Johnson & Johnson at UBS Genomics 2.0 and MedTech Innovations Summit Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : So maybe let's get a start, level setting. Biosense Webster is the very clear market leader today in electrophysiology. Can you talk, Celine, about how the EP market has evolved over the last decade? And how do you see it evolving over the next few years with pulsed field ablation, new technology coming online? Celine Martin Sure. Happy to. First, thank you for having us. It's a pleasure to be here. And I will say that having been in the space for 20 years, it's very rewarding to be talking today about how much we've come. We've come a long way in terms of the AF ablation established as a standard of care. So maybe as a starting point, let me spend some time talking about AFib as a disease state, number one. So AFib is the most common cardiac arrhythmia. It's a disease that's impacting about 37.5 million patients around the world. It's an age-related disease. So that means that 1 patient out of 4 above the age of 40 will experience AFib in a lifetime. And the prevalence is on the rise. So we clearly see that by 2030, the prevalence will increase by 70%. And if we fast forward 2050, there will be 5 million patients more added to the pool of patients each and every year. So you may ask, why does it matter? And it matters because AF is associated with a higher incidence of stroke and heart failure. The risk factor increases by a factor of 5x, and also mortality increases by a factor of 2x. So what we see today is that we've established ablation as a standard of care. If we look back in the last 10, 15 years, if I reflect on our latest product addition QDOT, the procedure is now well established. So the procedure is done in an hour with a success rate of 86% and practically almost no fluoroscopy. In fact, we had great news in the last week. The FDA approved our portfolio of products that is essentially subject to workflow with - there's no need for fluoro, which is a big breakthrough. So the procedure is well established. The challenge is that only 5% of the AF population that should REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 15, 2023 / 6:00PM, JNJ.N - Johnson & Johnson at UBS Genomics 2.0 and MedTech Innovations Summit get ablation, gets ablation today. So there's 95% of patients that essentially do not get access to therapy. So that's, I would say, the big challenge but also the big opportunity for us. So as a company, we've been very, very focused on addressing unmet needs. And there's 4 areas we're looking for. One is locate where to ablate, deliver better lesions, simplifying the procedure and eliminate fluoroscopy. And as I said before, we've moved the needle in a huge way in terms of overall standard of care, but there's still much more to do. So where I see the future is in 3 ways. Number one, a greater diagnosis of AF patients. No question about it. The smartwatches are helping in many ways, and there is greater awareness around AF and AF ablation. Number two, I am convinced that there will be much more innovation coming to the EP segment by virtue of the unmet need. Cadence of innovation will take the procedure time further down and hopefully enable better success rates. And last is greater access to care. So by virtue of the procedure time coming down, there will be many more patients being brought forward to the EP lab for procedure. And all that bodes really, really well for AF patients.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Okay. Got it. And is there some sort of education initiative that can be done at the referring physician level? Or how do we think about accessing the start of the referral funnel? And I appreciate that maybe some of it is like the EPs can't even handle it right now. So it's a moot point, I guess. But just thinking about the pathway that the patient goes through. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 15, 2023 / 6:00PM, JNJ.N - Johnson & Johnson at UBS Genomics 2.0 and MedTech Innovations Summit Celine Martin We're definitely investing a lot in raising awareness around AFib. As I mentioned earlier, the connection between AFib and stroke, the connection between AFib and heart failure, we're raising awareness around that. We have this unique outlet called Get Smart About AFib that's garnered a lot of attention among patients and referring physicians, really raises the level of information and education around what AF is and how it can be treated. We've also run studies. I think there's one that comes to mind, the ATTEST study, that has demonstrated that if you're essentially getting the ablation procedure done, you're 10x less likely to evolve from paroxysmal to persistent, again, with better outcomes in return.