Johnson & Johnson Q4 FY2025 Earnings Call

Good morning and welcome to Johnson & Johnson's Fourth Quarter 2025 Earnings Conference Call. All participants will be in a listening mode until the question and answer session of the conference. This call is being recorded. If anyone has any objections, you may disconnect at this time. If you experience technical difficulties during the conference, you may press star zero to reach the operator. I will now turn the conference call over to Johnson & Johnson. You may begin.

The company's review of business results for the fourth quarter and full year 2025, and our financial outlook for 2026. First, a few logistics. As a reminder, today's presentation and associated schedules are available on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position, and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. The description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2024 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, Joaquin Duarte, our Chairman and CEO, will discuss our business performance and growth drivers. I will then review the fourth quarter sales and P&L results, as well as full-year 2025 results for the enterprise. Joe Walk, our CFO, will then close by sharing an overview of our cash position, capital allocation priorities, and guidance for 2026, as well as key milestones and qualitative considerations for 2026. Jennifer Talbot, Executive Vice President, Worldwide Chairman Innovative Medicine, John Reed, Executive Vice President, Innovative Medicine Research and Development, and Tim Schmidt, Executive Vice President, Worldwide Chairman MedTech will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last up to 75 minutes. With that, I will now turn the call over to Joaquin.

Good morning, everyone, and thank you for joining us. I'm excited to discuss our very strong full year results. We said 2025 would be a catapult year for Johnson & Johnson. What it was, it was a year that launched us into a new era of actual by the strongest portfolio pipeline in our history. Johnson & Johnson today has a leading and expanding position in each of our six key businesses, oncology, immunology, neuroscience, cardiovascular, surgery. In each of these areas, we have multiple differentiated assets to drive growth and a strong competitive advantage, which you can see in the success of our recent launch. In recent years, we have increased our focus on areas of high growth and high unmet need, and we will continue this transformation with the planned separation of our orthopedics business. In 2025, we invested over $32 billion in R&D and M&A, including the acquisitions of intracellular therapies and HALDA therapeutics. We also initiated billions of dollars in new, state-of-the-art manufacturing facilities in the U.S., which will accelerate delivery of our next wave of innovation. These moves fuel our confidence that growth in 2026 will be faster than in 2025. And we have line of sight to double-digit growth by the end of the decade, which is notable as Johnson & Johnson is the only healthcare company that will soon deliver more than $100 billion. How is that possible? It's possible because we have tremendous strength and depth, both in innovative medicine and in medtech. We are different from other companies. We are not focused on one or two. We now have 28-plus non-balance sheet and free cash flow, creates the resilience and durability that we have in the full year. We delivered trends of our commercial execution and relentless focus on innovation drove strong momentum throughout the year, firmly placing the Stellara LOE in the rear-view mirror. In innovative medicine, we reported operational sales growth for the year of 5.3%. Full-year sales for our pharmaceutical business exceeded $60 billion for the first time with 13 brands growing. The foundation for these results and for the acceleration we see ahead is our unrivaled portfolio and pipeline. In 2025 alone, we secured 51 approvals and filed 32 submissions across major markets. We delivered positive readouts from 17 key studies and initiated 11 new Phase III programs. Our treatment is a competitive advantage from percent to 6.7%,

