Johnson & Johnson

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Johnson & Johnson (JNJ, Outperform Rating, $148 TP) “Pharma Growth Drivers Poised to Deliver Further Upside” Reinstating Coverage of JNJ with an Outperform Rating and $148 Target Price: We reinstate July 20, 2017 coverage of JNJ after the close of the Actelion acquisition. The stock has appreciated ~20% since the deal was announced on Jan 26 (vs. the S&P 500 +7.5%) but we see room for further upside, driven by RESEARCH ANALYSTS key pharma growth drivers. Based on channel checks and detailed modeling we have done across various therapeutic areas, we see opportunities for significant upside from assets such as Xarelto, Vamil Divan, MD (212) 538-5394 Darzalex and Imbruvica. [email protected] Full COMPASS data next main pharma catalyst. JNJ (and partner Bayer) will release full results of Michael V. Morabito, Ph.D. the Xarelto COMPASS trial on Aug 27. We already know COMPASS was successful in reducing major (212) 325-7298 adverse cardiac events. Based on the details in the data, our analysis suggests an additional 4MM [email protected] patients (or more) could become candidates for Xarelto. Beyond Xarelto, we are also optimistic on Barbara Kotei Imbruvica and Darzalex as both products have had strong uptake to date and are moving into earlier lines (212) 538-8119 of therapy and additional cancer indications that can drive further growth. In immunology we expect [email protected] additional Remicade biosimilars to take a greater toll on JNJ in 2018, but strong growth from Stelara as Duaa Mohamed well as initial uptake of Tremfya and sirukumab should offset this expected decline. (212)538-8127 Actelion acquisition adds another area of focus, but at a steep price. We believe the ~$29.1Bn [email protected] that JNJ paid for Actelion is slightly above what the company was worth, although it does bring JNJ another area of growth and possible future upside through the equity stake in R&D spin-out Idorsia. Catalysts: (1) COMPASS data for Xarelto at ESC on Aug 27; (2) sirukumab PDUFA in mod-severe RA HOLT CONTACT on Sept 22; (3) potential entry of additional Remicade biosimilars in the US in 2H 2017. Conchita Gonzalez de Castejon Risks: Disappointing clinical data, challenging commercial launches, increased concerns around drug (212) 325 2547 pricing and integration risk represent the primary downside risks to our call. conchita.gonzalezdecastejon@credit- suisse.com Valuation: Our $148 target price is based on a 75%/25% blend of DCF ($149) and relative ($144) valuation and suggests ~10% upside from the latest closing price. We use a 7.0% WACC along with a

1.5% perpetuity growth forecast for our DCF valuation and apply 18.5 times our new 2018 EPS estimate of $7.79 for our relative valuation.

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts

The authors of this report wish to acknowledge the contribution made by Selvakumar Nallasamy and Brajesh Nirala, employees of CRISIL Global Research and Analytics, a business division of CRISIL Limited. CRISIL Limited is a third-party provider of offshore research services to Credit Suisse. Key Charts

Key Charts for JNJ Pharma Key Growth Driver Through 2021 CS Total Pharma Sales Estimates Vs. Consensus Through 2021 (Total Company Sales in $ Billion) (Pharma Sales in $ Billion) $100 CAGR $50

$90 $44.5 3.1% $45 $43.3 $80 $41.3 $41.7 $39.4 $40.0 $70 $40 $38.1 $38.2 $60 3.7% $35.3 $35.5 $50 $35 $40 $30 $30 5.8% $20 $25 $10 $0 $20 2016 2017E 2018E 2019E 2020E 2021E 2017E 2018E 2019E 2020E 2021E

Pharma Medical Devices Consumer CS Estimates FOA Consensus

CS Total Sales Estimates Vs. Consensus Through 2021 CS Estimates an Expanding Operating Margin (Total Company Sales in $ Billion) (Operating Margin in %) $95 38% $88.6 $90 $86.8 36% $85.4 $84.4 $85 $82.3 $82.8 34% $79.5 $79.9 $80 32% $75.4 $75.8 $75 30% $70 28% $65 26% $60 24% $55 22% $50 20% 2017E 2018E 2019E 2020E 2021E 2016A 2017E 2018E 2019E 2020E 2021E

CS Estimates Consensus JNJ - CS Estimates JNJ - Consensus

Source: Company data, Credit Suisse estimates, Thomson Eikon, First Order Analytics 3 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Executive Summary

Executive Summary Reinstating Coverage of JNJ with an Outperform Rating and $148 Target Price: JNJ’s stock has appreciated ~20% since the Actelion deal was announced on January 26 (vs. the S&P 500 +7%) but we see room for further upside, driven by key pharma growth drivers such as Xarelto, Darzalex and Imbruvica.

Full COMPASS Data Next Main Pharma Catalyst: JNJ (and partner Bayer) will release full results of the Xarelto COMPASS trial on August 27th. We already know COMPASS was successful in reducing major adverse cardiac events. Based on the details in the data, our analysis suggests an additional 4MM patients (or more) could become candidates for Xarelto. Beyond Xarelto, we are also optimistic on Imbruvica and Darzalex as both products have had strong uptake to date and are moving into earlier lines of therapy and additional cancer indications that can drive further growth. In immunology we expect additional Remicade biosimilars to take a greater toll on JNJ in 2018, but strong growth from Stelara as well as initial uptake of Tremfya and sirukumab should offset this expected decline.

Sentiment on Macro Factors Likely an Important JNJ Driver in Coming Months: We expect investor focus in Pharma (and Health Care in general) in the coming months to remain on the news out of Washington, D.C. Expectations around drug pricing and tax reform are both headed in the direction that would be of benefit to JNJ (and its larger pharma peers) as significant reforms to how drugs are priced in the US is more and more unlikely in 2017 while corporate tax reform occurring in 2018 remains a real possibility.

Actelion Acquisition Adds Another Area of Focus, But at a Steep Price: We believe the ~$29.1Bn that JNJ paid for Actelion is above the ~$23Bn that we think the company was worth. However, the revenue synergies could be significant given JNJ’s commercial infrastructure, and the structure of the deal does provide JNJ with another avenue for future upside through its equity stake in the R&D spin-out Idorsia. Additional business development and M&A remain possible (especially if tax reform does occur) despite the price paid for Actelion.

Blended Valuation Suggests Room For ~10% Further Upside: Our DCF (based on forecasts through 2026, a 1.5% perpetuity growth rate beyond that, and a 7% WACC) suggests that JNJ is worth $149/share. On a relative basis, using an 18.5x P/E multiple off of our 2018 EPS estimate of $7.79 suggests that JNJ is worth $144/share. Our blended target price, based on 75% DCF and 25% relative, is $148, or about 10% above the latest closing price. Source: Company data, BLOOMBERG PROFESSIONALTM, Credit Suisse estimates 5 Financial Summary

JNJ Financial Summary Page

Johnson & Johnson (JNJ.N) Price (18-Jul-17,US$) 134.5 Market Cap (US$mn) 362212.8

Previous Value Current value

Rating NEUTRAL OUTPERFORM

Target Price (US$) 122.00 148.00 Year 12/16A 12/17E 12/18E 12/19E EPS (CS Adj.) (US$) 6.73 7.19 7.79 8.27 EPS Prev (US$) 6.71 7.23 7.47 7.86 EPS (Qtr 1) (US$) 1.73 1.83 EPS (Qtr 2) (US$) 1.74 1.83 EPS (Qtr 3) (US$) 1.68 1.83

EPS (Qtr 4) (US$) 1.58 1.70 Source: Credit Suisse Estimates, IBES

Income Statement 2016FYA 2017FYE 2018FYE 2019FYE Per Share 2016FYA 2017FYE 2018FYE 2019FYE Sales revenue 71,890 75,802 80,133 83,066 Equiv. FPO (period Avg.) (mn) 2,789 2,743 2,743 2,744 EBITDA 24,919 26,304 29,549 31,515 EPS (CS Adj.) (US$) 6.7 7.2 7.8 8.3 Depr. & amort. -3,754 -4,276 -4,550 -4,725 Prev. EPS (US$) 6.7 7.2 7.5 7.9 EBIT (US$) 22,436 23,633 26,498 28,291 DPS (US$) 3.2 3.4 3.6 3.8 Net interest exp -358 -625 -818 -776 Dividend yield (%) 2.3 2.5 2.6 2.8 Other adj. 681 1,632 700 500 Dividend Payout (%) 46.8 46.7 45.6 45.3 PBT (US$) 22,759 24,641 26,380 28,015 Earnings 2016FYA 2017FYE 2018FYE 2019FYE Income taxes -3,263 -4,277 -4,727 -5,038 Sales growth (%) 2.6 5.4 5.7 3.7 Profit after tax 19,496 20,364 21,653 22,977 EBIT growth (%) 13.0 5.3 12.1 6.8 Associates & other -732 -636 -285 -285 Net income growth (%) 7.6 5.1 8.3 6.2 Net profit (US$) 18,764 19,728 21,368 22,692 EPS growth (%) 8.5 6.9 8.3 6.2 Other NPAT adjustments -2,224 -3,225 -1,215 -1,215 EBITDA margin (%) 34.7 34.7 36.9 37.9 Reported net income 16,540 16,503 20,153 21,477 EBIT margin (%) 31.2 31.2 33.1 34.1 Cash Flow 2016FYA 2017FYE 2018FYE 2019FYE Pretax profit margin (%) 31.7 32.5 32.9 33.7 EBIT 22,436 23,633 26,498 28,291 Net income margin (%) 26.1 26.0 26.7 27.3 Net interest -358 -625 -818 -776 Valuation 2016FYA 2017FYE 2018FYE 2019FYE Change in working capital -2,405 90 -1,230 -632 EV/Sales (x) 4.8 5.0 4.6 4.3 Other cash & non-cash items -1,784 -2,229 -977 -1,313 EV/EBITDA (x) 13.9 14.3 12.4 11.4 Cash flow from operations 17,889 20,870 23,473 25,569 EV/EBIT (x) 15.5 15.9 13.9 12.7 CAPEX -2,262 -2,158 -3,413 -3,412 P/E (x) 20.0 18.7 17.3 16.3 Free cashflow to the firm 15,627 18,711 20,060 22,158 Price to book (x) 5.3 4.9 4.4 4.0 Cash flow from investments -4,761 -19,862 -8,426 -8,638 Asset turnover 0.5 0.5 0.5 0.5 Cashflow from financing -7,673 -5,666 -12,599 -14,189 Returns 2016FYA 2017FYE 2018FYE 2019FYE Changes in Net Cash/Debt -3,734 -27,844 7,849 9,211 ROE 23.4 22.6 25.3 24.4 Net debt at start -18,515 -14,781 13,063 5,214 ROGIC (%) 0.4 0.3 0.2 0.3 Change in net debt 3,734 27,844 -7,849 -9,211 Interest burden 1.0 1.0 1.0 1.0 Net debt at end -14,781 13,063 5,214 -3,997 Tax burden 0.2 0.2 0.2 0.2 Balance Sheet 2016FYA 2017FYE 2018FYE 2019FYE Financial leverage 2.0 2.0 1.9 1.8 Total current assets 65,032 45,637 53,789 62,290 Gearing 2016FYA 2017FYE 2018FYE 2019FYE Total fixed assets 15,912 16,435 16,911 17,424 Net debt/equity (%) -21.0 17.3 6.2 -4.3 Total liabilities 70,790 79,236 78,347 77,224 Net Debt to EBITDA (x) Net Cash 0.5 0.2 Net Cash Shareholder equity 70,418 75,677 83,731 92,587 Interest coverage ratio (X) 62.7 37.8 32.4 36.4 Total liabilities and equity 141,208 154,913 162,078 169,812 Source: Company data, Credit Suisse Estimates

Net debt -14,781 13,063 5,214 -3,997

Source: Company data, BLOOMBERG PROFESSIONALTM, Credit Suisse estimates 6 Credit Suisse Differentiation Points

Credit Suisse Differentiation Points vs. the Street

Pharma Focus Key to Understanding the Primary Growth Driver for JNJ – The vast majority of sell-side analysts covering JNJ are med tech analysts with less expertise and focus on the pharma business, which is nearly 50% of JNJ’s sales and JNJ’s primary growth driver

Integration of Global Credit Suisse Research Views – Our JNJ model, report, and overall analysis incorporates views from many of our global research colleagues, including those that cover JNJ's key partners and competitors

Detailed Modeling Approach to the JNJ Business, Including the Actelion Acquisition – We attempt to best capture the various dynamics of JNJ's modeling guidance – Multiple market models for JNJ’s key products help guide our understanding of the company’s future growth potential, especially the Pharma business, which is the company’s primary growth driver – In-depth analysis of Actelion assets highlights our views on the value of that acquisition – Please ask us for our detailed JNJ financial model and individual market models

Source: Company data, Credit Suisse estimates 7 Credit Suisse vs. Consensus

Credit Suisse 5-Year Sales and EPS Forecasts Modestly Higher Than Consensus

JNJ Revenues CAGR (2016-21) JNJ EPS CAGR (2016-21) (in $ Billion) CS: 4.5% CS: 7.2% Cons: 4.0% Cons: 7.1% $95 $10.00 $9.48 $88.6 $9.39 $90 $86.8 $9.50 $85.4 $84.4 $8.87 $85 $82.3 $82.8 $9.00 $8.60 $79.5 $79.9 $8.50 $8.27 $80 $8.13 $75.4 $75.8 $8.00 $7.77 $7.69 $75 $7.50 $7.16 $70 $7.09 $7.00 $65 $6.50 $60 $6.00 $55 $5.50 $50 $5.00 2017E 2018E 2019E 2020E 2021E 2017E 2018E 2019E 2020E 2021E

CS Estimates Consensus CS Estimates Consensus

% Diff: (0.6%) (0.4%) (0.7%) 1.2% 2.1% % Diff: (1.1%) 1.1% 1.7% 3.1% 0.9%

Source: Company data, Credit Suisse estimates, Thomson Eikon 8 Segment Contribution

Pharma Remains JNJ’s Main Growth Driver Over Next Several Years

2016 Revenue Breakdown Revenue Progression by Segment

(in $ Billion)

$100 CAGR $90 Consumer 3.1% Consumer 18% $80 18% $70 Pharma $60 Pharma47% 3.7% $50 Medical Devices 47% 35% $40 Medical Devices $30 5.8% 35% $20 $10 $0 2016 2017E 2018E 2019E 2020E 2021E

Pharma Medical Devices Consumer

Source: Company data, Credit Suisse estimates 9 Catalysts

Key Upcoming JNJ Catalysts: Pharma Product News and Macro Factors

Time

3Q 2017 4Q 2017 1H 2018

Progress on Corporate Tax Reform, US Drug Pricing and Healthcare Reform

Remicade

Entry of additional US biosimilars High August 27 October 28 Talacotuzumab Phase 3 COMPASS Results for Xarelto PDUFA (Priority Review) for Xarelto in Phase 3 Results

in CAD/PAD long-term secondary VTE prevention

September 22 Invokana Esketamine PDUFA for sirukumab in moderate-severe Final Decision Expected on FDA Drug Phase 3 Results

rheumatoid arthritis Safety Communication

Importance Imbruvica

Medium Apalutamide Phase 3 SHINE Top-Line Results Phase 3 SPARTAN Results (w/Bendamustine and Rituximab)

Darzalex Apalutamide Phase 3 ALYCONE Top-Line Results Phase 3 Chemo-Naive Results

(w/Bortezomib/Melphalan/Prednisone) Low Xarelto Phase 3 MARINER Trial Completion in Acute Medically Ill Post-Discharge

Source: Company data, Credit Suisse estimates 10 2017 Guidance

Credit Suisse Estimates Are Roughly In-Line with JNJ’s Guidance for the Rest of 2017

2017 Company Guidance vs CS Estimates ($ Million Except for Per Share Data) 2017 Guidance 2017 Metric 4Q Earnings 1Q Earnings 2Q Earnings CS 2017 Mid-Point Mid-Point Low High Mid-Point Estimates Consensus Revenues $74,450 $75,750 $75,800 - $76,100 $75,950 $75,802 $75,662 Revenues, c/c $75,150 $76,450 $75,900 - $76,200 $76,050 Operational growth 3.3% 6.3% 5.5% - 6.0% 5.8% Fx Impact 1.0% 1.0% ~ 0.1% 0.1% Nominal growth 3.5% 5.3% 5.4% - 5.9% 5.9% 5.4% Pre-tax op margin expansion Stable to slightly lower 0.0% Net Interest Expense $550 $650 $600 - $700 $650 $625 Other Income/(Expense) $1,200 $1,200 $1,600 - $1,800 $1,700 1,632 Pro forma Tax rate 19.5% 19.5% 19.0% - 20.0% 19.5% 19.9% EPS, Non-GAAP $7.01 $7.08 $7.12 - $7.22 $7.17 $7.19 $7.10 EPS, Non-GAAP, c/c $7.13 $7.20 $7.17 - $7.27 $7.22 Operational growth 5.9% 7.0% 7.0% - 8.0% 7.5%

Source: Company data, Credit Suisse estimates, First Order Analytics 11 Investment Risks

Risks

Unexpected Challenges to Main Pharma Products

Strong new products in competitive markets (including branded competitors and biosimilars) could lead to greater-than-forecast market share erosion and pricing pressures, especially if it impacts products on which we are especially bullish, such as Xarelto, Imbruvica, and Darzalex.

Pipeline Failures

In sum, we still assume >$5Bn in probability-adjusted sales in 2024 from products that are currently in JNJ’s pipeline. Setbacks from several of these products could lead to downside to our sales and earnings estimates.