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Okay, okay. Got it. Okay. And I don't know if this is still you, Celine, or whoever wants to take this question, but just the makeup of the overall ablation market today. Obviously, one of the things we're all trying to get our hands around is what this market looks like. From a growth perspective -- this has been a double-digit grower for a decade-plus, right, from a growth perspective but also from a market share perspective, thinking about RF and PFA. So today, how many of these -- if you can answer this, how many of these are done for atrial fibrillation versus CT and SCT, RF versus cryo mapping versus catheters, paroxysmal versus persistent? However you slice and dice this market, maybe. Jasmina Brooks Well, I think we can slice and dice in many different ways. So maybe I'll start with just arrhythmias in general. Atrial fibrillation is the most common arrhythmia today. So majority of the cardiac ablation procedures are treating atrial fibrillation followed by flutter, SVTs and then VTs. So AF still continues to be the fastest growing as well as the largest arrhythmia population that's being treated today. If you look at persistent versus paroxysmal or paroxysmal versus persistent, it's typically about a 60-40 is the number that we're looking at today, and that may shift. But right now, over the last 10 years, it has been that 60% to 40% split between paroxysmal and persistent AF. When we look at the modalities of treatment that I use for cardiac ablation today, RF is still the cornerstone. Obviously, there is cryo that has certain percentage of cases. And PFA is the new entrant in the space that time will tell where and how that percentage split is going to look like 5, 10 years from now. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 15, 2023 / 6:00PM, JNJ.N - Johnson & Johnson at UBS Genomics 2.0 and MedTech Innovations Summit

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Do you ever envision a world in which we're at over 50% of the patients that should be treated or treated with -- I'm not even going to put a time frame on it ever that we get there, over 50% of the patients? Celine Martin I mean it's -- I want to go back to what I said earlier. I mean we have a desire to get to 100% technique success rates, done by 100% of physicians, eventually enabling 100% of patients who need ablation to get ablation. To get to 50%, not any time soon, just by virtue of the bottlenecks we talked about earlier, linked to number of physicians, number of labs and number of patients.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Okay. Got it. And you mentioned PFA. So that's your fault that we're going to talk about that and not mine. But PFA, so maybe before we talk about what J&J is working on specifically, which you did highlight for the sell-side community at HRS, but how do you see PFA impacting the AF ablation market in the next few years from a growth perspective? I have my biases here, Celine. I think we spoke at the booth about this, but also the market share -- market split between RF, PFA and cryo. Celine Martin Yes. So I'll start by saying that I see PFA as the next inflection point in our AF market development by virtue of the benefits that are perceived coming from PFA, namely in terms of safety and in terms of efficiency. Maybe a few words on the mechanism of action very, very briefly. So radio frequency is a thermal-based modality. PFA is as well, but the mechanism of action is different. So think of PFA that's also called IRE, irreversible electroporation, is essentially very, very short high-voltage bipolar pulses that are essentially delivered across a very, very small period of time, like fractions of a second. And this mechanism being so quick, it essentially enables to discriminate between tissues. So think of it as -- the energy is going to go and deliver the lesion towards the myocardium but will not create the collateral damages that perhaps are known related to thermal energies like radio frequency. And I'm thinking here about phrenic nerve and esophagus. So there is a perceived notion of safety that makes it extremely compelling for clinicians. And because the energy delivery is so fast, it's deemed to be efficient. So this, in theory, will enable potentially more patients having access to ablation by virtue of safety profile and obviously procedure time. Now when we look at the body of clinical evidence, the PFA body of evidence really tells the 20 years' worth of experience we have with radio frequency. And I think there's still a lot we need to learn. We're already aware that even PFA has complications, especially the coronary spasm. So we are cautiously optimistic about the technology. But what I will say is that our approach as a company, as a market leader is to leverage all the capabilities that we have existing today linked to radio frequency. And I'm thinking navigation, the CARTO system, the feedback related to algorithms and essentially enable a portfolio of technologies coming from J&J that's going to be a wide array of categories, but all powered by this CARTO ecosystem. So we're going to have a multi-electrode catheter called VARIPULSE. We're going to have a focal tip dual energy, STSF, which is the most widely used catheter in the world. We want this platform to be dual-energy. Why? Because we want to give it the safety profile of PFA but also the proven durability of radio frequency. And we'll have next-gen single shot and we'll have a large tip focal technology called OMNYPULSE. So we're really approaching it as a broad portfolio to cater to the procedural needs, namely paroxysmal but also, eventually, persistent.