftheinvestigation.Johnson&JohnsonandJPIhavealsoreceivedrequestsforinformation
fromtherankingminoritymemberoftheUnitedStatesSenateCommitteeonHomelandSecurityandGovernmentalAffairsregardingthesales,marketing,and
educationalstrategiesrelatedtothepromotionofopioidsuse.
Other
InAugust2012,DePuyOrthopaedics,Inc.,DePuy,Inc.(nowDePuySynthes,Inc.),andJohnson&JohnsonServices,Inc.receivedaninformalrequestfromthe
UnitedStatesAttorney'sOfficefortheDistrictofMassachusettsandtheCivilDivisionoftheUnitedStatesDepartmentofJustice(theUnitedStates)forthe
productionofmaterialsrelatingtotheDePuyASRXLHipdevice.InJuly2014,theUnitedStatesnotifiedtheUnitedStatesDistrictCourtfortheDistrictof
MassachusettsthatithaddeclinedtointerveneinaquitamcasefiledpursuanttotheFalseClaimsActagainstthecompanies.InFebruary2016,theDistrictCourt
grantedthecompaniesmotiontodismisswithprejudice,unsealedthequitamcomplaint,anddeniedthequitamrelatorsrequestforleavetofileafurther
amendedcomplaint.ThequitamrelatorsappealedthecasetotheUnitedStatesCourtofAppealsfortheFirstCircuit.InJuly2017,theFirstCircuitaffirmedthe
DistrictCourtsdismissalinpart,reversedinpart,andaffirmedthedecisiontodenytherelatorsrequesttofileathirdamendedcomplaint.SinceOctober2013,a
groupofStateAttorneysGeneralhaveissuedCivilInvestigativeDemandsrelatingtothedevelopment,salesandmarketingofseveralofDePuyOrthopaedics,
Inc.'shipproducts.Thestatesareseekingmonetaryandinjunctiverelief.InJuly2014,theOregonDepartmentofJustice,whichwasinvestigatingthesematters
independentlyoftheotherstates,announcedasettlementofitsASRXLHipdeviceinvestigationforatotalpaymentof$4milliontotheStateofOregon.
InOctober2012,Johnson&JohnsonwascontactedbytheCaliforniaAttorneyGeneral'sofficeregardingamulti-stateAttorneyGeneralinvestigationofthe
marketingofsurgicalmeshproductsforherniaandurogynecologicalpurposesbyJohnson&Johnson'ssubsidiary,Ethicon,Inc.(Ethicon).Johnson&Johnsonand
Ethiconhavesinceenteredintoaseriesoftollingagreementswiththe47statesandtheDistrictofColumbiaparticipatinginthemulti-stateinvestigationandhave
respondedtoCivilInvestigativeDemandsservedbycertainoftheparticipatingstates.Thestatesareseekingmonetaryandinjunctiverelief.InMay2016,
CaliforniaandWashingtonfiledcivilcomplaintsagainstJohnson&Johnson,EthiconInc.andEthiconUS,LLCallegingviolationsoftheirconsumerprotection
statutes.SimilarcomplaintswerefiledagainstthecompaniesbyKentuckyinAugust2016andbyMississippiinOctober2017.Johnson&JohnsonandEthicon
haveenteredintoanewtollingagreementwiththeremaining44statesandtheDistrictofColumbia.
InDecember2012,Therakos,Inc.(Therakos),formerlyasubsidiaryofJohnson&JohnsonandpartoftheOrtho-ClinicalDiagnostics,Inc.(OCD)franchise,
receivedaletterfromthecivildivisionoftheUnitedStatesAttorney'sOfficefortheEasternDistrictofPennsylvaniainformingTherakosthattheUnitedStates
Attorney'sOfficewasinvestigatingthesalesandmarketingofUvadex(methoxsalen)andtheUvarXtsandCellexSystemsduringtheperiod2000tothe
present.TheUnitedStatesAttorney'sOfficerequestedthatOCDandJohnson&Johnsonpreservedocumentsthatcouldrelatetotheinvestigation.Therakoswas
subsequentlyacquiredbyanaffiliateofGoresCapitalPartnersIII,L.P.inJanuary2013,andOCDwasdivestedinJune2014.FollowingthedivestitureofOCD,
Johnson&JohnsonretainsOCDsportionofanyliabilitythatmayresultfromtheinvestigationforactivitythatoccurredpriortothesaleofTherakos.InMarch
2014andMarch2016,theUnitedStatesAttorneysOfficerequestedthatJohnson&Johnsonproducecertaindocuments,andJohnson&Johnsoniscooperating
withthoserequests.
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InJune2014,theMississippiAttorneyGeneralfiledacomplaintinChanceryCourtofTheFirstJudicialDistrictofHindsCounty,MississippiagainstJohnson&
JohnsonandJohnson&JohnsonConsumerCompanies,Inc.(nowJohnson&JohnsonConsumerInc.)(JJCI).Thecomplaintallegesthatdefendantsfailedto
discloseallegedhealthrisksassociatedwithfemaleconsumers'useoftalccontainedinJOHNSON'SBabyPowderandJOHNSON'SShowertoShower(a
productnolongersoldbyJJCI)andseeksinjunctiveandmonetaryrelief.Thepartieshaveagreedtoadjournthetrialdateandcurrentlyexpectthetrialtobere-
scheduledtothefallof2018.
InMarch2016,JanssenPharmaceuticals,Inc.(JPI)receivedaCivilInvestigativeDemandfromtheUnitedStatesAttorneysOfficefortheSouthernDistrictof
NewYorkrelatedtoJPIscontractualrelationshipswithpharmacybenefitmanagersovertheperiodfromJanuary1,2006tothepresentwithregardtocertainof
JPI'spharmaceuticalproducts.ThedemandwasissuedinconnectionwithaninvestigationundertheFalseClaimsAct.
InJanuary2017,JanssenPharmaceuticals,Inc.receivedaCivilInvestigativeDemandfromtheUnitedStatesDepartmentofJusticerelatingtoallegations
concerningthesalesandmarketingpracticesofOLYSIO.
InFebruary2017,Johnson&JohnsonreceivedasubpoenafromtheUnitedStatesAttorney'sOfficefortheDistrictofMassachusettsseekingtheproductionof
recordspertainingtopaymentstoany501(c)(3)charitableorganizationthatprovidesfinancialassistancetoMedicarepatients.Multiplepharmaceuticalcompanies
havepubliclyreportedreceiptofsubpoenasandongoinginquiriessimilartothisoneandtheonedescribedbelow.
ActelionPharmaceuticalsUS,Inc.(ActelionUS),receivedasubpoenainMay2016,withfollow-uprequestsinJuneandDecember2016,fromtheUnitedStates
Attorney'sOfficefortheDistrictofMassachusetts.ThesubpoenaseekstheproductionofrecordspertainingtoActelionUSpaymentsto501(c)(3)charitable
organizationsthatprovidefinancialassistancetoMedicarepatients.
InMarch2017,JanssenBiotech,Inc.receivedaCivilInvestigativeDemandfromtheUnitedStatesDepartmentofJusticeregardingaFalseClaimsAct
investigationconcerningmanagementandadvisoryservicesprovidedtorheumatologyandgastroenterologypracticesthatpurchasedREMICADEorSIMPONI
ARIA.
InApril2017,Johnson&JohnsonreceivedasubpoenafromtheUnitedStatesAttorneyfortheDistrictofMassachusettsseekingdocumentsbroadlyrelatingto
pharmaceuticalcopaymentsupportprogramsforOLYSIO,SIMPONIandSTELARA.ThesubpoenaalsoseeksdocumentsrelatingtoAverage
ManufacturerPriceandBestPricereportingtotheCenterforMedicareandMedicaidServicesrelatedtothoseproducts,aswellasrebatepaymentstostate
Medicaidagencies.
InJune2017,Johnson&JohnsonreceivedasubpoenafromtheUnitedStatesAttorney'sOfficefortheDistrictofMassachusettsseekinginformationregarding
practicespertainingtothesterilizationofDePuySynthesInc.spinalimplantsatthreehospitalsinBostonaswellasinteractionsofCompanyemployeeswith
physiciansatthesehospitals.
Fromtimetotime,Johnson&JohnsonhasreceivedrequestsfromavarietyofUnitedStatesCongressionalCommitteestoproduceinformationrelevanttoongoing
congressionalinquiries.ItisthepolicyofJohnson&Johnsontocooperatewiththeseinquiriesbyproducingtherequestedinformation.
GENERAL LITIGATION
InJune2009,followingthepublicannouncementthatOrtho-ClinicalDiagnostics,Inc.(OCD)hadreceivedagrandjurysubpoenafromtheUnitedStates
DepartmentofJustice,AntitrustDivision,inconnectionwithaninvestigationthathassincebeenclosed,multipleclassactioncomplaintswerefiledagainstOCD
bydirectpurchasersseekingdamagesforallegedpricefixing.Thesecaseswereconsolidatedforpre-trialpurposesintheUnitedStatesDistrictCourtforthe
EasternDistrictofPennsylvaniaasInreBloodReagentAntitrustLitigation.Followingtheappealandreversalofitsinitialgrantofamotionforclasscertification,
onremand,theDistrictCourtinOctober2015againgrantedamotionbytheplaintiffsforclasscertification.InJuly2017,theCourtissuedanopiniongrantingin
partanddenyinginpartOCD'smotionforsummaryjudgment.TheCourtgrantedsummaryjudgmentconcerningallegationsofpricefixingin2005and2008,and
deniedsummaryjudgmentconcerningallegationsofpricefixingin2001.OCDwasdivestedin2014andJohnson&Johnsonretainedanyliabilitythatmayresult
fromthesecases.
In June 2011, DePuy Orthopaedics, Inc. (DePuy) filed suit against Orthopaedic Hospital (OH) in the United States District Court for the Northern District of
IndianaseekingadeclaratoryjudgmentthatDePuydidnotoweOHroyaltiesundera1999developmentagreement.InJanuary2012,OHfiledabreachofcontract
caseinCaliforniafederalcourt,whichwaslaterconsolidatedwiththeIndianacase.InFebruary2014,OHbroughtsuitforpatentinfringementrelatingtothesame
technology,andthatactionwasalso
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consolidatedwiththeIndianacase.InAugust2017,thecourtdeniedDePuysmotionsforsummaryjudgment.Atrialdatehasnotbeenset.
InSeptember2011,Johnson&Johnson,Johnson&JohnsonInc.andMcNeilConsumerHealthcareDivisionofJohnson&JohnsonInc.receivedaNoticeofCivil
ClaimfiledbyNickFieldintheSupremeCourtofBritishColumbia,Canada(theBCCivilClaim).TheBCCivilClaimisaputativeclassactionbroughtonbehalf
ofpersonswhoresideinBritishColumbiaandwhopurchasedduringtheperiodbetweenSeptember20,2001andinoraboutDecember2010oneormorevarious