Macro Challenges

An increased likelihood of significant reforms to how drugs are priced in the US and/or a decreased likelihood of corporate tax reform being passed by 2018 would be viewed negatively for JNJ and its large US pharma peers.

Integration Setbacks

Along with the recently completed Actelion deal, JNJ has completed other smaller-sized deals and will likely continue doing so going forward, posing integration challenges to the company.

Source: Company data, Credit Suisse estimates 12 Target Price

Blended Target Price (75% DCF/25% Relative) Suggests That JNJ Is Worth $148/Share

DCF Valuation Snapshot Perpetuity Growth DCF Valuation: $149/Share 0.5% 1.5% 2.5% 5.0% $199 $240 $315 Key assumptions driving DCF valuation W 6.0% $160 $184 $222 A – Forecast horizon extends through 2026 7.0% $133 $149 $171 C – Perpetuity growth rate beyond 2026: 1.5% C 8.0% $114 $124 $138 – WACC: 7% (consistent with US major pharma) 9.0% $99 $106 $116 * Terminal Value is 61% of EV * Pipeline contributes 8% of 2023 Sales

Relative Valuation Implied Price: $144/Share DCF 2018 P/E Valuation Valuation Key assumptions driving P/E valuation Valuation $149 $144 – We assume a P/E multiple of 18.5x to our 2018 EPS estimate, which is slightly higher than the average Weight 75% 25% multiple of ~17x that we apply to our large-cap pharma Blended Target Price $148 group Current Stock Price $134.46 Upside/(Downside) 10%

Source: Company data, Credit Suisse estimates 13 Sum of the Parts

Our Sum-of-the-Parts Valuation Suggests a Value of $145/Share

Pharma MedTech Consumer Total JNJ 2018 Sales $38,410 $27,525 $14,197 $80,133 as % of Total Company 48% 34% 18% NA Operating profit $14,212 $8,808 $3,478 $26,498 Operating margin 37% 32% 25% 33% Non-operating expense ($57) ($40) ($21) ($118) Pre-Tax profit $14,155 $8,768 $3,458 $26,380 Tax expense ($2,690) ($1,666) ($657) ($5,012) Tax rate 19% 19% 19% 19% Net Profit $11,466 $7,102 $2,801 $21,368 EPS $4.18 $2.59 $1.02 $7.79 as % of Total Company 54% 33% 13% NA Avg. Shares 2,743 2,743 2,743 2,743

Peers FY2 PE Multiple 16.3x 19.4x 21.0x 18.0x Premium/(Discount) 10% 0% (10%) 3% Applied PE Multiple 18.0x 19.4x 18.9x 18.6x Equity Value/Share $75 $50 $19 $145 Market Cap $205,914 $137,877 $52,891 $396,683 as % of Total Company 52% 35% 13% NA

Sales CAGR ('18-'21) 4.7% 3.0% 3.0% 3.8% Sales CAGR ('18-'21), Peers 3.0% 5.0% 4.0% NA

Please let us know if you’d like to have the detailed SOTP model

Source: Company data, Credit Suisse estimates, Thomson Eikon 14 Blue Sky/Grey Sky

Scenario Analysis Suggests Blue Sky Valuation $158, Grey Sky $120

Controversy Bull Case Bear Case Credit Suisse View

The first-in-class position for several Remicade decline is likely to accelerate as

of JNJ’s key products (e.g., multiple biosimilars enter the US market, and We do believe the entry of a second (and Imbruvica, Darzalex, LAI franchise) earnings contributions from the product are then third) Remicade biosimilar in the US will have a will maintain JNJ’s strong position underappreciated by the Street. Stelara Pharma greater impact on the top and bottom line than people with both physicians and payers. growth is likely to continue, but pipeline Business may expect following the minimal impact seen to date Remicade’s decline will also immunology assets will have trouble Growth from PFE’s entry into the space. We also see the continue to be more gradual than differentiating themselves in crowded markets Potential immunology pipeline assets as relatively some fear and offset by strong where pricing pressures are likely to grow. undifferentiated, but we are above the Consensus on growth from Stelara and Simponi Imbruvica and Darzalex are clear winners, but other key mega-blockbusters such as Xarelto, and contributions from guselkumab expectations are now very high for the Imbruvica, Darzalex and the schizophrenia franchise. and sirukumab. product.

Despite the rhetoric, we are unlikely It is unclear how much will actually get done, to see much change around drug We are of the mindset that but rhetoric and headlines around drug pricing pricing in the US over the next 6-12 there will likely be limited progress on drug pricing would likely remain, limiting the amount of months at least, providing a relief for reform in the US this year, but we also expect any generalist interest and further upside that we Macro JNJ and its large pharma peers. significant tax reform to be pushed out to 2018 as would expect from JNJ and biopharma in Questions Tax reform may be pushed out a well. That said, headline risk around drug pricing is general. Tax reform more likely but not a little, but we are still likely to see likely to remain, and could lead to volatility and/or guarantee, and it is unclear what the exact some progress made there given the possible downside in JNJ and other large cap pharma proposals would be and how they may benefit bipartisan support that exists for that stocks. (or harm) JNJ and its peers. initiative.

The Actelion deal is a wise use of ex-US cash, and deal structure The Actelion deal will ultimately be shown to provides opportunity for further have destroyed shareholder value and upside. Regardless, JNJ has plenty We agree JNJ may have illustrative of the risks that go along with of firepower to acquire additional modestly overpaid for Actelion, but it has the financial needing to buy assets to maintain growth. assets (large or small) if it so desires strength to overcome this and continue to pursue Capital Tax reform would be a positive for JNJ, but in the future. Stable of externally- other assets that it finds attractive. The overall track Allocation we are unclear if and when that will come, sourced assets such as Xarelto, record on business development has been very strong limiting the opportunity for meaningful BD in Imbruvica, and Darzalex highlight over the past several years, and the company’s overall the near future. Continued dividend growth JNJ’s strength here, while excess financial strength and capabilities cannot be and share repurchases are now expected and cash will continue to be returned questioned. not likely to provide further upside. aggressively to shareholders through the dividend and share repurchases.

Source: Company data, Credit Suisse estimates, Thomson Eikon 15 PharmaValues

Our PharmaValues Valuation Suggests an NPV of $134.10 for JNJ…

Total BrandedAbbott Drug NPVLabs per share ($) Total BrandedDrugwise Drug NPV NPV per per Share Share (USD) (in $)62.52 Total Group NPV per share (USD) 132.37

Stelara Remicade Imbruvica Darzalex Invega/ Sustenna/Trinza Uptravi Sim poni Opsumit Invokana Zytiga Xarelto Edurant ARN-509 Darunavir STR Intranasal esketamine sirukum ab Marketed JNJ-473 Filed dolutegravir+rilpivarine ponesim od P3 Zejula P2 JNJ-4178 JNJ-922 Early Stage erdafitinib Imetelstat 0.0 2.0 4.0 6.0 8.0 NPV per share (USD)

Source: Company data, Credit Suisse estimates 16 PharmaValues

… Which is Middle of the Pack For US Major Pharma on NPV/EV Basis

Source: Credit Suisse PharmaValues Database 17 HOLT®

HOLT® DCF Based on Research Forecasts Indicates a Valuation for JNJ of $137.6/Share

CFROI® & Discount Rate (in %) EBITDA Margin (in %)

18 45 16 40 14 35 12 30 10 25 8 20 6 15 4 10 EBITDA margins (%) 2 0 5 2012 2014 2016 2018 2020 2022 2024 2026 0 2012 2014 2016 2018 2020 2022 2024 2026 Historical Forecast based on Research projection Discount Rate Historical Forecast based on Research projection

Asset growth (inflation adjusted, in %) Asset Turns (x) 8 6 0.5 4 0.5 2 0.4 0 0.4 Asset efficiency (Sales/Invested capital) (x) -2 0.3 -4 0.3 -6 0.2 -8 0.2 -10 0.1 -12 0.1 2012 2014 2016 2018 2020 2022 2024 2026 0.0 2012 2014 2016 2018 2020 2022 2024 2026 Historical Forecast based on Research projection Historical Forecast based on Research projection

Source: HOLT®, Credit Suisse estimates 18 HOLT

Incremental Growth has a Significantly Greater Impact on JNJ’s Valuation Than Incremental Margins

Base case based on Research forecast

Source: HOLT, Credit Suisse estimates 1919 HOLT

Actelion Acquisition Accretive to JNJ’s Returns on Capital, But Valuation Rich Based on CFROI Implied by Price

JNJ + ATLN Pro forma returns on capital Actelion – historical performance and expectations implied by purchase (CFROI LFY %) price

25 16.4% 15.5% 20

12.4% 10

-5

-10 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024Market- + = implied CFROI Forecast CFROI Discount Rate

Historical median Market Implied CFROI

JNJ ATLN JNJ+ATLN Pro forma The green dot represents the future returns on capital required to validate the purchase price paid of CHF288 (US$280) per share of Actelion

Source: HOLT, Credit Suisse estimates 20 One-Pager

Johnson & Johnson (JNJ, Outperform, $148 TP) “ Pharma Growth Drivers Poised to Deliver Further Upside”

Investment Thesis CS PharmaFilter

Reinstating coverage with an Outperform rating and $148 target price Core Earnings Capital Catalysts Key pharma growth drivers such as Xarleto, Darzalex, Imbruvica, and Franchise Innovation Growth Allocation Newsflow the schizophrenia franchise poised to deliver further upside Actelion deal provides new area of focus but at a steep price

Catalysts (1) COMPASS data for Xarelto at ESC on Aug 27; (2) PDUFA for sirukumab Excellent Average Poor in mod-severe rheumatoid arthritis on Sept 22; (3) Potential entry of additional Remicade biosimilars in the US in 2H 2017. Valuation Johnson & Johnson (JNJ) Risks Current Price (Jul 18) $134.46 Enterprise Value ($ mm) $355,240 Success of competitors to key pharma products (both branded and % of 52-Week High 98% 2018 P/E 17.3x biosimilars) could limit growth of key JNJ drivers more than expected; Target Price $145 Dividend Yield 2.5% pipeline failures could also drive downside; macro factors such as reforms to US drug pricing and lower likelihood of US corporate tax reform could Upside / Downside (%) 8% Short Interest, Days () negatively impact sentiment on investing in JNJ Market Cap ($ mm) $362,213

Valuation Credit Suisse Estimates vs. Consensus Our $148 TP is a 75/25 blend of DCF ($149) and relative valuation ($144). Fiscal Year Ending December 31 ($ in millions, except per share data) FY 2017 FY 2018 FY 2019 FY 2020 We use a 7.0% WACC and 1.5% perpetuity growth forecast for our DCF JNJ and 18.5 times our 2018 EPS ($7.79) for relative valuation EPS Sales EPS Sales EPS Sales EPS Sales CS $7.19 $75,802 $7.79 $80,133 $8.27 $83,066 $8.90 $86,355 Consensus $7.14 $75,771 $7.66 $79,805 $8.13 $82,780 $8.67 $84,521

$140 Difference ($) $0.05 $31 $0.13 $328 $0.14 $286 $0.23 $1,834 $130 Difference (%) 1% 0% 2% 0% 2% 0% 3% 2% $120 $110 $100 Industry Ratings $90 Analysts Buys Holds Sells Total $80 No. of Recommendations 9 12 0 21 % 43% 57% 0%

Source: Company data, Credit Suisse estimates, Thomson Eikon 21 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Product Story Pharma Business Remains JNJ’s Key Growth Driver Over Next Several Years Segment Contribution

Pharma Remains JNJ’s Main Growth Driver Over Next Several Years

2016 Revenue Breakdown Revenue Progression by Segment

(in $ Billion)

$100 CAGR $90 Consumer 3.1% Consumer 18% $80 18% $70 Pharma $60 Pharma47% 3.7% $50 Medical Devices 47% 35% $40 Medical Devices $30 5.8% 35% $20 $10 $0 2016 2017E 2018E 2019E 2020E 2021E

Pharma Medical Devices Consumer

Source: Company data, Credit Suisse estimates 24 Pharmaceuticals

JNJ’s Pharmaceutical Business Focuses on Six Core Areas

Cardiovascular/ Pulmonary Oncology Neuroscience Immunology Infectious Diseases Metabolic

Prostate Schizophrenia Rheumatoid HIV Lung Arthritis Pulmonary Mood Disorders Cardiovascular HCV B-cell Arterial Psoriasis Disease Malignancies Chronic Pain Respiratory Hypertension Alzheimer’s Inflammatory Diabetes Immuno- Bowel Disease Vaccines Oncology Disease

Source: Company data, Credit Suisse estimates 25 Pulmonary Pharmaceuticals

Actelion Acquisition Adds Additional Area of Focus for JNJ

. JNJ acquired Actelion for ~$29Bn, primarily utilizing the ex-US cash balance, above the ~$23Bn that we currently estimate the deal was worth . Acquisition brought JNJ into a new therapeutic area − Expands JNJ’s portfolio with multiple marketed products in pulmonary arterial hypertension (PAH) − Revenue synergies expected given JNJ’s global presence and more extensive commercial capabilities − Company expects deal to accelerate near- and long-term sales and EPS growth . Additional value creation possible through stake in R&D spin-off Idorsia − Prior to the acquisition, all the early-stage pipeline assets were spun off into a new company, Idorsia, in which JNJ was given 16% of equity and rights to an additional 16% equity through a convertible note − Idorsia continues with the development of broad portfolio across four therapeutic areas: specialty cardiovascular disorders, central nervous system disorders, immunological disorders, and orphan diseases − Additionally, JNJ has an option to in-license the dual-endothelin receptor antagonist ACT-132577, being studied in phase 2 for resistant hypertension, at the end of phase 2 studies

Standalone Actelion Portion Acquired by JNJ CS Estimate of Acquisition Valuation Marketed Products Phase 3 ~$22.4bn Opsumit Veletri Valchlor Ponesimod

Uptravi Ventavis Zavesca Cadazolid ~$23bn CS Estimate of Actelion’s Fair Value Tracleer Idorsia Spin-off 16% Stake to JNJ ~$2.2bn Early stage Pipeline ~$352mm marketcap

Source: Company data, Credit Suisse estimates, Thomson Eikon 26 Pulmonary Pharmaceuticals

Respondents To Recent Investor Survey Have Generally Negative Sentiment To Actelion Deal

Source: Credit Suisse Investor Survey 27 Pulmonary Pharmaceuticals

Pulmonary Arterial Hypertension a New Area of Focus for JNJ

. Pulmonary Arterial Hypertension (PAH) is a type of high blood pressure that affects arteries in the lungs and in the heart . As PAH develops, blood circulating through vessels that carry blood from the heart to the lungs, also known as pulmonary vessels, become restricted (either narrowed or blocked − The right side of the heart is put under increasing strain to pump blood through the lungs − Can progress to right heart failure and death . The New York Heart Association created a classification scale to measure the degree of disease severity in patients diagnosed with PAH − Scale is often used by health care providers to determine the treatment paradigm of patients − The higher the functional class, the more severe the PAH symptoms

Functional Classes and Associated Approximate Patient Distribution Among

Symptoms Functional Classes

Source: Company data, Credit Suisse estimates 28 Pulmonary Pharmaceuticals

Actelion with Multiple Products Across the Different Pathways That Are Targeted in the Treatment of Pulmonary Hypertension

PAH Treatment Pathways

Endothelin Receptor Phosphodiesterase-5- Prostacyclin Antagonists (ERA) inhibitors (PDE-5i) Receptor Agonists

Actelion Products

Source: Company data, Credit Suisse estimates 29 Pulmonary Pharmaceuticals

Tracleer: Eroding Sales with Entrance of Generics

$1,800 $1,654 $1,600 $1,624 $1,600

$1,400 $1,261 $1,200 $1,035 $1,000

$800 $580 $600 $366

Tracleer Tracleer Sales (Millions) $400 $251 $200

$0 2012 2013 2014 2015 2016 2017E 2018E 2019E

. Tracleer (bosentan) is an orally available medication targeting the Endothelin Receptor Antagonist (ERA) pathway . First oral product in PAH and used for the treatment of functional classes II-IV . Initiated at a dose of 62.5mg twice daily for four weeks, then increased to the maintenance dose of 125mg twice daily . Requires monthly blood tests due to possibility of liver toxicity . Sales expected to continue to fall due to increasing competition (including generics) and decreasing compliance levels as a result of side effects

Source: Company data, Credit Suisse estimates 30 Pulmonary Pharmaceuticals

Opsumit: Growing Sales but Vulnerable to PAH Market Competition

$1,600 $1,473 $1,388 $1,400 $1,306

$1,200 $1,106

$1,000 $844 $800

$600 $535

$400 Opsumit Opsumit Sales (Millions) $195 $200 $6 $0 2013 2014 2015 2016 2017E 2018E 2019E 2020E

. Opsumit (macitentan) is also orally available and targets the Endothelin Receptor Antagonist (ERA) pathway . “New and improved” version of Tracleer with superior endothelin receptor blockade and better safety, gaining more market share . Used in functional classes II-III . Recommended dosage is 10mg once daily (as opposed to twice daily for Tracleer) . Successfully showed improvement in morbidity and mortality events in patients . Sales expected to grow significantly, but the entrance of generics in 2018 (Adcirca generics) may begin to level sales growth due to Opsumit’s premium pricing

