Johnson & Johnson at Bernstein Conference: Strategic Growth and Challenges

On Wednesday, 28 May 2025, Johnson & Johnson (NYSE:JNJ) presented at the Bernstein 41st Annual Strategic Decisions Conference. Chairman and CEO Joaquin Guato and CFO Joe Wall discussed the company’s strategic direction, highlighting both growth opportunities and challenges. Despite facing headwinds like biosimilar competition, J&J remains optimistic about its diverse portfolio and future growth.

Key Takeaways

• Johnson & Johnson reported a 4.1% overall growth in Q1 2025, with a 4.2% rise in its Pharmaceutical Group.
• The company has invested $50 billion in M&A and R&D over the past two years, with plans to invest $55 billion in U.S. R&D, manufacturing, and technology over the next four years.
• J&J is confident in its ability to manage the impact of Stellara biosimilars, projecting significant growth in new product launches.
• The company is addressing macroeconomic challenges, including tariffs and Medicaid cuts, through proactive engagement with the administration.
• J&J aims for 2% to 3% organic sales growth and 5% to 7% EPS growth in 2025, with potential upside from pharmaceuticals and MedTech improvements.

Financial Results

• First Quarter 2025 Results:

- Overall growth: 4.1%

- Pharmaceutical group growth: 4.2%, despite an 80-100 basis points impact from Stellara biosimilars

- Med Tech group growth: 4%

• Investments:

- $50 billion invested in M&A and R&D over the last two years

- $55 billion planned for U.S. R&D, manufacturing, and technology over the next four years, a 25% increase from the previous period

• Future Guidance:

- Projected growth of 5% to 7% from 2025 to 2030

• Gross Margin:

- Q1 adjusted gross margin was 71.8%, below the consensus of 74.9%

- Committed to a 300 basis points improvement in operating margins by year-end

• Tariffs and Part D Redesign:

- Tariff impact reduced from $400 million to $200 million due to changes in China tariffs

- Estimated $2 billion headwind from Part D redesign in 2025

Operational Updates

• Pharmaceuticals:

- Focus on growth despite Stellara biosimilar entry

- SPRAVATO received monotherapy indication; expected $3 billion revenue in 2027-2028

- Tremfya launched for ulcerative colitis and approved for Crohn’s disease

- Icotrokinra for psoriasis expected to file later this year

• Med Tech:

- Ottava filing expected late this year or early next year

- Progress in cardiac ablation to regain market share

- $900 million restructuring in the surgery business

- Orthopedics aiming for improved performance, with Velis system in use

- TARIS drug-device combination launching in the second half of this year

Future Outlook

• Overall Strategy:

- Prioritizing R&D and long-term growth

- Focus on high-growth MedTech markets, particularly cardiovascular

• Specific Goals:

- Retain leadership in cardiac ablation

- Enter robotic surgical market with Ottava

- Grow through Stellara biosimilar entry

• Potential Acquisitions:

- Open to smaller tuck-in deals to enhance internal programs

• Product Launches:

- Launching Tremfya for ulcerative colitis and Crohn’s disease

- New launches in lung cancer and myasthenia gravis

Q&A Highlights

• Macro Environment:

- Monitoring MFN, Medicaid cuts, and tariffs

- Engaging with administration to balance innovation and affordability

• Med Tech Strategy:

- Focus on cardiovascular and robotics

- Prioritizing electrophysiology and Ottava

• Pharma Strategy:

- Emphasis on internal opportunities

• Importance of Diversification:

- Advantages of spanning the entire patient journey

- Financial strength supports strategic flexibility

• Venture Capital Portfolio:

- Provides strategic alignment and insights

For more detailed insights, refer to the full transcript of the conference call.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Lee Hambrite, US med tech analyst, Bernstein: Alright. Thank you, everybody. Thanks, guys. I’m Lee Hambrite, US med tech analyst at Bernstein, and we are thrilled to host Johnson and Johnson. We have chairman and CEO, Joaquin Guato, and CFO, Joe Wall.

Guys, for being here.