McNeilinfants'orchildren'sover-the-countermedicinesthatweremanufacturedattheFortWashington,Pennsylvaniafacility.TheBCCivilClaimallegesthatthe
defendantsviolatedtheBCBusinessPracticesandConsumerProtectionAct,andotherCanadianstatutesandcommonlaws,bysellingmedicinesthatwere
allegedlynotsafeand/oreffectiveordidnotcomplywithCanadianGoodManufacturingPractices.TheclasscertificationhearingscheduledforOctober2015was
adjourned,andthereiscurrentlynodatesetforthathearing.Inaddition,inApril2016,aputativeclassactionwasfiledagainstJohnson&Johnson,Johnson&
JohnsonSalesandLogisticsCompany,LLCandMcNeilPPC,Inc.(nowknownasJohnson&JohnsonConsumer,Inc.)inNewJerseySuperiorCourt,Camden
CountyonbehalfofpersonswhoresideinthestateofNewJerseywhopurchasedvariousMcNeilover-the-counterproductsfromDecember2008throughthe
present.ThecomplaintallegesviolationsoftheNewJerseyConsumerFraudAct.Followingthegrantofamotiontodismissandthefilingofanamended
complaint,inMay2017,theCourtdeniedamotiontodismisstheamendedcomplaint.Discoveryisunderway.
InMay2014,twopurportedclassactionswerefiledinfederalcourt,oneintheUnitedStatesDistrictCourtfortheCentralDistrictofCaliforniaandoneinthe
UnitedStatesDistrictCourtfortheSouthernDistrictofIllinois,againstJohnson&JohnsonandJohnson&JohnsonConsumerCompanies,Inc.(nowJohnson&
JohnsonConsumerInc.)(JJCI)allegingviolationsofstateconsumerfraudstatutesbasedonnondisclosureofallegedhealthrisksassociatedwithtalccontainedin
JOHNSON'SBabyPowderandJOHNSON'SShowertoShower(aproductnolongersoldbyJJCI).Bothcasesseekinjunctivereliefandmonetarydamages;
neitherincludesaclaimforpersonalinjuries.InOctober2016,bothcasesweretransferredtotheUnitedStatesDistrictCourtfortheDistrictCourtofNewJersey
aspartofanewlycreatedfederalmulti-districtlitigation.InJuly2017,theCourtgrantedJohnson&Johnson'sandJJCIsmotiontodismissoneofthecases.The
plaintiffhasappealed.InSeptember2017,theplaintiffinthesecondcasevoluntarilydismissedtheircomplaint.
InAugust2014,UnitedStatesCustomsandBorderProtection(USCBP)issuedaPenaltyNoticeagainstJanssenOrthoLLC(JanssenOrtho),assessingpenalties
fortheallegedimproperclassificationofdarunavirethanolate(theactivepharmaceuticalingredientinPREZISTA)inconnectionwithitsimportationintothe
UnitedStates.InOctober2014,JanssenOrthosubmittedaPetitionforReliefinresponsetothePenaltyNotice.InMay2015,USCBPissuedanAmendedPenalty
NoticeassessingsubstantialpenaltiesandJanssenOrthofiledaPetitionforReliefinJuly2015.
InMarchandApril2015,over30putativeclassactioncomplaintswerefiledbycontactlenspatientsinanumberofcourtsaroundtheUnitedStatesagainst
Johnson&JohnsonVisionCare,Inc.(JJVCI)andothercontactlensmanufacturers,distributors,andretailers,allegingverticalandhorizontalconspiraciestofix
theretailpricesofcontactlenses.Thecomplaintsallegethatthemanufacturersreachedagreementswitheachotherandcertaindistributorsandretailersconcerning
thepricesatwhichsomecontactlensescouldbesoldtoconsumers.Theplaintiffsareseekingdamagesandinjunctiverelief.Alloftheclassactioncaseswere
transferredtotheUnitedStatesDistrictCourtfortheMiddleDistrictofFloridainJune2015.Theplaintiffsfiledaconsolidatedclassactioncomplaintin
November2015.InJune2016,theCourtdeniedmotionstodismissfiledbyJJVCIandotherdefendants.Discoveryisongoing.InMarch2017,theplaintiffsfiled
amotionforclasscertification.
InAugust2015,twothird-partypayorsfiledapurportedclassactionintheUnitedStatesDistrictCourtfortheEasternDistrictofLouisianaagainstJanssen
Research&Development,LLC,JanssenOrthoLLC,JanssenPharmaceuticals,Inc.,Ortho-McNeil-JanssenPharmaceuticals,Inc.andJohnson&Johnson(aswell
ascertainBayerentities),allegingthatthedefendantsimproperlymarketedandpromotedXARELTOassaferandmoreeffectivethanlessexpensivealternative
medicationswhilefailingtofullydiscloseitsrisks.Thecomplaintseeksdamages.
InMay2017,apurportedclassactionwasfiledintheUnitedStatesDistrictCourtfortheWesternDistrictofWashingtonagainstLifescanInc.,Johnson&
Johnson,otherdiabetesteststripmanufacturersandcertainPharmacyBenefitManagers(PBMs).Thecomplaintallegesthatconsumerspaidinflatedpricesfor
glucosemonitorteststripsasaconsequenceofundisclosedrebatesandotherincentivespaidbymanufacturerstoPBMs.ThecomplaintincludesRICO,ERISA,
andstateconsumerprotectionclaims.Thecomplaintseeksequitablereliefanddamages.
InMay2017,LonzaSalesAG(Lonza)filedaRequestforArbitrationwiththeLondonCourtofInternationalArbitrationagainstJanssenResearch&
Development,LLC(Janssen).LonzaallegesthatJanssenbreacheda2005agreementbetweenthepartiesbysublicensingcertainLonzatechnologyusedinthe
manufactureofdaratumumabwithoutLonzasconsent.Lonzaseeksmonetarydamages.
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InSeptember2017,StrategicProductsGroup,Inc.(SPG)filedanantitrustcomplaintagainstLifescan,Inc.andLifescanScotland,Ltd.(collectively,Lifescan)in
theUnitedStatesDistrictCourtfortheNorthernDistrictofFlorida(PensacolaDivision).SPG,theexclusivedistributorofUnistripbloodglucosemeterteststrips,
allegesthatLifescanhasmonopolizedorisattemptingtomonopolizethemarketforbloodglucosemeterteststripscompatiblewithcertainLifescanmeters.The
complaintseeksdamages.
InSeptember2017,Pfizer,Inc.(Pfizer)filedanantitrustcomplaintagainstJohnson&JohnsonandJanssenBiotech,Inc.(collectivelyJanssen)inUnitedStates
DistrictCourtfortheEasternDistrictofPennsylvania.PfizerallegesthatJanssenhasviolatedfederalantitrustlawsthroughitscontractingstrategiesfor
REMICADE.Thecomplaintseeksdamagesandinjunctiverelief.
InSeptember2017,NationalEmployeesHealthPlan(NEHP)filedaputativeclassactionagainstJohnson&JohnsonandJanssenBiotech,Inc.(collectively
Janssen)inUnitedStatesDistrictCourtfortheEasternDistrictofPennsylvania.NEHPallegesthatJanssenhasviolatedfederalandstateantitrustandconsumer
lawsthroughitscontractingstrategiesforREMICADE.Thecomplaintseeksdamagesandinjunctiverelief.InOctober2017,asecondputativeclassactionwas
filedagainstJanssenbyUFCWLocal1500WelfareFundinUnitedStatesDistrictCourtfortheEasternDistrictofPennsylvania.Thesecondcomplaintalsoseeks
damagesandinjunctiverelief.
InOctober,2017,certainUnitedStatesservicemembersandtheirfamiliesbroughtacomplaintagainstanumberofpharmaceuticalandmedicaldevices
companies,includingJohnson&Johnsonandcertainofitssubsidiaries,allegingthatthedefendantsviolatedtheUnitedStatesAnti-TerrorismAct.Thecomplaint
allegesthatthedefendantsprovidedfundingforterroristorganizationsthroughtheirsalespracticespursuanttopharmaceuticalandmedicaldevicecontractswith
theIraqiMinistryofHealth.
Johnson&JohnsonoritssubsidiariesarealsopartiestoanumberofproceedingsbroughtundertheComprehensiveEnvironmentalResponse,Compensation,and
LiabilityAct,commonlyknownasSuperfund,andcomparablestate,localorforeignlawsinwhichtheprimaryreliefsoughtisthecostofpastand/orfuture
remediation.
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NOTE12RESTRUCTURING
TheCompanyannouncedrestructuringactionsinitsMedicalDevicessegmenttobetterservetheneedsofpatientsandcustomersintodaysevolvinghealthcare
marketplace.TheCompanyisundertakingactionstostrengthenitsgo-to-marketmodel,acceleratethepaceofinnovation,furtherprioritizekeyplatformsand
geographies,andstreamlineoperationswhilemaintaininghighqualitystandards.
TheCompanyestimatesthat,inconnectionwithitsplans,itwillrecordpre-taxrestructuringandotherchargesofapproximately$2.0billionto$2.4billion.Inthe
fiscalninemonthsof2017,theCompanyrecordedapre-taxchargeof$476million,ofwhich$46millionwasincludedincostofproductssoldand$265million
wasincludedinother(income)expense.Inthefiscalthirdquarterof2017,theCompanyrecordedapre-taxchargeof$187million,ofwhich$29millionwas
includedincostofproductssoldand$89millionwasincludedinother(income)expense.Inthefiscalsecondquarterof2017,theCompanyrecordeda$90
millionaccrualadjustmenttotheseverancereserveduetohighervoluntaryseparationthananticipated.Seethefollowingtableforadditionaldetails.Totalproject
costsof$1.8billionhavebeenrecordedsincetherestructuringannouncement.
Additionally,aspartoftheplan,theCompanyexpectsthattherestructuringactionswillresultinpositioneliminationsofapproximately4to6percentofthe
MedicalDevicessegmentsglobalworkforceoverthenext15months.Approximately2,200positionshavebeeneliminatedofwhich1,700receivedseparation
paymentssincetherestructuringannouncement.
TheCompanyestimatesthatapproximatelyonehalfofthecumulativepre-taxcostswillresultincashoutlays,including
approximately$400millionofemployeeseverance.Approximatelyonehalfofthecumulativepre-taxcostsarenon-cash,
relatingprimarilytofacilityrationalization,inventorywrite-offsandintangibleassetwrite-offs.
Thefollowingtablesummarizestheseverancerelatedreservesandtheassociatedspendingunderthisinitiativethroughthefiscalninemonthsof2017:
(Dollars in Millions)
Severance Asset Write-offs Other** Total
Reservebalance,January1,2017 $ 380 1 381

