Joseph J. Wolk
Executive Vice President and Chief Financial Officer at Johnson & Johnson
Thank you, Jessica. In the third quarter, Johnson & Johnson delivered results that illustrate not only the breadth of the business, but our ability to consistently beat financial expectations. Innovative Medicine continued to build on strong first half revenue momentum. We are advancing our pharmaceutical pipeline, achieving significant clinical and regulatory milestones across key therapeutic areas.
Our MedTech business, with the addition of Shockwave delivered operational growth of 6.4% in the quarter, but did experience headwinds in the Asia-Pacific region. We continue to fortify our future, advancing the OTTAVA robotic surgery system to IDE, expanding VELYS use and launching new intraocular lenses. Due to dynamics in the Asia-Pacific region, specifically in China, we are taking a responsibly conservative approach by assuming no material improvement in that part of the business for the remainder of this year. And as such, we expect MedTech adjusted operational sales growth for the full-year 2024 to be closer to 5% versus the 6% we referenced last quarter. The strength of a diversified business enables us to more than offset volatility in one part of our business, but yet be in a position to once again increase 2024 guidance for the enterprise.
Before diving into the results, I'll take a moment to touch on some enterprise-wide updates from the quarter. We are making progress towards resolving talc litigation. Our pre-packaged bankruptcy plan received overwhelming support from the current claimants of roughly 83% as well as the future claimants representative. As announced last Thursday, the case will be heard in the Texas Bankruptcy Court and while we remain committed to bringing this matter to a resolution, it would be premature to speculate on timing.
In addition to the pipeline highlights Joaquin mentioned, there are some additional notable advancements throughout the quarter. In oncology, we received US and EU regulatory approval for RYBREVANT in combination with chemotherapy as a second-line treatment for adults with advanced EGFR-mutated non-small cell lung cancer. With FDA priority review underway for a subcutaneous formulation of RYBREVANT, along with data supporting a treatment regimen to reduce adverse events, we are building a best-in-class EGFR portfolio.
We also presented Phase I data for RYBREVANT with chemotherapy in metastatic colorectal cancer patients, extending the asset's potential beyond lung cancer. In multiple myeloma, we advanced our leadership position with FDA approval and filing of two DARZALEX, FASPRO quad-based regimens for newly diagnosed patients. With CARVYKTI, we announced three-year follow-up data showing significantly extended overall survival and gained approval for commercial production at our Ghent facility, further expanding supply capacity.
Finally, in oncology. We added to the growing evidence base for our TARIS platform with positive Phase IIb data in patients with high-risk non-muscle invasive bladder cancer and positive interim Phase II data in patients with muscle-invasive bladder cancer. In Neuroscience, we submitted to the US and European regulatory bodies for what would be the first global approval of nipocalimab for the treatment of people living with generalized myasthenia gravis.
For the remainder of the year, we expect approval of TREMFYA subcu for Crohn's disease and data readouts on JNJ-2113, our targeted oral peptide for psoriasis and ulcerative colitis; JNJ-4804, our co-antibody therapeutic for inflammatory bowel disease; aticaprant for adjunctive major depressive disorder; and nipocalimab for rheumatoid arthritis.
In MedTech, we completed enrollment of the Omny-IRE clinical trial to evaluate safety and effectiveness in mapping and treating symptomatic paroxysmal atrial fibrillation during standard ablation procedures. Also in cardiovascular, we are preparing for the anticipated approval of VARIPULSE in the US and the submission of Impella ECP for regulatory approval. In Orthopaedics, we launched several exciting new products in the US, including our VELYS Spine robot and VOLT Plating System. The plentiful pipeline progress across our businesses will ensure continued success.
Let's now turn to cash and capital allocation. Free cash flow year-to-date was approximately $14 billion compared to $12 billion last year, which included eight months' contribution from the Consumer Health business. We ended the third quarter with $20 billion of cash and marketable securities and $36 billion of debt for a net-debt position of approximately $16 billion. Our capital allocation priorities remain unchanged. Our strong balance sheet enables us to strategically invest to grow our business while simultaneously returning capital to our shareholders.
Innovation remains core to our strategy. During the quarter, we invested nearly $5 billion in research and development. This is an increase over 2023 levels even after excluding acquired in-process R&D expense. Thus far in 2024, Johnson & Johnson has deployed approximately $18 billion for strategic acquisitions and licensing agreements, which includes the recent acquisition of V-Wave, another innovative treatment in heart failure, which closed last week.
Turning to our full year 2024 guidance. Excluding the impact from acquisitions and divestitures, we are increasing our adjusted operational sales guidance. We now expect growth in the range of 5.7% to 6.2% with a mid-point of 6%. We are also increasing operational sales growth by $200 million to a range of 6.3% to 6.8%, with a mid-point of $89.6 billion or 6.6%.