Joe Wall, CFO, Johnson and Johnson: Thank you. Thanks for having us.

Lee Hambrite, US med tech analyst, Bernstein: So we’re scheduled for a fifty minute fireside chat. Just a reminder that investors can submit questions at any time through Pigeonhole, and we’ll try to work them in, as we go. So, Joaquin, first of all, thanks so much for joining us. Lots of macro uncertainties lately and pressures on the industry. The news cycle has been pretty frenetic.

Maybe you could kick us off with some opening remarks on how you see the state of the industry and the state of the business at J and J.

Joaquin Guato, Chairman and CEO, Johnson and Johnson: Thank you, and thank you for inviting me. I have participated in all the strategic decision, conferences since I became CEO, so I’m already a veteran. Thank you, Lee. So how do I see the industry, trying to elevate myself? I see a great combination of, science and technology driving significant medical innovation in a way that I have not seen that in my forty years working in the industry.

So I I clearly see when we look at Johnson and Johnson that the opportunities to improve the standard of care, I see more opportunities than I have ever seen. So in that sense, I see the industry being healthy. Yes, there’s rhetoric in the industry, and I’m sure you will have more questions about that. But I also have seen a lot of situations in which we have a combination of headwinds and tailwinds. Ultimately, in this industry, if you are able to bring opportunities that are going to improve the standard of care for patients in severe diseases, you normally are able to create significant value.

So I remain optimistic despite of all the, comments that we may have seen there. And I also believe that we have an administration that wants to be able to create value for American businesses, that wants to invest in The US, that wants to create manufacturing jobs, and we share those goals with them too. So there’s good common ground to to build from there. Johnson and Johnson, we are we have a a great combination at Johnson and Johnson, that has made us successful for a hundred and forty years. That is based on two things, a clear focus on health care.

We are not a pharmaceutical company or a medical technology company. We’re a health care company. And we are the only company that can span the entire patient journey. Our breadth of capabilities at Johnson and Johnson is unmatched. We can go from, cell therapy to robotic surgery.

We can work in cardiovascular or in mental health. There’s no other company in the healthcare ecosystem with the breadth of capabilities of Johnson and Johnson, and that makes us unique. That is translated into a company that is broadly diversified. We can go where medicine is going. We have 26 platforms at Johnson and Johnson of more than a billion dollars.

And that diversification enables us to be able to manage multiple business cycles. We are diversified by product, by geographic area, and helps us to be able to reinvent ourselves constantly. That’s why we have had sixty three consecutive years of dividend increases. That’s why we’re able to deliver the consistent results that we deliver. We have been able to meet or exceed analyst expectations in earnings for twenty eight consecutive quarters for seven years.

If you have an example of a company doing that, please bring it up. As I look at our current situation, we have had the, first quarter results. Our overall growth in the first quarter results was 4.1%, four point two % in our pharmaceutical group and 4% in our med tech group. And I think the first quarter of this year is particularly important. Why?

Because we have started to address the number one question that I used to get in every single investor meeting. And you know the question, Lee? It was, are you going to be able to continue to deliver growth in the middle of the biosimilar entry in The U. S. Of your biggest product, Stellara?

And in the first quarter, we delivered 4.2% growth in our Pharmaceutical Group in the face of the Stellara biosimilars that were an eight ten basis points headwind. So we are starting to address the number one question that we have had. We are delivering growth in the face of the STELARA biosimilars. Again, I cannot find any other pharmaceutical company that has been able to grow in year one of having biosimilar or generic competition of their major product. Do you know any other one?

Can I tell you? Absolutely. So I’m I’m glad that we are able to to address that question, and our results show the strength of our business model. And we have been investing for that. In the last, two years, we have invested $50,000,000,000 in M and A and in R and D.

We also have announced an investment in The U. S. In R and D manufacturing and technology of $55,000,000,000 over the next four years, which is an increase of 25% of our previous four years. So we feel confident about our future, and we feel particularly confident about our ability to meet our guidance that we provided about having growth of 5% to 7% from 2025 to 02/1930. And I believe that, based on the results that we’re having today, we increase we are increasingly confident of our ability to do that.

