Johnson & Johnson
Q4 2007 Earnings Call Transcript

Published: 22 Jan 2008

[Louise Mehrotra:]

Good morning and welcome. I am Louise Mehrotra, Vice President of Investor Relations for Johnson & Johnson and it is my pleasure this morning to review our business results for the fourth quarter of 2007. Joining me on the podium today are our hosts for today’s meeting

[William C. Weldon:]

Thanks, Louise and thank you all for being here today. 2007 has been a very successful year. It was filled with opportunity, challenge, and change for Johnson & Johnson. It has been a year that demonstrated quite clearly how our broad base of healthcare businesses can absorb short-term pressures and help us build on our track record of growth. It’s been a year in which we grew sales from our existing portfolio and demonstrated significant progress in our pipeline of new drugs, devices, diagnostics, and consumer products, and a year in which we built on our foundation for the future with changes to our cost structure and organizational design. I would like to begin by reviewing our 2007 business and financial highlights and walk you through our segment results for the year. Then, in the remainder of my presentation I will focus on our strategic outlook for 2008 and beyond and describe for you how we are building on our foundation of growth and what priorities are critical to our continued success. In 2007, we delivered strong results across our broad base of businesses and exceeded expectations. Our total reported sales increased 14.6% with operational sales up 11.5% and pro forma sales up 4.2%. Adjusted earnings per share increased 10.4%. We made significant progress across our businesses and I am particularly proud that we achieved these results despite having to work through one of the more difficult years in Johnson & Johnson's recent history. During the year, we saw significant sales declines in two of our major products, Cypher and Procrit, due to major market declines for drug-eluting stents and erythropoietin stimulating agents. And in our consumer segment, we managed the complex integration of Pfizer Consumer Healthcare, the largest acquisition in our history. 2007 was a year when we took thoughtful, disciplined actions to deliver our commitments and to build an even stronger growth platform for the long term. We initiated major cost structure improvements in parts of the business, began a $10 billion share buy-back, and announced organizational changes to sharpen our focus on growth. And as we begin 2008, we are moving forward with confidence in our plans, products, pipeline, and people. We are focused on growth and execution. As you can see hear, our businesses, coupled with strong financial discipline, continued to deliver strong results and solid sales growth, strong earnings growth, and adjusted double-digit EPS growth that was faster than earnings due to our share repurchase program. We also generated a strong free cash flow in excess of $12 billion. To add some context to these results, I would like to remind you of the expectations we set for this meeting last January. We said we expected operational sales in 2007 to increase 11.5% to 12.5% and we delivered 11.5%. This is a remarkable achievement given the fact that we saw double-digit declines in sales for two of our major products. In January, we projected adjusted EPS range of $3.88 to $3.93. With our disciplined focus on execution and cost management, we raised our guidance twice during the year and at the end of the year, we produced a 10.4% increase in adjusted EPS to $4.15, significantly exceeding original expectations. With the addition of PCH this year, the three segments of our portfolio are more balanced. Pharmaceuticals generated approximately $25 billion in revenues, MD&D generated approximately $22 billion, and consumer $14.5 billion, for total sales of just over $61 billion. With the addition of PCH, our consumer business grew from 18% of our total revenue in 2006 to 24% in 2007 and I’ll get into more details on these segments in a few minutes. Operating profit for 2007 was $15.9 billion and 26% to sales. That compares to 2006 on a pro forma of $14.6 billion and 25.7% to sales. This demonstrates our continuing ability to leverage operating profit. We also took several actions to streamline and strengthen our business. We announced plans in July to generate $1.3 billion to $1.6 billion in cost savings for 2008 through a number of initiatives in our pharmaceuticals segment and Cordis business. We are executing against those plans and on track to achieve those savings this year. These actions were designed to address near-term market conditions and upcoming patent expirations, while making permanent improvements to our overall cost structure. We continued investments in our R&D pipeline and in-line product expansions which are critical to our continued growth. Finally, we reorganized to better attain growth in the spaces where our businesses intersect and also to explore new spaces in healthcare where we do not compete today. We established the office of strategy and growth that is being led by Nick Valeriani, who spoke with you in October. We also established two new business operating groups within our MD&D segment -- a surgical care group that will focus on technologies and solutions to enhance patient care in a surgical setting; and a comprehensive care group that will create portfolios to address the world’s most chronic and pervasive conditions. Sherry McCoy and Don Casey are respectively leading these groups, and I’ll speak in greater detail about the charters of these organizations when I discuss our strategic outlook. And let me now complete our look at 2007 with a review of our segment highlights. Our consumer businesses delivered healthy growth in the midst of integrating the largest acquisition in our company’s history. The integration of PCH remains on track to deliver our synergy targets through 2009 and we expect the accretive impact of the acquisition on a GAAP basis will be realized in 2009, one full year ahead of our original plan. The consumer segment saw operational sales growth of 44.2% and pro forma operational sales growth of 4.6% when the impact of PCH is reflected for both periods. Pro forma growth was ahead of estimated market growth rates. We launched approximately 600 new products and line extensions in the year, including such launches as Listerine Whitening Quick Dissolving Strips, Aveeno Positively Ageless, and new products in the Tylenol Rapid Release line. And we also saw strong momentum and double-digit growth in key emerging markets. This slide shows you the breakdown in sales and operational growth rates across our consumer franchises. As you can see, we saw continuing growth across all of our major franchises on an operational basis and this slide shows you the breakdown on pro forma sales and operational growth rates across our consumer franchises. We exceeded projected global category growth rates in four of five major franchises. Our consumer business continues to differentiate itself and build its brands on a foundation of science-based innovation. Zyrtec, the number one prescribed allergy treatment in the United States, gained FDA approval for over-the-counter sales and will be on store shelves this week. Ongoing product introductions and geographic expansion of major brands such as newly acquired Listerine and Nicorette, along with our key skin care brands will continue to be growth drivers and we will continue to focus on growth in emerging markets. This effort will be bolstered by our opening last month of a new consumer R&D center in Shanghai, which is dedicated to developing products for emerging markets around the world. In pharmaceuticals, nine products had 2007 sales of over $1 billion, including two that reached this milestone for the first time, Risperdal Consta and Concerta. Many of our $1 billion plus products delivered high-single-digit or double-digit growth, including Remicade, Topamax, Risperdal Consta, and Concerta. And the cancer treatment Velcade exceeded the $500 million mark for the first time. And we built on strong competitive positions across seven therapeutic areas, with 70% of our 2000 sales coming from products holding the number one or number two market positions. This breadth and depth enabled us to offset slower sales on Procrit and the impact of generic competition. To advance our future growth, we also delivered on the pipeline targets we had established for the period of 2005 to 2007 and saw continued progress against new targets that we set for 2010. This next slide provides you with greater detail on the sales and operational growth rates across our major pharmaceutical products. As you can see, the pharm segment on a whole grew by 4.3%. Generic competition on several of our products in several markets around the world negatively impacted growth by approximately 2.5 percentage points, while concerns in the U.S. about the appropriate use of ESAs had a similar negative impact. Excluding these impacts, we saw operational sales growth of almost 10%. We made excellent progress in advancing our late stage pipeline in 2007. We launched the anti-bacterial Doribax in the U.S. in 2007 and this month in Europe we launched Ionsys, the first needle-free patient control system for post-operative pain. We also received approval in the U.S. just last week for the HIV medicine TMC125 which we will market as Intelence. And we have four medicines currently filed -- the antibacterial Ceftobiprole in the U.S. and Europe; the long-acting injectable Paliperidone palmitate for schizophrenia, also in the U.S.; Ustekinumab, or CNTO 1275 for psoriasis in the U.S. and Europe; and Dapoxetine for premature ejaculation in several countries in Europe. We also made important supplemental filings on a few of our newer products, including Prezista in the U.S. for treatment-naïve HIV patients; Concerta in the U.S. for adult ADHD; and