with a midpoint of $100 billion, which is operational growth by approximately 30 basis points, resulting in an adjusted operational sales growth midpoint of 5.9%. We do benefit in 2026 as our financial calendar includes a 53rd week, which is worth approximately 100 basis points. As you know, we do not speculate on future currency movements, and last quarter we utilized the euro spot rate relative to the U.S. dollar of 1.17. As of last week, the U.S. dollar has stayed relatively flat to the euro spot rate, and as a result, we expect reported sales growth between 6.2% to 7.2%, with a midpoint of $100.5 billion, or 6.7%. 2026 sales growth across our innovative medicine business will be driven by Trinfia, Darzilex, Carvicti, Erlita, and Spravato, as well as new launches of Ribervant plus Last Clues in lung cancer and Kaplyta as injunctive therapy for major depressive disorder. In MedTech, we expect growth to be driven by continued uptake and market expansion of new product launches across our cardiovascular, surgery, and vision portfolios, including VaraPulse in electrophysiology, Ethicon 4000 in surgery, and the Oasis Max family in vision. Turning next to other items on the P&L, in 2026, we expect to drive continued operating efficiencies, the majority of which we plan to invest in our business to power our new product launches and pipeline with heavier investment at the outset of the year. Despite that increased investment, we are planning for our 2026 adjusted pre-tax operating margin to improve by at least the 50 basis points. Our pre-tax operating margin guidance takes into account the costs from the 53rd week of operations and full-year medtech tariffs of approximately $500 million, which is significantly above the 2025 amount. It also includes the impact of the recently announced voluntary agreement with the U.S. government to improve access to medicines and lower costs to U.S. patients. We expect net interest expense between $300 million and $400 million. We anticipate net other income to be $1 to $1.2 billion for 2026, relatively flat to last year. Finally, we are projecting an effective tax rate in the range of 17.5% to 18.5%, with the increase largely due to a mixed change with income in higher tax jurisdiction. Turning to adjusted operational earnings per share, we expect growth of 5.5% at the midpoint for a range of $11.28 to $11.48. By utilizing the exchange rate we mentioned earlier for our reported adjusted earnings per share for the year, we estimate a positive impact of $0.15. As such, we expect reported adjusted earnings per share of $11.53 at the midpoint. Regarding our share count, due to the rapid share price appreciation in the second half of 2025 into early 2026, our diluted share count is increasing to approximately 2.44 billion shares based on U.S. GAAP accounting rules for the diluted share count calculation, in line with how the fourth quarter of 2025 landed. The incremental diluted shares for next year are worth slightly more than $0.05 headwind versus 2025. Relative to current analyst expectations, our EPS and margin outlooks absorb the previously referenced incremental tariffs, the impact of the voluntary U.S. government agreement, and a higher share count. We will now shift to some 2026 phasing considerations to help inform your modeling. We are well positioned to build upon our accomplishments in 2025, continuing to make advancements across our innovative medicine and medtech portfolio and pipeline. We anticipate fairly consistent operational sales growth throughout the year, with a higher fourth quarter due to the benefit from the 53rd week referenced earlier. Regarding innovative medicine, we expect a more pronounced impact from newly launched products throughout the year. We anticipate Stellara to continue to follow the Humira erosion curve, which accelerated as we move through the second half of 2025 compared to the start. While not nearly as impactful as Stellara, we do anticipate generic impact for both Symphony and Upsummit to begin in 2026, both of which are contemplated in our full-year guidance. In MedTech, we will continue to accelerate our newly launched products and expect normalized to seasonality. The surgery transformation progress will accelerate throughout the year, and we anticipate some additional rounds of volume-based procurement in China, all of which has been incorporated into our 2026 guidance. Regarding the P&L, it is important to consider one-time items that impacted our EPS results in 2025. Specifically, in Q1 2025, the impact from Stellara biosimilars was less pronounced, given that the erosion accelerated starting in Q2. The intercellular acquisition anniversaries in Q2. And tariffs will be relatively linear in 2026, unlike last year where the P&L cost was largely recorded in Q4 2025. Given these factors, we expect higher earnings per share growth in the second half of the year versus the first half. We are excited about how our pipeline is anticipated to advance in 2026. For example, in innovative medicine, we expect regulatory approvals for icotide in psoriasis, Tecvali in combination with Darzilex in relapsed refractory multiple myeloma as early as second-lined, and Trimphia for the innovation of structural joint damage for patients with psoriatic arthritis. As this chart indicates, we also have many important regulatory submissions and data presentations across oncology, immunology, and neuroscience. In MedTech, we anticipate the following approvals and regulatory submissions, Otava Robotic Surgical System, athesia in biosurgery, and the Dual Energy ThermoCool SmartTouch SF catheter in the U.S. Tier 2, we are also excited for new launches and continued expansion of new products as seen in the chart. To close the prepared remarks, I hope it's evident that Johnson & Johnson is entering in 2026 with significant momentum. We are positioned to lead where healthcare is going to tackle areas of critical unmet need. Our strong financial position enables us to invest in our business and the next generation of scientific breakthroughs that will help improve patient outcomes while simultaneously delivering value for our shareholders. None of this would be possible without the hard work and dedication of our incredible colleagues worldwide who always keep patients at the center of everything we do. With that, we are happy to take your questions, so I will now turn it to Kevin to provide instructions for those seeking to participate in the Q&A.