As a matter of fact, I think that there’s significant still disconnects between the street and our own expectations. And that that’s something that is not not not new. We have done an analysis of our top 10 new product launches over the last twenty years. And in nine out of 10, we have exceeded the consensus expectations of the analysts. As a matter of fact, the median increase over the consensus expectations of the analysts in these top 10 launches was 93% at the five year mark.

So I’m not surprised, because it’s the pattern, that The Street is still underestimating our potential both in med tech and in pharmaceuticals. And I think Joe, in the first quarter, call, gave a good update on where these disconnects were.

Joe Wall, CFO, Johnson and Johnson: Yeah. Sure. Thanks, Joaquin. And, yeah, Lee, we’re very optimistic based on what we said back in December of twenty three on our Investor Day, and we pointed out some some significant disconnects between products that we saw, some of which were still in the pipeline that today are now approved, but those disconnects still exist. And we’re not talking hundreds of millions of dollars in our forecast.

We’re talking potentially billions. So if you go to Ribrovant last clues for, lung cancer, new data came out recently, proposed a one plus year benefit of life for the average lung cancer patient who has only three years to live diagnosed today, eighty percent of those patients don’t get to a second line of therapy. We feel really good that I think the street estimate for 2728 on average is about $2,000,000,000. We see twice that amount for that same time frame. Let’s go to SPRAVATO, something that’s been on the market but performing extremely well for us.

We launched it during COVID. There was a lot of, I’d say, implications to launching during that period of time for that particular drug. Just received monotherapy indication. The street has that also at about $2,000,000,000.27 28. We see that 50% higher in that same time frame.

Tremfya, most of our revenue about 75% of our revenue for Stelara came from IBD indications. We just successfully launched ulcerative colitis in the fourth quarter of last year. We recently received at the end of the first quarter of ’20 ’20 ’5 approval for Crohn’s disease, subcutaneous, induction as well as maintenance. We see that the Street has it about $6,000,000,000, 20 7, 20 8. We see that 25% higher in that same time frame.

A new one to the list, icotrokinra, which wasn’t in the twenty three Investor Day. That’s about $700,000,000. That’s the oral formulation that has biological efficacy we’re studying in psoriasis. Hope to file that later this year. We see that potentially two times higher.

And then lastly, for bladder cancer. About six hundred thousand patients every year get diagnosed as new patients for bladder cancer. The treatments today don’t do enough for patients, usually resulting in patients losing their bladder. About $700,000,000 is the forecast for 2728 for consensus. We see that three times higher during that same same time frame.

So you just do some rough math, and you clearly get to a much higher growth rate. So the five to seven percent when you consider that we’ve added a really nice asset in the neuroscience field with CAPLYTA, that five to 7%, we’re very, very bullish on. And, personally, I think Joaquin and I will both be disappointed if it’s not closer to seven than the five.

Lee Hambrite, US med tech analyst, Bernstein: This is great, guys. Thank you. There’s a a lot to dig into here. May maybe we can start with the macro environment. You know, lots of moving pieces here.

Obviously, MFN, Medicaid cuts, PBM reform, changes at HHS, cuts at FDA and CDC tariffs. How do how do you put all of that in perspective for us? And maybe you could, you know, kinda rank those in terms of sort of relative risk.

Joaquin Guato, Chairman and CEO, Johnson and Johnson: Yeah. Thank you. So, as I said at the outset, I’m optimistic about the outlook for the biopharmaceutical industry and the medical technology industry because I see, a situation in which science and technology are combining to advance the standard of care in a significant way both in med tech and in pharma. So, it’s difficult to predict how the how the the situation is going to, end up in some of the aspects we were talking before. Some of them can have a short term impact, like MFN or or or tariffs.

Some of them are more longer term impact, like what’s happening with the NIH or the FDA. I’m gonna tell you what is, our perspective. We see opportunities to work with this administration. We see openness to have a dialogue with the industry, and we are having that dialogue as we speak. And, we are working to try to be able to address a dual need.