Source: Company data, Credit Suisse estimates 31 Pulmonary Pharmaceuticals

Uptravi: Likely Longer-Term Growth Driver Given Novel Mechanism

$3,000 $2,571 $2,500 $2,232

$2,000 $1,823 $1,509 $1,500 $1,192

$1,000 $850

Uptravi Sales (Millions) $520 $500 $250

$0 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E

. Uptravi (selexipag) is an orally available selective IP prostacyclin receptor agonist, targeting and activating the prostacyclin pathway (different pathway from Tracleer and Opsumit) . Works higher up in the prostacyclin pathway, which has proven to be more efficacious in the GRIPHON study . Less side effects than Tracleer and Opsumit, although some GI tolerability issues remain . Main opportunity will be for use in combination therapy as opposed to monotherapy . Recommended starting dose of 200mcg given twice daily, then increase up to maximum dose of 1600mcg twice daily . Used in functional classes II-III

Source: Company data, Credit Suisse estimates 32 Pulmonary Pharmaceuticals

Opportunities for Uptravi in Combination Therapy Exist

Trial Design (in order of occurrence) AMBITION • Dual therapy in PAH usually involves the use of an ERA + PDE-5, for example, Letairis + Adcirca • Proven to improve patient condition at a greater rate than monotherapy

GRIPHON • Triple combination study • In addition to the ERA + PDE-5 being targeted in AMBITION, this study suggested that a third agent, such as Uptravi which targets the prostacyclin pathway, can improve outcomes further • This study added Uptravi to patients already being treated with one or two medications

TRITON • Also a triple combination study • Compares the combination of Opsumit + Adcirca to the combination of Opsumit + Adcirca + Uptravi, and in patients that are newly diagnosed with PAH

. So far, triple-combo therapies have improved patient outcomes even further than mono or dual therapy

. While there are other ERAs and PDE-5s acting as agents in combo therapy, Uptravi could be the main prostacyclin drug used in combination regimens

Source: Company data, Credit Suisse estimates 33 Pulmonary Pharmaceuticals

Multiple Other Companies Working on PAH Therapies

Drug Lead Company Target Phase

Trevyent SteadyMed Ltd (STDY) Prostacyclin Receptors NDA

Bardoxolone methyl Reata Pharmaceuticals (RETA) NF-Kappa B; STAT3 Transcription Factor III

Beraprost314d United Therapeutics (UTHR) Prostacyclin Receptors III

Citrupress Asklepion Pharmaceuticals Guanylate Cyclase (sGC) III

Gleevec Novartis AG (NVS) Platelet-derived growth factor receptor III (PDGFR) INOpulse Bellerophon Therapeutics (BLPH) Guanylate Cyclase (sGC) III

AIR001 Savara Inc. (SVRA) Nitric Oxide/Nitrogen Monoxide II

Aviptadil Relief Therapeutics Holding AG Vasoactive Intestinal Peptide (VIP) II Receptor Bestatin Eiger BioPharmaceuticals (EIGR) Leukotriene A4 hydrolase; Aminopeptidase II

Boxaban Cumberland Pharmaceuticals (CPIX) Prostaglandin Receptors II

CXA-10 Complexa, Inc NF-Kappa B; NRF2 II

Endothelial Progenitor Cells Northern Therapeutics Inc. Nitric Oxide Synthase; Stem Cells II

Lisuride Sinoxa Pharma Serotonin 5-HT2B receptor II

Ralinepag Arena Pharmaceuticals, Inc. (ARNA) Prostacyclin Receptors II

Source: BioMedTracker, Company data 34 Oncology Pharmaceuticals

Darzalex and Imbruvica Key Drivers of JNJ’s Oncology Business, with Many Similarities in Development to Date and Areas for Future Upside

. Imbruvica and Darzalex are both examples of successful business development arrangements that have delivered new growth drivers to JNJ . JNJ was able to realize the potential for both assets, which were developed at smaller biotech companies, before the market − Imbruvica came from Pharmacyclics (now part of ABBV) − Darzalex came from Genmab . Leveraging JNJ’s R&D and commercial capabilities, both products were rapidly developed and have had highly successful launches in their initial indications, with opportunities for significantly more upside as data for future indications matures . Focus to date for both products has been on liquid tumors, but potential for each to move into solid tumors also exists

$6,000 $6,000 $5,384 $5,549 $5,153 $5,000 $4,815 $5,000 $4,698 $4,303 $3,986 $4,000 $3,639 $4,000 $3,372 $2,772 $3,000 $3,000 $2,573

$1,950 $1,901 $2,000 $2,000

$1,240 $1,251

Darzalex Sales (Millions) Imbruvica Sales (Millions) $1,000 $572 $1,000

$0 $0 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Source: Company data, Credit Suisse estimates 35 Oncology Pharmaceuticals

Rapid Uptake for Darzalex to Date in Core Multiple Myeloma Indications…

. Darzalex is a CD-38 monoclonal antibody, and treatment can either be part of a combination therapy or monotherapy – First antibody approved in multiple myeloma − Has approvals in 2nd and 3rd line patients − POLLUX and CASTOR studies showed over 60% reduction in the risk of disease progression or death when combined with lenalidomide or Velcade − Multiple ongoing Phase 3 studies in first-line setting − Ultimate goal is to intervene in the early pre-diagnosis stages and prevent people from getting the disease . According to Evaluate Pharma, Darzalex has had the most successful multiple myeloma launch to date – 16,000+ patients treated – Approved in 43 countries, reimbursed in 13 . Main limitation of Darzalex that experts highlight in our conversations is the time needed to infuse Darzalex (as long as 7 hours for the initial infusion and then 3-5 hours for subsequent infusions) – JNJ working with Halozyme on a subcutaneous formulation (soon entering Phase 3) that could eliminate this issue and also potentially lower infusion-related side effects

Source: Company data, Evaluate Pharma, Credit Suisse estimates 36 Oncology Pharmaceuticals

… With Large Darzalex Development Program Ongoing That Extends Well Beyond Multiple Myeloma

. Also in multiple myeloma, JNJ is developing JNJ-7597, which induces T cell-mediated killing of malignant plasma cells . Phase 1 studies of JNJ-7597 are expected to start in 2017

Source: Company data, Credit Suisse estimates 37 Oncology Pharmaceuticals

Credit Suisse Darzalex Estimates Above Sell-Side JNJ Models, But Genmab-Focused Biotech Analysts Remain Well Above Credit Suisse

$7,000 $6,225 $6,032 $6,000 $5,789 $5,384

$5,000 $4,815 $4,303

$4,000 $3,639

$3,000 $2,772

$1,950

$2,000 Darzalex Sales (Millions) $1,240

$1,000 $572

$0 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

JNJ Darzalex Sales Consensus (MM) Genmab Darzalex Sales Consensus Year Mean Median Year Mean Median 2017 $1,233 $1,188 2017 $1,337 $1,374 2018 2,087 2,157 2018 2,226 2,174 2019 2,689 2,689 2019 3,967 3,326 2020 3,415 3,632 2020 5,097 4,621 2021 3,638 3,638 2021 6,609 6,007 2022 - - 2022 7,036 7,088 2023 - - 2023 7,594 7,939 2024 - - 2024 8,341 8,307

. Genmab receives royalties between 12% and 20% on global Darzalex sales, with the 20% royalty tier payable on net sales above $3Bn in a calendar year. It is also entitled to up to $1Bn in development, regulatory, and sales milestones.

Source: Company data, Credit Suisse estimates, BLOOMBERG PROFESSIONALTM 38 Oncology Pharmaceuticals

Imbruvica, Like Darzalex, Has Potential to Move into Multiple New Indications

. Nine Additional Submissions Planned by JNJ from 2017 Through 2021 − Company predicts >$500MM annual sales potential in four of the new indications . Diffuse Large B Cell and Follicular Lymphomas, plus Graft vs. Host Disease and Pancreatic Cancer

Source: Company data, Credit Suisse estimates 39 Oncology Pharmaceuticals

Continued Strong Growth Ahead for Imbruvica Based on Expansion into Additional Indications

Imbruvica Global Sales (in $ Billion) $6

$5.2

$5 $4.7 $4.3 $4.4 $4.0 $4 $3.7 $3.4 $3.2 $3 $2.6 $2.5

$1.9 $2 $1.9

$1.3 $1.3

$0 2016A 2017E 2018E 2019E 2020E 2021E 2022E

CS Estimates Consensus Estimates

. JNJ books ex-US Imbruvica sales and ABBV books US Imbruvica sales, while each then receives a 50% profit share of the region where they are not booking sales

Source: Company data, First Order Analytics, Credit Suisse estimates 40 Neuroscience Pharmaceuticals

Strong Growth for JNJ's LAI Franchise Is Driven by Invega Sustenna & Trinza; Contribution from Risperdal Consta Has Continued to Decline

Invega Sustenna/Trinza Monthly TRx Risperdal Consta Monthly TRx (TRx in Numbers, 3-Month Average YoY Growth in %) (TRx in Numbers, 3-Month Average YoY Growth in %)

100,000 70% 60,000 20% 90,000 60% 15% 80,000 50,000 50% 10% 70,000 40,000 60,000 40% 5% 50,000 30,000 40,000 30% 0% 20,000 30,000 20% (5%) 20,000 10% 10,000 (10%) 10,000

0 0% 0 (15%)

Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

TRx 3-Mon Avg. YoY Growth TRx 3-Mon Avg. YoY Growth

Source: Company data, Credit Suisse estimates, IMS Health 41 Neuroscience Pharmaceuticals

Invega Trinza Helps JNJ's LAI Franchise to Maintain Leadership with ~79% of TRx Share

Schiz LAIs TRx Market Share Market Share 100% 4% 90% 12% 80% 17% 70% 0.5% 60% 50% 40% 47% 30% 20% 10% 20% 0%

Risperdal Consta Invega Sustenna Zyprexa Relprevv Abilify Maintena Invega Trinza Aristada

Source: Company data, Credit Suisse estimates, IMS Health 42 Neuroscience Pharmaceuticals

LAIs Have Compelling Medical Proposition in Treating Schizophrenia Patients, with Strong Rationale to Move Earlier in Treatment Paradigm

Schizophrenia Is a Chronic, Severely Disabling Brain Disorder – The disease is marked by positive symptoms (hallucinations and delusions) and negative symptoms (depression, blunted emotions, and social withdrawal), as well as by disorganized thinking – An estimated 2.4 million Americans have schizophrenia, with men and women affected equally – Relapse is primarily driven by poor compliance, resulting in increased morbidity and higher hospitalization rates

We See Robust Long-Term Market Growth for the Long-Acting Injectables (LAIs) Market – There is room for higher adoption in the US (only ~6% patients with schizophrenia were prescribed Invega Sustenna or Risperdal Consta), which is still well below Europe (for example, Germany at ~11% or Spain at ~21%) – New players (including Otsuka/Lundbeck and ALKS) will likely help boost market growth, especially as marketing of oral competitors declines as those products lose patent protection – Risperdal Consta is losing share to more advanced Invega Sustenna/Trinza franchise

Focus on Relapse Prevention Helps Patients and Payors and Supports the Use of LAIs – Substantial evidence supports the need for relapse prevention, as multiple relapses can cause irreversible consequences – Substantial pharmacoeconomic benefit supports the use of LAIs; average annual hospitalization payments were ~35% lower for patients after switching from oral to LAI antipsychotic treatment – We expect formulary coverage for the LAIs to continue to improve over time

There Is an Opportunity to Move LAIs Earlier in Treatment, Particularly Newly Diagnosed Patients at the Time of First Episode or Patients Who Have Had One Relapse but Are Currently Stable – Currently, LAIs are most frequently used in patients following multiple relapses

Source: Company data, Credit Suisse estimates, Scientific presentations/publications 43 Neuroscience Pharmaceuticals

As Longer-Acting Therapies Gain More Acceptance…

LAIs TRx Share by Dosage Frequency:

2013 2015 MAT June 2017* 3 months, 2% 1-3 months, 1% 3 months, 10%

<1 month, 23% <1 month, 34% 1 month, 49% <1 month, 51% 1 month, 64% 1 month, 66%

* Aristada’s 882mg dose can be administered either once monthly or once in six weeks. For our analysis, we assumed half of the 882mg TRx are prescribed once monthly and the other half are for once in six weeks.

Source: IMS Health, Credit Suisse estimates 44 Neuroscience Pharmaceuticals

…Drug Manufacturers Are Preparing to Provide More Dosage Frequency Options

JNJ, in its recently held Pharma Business Review, disclosed plans to develop a six-month version of paliperidone palmitate and its plan to file the drug with the FDA in 2021 – JNJ also showed data supporting its view that the longer the antipsychotic dosing interval, the longer patients remain stable even after discontinuing the medication

Dosage Frequency-> < 1 month 1 month 1 month – 3 months > 3 months

Risperdal Consta Invega Sustenna Invega Trinza Paliperidone palmitate JNJ (Once in 2-weeks) (Once monthly) (Once in 3-months) (Once in 6 months) 1

Abilify Maintena Abilify Maintena Otsuka/Lundbeck (Once monthly)2 (Once in 2-months)3

Aristada Aristada (Once monthly) (Once in 6-weeks) Alkermes Aristada (Once in 2-months)

. Marketed drugs . Drugs in various development phase

1 - Invega Trinza six months (once in six months) is entering phase 3 in 2018, and JNJ plans to file with the FDA in 2021 2 - sNDA is filed with the FDA for Abilify Maintena’s line extension into bipolar I disorder and PDUFA is on July 28, 2017 3 - Per clinicaltrials.gov, Otsuka/Lundbeck are planning to start a phase 1 trial of Abilify Maintena two-month dosage in June 2017

Source: Company data, Credit Suisse estimates, clinicaltrials.gov 45 Neuroscience Pharmaceuticals

JNJ Takes the Lead in Expanding Dosage Duration Options with a Phase 3 Study of a Six-Month Version of Paliperidone Palmitate

Invega Trinza Represents a Potential Improvement in the Dosing Regimen for the Drug, Again Utilizing ALKS’s NanoCrystal technology – Invega Trinza was approved in the US in May 2015 and in the EU in May 2016 – Market share for Trinza has reached ~12% in the US, suggesting that physicians are open to prescribing longer duration therapies – The drug is priced in parity with Invega Sustenna, but patients can transition to Invega Trinza only after at least four months of treatment on Invega Sustenna

Many Schizophrenia Patients Are Hospitalized Multiple Times Due to Non-Adherence to Treatment – JNJ’s finding that Invega Trinza can protect patients from relapse for up to 274 days after stopping the therapy has led the company to potentially develop an even longer-acting option – JNJ’s studies found that the longer the dosage frequency the more time to relapse after stopping the medication, giving caregivers more time to put patients back into treatment before a relapse sets in – JNJ is planning to start phase 3 studies of paliperidone palmitate with six-month dosage duration, with a FDA approval possible in the 2021 timeframe

Source: Company data, IMS Health, Credit Suisse estimates 46 Neuroscience Pharmaceuticals

Regulatory and Legal Pathway to Decide the Timing of Risperdal Consta Follow On Version

Product US Patent Expiry

Risperdal Consta Nov 2020

Invega Sustenna May 2019

Invega Trinza Nov 2017; May 2018 (FDA Exclusivity)

Luye Pharma, a China-based pharma company, is developing LY03004, a branded generic version of Risperdal Consta – Company has completed three clinical trials for the drug, and the FDA has confirmed in October 2015 that no additional trials are needed for an NDA submission – Risperdal Consta is protected by six unexpired Orange book patents, three expiring in 2017, three in 2019, and the last one by Nov 2020 – In 2016, Luye Pharma filed two IPR petition against the ‘061 patent expiring in 2020 (owned by Alkermes), one of which has been denied and the other instituted with oral argument scheduled for Aug 28, 2017. A decision on the instituted IPR against the ‘061 patent would be expected latest by November 30, 2017. – We expect Luye to file under branded generic (505(b)(2)) pathway referencing Risperdal Consta and certifying as paragraph IV. JNJ has mentioned that it will vigorously defend its intellectual property rights and that LY03004 will likely have to battle it out through the US legal system before being able to enter the US market

Source: Company data, FDA.gov, EvaluatePharma, Credit Suisse estimates 47 Neuroscience Pharmaceuticals

Esketamine’s Novel Mechanism of Action Brings Potential for Enhanced Efficacy Over Standard Antidepressants

. Esketamine enhances synaptic plasticity by targeting the N-methyl-D-aspartate (NMDA) receptor − Esketamine binds and blocks the NMDA glutamate receptor on the inhibitor interneuron − As a result, there is increased firing of glutamate due to reduced inhibitory activity − Glutamate is the primary excitatory neurotransmitter in the brain and increased release causes activation at the AMPA (α-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid) receptors − Activation opens the pore of the channel allowing for sodium ions across the neural membrane for depolarization, which then causes a release of magnesium ions from the NMDA receptor channel, permitting calcium ions to pass through the pore − The action potential stimulates production and release of potential antidepressant-like effects such brain derived neurotrophic factors (BDNF) . BDNFs are proteins that help to support the survival of existing neurons and encourage the growth and differentiation of new neurons and synapses

Esketamine Mechanism of Action

Source: Company data, Credit Suisse estimates 48 Neuroscience Pharmaceuticals

Large Depression Market Currently Still Limited by Relatively Low Levels of Efficacy, Slow Onset of Action, and Side Effects . According to the Anxiety and Depression Association of America, Major Depressive Disorder (MDD) affects more than 15 million American adults annually

− IMS data suggest depression market is a $4Bn+ market, with total Rx growing 3-5% YoY since 2010 . Standard antidepressants are selective serotonin reuptake inhibitors (SSRIs) and serotonin-norepinephrine reuptake inhibitors (SNRIs) − SSRIs/SNRIs block reuptake of serotonin and/or norepinephrine in presynaptic cell − More serotonin and/or norepinephrine is then available in synaptic cleft to bind to post synaptic receptor − The binding of these neurotransmitters to the post synaptic receptors helps alleviate the symptoms of depression . Issues with standard antidepressants include: − Low Initial Treatment Efficacy: Over 30% of depression patients in US have treatment resistant depression − Slow Rate of Onset: may take 4-8 weeks for patients to experience antidepressant effects − Undesirable Side Effects: weight gain, nausea and insomnia among common side effects SSRIs Mechanism of Action