Thank you. Ladies and gentlemen, if you'd like to ask a question at this time, please press star, then 1 on your telephone keypad. If you'd like to withdraw your question, please press star, then 2. Please limit yourselves to one question only. Our first question is coming from Asad Ader from Goldman Sachs. Your line is now live.

Great. Congrats on the quarter, and thanks for taking the question. Joaquin, maybe just a big-picture question for you. You're entering this year in a clear position of strength following what's been one of the best performance years for the stock in about 20 years. You've had momentum in both business segments. You're generating tremendous free cash flow, and what you're saying is going to continue to elevate. And you've now started to talk more about double-digit revenue growth by the latter part of the decade, although street consensus is currently modeling something in the 6% range. So if you could just maybe double-click a little bit more on what the key levers are to bridge to that double-digit growth profile from where we sit today, particularly in the context of the current revenue base that's now approaching $100 billion and remains sizable through the end of the decade, even with the auto spin. And I guess what we're really trying to understand is how much of that acceleration comes from the organic pipeline versus acquisitions versus portfolio pruning. And I guess related, what innings are we in of the strategic repositioning away from lower growth segments like you're doing with OTHO towards higher growth segments?

Question, and sewer. I mean, we come out of a really successful 2025, leaving the Stellara biosimilars in the rearview mirror and initiating a cycle of accelerated growth for Johnson & Johnson. And you have seen that we have provided for 2026, which is strong and ahead of expectations. And as I said before, we have line of sight to double-digit growth in the later part of the decade, which is especially remarkable for a company that, according to our guidance, would be $100 billion in sales in 2026. So what are the reasons to believe? The reasons to believe are the strength of our portfolio and pipeline. And let me now take you through the six areas of focus that we are investing into the future. Let me start with oncology. Our ambition with oncology is to become the number one oncology company, reaching $50 billion by the end of the decade, sustained by our success in multiple myeloma, and also in solid tumors with lung cancer, prostate cancer, and bladder cancer. We are very confident on our progress there in our pipeline, and I'm sure we'll have some time to discuss that later in the call. In our second area in innovative medicine, which is immunology, we are focusing on three major blockbusters. One is Trenfaya, which has been very successful in IBD. You have seen the growth in the fourth quarter, you know, really spectacular, 65%. Trenfaya and IBD launch is doing really well, and as a reminder, in the case of Stellara, IBD was 75% of the sales, so there's significant growth for Trenfaya ahead of us. We see Trenfaya more than a $10 billion asset. The second one is IcoTide. IcoTide is the trademark of IcoTrokinra, our oral IL-23 blocker. We see the oral IL-23 blocker expanding the market, becoming a new blockbuster for us. We expect to have the launch of icotide in 2026, initially in psoriasis. This is going to be a transformational change for the treatment of these diseases, and we plan to continue to develop icotide 2 in IBD, in inflammatory bowel disease. And finally, the third blockbuster, in which we will see data this year, is our co-antibody therapeutic for patients that are refractory to biologics. I think that's a great solution for these patients. Many of them relapse. So three major blockbusters in immunology, which are largely de-risk, some of them are approved file, or you're going to see data very, very soon. To end in innovative medicine, we are very encouraged by the progress of Spravato, more than 60% growth, and also the very successful launch of Capelita in adjunctive treatment of major depressive disorder. We're seeing the first data coming in, very, very encouraging. We see Kaplaita, as we discussed, as additive to our growth, more than a $5 billion business. So all positives in our innovative medicine group clearly driving this line of sight to double-digit growth by the end of the decade. If I move to our medtech business, our cardiovascular sector, very strong growth in 2025. Double-digit growth is reaching $9 billion. It's one of the largest cardiovascular franchises in the industry. We are in three major markets, which are specialty markets with high growth. Cardiac ablation, where we are the leaders and we plan to expand our leadership in PFA with a launch of a new catheter every year, a new cartoversions, a team will explain later. Our strong position both with a biomed and shockwave in heart recovery and in calcified arterial disease. So that's going to be a growth driver for us into the rest of the decade. In surgery, we have had strong results both in wound closure and in biosurgery, which are high single-digit in both areas. We just filed for Otava which is going to make us a relevant player in the surgery robotics market which is an area in which you have all the right to compete. Let me remind all of you that we are in all hospitals in the world and we already participate in all surgeries and we plan to be a relevant player in robotic surgery with Otava and also with the launch of Monarch in Urology in which we are going to have a unique position. Then finally, InVision, you see our results. InVision, it's a market with growth. We're gaining share, and it's an area of innovation in which we plan to invest. So, you know, we have about a dozen new product launches for the company. Some of them are already approved. Most of them submitted. So I would say that in that sense is essentially what I would call the risk. and some of you have called our story of growth in the second half of the decade as one of the cleanest stories of growth for the healthcare sector, for the healthcare entire sector overall. So we feel very confident about our outlook is reflected in our guidance for 2026, and I can assure you that everybody here at Johnson & Johnson is focused on doing exactly what we do best, which is looking for innovation in medicine and medical technologies to improve the standard of care of the millions of patients that we serve, and we are convinced that that will translate in strong business results.