Currentyearactivity:
Charges 140 426 566
Cashpayments (45) (423) (468)
Settlednoncash (140) (140)
Accrualadjustment (90) (90)

Reservebalance,October1,2017* $ 245 4 249

*Cashoutlaysforseveranceareexpectedtobesubstantiallypaidoutoverthenext2yearsinaccordancewiththeCompany'splansandlocallaws.
**Otherincludesprojectexpensesuchassalariesforemployeessupportingtheinitiativeandconsultingexpenses.
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Item2MANAGEMENTSDISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTSOFOPERATIONS
RESULTSOFOPERATIONS
AnalysisofConsolidatedSales
Forthefiscalninemonthsof2017,worldwidesaleswere$56.3billion,atotalincreaseof4.6%,includingoperationalgrowthof4.8%ascomparedto2016fiscal
ninemonthssalesof$53.8billion.Currencyfluctuationshadanegativeimpactof0.2%forthefiscalninemonthsof2017.Inthefiscalninemonthsof2017,the
netimpactofacquisitionsanddivestituresonworldwideoperationalsalesgrowthwasapositive3.0%.
SalesbyU.S.companieswere$29.4billioninthefiscalninemonthsof2017,whichrepresentedanincreaseof4.0%ascomparedtotheprioryear.Inthefiscal
ninemonthsof2017,thenetimpactofacquisitionsanddivestituresontheU.S.operationalsalesgrowthwasapositive3.3%.Salesbyinternationalcompanies
were$26.9billion,anincreaseof5.3%,includingoperationalgrowthof5.8%,partiallyoffsetbyanegativecurrencyimpactof0.5%ascomparedtothefiscalnine
monthssalesof2016.Inthefiscalninemonthsof2017,thenetimpactofacquisitionsanddivestituresontheinternationaloperationalsalesgrowthwasapositive
2.8%.
Inthefiscalninemonthsof2017,salesbycompaniesinEuropeachievedgrowthof5.3%,whichincludedoperationalgrowthof6.2%andanegativecurrency
impactof0.9%.SalesbycompaniesintheWesternHemisphere,excludingtheU.S.,achievedgrowthof5.9%,whichincludedoperationalgrowthof3.1%,anda
positivecurrencyimpactof2.8%.SalesbycompaniesintheAsia-Pacific,Africaregionachievedgrowthof5.0%,includingoperationalgrowthof6.4%partially
offsetbyanegativecurrencyimpactof1.4%.
Forthefiscalthirdquarterof2017,worldwidesaleswere$19.7billion,atotalincreaseof10.3%,includingoperationalgrowthof9.5%ascomparedto2016fiscal
thirdquartersalesof$17.8billion.Currencyfluctuationshadapositiveimpactof0.8%forthefiscalthirdquarterof2017.Inthefiscalthirdquarterof2017,the
netimpactofacquisitionsanddivestituresonworldwideoperationalsalesgrowthwasapositive5.7%.
SalesbyU.S.companieswere$10.3billioninthefiscalthirdquarterof2017,whichrepresentedanincreaseof9.7%ascomparedtotheprioryear.Inthefiscal
thirdquarterof2017,thenetimpactofacquisitionsanddivestituresontheU.S.operationalsalesgrowthwasapositive5.9%.Salesbyinternationalcompanies
were$9.4billion,anincreaseof10.9%,includingoperationalgrowthof9.3%,andapositivecurrencyimpactof1.6%ascomparedtothefiscalthirdquartersales
of2016.Inthefiscalthirdquarterof2017,thenetimpactofacquisitionsanddivestituresontheinternationaloperationalsalesgrowthwasapositive5.5%.
Inthefiscalthirdquarterof2017,salesbycompaniesinEuropeachievedgrowthof12.4%,whichincludedoperationalgrowthof7.9%andapositivecurrency
impactof4.5%.SalesbycompaniesintheWesternHemisphere,excludingtheU.S.,achievedgrowthof12.4%,whichincludedoperationalgrowthof10.1%,and
apositivecurrencyimpactof2.3%.SalesbycompaniesintheAsia-Pacific,Africaregionachievedgrowthof8.5%,includingoperationalgrowthof10.6%
partiallyoffsetbyanegativecurrencyimpactof2.1%.
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ANALYSISOFSALESBYBUSINESSSEGMENTS
Consumer
Consumersegmentsalesinthefiscalninemonthsof2017were$10.1billion,anincreaseof1.9%ascomparedtothesameperiodayearago,includingoperational
growthof1.6%andapositivecurrencyimpactof0.3%.U.S.Consumersegmentsalesincreasedby3.8%.InternationalConsumersegmentsalesincreasedby
0.6%,includinganoperationalincreaseof0.2%andapositivecurrencyimpactof0.4%.Inthefiscalninemonthsof2017,theimpactofacquisitionsand
divestituresontheConsumersegmentoperationalsalesgrowthwasapositive2.3%.
MajorConsumerFranchiseSales*FiscalNineMonthsEnded
Total Operations Currency
(DollarsinMillions) October1,2017 October2,2016 Change Change Change
Beauty $ 3,090 $ 2,834 9.0% 8.9% 0.1%
OTC 3,021 2,938 2.8 2.6 0.2
BabyCare 1,426 1,508 (5.4) (5.4) 0.0
OralCare 1,138 1,171 (2.8) (3.0) 0.2
WomensHealth 788 803 (1.9) (3.5) 1.6
WoundCare/Other 599 621 (3.5) (3.8) 0.3
Total Consumer Sales $ 10,062 $ 9,875 1.9 % 1.6% 0.3%
*Prioryearamountshavebeenreclassifiedtoconformtocurrentyearpresentation.
Consumersegmentsalesinthefiscalthirdquarterof2017were$3.4billion,anincreaseof2.9%ascomparedtothesameperiodayearago,includingoperational
growthof1.6%andapositivecurrencyimpactof1.3%.U.S.Consumersegmentsalesdecreasedby0.5%.InternationalConsumersegmentsalesincreasedby
5.1%,includingoperationalgrowthof3.0%andapositivecurrencyimpactof2.1%.Inthefiscalthirdquarterof2017,thenetimpactofacquisitionsand
divestituresontheConsumersegmentoperationalsalesgrowthwasapositive0.5%.
MajorConsumerFranchiseSales*FiscalThirdQuartersEnded
Beauty $ 1,033 $ 979 5.5% 4.4% 1.1%
OTC 1,002 943 6.3 4.4 1.9
BabyCare 477 495 (3.6) (3.6) 0.0
OralCare 382 383 (0.3) (1.3) 1.0
WomensHealth 270 269 0.4 (1.8) 2.2
WoundCare/Other 192 192 0.0 (1.2) 1.2
Total Consumer Sales $ 3,356 $ 3,261 2.9 % 1.6% 1.3%
*Prioryearamountshavebeenreclassifiedtoconformtocurrentyearpresentation.
TheBeautyfranchiseachievedoperationalgrowthof4.4%ascomparedtotheprioryearfiscalthirdquarter.Growthwasprimarilydrivenbyinclusionofsales
fromtherecentacquisitions,VogueInternationalLLCandDr.Ci:Labo.
TheOTCfranchiseachievedoperationalgrowthof4.4%ascomparedtotheprioryearfiscalthirdquarter.Growthwasprimarilydrivenbysalesofanalgesics
productsandsalesoutsidetheU.S.fromtherecentacquisitionofRhinocortandanti-smokingaids.
TheBabyCarefranchiseexperiencedanoperationaldeclineof3.6%ascomparedtotheprioryearfiscalthirdquarterduetocompetitivepressure.
TheOralCarefranchiseexperiencedanoperationaldeclineof1.3%ascomparedtotheprioryearfiscalthirdquarterprimarilydrivenbycategorydeclinesand
competitivepressure.
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TheWomensHealthfranchiseandtheWoundCare/Otherfranchisewererelativelyflatascomparedtotheprioryearfiscalthirdquarter.
Pharmaceutical
Pharmaceuticalsegmentsalesinthefiscalninemonthsof2017were$26.6billion,anincreaseof5.3%ascomparedtothesameperiodayearago,withan
operationalincreaseof5.6%andanegativecurrencyimpactof0.3%.U.S.Pharmaceuticalsalesincreased3.8%ascomparedtothesameperiodayearago.
InternationalPharmaceuticalsalesincreasedby7.6%,includingoperationalgrowthof8.4%partiallyoffsetbyanegativecurrencyimpactof0.8%.Inthefiscal
ninemonthsof2017,thenetimpactofacquisitionsanddivestituresonthePharmaceuticalsegmentoperationalsalesgrowthwasapositive2.5%.Adjustmentsto
previousreserveestimates,ascomparedtotheprioryear,negativelyimpactedthereportedPharmaceuticalsegmentoperationalgrowthforthefiscalninemonths
of2017,byapproximately2.0%,primarilyintheImmunologyandCardiovascular/Metabolism/Othertherapeuticareas.
MajorPharmaceuticalTherapeuticAreaSales*FiscalNineMonthsEnded
Total Immunology $ 9,158 $ 9,032 1.4 % 1.4 % 0.0 %
REMICADE 4,849 5,342 (9.2) (9.4) 0.2
SIMPONI/SIMPONIARIA 1,343 1,319 1.8 1.9 (0.1)
STELARA 2,930 2,353 24.5 24.8 (0.3)
OtherImmunology 36 18 100.0 98.3 1.7
Total Infectious Diseases 2,354 2,447 (3.8) (3.8) 0.0
EDURANT/rilpivirine
522 408 27.9 27.7 0.2
PREZISTA/PREZCOBIX/REZOLSTA 1,351 1,404 (3.8) (3.7) (0.1)
OtherInfectiousDiseases 481 635 (24.3) (24.5) 0.2
Total Neuroscience 4,462 4,615 (3.3) (2.7) (0.6)
CONCERTA/methylphenidate 588 659 (10.8) (10.5) (0.3)
INVEGASUSTENNA/XEPLION/TRINZA 1,876 1,629 15.2 15.6 (0.4)
RISPERDALCONSTA 608 683 (11.0) (10.4) (0.6)
OtherNeuroscience 1,390 1,644 (15.5) (14.5) (1.0)
Total Oncology 5,219 4,345 20.1 20.8 (0.7)
DARZALEX 871 372 ** ** **
IMBRUVICA 1,371 905 51.5 52.1 (0.6)
VELCADE 843 950 (11.3) (9.8) (1.5)
ZYTIGA 1,750 1,741 0.5 1.0 (0.5)
OtherOncology 384 377 1.9 2.6 (0.7)
