Results of Operations
Analysis of Consolidated Sales
For the first fiscal nine months of 2008, worldwide sales were $48.6 billion, a total increase of 7.6% including an operational increase of 3.0% over 2007 first fiscal nine months sales of $45.1 billion. Currency had a positive impact of 4.6% for the period.

Sales by U.S. companies were $24.6 billion in the first fiscal nine months of 2008, which represented an increase of 1.8% over the same period last year. Sales by international companies were $23.9 billion, which represented a total increase of 14.3% including an operational increase of 4.3%, and a positive impact from currency of 10.0% over the first fiscal nine months of 2007.

Sales by companies in Europe achieved total growth of 12.6%, including an operational growth of 1.4% and a positive impact from currency of 11.2%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved total growth of 18.2% including operational growth of 8.4% and a positive impact from currency of 9.8%. Sales by companies in the Asia-Pacific, Africa region posted sales growth of 15.5%, with operational growth of 7.8% and a positive impact from currency of 7.7%.

For the fiscal third quarter of 2008, worldwide sales were $15.9 billion, a total increase of 6.4% and an operational increase of 3.3%, over 2007 fiscal third quarter sales of $15.0 billion. Currency fluctuations positively impacted sales by 3.1% for the period.

Sales by U.S. companies were $7.9 billion in the fiscal third quarter of 2008, which represented an increase of 0.4%. Sales by international companies were $8.0 billion, which represented a total increase of 13.1%, including an operational increase of 6.5%, and a positive impact from currency of 6.6% over the fiscal third quarter of 2007.

Sales by companies in Europe achieved total growth of 8.3%, with operational growth of 1.0% and a positive impact from currency of 7.3%. Sales by companies in the Western Hemisphere, excluding the U.S., achieved total growth of 22.3%, operational growth of 15.3% and a positive impact from currency of 7.0%. Sales by companies in the Asia-Pacific, Africa region posted sales growth of 16.5%, with operational growth of 11.3% and a positive impact from currency of 5.2%.

Analysis of Sales by Business Segments

Consumer
Consumer segment sales in the first fiscal nine months of 2008 were $12.2 billion, an increase of 14.2% over the same period a year ago, with 8.7% of operational growth and a positive currency impact of 5.5%. U.S. Consumer segment sales increased by 10.5% while international sales achieved growth of 17.2%, representing an operational increase of 7.3%, with a positive currency impact of 9.9%.

Major Consumer Franchise Sales - First Fiscal Nine Months

                                                                                              Operations
(Dollars in Millions)             Sept. 28, 2008      Sept. 30, 2007       Total Change         Change          Currency Change
OTC Pharm & Nutr                  $         4,438     $         3,727               19.1 %            14.2 %                 4.9 %
Skin Care                                   2,537               2,258               12.4               6.9                   5.5
Baby Care                                   1,691               1,445               17.0               9.8                   7.2
Women's Health                              1,475               1,345                9.7               2.9                   6.8
Oral Care                                   1,228               1,109               10.7               6.4                   4.3
Wound Care/Other                              830                 799                3.9              (0.3 )                 4.2

Total                             $        12,199     $        10,683               14.2 %             8.7 %                 5.5 %

Consumer segment sales in the fiscal third quarter of 2008 were $4.1 billion, an increase of 13.1% over the same period a year ago with 9.4% of operational growth and a positive currency impact of 3.7%. U.S. Consumer segment sales increased by 11.2% while international sales achieved growth of 14.7%, representing an operational increase of 8.1%, with a positive currency impact of 6.6%.

Major Consumer Franchise Sales - Fiscal Third Quarter

                                                                                                Operations
(Dollars in Millions)              Sept. 28, 2008       Sept. 30, 2007       Total Change         Change          Currency Change
OTC Pharm & Nutr                  $          1,439     $          1,264               13.8 %            11.3 %                 2.5 %
Skin Care                                      858                  737               16.4              12.0                   4.4
Baby Care                                      586                  511               14.7               9.4                   5.3
Women's Health                                 510                  461               10.6               5.5                   5.1
Oral Care                                      434                  396                9.6               6.7                   2.9
Wound Care/Other                               272                  254                7.1               4.2                   2.9

Total                             $          4,099     $          3,623               13.1 %             9.4 %                 3.7 %

The OTC Pharmaceuticals and Nutritionals franchise achieved operational growth of 11.3% over prior year fiscal third quarter. A major contributor was the continued success of over-the-counter ZYRTEC® in the U.S., which was launched during the fiscal first quarter of 2008. On October 7, 2008 the Company announced a voluntary labeling change on children's cough and cold medicines regarding usage for children under the age of 4 years, to encourage the safe, effective use of these products. These actions will not have a significant impact on sales for the OTC Pharmaceuticals and Nutritionals franchise.

