Johnson & Johnson Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Joaquin Duato highlighted the strong second quarter, noting the diversified business strength in both med tech and innovative medicine. Innovative Medicines had over $15 billion in quarterly sales for the first time, with oncology, immunology, and neuroscience showing growth. Medtech had 6.1% operational sales growth, particularly strong in cardiovascular surgery.
• John Reed discussed the cash position, with free cash flow over $6 billion in the first half of 2025, and updated guidance. He emphasized the pipeline progress in innovative medicine and medtech, including expected approvals and filings.
• Jennifer Taubert and Tim Schmidt highlighted the strength of the portfolio outside of STELARA, with 13 brands growing double digits, and medtech showing improvement from Q1.

Segment Performance

• Innovative Medicine: Worldwide sales were $15.2 billion, increasing 3.8% despite a significant headwind from STELARA. Oncology showed strong growth with myeloma therapies like CARVYKTI growing over 100%, lung cancer product RYBREVANT/LAZCLUZE with sales of $179 million and over 100% growth. Immunology saw TREMFYA grow 30.1% but STELARA declined 43.2% due to biosimilar competition. Neuroscience had SPRAVATO growing 53%.
• Medtech: Worldwide sales were $8.5 billion, up 6.1%. Cardiovascular had over 22% operational sales growth, driven by new product performance in Abiomed and Shockwave. Surgery and vision also contributed to growth.

Guidance

• Raised full-year sales guidance by $2 billion and EPS guidance by $0.25, from $10.60 to $10.85.
• Operational sales growth for the full year is expected to be in the range of 4.5% to 5%, with a midpoint of $92.9 billion. Excluding acquisitions/divestitures, adjusted operational sales growth is expected 3.2%-3.7%.
• Anticipated positive foreign currency impact of $1.1 billion, leading to reported sales growth of 5.1%-5.6% with a midpoint of $93.4 billion.
• Maintained operating margin guide for the full year, considering efficiency programs and nonrecurring charges.

Risks

• Biosimilar competition impacting STELARA sales.
• Talc litigation, with a Daubert hearing expected in fall.
• Tariffs, with an anticipated impact of $200 million on medtech business in 2025.

Question and Answer

Q: Chris Schott from JPMorgan asked about drivers of upside to the guidance for the year.

A: Joseph Wolk referred to Jennifer Taubert and Tim Schmidt to highlight strong performance in Innovative Medicine (over $15 billion quarter despite STELARA erosion) and Medtech improvement from Q1, expecting continued momentum in second half.

Q: Terence Flynn from Morgan Stanley inquired about oncology target of $50 billion by end of decade and RYBREVANT subcu approval.

A: Jennifer Taubert discussed oncology portfolio strength, including TAR-200 and RYBREVANT/LAZCLUZE, noting RYBREVANT subcu responded to agency and awaiting approval.

Q: Larry Biegelsen from Wells Fargo asked about acceleration in top line growth and operating margin improvement.

A: Joseph Wolk stated 2026 expected to be better than 2025 in growth rate, but reserved comment on margin accretion until more factors come into view.

Q: Asad Haider from Goldman Sachs asked about pharma tariffs and manufacturing.

A: Joaquin Duato mentioned tax policies enabling $55 billion U.S. investment and progress towards manufacturing medicines consumed in U.S. in U.S.

Q: Shagun Singh from RBC Capital Markets asked about OTTAVA submission timeline and EP strategy.

A: Joseph Wolk clarified OTTAVA submission timeline is on track, and EP performance was strong with over 10,000 cases globally and positive feedback from physicians.

Q: Alexandria Hammond from Wolfe Research asked about TAR 200 launch strategy.

A: Jennifer Taubert discussed the large opportunity for TAR 200 in bladder cancer and well underway launch planning.

Q: Danielle Antalffy from UBS asked about med tech growth outlook for 2026 and beyond.

A: Tim Schmidt mentioned cardiovascular and surgery as key growth drivers, confident in med tech's ability to deliver growth.

Q: Vamil Divan from Guggenheim Securities asked about pipeline updates for immunology therapies.

A: John Reed provided updates on Phase IIb studies in IBD and the oral targeted peptide inhibitor for IL-23 receptor, with data expected later in the year.