Source: Company data, Credit Suisse estimates, Lattimore, et al. 2005 49 Neuroscience Pharmaceuticals

Rapid Onset of Action of Esketamine Encouraging, but Potential Safety Concerns Leads to Questions on Commercial Opportunity

. In Phase 2 studies, 58% of patients achieved response in . Phase 2 data also showed rapid response in patients at the first 2 hours following intranasal esketamine dose imminent risk for suicide when given in addition to SOC Percentage of Patients Achieving Response at 2 Hours Post Intranasal Resolution of Suicide Risk Assessment Score at 24 Hours Esketamine Dose Versus at 8 Weeks with Conventional Treatments

. In addition to the rapid onset, intranasal esketamine’s non-invasive formulation contributes to the product’s appeal . However there are a few questions surrounding the product’s commercial opportunity − Given that esketamine is an enantiomer of ketamine, it is at risk of a similar side-effect profile similar to ketamine . At their last Pharma Business Review in May, the company highlighted they believe the drug has a manageable side-effect profile of esketamine which generally resolves within 2 hours of dosing − Additionally, esketamine is required to be administered under the observation of a health care provider, which could limit the commercial uptake of the drug but could also ensure that the drug is used appropriately by patients

Source: Company data, Credit Suisse estimates 50 Neuroscience Pharmaceuticals

Expected Launch of Next Generation of Depression Drugs Could Transform the Treatment Resistant Depression Market . Phase 3 data presentation and filing of esketamine in treatment-resistant depression is anticipated in 2018 . Other assets in development with novel mechanisms of action could expand use of next-generation depression drugs − Rapastinel is weak partial agonist at the NMDA receptor site being developed by AGN . IV formulation currently in phase 3, although timing around oral formulation less clear . Despite Esketamine’s intranasal formulation being an advantage over Rapastinel’s IV formulation, Rapastinel’s differing mechanism of action from ketamine, could allow it exhibit a cleaner side effect profile than Esketamine − ALKS 5461 is a combination of buprenorphine and samidorphan acting as a κ-opioid receptor antagonist . Although ALKS 5461’s oral formulation gives it an advantage over both Rapastinel and Esketamine, ALKS failed two of its three Phase 3 trials which has raised some questions around the efficacy of product and ultimate approvability . ALKS is targeting NDA submission of ALKS 5461 in 2H 2017 . We model launch of ALKS 5461, Esketamine and Rapastinel in 2018, 2019 and 2020, respectively

Credit Suisse Projected Sales of ALKS 5461, Esketamine, and Rapastinel

Source: Company data, Credit Suisse estimates 51 Immunology Pharmaceuticals

Remicade Withstanding Biosimilar Pressure in the US for Now, but Additional Biosimilar Entrants Will Likely Lead to a Greater Impact

. JNJ remains confident that it has lost negligible market share (<1%) in the US since the entry of Pfizer’s Remicade biosimilar Inflectra in late 2016 − Have seen some impact on price, but were already giving significant discounts on Remicade even before the entry of biosimilars − No disadvantages to date on any formularies − Lack of interchangeability also will limit impact on GI indications where Remicade use remains strong . We continue to believe the impact of biosimilars is better seen once there are two or more biosimilars on the market − As a result, we will be closely watching how the entry of MRK/Samsung’s biosimilar Remicade (which is expected soon) will impact US Remicade sales in the coming quarters − US Remicade sales represented ~24% of JNJ’s total Pharma sales in 2016 and ~13% of JNJ’s total company sales, although the earnings contribution is significantly greater than that

Remicade US Sales (in $ Billion) $6

$4.8 $4.7 $5 $4.5 $4.2 $4 $3.6 $3.1 $3 $2.6

$0 2015 2016 2017E 2018E 2019E 2020E 2021E

Source: Company data, Credit Suisse estimates 52 Immunology Pharmaceuticals

Marketed and Pipeline Assets Adding Diversity to JNJ’s Immunology Franchise Beyond Remicade

. Total Remicade Sales to JNJ in 2016 Were ~$7.0Bn − Though biosimilar pressure is eroding Remicade sales outside of the US and we expect the same to eventually happen in the US, the company has done a reasonable job of diversifying its Immunology business beyond just Remicade with marketed products such as Stelara and Simponi and pipeline assets such as guselkumab and sirukumab

WW Immunology Sales in 2014 WW Immunology Sales in 2020

(~$10.2Bn total) (~$12.5Bn total)

35%

Remicade

50% Remicade Simponi 50% All Other Immunology Products Stelara 42% Other

17%

*Others include Guselkumab and Sirukumab

Source: Company data, Credit Suisse estimates 53 Cardiology Pharmaceuticals

New Indications to Drive Expansion of the Xarelto Market

. Current indications in atrial fibrillation (A-Fib) and venous thromboembolism (VTE) yield a potential patient population of 7-8MM patients annually . There are an additional ten trials under way with label-altering potential − JNJ estimates these additional indications could expand Xarelto’s market to 30-35MM patients annually − BMY/PFE are not pursuing these additional indications for Eliquis, leaving Xarelto alone to compete with the current standards of care for most of these indications . Note PTLA did recently receive approval for Beyvexxa for the acute medically ill population

Source: Company data, Credit Suisse estimates 54 Cardiology Pharmaceuticals

COMPASS Leads the Way for Xarelto Market Expansion

. JNJ estimates an additional 10-12MM patients with . Other key trials to monitor include: CAD/PAD could become candidates for Xarelto based − COMMANDER (chronic heart failure) on the results of the COMPASS trial − VOYAGER (PAD) − Trial was stopped over a year early for positive efficacy in cardiovascular outcomes − MARINER (VTE in medically ill patients) − Detailed data to be presented at the European Society of Cardiology Meeting on August 27th

Source: Company data, Credit Suisse estimates 55 Cardiology Pharmaceuticals

Multiple Upcoming Xarelto Catalysts Should Allow for the Product to Regain the Factor Xa Throne from PFE/BMY’s Eliquis

Trial Indication Status Catalyst Timing

Completed Early Data Aug 27, 2017

Enrolling Data Mid 2018

Enrolling Data 1Q 2018

Enrolling Data 1H 2019

Enrolling Data Mid 2018

Enrolling Data 2019

Enrolling Data 2022

Priority Review PDUFA Oct 27, 2017

Completed NDA Filing Pending*

* The trial was completed in September and published in November 2016, but the company has not provided an update on a filing timeline

Source: Company data, Credit Suisse estimates 56 Cardiology Pharmaceuticals

CANVAS Data Validates Cardiovascular Benefits of SGLT-2s, but Safety Concerns Likely to Pressure Invokana’s Future Outlook

. On CANVAS’s primary composite MACE outcome . Amputation risk likely to limit benefit Invokana will (including CV death, non-fatal heart attack, and see from CANVAS non-fatal stroke), there was a 14% reduction seen in − Recent FDA Drug Safety Communication highlighted a risk patients who were treated with Invokana as compared of increased amputations with Invokana and likely inclusion to placebo of a Black Box Warning in the Invokana package insert − Same reduction seen by LLY’s Jardiance in its − CV and kidney benefits outweigh amputation risk and EMPA-REG Outcomes trial possible over time that class-related language around amputations could end up in the Jardiance label, as is the − Overall, CANVAS and EMPA-REG were case in the EU, however for now at least the difference in comparable on key efficacy endpoints labels between Invokana and Jardiance could give LLY the commercial advantage

Sources: Company data, Credit Suisse research, Zinman B et al. N Engl J Med. 2015; Wanner K et al. N Engl J Med. 2016 57 Product Story: Medical Devices Largest Global Medical Devices Business with Broad Base of Market-Leading Offerings Medical Devices

Global MedTech Market Currently Expanding at 4-6% CAGR; However, Many Markets Remain Underpenetrated Minimally Invasive Surgery (General Surgery) Patients not receiving treatment 34%

$470

Patients receiving 66% treatment

$370 $340 Ablation (% with AF Diagnosis)

$250 2%

98% MedTech Market Size ($US Billions)

2005 2010 2015 2020 Total Knee Replacements (% with Symptomatic Year OA Diagnosis)

99%

Sources: Company data, Credit Suisse estimates and analysis 59 Medical Devices

Success in Medical Devices Propelled by Disciplined Portfolio Approach That Has Established JNJ as Market Leader in Multiple Categories

Cardiovascular & Surgery Specialty Solutions Orthopedics

Infection Prevention Joint Energy Reconstruction Arrhythmias Endocutters Trauma Vision Care Biosurgery Cranio- Diabetes Care maxillofacial Wound Closure Breast Spinal Surgery Aesthetics

Sources: Company data, Credit Suisse estimates and analysis 60 Medical Devices

Medical Devices Segment Growing at Almost 4% CAGR Over the Next Four Years Driven by Robust Pipeline

JNJ Medical Devices Segment Sales (in $ Billion) $35

$30

$25

$20

$15

$10

$0 2016A 2017E 2018E 2019E 2020E 2021E Recent and Upcoming Launches Driving Growth Surgery Cardiovascular and Specialty Solutions Orthopedics . ECHELON ONE . THERMOCOOL SMARTTOUCH SF Catheter . ATTUNE Knee System Revision . HARMONIC HD 1000i Shear . CARTO SMARTTOUCH 5D Catheter . Elective Foot . SURGICEL ORC Powder . Balloon Catheter for Ablation . ACTIS Hop Stem Anterior Approach

Sources: Company data, Credit Suisse analysis 61 Product Story: Consumer Return of Over-the-Counter Products Helped Drive Consumer Recovery Consumer

JNJ’s Consumer Health Business Focuses on Six Growth Categories Contributing Over $13 Billion in Sales Annually

Beauty OTC Baby Care Oral Health Women’s Health Wound Care

Aging Aging Aging 135 million High incidence population population Population babies born per of cavities and Significant unmet need in Significant unmet year gum disease Chronic Consumer shift to Emerging need in: conditions self-care 75% of births in Access to care in Markets Emerging Emerging Consumer shift to - Sun Care Markets Markets self-care - Anti-aging

Source: Company data, Credit Suisse estimates 63 Consumer

Global Leader in Multiple Product Segments with >50% of Franchise Sales Generated Outside of North America

Geographic Breakdown of JNJ Consumer Sales in 2016

EMEA 28% US 39%

Asia Pacific 17%

Latin America Canada 11% 5%

. Geographical diversity enhances market penetration and status as clear market leader

Sources: Company data, Credit Suisse estimates and analysis 64 Consumer

Anticipate Major Consumer Franchise Sales to Grow at 3% YoY from 2016 to 2021 Driven by 12 Mega Brands

JNJ Consumer Segment Sales (in $ Billion) $15.5

$15.0

$14.5

$14.0

$13.5

$13.0

$12.5

$12.0 2016A 2017E 2018E 2019E 2020E 2021E

. 12 mega brands drive the Consumer segment − Three brands gross over $1Bn annually: Johnson’s Baby, Neutrogena, Listerine − Other mega brands include: Aveeno, Benadryl, Band-Aid, Zyrtec, Carefree, Tylenol, Clean & Clear, Motrin, Le Petit Marseillais

Sources: Company data, Credit Suisse estimates and analysis 65 Consumer

Ongoing Talc Lawsuits Present a Risk but Ultimate Impact Far from Clear

JNJ Talc Lawsuit and Associated Risks Recent SCOTUS Ruling on BMY Case Could Benefit JNJ . There are over 3,000 lawsuits filed that claim JNJ ignored studies linking its baby powder and Shower to . The Supreme Court ruled, in a case involving Shower talc products to ovarian cancer and failed to Bristol-Myers Squibb, that state courts cannot hear warn customers about the risk claims against companies that are not based in the state when the alleged injuries did not occur . The company has denied any links between its talc there use and ovarian cancer . Reaction to the ruling has obviously been mixed . Baby Powder is considered a cosmetic, which does not need to be approved by the FDA − Business Community: In favor of the ruling as it prevents plaintiffs from “shopping” around to find the . So far, Johnson & Johnson have lost four lawsuits most favorable court to bring lawsuits related to the issue − Plaintiffs: Opposed to the ruling as they believe it is − Missouri: $72 million (2016) denying them appropriate access to justice − Missouri: $55 million (2016) . A St. Louis judge declared a mistrial in the latest case − St. Louis: $70 million (2016) where two out of three women at issue were from out − Virginia: $110.5 million (2017) of state . It won its first trial in 2017, are appealing the trial . The Supreme Court ruling may turn out to be a positive losses, while preparing for additional trials this year for JNJ as it may allow for a reversal of talc cases currently under appeal in St. Louis . Given the sheer number of lawsuits as well as the size of some of the judgements to date, the total impact to JNJ could be quite meaningful if it loses many more cases

Source: Company data, Credit Suisse estimates 66 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Financial Outlook Expect Continued Margin Expansion to Contribute to Bottom-Line Growth 2017 Guidance

Credit Suisse Estimates Are Roughly In-Line with JNJ’s Guidance for the Rest of 2017

Source: Company data, Credit Suisse estimates, First Order Analytics 69 Sales CAGR

CS Estimates JNJ’s Sales Growth Will Be Above the Sector Average, Both for Pharma Specifically and for the Company as a Whole

2016-2023 Pharma Sales CAGR 2016-2023 Total Sales CAGR

8.0% 8.0% 7.3% 7.2% 7.0% 6.5% 7.0% 6.0% 6.0% 4.8% 5.0% US Pharma 5.0% 4.6% US Pharma Peers Avg., 3.8% Peers Avg., 4.0% 3.7% 3.7% 3.2% 4.0% 3.1% 2.8% 3.0% 3.0% 2.8% 2.3% 2.3% 2.0% 2.1% 2.0% 2.0%

1.0% 1.0%

0.0% 0.0% JNJ ABBV AGN BMY LLY MRK PFE JNJ ABBV AGN BMY LLY MRK PFE US Pharma Peers US Pharma Peers

Source: Credit Suisse estimates 70 CS vs Consensus

Our Steady Top-Line Growth and a Relatively Faster Bottom-Line Growth Is Modestly Above the Consensus...

CS vs Consensus: Sales Estimates CS vs Consensus: EPS Estimates (Sales in $ Billion) (EPS in $) $95 $10.00 $9.48 $88.6 $9.39 $90 $86.8 $9.50 $85.4 $84.4 $8.87 $85 $82.3 $82.8 $9.00 $8.60 $79.5 $79.9 $8.50 $8.27 $80 $8.13 $75.4 $75.8 $8.00 $7.77 $7.69 $75 $7.50 $7.16 $70 $7.09 $7.00 $65 $6.50 $60 $6.00 $55 $5.50 $50 $5.00 2017E 2018E 2019E 2020E 2021E 2017E 2018E 2019E 2020E 2021E

CS Estimates Consensus CS Estimates Consensus

Source: Credit Suisse estimates, Thomson Eikon 71 EPS Growth

..With the Bottom Line Driven by Sales Growth and Expanding Operating Margin

EPS Growth Breakdown

14%

12%

10% 9.6%

8% 7.2% 6.4% 6.9% 6% 5.4% 4.4% 4% 3.1% 2%

0% 2017E 2018E 2019E 2020E 2021E 2022E 2023E (2%)

(4%)

(6%) Sales Growth Change in Op Margin Share Transaction Others EPS Growth

Source: Credit Suisse estimates, Thomson Eikon 72 Margins

Credit Suisse Margin Assumptions Roughly In-Line with the Consensus

Gross Margin Operating Margin

72% 38% 36% 70% 34% 68% 32% 30% 66% 28% 64% 26% 24% 62% 22% 60% 20% 2016A 2017E 2018E 2019E 2020E 2021E 2016A 2017E 2018E 2019E 2020E 2021E

JNJ - CS Estimates JNJ - Consensus JNJ - CS Estimates JNJ - Consensus

Net Margin

30% 29% 28% 27% 26% 25% 24% 23% 22% 21% 20% 2016A 2017E 2018E 2019E 2020E 2021E

JNJ - CS Estimates JNJ - Consensus

Source: Company data, Credit Suisse estimates, First Order Analytics 73 Balance Sheet and Cash Flow

JNJ’s Balance Sheet Strength and Surplus Cash Flow Provides Room for Further Business Development Activities

Net Debt/Adjusted EBITDA Free Cash Flow Utilization (in $ Billion) $30

1.0x $25 0.5x 0.5x 0.2x $20 0.0x $15 (0.5x) (0.1x) (0.4x) (0.6x) (1.0x) (0.7x) $10 (1.1x) (1.5x) (1.4x) $5 (2.0x) (1.7x) $0 (2.1x) (2.5x) 2017E 2018E 2019E 2020E 2021E 2022E 2023E (2.5x) (3.0x) FCF Debt Transaction, net Dividend Payment Share Repo Surplus Cash

