Johnson & Johnson Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Joaquin Duato highlighted strong Q3 results, with 5.4% operational sales growth across the business. Innovative Medicine had 5.3% growth with over $15B in sales for the second consecutive quarter. MedTech saw 5.6% operational sales growth. The planned separation of the Orthopaedics business was announced to sharpen focus on high-growth areas. Key progress in six priority areas: Oncology (nearly 20% growth), Immunology (Tremfya up 40.1% driven by IBD), Neuroscience (SPRAVATO up 60.8%), Cardiovascular (up ~12%), Surgery, and Vision (over 6% growth).

Segment Performance

• Innovative Medicine: Worldwide sales were $15 billion in Q3 2025, with 5.3% operational sales growth. Oncology saw nearly 20% operational sales growth, including DARZALEX growing 19.9%, Carvicti with 81.4% growth, etc. Immunology had Tremfya growing 40.1% despite STELARA's 42% decline. Neuroscience's SPRAVATO grew 60.8%.
• MedTech: Worldwide sales were $8.4 billion, up 5.6%. Cardiovascular operational sales increased ~12%, Surgery had growth, Vision grew over 6%.

Guidance

• Full-year 2025 operational sales growth is expected to be in the range of 4.8% to 5.3% (midpoint $93.2B or 5.1%). Adjusted operational sales growth is projected to be 3.5% to 4%. Reported sales growth is expected to be 5.4% to 5.9% (midpoint $93.7B or 5.7%). EPS guidance is reaffirmed at $10.85 to $10.9 with a midpoint of $10.85. Forward-looking for 2026, expects accelerated growth in Innovative Medicine and MedTech, with plans for regulatory submissions and new product launches.

Risks

• Talc litigation: Pending judicial process regarding re-examining junk science claims. Regulatory uncertainties: Potential impacts on product approvals and market access.

Question and Answer

Q: On the orthopedic spin-out, why now and if similar separations for other divisions?

A: Joaquin Duato stated it's about prioritizing high-growth markets and creating a standalone company better positioned for growth. Joe Wolk added it's not a precursor to other separations, and orthopedics is set for success.

Q: Commentary on margins post ortho spin?

A: Joe Wolk and Tim Schmid discussed that margin improvement is expected but muted in the near term due to the process duration, with higher growth businesses like cardiovascular and vision contributing.

Q: Thoughts on MFN agreements and policy dynamics?

A: Joaquin Duato mentioned ongoing discussions with the administration, focusing on common ground for access, innovation protection, and U.S. manufacturing investment.

Q: Acceleration in sales growth next year?

A: Joe Wolk said there's a tailwind from FX, and growth is expected to accelerate with new product launches and fading Stellara headwinds.

Q: Near-term uptake and long-term outlook for Inlexo?

A: Jennifer Taubert and John Reed discussed strong clinician receptivity, plans for J code reimbursement, and broad development programs including Phase III studies for various bladder cancer indications.