The Baby Care franchise operational growth of 9.4% over prior year fiscal third quarter was the result of strong sales performance by wipes, haircare and powder product lines primarily in sales outside the U.S.

The Women's Health franchise operational growth of 5.5% over the prior year fiscal third quarter was primarily due to the successful launch of new products in the U.S.

The Oral Care franchise operational growth of 6.7% was driven by the strong growth of LISTERINE® mouthwash. The launch of the dissolvable whitening strips in the third quarter of 2007 impacted the U.S. growth comparisons for the quarter.

Pharmaceutical
Pharmaceutical segment sales in the first fiscal nine months of 2008 were $18.9
billion, a total increase of 2.2% over the same period a year ago with an
operational decline of 1.5% and an increase of 3.7% related to the positive
impact of currency. The U.S. Pharmaceutical sales decreased by 2.2% over the
same period a year ago. Total growth in international Pharmaceutical sales was
9.9%, an increase related to the positive impact of currency.

Major Pharmaceutical Product Revenues* - First Fiscal Nine Months
                                                                                             Operations
(Dollars in Millions)             Sept. 28, 2008      Sept. 30, 2007      Total Change         Change           Currency Change

REMICADE®                         $         2,862     $         2,419              18.3 %            18.3 %                    - %
TOPAMAX®                                    2,051               1,801              13.9              12.1                    1.8
PROCRIT®/EPREX®                             1,900               2,257             (15.8 )           (19.8 )                  4.0
RISPERDAL®/Risperidone                      1,841               2,546             (27.7 )           (30.0 )                  2.3
LEVAQUIN®/FLOXIN®                           1,180               1,214              (2.8 )            (3.0 )                  0.2
RISPERDAL® CONSTA®                            990                 833              18.8              11.2                    7.6
CONCERTA®                                     967                 739              30.9              27.3                    3.6
ACIPHEX®/PARIET®                              884               1,010             (12.5 )           (16.9 )                  4.4
DURAGESIC®/Fentanyl Transdermal               764                 900             (15.1 )           (21.0 )                  5.9
Other                                       5,443               4,750              14.6               8.2                    6.4

Total                             $        18,882     $        18,469               2.2 %            (1.5 )%                 3.7 %

*Prior year amounts have been reclassified to conform to current presentation.

Pharmaceutical segment sales in the fiscal third quarter of 2008 were $6.1 billion, a total increase of 0.2% over the same period a year ago with an operational decline of 2.5% and an increase of 2.7% related to the positive impact of currency. U.S. Pharmaceutical sales decreased by 6.0% over the same period a year ago. Total growth in international Pharmaceutical sales was 10.3%, representing an operational increase of 3.3% with a positive currency impact of 7.0%.

Major Pharmaceutical Product Revenues* - Fiscal Third Quarter

                                                                                               Operations
(Dollars in Millions)              Sept. 28, 2008       Sept. 30, 2007      Total Change         Change           Currency Change

REMICADE®                         $            978     $            819              19.4 %            19.4 %                    - %
TOPAMAX®                                       728                  613              18.8              17.6                    1.2
PROCRIT®/EPREX®                                619                  682              (9.2 )           (11.9 )                  2.7
CONCERTA®                                      398                  231              72.3              66.4                    5.9
RISPERDAL® CONSTA®                             338                  294              15.0               9.8                    5.2
LEVAQUIN®/FLOXIN®                              333                  371             (10.2 )           (10.4 )                  0.2
RISPERDAL®/Risperidone                         320                  831             (61.5 )           (63.0 )                  1.5
ACIPHEX®/PARIET®                               282                  338             (16.6 )           (19.0 )                  2.4
DURAGESIC®/Fentanyl Transdermal                259                  309             (16.2 )           (20.7 )                  4.5
Other                                        1,858                1,611              15.3              10.7                    4.6

Total                             $          6,113     $          6,099               0.2 %            (2.5 )%                 2.7 %

*Prior year amounts have been reclassified to conform to current presentation.

