JOHNSON & JOHNSON Q4 FY2024 earnings call

• 2024 was a year of progress and transformation for Johnson & Johnson, operating in high unmet need, high growth and high innovation segments. Invested approximately $50 billion in R&D and M&A in 2024, including acquisition of Intra-Cellular Therapies. Innovative Medicine had sales over $14 billion for third consecutive quarter with 10 key brands growing double-digit. MedTech had second year of over $30 billion in sales with growth across most parts. 2024 saw 27 approvals in major markets for Innovative Medicine and 15 major products launched in MedTech. Made significant M&A investments in MedTech and Innovative Medicine, e.g., Shockwave, V-Wave, Ambrx Proteologix, etc.

Innovative Medicine

• Worldwide sales of $14.3 billion in 2024, increased 6.5% excluding the COVID-19 vaccine, with 11.1% growth in the US and 0.3% decline outside the US. STELARA declined 13.6% due to biosimilar competition. SPRAVATO grew 45.3% and exceeded $1 billion in annual sales. Oncology portfolio showed strong growth, e.g., DARZALEX grew 23.5%, CARVYKTI had over 100% growth, ERLEADA reached $3 billion in annual sales. Immunology saw TREMFYA growth of 5.6% but STELARA decline. Neuroscience's SPRAVATO had strong growth. Pulmonary Hypertension's OPSUMIT grew 2.5% and UPTRAVI grew 12.1%.

MedTech

• Full year sales over $30 billion, with growth across most parts. Cardiovascular, electrophysiology delivered 7.3% growth. Abiomed grew 13.2%. Contact Lenses and Other grew 7.4%. Surgical Vision grew 13.6%. Orthopedics grew 2.5% inclusive of hips growth of 5.6%. Surgery grew 0.4% with some impacts from divestitures and competitive pressures.

• Anticipates operational sales in the range of 2.5% to 3.5% for 2025, with midpoint of $91.3 billion or 3.0%. Acquisitions and divestitures expected to favorably impact operational growth by ~50 basis points. Innovative Medicine growth driven by proven assets, newly launched products and new launches. MedTech growth driven by recent acquisitions and uptake of newly launched products. China expected to remain a headwind through 2025. Adjusted pre-tax operating margins expected to increase by ~300 basis points in 2025. Projected net other income for 2025 is $900 million to $1.1 billion. Expect net interest income between zero and $100 million. Effective tax rate projected in range of 16.5% to 17.0%. Adjusted operational earnings per share expected to grow 8.7% at midpoint. Planned acquisition of Intra-Cellular Therapies expected to accelerate sales growth by ~80 basis points but have dilutive impact on adjusted EPS of ~$0.30 to $0.35 in 2025.

• MedTech's VARIPULSE in US had a temporary pause of all US cases while investigating root cause of neurovascular events. China remains a headwind for MedTech performance, particularly in orthopedics and other areas due to VBP and competitive pressures. STELARA biosimilar competition continues to impact Innovative Medicine's sales.

Q: Terence Flynn from Morgan Stanley asked about how to frame the myeloma franchise growth in 2025, including bispecifics, CAR-T, and broadening into community setting.

A: Jennifer Taubert and John Reed responded, discussing DARZALEX's growth over $3 billion and 22% growth, CARVYKTI's strong quarter and nearing $1 billion for the year, TEC and TAL products performing well, and plans to bring bispecifics into earlier lines of therapy with positive data from ASH Congress.

Q: Josh Jennings from TD Cowen asked about the medical device acquisition strategy and future shifts.

A: Joaquin Duato and Joseph Wolk responded, mentioning external innovation is important, 40+ business development transactions in 2024, excitement around Abiomed and Shockwave acquisitions, and future focus on smaller opportunities and larger acquisitions like Intra-Cellular Therapies.

Q: Alexandria Hammond from Wolfe Research asked about CAPLYTA sales growth cadence to $5 billion and if seltorexant and aticaprant would be deprioritized.

A: Jennifer Taubert and John Reed responded, talking about CAPLYTA's sales trajectory, filing for AMDD approval, and stating that the portfolio includes multiple mechanisms and no deprioritization of other molecules, with SPRAVATO's recent monotherapy approval as a positive momentum.

Q: Tim Anderson from Bank of America asked about immunology franchise and TREMFYA, including biosimilar impact and price erosion.

A: Jennifer Taubert responded, discussing TREMFYA's growth in psoriasis and psoriatic arthritis, potential patient switches to better therapies, and appropriate pricing and access measures to support launch in IBD.

Q: Lawrence Biegelsen from Wells Fargo asked about MedTech market growth in 2025 and VARIPULSE.

A: Tim Schmid responded, mentioning end markets growing 5%-7%, temporary pause of US VARIPULSE cases for investigation, no impact outside US, and the opportunity in electrophysiology with low global penetration and expanding market size.

Q: Chris Schott from JPMorgan asked about operating margins and margin expansion cadence.

A: Joseph Wolk responded, discussing 150 basis points improvement related to corporate infrastructure focus, investment prioritization in Innovative Medicine and MedTech, and expectation of margin expansion commensurate with sales growth in 2026 and beyond.

Q: David Roman from Goldman Sachs asked about MedTech strategy, organic vs inorganic growth, and VARIPULSE revenue recognition.

A: Joseph Wolk responded, talking about MedTech performance in 2024, end market growth expectations, continued growth drivers, and no revenue recognition reversal charges related to VARIPULSE in the quarter