Pulmonary Hypertension 761 *** ***
OPSUMIT 304 *** ***
TRACLEER 236 *** ***
UPTRAVI 133 *** ***
Other 88 *** ***
Cardiovascular / Metabolism / Other 4,621 4,793 (3.6) (3.1) (0.5)
XARELTO 1,790 1,690 5.9 5.9
INVOKANA/INVOKAMET 844 1,036 (18.5) (18.3) (0.2)
PROCRIT/EPREX 740 846 (12.5) (12.4) (0.1)
Other 1,247 1,221 2.1 3.8 (1.7)
Total Pharmaceutical Sales $ 26,575 $ 25,232 5.3 % 5.6 % (0.3)%
*Prioryearamountshavebeenreclassifiedtoconformtocurrentyearproductdisclosure.
**Percentagegreaterthan100%ornotmeaningful
***OnJune16,2017,theCompanyacquiredActelion.
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Pharmaceuticalsegmentsalesinthefiscalthirdquarterof2017were$9.7billion,anincreaseof15.4%ascomparedtothesameperiodayearago,withan
operationalincreaseof14.6%andapositivecurrencyimpactof0.8%.U.S.Pharmaceuticalsalesincreased15.4%ascomparedtothesameperiodayearago.
InternationalPharmaceuticalsalesincreasedby15.5%,includingoperationalgrowthof13.5%andapositivecurrencyimpactof2.0%.Inthefiscalthirdquarterof
2017,thenetimpactofacquisitionsanddivestituresonthePharmaceuticalsegmentoperationalsalesgrowthwasapositive7.9%.
MajorPharmaceuticalTherapeuticAreaSales*FiscalThirdQuartersEnded
Total Immunology $ 3,269 $ 3,084 6.0 % 5.3% 0.7%
REMICADE 1,647 1,783 (7.6) (8.2) 0.6
SIMPONI/SIMPONIARIA 476 481 (1.0) (1.4) 0.4
STELARA 1,124 814 38.1 37.0 1.1
OtherImmunology 22 6 ** ** 0.0
Total Infectious Diseases 813 842 (3.4) (5.3) 1.9
EDURANT/rilpivirine 194 149 30.2 25.1 5.1
PREZISTA/PREZCOBIX/REZOLSTA 467 493 (5.3) (6.7) 1.4
OtherInfectiousDiseases 152 200 (24.0) (24.5) 0.5
Total Neuroscience 1,498 1,464 2.3 2.0 0.3
CONCERTA/methylphenidate 198 190 4.2 3.8 0.4
INVEGASUSTENNA/XEPLION/TRINZA 643 556 15.6 14.3 1.3
RISPERDALCONSTA 194 222 (12.6) (13.5) 0.9
OtherNeuroscience 463 496 (6.7) (5.6) (1.1)
Total Oncology 1,898 1,517 25.1 23.8 1.3
DARZALEX 317 163 94.5 92.0 2.5
IMBRUVICA 512 349 46.7 44.7 2.0
VELCADE 273 304 (10.2) (11.2) 1.0
ZYTIGA 669 582 14.9 14.2 0.7
OtherOncology 127 119 6.7 5.1 1.6
Pulmonary Hypertension 670 *** ***
OPSUMIT 259 *** ***
TRACLEER 210 *** ***
UPTRAVI 124 *** ***
Other 77 *** ***
Cardiovascular / Metabolism / Other 1,547 1,493 3.6 3.3 0.3
XARELTO 635 529 20.0 20.0
INVOKANA/INVOKAMET 265 328 (19.2) (19.3) 0.1
PROCRIT/EPREX 238 250 (4.8) (5.8) 1.0
Other 409 386 6.0 5.6 0.4
Total Pharmaceutical Sales $ 9,695 $ 8,400 15.4 % 14.6% 0.8%
*Prioryearamountshavebeenreclassifiedtoconformtocurrentyearproductdisclosure.
**Percentagegreaterthan100%ornotmeaningful
***OnJune16,2017,theCompanyacquiredActelion.
Immunologyproductsachievedoperationalgrowthof5.3%ascomparedtothesameperiodayearagodrivenbystronguptakeofSTELARA(ustekinumab)and
theU.S.launchofTREMFYA(guselkumab).Immunologywasnegativelyimpactedbymodestsharelossandincreaseddiscounts/rebatesofREMICADE
(infliximab)duetobiosimilarcompetition.
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ThepatentsforREMICADE(infliximab)incertaincountriesinEuropeexpiredinFebruary2015.BiosimilarversionsofREMICADEhavebeenintroducedin
certainmarketsoutsidetheUnitedStates,resultinginareductioninsalesofREMICADEinthosemarkets.Additionalbiosimilarcompetitionwilllikelyresultin
afurtherreductioninREMICADEsalesinmarketsoutsidetheUnitedStates.TheintroductionofabiosimilarversionofREMICADEintheUnitedStatesis
subjecttoenforcementofpatentrights,approvalbytheU.S.FoodandDrugAdministration(FDA)andcompliancewiththe180-daynoticeprovisionsofthe
BiologicsPriceCompetitionandInnovationAct.InApril2016,theFDAapprovedforsaleintheUnitedStatesaninfliximabbiosimilartobemarketedbya
subsidiaryofPfizerInc.,whichwaslaunchedintheUnitedStatesinlate2016.InadditioninApril2017,theFDAapprovedforsaleintheUnitedStatesan
infliximabbiosimilartobemarketedbyMerck,whichwaslaunchedinJuly2017.ContinuedinfliximabbiosimilarcompetitionintheU.S.marketwillresultina
furtherreductioninU.S.salesofREMICADE.TheCompanycontinuestoassertREMICADErelatedpatentrights.SeeNote11totheConsolidatedFinancial
StatementsforadescriptionoflegalmattersregardingtheREMICADEpatents.
Infectiousdiseaseproductsexperiencedanoperationaldeclineof5.3%ascomparedtothesameperiodayearago.LowersalesofOLYSIO(simeprevir),
vaccinesandPREZISTA/PREZCOBIX/REZOLSTA(darunavir/cobicistat)werepartiallyoffsetbysalesofEDURANT/rilpivirine.
Neuroscienceproductsachievedoperationalgrowthof2.0%ascomparedtothesameperiodayearago.StrongsalesofINVEGASUSTENNA/XEPLION/
TRINZA(paliperidonepalmitate)werepartiallyoffsetbylowersalesofRISPERDALCONSTA(risperidone).
Oncologyproductsachievedstrongoperationalsalesgrowthof23.8%ascomparedtothesameperiodayearago.Contributorstothegrowthwerestrongsalesof
IMBRUVICA(ibrutinib)andDARZALEX(daratumumab)duetoincreasedpatientuptakeandsalesofZYTIGA(abirateroneacetate)drivenbymarket
growth.Severalgenericcompanieshavefiledpetitionsseekingtoinvalidatethe438patentforZYTIGA.IfthereisalaunchofagenericversionofZYTIGA
followingFDAapprovalitwilllikelyresultinareductioninU.S.sales.SeeNote11totheConsolidatedFinancialStatementsforadescriptionoflegalmatters
regardingZYTIGA.
PulmonaryHypertensionisanewtherapeuticareawhichwasestablishedwiththeacquisitionofActeliononJune16,2017.SeeNote10totheConsolidated
FinancialStatementsforadditionaldetailsregardingtheacquisition.
Cardiovascular/Metabolism/Otherproductsachievedoperationalgrowthof3.3%ascomparedtothesameperiodayearago.SalesgrowthofXARELTO
(rivaroxaban)duetoincreasedmarketsharewaspartiallyoffsetbylowersalesofINVOKANA/INVOKAMET(canagliflozin)intheU.S.primarilyduetoan
increaseinpricediscountsandmarketsharedeclinedrivenbycompetitivepressure.
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Medical Devices
TheMedicalDevicessegmentsalesinthefiscalninemonthsof2017were$19.6billion,anincreaseof5.0%ascomparedtothesameperiodayearago,with
operationalgrowthof5.3%andanegativecurrencyimpactof0.3%.U.S.MedicalDevicessalesincreased4.3%.InternationalMedicalDevicessalesincreasedby
5.7%,includinganoperationalincreaseof6.3%andanegativecurrencyimpactof0.6%.Inthefiscalninemonthsof2017,thenetimpactofacquisitionsand
divestituresontheMedicalDevicessegmentoperationalsalesgrowthwasapositive4.0%.
MajorMedicalDevicesFranchiseSalesFiscalNineMonthsEnded
October2, Total Operations Currency
(DollarsinMillions) October1,2017 2016 Change Change Change
Surgery $ 7,001 $ 6,909 1.3 % 1.7 % (0.4)%
Advanced 2,733 2,609 4.8 5.3 (0.5)
General 3,293 3,260 1.0 1.4 (0.4)
Specialty 975 1,040 (6.3) (6.4) 0.1
Orthopaedics 6,919 6,947 (0.4) (0.2) (0.2)
Hips 1,030 1,011 1.9 2.2 (0.3)
Knees 1,126 1,129 (0.3) 0.0 (0.3)
Trauma 1,947 1,915 1.7 1.8 (0.1)
Spine&Other 2,816 2,892 (2.6) (2.3) (0.3)
Vision Care 2,944 2,064 42.6 43.2 (0.6)
ContactLenses/Other 2,236 2,064 8.3 8.9 (0.6)
Surgical 708 * *
Cardiovascular 1,528 1,364 12.0 12.7 (0.7)
Diabetes Care 1,225 1,327 (7.7) (7.7) 0.0
Diagnostics 1 66 ** ** **
Total Medical Devices Sales $ 19,618 $ 18,677 5.0 % 5.3 % (0.3)%
*OnFebruary27,2017,theCompanyacquiredAbbottMedicalOptics(AMO)
**OnJune30,2014,theCompanydivestedtheOrtho-ClinicalDiagnosticsbusiness(theDiagnosticsfranchise)
TheMedicalDevicessegmentsalesinthefiscalthirdquarterof2017were$6.6billion,anincreaseof7.1%ascomparedtothesameperiodayearago,with
operationalgrowthof6.6%andapositivecurrencyimpactof0.5%.U.S.MedicalDevicessalesincreased4.6%.InternationalMedicalDevicessalesincreasedby
9.6%,includinganoperationalincreaseof8.6.%andapositivecurrencyimpactof1.0%.Inthefiscalthirdquarterof2017,thenetimpactofacquisitionsand
divestituresontheMedicalDevicessegmentoperationalsalesgrowthwasapositive5.4%.
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MajorMedicalDevicesFranchiseSalesFiscalThirdQuartersEnded
October2, Total Operations Currency
(DollarsinMillions) October1,2017 2016 Change Change Change
Surgery $ 2,346 $ 2,284 2.7 % 2.1 % 0.6%
Advanced 923 884 4.4 3.9 0.5
General 1,105 1,063 4.0 3.2 0.8
Specialty 318 337 (5.6) (5.9) 0.3