Velcade in Europe for front-line multiple myeloma. Our partner, Millennium Pharmaceuticals, filed Velcade for this indication in the U.S. as well. As we told you in June, we expect to make seven to 10 filings between 2008 and the end of 2010 and that remains our target. In fact, we expect to make our first filing of 2008 later this week with the pain medication Tapentadol in the U.S. Many of these compounds have the potential to be first or best-in-class treatments. Our medical device and diagnostics franchises comprise the world’s largest technology business with capacity to treat some of the world’s most pervasive conditions more comprehensively than any other company. In a challenging year for Cordis, the medical devices and diagnostics business excluding drug-eluting stents grew nearly 10% operationally. We also enjoyed strong competitive positions across our diverse businesses, with more than 80% of 2007 sales coming from businesses in the number one or number two market position. This next slide shows you the breakdown of sales and operational growth rates across our MD&D franchises. Our Vision Care business passed the $2 billion milestone for the first time and in the Cordis franchise, we saw double-digit growth in our Biosense Webster and neurovascular businesses. We had a number of major approvals and launches in 2007, including the realized adjustable gastric band for the surgical treatment of morbid obesity; Animas 2020, the smallest full featured insulin pump available on the market; and Gene Search Breast Lymph Node Assay, a molecular diagnostic to detect the spread of breast cancer to the lymph nodes while a patient is undergoing initial surgery. Last month, Gene Search was cited by Time Magazine as one of the top 10 medical breakthroughs of 2007. We are well-positioned going into 2008 with a robust pipeline and strategic development programs in orthopedics, biosurgicals, bariatric surgery, vision care, and the other major categories. The medical device and diagnostic development work we discussed with you in October continues to progress nicely. I am really proud of what our people have accomplished in 2007 in face of significant challenges. We recognize that there are still short-term pressures but there are even more extraordinary opportunities ahead. And let me begin by quickly reviewing the foundations of our business before looking out to 2008 and beyond. As you know, at the foundation of Johnson & Johnson’s business is our fundamental commitment to our credo, which provides a common set of values to our 119,000 employees around the globe. The four tenants of our credo provide a clear focus and mindset for how we approach every decision -- patients and customers first, then our employees, our communities, and our shareholders. We also work under an operating model that has served us well for decades. Its four elements are being broadly based in human healthcare, managing our businesses for the long term, taking a decentralized management approach, and focusing on our people and values. Our credo and operating model, along with our financial strength, discipline, and talented people, have enabled us to build a track record of exceptionally consistent performance throughout the years -- 75 consecutive years of sales increases, 24 consecutive years of adjusted earnings increases, and 45 consecutive years of dividend increases, a track record that few if any companies can claim. As we look to continue this performance for 2008 and beyond, our senior management team has set its sights on four basic priorities that we view as essential to this success. They are critical to serving all of our businesses and building on our position as the global leader in healthcare. They are also areas where we bring unique capabilities and strengths to bear, places where we have significant advantages over our competition. These priorities are winning in healthcare, capitalizing on convergence, accelerating growth in emerging markets, and developing leadership and talent. Let me begin by discussing winning in healthcare. Winning in healthcare really means two things. First, competing in the right business sectors and second, executing well with the right people, products, and pipelines in those sectors. Today, we compete in three very important sectors making up roughly 30% of the $4 trillion global healthcare market, as shown on this slide. As big as Johnson & Johnson is, however, we still represent only about 5% of total sales in those sectors so there is plenty of room for us to grow our existing franchises. As you know, our existing franchises make up the broadest base of healthcare businesses in the industry and are well-known leaders across our three segments. We are continuing to grow our inline products, expand our iconic brands, and ensure that our pipelines enable us to develop sustainable leadership positions. We are also looking at areas where we may have a smaller presence to see how we can expand our positions and gain leadership positions in these areas. We will continue to nurture new businesses within our existing family of companies and find ways to grow them into major contributors. One of many examples is the way that Ethicon Endo-Surgery and Cordis emerged out of the Ethicon business and have grown to become two of the most significant franchises in the company. Each of those businesses grew into their own multi-billion dollar franchises as their markets developed. They were given resources, dedicated management, and the backing of Johnson & Johnson. With the formation of our new surgical care group, we are also looking at how a more integrated view of an area like surgery could potentially drive innovation, growth, and a greater focus on the patient and doctor. With surgical care, we may further redefine surgery. For example, a potential new product like computer-assisted personalized sedation or CAPS, could allow procedures in locations outside the traditional hospital setting and it will make important screening procedures more accessible to patients. We believe this technology has the potential to transform the current standard of care and create entirely new business opportunities for us. With the formation of our new comprehensive care group, we are also looking at how we can better address chronic and pervasive diseases where we operate today and where Johnson & Johnson's breadth and experience can make a difference for the patient. In 2005, nearly 50% of the disease burden and 60% of mortalities were due to chronic diseases and in fact about 45% of global mortalities were attributed to four major chronic diseases -- cardio-vascular, cancer, diabetes, and arthritis -- places where Johnson & Johnson has a major presence. In the past, however, the industry has tended to take a more siloed product by product approach to these and other disease states rather than a broader view. The comprehensive care group will now take disease states and bring Johnson & Johnson's full portfolio to bear on treatment efforts. We will continue looking more holistically at our patients and the full cycle of their health, from wellness and prevention programs to disease management and treatments. So that gives you an idea of what we are doing in the 30% of healthcare where we compete today, but what about the opportunities in the other 70%? There’s another enormous opportunity represented by this 70%, or about $2.8 trillion of sales in healthcare sectors where we do not compete today. It is in these other healthcare area sectors that we will be looking for entirely new platforms for growth. Throughout our history, we have reached points where we looked beyond where we were and discovered our next evolutionary platform. We are now at just this juncture. Over the next five to 10 years, the healthcare industry will go through one of the most dynamic periods of change in its history, based on expected changes in demographics, technology, demand, and affordability. No one is better positioned than Johnson & Johnson to deal with the changes in the healthcare landscape and to build successful businesses from these opportunities. As I mentioned earlier, one way we are doing this is with our office of strategy and growth, which will look specifically at the white spaces in healthcare, places where we envision new opportunities but have not yet ventured forth. This group will identify opportunities for growth that are distinct from those being pursued by our existing businesses. It will have responsibility for identifying where and how we build the next line of businesses that will take their place beside consumer, pharmaceuticals, and medical devices and diagnostics. To win in healthcare, a highly productive pipeline is essential, whether it be in the existing 30% we compete in today or the on-tap 70%. Given the robust pipelines we currently have in pharmaceuticals, medical devices and diagnostics, and consumer, we are continuing to invest resources and attention to achieve organic productivity and build our business for the long term. In 2007, we spent $7.7 billion on R&D, an increase of almost 8%, and we continue to take measures to increase our return on that investment. For Johnson & Johnson, our commitment to pipeline productivity is broader than traditional pharmaceutical R&D. It means capitalizing on the global capabilities across all our businesses in ways that competitors cannot. We are taking advantage of our increasingly global reach to access innovation and talent around the world in markets like China and India, and to help us build faster and more efficient in R&D. For example, a growing number of patients in our clinical trials comes from outside the U.S. and Western Europe. This speeds recruitment for the increasingly large scale trials and also provides us with data on a broader range of patient populations, something that helps us secure regulatory approvals in overseas markets and also helps us to manage our costs. We can