One is to be able to maintain our ability to continue to innovate in the context of this unique opportunity that we have today, and at the same time, make sure that medicines for American patients and medical technologies are affordable and the patient experience improve. So that’s what we are trying to do with this administration, and I think we have common ground to be able to do that. Now, you know, what’s gonna happen with tariffs? To be honest, I don’t know. We have said it before, and I will say it now.

If we want to have more jobs in The US and to manufacture in The US, it’s also about tax policy. And part of the investments that we were describing before of the of the of the $55,000,000,000 are facilitated clearly with the 02/2017 Tax Cuts and Jobs Act. You know, that is what has made possible for us to be able to invest in The US. Our goal is to be able to manufacture here in The US once we complete this four year plan investment, essentially, all the advanced medicines that are being used in The US. So I think that’s a goal that we share with the administration, and we want to work to be able to do that.

Lee Hambrite, US med tech analyst, Bernstein: All all the advanced medicines, meaning, these are the

Joaquin Guato, Chairman and CEO, Johnson and Johnson: Advanced biologics? Biologic. Yeah. And for the most part, you know, in our med tech sector, we have already a quite a a dual source, you know, manufacturing footprint that enables us to work with two separate supply chain.

Lee Hambrite, US med tech analyst, Bernstein: Very good. Okay. Let’s drill down on most favored nation drug pricing. The the president’s executive order was a little bit light on details, but the press conference and, commentary since, you know, the tone seems to be, more about helping pharma companies to your point, and the focus seems to be more on PBM reform and balancing lower prices in The US with higher prices in Europe and and elsewhere outside The US. Can you just help us understand your your latest thinking on how all of that might play out?

Joe Wall, CFO, Johnson and Johnson: Yeah. It’s it’s similar to tariffs, Lee. Quite frankly, we still have to see what is what actually transpires. What I would say and maybe underscore what Joaquin said about how the administration and its officials are willing to engage in the dialogue. I mean, how, often have we heard or not heard about middlemen as part of the equation here?

Right? So if you just look at the difference between list and net price, on average, the industry is discounting 50 to 60% off of list. Yet we all know, whether it’s ourselves or or people close to us going to the pharmacy counter paying higher co pays. If we made just a simple change and calculated the co pay off of lit net price versus list price, that results in a 50 to 60% reduction of out of pocket copay costs. There’s also the administrative factor of, you know, prior authorizations, additional approvals to get the drug that’s been prescribed to them by the physician that they trust.

Right? Those are I think IRA did have the benefit of limiting the cope out of pocket co pay, $2,000. That’s become less noise, I think, in the system. Not that we shouldn’t do more for patients, but now it’s about, hey. I I was supposed to get this drug, and I have to go I have to make three or four phone calls and hopefully talk to the right person after that time to get the drug that I was prescribed.

So there’s a lot that can be done in the system. You know, in terms of, the opportunity of raising prices outside The US, I think, administratively, that gets a little bit complicated. I’d like to see how that’s going to be affected. But, you know, maybe the the pie remains intact, and it is it acts similar to a tariff in that or or the the argument with NATO. Right?

You know, The US was paying an un disproportionate share, and so how can other countries contribute to that? You the the access in countries outside The US is is quite alarming, if you ask me. So you look at the g 20. There’s been about a 30 oncology drugs approved since 2014. Americans have access to about 96% of those drugs.

In the g 20, so developed countries, it’s like 48%, I believe. So if we want the best treatments available to the patients that that really changes their life like, look what look what we’ve done with DARZALEX and CARVICTI. CARVICTI at ASCO is gonna have a five year data coming out, and the results are astounding. They’re gonna be astounding. And it it’s those types of treatments we wanna make sure that we preserve the system here where Americans do have access to the best medicines.

We just gotta get the discounts and the rebates that are intended for the patients into their hands.