Thank you. Our next question is coming from Larry Beigelson from Wells Fargo. Your line is now live.

Good morning. Thanks for taking the question, and I'll echo my congratulations on a nice end to the year here. So, Tim, there's some dynamics in the medtech market that you called out in the slides, as well as the loss of coverage in the U.S. from the enhanced subsidies expiring. How are you thinking about the MedTech market in 2026 relative to 2025? And how are you thinking about J&J's adjusted operational growth in 26 versus 25? Do you expect an acceleration? And, you know, it would be helpful if you could touch upon the outlook for your EP business, which is growing below market. Thank you.

So quickly on the subsidies and put that one to bed. Firstly, you know, based on what we know, the loss of ACA subsidies or any potential policy changes under the one big beautiful bill to have a material impact on our med tech performance. And, you know, while we'll continue to monitor how coverage dynamics evolve, at this stage we see no indication of an impact on our growth trajectory. You know, the primary constraint, as you know, Larry, in our business is really more about clinical capacity, not coverage levels. and procedure demands remained very robust across our portfolio, which I think really speak to the resilience of the businesses that we've decided to participate in. You know, turning to your question about the year, we do expect to see accelerate. We expect the year to be better in 2026 than it was in 25. And, you know, I think it's important to maybe hedge this question on really our strategy. And I think you know for the last couple of years we've been very clear in articulating our strategy focused on shifting our portfolio into higher innovation, higher growth, and higher margin markets. And as you just heard from Joaquin, we have deliberately chosen to focus on our three focus areas of CV, surgery, and vision. And I think our results, Larry, speak for themselves. Our strategy is working. We said we would accelerate our performance in the back half of 25, and we did exactly that beating consensus for the third consecutive quarter. And what we're most proud of, Larry, is that we saw acceleration across the board. As you We heard from Joaquin, Cardiovascular, now one of our largest businesses at $9 billion, grew 15.2% operationally in 2025, driven by success of Abia and Shockwave, both double-digit growers and increasing performance in EP, which I'll touch on a little later. Vision, strong, mid- to high-single-digit performer, double-digit growth in surgical vision, and, of course, we couldn't be more excited by the growth opportunity that will come with Otava as we look to commercialize that first in the U.S., hopefully this year. We've also seen continued improvement of ortho. You would have expected maybe some distraction as a result of the announcement we made. We've seen exactly the opposite with sequential growth through the quarter and 3.5% in Q4. And so I'll finally reinforce, Larry, that our portfolio transformation is working. You know, if you look at the $34 billion business today, we have roughly half of our assets participating in higher growth markets, growing north of 5%. That's compared to about 20% in 2018, and this will catapult to north of 70% following the ortho separation. And so as a result, we believe, frankly, that our best days are ahead, and we remain very confident in our ability to drive accelerated operational growth as we further push into higher areas of innovation, growth, and margins. Let me touch quickly on EP, because I think that was another part of your question. You know, the results speak for themselves, and they're speaking loud and clear. We're seeing continued acceleration in the markets that matter most, especially here in the U.S. and in Europe. You will have seen that in the fourth quarter, our growth accelerated to 9.5%. We're on the cusp of, once again, double-digit growth here in the United States, which is by far, in a way, the most important market. We're seeing this driven by the success of Varipulse, more than 40,000 cases today, Larry, with a benchmark safety profile. As you heard from Joaquin, we've made a commitment to an additional catheter each year for the foreseeable future, starting with dual energy STSF, followed by Omnipulse, which is a large to focal catheter, and we're also doubling down on our leadership position in mapping. And we now see really customers shifting back to Cardo based on the integration we have across our portfolio, and just to put a point on this, Larry, for example, our Cardo 3 system is widely recognized as the industry benchmark in mapping. In fact, in a recent study, it found that patients treated with PFA devices, whether that be ours or the competitions using Cardo, were 61 percent, once again, 61 percent less likely to experience AFib-related readmissions, which I think further reinforces the competitive advantage we have in this portfolio. And so I've said this before, Larry, and I'll end by saying that we are not rolling over. J&J's strength lies in our comprehensive portfolio of integrated EP solutions, mapping, ablation, and cardiac imaging technologies combined with our best-in-class mappers. And we remain resolute and confident that our deep EP expertise earned over 30 years and our robust pipeline position us well to continue to drive global leadership in this important space.