Source: Company data, Credit Suisse estimates 74 GAAP vs. Non-GAAP

JNJ Has Generally Shown Limited Divergence Between Its GAAP and Non-GAAP Results

2014 2015 2016 2017 Sum of 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Last 14Qs GAAP Net Income $4,727 $4,326 $4,749 $2,521 $4,320 $4,516 $3,358 $3,215 $4,457 $3,997 $4,272 $3,814 $4,422 $3,827 $56,521 Specified Items Amortization of Intangible Assets 368 474 417 371 312 318 639 301 282 326 319 344 329 480 5,280 Stock Based Compensation 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Restructuring Charges 0 0 0 0 0 0 0 590 137 141 109 298 161 128 1,564 M&A-Related Costs 118 144 167 325 32 49 32 83 0 0 0 0 38 254 1,242 IPR&D 18 4 0 156 0 0 10 214 0 29 0 0 0 0 431 Collaboration & Milestone 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Sales of Assets Gains/Losses 0 0 (1,948) 49 (26) (3) 0 (33) 0 0 0 0 0 0 (1,961) Litigation Gains/Losses 0 276 411 692 (263) 143 409 0 66 600 55 105 0 493 2,987 Others 0 0 220 0 0 0 0 0 22 24 67 32 0 182 547 Tax Impact (538) (91) 589 (227) 43 (211) (276) (327) (110) (251) (139) (232) 88 (347) (2,029) Non-GAAP Net Income $4,693 $5,133 $4,605 $3,887 $4,418 $4,812 $4,172 $4,043 $4,854 $4,866 $4,683 $4,361 $5,038 $5,017 $64,582 Spread ($34) $807 ($144) $1,366 $98 $296 $814 $828 $397 $869 $411 $547 $616 $1,190 $8,061 As % of GAAP Net Income -1% 19% -3% 54% 2% 7% 24% 26% 9% 22% 10% 14% 14% 31% 14% As % of Sales -0.2% 4.1% -0.8% 7.5% 0.6% 1.7% 4.8% 4.6% 2.3% 4.7% 2.3% 3.0% 3.5% 6.3% 3.2%

As % of GAAP Net Income Amortization of Intangible Assets 7.8% 11.0% 8.8% 14.7% 7.2% 7.0% 19.0% 9.4% 6.3% 8.2% 7.5% 9.0% 7.4% 12.5% 9.3% Stock Based Compensation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Restructuring Charges 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 18.4% 3.1% 3.5% 2.6% 7.8% 3.6% 3.3% 2.8% M&A-Related Costs 2.5% 3.3% 3.5% 12.9% 0.7% 1.1% 1.0% 2.6% 0.0% 0.0% 0.0% 0.0% 0.9% 6.6% 2.2% IPR&D 0.4% 0.1% 0.0% 6.2% 0.0% 0.0% 0.3% 6.7% 0.0% 0.7% 0.0% 0.0% 0.0% 0.0% 0.8% Collaboration & Milestone 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Sales of Assets Gains/Losses 0.0% 0.0% -41.0% 1.9% -0.6% -0.1% 0.0% -1.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -3.5% Litigation Gains/Losses 0.0% 6.4% 8.7% 27.4% -6.1% 3.2% 12.2% 0.0% 1.5% 15.0% 1.3% 2.8% 0.0% 12.9% 5.3% Others 0.0% 0.0% 4.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.5% 0.6% 1.6% 0.8% 0.0% 4.8% 1.0% Tax Impact -11.4% -2.1% 12.4% -9.0% 1.0% -4.7% -8.2% -10.2% -2.5% -6.3% -3.3% -6.1% 2.0% -9.1% -3.6% Non-GAAP Net Income 99% 119% 97% 154% 102% 107% 124% 126% 109% 122% 110% 114% 114% 131% 114%

Looking over the past 14 quarters, JNJ has generally limited divergence between its GAAP and non-GAAP results (except 4Q14). In 4Q14, the relatively large divergence was driven by an increase in the litigation accrual, integration costs related to Synthes acquisition, and an in-process research and development charge. Note that JNJ started reporting non-GAAP results excluding amortization from 1Q15 onward – Based on the 2015 earnings reports, we were able to capture amortization expenses for the four quarters of 2014 as well

Sources: Company data, Credit Suisse estimates and analysis 75 GAAP vs. Non-GAAP

Amortization of Intangible Assets Main Add Back to Non-GAAP Net Income Since 2014 JNJ – Reconciliation of GAAP to Non-GAAP Net Income (Last 14 Qs Aggregate Net Income in $ Million) JNJ GAAP Net Income to Non-GAAP Net Income Bridge – Sum of Last 14Qs $68,000 $547 $66,000 $2,029 $431 $0 $64,000 $1,242 $1,961 $2,987 $1,564 $62,000 $0 $60,000 $5,280 $58,000 $64,582 $56,000 $54,000 $56,521 $52,000 $50,000

Over the observed period, amortization expenses top the add-backs to arrive at non-GAAP net income, followed by litigation expenses and legal settlement charges A gain of $1,948M related to divestiture of Ortho-Clinical Diagnostics business was recorded in 3Q14 and forms the majority of the Gains from sales of assets Restructuring charges are another significant adjustment item during the observed period

Sources: Company data, Credit Suisse estimates and analysis 76 GAAP vs. Non-GAAP

Amortization and Litigation Expenses Main Add Back in 2Q 2017

JNJ – Reconciliation of GAAP to Non-GAAP Net Income (2Q17 Net Income in $ Million) JNJ GAAP Net Income to Non-GAAP Net Income Bridge – 2Q17 $5,500 $182 $347 $5,000 $493 $0 $0 $0 $4,500 $254 $0 $128 $4,000 $480 $5,017

$3,500 $3,827

$3,000

For 2Q17, Litigation expenses followed by Amortization expenses and M&A related costs are the major reasons for divergence between GAAP and non-GAAP net income $213M of M&A related costs is related to acquisition of Actelion and $41M is related to acquisition of the Abbott Medical Optics business $182M of charges related to impairment of Diabetes assets are placed under “Others” in the above chart

Sources: Company data, Credit Suisse estimates and analysis 77 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Business Development Business Development

Actelion Deal the Largest of JNJ’s Recent Business Development Efforts

Deal Value Ann. Date Target Name JNJ's Segment (MM) Jan 2017 Actelion Pharmaceuticals Ltd $29,039 Pharma

Apr 2011 Synthes Inc $18,205 Medical Devices JNJ's Acquisitions by Business Segments Sep 2016 Abbott Medical Optics Inc $4,325 Medical Devices (in $ Billion)

Jun 2016 Vogue International Inc $3,300 Consumer $35 Sep 2014 Alios BioPharma Inc $1,750 Pharma $30 Sep 2010 Crucell NV $1,742 Pharma

Dec 2008 Mentor Corp $1,114 Medical Devices $25

Jun 2013 Aragon Pharmaceuticals Inc $1,000 Pharma $20 May 2009 Cougar Biotechnology Inc $912 Pharma $15 Jul 2009 Elan Corp PLC $885 Pharma

Dec 2009 Acclarent Inc $785 Medical Devices $10

Sep 2009 Crucell NV $444 Pharma $5 Jul 2010 Micrus Endovascular Corp $398 Medical Devices $0 Nov 2008 Omrix Biopharmaceuticals $387 Pharma 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mar 2008 Beijing Dabao Cosmetics $328 Consumer Pharma Medical Devices Consumer May 2011 JB Chemicals $245 Consumer

Jul 2016 Ci:z Holdings Co Ltd $205 Consumer

Source: Company data, Credit Suisse estimates 80 Tax Reform

Greater Access to Ex-US Cash Could be an Important Driver for JNJ

. Since the election of President Trump, there has been increased focus on the potential for comprehensive corporate tax reform in the US

. More importantly than the actual tax rate, we could see changes implemented that allow for US-domiciled companies such as JNJ to have greater access to cash or earnings that are currently outside of the US − This could be in the form of a one-time repatriation holiday (which we view as likely) or could be through a broader change to a territorial-based tax system (which we view as less likely) − As we enter 2H 2017 with very little progress on the topic to date, it is looking like we may need to wait until 2018 to see anything meaningful pass on corporate tax reform

. JNJ is one of the companies are among the list of US companies that have the most cash and/or earnings currently parked overseas − Greater flexibility to access this cash could increase the amount of cash that JNJ could use for business development/M&A and/or returning cash to shareholders

US Pharmaceuticals Ex-US Cash and Earnings Earnings as a % Cash as a % of Ticker Company Ex-US Earnings (MM) of S&P 500 Ex-US Cash (MM) S&P 500 PFE Pfizer $ 80,000 3.5% $ 14,140 1.9% MRK Merck $ 59,200 2.6% $ 11,140 1.5% JNJ Johnson & Johnson $ 58,000 2.5% $ 38,200 5.1% LLY Eli Lilly $ 26,500 1.2% $ 7,120 1.0% ABBV AbbVie $ 25,000 1.1% $ 7,150 1.0% BMY Bristol-Myers $ 25,000 1.1% $ 7,500 1.0% Note: Allergan and Teva are domiciled outside the US and do not disclose ex-US earnings and cash numbers

Source: Company data, Credit Suisse estimates 81 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Catalysts Macro Factors and Pharma Product News Key Upcoming JNJ Catalysts Catalysts

Key Upcoming JNJ Catalysts: Pharma Product News and Macro Factors

Time

3Q 2017 4Q 2017 1H 2018

Progress on Corporate Tax Reform, US Drug Pricing and Healthcare Reform

Remicade

Entry of additional US biosimilars High August 27 October 28 Talacotuzumab Phase 3 COMPASS Results for Xarelto PDUFA (Priority Review) for Xarelto in Phase 3 Results

in CAD/PAD long-term secondary VTE prevention

September 22 Invokana Esketamine PDUFA for sirukumab in moderate-severe Final Decision Expected on FDA Drug Phase 3 Results

rheumatoid arthritis Safety Communication

Importance Imbruvica

Medium Apalutamide Phase 3 SHINE Top-Line Results Phase 3 SPARTAN Results (w/Bendamustine and Rituximab)

Darzalex Apalutamide Phase 3 ALYCONE Top-Line Results Phase 3 Chemo-Naive Results

(w/Bortezomib/Melphalan/Prednisone) Low Xarelto Phase 3 MARINER Trial Completion in Acute Medically Ill Post-Discharge

Source: Company data, Credit Suisse estimates 84 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Investment Risks Competition, Data Readouts in Pharma Pose Greatest Risk to Our Call Investment Risks

Risks

Unexpected Challenges to Main Pharma Products

Pipeline Failures

Macro Challenges

Integration Setbacks

Along with the recently completed Actelion deal, JNJ has completed other smaller-sized deals and will likely continue doing so going forward, posing integration challenges to the company.

Source: Company data, Credit Suisse estimates 87 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Valuation We Assign a $148 Target Price to JNJ Shares Valuation

Comp Sheet Provides Perspective on How JNJ Stacks Up to Peers (1/2)

Market Cap P/E EV/EBITDA EV/Sales Company ($ mm) 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 Johnson & Johnson $362,213 20.0x 18.7x 17.3x 16.3x 14.3x 13.5x 12.0x 11.3x 4.9x 4.7x 4.4x 4.3x Major Pharma (US) Allergan Plc. $82,533 18.2x 15.3x 14.1x 12.5x 14.9x 14.2x 13.2x 11.8x 7.6x 7.0x 6.5x 6.0x AbbVie Inc. $114,957 14.9x 13.1x 10.9x 9.7x 12.9x 11.7x 10.0x 9.1x 5.7x 5.2x 4.8x 4.6x Bristol-Myers Squibb Co. $90,181 19.4x 18.6x 17.9x 15.9x 16.6x 15.6x 16.1x 14.2x 4.8x 4.6x 4.6x 4.3x Eli Lilly & Co. $92,351 23.8x 20.2x 19.2x 17.6x 18.5x 15.4x 14.7x 13.8x 4.7x 4.5x 4.4x 4.3x Merck & Co., Inc. $170,702 16.5x 16.2x 15.0x 13.6x 12.4x 12.2x 11.6x 10.7x 4.6x 4.6x 4.4x 4.2x Pfizer $198,663 13.9x 13.2x 12.3x 12.0x 11.2x 10.7x 10.2x 10.2x 4.3x 4.3x 4.2x 4.2x Average (cap-weighted) 17.0x 15.6x 14.4x 13.2x 13.7x 12.8x 12.1x 11.2x 5.1x 4.9x 4.7x 4.5x Major Pharma (EU) AstraZeneca $83,757 24.9x 36.3x 23.2x 17.6x 12.3x 15.2x 12.1x 10.3x 3.3x 3.4x 3.4x 3.5x Bayer $104,362 15.1x 15.7x 14.8x 14.1x 11.7x 10.9x 10.6x 10.1x 2.2x 2.1x 2.1x 2.0x GlaxoSmithKline plc $102,728 16.8x 15.5x 15.7x 14.5x 10.7x 9.3x 9.2x 8.5x 3.5x 3.2x 3.2x 3.0x Novartis $218,863 18.0x 17.9x 16.2x 15.5x 15.8x 16.3x 15.3x 15.0x 4.7x 4.7x 4.5x 4.4x Novo Nordisk A/S $83,549 18.4x 17.2x 15.7x 14.7x 10.1x 9.5x 9.3x 8.8x 4.7x 4.4x 4.3x 4.2x Roche $218,631 17.6x 17.0x 15.5x 14.7x 12.5x 10.9x 10.1x 9.7x 4.4x 4.3x 4.2x 4.1x Sanofi $119,516 14.8x 14.8x 13.8x 12.9x 9.3x 8.5x 8.1x 7.8x 3.2x 3.1x 3.2x 3.1x Average (cap-weighted) 17.7x 18.4x 16.1x 14.8x 12.3x 11.9x 11.1x 10.6x 3.9x 3.8x 3.7x 3.6x Biotech - Large Cap Amgen, Inc. $130,519 15.2x 14.3x 13.9x 13.4x 10.6x 10.4x 10.4x 10.3x 5.5x 5.6x 5.7x 5.8x Biogen, Inc. $59,944 13.8x 13.8x 13.0x 12.7x 10.9x 10.5x 9.9x 9.7x 5.6x 5.6x 5.4x 5.3x Celgene Corporation $104,841 22.6x 18.2x 14.0x 11.4x 29.4x 16.8x 13.9x 11.2x 9.8x 8.4x 6.7x 5.6x Gilead Sciences, Incorporated $93,679 6.2x 8.6x 9.8x 9.3x 5.7x 7.1x 8.3x 8.3x 3.5x 4.3x 5.0x 5.1x Regeneron Pharmaceuticals, Inc. $52,893 43.7x 40.0x 30.1x 25.2x 36.4x 28.9x 23.2x 18.2x 10.8x 9.4x 8.4x 7.6x Average (cap-weighted) 18.3x 17.0x 14.9x 13.4x 17.1x 13.4x 12.2x 10.9x 6.7x 6.5x 6.1x 5.8x S&P 500 20.8x 18.8x 17.6x NA 13.4x 12.4x 11.3x 10.5x 3.3x 3.1x 2.9x 2.7x

Sources: Company data, Thomson Eikon, Credit Suisse analysis 90 Valuation

Comp Sheet Provides Perspective on How JNJ Stacks Up to Peers (2/2)

Market Cap Operating Margin Net Margin '16-'21 CAGR '16-'21 Dividend Company ($ mm) 2016 2017 2018 2019 2016 2017 2018 2019 EPS Sales PEG Yield Johnson & Johnson $362,213 31% 31% 33% 34% 26% 26% 27% 27% 7.2% 4.5% 2.76 2.5% Major Pharma (US) Allergan Plc. $82,533 50% 48% 49% 50% 38% 37% 37% 39% 13.5% 7.7% 1.35 1.1% AbbVie Inc. $114,957 42% 43% 47% 49% 31% 32% 34% 37% 12.1% 5.6% 1.23 3.5% Bristol-Myers Squibb Co. $90,181 27% 26% 25% 28% 24% 24% 25% 26% 8.5% 4.0% 2.27 2.8% Eli Lilly & Co. $92,351 21% 25% 26% 27% 18% 20% 20% 22% 14.3% 4.9% 1.66 2.5% Merck & Co., Inc. $170,702 34% 34% 35% 37% 26% 26% 27% 29% 7.6% 2.9% 2.17 3.0% Pfizer $198,663 35% 37% 38% 38% 28% 29% 29% 30% 6.2% 1.9% 2.25 3.8% Average (cap-weighted) 35% 36% 37% 38% 27% 28% 29% 30% 9.5% 3.9% 1.90 3.0% Major Pharma (EU) AstraZeneca $83,757 17% 12% 18% 24% 11% 8% 12% 17% 20.2% 2.6% 1.23 4.2% Bayer $104,362 15% 17% 18% 18% 13% 12% 13% 13% 3.4% 3.0% 4.45 2.5% GlaxoSmithKline plc $102,728 29% 31% 31% 32% 17% 17% 17% 17% 6.6% 6.1% 2.53 5.0% Novartis $218,863 25% 24% 25% 25% 22% 21% 22% 23% 6.3% 2.0% 2.85 3.4% Novo Nordisk A/S $83,549 43% 43% 43% 44% 34% 33% 35% 35% 9.1% 4.7% 2.03 2.8% Roche $218,631 34% 35% 37% 37% 23% 24% 25% 26% 6.7% 3.2% 2.61 3.4% Sanofi $119,516 26% 27% 28% 29% 21% 20% 22% 23% 6.6% 3.0% 2.24 3.6% Average (cap-weighted) 28% 27% 29% 30% 21% 20% 21% 22% 7.7% 3.3% 2.64 3.5% Biotech - Large Cap Amgen, Inc. $130,519 43% 45% 46% 47% 34% 36% 36% 38% 4.8% 0.0% 3.17 2.6% Biogen, Inc. $59,944 45% 48% 50% 50% 32% 36% 37% 37% 3.2% 2.1% 4.34 - Celgene Corporation $104,841 28% 47% 46% 49% 18% 38% 37% 40% 23.9% 19.1% 0.95 - Gilead Sciences, Incorporated $93,679 58% 56% 55% 57% 44% 40% 39% 40% (2.6%) (5.6%) -2.35 2.9% Regeneron Pharmaceuticals, Inc. $52,893 27% 29% 33% 36% 18% 18% 23% 26% 21.0% 11.3% 2.08 - Average (cap-weighted) 41% 46% 47% 49% 30% 35% 36% 37% 9.5% 5.0% 1.50 1.4% S&P 500 - 3.4% - 2.4%