also leverage the engineering prowess, materials, and diagnostic capabilities, delivery and formulation expertise, and deep knowledge of patients and consumers across all our companies and geographies. By leveraging these strengths, we improve our productivity, speed to market, cost structure, and enhance the discoveries we can deliver to patients. This type of collaboration in our R&D operations leads right into our next business priority, and that is capitalizing on convergence. Our approach to innovation extends beyond our pipeline and includes nurturing breakthroughs within and across our business segments. As you heard us discuss throughout 2007, our broad base offers us a unique vantage point to both identify new patient needs and advance a trend towards convergence in healthcare. I would suggest that you think of convergence in two different ways -- first is the convergence of products and technologies and second is the convergence of patient-centric solutions for healthcare treatments. Existing convergence models focus on bringing together products and technologies into a higher order product, much like the transformation that the Cypher stent ushered in to become the standard of care in the treatment of coronary artery disease. Beyond technology convergence lies solution-based convergence whereby we seek to view the world from the vantage point of a patient or a consumer and address the needs of a condition from end to end, bundling together products and services. Let me offer some examples of convergence. One example is in the area of heavy bleeding. Heavy uncontrolled bleeding is the leading cause of death due to injury around the world. In the U.S. alone, such trauma causes -- cases caused more than 160,000 deaths last year. Scientists from our Ethicon business have teamed up with OMRIX bio-pharmaceuticals and our biologics manufacturing team at Centocor to create a remarkable patch, one that could rapidly manage the whole spectrum of bleeding. In this case, proprietary biologics are embedded on a biodegradable patch that is placed on the internal wound by a surgeon and it forms an instant clot when it comes in contact with blood. This product, the fiber, and patch is in early phases of clinical testing. The second perspective on convergence is the convergence of patient-centric solutions. When you look at healthcare, first from a patient’s point of view, then the divisions that we sometimes see as healthcare suppliers begin to go away, the patient sees the many elements of his or her medical experience as part of one single treatment continuum. When Johnson & Johnson takes this patient-centric view of chronic and pervasive conditions like Diabetes or heart disease, it can deploy all its assets and medical knowledge to serve patients more effectively. And let’s discuss diabetes as an example. This is a seriously under-treated, complex, and overwhelming disease. The diabetic patient often takes as many as 16 prescription medications, deals with conditions like obesity, coronary artery disease, and vision problems, and has a rolodex of care providers from physicians to educators to retailers. And when you think about the need for convergence of care, consider that over 70% of patients who are hospitalized for heart attacks test positive for diabetes or pre-diabetes, conditions they may not have know they even had. Also consider the life cycle of this disease -- in an age of personalized medicine, we can use predictive technologies, such as our investigational diagnostic test for pre-diabetes, or new developments in bio-markers and genomics to understand a patient’s likelihood to have this disease. A number of our products and medical devices might also help patients facilitate lifestyle changes or manage the disease. It might be products like Splenda that contribute to a healthier, low calorie diet, or monitors from Life Scan that help monitor blood glucose, pumps from Animas that deliver insulin or gastric bypass or joint replacement surgery that can return patients to more active lifestyles. Within our one extraordinary company, Johnson & Johnson, we have the know-how, proprietary technology, and the capabilities of many diverse innovative franchises to address diseases like Diabetes and to address them in a more comprehensive way than any other company in the world. Our next business priority is accelerating growth in emerging markets. Johnson & Johnson has been a global company since the 1920s when we established our first international affiliate in Canada and first overseas affiliate in Great Britain. We have continued since then to build businesses throughout the world and today we have a presence in 57 countries. In the last year, 47% of our revenues were from outside the United States and we expect solid growth to continue in these markets. Still an important part of our growth strategy is the United States, which remains the leading global healthcare market and is projected to grow about 5% annually between now and 2015. However, as you can see in this slide, the most significant product growth rates are occurring in emerging markets outside the U.S. in less developed countries like Brazil, Russia, India, and China, often referred to as the BRIC countries. And because of their sizable growth and the substantial investments being made over the next seven years, they will soon be commensurate in size to some of the more developed, slower growing international markets today. In emerging markets, Johnson & Johnson can continue to build on its strength. Our historical double-digit growth rates exceed the projected average growth rates for these markets and bode well for continued success. Incredible opportunities exist in the emerging markets not only in the BRIC countries but in other development markets where we can build off our existing presence or where we can address significant unmet needs in places like Mexico, Southeast Asia, and the Middle East. We have strong and growing businesses in most of the countries. For example, in 2007 we actually celebrated our 50th year in India and continue to grow in strong, double-digit rates. Our decentralized operating model, our increasing global footprint, and our insights into the unique needs of local markets are all capabilities that will continue to serve us well. We have several strategies for the emerging markets that are common to all of our business segments -- addressing localized product and market strategies, building on our existing business strengths and our brand equity, focusing on mid-tier demographics, exploring new categories and new business models, and deploying an enterprise wide approach to areas like site development and recruiting. And let me describe a couple of these in more detail. We are developing localized product to market strategies in each region. This means developing products for special market needs with pricing appropriate to the local market. We market Life Scan’s one-touch Horizon monitor in emerging markets where cost has been an impediment to people checking their blood glucose regularly. We are developing flavors, sense, and consumer packaging that are more in line with local needs and tastes; for example, fruit flavors of Nicorette gum for smoking cessation in Asia. And as we explore medicines for some of the most prevalent illnesses in the emerging markets, illnesses like HIV, tuberculosis, and hepatitis C, we also recognize the need to implement access programs that take into account the needs of patients with limited means. The Johnson & Johnson brand an many of our subsidiary companies have recognizable brands in many emerging markets. We are leveraging this in new market segments as a global Olympic partner for the 2008 Beijing Olympic Games. This is Johnson & Johnson's first cycle as an Olympic partner and we have seen the brand building impact in China already. With a nearly 50% increase in top-of-mind awareness, this impact will serve us not only during the Beijing Olympics but long after in building our reputation and our business. Our final strategic area is developing leadership and talent. None of our strategies work without the right talent and expertise to drive them. At Johnson & Johnson, we take great pride in the way we develop our leaders and in the commitment we make to them. As a result of these efforts, I believe we have one of the richest talent pools in the corporate world and our strong leadership and people management programs have been recognized for years in industry surveys and media. Our leaders are exposed to a variety of industries, company sizes, and geographies throughout their careers. In many cases, our executives are running companies within Johnson & Johnson that would be premiere public companies on their own. Sherry and Don, the recent senior executive appointments I mentioned before, are perfect cases in point. Both ran significant businesses at Johnson & Johnson in multiple sectors before their latest assignments. So that concludes my review of the business highlights for 2007 and the strategies we are pursuing to better serve the evolving needs of our patients. To recap, 2007 was a year in which we overcame some unexpected challenges and delivered solid business results. This is all thanks to the perseverance and hard work of the many talented people across our company. We remain true to our credo and to the operating model that has helped drive our company’s track record of success over the long term. We remain committed to patients and to our customers all around the world. We continue to feel very positive about opportunities in the healthcare market, about our ability to deliver useful, innovative medicines, technologies, and products, and about our focus on accelerating markets and accelerating growth. I hope you share my excitement for the future of Johnson & Johnson and now I would like to turn it over to Dominic Caruso to take you through some financial details and others for 2008.