Thank you. The next question today is coming from Chris Schott from GPMorgan Chase & Company, your line is now live.

Hi, great. Thanks so much, and congrats on the results. Joe, can you just elaborate a little bit more on how to think about margin progression over time at J&J? You've obviously highlighted the potential for accelerating top-line growth over the next several years. Should we think about that higher level of top-line growth being associated with greater margin expansion, or is this kind of 50 basis point year type improvement that you're seeing this year a reasonable proxy do you think about margin expansion for J&J over time? Thank you.

Yeah, good morning, Chris. Thanks for the question. Yeah, it's a great question. As we look at the margin expansion, the idea would be to continue to improve our infrastructure. What gives me confidence with respect to 2026 outlook of at least 50 basis points is, as you know, with the orthopedic separation, much like we did with the consumer health separation, we're going to take this opportunity to look and see where there's areas of opportunity efficiency to eliminate stranded costs. While that will probably need to be in place for 2027, we're going to get a jump start on that in 2026. There's also, as you know from recent calls, efforts underway to improve our operating margins, our gross margins specifically in our manufacturing footprint, largely in the med tech space. And then lastly, while we will have continued Stellara erosion, it'll be off a smaller base. So that will have less of an impact going forward. And so I wouldn't want to give you a longer term outlook. What I can say is I'll harken back to our last investor day where we said that earnings would be commensurate with sales growth. So you can expect that the margin profile will improve in conjunction with the sales growth profile as we move out to the next couple of years and to the back half of this decade.

Thank you. Next question today is coming from Joanne Wunsch from Citibank. That is now live.

Good morning. Thank you for taking the question, and I'll add my congrats on a good quarter. I just want to spend a minute or two talking about vision care. You highlighted that as one of the three growth areas in medical technology. It looks like in your surgical business it was a little bit slower during the quarter versus what we saw in the United States versus what we saw outside the United States. If you could tease that apart a little bit and your views on the health of the contact Mark, it would be really welcome. Thanks again.

Once again, we've doubled down and really focusing on, as you highlighted, a strong fourth quarter at growth. Underlying performance within our contact lens category. While we did see a little softness, Joanne, in Asia-Pacific, underlying demand is robust with share gains, driven by the continued rollout of our AccuView Oasis one-day family, which I think you probably know that we've added to with the addition of a product focused on multifocal astigmatism, an only product or only daily disposable available for patients suffering with both presbyopia and astigmatism, and so we believe that's going to be a nice growth driver for the future. You know, turning to surgical vision, growth of close to 11% in the quarter, and that's all driven by our doubling down of our focus on premium intraocular lenses, both with Technos Odyssey launch here in the U.S. last year and Piercy more broadly globally. As you look to 2026, we're going to be further enhancing that performance by building out the portfolio specifically with the launch of Piercy here in the United States. You know, you touched on our fourth quarter performance. Underlying performance of our premium IOLs here in the U.S. was outstanding. We did see that offset somewhat by some ongoing market declines in some of the legacy categories which we're working to address, but we're confident that our surgical vision business can continue to be a strong double-digit grow for the foreseeable future. A couple other areas I'll focus on here is that we are expanding global market share, both in contact lenses and surgical vision, not just winning here in the United States, but more important globally. We're focusing very much on portfolio optimization, and I do think the auto separation enables greater capital allocation to vision, supporting both R&D, commercial execution and digital transformation. And so we're thrilled with the continued improvement in surgical vision and have great confidence in that continuing. Thank you.