REMICADE® (infliximab), a biologic approved for the treatment of Crohn's disease, ankylosing spondylitis, psoriasis, psoriatic arthritis, ulcerative colitis and use in the treatment of rheumatoid arthritis, achieved operational growth of 19.4% over prior year fiscal third quarter. The U.S. sales growth was driven by market growth. An increase in export sales is due to the increased demand outside the U.S. and customer production planning needs. REMICADE® is competing in a market which is experiencing increased competition due to new entrants and the expansion of indications for existing competitors.

TOPAMAX® (topiramate), which has been approved for adjunctive and monotherapy use in epilepsy, as well as for the prophylactic treatment of migraines, achieved strong operational growth of 17.6% as compared to prior year fiscal third quarter. The growth was primarily due to increases in the migraine category partially offset by generic competition in certain markets outside the U.S. The patent for TOPAMAX® (topiramate) in the U.S. expired in September 2008. In July 2008, the U.S. Food and Drug Administration (FDA) granted pediatric exclusivity for TOPAMAX®, which extends market exclusivity in the U.S. until March 2009. The expiration of a product patent or loss of market exclusivity is likely to result in a significant reduction in sales. In the first fiscal nine months of 2008, U.S. sales of TOPAMAX® were $1.7 billion.

PROCRIT® (Epoetin alfa)/EPREX® (Epoetin alfa) experienced an operational sales decline of 11.9%, as compared to prior year fiscal third quarter. The decline in PROCRIT® sales was due to the declining markets for Erythropoiesis Stimulating Agents (ESAs) in the U.S. Outside the U.S., new competition and label reviews have contributed to the lower sales results for EPREX®. Discussions with European regulators regarding changes to the label for ESAs, including EPREX®, are underway. The FDA issued an order requiring a labeling supplement making specific revisions to the label for ESAs, including PROCRIT®. The label for PROCRIT® was updated July 30, based on review of emerging safety data for the use of ESAs in patients with cancer.

CONCERTA® (methylphenidate HCl), a product for the treatment of attention deficit hyperactivity disorder, achieved operational sales growth of 66.4% over the fiscal third quarter of 2007. Sales results in the fiscal third quarter of 2008 were favorably impacted by approximately $135 million, related to a change in the estimate of accrued rebates. Of the $135 million, $115 million relates to amounts recorded in prior years. An additional contributor to the sales growth was market growth. Although the original CONCERTA® patent expired in 2004, the FDA has not approved any generic version that is substitutable for CONCERTA®. Two parties have filed Abbreviated New Drug Applications (ANDAs) for generic versions of CONCERTA®, which are pending and may be approved at any time.

RISPERDAL® CONSTA® (risperidone), a long acting injectable for the treatment of schizophrenia, achieved operational growth of 9.8% over the fiscal third quarter of 2007. Strong growth was due to a positive shift from oral to injectable therapies outside the U.S.

LEVAQUIN®(levofloxacin)/FLOXIN®, RISPERDAL®(risperidone), ACIPHEX®/PARIET® and DURAGESIC®/Fentanyl Transdermal (fentanyl transdermal system) experienced operational declines of 10.4%, 63.0%, 19.0% and 20.7% respectively, versus the prior year. Generic competition continued to negatively impact the sales of these products.

Market exclusivity for RISPERDAL® oral in the U.S. expired on June 29, 2008 and Janssen, a Johnson & Johnson subsidiary, launched an authorized generic version of RISPERDAL® oral on June 30, 2008. Loss of market exclusivity for the RISPERDAL® oral patent has resulted in a significant reduction in sales in the U.S.

In the fiscal third quarter of 2008, Other Pharmaceutical sales achieved operational growth of 10.7% versus the prior year. The biggest contributor to the increase was VELCADE®, a treatment for relapse multiple myeloma, which was co-developed with Millenium Pharmaceuticals, Inc.

Medical Devices and Diagnostics
Medical Devices and Diagnostics segment sales in the first fiscal nine months of
2008 were $17.5 billion, an increase of 9.4% over the same period a year ago,
with 4.3% of this change due to operational increases and the remaining 5.1%
increase related to the positive impact of currency. The U.S. Medical Devices
and Diagnostics sales increase was 2.4% and the growth in international Medical
Devices and Diagnostics sales was 16.0%, which included operational increases of
6.0% and an increase of 10.0% related to the positive impact of currency.