As you know, we don't speculate on future currency movements. For today's call, we are utilizing a euro spot rate relative to the US dollar of $1.10, slightly above last quarter's guidance. This results in an estimated incremental positive foreign currency impact of $200 million, reducing our previous full year negative impact to $1 billion. As such, we expect reported sales growth between 5.1% to 5.6% with a mid-point of $88.6 billion, or 5.4%.
Regarding the rest of the P&L. With the addition of the V-Wave transaction, we now anticipate our 2024 adjusted pre-tax operating margin to decline by approximately 200 basis points. Excluding the impact of asset acquisition accounting and related R&D investment, we would be on track to improve operating margins by 50 basis points, which is consistent with what we guided to at the beginning of the year.
As we strive to advance and accelerate our pipeline, you can anticipate elevated levels of investment in the fourth quarter. Net interest income is now projected to be between $450 million and $550 million, $150 million greater than our previous guidance. Other income is anticipated to be in the range of $1.9 billion to $2.1 billion, an increase versus previous guidance driven by the one-time monetization of royalty rights Jessica referenced that will be utilized for that higher Q4 investment I referenced a moment ago. Our effective tax rate, consistent with previous guidance is expected to be between 17.5% and 18.5% for the full-year.
Similar to last quarter, we have provided an EPS bridge to outline the impact from acquisition activity throughout the year. Before the impact of the V-Wave acquisition, our outlook for adjusted operational EPS performance is once again increasing. As the schedule reflects, we are expecting an incremental $0.10 per share increase on our operational performance for a total increase of $0.18 per share for the year. On this basis, when excluding acquisition activity throughout the year, EPS growth is 9.2%.
To account for the completion of the V-Wave transaction, as previously disclosed, our adjusted operational EPS guidance now includes dilution of $0.24 per share in the fourth quarter and $0.06 per share in 2025. Combined, this yields an updated 2024 adjusted operational EPS guidance of $9.91 at the mid-point of the range, basically flat year-on-year, despite absorbing approximately $0.92 of acquisition activity. While not predicting the impact of currency movements, utilizing the recent exchange rates just referenced, our reported adjusted earnings per share for the year now estimates a full year positive impact of $0.02 per share. As such, we expect reported adjusted earnings per share of $9.93 at the mid-point.
We are still finalizing our plans for next year, but let me provide you some preliminary qualitative commentary to inform your modeling for 2025. For Innovative Medicine, we remain very confident in our ability to deliver growth despite a significant LOE, resulting in sales above the $57 billion commitment we stated in 2021. This will be driven by our in-market brands and continued progress from our recently launched products, including TREMFYA in IBD and RYBREVANT in non-small cell lung cancer.
Regarding the STELARA LOE, we are planning for biosimilar entries in the US in January, assuming that HUMIRA's erosion curve is a relatively good proxy for your models. We continue to expect a negative impact associated with the Part D redesign. In our pipeline, we anticipate data readouts across all our priority platforms: anticipated approvals of TREMFYA subcu in Crohn's disease; RYBREVANT subcu for lung cancer; and nipocalimab in generalized myasthenia gravis as well as potential filings for TARIS in bladder cancer and aticaprant in major depressive disorder. As a reminder, TREMFYA, RYBREVANT and TARIS continue to be the three largest underappreciated assets in terms of our revenue projections versus what analysts are estimating for the back half of this decade.
For MedTech, we continue to expect to deliver on our long-term objective identified at last year's enterprise business review of growing operational sales in the upper end of the 2022 through 2027 weighted average market growth rate of 5% to 7%. We also expect continued adoption of newer products across all MedTech businesses such as VARIPULSE in electrophysiology, VELYS enabling technology across Orthopaedics, Odyssey and PureSee in surgical vision and contributions from our Abiomed and Shockwave integrations. Specific to volume-based pricing in China, we expect continued impacts from the rollout of the 2024 tenders in Orthopaedics sports and intraocular lenses and anticipate VBP to continue expanding across provinces and products.
Moving to the rest of the P&L. When thinking about operating margin, there are pluses and minuses. Tailwinds include an anticipated reduction of acquired IP R&D expense year-over-year, continued focus on MedTech margin improvement and continued opex optimization benefits post the separation. Working against us is unfavorable product mix driven by STELARA biosimilar entrants and Part D redesign. With a brief look at your models last week, the consensus margin does not appear unreasonable, and we'll provide further clarity in January, once we complete our 2025 plan. We do not expect to maintain the heightened levels of interest income due to a reduction in interest rates and impact from debt experienced in 2024 related to acquisition activity.
Regarding other income and expense, we expect lower net other income due to the non-recurring nature of the monetization of royalty rights experienced in Q3, a lower benefit related to employee benefit programs based on discount rate assumptions as well as income loss on the Kenvue dividend. Lastly, based on what we know today, under current tax law, we anticipate our 2025 tax rate to be slightly lower than our anticipated 2024 tax rate. To wrap up prior to Q&A, we are pleased with our underlying 2024 performance that simultaneously fortified a strong foundation for continued success heading into 2025.
With that, I'll now turn it over to Kevin to open the call for your questions.