Thank you. Next question is coming from Terence Flynn from Morgan Stanley. Your line is now live.

Great. Thanks for taking the question. Appreciate it. Congrats on the quarter. Obviously, multiple myeloma is another one of your key growth drivers here. I was wondering, post a lot of the earlier stage data, earlier line data we've seen for Tech Valley, if you could speak to how you're thinking about positioning here of that franchise relative to Carvicti. And then the related question is, I know FDA published some final guidance regarding MRD negativity and CR's endpoints, so just thinking about how you might implement that across your development portfolio and what that could mean for timelines.

Thanks for the question, Terrence, and good morning, everyone. Yeah, for multiple myeloma, with the data that we saw for Tecveli plus Darzalex in the second-line-plus setting, as well as most recently the Tecveli data in patients who were refractory to anti-CD38 and lenalidomide therapy. And maybe if I take a step back, over the past 20 years, J&J therapies have dramatically improved survival for people with multiple myeloma, you know, from three to five year survival rates to 10 to 15 years now or more. Yet, you know, despite these advances, multiple myeloma is still, it's a complex disease, a heterogeneous disease, and about 40 percent of patients are currently in the second line and third line settings. So how do all of these agents fit and why do we see that this is such an extraordinary opportunity. Well, first, if we start off with the TEC-DARA information, plus TEC-9 and CARVICTI, together they really provide highly effective agents that allow treatment that's tailored to the treatment goals, the patient setting, access, the patient status, and the prior therapy. So there's a number of things that get taken into account. So we start off with TEC plus DARA. This is really community-ready therapy that's proven an unprecedented efficacy rate in the second-line-plus setting. The hazard ratio was .17. And so this is for patients who are CD38 naive or are CD38 experienced. And this is about 70% of the population in that second-line in a third line setting. If you take a look at TEC-DARA, the data, again, extraordinarily impressive, 71% reduction in the risk of disease progression, 40% reduction in overall survival. And this is for patients who are refractory to anti-CD38 therapy and leadalidomide therapies. And so you can see the 70% TEC-DARA and then the 30% for the TEC-9 data. And then when When you bring Carvicti in, Carvicti is really the most successful CAR-T therapy. We just announced we're over 10,000 patients who've been infused with this, and this is a single-dose therapy with really a tremendous shot at what we would count as cure. And we're the only CAR-T therapy that's got that superior overall survival versus the standard of care. And so really when you take a look at what the goals are for that patient, what their prior lines of therapy would be and what the practice setting is, J&J now has an option for really every one of those patients in that second line, third line setting. So we see a lot of growth potential ahead for these agents, as well as Darzolex in the front line setting.

Yeah, maybe to get into your MRD, but first just to supplement a little bit, But I'd also note that the Tech Bailey regimens, whether it's monotherapy in CD38 refractory patients or CD38 naïve, or have been exposed but still remain sensitive, these are dexamethasome free regimens, which means the patients aren't on high dose steroids, which really is an improvement on quality of life. The other thing I wanted to note is that the FDA, in fact, with diagnostic three data that unsolicited, they contacted us and offered a priority review voucher to accelerate with that recent interaction with the FDA. Indeed, on MRD, that is exciting for us. Last year, there was an ODEP of using the evidence behind that, frankly, was pioneered by J&J over the years, so we're excited that that is an option. We are mindful, however, that it's only an option in the United States, so we, at this point we'll still have to deliver progression-free and overall survival data for other territories. So I suspect that will continue to be an element of our protocols, but indeed we will be speaking with the agents to be able to have opportunities to accelerate. I think a place where this could be particularly apropos is with our new tri-specific antibody for myeloma romantamig, which brings the features of both molecule efficacy, improved tolerability.

The next question today is coming from Danielle Antalpian from UBS. Your line is now live.

Hey, good morning, guys. Thanks so much for taking the question. I'll echo everyone's strong end to the year, and happy new year. Just a question on this move to higher growth and markets. Appreciate that you've done a lot of and are doing a lot of portfolio pruning now. You mentioned the 70% in a few years here. I mean, ultimately, I guess it's too hard, do you see that 70% moving higher or do you think that's like sort of the aspirational peak? That's the first part. And the second part is what are some other growth markets, whether it's in innovative medicines or med tech, where you guys aren't participating today that you see to participate over that timeframe, whether it's via organic or inorganic moves? Thanks so much for taking the question.