Major Medical Devices and Diagnostics Franchise Sales* - First Fiscal Nine
Months
                                                                                              Operations
(Dollars in Millions)             Sept. 28, 2008      Sept. 30, 2007       Total Change         Change          Currency Change
DEPUY®                            $         3,737     $         3,378               10.6 %             6.7 %                 3.9 %
ETHICON ENDO-SURGERY®                       3,169               2,770               14.4               8.7                   5.7
ETHICON®                                    2,922               2,659                9.9               4.1                   5.8
CORDIS®                                     2,413               2,557               (5.6 )           (10.7 )                 5.1
Diabetes Care                               1,956               1,730               13.1               7.6                   5.5
Vision Care                                 1,898               1,643               15.5               9.6                   5.9
ORTHO-CLINICAL DIAGNOSTICS®                 1,389               1,249               11.2               6.6                   4.6

Total                             $        17,484     $        15,986                9.4 %             4.3 %                 5.1 %

*Prior year amounts have been reclassified to conform to current presentation.

Medical Devices and Diagnostics segment sales in the fiscal third quarter of 2008 were $5.7 billion, an increase of 8.8% over the same period a year ago, with 5.6% of this change due to operational growth and the remaining 3.2% increase related to the positive impact of currency. The U.S. Medical Devices and Diagnostics sales increase was 3.1% and the growth in international Medical Devices and Diagnostics sales was 14.3%, which included operational growth of 8.0% and an increase of 6.3% related to the positive impact of currency.

Major Medical Devices and Diagnostics Franchise Sales* - Fiscal Third Quarter

                                                                                                Operations
(Dollars in Millions)              Sept. 28, 2008       Sept. 30, 2007       Total Change         Change          Currency Change
DEPUY®                            $          1,195     $          1,086               10.0 %             8.0 %                 2.0 %
ETHICON ENDO-SURGERY®                        1,042                  922               13.0               9.5                   3.5
ETHICON®                                       957                  881                8.6               5.2                   3.4
CORDIS®                                        726                  777               (6.6 )           (10.2 )                 3.6
Diabetes Care                                  667                  585               14.0              10.3                   3.7
Vision Care                                    652                  577               13.0               9.0                   4.0
ORTHO-CLINICAL DIAGNOSTICS®                    470                  420               11.9               9.0                   2.9

Total                             $          5,709     $          5,248                8.8 %             5.6 %                 3.2 %

*Prior year amounts have been reclassified to conform to current presentation.

The DePuy franchise achieved operational growth of 8.0% over the same period a year ago. This growth was primarily due to strong performance by the hip product line. An additional contributor to the growth was strong performance in the Mitek sports medicine product line primarily due to new product launches.

The Ethicon Endo-Surgery franchise achieved operational growth of 9.5% over prior year fiscal third quarter. This growth was mainly driven by the HARMONIC™ business due to the success of newly launched products. Additional contributors to the growth were the REALIZE® Gastric Band in the U.S. and endoscopy products outside the U.S.

The Ethicon franchise achieved operational growth of 5.2% from the same period in the prior year resulting from solid growth in Hemostasis and biosurgicals.

The Cordis franchise experienced an operational sales decline of 10.2% over the fiscal third quarter of 2007. This decline was caused by lower sales of the CYPHER® Sirolimus-eluting Coronary Stent. Loss of market share for the CYPHER® Sirolimus-eluting Coronary Stent is due to increased competition on a global basis. These results were partially offset by growth of the Biosense Webster business.

The Diabetes Care franchise achieved operational growth of 10.3% over the fiscal third quarter of 2007 reflecting the continued success of the ONETOUCH® ULTRA® product lines and the growth of the Animas business.

The Vision Care franchise achieved operational sales growth of 9.0%. ACUVUE® OASYS™, 1-DAY ACUVUE®MOIST™, and ACUVUE® lenses for Astigmatism were the major contributors to this growth.

The Ortho-Clinical Diagnostics franchise achieved operational growth of 9.0% over the fiscal third quarter of 2007 resulting from strong growth in Immunohematology and Immunodiagnostics products.