Joaquin Guato, Chairman and CEO, Johnson and Johnson: And I I believe that it’s in these circumstances where a company like Johnson and Johnson plays better because of our diversification that I was telling you before. I mean, we’re diversified geographically. We are diversified, by book of business, and we always have opportunities to grow one way or another within our own portfolio. So I’m optimistic about our ability to to navigate these circumstances as we have navigated multiple circumstances in the past.

Lee Hambrite, US med tech analyst, Bernstein: Yeah. Very good. Still lots of questions about how m MFN works. Still really up in the air. Okay.

HHS, lots lots of changes at HHS, including new leadership, cuts at FDA and CDC. Have have you seen any changes in the day to day interactions with with the agency or or drug approval timeline?

Joaquin Guato, Chairman and CEO, Johnson and Johnson: Not. We don’t have seen any any impact in our, drug approval timelines. And we continue to have a a good dialogue with the with the FDA, And that’s to the credit of the people working at the FDA that continue to produce, for the health of all Americans. So at this point, I we have seen a very good working relationship with the FDA. We have you know, multiple approvals that are ongoing, and all of them are are on time.

Lee Hambrite, US med tech analyst, Bernstein: Great. Okay. One of the questions from the from the audience, is on talc. Let’s just get that out of the way. You know, it it seems like the the end of the road for the bankruptcy path.

Now we’re back in the tort system. Now what’s what’s the path forward from here, and how should investors value that liability related to talk?

Joaquin Guato, Chairman and CEO, Johnson and Johnson: So very simply, you know, we’re back in the tort system. We, are now working with the redo of the Dauber hearing, which is heard in New Jersey, which is gonna set different standards for evidence to be able to be presented in the MDL. And we like our odds in the tort system. In the last, you know, years, we have won, sixteen out of seventeen cases in ovarian cancer, so we like our odds in the TOR system. On the mesothelioma side, we have essentially all of the cases settled, so we like where we are today and we have been able to revert $7,000,000,000 of, you know, accruals that we had, for this bankruptcy.

I have to tell you, look, this this bankruptcy had more than 80% of support of the claimants and the plaintiffs. And, clearly, we continue to believe that there is no, connection between TALT and cancer. And most of the science, the regulatory agencies support that, that that, assertion that I’m giving you, and we like our odds in the in the tort system, and that’s where we’re going. We have no intention to settle. We are going to fight it in

Joe Wall, CFO, Johnson and Johnson: the tort system, and we like our odds as they are. Yeah. The other component I would just add to that is just, the level of rigor that’s gonna be placed around this junk science. So the change in how the Daubert standard is applied is a very significant factor that actually improves, our hand, than what we had in the cases that we prevailed in. So that’s only gonna get tougher for the plaintiff’s attorneys and their claimants.

Lee Hambrite, US med tech analyst, Bernstein: I think I think you mentioned before that there was there’s actually a decent chance that a lot of these cases get thrown out through the Daubert

Joe Wall, CFO, Johnson and Johnson: That’s correct. During the bankruptcy proceeding, we found out that a lot of the claims were either barred or fraudulent so that the claims that were out there in the tens of thousands is probably significantly less. We still don’t have a a firm number. We’ll have to see what what’s filed here. But there was even talk yesterday in a Bloomberg article, I believe, just the the cost that the plaintiff’s attorneys are now weighing in their mind whether it’s worth pursuing or not, to file one of these claims.

Lee Hambrite, US med tech analyst, Bernstein: Yeah. Got

Joe Wall, CFO, Johnson and Johnson: it. So there’s even they’re thinking about it differently if that article is true to form.

Lee Hambrite, US med tech analyst, Bernstein: Can you talk about timeline just briefly? Is there is there any chance this is resolved somewhat or or is this likely to drag out for for many years?

Joe Wall, CFO, Johnson and Johnson: I I think the best next milestone we can point to is a couple months away with the Daubert hearing and how judgeship rules in New Jersey. Yeah.

Lee Hambrite, US med tech analyst, Bernstein: Okay. Very good. Okay. Why why don’t we shift to to financials, Joe? You know, looking forward, you’re guiding to 2025 organic sales growth of two to 3%.