Orthopaedics 2,251 2,251 0.0 (0.8) 0.8
Hips 328 320 2.5 1.5 1.0
Knees 343 355 (3.4) (4.4) 1.0
Trauma 662 637 3.9 3.1 0.8
Spine&Other 918 939 (2.2) (2.8) 0.6
Vision Care 1,091 739 47.6 48.4 (0.8)
ContactLenses/Other 800 739 8.3 9.1 (0.8)
Surgical 291 * *
Cardiovascular 506 451 12.2 12.5 (0.3)
Diabetes Care 405 427 (5.2) (6.9) 1.7
Diagnostics 7 ** ** **
Total Medical Devices Sales $ 6,599 $ 6,159 7.1 % 6.6 % 0.5%
*OnFebruary27,2017,theCompanyacquiredAbbottMedicalOptics(AMO)
**OnJune30,2014,theCompanydivestedtheOrtho-ClinicalDiagnosticsbusiness(theDiagnosticsFranchise)
TheSurgeryfranchiseachievedoperationalsalesgrowthof2.1%ascomparedtotheprioryearfiscalthirdquarter.OperationalgrowthinAdvancedSurgerywas
primarilydrivenbyendocutter,energy,includingrecentacquisitions,andbiosurgeryproducts.OperationalgrowthinGeneralSurgerywasprimarilydrivenby
stronggrowthinsutures.Salesgrowthwaspartiallyoffsetbydeclinesinmechanicalproducts.TheoperationalsalesdeclineinSpecialtySurgerywasprimarily
drivenbyAdvancedSterilization,Sterilmedandaestheticproducts.
TheOrthopaedicsfranchiseexperiencedanoperationalsalesdeclineof0.8%ascomparedtotheprioryearfiscalthirdquarter.Thedeclinewasprimarilydueto
sharelossinU.S.Spine,pricingandcompetitivepressures.Thiswaspartiallyoffsetbysalesgrowthoftrauma,sportsmedicineproductsandU.S.hips.
TheVisionCarefranchiseachievedoperationalsalesgrowthof48.4%ascomparedtotheprioryearfiscalthirdquarter.Operationalgrowthwasdrivenbysales
fromtherecentacquisitionofAMO,withthemajorityofAMOsalesinthesurgicalcategory,andnewproductlaunchesinthecontactlensescategory.
TheCardiovascularfranchiseachievedstrongoperationalsalesgrowthof12.5%ascomparedtotheprioryearfiscalthirdquarter.Strongoperationalgrowthinthe
electrophysiologybusinesswasdrivenbymarketgrowthandcontinueduptakeoftheTHERMOCOOLSMARTTOUCHContactForceSensingCatheter.
TheDiabetesCarefranchiseexperiencedanoperationalsalesdeclineof6.9%ascomparedtotheprioryearfiscalthirdquarterprimarilyduetopricedeclinesand
competitivepressure.Subsequenttothefiscalthirdquarterof2017,theCompanyannounceditsdecisiontoexittheAnimasinsulinpumpbusiness.Animashas
selectedMedtronicplctofacilitateaseamlesstransitionforpatients,caregiversandhealthcareproviders.The2016annualsalesforAnimaswereapproximately
$0.2billion.TheCompanyiscontinuingtoevaluatepotentialstrategicoptionsforLifeScan,Inc.anddeterminethebestopportunitytodrivefuturegrowthand
maximizeshareholdervalue.
ANALYSISOFCONSOLIDATEDEARNINGSBEFOREPROVISIONFORTAXESONINCOME
Consolidatedearningsbeforeprovisionfortaxesonincomeforthefiscalninemonthsof2017was$15.1billionrepresenting26.9%ofsalesascomparedto$15.5
billioninthefiscalninemonthsof2016,representing28.8%ofsales.Consolidatedearningsbeforeprovisionfortaxesonincomeforthefiscalthirdquarterof
2017was$4.8billionrepresenting24.4%ofsalesascomparedto$5.3billioninthefiscalthirdquarterof2016,representing29.6%ofsales.Thedecreaseasa
percenttosales
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inbothperiodswasprimarilyduetohigheramortizationandothercostsrelatedtotherecentacquisitions,primarilyActelionandAMO,higherinvestmentspend
andahigherrestructuringchargeof$0.1billion.Thefiscalninemonthsof2017alsoincludedanassetimpairmentchargeof$0.2billionprimarilyrelatedtothe
insulinpumpbusiness.Thiswaspartiallyoffsetbyfavorableproductmixandhighergainsondivestituresof$0.4billionand$0.3billion,primarilyrelatedtothe
COMPEEDdivestiture,inthefiscalthirdquarterandfiscalninemonthsof2017,respectively,ascomparedtothesameperiodayearago.Additionally,thefiscal
ninemonthsof2017includedagainof$0.2billionrelatedtomonetizationoffutureroyaltyreceivablesandahighergainof$0.2billionrelatedtothesaleof
certaininvestmentsinequitysecurities.
CostofProductsSold
Consolidatedcostsofproductssoldforthefiscalninemonthsof2017increasedto32.2%from30.0%ofsalesascomparedtothesameperiodayearago.
Consolidatedcostsofproductssoldforthefiscalthirdquarterof2017increasedto35.1%from30.8%ofsalesascomparedtothesameperiodayearago.The
unfavorableincreaseinbothperiodswasprimarilydrivenbyhigheramortizationexpenseandchargesforinventorystep-uprelatedtotherecentacquisitions
partiallyoffsetbyfavorablecurrencyimpactsandproductmix.Theintangibleassetamortizationexpenseforthefiscalninemonthsof2017and2016was$1,886
millionand$895million,respectively.
Selling,MarketingandAdministrativeExpenses
Consolidatedselling,marketingandadministrativeexpensesforthefiscalninemonthsof2017increasedslightlyto27.4%from27.2%ofsalesascomparedtothe
sameperiodayearago.Consolidatedselling,marketingandadministrativeexpensesforthefiscalthirdquarterof2017increasedto27.5%from26.8%ofsalesas
comparedtothesameperiodayearagoprimarilyduetotheinvestmentinnewproductspartiallyoffsetbyfavorablemix.
ResearchandDevelopmentExpense
Worldwidecostsofresearchanddevelopmentactivitiesforthefiscalninemonthsof2017increasedto12.3%ofsalesfrom12.0%ofsalesascomparedtothe
sameperiodayearago.Worldwidecostsofresearchanddevelopmentactivitiesforthefiscalthirdquarterof2017increasedto13.1%from12.2%ofsalesas
comparedtothesameperiodayearago.Theincreaseinbothperiodsin2017wasprimarilyduetoincreasedinvestmentspendinginthePharmaceuticalsegment
toadvancethepipeline.
In-ProcessResearchandDevelopment(IPR&D)
Duringthefiscalninemonthsof2016,theCompanyrecordedachargeof$29millionforthediscontinuationofadevelopmentprogramrelatedtoCrucell.
Interest(Income)Expense
Interestincomeinthefiscalninemonthswashigherthanthesameperiodayearagoduetohigheraverageinterestratespartiallyoffsetbylowercash,cash
equivalentsandmarketablesecuritiesbalancesduringtheperiod.Interestincomeinthefiscalthirdquarterof2017waslowerthanthesameperiodayearagodue
tolowercash,cashequivalentsandmarketablesecuritiesbalancesduringtheperiodpartiallyoffsetbyhigheraverageinterestrates.Theendingbalanceofcash,
cashequivalentsandcurrentmarketablesecuritieswas$16.2billionattheendofthefiscalthirdquarterof2017,whichisadecreaseof$24.2billionascompared
tothesameperiodayearago.Thedecreaseinthebalanceofcash,cashequivalentsandmarketablesecuritieswasduetotheuseofcashforgeneralcorporate
purposesincluding,acquisitions,primarily,theActelionacquisitionfor$29.1billion,netofcashacquired.
Interestexpenseinthefiscalninemonthsandfiscalthirdquarterof2017washigherascomparedtothesameperiodsayearago.Attheendofthefiscalthird
quarterof2017,theCompanysdebtpositionwas$35.2billionascomparedto$27.0billionthesameperiodayearago.Thehigherdebtbalanceofapproximately
$8.2billionwasprimarilyduetoincreasedborrowings.TheCompanyincreasedborrowings,capitalizingonfavorabletermsinthecapitalmarkets.Theproceeds
oftheborrowingswereusedforgeneralcorporatepurposes,primarilythestockrepurchaseprogram.
Other(Income)Expense,Net
Other(income)expense,netforthefiscalninemonthsof2017wasfavorableby$0.3billionascomparedtothesameperiodayearago.Thefiscalninemonthsof
2017includedhighergainsondivestitures,primarilyCOMPEED,of$0.3billion,againof$0.2billionrelatedtomonetizationoffutureroyaltyreceivables,a
highergainof$0.2billionrelatedtothesaleofcertain
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investmentsinequitysecuritiesandlowerlitigationexpenseof$0.1billionascomparedtothesameperiodayearago.Thiswaspartiallyoffsetby$0.3billionof
acquisitioncostsrelatedtoActelionandAMO,anassetimpairmentchargeof$0.2billionprimarilyrelatedtotheinsulinpumpbusinessandahigherrestructuring
relatedchargeof$0.2billionascomparedtothesameperiodayearago.
Other(income)expense,netforthefiscalthirdquarterof2017wasfavorableby$0.2billionascomparedtothesameperiodayearago.Thefiscalthirdquarterof
2017includedhighergainsondivestitures,primarilyCOMPEED,of$0.4billion.Thiswaspartiallyoffsetby$0.1billionofacquisitioncostsrelatedtoActelion
andAMOandhigherlitigationexpenseof$0.1billionascomparedtothesameperiodayearago.
INCOMEBEFORETAXBYSEGMENT
Incomebeforetaxbysegmentofbusinessforthefiscalninemonthswereasfollows:

IncomeBeforeTax SegmentSales PercentofSegmentSales
October1, October1,
(DollarsinMillions) 2017 October2,2016 2017 October2,2016 October1,2017 October2,2016
Consumer $ 2,132 $ 1,816 $ 10,062 $ 9,875 21.2% 18.4%
Pharmaceutical 9,934 10,340 26,575 25,232 37.4 41.0
MedicalDevices 3,938 4,041 19,618 18,677 20.1 21.6
Segmenttotal 16,004 16,197 56,255 53,784 28.4 30.1
Less:Expensesnotallocatedtosegments(1) 891 718
Worldwidetotal $ 15,113 $ 15,479 $ 56,255 $ 53,784 26.9% 28.8%
(1)Amountsnotallocatedtosegmentsincludeinterest(income)expenseandgeneralcorporate(income)expense.
Incomebeforetaxbysegmentofbusinessforthefiscalthirdquarterswereasfollows:
IncomeBeforeTax SegmentSales PercentofSegmentSales

October1, October1,
(DollarsinMillions) 2017 October2,2016 2017 October2,2016 October1,2017 October2,2016
Consumer $ 878 $ 679 $ 3,356 $ 3,261 26.2% 20.8%
Pharmaceutical 2,857 3,309 9,695 8,400 29.5 39.4
MedicalDevices 1,383 1,526 6,599 6,159 21.0 24.8
Segmentoperatingprofit 5,118 5,514 19,650 17,820 26.0 30.9
Less:Expensesnotallocatedtosegments(1) 328 233
Worldwideincomebeforetax $ 4,790 $ 5,281 $ 19,650 $ 17,820 24.4% 29.6%
(1)Amountsnotallocatedtosegmentsincludeinterest(income)expenseandgeneralcorporate(income)expense.
ConsumerSegment
TheConsumersegmentincomebeforetaxasapercentofsalesinthefiscalninemonthsof2017was21.2%versus18.4%forthesameperiodayearago.The
increaseintheincomebeforetaxasapercentofsalesinthefiscalninemonthsof2017ascomparedto2016wasattributabletohighergainsondivestitures,
primarilythedivestitureofCOMPEEDin2017.Additionally,thefiscalninemonthsof2016werenegativelyimpactedbyoperationsinVenezuela.Thiswas
partiallyoffsetbyhigherselling,marketingandadministrativeexpensesascomparedtotheprioryearduetoincreasedadvertisingandpromotionalspendingand
higheramortizationexpensein2017relatedtoacquisitions.
TheConsumersegmentincomebeforetaxasapercentofsalesinthefiscalthirdquarterof2017was26.2%versus20.8%forthesameperiodayearago.The
increaseintheincomebeforetaxasapercentofsalesinthefiscalthirdquarterof2017ascomparedto2016wasattributabletohighergainsondivestitures,
primarilythedivestitureofCOMPEEDin2017.Thiswaspartiallyoffsetbyhigherselling,marketingandadministrativeexpensesascomparedtotheprioryear
duetoincreasedadvertisingandpromotionalspending.
PharmaceuticalSegment
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ThePharmaceuticalsegmentincomebeforetaxasapercentofsalesinthefiscalninemonthsof2017was37.4%versus41.0%forthesameperiodayearago.The
decreaseintheincomebeforetaxasapercentofsalesforthefiscalninemonthsof2017wasprimarilyduetohigheramortizationexpenseandothercostsrelated
totheActelionacquisition,lowergainsondivestituresascomparedtotheprioryearandapositiveadjustmentof$0.5billiontopreviousreserveestimatesinthe
fiscalninemonthsof2016.Thiswaspartiallyoffsetbyagainof$0.2billioninfiscalninemonthsof2017relatedtomonetizationoffutureroyaltyreceivablesand
favorableproductmix.
ThePharmaceuticalsegmentincomebeforetaxasapercentofsalesinthefiscalthirdquarterof2017was29.5%versus39.4%forthesameperiodayearago.The
decreaseintheincomebeforetaxasapercentofsalesforthefiscalthirdquarterof2017wasprimarilyduetohigheramortizationexpenseandothercostsrelated
totheActelionacquisition.Thiswaspartiallyoffsetbyfavorableproductmix.
MedicalDevicesSegment
TheMedicalDevicessegmentincomebeforetaxasapercentofsalesinthefiscalninemonthsof2017was20.1%versus21.6%forthesameperiodayearago.
TheMedicalDevicessegmentincomebeforetaxasapercentofsalesinthefiscalthirdquarterof2017was21.0%versus24.8%forthesameperiodayearago.
Thedecreaseintheincomebeforetaxasapercentofsalesforthefiscalninemonthsof2017ascomparedto2016wasprimarilyduetoanassetimpairmentcharge
of$0.2billionprimarilyrelatedtotheinsulinpumpbusiness,$0.2billionofhigheramortizationexpenseandotheracquisitioncostsrelatedtoAMO,$0.1billion
ofhigherrestructuringandunfavorabletransactionalcurrencyascomparedtothefiscalninemonthsof2016.Thiswaspartiallyoffsetby$0.2billionoflower
litigationexpensein2017.Thedecreaseintheincomebeforetaxasapercenttosalesforthefiscalthirdquarterof2017ascomparedto2016wasprimarilydueto
$0.1billionofhigherlitigationexpense,$0.1billionofhigheramortizationexpenseandotheracquisitioncostsrelatedtoAMOand$0.1billionofhigher
restructuringascomparedtothefiscalthirdquarterof2016.Additionally,thefiscalthirdquarterof2017includedhigherinvestmentspendingtosupportnew
productlaunches.
Restructuring
TheCompanyannouncedrestructuringactionsinitsMedicalDevicessegmentthatareexpectedtoresultinannualizedpre-taxcostsavingsof$800millionto$1.0
billion,themajorityofwhichisexpectedtoberealizedbytheendof2018.Approximately$250millioninsavingswererealizedin2016andapproximately$200
millionadditionalsavingsisexpectedin2017.ThesavingswillprovidetheCompanywithaddedflexibilityandresourcestofundinvestmentinnewgrowth
opportunitiesandinnovativesolutionsforcustomersandpatients.TheCompanyestimatesthat,inconnectionwithitsplans,itwillrecordpre-taxrestructuring
relatedchargesofapproximately$2.0billionto$2.4billion,mostofwhichareexpectedtobeincurredbytheendof2017.Inthefiscalthirdquarterof2017,the
Companyrecordedapre-taxchargeof$187million,ofwhich$29millionisincludedincostofproductssoldand$89millionisincludedinother(income)
expense.Inthefiscalninemonthsof2017,theCompanyrecordedapre-taxchargeof$476million,ofwhich$46millionisincludedincostofproductssoldand
$265millionisincludedinother(income)expense.Restructuringchargesof$1.8billionhavebeenrecordedsincetherestructuringwasannounced.SeeNote12
totheConsolidatedFinancialStatementsforadditionaldetailsrelatedtotherestructuring.
ProvisionforTaxesonIncome
Theworldwideeffectiveincometaxratesforthefiscalninemonthsof2017and2016were20.5%and17.8%,respectively.TheCompanycompletedits
acquisitionofAMOinthefirstfiscalquarterof2017,andincurredincrementaltaxcoststhatwerediscretelyrecordedinthefirstquarter,whichhasincreasedthe
effectivetaxrateby1.4%forthefirstninemonthsof2017comparedtothesameperiodin2016.Additionally,theCompanyhadmoreincomeinhighertax
jurisdictionsrelativetolowertaxjurisdictionsascomparedto2016.Theseincreasestotheeffectivetaxratewerepartiallyoffsetbyadditionaltaxbenefits
receivedfromstock-basedcompensationthateithervestedorwereexercisedduringthefiscalninemonthsof2017and2016,whichreducedtheeffectivetaxrate
by2.1%and2.2%,respectively.
AsofOctober1,2017,theCompanyhadapproximately$3.3billionofliabilitiesfromunrecognizedtaxbenefits.TheCompanybelievesitispossiblethataudits
maybecompletedbytaxauthoritiesinsomejurisdictionsoverthenexttwelvemonths.TheCompanyisnotabletoprovideareasonablyreliableestimateofthe
timingofanyfuturetaxpaymentsrelatingtouncertaintaxpositions.
SeeNote8totheConsolidatedFinancialStatementsintheAnnualReportonForm10-KforthefiscalyearendedJanuary1,2017formoredetailedinformation
regardingunrecognizedtaxbenefits.
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LIQUIDITYANDCAPITALRESOURCES
CashFlows
Cashandcashequivalentswere$15.7billionattheendofthefiscalthirdquarterof2017ascomparedwith$19.0billionattheendoffiscalyear2016.The
primarysourcesofcashwereapproximately$15.0billionnetcashgeneratedfromoperatingactivitiesoffsetby$14.4billionusedbyinvestingactivitiesand
$4.1billionusedbyfinancingactivities.Inaddition,theCompanyhad$0.5billioninmarketablesecuritiesattheendofthefiscalthirdquarterof2017and$22.9
billionattheendof2016.
Cashflowfromoperationsof$15.0billionwastheresultof$12.0billionofnetearnings,$4.8billionofnon-cashchargesandotheradjustmentsfordepreciation
andamortization,stock-basedcompensationandassetwrite-downsanda$0.3billionincreaseinaccountspayableandaccruedliabilities.Cashflowfrom
operationswasreducedby$1.0billionrelatedtoanincreaseinaccountsreceivable,inventoriesandofotherassets,adecreaseof$0.3billioninothercurrentand
noncurrentliabilities,adecreaseinthedeferredtaxprovisionof$0.4billionand$0.5billionforthenetgainonsaleofassets/businesses.
Investingactivitiesuseof$14.4billionofcashwasprimarilyusedforacquisitionsof$34.7billionandadditionstoproperty,plantandequipmentof$2.0billion.
Investingactivitiesalsoincludedasourceof$21.7billionfromthenetsalesofinvestmentsinmarketablesecuritiesand$0.7billionofproceedsfromthedisposal
ofassets/businesses,net,primarilythedivestitureofCOMPEED.
Financingactivitiesuseof$4.1billionofcashwasprimarilyusedfordividendstoshareholdersof$6.7billionandrepurchaseofcommonstockof$5.5billion.
Financingactivitiesalsoincludedasourceof$7.3billionfromthenetproceedsofshortandlong-termdebtand$0.9billionofproceedsfromstockoptions
exercised/employeewithholdingtaxonstockawards,net.
Duringthefiscalsecondquarterof2017,theCompanyacquiredActelionLtd.AsofOctober1,2017,theCompanypaid$29.1billion,netofcashacquired,
representing98.4%ofthesharestowhichtheofferwasextended.TheCompanyrecordedacurrentliabilityof$0.5billionforthesharesnottenderedasof
October1,2017,whichtheCompanyexpectstopaybytheendof2017asittakesstepstoacquiretheremainingoutstandingsharesofActelion.TheCompany
usedcashheldbyitsforeignsubsidiariestopayfortheacquisition.
TheCompanyhasaccesstosubstantialsourcesoffundsatnumerousbanksworldwide.InSeptember2017,theCompanysecuredanew364-dayCreditFacility.
TotalcreditavailabletotheCompanyunderthefacility,whichexpiresSeptember13,2018,approximates$10.0billion.Interestchargedonborrowingsunderthe
creditlineagreementisbasedoneitherbidsprovidedbybanks,theprimerateorLondonInterbankOfferedRates(LIBOR),plusapplicablemargins.Commitment
feesundertheagreementarenotmaterial.
Inthefiscalthirdquarterof2017,theCompany'snotespayableandlong-termdebtwasinexcessofcash,cashequivalentsandmarketablesecurities.The
Companyanticipatesthatoperatingcashflows,theabilitytoraisefundsfromexternalsources,borrowingcapacityfromexistingcommittedcreditfacilitiesand