Sources: Company data, Thomson Eikon, Credit Suisse analysis 91 Valuation

MedTech Exposure, Diversification Has Boosted JNJ Over Last 12-18 Months, While Pricing Concerns Have Limited Pharma Pure Plays…

Historical FY1 EV/Sales FY1 EV/Sales – Premium/(Discount) To US Pharma Peers 4.8x 4.7x 0% (0.7%) 4.6x (5%) 4.4x (10%) Prem/Disc 3Y 4.2x Avg., (15.5%) 4.0x (15%)

3.8x 3Y Avg., 4.0x (20%) 3.6x (25%) 3.4x 3.2x (30%)

3.0x (35%)

Jul-16 Jul-14 Jul-15

Apr-15 Apr-16 Apr-17

Jan-17 Jan-15 Jan-16

Oct-14 Oct-15 Oct-16

Jun-14 Jun-15 Jun-16

Mar-15 Mar-16 Mar-17

Feb-15 Feb-16 Feb-17

Nov-14 Sep-15 Sep-14 Nov-15 Sep-16 Nov-16

Aug-14 Aug-15 Aug-16

Dec-14 Dec-15 Dec-16

May-17 May-15 May-16

Note: US Pharma Peers included in this comparison are ABBV, AGN, BMY, LLY, MRK & PFE

Source: Company data, Thomson Eikon, Credit Suisse estimates 92 Valuation

… With JNJ Now at Peak PE Multiples Relative to Historical Norms but Still In Line With S&P 500

Historical FY1 PE FY1 PE - Premium/(Discount) vs S&P 500 20x 10% 18.9x 19x 5% 0% 18x Average, -1% Average, 17.0x 0% 17x (5%) 16x

(10%) 15x

14x (15%)

Jul-15 Jul-14 Jul-16 Jul-14 Jul-15 Jul-16

Jan-14 Jan-15 Jan-16 Jan-17 Jan-14 Jan-15 Jan-16 Jan-17

Mar-14 Mar-15 Mar-16 Mar-17 Mar-14 Mar-15 Mar-16 Mar-17

Nov-14 Nov-16 Sep-15 Sep-16 Sep-14 Sep-15 Nov-15 Sep-16 Sep-14 Nov-14 Nov-15 Nov-16

May-14 May-15 May-16 May-17 May-14 May-15 May-16 May-17

Source: Company data, Thomson Eikon, Credit Suisse estimates 93 Valuation

Over Multiple Time Points, JNJ has Provided Greater Total Return to Shareholders Than the S&P 500 and S&P Pharma JNJ: 3Y Indexed Share Price Performance 140

130

120

110

100

Jul-14 Jul-15 Jul-16 Jul-17

Apr-15 Apr-16 Apr-17

Oct-14 Oct-15 Oct-16

Jan-15 Jan-16 Jan-17

Jun-15 Jun-16 Jun-17

Feb-17 Feb-15 Mar-15 Feb-16 Mar-16 Mar-17

Nov-15 Nov-16 Sep-14 Nov-14 Sep-15 Sep-16

Aug-14 Aug-15 Aug-16

Dec-14 Dec-15 Dec-16

May-15 May-16 May-17

Indexed JNJ Price Indexed S&P 500 Indexed S&P Pharma

YTD 1-Year 3-Year 5-Year JNJ 16.7% 7.4% 32.1% 93.8% Price S&P 500 9.9% 13.7% 24.4% 79.2% Return S&P Pharma 8.8% -1.3% 16.1% 69.4% JNJ 18.2% 12.1% 43.6% 124.1% Total S&P 500 11.1% 15.9% 32.5% 99.4% Return S&P Pharma 10.3% 1.3% 25.1% 93.7%

Source: Company data, Thomson Eikon, Credit Suisse estimates 94 Valuation

Despite the Recent Run-Up, JNJ’s Short Interest Level Suggests the Stock Is Not Overvalued

Short Interest Ratio (Days) (Jun 30, 2017) Short Interest Ratio (Days)

5 7 4.0 4 6 4 3.0 5 JNJ 3Y Avg., 2.9 3 US Pharma 3.4 Peers Avg., 2.4 4 3 2.3 2.1 3 2 1.7 2 2 2.3 1.0 1 1 0 1

Jul-14 Jul-15 Jul-16

Jan-15 Jan-16 Jan-17

Mar-17 Mar-15 Mar-16

Sep-15 Sep-14 Nov-14 Nov-15 Sep-16 Nov-16

May-16 May-17 JNJ ABBV AGN BMY LLY MRK PFE May-15 US Pharma Peers JNJ US Pharma Peers Avg. JNJ 3Y Avg.

Source: Company data, Thomson Eikon, Credit Suisse estimates 95 Valuation

Blended Target Price (75% DCF/25% Relative) Suggests That JNJ Is Worth $148/Share

Source: Company data, Credit Suisse estimates 96 Valuation

Our Sum-of-the-Parts Valuation Suggests a Value of $145/Share

Sales CAGR ('18-'21) 4.7% 3.0% 3.0% 3.8% Sales CAGR ('18-'21), Peers 3.0% 5.0% 4.0% NA

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Source: Company data, Credit Suisse estimates, Thomson Eikon 97 Blue Sky/Grey Sky

Scenario Analysis Suggests Blue Sky Valuation $158, Grey Sky $120

Controversy Bull Case Bear Case Credit Suisse View

The first-in-class position for several Remicade decline is likely to accelerate as

Source: Company data, Credit Suisse estimates, Thomson Eikon 98 PharmaValues

Our PharmaValues Valuation Suggests an NPV of $134.10 for JNJ…

Total BrandedAbbott Drug NPVLabs per share ($) Total BrandedDrugwise Drug NPV NPV per per Share Share (USD) (in $)62.52 Total Group NPV per share (USD) 132.37

Source: Company data, Credit Suisse estimates 99 PharmaValues

… Which is Middle of the Pack For US Major Pharma on NPV/EV Basis

Source: Credit Suisse PharmaValues Database 100 HOLT

HOLT® DCF Based on Research Forecasts Indicates a Valuation for JNJ of $137.6/Share

CFROI & Discount Rate (in %) EBITDA Margin (in %)

Source: HOLT, Credit Suisse estimates 101 HOLT

Incremental Growth has a Significantly Greater Impact on JNJ’s Valuation Than Incremental Margins

Base case based on Research forecast

Source: HOLT, Credit Suisse estimates 102 HOLT

Actelion Acquisition Accretive to JNJ’s Returns on Capital, But Valuation Rich Based on CFROI Implied by Price

JNJ + ATLN Pro forma returns on capital Actelion – historical performance and expectations implied by purchase (CFROI LFY %) price

25 16.4% 15.5% 20

12.4% 10

-5

-10 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024Market- + = implied CFROI Forecast CFROI Discount Rate

Historical median Market Implied CFROI

JNJ ATLN JNJ+ATLN Pro forma The green dot represents the future returns on capital required to validate the purchase price paid of CHF288 (US$280) per share of Actelion

Source: HOLT, Credit Suisse estimates 103 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Company Background Company Overview

Business Overview

Johnson & Johnson is a large, diversified health care company engaged in the discovery, development, manufacture, and sale of broad range of products in the health care field

JNJ is a holding company and operates through a group of 275 companies in 60 countries, employing 128,700 people

JNJ reports its revenue under three different business segments: Pharmaceuticals, Medical Devices, and Consumer Healthcare products

JNJ was incorporated in 1887 and is headquartered in New Brunswick, New Jersey, USA

Source: Company data, Credit Suisse estimates 106 Management Team

Johnson & Johnson’s Management Team (1/2)

Start Date Name Position (Current Position) Comments Mr. Gorsky joined JNJ as a sales representative with Janssen Pharmaceutical Inc. and has held various positions of increasing responsibilities within the organization. In 2001, he became president of Janssen Pharmaceutical Inc., and in 2003 he was made company group chairman of JNJ's pharmaceuticals business in EMEA. In 2004, Mr. Gorsky, joined Novartis Pharmaceuticals Corporation, as the head of the company's pharmaceuticals business in North America and in 2008, he re-joined JNJ as company group chairman for Ethicon. He was appointed worldwide chairman of Alex Chairman and CEO 2012 the Medical Devices and Diagnostics Group in September 2009 and later became vice chairman of Gorsky the Executive Committee in 2011. In April 2012, he was elected as member of the Board of Directors and was named chairman of the Executive Committee, before assuming his current responsibilities as the CEO in December 2012. Mr. Gorsky has also spent six years in the U.S. Army. Mr. Gorsky has a bachelor of science degree from the U.S. Military Academy at West Point, New York, and a master of business administration degree from The Wharton School of the University of Pennsylvania. Mr. Caruso joined JNJ in October 1999, after the merger of Centocor and JNJ, as CFO for Centocor, Inc. After that in 1999, he became VP of Finance for Ortho-McNeil Pharmaceutical, Inc. and a member of its management board. In 2003, he was made the VP, Group Finance for JNJ's Dominic Executive Vice 2007 Medical Devices and Diagnostics Group, and a member of its Group Operating Committee. In 2005, Caruso President, CFO Mr. Caruso took responsibility for the JNJs Group Finance organization and became the CFO of the company in January 2007. Before joining JNJ, Mr. Caruso worked with Centocor since 1985. Mr. Caruso has B.S. degree in business administration from Drexel University. Dr. Stoffels joined JNJ in 2002 with the acquisition of Virco and Tibotec; he was CEO of Virco and Chairman of Tibotec. He was made company group chairman, Global Virology, in 2005 and company group chairman, Pharmaceuticals, for worldwide research and development for the Executive Vice CNS and Internal Medicine Franchises in 2006. In 2009, he was appointed global head, R&D, Paul President, Chief 2012 Pharmaceuticals, and worldwide chairman, Pharmaceuticals Group, in 2011. Dr. Stoffels started Stoffels Scientific Officer his career as a physician in Africa, as part of the Janssen Research Foundation (JRF), focusing on HIV and tropical diseases research. Mr. Stoffels has studied medicine at the University of Diepenbeek and the University of Antwerp in Belgium and infectious diseases and tropical medicine at the Institute of Tropical Medicine in Antwerp, Belgium.

Source: Company data, Credit Suisse estimates 107 Management Team

Johnson & Johnson’s Management Team (2/2)

Start Date Name Position (Current Position) Comments Ms. Peterson joined JNJ in December 2012 as group worldwide chairman and is responsible for the Consumer Group of Companies, Johnson & Johnson Supply Chain, and Information Technology. Before joining JNJ, she was chairman and CEO of Bayer CropScience AG in Germany. Before that, Executive Vice Sandra she was president and CEO of Bayer Medical Care and president of Bayer HealthCare AG's President, Group 2012 Peterson Diabetes Care Division. Prior to that, she was at Medco Health Solutions (previously known Worldwide Chairman as Merck-Medco). Ms. Peterson began her career as a consultant at McKinsey & Company, Inc. and has also worked at Nabisco, Inc., and Whirlpool Corporation. Ms. Peterson has a B.A. in government from Cornell University and an M.P.A. in applied economics from Princeton University. Mr. Ullmann joined JNJ in 1989 as a M&A attorney and over the years has served at various levels within the organization. Before assuming his current responsibilities, as VP General Counsel, in January 2012, Mr. Ullmann was corporate secretary from 1999 to 2006. He has also served on the management boards of Johnson & Johnson Consumer Products Company, Inc., Janssen Executive Vice Michael Pharmaceuticals, Inc. (U.S.), McNeil Pharmaceuticals and Johnson & Johnson Sales and Logistic President, General 2012 Ullmann Company, LLC, and was appointed member of the Law Department Operating Committee and Counsel Associate General Counsel in 2002. In 2006, he was appointed General Counsel of the Medical Devices and Diagnostics Group at JNJ. Before joining JNJ, Mr. Ullmann practiced law in New York City. He graduated magna cum laude from Cornell University, College of Arts & Sciences, and also has a law degree from Columbia University School of Law.

Source: Company data, Credit Suisse estimates 108 Compensation

Johnson & Johnson’s 2016 Executive and Director Compensation

Change in Pension & Non-Equity Nonqualified Stock Option Incentive Plan Deferred All Other Name Position Salary Bonus Awards Awards Compensation Earnings Compensation Total

Non-Employee Director Compensation M. C. Beckerle Director 111,667 – 164,985 – – – 17,800 294,452 M. S. Coleman Director 36,666 – 164,985 – – – 20,000 221,651 D. S. Davis Director 135,000 – 164,985 – – – – 299,985 I. E. L. Davis Director 110,000 – 164,985 – – – – 274,985 S. L. Lindquist Director 107,038 – 164,985 – – – 1,500 273,523 M. B. McClellan Director 110,000 – 164,985 – – – – 274,985 A. M. Mulcahy Director 140,000 – 164,985 – – – 20,000 324,985 W. D. Perez Director 130,000 – 164,985 – – – 20,000 314,985 C. Prince Director 130,000 – 164,985 – – – 20,000 314,985 A. E. Washington Director 110,000 – 164,985 – – – 20,000 294,985 R. A. Williams Director 130,000 – 164,985 – – – 20,000 314,985

Executive Compensation Alex Gorsky Chairman & CEO 1,600,000 3,780,000 10,608,901 4,118,398 4,652,556 5,663,771 228,094 26,871,720 Dominic Caruso EVP, CFO 909,500 1,534,800 3,624,523 1,425,643 2,758,967 2,475,956 110,240 11,304,829

Paulus Stoffels EVP, Chief Scientific Officer 1,144,000 1,600,000 4,383,454 1,750,317 2,425,461 2,642,012 380,232 12,725,476 Sandra Peterson EVP, Group Worldwide Chairman 963,462 1,600,000 3,897,074 1,539,002 1,600,000 592,000 141,246 8,732,784 EVP, Worldwide Chairman, Joaquin Duato Pharmaceuticals 875,000 1,400,000 3,198,483 1,260,002 2,158,006 2,535,760 77,278 10,104,529

Source: Company data, Credit Suisse estimates 109 Board of Directors

Johnson & Johnson’s Board of Directors

Name Position Independent Alex Gorsky Chairman N Mary C. Beckerle Director Y Mary Sue Coleman Director Y D. Scott Davis Director Y Ian E. L. Davis Director Y Susan L. Lindquist Director Y Mark B. McClellan Director Y Anne M. Mulcahy Director Y William D. Perez Director Y Charles O. Prince Director Y A. Eugene Washington Director Y Ronald A. Williams Director Y

Source: Company data, Credit Suisse estimates 110 PEERS

Select Output from Credit Suisse’s PEERS Database Highlights Breadth of JNJ’s Reach Within Health Care

Source: Company data, Credit Suisse analysis 111 Table of Contents

Financial Executive Statements Summary

Company Product Background Story

Valuation Financial Outlook

Investment Business Risks Development

Catalysts Financial Statements JNJ Pharma Revenue Forecasts (2016A-2025E) (1/2) Pharmaceuticals FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 '16-'21 '16-'26 Immunology Remicade 6,966 6,270 5,617 4,946 4,320 3,758 3,405 3,031 2,680 2,350 (11.6%) (11.6%) Simponi (golimumab)/Simponi Aria 1,745 1,835 1,937 2,034 2,130 2,165 2,078 1,932 1,773 1,595 4.4% (2.5%) Stelara (ustekinumab) 3,232 3,948 4,484 4,967 5,259 5,441 5,407 5,212 4,994 4,638 11.0% 3.1% Tremfya (guselkumab) 19 102 202 347 522 685 819 944 1,079 NM NM Other Immunology 25 27 28 28 29 30 30 31 31 32 3.4% 2.7% Pipeline Sirukumab (CNTO 136) 10 108 210 373 518 581 641 701 762 NM NM Phase II Pipeline Products 0 0 0 0 0 0 0 NM NM Total Immunology 11,968 12,110 12,274 12,387 12,458 12,433 12,186 11,666 11,123 10,456 0.8% (2.0%) Infectious Diseases Edurant (TMC 278) 573 660 739 781 803 824 843 740 653 578 7.5% (1.1%) Incivo (telaprevir) 0 0 0 0 0 0 0 0 0 0 NM NM Olysio/Sovriad 106 14 7 6 5 5 4 4 3 3 (46.4%) (30.6%) Prezista 1,851 1,658 1,180 590 295 147 74 37 18 9 (39.7%) (45.1%) Other Infectious Diseases 678 605 616 620 624 624 624 624 624 624 (1.6%) (0.8%) Pipeline Phase II Pipeline Products 35 90 200 310 420 510 620 NM NM Total Infectious Diseases 3,208 2,938 2,542 2,032 1,817 1,800 1,855 1,825 1,809 1,835 (10.9%) (5.6%) NeuroScience Concerta 863 656 489 454 435 421 407 395 383 372 (13.4%) (8.3%) Invega 311 247 215 197 181 165 156 146 137 129 (11.9%) (9.0%) Invega Sustenna 1,977 2,169 2,244 2,249 2,233 2,195 2,090 1,964 1,796 1,626 2.1% (3.0%) Invega Trinza 237 357 450 564 709 848 994 1,127 1,184 1,234 29.0% 18.3% Risperdal Consta 893 787 650 527 418 270 188 123 89 64 (21.3%) (25.5%) Other NeuroScience 1,804 1,571 1,480 1,406 1,335 1,269 1,205 1,145 1,088 1,033 (6.8%) (5.9%) Pipeline Intranasal esketamine (depression) 0 110 342 471 559 628 699 747 NM NM Ponesimod (Relapsing MS) 0 0 50 100 150 200 250 300 NM NM Phase II Pipeline Products 0 0 0 40 90 170 240 NM NM Total NeuroScience 6,085 5,786 5,527 5,507 5,701 5,738 5,790 5,819 5,796 5,745 (1.2%) (0.8%) Oncology Velcade 1,224 1,090 981 834 667 467 327 229 160 112 (17.5%) (24.0%) Zytiga 2,260 2,206 2,046 1,343 1,034 886 651 325 163 81 (17.1%) (33.1%) Dacogen (decitabine) 90 95 100 105 110 100 100 90 90 90 2.1% 0.0% Sylvant (siltuximab) 105 187 225 263 285 300 300 300 300 300 23.4% 11.1% Imbruvica 1,251 1,901 2,573 3,372 3,986 4,698 5,153 5,549 5,958 6,371 30.3% 18.6% Yondelis 15 50 60 70 80 90 100 110 120 130 43.1% 25.0% Darzalex 572 1,240 1,950 2,772 3,639 4,303 4,815 5,384 5,789 6,032 49.7% 27.0% Other Oncology 290 252 257 262 267 273 278 284 289 295 (1.2%) 0.4% Pipeline ARN-509 63 325 525 700 900 1,100 1,250 1,400 NM NM Talacotuzumab (AML) 0 0 70 175 350 450 550 600 NM NM Phase II Pipeline Products 50 140 230 300 375 415 435 NM NM Total Oncology 5,807 7,021 8,254 9,395 10,803 12,222 13,274 14,196 15,084 15,847 16.0% 11.1%