[Dominic J. Caruso:]

Thank you, Bill and good morning, everyone. To wrap up our formal presentations, I would like to touch briefly on 2007 and then provide some comments for you to consider as you refine your models for 2008. We are pleased with our solid financial results for 2007 and, as Bill highlighted for you, during 2007 we positioned ourselves well for continued success in the future. Our sales results for 2007 were above the mean of the analyst expectations as published by First Call, reflecting solid performances across many of our businesses. Our solid earnings performance demonstrates our ability to continue managing costs and improving margins. We were also able to continue investing in the future and to increase our earnings estimates as we overcame the dilutive effect of the PCH and Conor acquisitions and offset the P&L pressures that came with the market challenges that we faced during the year. I would like to point out some items that differ from the guidance I provided in October. First let’s review our effective tax rate. As you can see from the boxed section of the statement of earnings schedule attached to the press release, our effective tax rate was 22.1% for the full year 2007, lower than the guidance I provided in October of 23.5% to 24%. I am happy to report that we were able to implement some tax planning strategies as well as some adjustments resulting from the filing of our prior year tax return and therefore improve on the rate we had anticipated for the year. This lower tax rate increased earnings per share by approximately $0.07. Also, you will see that other income and expense for 2007 was $534 million of expense, but this includes the write-down related to Natrecor. Other income and expense was $144 million of income excluding this Natrecor write-down, or lower than the guidance I provided in October of income between $250 million and $300 million. This is a result of several charges we took in the fourth quarter related to contract terminations, legal matters, and other non-operating items. These additional costs had negative impact to earnings per share of approximately $0.03. Additionally, during the fourth quarter we experienced higher costs related to our restructuring efforts. We had previously estimated that these types of costs that are note separately includable in restructuring charges would be $0.02 to $0.03 per share. However, due to the acceleration of some of these activities, these costs are now approximately $0.05 per share or an additional negative impact to earnings of approximately $0.03. So in summary, the $0.07 per share benefit achieved from the lower tax rate helped to offset the negative EPS impact of the additional cost items I mentioned, which aggregated to approximately $0.06 per share. The $0.01 remainder of the benefit from the lower tax rate and our strong operating results helped us exceed the higher end of my earnings guidance by $0.02. Now an update on the $10 billion share repurchase program that we initiated in 2007. We began purchasing shares in August and through the end of 2007, we have purchased $3.6 billion of our stock. This share repurchase program, along with our dividends, demonstrates our commitment to returning value to our shareholders while allowing us the flexibility to invest in business building activities. Now I would like to provide some comments for you to consider as you refine your models for 2008. Let’s start with a discussion of cash and interest income and expense. During 2007, we continue to generate strong cash flows. In fact, for 2007, as Bill pointed out earlier, we generated free cash flow or cash flow after necessary capital expenditures of approximately $12 billion. At the end of 2007, we had approximately $200 million of net debt. This consists of approximately $9.3 billion of cash and investments and $9.5 billion of debt. This is an improvement of $2.3 billion in our overall net debt position from year-end 2006. We achieved this improvement while completing the $1.4 billion acquisition of Conor Medsystems and utilizing $3.6 billion to repurchase shares. For purposes of your models, assuming no major acquisitions and considering the continuation if not full completion of the share repurchase program during 2008, I suggest you consider modeling net interest income and expense of between zero and a modest level of interest income. Turning now to other income and expense, as a reminder of the nature of this account, this is where we record royalty income as well as one-time gains and losses arising from such items as litigation, gains or losses from investments by our development corporation, and asset sales. This account is difficult to forecast but assuming no major one-time gains or losses, I would recommend that you consider modeling other income and expense for 2008 as a net gain, ranging from approximately $150 million to $200 million. And now a word on taxes -- for 2007, the company’s effective tax rate excluding special items was 22.1%. I mentioned earlier in the fourth quarter we made some adjustments relating to the filing of our prior year tax return. Additionally, as you know, the R&D tax credit legislation has not been renewed for 2008. We suggest that you model our effective tax rate for 2008 in the range of 24% to 24.5%. As always, we will continue to pursue opportunities in this area to improve upon this rate throughout the year. Turning to sales, the current mean of analyst estimates for 2008 as published by First Call reflects a growth rate of 3.7%. We would be comfortable with your models reflecting total sales growth for the full year 2008 of between 4% and 5%. This would include operational sales growth of between 1% and 2% and a positive impact from currency of approximately 3% if rates were to remain where they are today. Now turning to earnings -- when I last checked, the recent First Call mean estimate for our EPS for full year 2008 is $4.41 per share. I suggest that you consider full year 2008 EPS estimate, including the impact of IPR&D charges, restructuring charges, or other special items of between $4.39 and $4.44. As you can see from my guidance, we are growing our earnings per share at a rate that is faster than the rate of growth in sales. This is the financial discipline at Johnson & Johnson that I often speak of. While this may vary in degree and by business segment year to year, or may be impacted from time to time by short-term dilutive impacts of acquisitions, this is a fundamental way we run our business; that is, growing income faster than sales over time. In 2008, our share repurchase program will enhance our EPS and, as you work through the guidance I provided a few minutes ago, we would be comfortable with your models reflecting an improvement in pretax operating margins for 2008. In closing, I would like to offer these final thoughts on 2007 and look at the year ahead. I am very proud to be able to report on the strong financial performance delivered this year because it is a testament to the hard work, dedication, and focus of the talented people across the Johnson & Johnson family of companies. As I’ve said to you throughout the year, Johnson & Johnson is committed to being a growth company and the results, priorities, and outlook provided today reinforce that. Our commitment to growth means three things to us. First, we continue to focus on competing in the most attractive, fastest growing segments of healthcare and as Bill pointed out, we are also looking outside our current businesses for new platforms of growth. Second, with our robust pipelines and advantages in the convergence of healthcare, we are well-positioned to build on our broad base and our superior science and technology for continued market leadership. And third, with our strong business and our financial discipline, we expect to grow our earnings faster than our sales once again in 2008. I look forward to updating you throughout the year and on our progress. Now, Louise, back to you.