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Yes. Okay. That makes sense. And maybe we could talk about next steps for J&J and PFA. But actually, I just thought of something, if I could. You mentioned this being the -- an inflection. When was the last inflection? Like is there anything historically that you could point to that we could look at as a sort of proxy? Or is this like a totally new frontier for... Celine Martin So if I look at inflection point related to effectiveness and also share dynamics for J&J, I would say, the introduction of SMARTTOUCH.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Yes. Okay. That's what I thought. Okay. So J&J's PFA portfolio and VARIPULSE. You presented data at -- I think it was the AF meeting in February. I don't even know if it's still called Boston AF because it's in Orlando, right? It's very confusing. Anthony Hong No, it's back in Boston. Celine Martin No. It's back... Jasmina Brooks Back in Boston, yes.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : You guys sound like your bored, probably. Okay. Well, that's great. And I think another thing that's important to point out is Biosense Webster has been delivering strong double-digit growth internationally still. While PFA -- I mean is there any reason to think that what happens in the U.S. wouldn't be similar to what happens internationally, which is RF is still growing double digits, PFA is growing well. Are they structurally different markets for some reason that we should think of the U.S. as being different? Celine Martin So I think, as Jass pointed out, our strategy is global in nature and the execution of our strategy is the same irrespective of where you are in the world. We have a pretty well organized go-to-market strategy with our CARTO mappers that you find everywhere around the world. So I don't expect differences. What I will even say is that we've picked up 10 points of share in the last 6 years. And this year, we're gaining share on the global basis.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : And another point to make probably too, I think, correct me if I'm wrong, the initial PFA trials are being done in paroxysmal. And you mentioned 40% of these are being done in persistent patients. Anthony Hong Correct.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Yes. Okay. Got it. And if we think about the operator dynamics, so from an EP perspective, are there still EPs that aren't doing ablations because they're not well trained, experienced, et cetera? Is PFA something that can get into the hands of a less experienced operator, and that helps drive market growth? And that wasn't a doc doing RF anyway. So is that something that is happening or could happen? Jasmina Brooks Of course, it's a possibility, right, especially if they're concerned with the complications rate. But I mean, complication rates with RF are not -- we're not talking double digit here. We're talking like lower single digits that we've seen. So there may be an opportunity for additional electrophysiologists that may not be doing left-sided procedures, which atrial fibrillation is the left side of the procedure. Knowing that there is the promise of safety with PFA, they may feel more comfortable doing PV isolation.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : The one thing that I've been thinking about over the last few weeks as we get closer to Advent is J&J does not have the implantables that they sell to the EP, so think ICDs, CRTDs, things like that. And you are just selling not -- I mean it's a big product for the EPs, but AF ablation or ablation product. So is there a risk here in some way, shape or form of competitors bundling products and gaining share that way? I mean maybe talk about how sticky share is and whether that is a real risk or that's just me being... Celine Martin So I go back to the catheter equipment. I go back to giving monetary incentives for hospitals to access the latest and greatest from the CARTO system through the SA. I go back to the group of CARTO mappers we have to support cases each and every day. Those are very important switching costs that we believe cannot be dismissed when you think of the share dynamics. We index a lot on that as the reason why we believe that most of the customers are going to stick to the technology they are used to. They have it. It's readily available. And as I said earlier, with QDOT, with -- and our procedure time, they're already achieving amazing efficiency and clinical outcomes. So we believe that there is a tremendous stickiness linked to the technology and the people that are there to support. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 15, 2023 / 6:00PM, JNJ.N - Johnson & Johnson at UBS Genomics 2.0 and MedTech Innovations Summit Jasmina Brooks If I may add something, this obviously, PFA -- introduction of PFA is not creating this new situation where other companies may have broader cardiovascular portfolio where they can offer this joint product offerings. So we have seen that play out over the last many years, right? In the end, the decision of what product they want to use for what procedure for their specific patient is down to an electrophysiologist, so they're planning their procedure. One thing that I want to highlight here, we're Biosense Webster, but we're part of J&J MedTech. So this joint product offering doesn't necessarily need to be across the cardiovascular space. But if you look at the portfolio of products that we have as J&J MedTech, there is an opportunity for us to maybe start doing similar stuff across the wide range of the portfolio of products that we have outside of cardiovascular space.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Yes, yes. Okay. And then let's talk about if we could explore beyond PFA and what could be coming -- or maybe even if it's within PFA, how to continue to improve upon the system. So we -- the product offering, so we get to that 50%-plus share in 2300? Celine Martin So first, I would say, as a company, we're agnostic to the source of innovation. We're very fortunate to have a very, very strong R&D organization, a flagship center in Israel, a flagship center in California. So because we've been so focused on AF as our sole point of attention for 20 years, we have subject matter expertise and depth that gives us this edge in terms of innovation. And we always say it's the oxygen of the business. But it's not just ablation. So when I think of AF, I mentioned earlier the connectivity to stroke and the connectivity to heart failure. So ablation does address the stroke risks, but there's other mechanisms of action to address stroke. And we're keenly interested in the left atrial appendage closure category as one adjacency that we believe is critical to play in. And you're familiar with our WaveCrest technology. That's one area that we're very committed to. Second, imaging. We acquired NuVision as a company 2 years ago, and we believe that NuVision has the potential to expand within the sphere of EP AF, but also potentially other adjacencies in the IC category. Next to that, I'm thinking heart failure. And I'm thinking structural heart as natural adjacencies to leverage and capitalize on the CD presence we have as J&J.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Yes, and probably not something that doesn't necessarily -- tell me if I'm wrong, doesn't necessarily reduce the need for an ablation. It's more concomitant to an ablation... Celine Martin It is indeed. The trends in the future would suggest that it might be a concomitant procedure where you tackle the need for fixing the rhythm, so bring the patient back into sinus, but also managing the stroke risk.

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Okay. I was going to ask if CARTONET is there already or if that's -- yes. Okay. Celine Martin It is out already. Anthony Hong (inaudible).

Question: Danielle Joy Antalffy - UBS Investment Bank, Research Division - Analyst : Okay. Got it. I guess, in the last 2 minutes, is there any sort of message that you either think The Street investors are misunderstanding about the J&J Biosense Webster EP business or CSS broadly that you want to make sure we understand. So you go into these next few weeks, we see Advent make sure you leave an impression on folks, like this is how J&J is doing and will continue to do? Celine Martin I think the point that Tony made around the clinical standard of care and the success rates, understanding that is really, really critical. I would say, from a J&J standpoint, we're very bullish about the AF market. We're market leaders. We're gaining share. We have an amazing cadence of innovation REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 15, 2023 / 6:00PM, JNJ.N - Johnson & Johnson at UBS Genomics 2.0 and MedTech Innovations Summit starting today. We have QDOT as the best-in-class RF technology that is out there with a very high success rate, short procedure time. And we're the only company with essentially the no fluoro label. So that's already a huge advancement for AF ablation in terms of standard of care. And we're moving really fast to the next wave, which is PF-enabled, knowing that we're cautiously optimistic about it, we know that there's still a lot to learn, but you're going to see a cadence of innovation, as I mentioned earlier, of catheters that will be CARTO-powered. And we're very bullish about the clinical success we're going to get from those technologies. And we believe that by virtue of the CARTO installed base, more than 5,000 systems, we'll be able to reach the global patients as fast as possible.