Source: Company data, Credit Suisse estimates 114 JNJ Pharma Revenue Forecasts (2016A-2025E) (2/2)

Pharmaceuticals FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 '16-'21 '16-'26 Cardiovascular/Metabolism/Other Procrit/Eprex 1,105 996 896 806 726 653 588 529 476 429 (10.0%) (10.0%) Xarelto 2,288 2,479 2,890 3,303 3,812 4,197 4,733 5,314 4,841 1,622 12.9% (17.7%) Invokana/Invokamet 1,407 1,200 1,341 1,402 1,405 1,393 1,389 1,399 1,264 1,045 (0.2%) (4.0%) Sirturo 78 95 110 125 140 150 160 170 180 190 14.0% 9.9% Others 1,518 1,588 1,603 1,603 1,603 1,603 1,603 1,603 1,603 1,603 1.1% 0.5% Total Cardiovascular/Metabolism/Other 6,396 6,357 6,841 7,241 7,686 7,996 8,473 9,016 8,365 4,889 4.6% (6.0%) Pulmonary Hypertension Opsumit 615 1,306 1,388 1,473 1,511 1,534 1,539 1,522 1,483 NM NM Uptravi 283 850 1,192 1,509 1,823 2,232 2,571 2,406 2,179 NM NM Tracleer 245 366 251 207 189 83 45 49 52 NM NM Other Pulmonary 181 450 518 595 684 787 866 952 1,048 NM NM Pipeline

Total Pulmonary Hypertension 1,324 2,972 3,349 3,784 4,208 4,636 5,020 4,929 4,762 NM NM Total Marketed Products 33,464 35,526 38,240 39,180 40,660 42,003 43,025 43,639 42,562 38,430 4.7% 0.6% Total Pipeline 0 10 170 730 1,590 2,394 3,189 3,904 4,545 5,104 NM NM Total Pharmaceuticals 33,464 35,536 38,410 39,911 42,250 44,398 46,214 47,543 47,107 43,534 5.8% 2.1%

Source: Company data, Credit Suisse estimates 115 JNJ Medical Devices & Consumer Revenue Forecasts (2016A-2025E)

CAGR CAGR Medical Devices FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 '16-'21 '16-'26 Hospital Medical Devices Cardiovascular care $1,849 $2,073 $2,176 $2,285 $2,354 $2,424 $2,497 $2,572 $2,649 $2,728 5.6% 4.3% Diagnostics $66 $1 Orthopaedics(DePuy/Synthes) $9,334 $9,392 $9,670 $9,951 $10,201 $10,430 $10,647 $10,851 $11,046 $11,219 2.2% 2.0% Specialty Surgery/ Other $9,296 $9,410 $9,777 $10,173 $10,547 $10,864 $11,124 $11,391 $11,618 $11,851 3.2% 2.7% Total Hospital Medical Devices $20,545 $20,876 $21,623 $22,409 $23,102 $23,718 $24,268 $24,813 $25,314 $25,799 2.9% 2.5% Consumer Medical Devices Diabetes Care $1,789 $1,687 $1,721 $1,755 $1,790 $1,826 $1,863 $1,900 $1,919 $1,938 0.4% 0.9% Vision Care $2,785 $4,011 $4,182 $4,349 $4,480 $4,569 $4,649 $4,730 $4,813 $4,898 10.4% 6.0% Total Consumer Medical Devices $4,574 $5,698 $5,902 $6,104 $6,270 $6,395 $6,512 $6,630 $6,732 $6,836 6.9% 4.3% Total Medical Devices 25,119 26,574 27,525 28,513 29,372 30,113 30,779 31,443 32,046 32,634 3.7% 2.8%

CAGR CAGR Consumer Products FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 '16-'21 '16-'26 Beauty (Skin Care) $3,897 $4,328 $4,526 $4,707 $4,896 $5,043 $5,194 $5,350 $5,510 $5,675 5.3% 4.1% Baby Care $2,001 $1,938 $1,996 $2,056 $2,118 $2,181 $2,247 $2,314 $2,384 $2,455 1.7% 2.4% Oral Care $1,568 $1,528 $1,574 $1,621 $1,670 $1,720 $1,772 $1,807 $1,843 $1,880 1.9% 2.0% OTC $3,977 $4,081 $4,245 $4,372 $4,503 $4,638 $4,777 $4,921 $5,019 $5,120 3.1% 2.8% Women's Health $1,067 $1,057 $1,088 $1,110 $1,132 $1,144 $1,155 $1,167 $1,179 $1,191 1.4% 1.2% Other Consumer/Wound Care $797 $760 $767 $775 $775 $775 $775 $775 $775 $775 (0.6%) (0.3%) Total Consumer $13,307 $13,692 $14,197 $14,642 $15,094 $15,501 $15,920 $16,334 $16,710 $17,096 3.1% 2.8%

Source: Company data, Credit Suisse estimates 116 JNJ Income Statement (2016A-2025E)

2017 Mar-17 Jun-17 Sep-17 Dec-17 FY 2016 1QA 2QA 3QE 4QE FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total Revenues $71,890 $17,766 $18,839 $19,287 $19,910 $75,802 $80,133 $83,066 $86,716 $90,012 $92,913 $95,320 $95,863 $93,264 Cost of Goods Sold 21,685 5,386 5,823 5,886 6,175 23,270 24,116 24,733 25,676 26,524 27,290 28,112 28,391 28,043 Gross Profit 50,205 12,380 13,016 13,401 13,736 52,533 56,017 58,333 61,040 63,488 65,624 67,208 67,472 65,221 SG&A Expense 19,945 4,737 5,262 5,201 5,734 20,934 21,353 21,780 21,998 22,218 22,440 22,440 22,215 21,105 R&D Expense 9,095 2,060 2,285 2,374 2,851 9,570 9,666 9,763 9,860 9,959 10,058 10,058 9,958 9,460 Operating Profit $21,165 $5,583 $5,469 $5,826 $5,151 $22,028 $24,998 $26,791 $29,182 $31,312 $33,125 $34,709 $35,299 $34,657 Add: Amortization expense $1,271 $329 $480 $375 $421 $1,605 $1,500 $1,500 $1,500 $1,500 $1,300 $1,000 $700 $500 Operating Profit (Cash basis) $22,436 $5,912 $5,949 $6,201 $5,572 $23,633 $26,498 $28,291 $30,682 $32,812 $34,425 $35,709 $35,999 $35,157 Interest (Income) (368) (121) (90) (10) (13) (234) (61) (83) (106) (138) (171) (207) (248) (291) Interest Expense 726 204 212 219 223 859 879 859 853 850 834 812 785 784 Other Expense (Income), Non-GAAP (681) (274) (458) (450) (450) (1,632) (700) (500) (500) (500) (500) (500) (500) (500) Total other expense (income) (323) (191) (336) (241) (239) (1,007) 118 276 248 212 163 105 36 (6) Income before Taxes (Cash basis) $22,759 $6,103 $6,285 $6,441 $5,811 $24,641 $26,380 $28,015 $30,435 $32,600 $34,262 $35,605 $35,963 $35,163 Tax Provision 3,995 1,065 1,268 1,417 1,162 4,912 5,012 5,323 5,783 6,194 6,510 6,765 6,833 6,681 Net Income $18,764 $5,038 $5,017 $5,024 $4,649 $19,728 $21,368 $22,692 $24,652 $26,406 $27,753 $28,840 $29,130 $28,482 Diluted Shares (MM) 2,789 2,755 2,742 2,739 2,737 2,743 2,743 2,744 2,745 2,746 2,746 2,747 2,748 2,748 EPS from Continuing Ops $6.73 $1.83 $1.83 $1.83 $1.70 $7.19 $7.79 $8.27 $8.98 $9.62 $10.11 $10.50 $10.60 $10.36

Margin Analysis Gross Margin 69.8% 69.7% 69.1% 69.5% 69.0% 69.3% 69.9% 70.2% 70.4% 70.5% 70.6% 70.5% 70.4% 69.9% SG&A Expense 27.7% 26.7% 27.9% 27.0% 28.8% 27.6% 26.6% 26.2% 25.4% 24.7% 24.2% 23.5% 23.2% 22.6% R&D Expense 12.7% 11.6% 12.1% 12.3% 14.3% 12.6% 12.1% 11.8% 11.4% 11.1% 10.8% 10.6% 10.4% 10.1% EBITDA Margin 34.7% 36.6% 34.8% 35.9% 31.7% 34.7% 36.9% 37.9% 39.3% 40.5% 41.1% 41.6% 41.9% 42.4% Operating Margin 31.2% 33.3% 31.6% 32.1% 28.0% 31.2% 33.1% 34.1% 35.4% 36.5% 37.1% 37.5% 37.6% 37.7% Pretax Operating Margin (per JNJ) 31.2% 33.3% 31.6% 32.1% 28.0% 31.2% 33.1% 34.1% 35.4% 36.5% 37.1% 37.5% 37.6% 37.7% Pretax Margin 31.7% 34.4% 33.4% 33.4% 29.2% 32.5% 32.9% 33.7% 35.1% 36.2% 36.9% 37.4% 37.5% 37.7% Tax Rate 17.6% 17.5% 20.2% 22.0% 20.0% 19.9% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% 19.0% Net Margin 26.1% 28.4% 26.6% 26.1% 23.3% 26.0% 26.7% 27.3% 28.4% 29.3% 29.9% 30.3% 30.4% 30.5% Year/Year Changes Pharma Revenues 6.5% 0.8% (0.2%) 10.6% 13.8% 6.2% 8.1% 3.9% 5.9% 5.1% 4.1% 2.9% (0.9%) (7.6%) Medical Devices Revenues (0.1%) 3.0% 4.9% 7.4% 7.7% 5.8% 3.6% 3.6% 3.0% 2.5% 2.2% 2.2% 1.9% 1.8% Consumer Revenues (1.5%) 1.0% 1.7% 3.8% 5.0% 2.9% 3.7% 3.1% 3.1% 2.7% 2.7% 2.6% 2.3% 2.3% Total Revenues 2.6% 1.6% 1.9% 8.2% 10.0% 5.4% 5.7% 3.7% 4.4% 3.8% 3.2% 2.6% 0.6% (2.7%) Gross Profit 3.4% 1.9% (1.0%) 8.7% 9.3% 4.6% 6.6% 4.1% 4.6% 4.0% 3.4% 2.4% 0.4% (3.3%) SG&A (5.9%) 1.0% 1.7% 9.0% 8.0% 5.0% 2.0% 2.0% 1.0% 1.0% 1.0% 0.0% (1.0%) (5.0%) R&D 0.5% 2.3% 0.9% 9.0% 8.0% 5.2% 1.0% 1.0% 1.0% 1.0% 1.0% 0.0% (1.0%) (5.0%) Operating Income 15.7% 2.4% (4.2%) 8.2% 11.4% 4.1% 13.5% 7.2% 8.9% 7.3% 5.8% 4.8% 1.7% (1.8%) Pre-Tax Income 3.4% 5.2% 4.3% 10.5% 13.9% 8.3% 7.1% 6.2% 8.6% 7.1% 5.1% 3.9% 1.0% (2.2%) Net Income 7.6% 3.8% 3.1% 7.3% 6.6% 5.1% 8.3% 6.2% 8.6% 7.1% 5.1% 3.9% 1.0% (2.2%) Diluted EPS from Operations 8.5% 5.6% 5.1% 9.1% 7.7% 6.9% 8.3% 6.2% 8.6% 7.1% 5.1% 3.9% 1.0% (2.2%)

Source: Company data, Credit Suisse estimates 117 JNJ Balance Sheet (2016A-2025E)

2017 Mar-17 Jun-17 Sep-17 Dec-17 FY 2016 1QA 2QE 3QE 4QE FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 ASSETS Cash & equivalents $18,972 $20,909 $9,878 $12,465 $14,423 $14,423 $16,872 $19,614 $25,430 $31,625 $38,762 $47,460 $56,664 $66,573 Marketable securities 22,935 18,434 3,434 4,659 5,884 5,884 10,784 15,684 20,584 25,484 30,384 35,284 40,184 45,084 Accounts receivable 11,699 12,300 12,154 12,443 12,845 12,845 13,355 13,844 14,453 15,002 15,486 15,887 15,977 15,544 Inventories 8,144 8,878 8,319 8,408 8,821 8,821 8,932 9,160 9,509 9,824 10,107 10,412 10,515 10,386 Deferred taxes 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Prepaid expenses and other 3,282 2,826 3,466 3,549 3,663 3,663 3,846 3,987 4,162 4,321 4,460 4,575 4,601 4,477 Total Current Assets 65,032 63,347 37,251 41,524 45,637 45,637 53,789 62,290 74,139 86,255 99,199 113,618 127,942 142,064 Net PP&E 15,912 16,191 16,266 16,349 16,435 16,435 16,911 17,424 18,005 18,721 19,576 20,355 20,968 21,268 Intangibles, net 26,876 29,466 44,091 43,716 43,295 43,295 41,795 40,295 38,795 37,295 35,995 34,995 34,295 33,795 Goodwill 22,805 24,844 35,147 35,147 35,147 35,147 35,147 35,147 35,147 35,147 35,147 35,147 35,147 35,147 Deferred taxes 6,148 6,380 5,802 5,786 5,973 5,973 6,010 6,230 6,504 6,751 6,969 7,149 7,190 6,995 Other assets 4,435 4,690 8,426 8,426 8,426 8,426 8,426 8,426 8,426 8,426 8,426 8,426 8,426 8,426 Total Assets $141,208 $144,918 $146,984 $150,948 $154,913 $154,913 $162,078 $169,812 $181,015 $192,594 $205,311 $219,689 $233,966 $247,694 LIABILITIES AND STOCKHOLDERS' EQUITY Loans and notes payable $4,684 $5,355 $6,105 $6,480 $6,855 $6,855 $7,924 $5,984 $7,147 $7,418 $6,908 $6,771 $5,355 $8,339 Accounts payable 6,918 6,082 6,295 6,363 6,500 6,500 6,346 6,509 6,757 6,980 7,181 7,398 7,471 7,380 Accrued liabilities 5,635 5,262 5,883 6,085 6,199 6,199 6,065 6,190 6,041 6,164 6,278 6,364 6,359 6,154 Accrued rebates, returns, and promotions 5,403 5,451 5,883 6,085 6,199 6,199 6,065 6,021 6,041 6,164 6,278 6,364 6,359 6,154 Accrued salaries 2,676 1,836 2,674 2,746 2,834 2,834 2,757 2,814 2,877 2,935 2,989 3,031 3,028 2,930 Income taxes payable 971 1,133 829 849 876 876 881 914 954 990 1,022 1,049 1,054 1,026 Total current liabilities 26,287 25,119 27,669 28,607 29,463 29,463 30,038 28,432 29,816 30,650 30,656 30,976 29,627 31,982 Long-term debt 22,442 27,015 26,265 25,890 26,515 26,515 24,946 25,317 24,525 22,962 21,908 20,992 21,492 19,008 Deferred tax liability 2,910 3,308 3,014 3,086 3,186 3,186 3,205 3,323 3,469 3,600 3,717 3,813 3,835 3,731 Employee related obligations 9,615 9,609 8,557 8,885 9,151 9,151 9,097 9,004 9,205 9,392 9,566 9,698 9,690 9,377 Other liabilities 9,536 9,526 10,161 10,769 10,922 10,922 11,061 11,149 11,254 11,336 11,396 11,401 11,241 10,732 Total Liabilities 70,790 74,577 75,666 77,236 79,236 79,236 78,347 77,224 78,269 77,940 77,243 76,880 75,886 74,830 Common Stock 3,120 3,120 3,120 3,120 3,120 3,120 3,120 3,120 3,120 3,120 3,120 3,120 3,120 3,120 Notes receivable from employee stock ownership 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Accumulated other income (14,901) (14,522) (14,522) (14,522) (14,522) (14,522) (14,522) (14,522) (14,522) (14,522) (14,522) (14,522) (14,522) (14,522) Retained Earnings 110,551 111,643 113,767 116,408 118,621 118,621 126,635 135,422 145,480 157,288 170,602 185,244 200,415 215,099 Treasury stock (28,352) (29,900) (31,048) (31,295) (31,543) (31,543) (31,503) (31,433) (31,333) (31,233) (31,133) (31,033) (30,933) (30,833) Shareholders' Equity 70,418 70,341 71,318 73,711 75,677 75,677 83,731 92,587 102,745 114,654 128,068 142,809 158,081 172,864 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $141,208 $144,918 $146,984 $150,948 $154,913 $154,913 $162,078 $169,812 $181,015 $192,594 $205,311 $219,689 $233,966 $247,694