Cost of Products Sold and Selling, Marketing and Administrative Expenses Consolidated costs of products sold for the first fiscal nine months of 2008 increased to 29.1% from 28.8% of sales as compared to the same period a year ago. The cost of products sold for the fiscal third quarter of 2008 increased to 30.0% from 28.5% of sales in the same period a year ago. The increase in both the first fiscal nine months and the fiscal third quarter was primarily due to the change in the mix of businesses, with stronger sales growth in the Consumer business and lower sales growth in the Pharmaceutical business, as well as inventory write-offs in the Pharmaceutical business.

Consolidated selling, marketing and administrative expenses were 32.6% for both the first fiscal nine months of 2008 and 2007. Consolidated selling, marketing and administrative expenses for the fiscal third quarter of 2008 decreased to 32.6% from 32.7% of sales in the same period a year ago. Decreases in the fiscal third quarter were primarily due to cost containment efforts offsetting the impact of the change in the mix of businesses.

Research & Development
Research activities represent a significant part of the Company's business. These expenditures relate to the development of new products, improvement of existing products, technical support of products and compliance with governmental regulations for the protection of the consumer. Worldwide costs of research activities, for the first fiscal nine months of 2008 were $5.5 billion, an increase of 2.2% over the same period a year ago. Research and development spending in the fiscal third quarter of 2008 was $1.9 billion, an increase of 1.5% over the fiscal third quarter of 2007. As a percent to sales, the level of research and development spending decreased for both the fiscal third quarter and the first fiscal nine months of 2008 as compared to the same period a year ago. The decreases as a percent to sales in the quarterly and nine month periods were primarily due to changes to the mix of businesses and increased efficiencies in the Pharmaceutical research and development support.

In-Process Research & Development(IPR&D) In the fiscal third quarter of 2008, the Company had no IPR&D charges. IPR&D charges of $40 million before and after tax were recorded during the first fiscal nine months of 2008 related to the acquisition of Amic AB.

In the fiscal third quarter of 2007, the Company had no IPR&D charges. IPR&D charges of $807 million before and after tax were recorded during the first fiscal nine months of 2007 related to the acquisitions of Conor Medsystems Inc.

Other (Income) Expense, Net
Other (income) expense, net is the account where the Company records gains and losses related to the sale and write-down of certain equity securities of the Johnson & Johnson Development Corporation, gains and losses on the disposal of fixed assets, currency gains and losses, minority interests, litigation settlements, as well as royalty income. The favorable change in other (income) expense, net for the fiscal third quarter of 2008 as compared to the fiscal third quarter of 2007 was primarily due to a settlement payment of $200 million received from Amgen in the fiscal third quarter of 2008. The favorable change in other (income) expense, net for the first fiscal nine months of 2008 as compared to the same period a year ago was $34 million. This was primarily due to the settlement payment of $200 million received from Amgen in the fiscal third quarter of 2008 versus the net gain of $175 million related to the divestiture of certain consumer brands recorded in the fiscal first quarter of 2007.

Pharmaceutical Segment
Operating profit for the Pharmaceutical segment as a percent to sales in the first fiscal nine months of 2008 was 34.5% versus 32.5% over the same period a year ago. Operating profit as a percent to sales in the fiscal third quarter of 2008 was 32.8% versus 26.1% over the same period a year ago. For both periods in 2008, operating profit increased, as compared to the same periods a year ago. This was due to the restructuring charges of $429 million recorded during the fiscal third quarter of 2007 offset by the change in product mix, primarily due to the RISPERDAL® oral loss of exclusivity during 2008. The fiscal third quarter of 2008 included a settlement of $200 million received from Amgen partially offset by inventory write-offs.

Medical Devices and Diagnostics Segment
Operating profit for the Medical Devices and Diagnostics segment as a percent to sales in the first fiscal nine months of 2008 was 29.5% versus 21.1% over the same period a year ago. Operating profit as a percent to sales in the fiscal third quarter of 2008 was 29.0% versus 21.7% over the same period a year ago. The primary driver of the improvement in the operating profit margin in the Medical Devices and Diagnostics segment for both periods in 2008 versus the same period a year ago was due to favorable mix and manufacturing efficiencies in 2008 as well as the restructuring charges of $301 million recorded during the . . .