accesstothecommercialpapermarketswillcontinuetoprovidesufficientresourcestofundoperatingneeds.TheCompanymonitorstheglobalcapitalmarketson
anongoingbasisandfromtimetotimemayraisecapitalwhenmarketconditionsarefavorable.TheCompanyfiledanewshelfregistrationonFebruary27,2017.
Inthefiscalfirstquarterof2017,theCompanyissuedbondsforatotalof$4.5billionforgeneralcorporatepurposes.
OnOctober13,2015,theCompanyannouncedthatitsBoardofDirectorsapprovedasharerepurchaseprogram,authorizingtheCompanytopurchaseupto$10.0
billionoftheCompany'ssharesofcommonstock.AsofJuly2,2017,$10.0billionwasrepurchasedundertheprogramandtheprogramwascompleted.Shares
acquiredareavailableforgeneralcorporatepurposes.TheCompanyfinancedthesharerepurchaseprogramthroughavailablecashandaccesstothecapital
markets.
Dividends
OnJuly17,2017,theBoardofDirectorsdeclaredaregularcashdividendof$0.84pershare,payableonSeptember12,2017toshareholdersofrecordasof
August29,2017.
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OnOctober19,2017,theBoardofDirectorsdeclaredaregularcashdividendof$0.84pershare,payableonDecember12,2017toshareholdersofrecordasof
November28,2017.TheCompanyexpectstocontinuethepracticeofpayingregularquarterlycashdividends.
OTHERINFORMATION
NewAccountingPronouncements
RefertoNote1totheConsolidatedFinancialStatementsfornewaccountingpronouncements.
EconomicandMarketFactors
TheCompanyoperatesincertaincountrieswheretheeconomicconditionscontinuetopresentsignificantchallenges.TheCompanycontinuestomonitorthese
situationsandtakeappropriateactions.Inflationratesandcurrencyexchangeratescontinuetohaveaneffectonworldwideeconomiesand,consequently,onthe
waytheCompanyoperates.Inthefaceofincreasingcosts,theCompanystrivestomaintainitsprofitmarginsthroughcostreductionprograms,productivity
improvementsandperiodicpriceincreases.
InJune2016,theUnitedKingdom(U.K.)heldareferenduminwhichvotersapprovedanexitfromtheEuropeanUnion(E.U.),commonlyreferredtoasBrexit
andinMarch2017theU.K.formallystartedtheprocessfortheU.K.toleavetheE.U.Giventhelackofcomparableprecedent,itisunclearwhatfinancial,trade,
regulatoryandlegalimplicationsthewithdrawaloftheU.K.fromtheE.U.willhave.Brexitcreatesglobalpoliticalandeconomicuncertainty,whichmaycause,
amongotherconsequences,volatilityinexchangeratesandinterestrates,additionalcostcontainmentbythird-partypayorsandchangesinregulations.However,
theCompanycurrentlydoesnotbelievethattheseandotherrelatedeffectswillhaveamaterialimpactontheCompanysconsolidatedfinancialpositionor
operatingresults.AsofOctober1,2017,thebusinessoftheCompanysU.K.subsidiariesrepresentedlessthan3%ofboththeCompanysconsolidatedassetsand
fiscalninemonthsrevenues,respectively.
TheBelgiangovernmentwillproposeachangetoitscorporatetaxcodetoParliament,includingaproposaltoloweritsstatutorytaxrate.Ifenacted,theproposed
changewouldresultinrevaluationoftheCompany'sdeferredtaxassets,withacorrespondingchargetotaxexpensethatmayhaveamaterialeffectonthe
Companysresultsofoperationsfortheperiod.BasedonthedeferredtaxassetbalancesandforeigncurrencyexchangeratesasofOctober1,2017,theCompany
estimatesforevery1%thatthestatutorytaxisloweredtherewillbeadditionalone-timetaxexpenseofapproximately$80-90million.
TheCompanyfacesvariousworldwidehealthcarechangesthatmaycontinuetoresultinpricingpressuresthatincludehealthcarecostcontainmentand
governmentlegislationrelatingtosales,promotionsandreimbursementofhealthcareproducts.
Changesinthebehaviorandspendingpatternsofpurchasersofhealthcareproductsandservices,includingdelayingmedicalprocedures,rationingprescription
medications,reducingthefrequencyofphysicianvisitsandforegoinghealthcareinsurancecoverage,maycontinuetoimpacttheCompanysbusinesses.
TheCompanyalsooperatesinanenvironmentincreasinglyhostiletointellectualpropertyrights.FirmshavefiledAbbreviatedNewDrugApplicationsor
BiosimilarBiologicalProductApplicationswiththeFDA,initiatedinterpartesreviewproceedingsintheUnitedStatesPatentandTrademarkOffice,orotherwise
challengedthecoverageand/orvalidityoftheCompany'spatents,seekingtomarketgenericorbiosimilarformsofmanyoftheCompanyskeypharmaceutical
productspriortoexpirationoftheapplicablepatentscoveringthoseproducts.IntheeventtheCompanyisnotsuccessfulindefendingthepatentclaimschallenged
intheseactions,genericorbiosimilarversionsoftheproductsatissuemaybeintroducedtothemarket,resultinginthepotentialforsubstantialmarketshareand
revenuelossesforthoseproducts,andwhichmayresultinanon-cashimpairmentchargeinanyassociatedintangibleasset.Forfurtherinformation,seethe
discussiononREMICADERelatedCasesandLitigationAgainstFilersofAbbreviatedNewDrugApplicationsinNote11totheConsolidatedFinancial
Statements.
Item3QUANTITATIVEANDQUALITATIVEDISCLOSURESABOUTMARKETRISK
TherehasbeennomaterialchangeintheCompanysassessmentofitssensitivitytomarketrisksinceitspresentationsetforthinItem7A,Quantitativeand
QualitativeDisclosuresAboutMarketRisk,initsAnnualReportonForm10-KforthefiscalyearendedJanuary1,2017.
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TableofContents
Item4CONTROLSANDPROCEDURES
Disclosurecontrolsandprocedures.Attheendoftheperiodcoveredbythisreport,theCompanyevaluatedtheeffectivenessofthedesignandoperationofits
disclosurecontrolsandprocedures.TheCompanysdisclosurecontrolsandproceduresaredesignedtoensurethatinformationrequiredtobedisclosedbythe
CompanyinthereportsthatitfilesorsubmitsundertheSecuritiesExchangeActisrecorded,processed,summarizedandreported,withinthetimeperiods
specifiedintheSECsrulesandforms.Disclosurecontrolsandproceduresinclude,withoutlimitation,controlsandproceduresdesignedtoensurethatinformation
requiredtobedisclosedbytheCompanyinthereportsthatitfilesorsubmitsundertheSecuritiesExchangeActisaccumulatedandcommunicatedtothe
Companysmanagement,includingitsprincipalexecutiveandprincipalfinancialofficers,orpersonsperformingsimilarfunctions,asappropriate,toallowtimely
decisionsregardingrequireddisclosure.AlexGorsky,ChairmanandChiefExecutiveOfficer,andDominicJ.Caruso,ExecutiveVicePresident,ChiefFinancial
Officer,reviewedandparticipatedinthisevaluation.Basedonthisevaluation,Messrs.GorskyandCarusoconcludedthat,asoftheendoftheperiodcoveredby
thisreport,theCompanysdisclosurecontrolsandprocedureswereeffective.
Internalcontrol.Duringtheperiodcoveredbythisreport,therewerenochangesintheCompanysinternalcontroloverfinancialreportingthathavematerially
affected,orarereasonablylikelytomateriallyaffect,theCompanysinternalcontroloverfinancialreporting.
TheCompanyisimplementingamulti-year,enterprise-wideinitiativetointegrate,simplifyandstandardizeprocessesandsystemsforthehumanresources,
informationtechnology,procurement,supplychainandfinancefunctions.TheseareenhancementstosupportthegrowthoftheCompanysfinancialshared
servicecapabilitiesandstandardizefinancialsystems.ThisinitiativeisnotinresponsetoanyidentifieddeficiencyorweaknessintheCompanysinternalcontrol
overfinancialreporting.Inresponsetothisinitiative,theCompanyhasandwillcontinuetoalignandstreamlinethedesignandoperationofitsfinancialcontrol
environment.
PartIIOTHERINFORMATION
Item1LEGALPROCEEDINGS
TheinformationcalledforbythisitemisincorporatedhereinbyreferencetoNote11includedinPartI,Item1,FinancialStatements(unaudited)Notesto
ConsolidatedFinancialStatements.
Item2UNREGISTEREDSALESOFEQUITYSECURITIESANDUSEOFPROCEEDS
(c)PurchasesofEquitySecuritiesbytheIssuerandAffiliatedPurchasers.
OnOctober13,2015,theCompanyannouncedthatitsBoardofDirectorsapprovedasharerepurchaseprogram,authorizingtheCompanytopurchaseupto$10.0
billionoftheCompany'ssharesofcommonstock.AsofJuly2,2017,$10.0billionwasrepurchasedundertheprogramandtheprogramwascompleted.
ThefollowingtableprovidesinformationwithrespecttoCommonStockpurchasesbytheCompanyduringthefiscalthirdquarterof2017.Therepurchasesbelow
alsoincludethestock-for-stockoptionexercisesthatsettledinthefiscalthirdquarter.
Total Number of Maximum Number of
Shares Purchased Shares that May Yet
Total Number as Part of Publicly Be Purchased Under
of Shares Avg. Price Announced Plans the Plans or
Period Purchased (1) Per Share or Programs (2) Programs (3)
July3,2017throughJuly30,2017 2,074,038 133.16
July31,2017throughAugust27,2017 280,632 132.35
August28,2017throughOctober1,2017 3,456 133.13
Total 2,358,126
(1)Duringthefiscalthirdquarterof2017,theCompanyrepurchasedanaggregateof2,358,126sharesofJohnson&JohnsonCommonStockinopen-market
transactionsaspartofasystematicplantomeettheneedsoftheCompanyscompensationprograms.
47
TableofContents
(2)AsofJuly2,2017,anaggregateof86,592,946shareswerepurchasedforatotalof$10.0billionsincetheinceptionoftherepurchaseprogramannouncedon
October13,2015.
(3)AsofJuly2,2017therepurchaseprogramwascompleted.
Item6EXHIBITS
Exhibit31.1CertificationofChiefExecutiveOfficerunderRule13a-14(a)oftheSecuritiesExchangeActpursuanttoSection302oftheSarbanes-OxleyActof
2002Filedwiththisdocument.
Exhibit31.2CertificationofChiefFinancialOfficerunderRule13a-14(a)oftheSecuritiesExchangeActpursuanttoSection302oftheSarbanes-OxleyActof
2002Filedwiththisdocument.
Exhibit32.1CertificationofChiefExecutiveOfficerpursuanttoSection906oftheSarbanes-OxleyActof2002Furnishedwiththisdocument.
Exhibit32.2CertificationofChiefFinancialOfficerpursuanttoSection906oftheSarbanes-OxleyActof2002Furnishedwiththisdocument.
Exhibit101XBRL(ExtensibleBusinessReportingLanguage)ThefollowingmaterialsfromJohnson&JohnsonsQuarterlyReportonForm10-Qforthequarter
endedOctober1,2017,formattedinExtensiveBusinessReportingLanguage(XBRL),(i)consolidatedbalancesheets,(ii)consolidatedstatementsofearnings,
(iii)consolidatedstatementsofcomprehensiveincome(iv)consolidatedstatementsofcashflows,and(v)thenotestotheconsolidatedfinancialstatements.
48
TableofContents
SIGNATURES
PursuanttotherequirementsoftheSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersigned
thereuntodulyauthorized.
JOHNSON&JOHNSON
(Registrant)

