Earnings Call Transcript - JNJ Q2 2025

Operator, Operator

Good morning, and welcome to Johnson & Johnson's Second Quarter 2025 Earnings Conference Call. This call is being recorded. I will now turn the conference call over to Johnson & Johnson. You may begin.

Darren Snelllgrove, Vice President of Investor Relations

Hello, everyone. This is Darren Snelllgrove, Vice President of Investor Relations for Johnson & Johnson. I am excited to be here today and to lead the Investor Relations team moving forward. Welcome to our 2025 second quarter review of business results and updated financial outlook. 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. A 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 Duato, our Chairman and CEO, will discuss our business performance and key catalysts. I will then review the second quarter sales and P&L results. Joe Wolk, our CFO, will then close by sharing an overview of our cash position and guidance update for 2025. Jennifer Taubert, 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 approximately 60 minutes. With that, I will now turn the call over to Joaquin.

Joaquin Duato, Chairman and CEO

Thank you, Darren, and hello, everyone. I'm excited to talk about our very strong second quarter. Today's results showcased the strength of our uniquely diversified business as the only major health care company operating in both the med tech and innovative medicine sectors. In the second quarter, we delivered operational sales growth of 4.6% across our business. In Innovative Medicines, we reported 3.8% operational sales growth, delivering more than $15 billion in quarterly sales for the first time. No other health care company has grown through the loss of exclusivity of a multibillion dollar product in the first year, in our case, STELARA, and yet that is exactly what we are doing. For the second quarter in a row, our performance was driven by double-digit growth across three brands including DARZALEX, CARVYKTI, and others. In medtech, we delivered 6.1% operational sales growth with particularly strong momentum in cardiovascular surgery. Based on our strong performance in the quarter, we are pleased to raise our full-year sales guidance by $2 billion and EPS guidance by $0.25 from $10.60 to $10.85. Results like this are a direct result of our deep and resilient portfolio. It's what makes Johnson & Johnson unique. Today, we will focus on the remarkable ways we are driving innovation and creating value for patients and shareholders. We'll highlight the depth of our portfolio and pipeline focusing on six areas of unmet need and where we are delivering significant growth. Oncology, immunology, neuroscience, cardiovascular, and surgery are spaces where we are moving the conversation from treatment to cure and where we are extending and improving lives in meaningful ways. Let's start with innovative medicine and oncology, where we have a bold vision to eliminate cancer. Our leading products for the treatment of blood cancers and solid tumors are built on cutting-edge scientific platforms that are transforming outcomes for patients with more than 10 products in market across 26 approved indications and over 25 treatments in late-stage development. We expect to become the number one oncology company by 2030 with sales of more than $50 billion. When you look at our quarterly results in oncology, with operational sales growth of 22.3%, you can see that we are well on our way to achieving that. There are three key areas of Q2 progress I’d like to highlight. First is multiple myeloma, where we have treatments in every line of therapy. Approximately 80% of myeloma patients today receive a Johnson & Johnson medicine at some point in their treatment journey. In Q2, we presented several important sets of data including new five-year data showing a single treatment of our CAR T therapy CARVYKTI has the potential to deliver long-term remission. We also presented the first data from our investigational tri-specific antibody, which showed an unprecedented 100% overall response rate in heavily pretreated patients. With results like this, we are closer than ever to our ambition of curing multiple myeloma. Second is lung cancer, where our chemotherapy-free combination has a projected overall survival of at least a year over the current standard of care. The intent to prescribe continues to grow among healthcare professionals, which you can see in our strong quarterly sales. This is a life-changing advancement for patients and one we are building on with a pipeline of novel therapies. Lastly, in bladder cancer, we are excited to share that we have received FDA priority review for TAR-200, a first-of-its-kind drug-releasing system. We anticipate launching TAR-200 for high-risk non-muscle invasive bladder cancer later this year, a transformational product that harnesses our unique expertise in both innovative medicine and medtech. We expect TAR-200 to generate at least $1 billion in annual peak sales. In immunology, we have 25 years of redefining the standard of care, and we are just getting started. With six products in market across 14 approved indications and many treatments in late-stage development, we are expanding treatment options for patients and restoring health for millions of people around the world. From REMICADE and SYMPHONY to STELARA and TREMFYA, and now exploring targeted oral peptides and future combinations, the growth potential of our immunology portfolio and pipeline continues to be significant. I'll draw your attention to two key areas of Q2 progress. First is TREMFYA, which has recently expanded into inflammatory bowel disease and grew 30% in the quarter, with strong uptake in Crohn's disease and ulcerative colitis. We expect it to generate at least $10 billion annually in peak sales. We also made important progress in our pipeline in Q2 and expect to file for regulatory approval in the third quarter as the first targeted oral peptide to selectively block the IL-23 receptor with similar efficacy to a biologic. As a once-a-day pill, this molecule has the potential to set a new standard in the treatment of plaque psoriasis, and we look forward to sharing more in the coming months. In neuroscience, we are building on a 17-year legacy to be the number one company by the end of the decade. We are pushing boundaries in diseases like schizophrenia, depression, and Alzheimer’s, which together affect one in eight people worldwide. In Q2, SPRAVATO grew 53%, delivering sustained double-digit growth and demonstrating the power of this medicine for patients living with difficult-to-treat depression. We also completed the acquisition of intracellular therapies this quarter. CAPLYTA, approved to treat adults with schizophrenia and bipolar depression, adds to Johnson & Johnson's robust lineup of therapies with $5 billion-plus potential in peak year sales. Turning to medtech, particularly in cardiovascular, we are leaders in heart recovery, circulatory restoration, and electrophysiology. In Q2, we delivered over 22% operational sales growth, driven by new product performance in Abiomed and strength in mapping. We have now completed more than 10,000 variable cases globally with a reported neurovascular event rate of less than 0.5%. This is consistent with published rates across other platforms. We are confident in retaining our leadership position in mapping. Lastly, I’m excited to discuss the strong growth across all our business segments that brings all of this together. The bottom line is this: Johnson & Johnson's relentless focus on innovation yields results quarter after quarter, year after year.