Sticking to your promise, as you said, Joaquin, to grow despite Stellara Stellara LOE and EPS growth of about five to 7%. What’s what’s your latest thinking on sources of upside and downside to those numbers?

Joe Wall, CFO, Johnson and Johnson: Yeah. I I, you know, I still like that I’m not gonna give mid quarter, guidance. We’ll we’ll update that in July, but the year did get off to a very fast start. I would say, the upside is, from some of the pharmaceutical products, just the, level of receptivity for, ulcerative colitis that we saw with Tremfya. We think that will also play well with Crohn’s disease, so that’s a potential opportunity.

Ribrovant last clues, some of the newer, multiple myeloma therapies, DARZALEX continues to do well. So it’s it’s hard to come up with a a real strong downside on the the pharmaceutical side. I think on the med tech side, we continue to make progress. Some of the things that we haven’t, maybe executed as well as we should in recent quarters, We see a light at the end of the tunnel for those. So if you go to Vision Care, 2024 as well as maybe the first quarter, you know, ’25 wasn’t as strong as we had hoped because of some supply chain issues that really related back to 2023.

Those are now correct. They were putting some investment from, behind it commercially, some new indications with astigmatism coming out. We think it’s, that’s gonna get back to the growth that we’re, used to. EP is going to be an improving story as we go throughout the year. Joaquin certainly, will tell you, I’m sure, in one of these responses how committed we are to being the number one, in cardiac ablation, no matter whether it’s RF, PFA, or whatever else might come down the road.

Orthopedics has room for improvement. So we had a number of one timers in the first quarter that probably hampered the reported growth that I see abating as the year goes on. And as we called in January, we always saw the second half stronger than the first half for our entire business.

Joaquin Guato, Chairman and CEO, Johnson and Johnson: I would say, look, we are more convinced that we were at the beginning of the year that this is going to be a good year for Johnson and Johnson.

Lee Hambrite, US med tech analyst, Bernstein: Very good. Very good. Just quickly on tariffs. You know, you you reported early as you always do and and sized 2025 impact around 400,000,000. Things have changed a little bit since then.

We maybe walked back from the ledge on a couple of conversations. You know, can you just reflect on

Joe Wall, CFO, Johnson and Johnson: to that? You know, listen. And and things will change by the week, by the day. I I would say just based on the retaliatory China tariffs that we had in our $400,000,000 assessment, that probably cuts the 400 down to 200, but that doesn’t include anything that may come out of section two thirty two. The Europe tariffs are still somewhat in flux.

So, we will provide, our best and latest estimate in a transparent way on July 16 when we report earnings. But it’s a moving target, but it’s going in the right direction.

Lee Hambrite, US med tech analyst, Bernstein: That’s great. K. Looking at margins, the first quarter in twenty five was was a miss on adjusted gross margin seven seventy one eight versus consensus seventy four nine. That said, EPS still beat, by 7% driven by spending control on r and d and SG and A and some favorability in in other income. You have a a number of efficiency programs running across the organization.

How should investors think about margin progression over the next few years beyond the Stellara LOE?

Joe Wall, CFO, Johnson and Johnson: Yeah. Well, I think it’s important the first quarter. You guys saw it as a miss. I’m not sure that was a fair characterization. I and I hate to say that, because you guys are very good at what you do.

You’ve got a lot of companies to cover. But when you just think about Stellara as well as Part d redesign, which was worth about, you know, 4 to $500,000,000, that’s pretty significant. So the expectation that we were gonna actually improve gross margins for the first quarter was, optimistic. That doesn’t mean we don’t have initiatives going on across all of our businesses to improve the gross margin profile, most notably in our surgery business as well as the ongoing efforts in our orthopedics business where we’re looking at SKU rationalization, network footprint, as well as exiting some markets that just aren’t profitable. That work will continue.

You know, I think the way I I we like to manage the full p and l. We like to manage that. We’re always prioritizing that next dollar towards r and d because that is really the the long term lifeblood of the company going forward, you know, transforming the current standard of care into something much better. And so I think what you can expect from Johnson and Johnson is us doing, you know, at or, slightly above our sales growth when you think about operating margins. This year, we committed to 300 basis points despite the the miss in q one.

