Thus, our experience with the McNeil Consumer Healthcare recalls has been difficult for all of us. Most important, we disappointed our customers. Trust and confidence in Johnson & Johnson and our products are fundamental to everything we do. Even though millions of customers remain supportive of our work to assure quality and restore our consumer brands to the market, that trust and confidence have been truly tested. 

During this past year, I visited many manufacturing locations around the world. I can assure you that our people are dedicated to giving our customers the highest-quality products, with no compromises whatsoever. It is our responsibility to learn from what happened, address problems at their root causes and ensure that only the highest-quality products reach our customers. That hard work—and the subsequent results—will help earn back trust and respect. 

We are on our way to restoring McNeil Consumer Healthcare to the high levels of quality and compliance that people expect of all Johnson & Johnson companies and that we expect of ourselves. 

As part of this commitment, we accelerated the imple- mentation of organizational changes to our Supply Chain, Manufacturing and Quality and Compliance areas, which began early in 2010 . We also undertook a thorough review of how we operated our manufacturing plants and examined in detail the historical production records of McNeil Consumer Healthcare products sold in the U.S. and produced in McNeil’s internal manufacturing network. 

We have completed this internal review, and we will continue to conduct reviews at external sites that manufacture McNeil products. If these reviews reveal any further issues, we will not hesitate to take whatever steps are needed, including further market action, to ensure that our products meet world-class quality standards. These and other steps we have taken under the Comprehensive Action Plan submitted to the U.S. Food and Drug Administration (FDA) constitute an uncompromising effort to ensure high quality at McNeil. These actions will help us assure that moving forward, our products in the marketplace live up to the standards and expectations that consumers have for all products coming from Johnson & Johnson. 

At the same time, we are focused on returning the recalled products to the marketplace in 2011 . We began shipping a small amount of product in the fourth quarter of 2010,  and alternate supply of the remaining key products will ramp up in the latter half of 2011 . At the appropriate time, we will invest in market support for our over-the-counter brands. We also will be introducing product and packaging innovations for a number of products, especially those for young children. 

## 2010 HIGHLIGHTS 

Even as we faced challenges throughout 2010 , we remained unwavering in who we are as a company. The source of our enduring strength is a fundamental commitment to Our Credo and an operating model that has served us well for decades. 

Our operating model includes a commitment to being broadly based in human health care; a decentralized management approach that keeps our people close to customers; managing for the long term; and a focus on people and values. We focus on four growth enablers—products, pipelines, global presence and people—that support the model and enable accelerated growth. 

Our 2010  accomplishments reflect the strength of our model and growth enablers. 

 • New Products:  We introduced innovative products across our businesses and saw strong growth in recently introduced products. These include consumer products that address emerging health care needs, such as JOHNSON’S ® NATURAL ® baby products and LISTERINE ® ZERO ™  mouthwash. In our Medical Devices and Diagnostics (MD&D) segment, we launched more than 50  new products. For example, a new ENSEAL ®  tissue-sealing device for large vessel sealing in open surgery was introduced in the U.S., strengthening our energy surgical instrument portfolio. In Pharmaceuticals, we saw growth of key innovations approved in 2009 — NUCYNTA ® * (tapentadol) for pain, STELARA ®  (ustekinumab) and SIMPONI ®  (golimumab) in immunology, and INVEGA ® SUSTENNA ®  (paliperidone palmitate) for schizophrenia. 

With a consistent flow of new products based on scientific innovation, approximately a quarter of Johnson & Johnson sales last year came from new products introduced in the past five years, and approximately 70  percent of our sales were from products with No. 1  or No. 2  global market share positions. 

• Leading Product Pipelines: Across our businesses, we invested nearly $ 7  billion in research and development to advance our newest technologies and pipeline compounds. Our Pharmaceuticals pipeline is recognized as among the best in the industry. 

Rivaroxaban**, our anti-coagulant, has been filed in the U.S. for the prevention of stroke in patients with atrial fibrilation, a condition that can lead to major physical and behaviorial impairments, or death. The Company also responded to the FDA Complete Response Letter for its review of the rivaroxaban filing for preventing deep vein thrombosis and pulmonary embolism following total knee and hip replacement surgery. Abiraterone acetate, an investigational compound for the treatment of metastatic advanced prostate cancer from last year’s acquisition of Cougar Biotechnology, was granted priority review in the U.S. and accepted for accelerated assessment in Europe. Telaprevir,*** for hepatitis C, an undertreated global infectious disease, has also been accepted for accelerated assessment in Europe. Additionally, we filed TMC 278  for HIV in both the U.S. and Europe. 

In MD&D, the Fibrin Pad, a revolutionary hemostasis product that combines two biomaterials and two biologics to stop bleeding during surgical procedures, was filed for regula- tory approval with the FDA. 

• Targeted Acquisitions:  We believe in an organic and collaborative approach to innovation. In addition to our own internal research and development programs, we create partnerships through licensing and make targeted acquisitions to either add a capability or gain an asset from which we can drive more value. We acquired Micrus Endovascular, a 