Darren Snelllgrove, Vice President of Investor Relations

Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Starting with Q2 2025 sales results. Worldwide sales were $23.7 billion for the quarter, an increase of 4.6% despite an approximate 710 basis point headwind from STELARA. Growth in the U.S. was 7.8% and 0.6% outside of the U.S. Worldwide growth was positively impacted by 160 basis points, primarily due to the Intracellular and Shockwave acquisitions. Turning now to earnings. For the quarter, net earnings were $5.5 billion with diluted earnings per share of $2.29 versus diluted earnings per share of $1.93 a year ago. Adjusted net earnings for the quarter were $6.7 billion, with adjusted diluted earnings per share of $2.77 representing a decrease of 2.1% and 1.8%, respectively, compared to the second quarter of 2024. The decrease is driven by interest associated with incremental debt from the Intracellular acquisition and gross profit erosion from STELARA. I will now comment on business sales performance in the quarter with a focus on the six areas Joaquin discussed that will drive significant growth for the enterprise. Beginning with innovative medicine, where our results demonstrate the depth of our expertise in oncology, immunology, and neuroscience. Worldwide sales of $15.2 billion increased 3.8% despite an approximate 1,170 basis point headwind from STELARA, demonstrating the strength of our key brands and new launches. Growth in the U.S. was 7.6% and a decline of 1.6% outside the U.S. Growth outside of the U.S. was negatively impacted by STELARA biosimilars and the COVID-19 vaccine. Acquisitions and divestitures had a net positive impact of 140 basis points on worldwide growth due to the intracellular acquisition. In oncology, starting with myeloma, growth was 21.5%, primarily driven by continued strong share gains. CARVYKTI achieved sales of $439 million with growth of over 100% driven by share gains. In lung cancer, RYBREVANT/LAZCLUZE delivered sales of $179 million and growth over 100%. Within immunology, TREMFYA delivered growth of 30.1%. STELARA declined by 43.2%. In neuroscience, growth of 53% was driven by continued strong demand from physicians and patients. Long-acting injectables declined by 6.3%. I'll now turn your attention to med tech. Worldwide sales of $8.5 billion increased 6.1%, driven by strong performance in cardiovascular, surgery, and vision. In Cardiovascular, electrophysiology delivered growth of 9.8%, driven by new product performance and procedure growth.

John Reed, Executive Vice President, Innovative Medicine Research and Development

Thank you, Darren, and I’m glad to see your first earnings call is off to a good start. I look forward to you leveraging your recent experience in leading the innovative medicine finance team to benefit Johnson & Johnson's Investor Relations function. As already highlighted, we delivered a very strong second quarter, exceeding expectations on both the top and bottom line. While our currently marketed products and platforms drove this quarter's performance, the progress across our pipeline in the first half of the year heightens our conviction to achieve and likely beat the upper end of the growth targets we conveyed at our 2023 enterprise business review. As previously mentioned by Joaquin and Darren, the Innovative Medicine business continues to grow through STELARA's loss of exclusivity and driven by our in-market portfolio. We continue to advance our pipeline, attaining significant clinical and regulatory milestones that will help drive sustained and accelerating growth through the back half of the decade. In medtech, while we still have work to do, we saw improvement over first quarter results, driven by strong performance in the cardiovascular portfolio, surgical vision, and wound closure in surgery.