[Louise Mehrotra:]

We will now begin our Q&A session. We ask that you wait for a microphone as this meeting is being webcast. And as we have Bill Weldon with us today, we ask that you keep your questions at the strategic level. Rick.

[Frederick Wise:]

Good morning, everybody. Bill, I understand that long-term emerging markets are a huge opportunity for JNJ and I appreciate [your strategy], but can you talk about the near-term risks, near-term being the next 12, 18 months, as global markets weaken and -- is that a big concern for you in ’08 and ’09 perhaps? Is that one of the major risks?

[William C. Weldon:]

I think that you are always concerned about the weakening of markets but I think as we move into healthcare and see some of the healthcare needs and the investments that many of these companies are making in healthcare, I think from the slide you saw that most of the developing world is growing two to three times faster than the developed world, so we think there are huge opportunities to move in and to be able to help treat patients and to create opportunities and value for ourselves, our shareholders, for the -- in treating patients. So we think healthcare is a great place to be and though there will be impacts on it, we think that the resources are being made available in most of these countries to take care of the healthcare needs of their people.

[Frederick Wise:]

Two other big picture questions quickly; you seem to be shaking up the organization in terms of personnel in significant ways, creating the new office -- but I see more change I think at divisional levels than I’ve seen in a long time. I’d be curious to hear your more personal thoughts about what are you trying to achieve where you are going? Is it all about growth, as you often say? And maybe just lastly, it’s hard to resist asking the acquisition question. I might as well throw it out there. Does the current environment set you up for more opportunities do you think? Thank you.

[William C. Weldon:]