Daniel, thank you. I mean, our aspiration is not to put a limit on the high-growth markets in which we participate, and I think we can conservatively say that once we separate Ortho, we'll be at least at 70%. And there is tremendous opportunity, even just focused within the three business units we've decided to focus on within MedTech, both in cardiovascular, in surgery, and in vision. I think we've built your confidence around cardiovascular, continuing to be a strong double-digit grower. Surgery, one of our profitable businesses where we maintain leadership positions both in contact lens and surgical vision. We believe it's going to be a strong middle to high single-digit grower. And then surgery is the major opportunity to really the catapult to our growth, and that comes down to our belief in Otava. As you heard from Joaquin, we are absolutely resolute in our commitment to play a bigger role beyond open and laparoscopic surgery in robotics with Otava. And what we are most confident about is that we have something that is unique and different and something that surgeons and health system CEOs tell us every day that they need. And so, you know, while we're excited by the recent milestone and the submission for approval, we're just getting started, you know. And what really highlights the fact that this is different is you'll recall that this is a very different regulatory pathway we chose. This is a de novo pathway. And the reason we chose that pathway is that there is no predicate device, Nothing that can be compared against. And so this is a noble platform where there's no reference or predicate device. And so, you know, that coupled with the fact that we're going after the U.S. should further reinforce our confidence in the fact that we believe we have something that is really different. Now, we're not stopping just in the U.S. We're building our submissions in a parallel path fashion outside of the U.S. with a focus on Japan and some select U.S. markets. And you will have recalled from the announcement we made two weeks ago, we're also already expanding into our next IDE clinical study in the lower abdomen and so make no mistake that we believe that we can and will be a formidable player in surgical robotics we don't take the current incumbent for granted by any means but we do think that presence we have in open laparoscopic and soon-to-be robotic surgery give us a right to play and a tremendous opportunity to drive to those high levels of growth that we've committed in the back half of the decade And then in innovative medicine, we are looking to expand in a number of really exciting areas right now where we've got clinical work already underway.

And so to give maybe a few examples, Ribrovand in head and neck cancer and colorectal cancer, which is clinical trials underway, Amave, which we haven't spoken about yet today, but areas such as Sjogren's disease and SLE, lupus, areas of really high unmet medical need, atopic dermatitis, of which we made a number of key acquisitions and licensing at the end of 2024 that give us a stable of assets there that we're working towards, B-cell malignancies with our BICAR that's in development, and even Milvexian that we're developing in partnership with Bristol-Myers SQUIB on end that we're very, very excited about for atrial fibrillation and secondary stroke prevention. So a number of additional really key diseases that could be growth drivers for us in the Thank you.

Next question today is coming from from Pruhenheim Security, your line is now live.

Great. Thank you so much for taking the question. So I just want to ask on in Lexo, it's a couple of questions here, but just one, any or initial feedback you can share with us in terms of the initial launch and what doctors and patients are saying, if there's any update on when you expect to get a permanent day code. And then finally, just I see you listed Sunrise 5 data and potential submission on your events list for 2026. So that's good to see them. Here's if you can just talk about how that data and how that might impact the addressable population for the product. And then tie to that Sunrise 3 I thought might come this year, We didn't include that one on the list, so I'm just curious if there's any update on signing one, we might see data from Sunrise 3.

Great. Thanks so much for the question on Alexo. So we are really pleased with the launch and what we're seeing in terms of interest and receptivity by both urologists as well as the patients who've had application of the device. As you recall, we've really launched into the BCG unresponsive population. And as you noted, we're actually looking to further expand that through Sunrise 5, the BCG experience, and then Sunrise 3 population, the BCG naive population. So, so far, the interest and enthusiasm on this has been really, really robust. We are anticipating the permanent J code at the beginning of the second quarter, sort of in that April timeframe, which we think is going to be a really nice catalyst for utilization. And so we do continue to believe strongly that this is one of our $5 billion-plus assets and really look forward to getting that permanent J code in the second quarter. John, do you want to talk about it?

We're making great progress with this lead product in Lexo. But I would also remind that we see a whole series of innovative – we use these devices in the bladder to deliver different payloads. The next one on deck is containing ertifitinib, that's a targeted therapy, intermediate risk population, where patients with localized bladder cancer per year.