Source: Company data, Credit Suisse estimates 118 JNJ Cash Flow Statement (2016A-2025E)

2017 Mar-17 Jun-17 Sep-17 Dec-17 FY 2016 1QA 2QE 3QE 4QE FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Statement of Cash Flows Reported Net income $16,540 $4,422 $3,827 $4,342 $3,912 $16,503 $20,153 $21,477 $23,437 $25,191 $26,700 $28,030 $28,563 $28,077 Adjustments to Net Income Depreciation 2,554 583 716 728 750 2,776 3,050 3,225 3,409 3,604 3,790 3,987 4,181 4,363 Amortization 1,200 329 375 375 421 1,500 1,500 1,500 1,500 1,500 1,300 1,000 700 500 Total D&A 3,754 912 1,091 1,103 1,171 4,276 4,550 4,725 4,909 5,104 5,090 4,987 4,881 4,863 Stock Based Compensation 878 229 253 253 253 987 1,040 1,070 1,100 1,100 1,100 1,100 1,100 1,100 Purchased IPR&D 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Asset Write-downs 283 37 0 0 0 37 0 0 0 0 0 0 0 0 Deferred Tax Provision (341) (27) 284 88 (87) 258 (17) (103) (128) (115) (102) (84) (19) 91 Accounts Receivable Allowances (11) (13) 10 10 10 17 40 40 40 40 40 40 40 40 Accounts receivable (1,065) (96) 136 (299) (412) (671) (550) (529) (648) (589) (524) (441) (131) 393 Inventories (249) (368) 559 (90) (413) (311) (111) (229) (349) (314) (284) (305) (103) 129 Accounts Payable 656 (2,030) 213 68 137 (1,612) (153) 162 248 223 202 216 73 (92) Other Assets (545) (573) (640) (82) (115) (1,410) (183) (141) (175) (158) (139) (116) (26) 125 Other Liabilities (1,133) 420 1,170 1,431 764 3,784 (255) 166 280 608 549 377 (174) (1,360) Net Cash From Operations $18,767 $2,913 $6,902 $6,823 $5,219 $21,856 $24,513 $26,639 $28,713 $31,089 $32,633 $33,805 $34,204 $33,366 Cash Flows from Investing Activities Additions to PP&E (3,226) (560) (791) (810) (836) (2,998) (3,526) (3,738) (3,989) (4,321) (4,646) (4,766) (4,793) (4,663) Acquisitions (4,509) (4,852) (29,039) 0 0 (33,891) 0 0 0 0 0 0 0 0 Proceeds from Disposals 1,267 31 0 0 0 31 0 0 0 0 0 0 0 0 Other (123) 1 0 0 0 1 0 0 0 0 0 0 0 0 Cash From Investing b/4 Marketable Securities (6,591) (5,380) (29,830) (810) (836) (36,856) (3,526) (3,738) (3,989) (4,321) (4,646) (4,766) (4,793) (4,663) Net (Purchase)/Sales of Investments 1,830 4,444 15,000 (1,225) (1,225) 16,994 (4,900) (4,900) (4,900) (4,900) (4,900) (4,900) (4,900) (4,900) Cash From Investing Activities ($4,761) ($936) ($14,830) ($2,035) ($2,061) ($19,862) ($8,426) ($8,638) ($8,889) ($9,221) ($9,546) ($9,666) ($9,693) ($9,563) Cash Flows from Financing Activities Dividends to Shareholders (8,621) (2,171) (2,303) (2,301) (2,299) (9,074) (9,739) (10,290) (10,979) (10,982) (10,985) (10,988) (10,991) (10,994) Repurchase of Common Stock (8,979) (3,342) (1,400) (500) (500) (5,742) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000) Net Increase/(Decrease) in Short-Term Debt (1,906) 524 750 375 375 2,024 1,069 (1,940) 1,163 271 (510) (137) (1,416) 2,984 Net Increase/(Decrease) in Long-Term Debt 9,781 4,462 (750) (375) 625 3,962 (1,569) 371 (792) (1,563) (1,054) (916) 500 (2,484) Proceeds from Exercise of Stock Options 1,174 377 600 600 600 2,177 (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) (2,400) Net Cash From Financing Activities ($8,551) ($150) ($3,103) ($2,201) ($1,199) ($6,653) ($13,639) ($15,259) ($14,008) ($15,674) ($15,949) ($15,441) ($15,307) ($13,894) FX Impact (215) 110 0 0 0 110 0 0 0 0 0 0 0 0 Increase/(decrease) in cash and cash equivalents $5,240 $1,937 ($11,031) $2,587 $1,958 ($4,549) $2,449 $2,742 $5,816 $6,194 $7,138 $8,698 $9,204 $9,909 Beginning Cash Balance 13,732 18,972 20,909 9,878 12,465 18,972 14,423 16,872 19,614 25,430 31,625 38,762 47,460 56,664 Ending Cash Balance $18,972 $20,909 $9,878 $12,465 $14,423 $14,423 $16,872 $19,614 $25,430 $31,625 $38,762 $47,460 $56,664 $66,573

Source: Company data, Credit Suisse estimates 119 Disclosures Companies Mentioned (Price as of 18-Jul-2017) 3-Year Price and Rating History for Johnson & Johnson (JNJ.N) AbbVie Inc. (ABBV.N, $72.23) Abbott Laboratories (ABT.N, $48.74) Achillion Pharmaceuticals, Inc. (ACHN.OQ, $4.36) Actelion (ATLN.S, SFr266.5) JNJ.N Closing Price Target Price Alkermes plc (ALKS.OQ, $58.01) Date (US$) (US$) Rating Allergan Plc. (AGN.N, $245.73) Amgen, Inc. (AMGN.OQ, $177.48) 09-Oct-14 102.08 110.00 N * Arena Pharmaceuticals Inc (ARNA.OQ, $23.0) 17-Dec-14 104.07 113.00 AstraZeneca (AZN.L, 5069.0p) Bayer (BAYGn.DE, €109.95) 22-Jan-15 103.76 110.00 Bellerophon (BLPH.OQ, $1.5) 04-May-15 100.35 108.00 Berry Global Group (BERY.N, $57.64) 08-Jun-15 97.96 109.00 Biogen, Inc. (BIIB.OQ, $282.6) Boston Scientific Corp (BSX.N, $27.79) 02-Nov-15 102.17 110.00 Bristol-Myers Squibb Co. (BMY.N, $54.74) 16-Dec-15 105.25 108.00 CR Bard (BCR.N, $320.09) Cardinal Health (CAH.N, $76.97) 04-Feb-16 103.90 106.00 Celgene Corporation (CELG.OQ, $134.27) 01-May-16 112.08 112.00 NEUTRAL Celladon (EIGR.OQ, $9.55) REST RICT ED Cumberland (CPIX.OQ, $6.96) 27-Jul-16 124.77 123.00 Daiichi Sankyo (4568.T, ¥2,497) 19-Dec-16 116.02 122.00 Edwards LifeSciences Corp. (EW.N, $116.49) Eli Lilly & Co. (LLY.N, $83.7) 26-Jan-17 111.84 R GENMAB (GEN.CO, Dkr1450.0) 16-Jun-17 133.04 122.00 N Galapagos NV (GLPG.AS, €66.79) 30-Jun-17 132.29 R Gilead Sciences, Incorporated (GILD.OQ, $71.69) GlaxoSmithKline plc (GSK.L, 1600.0p) * Asterisk signifies initiation or assumption of coverage. HCA Holdings, Inc. (HCA.N, $85.87) Halozyme (HALO.OQ, $12.97) The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total Idorsia (IDIA.S, SFr17.5) revenues, a portion of which are generated by Credit Suisse's investment banking activities Johnson & Johnson (JNJ.N, $134.46, OUTPERFORM, TP $148.0) Lundbeck (LUN.CO, Dkr371.1) McKesson (MCK.N, $165.41) As of December 10, 2012 Analysts’ stock rating are defined as follows: Medtronic (MDT.N, $85.85) Merck & Co., Inc. (MRK.N, $62.41) Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Minerva (NERV.OQ, $62.41) Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Molecular Partners (MOLN.S, SFr28.9) Mylan Inc. (MYL.OQ, $38.11) Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. Novartis (NOVN.S, SFr80.5) Novo Nordisk A/S (NOVOb.CO, Dkr275.8) *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which Otsuka (4768.T, ¥7,000) consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Pfizer (PFE.N, $33.36) Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return Portola Pharmaceuticals (PTLA.OQ, $64.93) relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most Reata Pharms (RETA.OQ, $30.34) Regeneron Pharmaceuticals, Inc. (REGN.OQ, $497.63) attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are Relief Hldg (RLFB.S, SFr0.01) based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings Roche (ROG.S, SFr243.2) were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s Samsung BioLogics (207940.KS, W260,500) coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is Sanofi (SASY.PA, €82.59) assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between - Savara (SVRA.OQ, $5.81) 5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Shire Pharmaceuticals (SHP.L, 4170.5p) Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. Smith & Nephew (SN.L, 1320.0p) Teva Pharmaceutical (TEVA.N, $31.95) Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, The Procter & Gamble Company (PG.N, $88.64) Umicore (UMI.BR, €66.21) including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other United Therapeutics Corp. (UTHR.OQ, $129.96) circumstances. Vertex Pharmaceuticals Incorporated (VRTX.OQ, $132.16) Whirlpool Corp (WHR.N, $196.2) Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company Zimmer Biomet Holdings (ZBH.N, $131.18) at this time.

Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view Disclosure Appendix on the equity security of the company or related products. Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 Analyst Certification months or the analyst expects significant volatility going forward. I, Vamil Divan, MD, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of report. the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 44% (65% banking clients) Neutral/Hold* 40% (59% banking clients) Underperform/Sell* 14% (53% banking clients) Restricted 2% *For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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For Credit Suisse's position on the issue, please see https://www.credit- For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit- suisse.com/media/assets/corporate/docs/about-us/responsibility/banking/policy-summaries-en.pdf . suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. Target Price and Rating Credit Suisse has sent extracts of this research report to the subject company (JNJ.N) prior to publication for the purpose of verifying factual accuracy. Valuation Methodology and Risks: (12 months) for Johnson & Johnson (JNJ.N) Based on information provided by the subject company, factual changes have been made as a result. Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (ABBV.N, BAYGn.DE, BMY.N, Method: Our $148 target price for JNJ is based on a 75%/25% blend of DCF valuation ($149) and relative valuation ($144). We use a 7% WACC LLY.N, AMGN.OQ, ROG.S, AZN.L, CELG.OQ, PFE.N, NOVN.S, MRK.N, 207940.KS, PTLA.OQ, GSK.L, BIIB.OQ, HCA.N, SHP.L, PG.N, TEVA.N, along with a 1.5% perpetuity growth forecast for our DCF valuation and apply 18.5 times our 2018 EPS estimate for relative valuation. Our GLPG.AS, BERY.N) within the past 3 years. Outperform rating is based on our view of potential growth from new pharma products. Principal is not guaranteed in the case of equities because equity prices are variable. Risk: Key risks to our $148 target price and Outperform rating on JNJ are (1) Unexpected challenges to main pharma products; (2) pipeline Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. setbacks could limit potential of new products to replace growth that we believe key marketed products will lose in coming years and lead to downside; and (3) macro challenges around drug pricing. This research report is authored by: Credit Suisse Securities (USA) LLC ...... Vamil Divan, MD ; Michael V. Morabito Ph.D. ; Barbara Kotei ; Duaa Mohamed Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures/view/selectArchive for the definitions of abbreviations typically used in the target price method and risk sections. Important Credit Suisse HOLT Disclosures With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this See the Companies Mentioned section for full company names report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be directly related to the Credit Suisse currently has, or had within the past 12 months, the following as investment banking client(s): JNJ.N, ABBV.N, BAYGn.DE, BMY.N, specific views disclosed in this report. LLY.N, AMGN.OQ, ROG.S, AZN.L, CELG.OQ, PFE.N, GILD.OQ, UTHR.OQ, NOVN.S, LUN.CO, MRK.N, 207940.KS, PTLA.OQ, AGN.N, GSK.L, The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative SASY.PA, BIIB.OQ, REGN.OQ, MCK.N, CAH.N, HCA.N, SHP.L, SN.L, PG.N, TEVA.N, GLPG.AS, BERY.N algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the Credit Suisse provided investment banking services to the subject company (JNJ.N, ABBV.N, BAYGn.DE, BMY.N, LLY.N, AMGN.OQ, CELG.OQ, companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default PFE.N, GILD.OQ, NOVN.S, MRK.N, 207940.KS, AGN.N, HCA.N, SHP.L, PG.N, TEVA.N, BERY.N) within the past 12 months. algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data Credit Suisse currently has, or had within the past 12 months, the following issuer(s) as client(s), and the services provided were non-investment- vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. The banking, securities-related: BAYGn.DE, BMY.N, LLY.N, AMGN.OQ, ROG.S, CELG.OQ, PFE.N, NOVN.S, LUN.CO, MRK.N, 207940.KS, GSK.L, adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. SHP.L, PG.N, TEVA.N, BERY.N The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur. Credit Suisse has managed or co-managed a public offering of securities for the subject company (ABBV.N, BAYGn.DE, BMY.N, AMGN.OQ, PFE.N, NOVN.S, 207940.KS, HCA.N, SHP.L, TEVA.N, BERY.N) within the past 12 months. Additional information about the Credit Suisse HOLT methodology is available on request. Within the past 12 months, Credit Suisse has received compensation for investment banking services from the following issuer(s): JNJ.N, ABBV.N, The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT BAYGn.DE, BMY.N, LLY.N, AMGN.OQ, CELG.OQ, PFE.N, GILD.OQ, NOVN.S, MRK.N, 207940.KS, AGN.N, HCA.N, SHP.L, PG.N, TEVA.N, BERY.N valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variable may also be adjusted to produce alternative warranted prices, any of which could occur. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (JNJ.N, ABBV.N, BAYGn.DE, BMY.N, LLY.N, 4568.T, AMGN.OQ, ROG.S, AZN.L, ALKS.OQ, CELG.OQ, PFE.N, GILD.OQ, UTHR.OQ, NOVN.S, LUN.CO, MRK.N, 207940.KS, CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks PTLA.OQ, AGN.N, GSK.L, NOVOb.CO, SASY.PA, BIIB.OQ, REGN.OQ, WHR.N, MCK.N, CAH.N, HCA.N, SHP.L, SN.L, PG.N, TEVA.N, GLPG.AS, or registered service marks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation ACHN.OQ, BERY.N) within the next 3 months. advisory service of Credit Suisse. Within the last 12 months, Credit Suisse has received compensation for non-investment banking services or products from the following issuer(s): Important disclosures regarding companies or other issuers that are the subject of this report are available on Credit Suisse’s disclosure website at BAYGn.DE, BMY.N, LLY.N, AMGN.OQ, ROG.S, CELG.OQ, PFE.N, NOVN.S, LUN.CO, MRK.N, 207940.KS, GSK.L, SHP.L, PG.N, TEVA.N, BERY.N https://rave.credit-suisse.com/disclosures or by calling +1 (877) 291-2683. As of the date of this report, Credit Suisse makes a market in the following subject companies (JNJ.N). A member of the Credit Suisse Group is party to an agreement with, or may have provided services set out in sections A and B of Annex I of Directive 2014/65/EU of the European Parliament and Council ("MiFID Services") to, the subject issuer (ABBV.N, BAYGn.DE, BMY.N, 4568.T, AMGN.OQ, ALKS.OQ, CELG.OQ, PFE.N, GILD.OQ, UTHR.OQ, NOVN.S, LUN.CO, MRK.N, 207940.KS, PTLA.OQ, AGN.N, NOVOb.CO, BIIB.OQ, REGN.OQ, WHR.N, MCK.N, CAH.N, HCA.N, SHP.L, SN.L, PG.N, TEVA.N, GLPG.AS, UMI.BR, BERY.N) within the past 12 months. As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SHP.L, SN.L). As of the end of the preceding month, Credit Suisse beneficially owned between 1% and 3% of a class of common equity securities of (NOVN.S). Credit Suisse beneficially holds >0.5% short position of the total issued share capital of the subject company (BAYGn.DE). Credit Suisse has a material conflict of interest with the subject company (BAYGn.DE) . Credit Suisse is acting as joint lead financial advisor to Bayer in relation to the proposed offer for Monsanto. Credit Suisse has a material conflict of interest with the subject company (GSK.L) . "Urs Rohner, the Chairman of Credit Suisse is a non-executive Director of GlaxoSmithKline plc (LSE:GSK)" As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (PFE.N). As of the date of this report, an analyst involved in the preparation of this report, Vamil Divan, has following material conflicts of interest 122 This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. 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