I wouldn’t describe it as shaking it up. I think it’s a natural -- it’s a natural progression to look at the growth and the opportunities going into the future. If you look first at our MD&D business, it was very diverse and very broad and it covered all kinds of things, as you all know. So what we decided to do is we felt we had two really great opportunities. One was to really look at the surgical patient because people talk about going in and using endoscopic instruments or sutures or whatever it may be or replacing these, but when you look at the patient, the patient really has a lot more needs than just the knee coming in. There’s a lot of things that are involved in and I think the example I gave here of this controlled sedation for the patients is going to revolutionize surgery and diagnostics and it’s really bringing more to bear on the surgical patient, the selection of the patient, and the treatment of the patient, other than just going in and doing the procedure itself. So we think that there is a really great opportunity to bring the focus into that area and really focus on the operating suite and the surgical patient. That’s number one. And we had businesses that were natural for that area. If you look at Ethicon, Ethicon Endo, and DePuy, you had businesses that were really focused in that area and we can broaden those even beyond where they are today. Then you look at comprehensive care and we are seeing more and more as healthcare is evolving that the healthcare system is looking at the patient and the example I gave in diabetes, they are looking holistically at the treatment of the patient and the patient is looking for how do I deal with my disease? Not just how do I monitor my glucose or how do I pump in insulin or how do I do this or do that, but how do I really manage it? So we’re looking at how do we help manage these diseases so that we can manage them in a better way, we can actually -- I think we are probably one of the few organizations that can actually get up front and look at prevention and wellness as an opportunity for a business that will affect diabetes, it will affect cancer, it will affect cardiovascular disease. You can look at all of them and there is a real opportunity to get in earlier and it’s the right thing to do as well as a great opportunity to help move that forward. But if you look at the diabetic patient, it’s all the way across and our target is if we can really manage the disease better and help the patients manage their disease better, we’ll preclude some of the amputations and some of the ocular problems and other things at the back end. So that’s how we’re going to really start looking at ourselves and it may be through things that we’re doing but it may mean that we have to reach out and form some relationships with partners, so there’s more to it. But I think as you look at, and we’ve worked in the U.K. and we’ve worked in the U.S., we’ve worked in other areas, when you look at the total patient, there’s a tremendous opportunity to reduce healthcare costs and to really take care of patients. And then the third one is this area of strategy and growth, and the reason that we started looking at that is we feel we’re very uniquely positioned to be able to drive our business through the three segments that we really deal with, and that’s the medical devices diagnostics, pharmaceuticals, and the OTC consumer business. But there is two-thirds of the healthcare market, or approximately $3 trillion, $2.8 trillion, that is also going to be critically important as healthcare goes into the future. So you can look at services, you can look at health information technology, it’s all built around information. And so we’re looking at areas where we’ve never gone before and if there’s an overlap, there may be a convergence down the road if you look at evidence-based medicine, electronic medical records, health information technology but today, it allows us to make investments in the future and when you look at the graph we put up there, you look at this -- it’s not a natural rhythm but there are times when we have gone into spaces -- 40 to 50 years ago we never thought we’d be in pharmaceuticals and it’s become a huge opportunity for us. And these continue to be huge opportunities. We’re not taking attention off of those, but we are also looking into how do we help shape the future and how do we become an integral part of that, again through investments, through partners, through doing things that we have really not considered before. So we’re really excited about the opportunities to advance our businesses today and look into the future and make sure we are being current with what the needs are as we advance our own business. Acquisitions -- one more, I’m sorry. The same thing goes here as always. We don’t talk about acquisitions. We have our models we use. We want to make sure as we look at acquisitions, we’re bringing products in, we’re bringing shareholder value. I think that’s really what it comes down to -- how do we enhance shareholder value for our shareholders through acquisitions, licenses, or other ways of driving our business forward.

[Louise Mehrotra:]

Mike.

[Michael Weinstein:]

A couple of questions, and I’ll start with Bill and then maybe follow-up with Dominic. Bill, when we think about the past six months in particular, there was a lot of positive development in the pharmaceutical pipeline. It was, in my view, a bit of a critical period for the company as we [took longer term] terms into the next year or two but if we think about the company in the next five years, the pharmaceutical pipeline development is pretty important and the last six months were fairly encouraging. As you think about the number of product launches the company potentially has in 2008, 2009, 2010, can you talk just a little bit about the need to invest ahead of those launches, the need to restructure the pharmaceutical sales forces ahead of those launches and how that balances off versus the big cost restructure the company just did? And then I have a financial follow-up for Dominic.

[William C. Weldon:]

When we announced the realignment, if you want to call it a reorganization, earlier this year or earlier last year, it was really with the intent of understanding what the products that were coming into the market would be, so we didn’t see that we would -- we tried to reposition ourselves and we did reduce our sales forces, but we tried to position ourselves in a way that we’d be able to capitalize on the products that would be coming into the market going forward. So we don’t see that there needs to be huge changes as we go forward. We think we have the resources necessary. Now, there’ll be tweaks throughout as we always do but we think we’re really pretty well-positioned with our sales organizations to be able to launch the products in the markets we’re going into because most of them we compete in today. So we don’t see that there will be any real significant needs that will have to be addressed through the sales force. Does that answer the question?

[Michael Weinstein:]

Yeah, I mean, there are some categories -- I mean, we’re still early relative to some of the bigger pipeline products that are coming forward, but there are some categories you would be moving into and there are some drugs that are potentially going generic [inaudible]. There is some potential shifting within your pharmaceutical sales forces, right, naturally because of the evolution of the business? Dominic, can I [inaudible] a little bit on your ’08 commentary? I remember a year ago you gave earnings guidance and I was struck by some of the commentary that I thought below the top line was conservative and a year later, I’m probably in the same position. Your tax rate commentary, you’re not assuming the extension of the R&D tax credits -- that’s what you meant by that?

[Dominic J. Caruso:]

That’s right. We have not assumed the extension of the R&D tax credit in the tax rate guidance.

[Michael Weinstein:]

And then maybe you could just explain if you would, you’re a little bit more conservative than we are on both of the other lines, the other income line and the other expense line. I just want to understand your guidance versus [the way that we were] modeling.

[Dominic J. Caruso:]

Sure. Let’s take interest income and expense. It’s probably the easiest one and I gave guidance that it’s probably going to be break even or a modest amount of income. So what’s happening throughout the year is obviously we’re continuing to generate strong cash flows, we’re going to use a significant amount of that to repurchase stock, and then our cash build-up will be primarily overseas and our debt build-up will be in the U.S., so there’s a mix there that we need to think about when we forecast our interest rates. And then of course this past year, which will affect us in ’08, unlike it affected us in ’07, we actually took advantage of the lower long-term rates due to the credit market crisis and we termed out about $5 billion of our debt in much, much longer term rates, which we think are favorable rates for the long-term. Those balances were in very, very short-term commercial paper instruments earlier in the year. So we have higher interest expense, if you will, on that debt moving into 2008, coupled with a little bit lower interest income on investments abroad. The net of that is that although we are going to generate positive cash, of course, it’s going to be nearly break-even in terms of interest income and expense. In other income and expense, it’s primarily driven by number one, a base of royalty income and then each year, as I say, it’s difficult to forecast what other items may run through that line but we still have Pfizer integration costs running through that line, we still have a number of costs associated with multiple areas like product liability, closures of facilities and all those sort of costs that run through there, so we’ve tried to give you an estimate of what we think that net number for the year will be.

[Michael Weinstein:]

Just to clarify that, so in the interest income line, what are you assuming? If you can share with us to the extent that you want to do, what are you assuming relative to your free cash flow generation? It looks like you are just assuming that that goes elsewhere -- maybe it’s the share buy-back or acquisition, and then on the other line, the other expense line, the Pfizer, the restructuring in the Pfizer piece, how much is that in 2008?

[Dominic J. Caruso:]

I don’t want to give you a specific number for either of those but we are going to increase our free cash flow next year over this year. Again, as I said, most of that will be generated ex-U.S. versus U.S. And then the Pfizer integration cost, as I mentioned, will just continue in 2008, as well as the Pfizer synergy costs, which are above the line in SG&A and reflect in our pretax operating margins above the other income line.