This question is coming from from RBC Capital Market. Your line is now live.

Great, thank you so much. Joaquin and Joe, could you spend some time and elaborate on your next step with respect to the TALC litigation, you know, implications of the initial decision? You know, I know you indicated it will be appealed, you know, if the reserves need to be stepped up. And then most importantly, what are your plans for an eventual resolution and risk mitigation here? You know, I think this may be contributing to the modest top down today, even though, you know, you reported strong results and you have a very strong outlook through the end of the decade. Thank you for taking the question.

Yeah, I'll start Shagun and then Joaquin, I'll turn it over to you. So thank you very much for the question. And I want to thank you for acknowledging just the strong results and outlook of the business, which is really what is at the heart of Johnson & Johnson. So last night the special master reviewing the Daubert motions in the TALC MDL issued what is known as a report and recommendation. So that really has no legal import until the judge actually accepts this recommendation. The recommendation itself excluded certain aspects of the plaintiffs' expert witnesses and their opinions. And simultaneously, the recommendation also endorsed virtually all of our opinions of our experts. However, there were other parts of the recommendation where the special master clearly failed to apply the new federal rules of evidence known as Rule 702, which really reinforced starting in December of 2023, the gatekeeping responsibilities that the special master should have had. We will certainly appeal those erroneous parts of the recommendation to the district court. Again, this recommendation from the special master has no legal consequence until the appeal is resolved. The bottom line is this is not going to change our strategy. We will continue to aggressively fight in the court system each and every one of these meritless claims. We will do so whether it's at original trial or through appeal. And we will continue to really bring to light the actions of the plaintiff's bar, the tactics that they use, the third-party litigation financing, all which is really undermining U.S. business and U.S. competitiveness overall. Joaquin?

Thank you, Joe. So, I would tell you and I would tell investors, we have been navigating this talk issue already for a decade. And we have been able to continue to deliver excellent results, invest in our business, and continue to return value to shareholders. So let's focus on the real story here. The real story is our successful 2025, the strong guidance for 2026, and what you said before, our line of sight for double-digit growth in the later part of the decade. This is a clean story for us, one of the cleanest stories in the entire healthcare sector, and we are in a position of strength today. And as Joe said, we are going to continue to fight these merit-less claims, and we are going to continue with our strategy of litigating every single one. What I can assure you and all investors is that every single employee of Johnson & Johnson does not get distracted. They wake up every day with the intent to bring new medicines and medical technologies that improve the standard of care of the millions of patients that we serve every day, and that's really our goal. Let's focus on what really matters. Let's don't get distracted.

Thanks, Shagun. And I think we probably have time for one more question.

Our final question today is coming from Alexandria Hammond from Wolf Research, your life is now Thanks for taking the question.

On the old vaccine, can you talk a little bit about your confidence in this asset? What do you think you'll need to show to be competitive in what's already a pretty crowded space with another potential next generation, Dr. Levin, from Bayer? And I guess as a quick follow-up, how can you leverage your past experiences commercializing Zarelto to make another multibillion-dollar opportunity for J&J?

APTT biomarker, the thromboplasin has got the right dose and the right study design, So we'll be looking forward to those data.

We're really excited about the opportunity with Milvexian, and what we're really looking to show there is clear superiority in terms of safety and bleeding risk. We know from all of our experience in the market with Zarelto that there are a lot of patients that are not treated or are under-treated because of fear of safety risk, and so we think there's extraordinary need for highly efficacious and and highly safe with low bleeding risk product in the market both for atrial fibrillation and then we're very excited about the possibilities and secondary stroke as well so we're looking forward to this product that we're developing in collaboration with Bristol Myers Squibb it is absolutely one of our five billion dollars plus assets on our list Alex and thank you continued interest in

our company. I will now turn the call over to Joaquin for some brief closing remarks.

Thank you to all of you for joining the call today. As we have commented in the call, we are starting the year from a position of strength, portfolio, and pipeline in our history, and we have a leading and expanding position in our six key business areas of focus. 2026 will be a year of accelerated growth and expanded impact, and I look forward to sharing our progress with you in the remaining of the year. Thank you very much, and this finalizes the call.

Thank you. This concludes today's Johnson & Johnson's fourth quarter 2025 earnings conference call.

You may now disconnect.