Joseph Wolk, CFO

Thank you very much for the question. I would say both are contributing to the strong performance. This is a great opportunity for Jennifer and Tim to address some of the strength that we saw in our second quarter results, as you saw credit to Jennifer and her team achieving the first $15 billion quarter despite a $1.2 billion year-on-year erosion in the quarter from STELARA. I don't think any other company can do that. We expect both businesses to continue that momentum and grow better in the second half of the year.

Jennifer Taubert, Executive Vice President, Worldwide Chairman, Innovative Medicine

Thanks so much, Joe. You mentioned our achievement of over $15 billion in our first $15 billion quarter. It's important to note that outside of STELARA, which accounts for just 10% of our business, we experienced impressive growth of 15.5%. We had 13 brands that grew in double digits. Noteworthy contributors to this growth include DARZALEX, CARVYKTI, and RYBREVANT/LAZCLUZE. In immunology, TREMFYA has made a strong debut in treating ulcerative colitis and Crohn's disease. In the neuroscience sector, both [indiscernible] and CAPLYTA also delivered very strong results for the quarter.

Tim Schmidt, Executive Vice President, Worldwide Chairman, Medtech

Thank you, Jennifer. For medtech, we delivered Q2 operational growth of 6.1%. This is a 4.4% sequential improvement over the first quarter. The primary contributor is cardiovascular, which grew 22%. We are now one of the largest and fastest-growing medtech companies in cardiovascular, driven by the success of Abiomed and Shockwave. We also saw great results in vision, primarily driven by contact lenses and continued solid growth in surgery, especially in wound closure and biosurgery.

John Reed, Executive Vice President, Innovative Medicine Research and Development

As you can see, it's hard to pick one particular product that gives us reason for enthusiasm in the back half. I would say TREMFYA, we're just getting started with our inflammatory bowel disease and grew 30% in the quarter. On the medtech side, I think the really shining star while maybe not the highest number is the EP energy that we have going forward.

Operator, Operator

Our first question is coming from Chris Schott from JPMorgan.

Christopher Schott, Analyst

J&J obviously reported a very strong top-line beat despite the STELARA loss of exclusivity. I just be interested, Joe, any color you might have in terms of the drivers of upside to the guidance for the year as we think about how much of this is the innovative business versus med tech and any particular franchises in those businesses that's driving guidance raise?

Joseph Wolk, CFO

Chris, thank you very much for the question. I would say it's both are contributing in terms of the strong performance. This is a great opportunity for Jennifer and Tim to address some of the strength that we saw in our second quarter results, as you saw in credit to Jennifer and her team achieving the first $15 billion quarter despite $1.2 billion of year-on-year erosion in the quarter from STELARA. I don't think any other company can do that. And then, Tim, a notable improvement from what we reported in Q1 gives us a lot of enthusiasm for the balance of this year where we expect both businesses to actually continue that momentum and grow better in the second half to the first half.

Jennifer Taubert, Executive Vice President, Worldwide Chairman, Innovative Medicine

Thanks so much, Joe, and good morning, everybody. And Joe, you stole my thunder on the over $15 billion in our first $15 billion quarter. Importantly, if you take a look at the 90% of our business that is not STELARA, we actually had extraordinarily robust growth of 15.5%. We had 13 brands that were growing double digits. A few of the notable drivers there include DARZALEX, CARVYKTI, and RYBREVANT/LAZCLUZE.

Tim Schmidt, Executive Vice President, Worldwide Chairman, Medtech

For medtech, we delivered Q2 operational growth of 6.1%. This is a 4.4% sequential improvement over the first quarter. The primary contributor to that is cardiovascular, which grew 22%.

John Reed, Executive Vice President, Innovative Medicine Research and Development

We have had really great momentum in the oncology pipeline. In the last 1.5 years, I think we've had 8 proof-of-concept readouts that gave us the confidence to now move into late-stage pivotal studies across the portfolio. We also have exciting developments in myeloma, where we are continuing to elevate the standard of care.

Joaquin Duato, Chairman and CEO

Thank you for joining the call today. Our Q2 results reflected the depth and strength of our uniquely diversified business. As you heard, we expect elevated growth in the second half of the year. We have a lot to look forward to over the next 6 months with game-changing approvals and submissions anticipated in areas like lung and bladder cancer, major depressive disorder, psoriasis, surgery, and cardiovascular. These milestones will extend and improve lives in transformative ways and deliver significant value to patients and shareholders. Thank you for your continued interest in Johnson & Johnson and enjoy the rest of the day.

Operator, Operator

Thank you. This concludes today's conference and Johnson & Johnson Second Quarter 2025 Earnings Conference Call. You may now disconnect.