[Louise Mehrotra:]

Larry.

[Larry Biegelsen:]

First, a question for Bill and then two pipeline questions; on the diabetes example, Bill, that was an impressive array of products but could you talk about some of the tangible benefits you expect to see for JNJ from bundling those products? And how do you incentivize people to work across divisions? The comprehensive care group is comprised of device divisions, but you are looking for people to work across the pharmaceutical division and consumer divisions as well.

[William C. Weldon:]

We may have some realignments as we go forward. They are really working on that right now. But I think it’s easier to explain in that the people in the pharmaceutical -- if you look at pharmaceutical R&D, for example, they are working looking at products that will improve diabetes or health in that area. We are doing stem cell research in that area and we are looking at having this group be able to take the products from those areas and bring them into the treatment for the patient in a total way, so we have areas where people are dedicated to diabetes even though they may not specifically be working in this area. And what we are doing is setting up -- it’s actually small groups that are working together that are focused in this area. We’ve been working on this probably for about the last six or seven months where we brought teams of people from Cordis, if you look at the cardiovascular problems, if you look at Ethicon and amputations, you look at Vistakon and eye problems, the pharm group and others, we have a team of people that have worked on this and are actually bringing it together. As far as the compensation, the compensation model will still remain consistent. There will be -- if you look at another is the realized gastric band. The Endo people are selling that for morbid obesity where people may not have diabetes but we’ll also have people involved dealing with specific weight loss for diabetes and they’ll be able to work together across the groups. But they’ve actually put up ways that they can do that.

[Larry Biegelsen:]

First on the pipeline, Telaprevir, could you give us an update on the initiation of the Phase III program in Europe and your filing date? At the R&D day last year you said you would start by the end of ’07 the Phase III trial and file 2009/2010, but a recent Vertex press release, as you know, said that you are doing few Phase II studies in Europe which will complete in the second half of 2008, and I was wondering if there was an update on that and how that affects your timeline. And then on Golimumab, do you still plan to present the Phase III RA data at ULAR this year and file in the second quarter of 2008 to the U.S.? Thanks.

[William C. Weldon:]

Louise is looking some things up. I can make a couple of quick comments. On Telaprevir, we still are in the timeline that we had planned on for submission I think at the end of 2010. We are still on that same timeline and as far as 148, we are still on target.

[Louise Mehrotra:]

-- presenting that data at ULAR.

[Larry Biegelsen:]

You’re planning to present at ULAR the Phase III data and Telaprevir, Bill, you said filing towards the end of 2010 is what you are targeting right now?

[Louise Mehrotra:]

2010 timeframe.

[William C. Weldon:]

We’re still on target to -- Telaprevir is still on target. What’s going on in the U.S. is, you know, you’d have to talk to the other company about it.

[Larry Biegelsen:]

Thank you.

[Louise Mehrotra:]

Vince.

[Unidentified Analyst:]

Two questions for Bill; first, the company gave ’08 guidance but some would argue that 2009 is a really, really tough year where you’ve got Risperdal still facing generic and Topamax going generic. So as you look out to ’09, should we think about ’09 as a year looking similar to 2008 in terms of top line and bottom line? And then, can you talk about how you envision the company beyond 2009, beyond the difficult years? Do we get back to JNJ typical solid double-digit low teens type of EPS growth? And then secondly, on the drug side, on the pharma side, we did have some management changes in 2007 announced, Joe Scodari stepping down, Chris Poon taking over. Should we assume though we get additional management announcements on the pharmaceutical side in 2008? Thanks.

[William C. Weldon:]

Let me take the second one first. We don’t anticipate any other changes. Joe had planned to retire. Chris was going to pick up the pharmaceutical group. She’s had a lot of experience there and we think we have -- there will be a great transition there that was planned and in place so we don’t see any other changes. As far as 2008 and 2009, if you go back to what we did earlier this year to get really focused on growth and to really improve the cost structure of the company, those benefits, the $1.3 billion to $1.6 billion, are going to be carried on throughout ’08, ’09 and what not. So we feel we’ve really -- we’ve addressed the financial impact so we can manage our business going forward without worrying about it. We recognize and I met with our pharm group the other day and July 1st of this year, the market will be different than it is June 1st. I mean, that’s a fact. So we are going to have to continue to do our jobs, get focused on the opportunities. We have great engines of growth throughout our business. We have a wonderful pipeline and I think that’s the big thing, and I guess Mike asked a question earlier; it is going to mean some more investments, even if it’s not in people it’s going to be in other types of investments. But we think that we’ve, through 2006, 2007, the approvals we’ll be seeing this year and beyond will position us very well as we move through 2008 and 2009, and I think in ’10, that will all be behind us. So we are very excited about where we are today, the changes we’ve made, and the focus we have on the opportunities and developing and bringing the pipeline to life. So yeah, it’s going to be -- you know, we’re not blind to the challenges but we feel we’ve really looked at and acknowledged the Risperdal and Topamax issues and we feel we’ve gotten ahead of them and we’re going to power through it and do the job that we’ve always done.

[Unidentified Analyst:]

…2010 we get back to typical JNJ, you know --

[William C. Weldon:]

2010 we’ll be moving along nicely.

[Louise Mehrotra:]

Bob.

[Bob Hopkins:]

Bill, a quick follow-up question on some of the earlier ones; you talked about being at something of an inflection point in your corporate history as you try to take advantage and win in healthcare more broadly. Obviously historically you’ve been focused on consumer and mostly in the healthcare product side. It sounds like from what you are communicating here is that as we move forward, whether it’s internally or externally, you are going to become a lot more focused on healthcare services. Is that a fair interpretation of your comments?

[William C. Weldon:]

Well, you know, there’s a lot of things in that other $2.8 trillion that’s out there. It’s more than just services but yeah, I think services are going to be very important. I think information is critically important and we end up selling information. It’s information that is going to drive the evidence-based decisions the physicians will be making in the future. It’s going to also be information that’s going to eliminate the problems and the issues that are going on in hospitals today, where there may be concomitant use or misinterpretation of drugs. So there’s lots of opportunities out there, Bob. So I think service is one of them but it’s really the reason why we put this group together because it is all encompassing when you get out there and some of it is easy for us to see today and I think everyone can see it and everyone is talking about it. There’s not a lot being done but a lot of people are talking about it. But there’s a lot of other things in there and that’s what the group is going to do, is they are going to explore the opportunities and they are really going to be looking at ways that we can make investments that will really set up the next $20 billion franchise for JNJ. But services you have to say are going to be a very important part of that and I think over time you will also see that some of these services and information are going to actually merge with some of our core businesses further down the road. I can’t predict the future. All I can say is that I think we’ll be very well-positioned and we have a group that’s going to be able to help us really make some choices. Some of them are going to be wrong and we know that, but hopefully some of them are going to be right and we’re going to be very well-positioned, better than anyone else.