Date:November2,2017 By/s/D.J.CARUSO
D.J.CARUSO
ExecutiveVicePresident,ChiefFinancialOfficer(PrincipalFinancial
Officer)

Date:November2,2017 By/s/R.A.KAPUSTA
R.A.KAPUSTA
Controller(PrincipalAccountingOfficer)
49
Exhibit31.1
CERTIFICATIONOFCHIEFEXECUTIVEOFFICER
PURSUANTTOSECTION302OFTHESARBANES-OXLEYACT
I,AlexGorsky,certifythat:
1.IhavereviewedthisQuarterlyReportonForm10-QforthequarterlyperiodendedOctober1,2017(thereport)ofJohnson&Johnson(the
"Company");
2.Basedonmyknowledge,thisreport doesnotcontain anyuntrue statement ofamaterial factoromit tostateamaterial factnecessary tomakethe

statementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financialcondition,resultsofoperationsandcashflowsoftheCompanyasof,andfor,theperiodspresentedinthisreport;
4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the
Companyandhave:
a)Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensure
thatmaterialinformationrelatingtotheCompany,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularly
duringtheperiodinwhichthisreportisbeingprepared;
(b)Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderoursupervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordancewithgenerallyacceptedaccountingprinciples;
c)EvaluatedtheeffectivenessoftheCompany'sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessof
thedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and
d)DisclosedinthisreportanychangeintheCompany'sinternalcontroloverfinancialreportingthatoccurredduringtheCompany'smostrecentfiscal
quarter(theCompany'sfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,the
Company'sinternalcontroloverfinancialreporting;and
5.TheCompany'sothercertifyingofficer(s)andIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothe
Company'sauditorsandtheauditcommitteeoftheCompany'sboardofdirectors(orpersonsperformingtheequivalentfunctions):
(a)Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikely
toadverselyaffecttheCompany'sabilitytorecord,process,summarizeandreportfinancialinformation;and
(b)Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheCompany'sinternalcontrolover
financialreporting.
/s/AlexGorsky
__________________________
AlexGorsky
ChiefExecutiveOfficer
Date:November2,2017
Exhibit31.2
CERTIFICATIONOFCHIEFFINANCIALOFFICER
PURSUANTTOSECTION302OFTHESARBANES-OXLEYACT
I,DominicJ.Caruso,certifythat:
1.IhavereviewedthisQuarterlyReportonForm10-QforthequarterlyperiodendedOctober1,2017(thereport)ofJohnson&Johnson(the
"Company");
2.Basedonmyknowledge,thisreport doesnotcontain anyuntrue statement ofamaterial factoromit tostateamaterial factnecessary tomakethe

statementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financialcondition,resultsofoperationsandcashflowsoftheCompanyasof,andfor,theperiodspresentedinthisreport;
4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the
Companyandhave:
a)Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensure
thatmaterialinformationrelatingtotheCompany,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularly
duringtheperiodinwhichthisreportisbeingprepared;
(b)Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderoursupervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordancewithgenerallyacceptedaccountingprinciples;
c)EvaluatedtheeffectivenessoftheCompany'sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessof
thedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and
d)DisclosedinthisreportanychangeintheCompany'sinternalcontroloverfinancialreportingthatoccurredduringtheCompany'smostrecentfiscal
quarter(theCompany'sfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,the
Company'sinternalcontroloverfinancialreporting;and
5.TheCompany'sothercertifyingofficer(s)andIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothe
Company'sauditorsandtheauditcommitteeoftheCompany'sboardofdirectors(orpersonsperformingtheequivalentfunctions):
(a)Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikely
toadverselyaffecttheCompany'sabilitytorecord,process,summarizeandreportfinancialinformation;and
(b)Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheCompany'sinternalcontrolover
financialreporting.

/s/DominicJ.Caruso
______________________________
DominicJ.Caruso
ChiefFinancialOfficer
Date:November2,2017
Exhibit32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
Theundersigned,AlexGorsky,theChiefExecutiveOfficerofJohnson&Johnson,aNewJerseycorporation(theCompany),pursuantto18U.S.C.1350,
asadoptedpursuanttoSection906oftheSarbanes-OxleyActof2002,herebycertifiesthat,tothebestofmyknowledge:
(1) theCompany'sQuarterlyReportonForm10-QforthequarterlyperiodendedOctober1,2017(theReport)fullycomplies
withtherequirementsofSection13(a)oftheSecuritiesExchangeActof1934;and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operationsoftheCompany.

/s/AlexGorsky
AlexGorsky
ChiefExecutiveOfficer

Dated:November2,2017
ThiscertificationisbeingfurnishedtotheSECwiththisReportpursuanttoSection906oftheSarbanes-OxleyActof2002andshallnot,excepttotheextent
requiredbysuchAct,bedeemedfiledbytheCompanyforpurposesofSection18oftheSecuritiesExchangeActof1934,asamended,orotherwisesubject
toliabilityofthatsection.

Exhibit32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
Theundersigned,DominicJ.Caruso,theChiefFinancialOfficerofJohnson&Johnson,aNewJerseycorporation(theCompany),pursuantto18U.S.C.
1350,asadoptedpursuanttoSection906oftheSarbanes-OxleyActof2002,herebycertifiesthat,tothebestofmyknowledge:
(1) theCompany'sQuarterlyReportonForm10-QforthequarterlyperiodendedOctober1,2017(theReport)fullycomplieswith
therequirementsofSection13(a)oftheSecuritiesExchangeActof1934;and

(2) theinformationcontainedintheReportfairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsof
theCompany.

/s/DominicJ.Caruso
DominicJ.Caruso
ChiefFinancialOfficer

Dated:November2,2017
ThiscertificationisbeingfurnishedtotheSECwiththisReportpursuanttoSection906oftheSarbanes-OxleyActof2002andshallnot,excepttotheextent
requiredbysuchAct,bedeemedfiledbytheCompanyforpurposesofSection18oftheSecuritiesExchangeActof1934,asamended,orotherwisesubject
toliabilityofthatsection.

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JOHNSON & JOHNSON

Filed 11/02/17 for the Period Ending 10/01/17

Address ONE JOHNSON & JOHNSON PLZ

Commission file number 1-3215

Recently Issued Accounting Standards

(DollarsinMillions) October1,2017 January1,2017

(DollarsinMillions) October1,2017 January1,2017

(DollarsinMillions) Consumer Pharm MedDevices Total

October 1, 2017 January 1, 2017

(DollarsinMillions) CostBasis FairValue

Foreign Gain/(Loss) Employee Gain/(Loss) TotalAccumulated

(DollarsinMillions) June16,2017 October1,2017

United States Proceedings

IncomeBeforeTax SegmentSales PercentofSegmentSales

2.Basedonmyknowledge,thisreport doesnotcontain anyuntrue statement ofamaterial factoromit tostateamaterial factnecessary tomakethe

2.Basedonmyknowledge,thisreport doesnotcontain anyuntrue statement ofamaterial factoromit tostateamaterial factnecessary tomakethe

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

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