[Bob Hopkins:]

Thank you for that, and then just one quick follow-up on the medical device side; do you feel like you are comfortable with your current portfolio or are there still product areas that you feel represent gaps that you’d like to address as you look forward? Thank you.

[William C. Weldon:]

I think when you look at medical devices, there’s always new innovations coming through and there’s always new things, so we keep our eyes opened. I don’t think we have all the answers and I think there’s going to be a lot of tremendous change that’s going to go on and new things. Hopefully some of them will be developed or discovered or invented internally, but there will be a lot externally and I think you look at micro-electronics, they are going to have a huge play as you go forward. So there’s a whole lot of things and I don’t think we have them all in-house, so we’ll continue to look for opportunities external as well as develop them internal.

[Louise Mehrotra:]

Catherine.

[Catherine Arnold:]

Bill, you were very candid about the headwinds that the [erythropoietin stimulating agents] franchise caused you in 2007 and I’m wondering as I interpret your 2008 guidance if you are making some assumptions regarding solving the bleeding of that franchise, if you will, in regard to the penetration rates. You had mentioned market share, Louise, in your comments but penetration rates are obviously a key component of when you reach trough levels. Is that going to happen in 2008? And then my second question is about the office of strategy; could you tell me if those folks are going to be compensated based on what they bring to you in 2008? And do they have to bring to you current revenue and profit-generating businesses?

[William C. Weldon:]

The second one is very simple; no, they don’t have to bring -- they are not going to be evaluated on are they going to bring profits in 2008. I think they are going to be looked at as are they making investments. I think as they comb the landscape, they will see a lot of opportunities that will actually be able to be fed into the other businesses for the other ones to pursue, and they may find things that are going to be able to be creating revenue, if not profits, very shortly in short term. But I think it’s more of an investment in the future and that it will not be viewed as being evaluated on are you creating income for us this year. But it will be evaluated on the potential of income growth for the future. As far as the ESAs, that was the other question, and Procrit, I think it’s going to be hard to comment on that. What we are pleased about, we’re obviously disappointed about the way the market has really contracted over time but we are very pleased about the performance of Procrit in the market because we’ve actually been able to gain share. Right now we’re seeing a leveling off. We have the ODAC meeting next month. We can’t predict what’s going to happen there. We feel, you know, when used appropriately, we have a wonderful drug that over a long term has been shown to be very safe and very effective and we are going to continue to try and drive the product and drive the results appropriately, because we do feel it’s safe, it’s efficacious when used appropriately, and brings extraordinary benefits to patients. So we think we’ll be able to continue to drive it and we have a strong commitment behind it.

[Catherine Arnold:]

Just as a follow-up, if you don’t reach trough penetration in ’08, your guidance is still okay?

[William C. Weldon:]

If we don’t reach what?

[Catherine Arnold:]

Trough penetration in some of the key segments like human therapy dysonemia, anemia of cancer --

[William C. Weldon:]

We feel good with where we are with Procrit in our forecast.

[Louise Mehrotra:]

Next question over here, Bruce.

[Bruce Nudell:]

Bill, just kind of putting ballpark ranges around it, when you look at next year’s guidance, what sort of operational revenue decline is built in for pharma and/or increase? And a follow-up with regard to Catherine’s question with ESAs, you know, we’ve modeled for chemotherapy induced anemia something like a 75% decline in Medicare patients. In the U.S., do you see the ESA market down 50%, 60%? What’s the ballpark you see in the U.S.? Thank you.

[William C. Weldon:]

You know, we don’t give any numbers on the financials and the impacts on pharmaceuticals. I think we see the ESAs, I think we are going to see will continue to maybe show some declines this year. I don’t think the magnitude of the ones you were describing but we’ll continue to see declines.

[Louise Mehrotra:]

Glenn.

[Glenn Reicin:]

Could you just talk a little bit conceptually about the launch of OTCs, or technically the economics of the launch like that are? I assume it’s not a moneymaker for several years and I thought you sort of sworn off the whole category with the old days of [inaudible] and the like, so maybe talk a little bit about the development of your decision to go ahead with that.

[William C. Weldon:]

In all OTC area?

[Glenn Reicin:]

Just that product in particular, Zyrtec.

[William C. Weldon:]

Zyrtec -- our feeling about Zyrtec -- we feel very good about it. Obviously it was the number one prescribed pharmaceutical. We’ve looked at Claritin. We’ve looked at other products and the models that they’ve used. We’ve worked closely with our partners, the Wal-Marts and CVSs and Rite-Aids and Walgreen’s and everyone else to make sure that we have a good relationship there. And we feel very good about where we are going. We feel very good about the investments. We started shipping actually Zyrtec, the trucks started I think Monday morning and we’ll have it on the shelves by the end of this week. So basically, I think we have a very strong program, a comprehensive program when looking at all the experiences we could gain from everyone else’s launches and taking advantage of begin able to move patients from the prescription area into this area as well as to look at it that we feel Zyrtec is probably the most effective of all the products. So when you start looking at the treatment in this area, we think that there’s a big opportunity for the product.

[Glenn Reicin:]

And the economics of a launch like that, how much does it actually cost you to launch and what’s the break-even? How many years conceptually does it take to break even on a launch like that? Is it two years, one year, five years?

[Dominic J. Caruso:]

We’re not going to talk about that level of specificity, but we wouldn’t be excited about it if we didn’t think it was going to make us money in a reasonable amount of time.

[Louise Mehrotra:]

With respect to everybody’s time, we’ll now close the meeting with some final remarks from Bill.

[William C. Weldon:]

I’ll just make them from here. I really do want to thank everyone for coming. I also want to tell you how we feel that the organization really did respond to some extraordinary pressures and challenges in 2007 and delivered very solid results. We are very excited, as I said, about 2008 and beyond and we are going to continue to drive our business and we do have a MD&D review set up for June in New Brunswick and we look forward to seeing you all there. Thanks very much.