We’re still committed to that 300 basis points improvement by the year end. Now some of that has a natural tailwind because we had asset acquisitions of about a 50 basis points last year that won’t you know, that aren’t on the horizon to repeat this year in the second half. And then the other 50 basis points is around operational improvement. Some of that is just due to technological advances. AI is helping our business become more predictable, in terms of our forecasting.

That leads to better efficiencies. We’re using some of the AI technologies in some of our global services to to be, quicker in processing AR, looking at disputes, things that kinda can add cost, but also limit cash flow. We’re we’re using those tools to to improve the overall financial health of the business as well.

Lee Hambrite, US med tech analyst, Bernstein: Excellent. Okay. Let’s shift into the the fun part in the businesses. May maybe we’ll start with EP in med tech. You know, you’ve got a a couple competitors here who have had some really successful PFA launches, more PFA launches to come.

You you’ve been the dominant player in A fib for a really long time, but you’re a bit behind on PFA. What are you doing to stem those market share losses in EP?

Joaquin Guato, Chairman and CEO, Johnson and Johnson: Thank you. And let me start by saying that we are determined to retain our leadership in cardiac ablation. So that means that we are gonna be investing in cardiac ablation to be sure that we are at the forefront of medical innovation and that we are going to have the appropriate clinical and commercial support to deliver on that. So let’s be clear, we are determined to do that. And when I think about our priorities in medtech, number one priority is to win in cardiac ablation.

Number one priority. So, it’s correct that we are, we have been late in BFA, and we’re working to correct that, right? So when it comes to cardiac ablation, now we have a new modality, which is PFA. We have to see what the overall, clinical effect of PFA is once we have more time to analyze that. And, eventually, we’ll understand better how PFA, RF can combine and coexist together.

So that’s something that we’re gonna be working to understand. Nevertheless, clearly, PFA has had a significant impact. We remain leaders in overall, you know, cardiac ablation with a business of more than $5,000,000,000, and we are especially strong in the mapping area. You know, we are also mapping most of the competitive procedures too. Why we are strong in the mapping area, which is a very important part of the value of each procedure, sometimes we only focus on the catheter.

Keep in mind that mapping and the mapping catheters are a very important part of the value of each procedure. Are we strong in the mapping area? We have the best mapping system in the market, which is Carto, with more than 5,000 installations. We have the best mapping catheters. We have the best intracardiac echography technology with our ultrasound technology.

And we have studies to demonstrate that the combination of intracardiac echo plus hour mapping clearly improves outcomes in any ablation procedure. And finally, we have a well established, network of clinical specialists, we call them mappers, that are supporting the procedure. So we are determined to maintain our leadership on the mapping space, which is a very important part of the value of each procedure. And that’s a strong, a clear strength of Johnson and Johnson. The second area, we are working in PSA catheter innovation.

We are working to improve body pulse with different things. We’re looking at the pulse sequence. We are looking at the irrigation flow. We are going to work in order to improve our body pulse catheter. Our body pulse today is working very well outside of The U.

S. And we are now with new instructions for use, getting up to speed here in The U. S. Too. So you’re going to see an improvement in body pulse as the year goes by.

And sustaining catheter innovation, we are working in two additional catheters. One is a dual energy catheter, which will give the opportunity of having RF and PSA in a single catheter, which is very practical for the electrophysiologists as they can ablate with different energy modalities depending on the lesion. That’s already ongoing, and it’s approved in Europe and we’re going be launching. It will come to The US. And we think it’s going be another alternative based on the STSF catheter, which is the most utilized catheter today as far as handling the catheter in radiofrequency.

And then the the third catheter that we are developing is a large deep focal catheter. We call it Omnipulse, that we are starting our IDEA study here in The U. S. As we speak, that will give another option for the electrophysiology. So we are going to have a suite of PSA catheters together with our suite of RF catheters that is going to create a combination together with our mapping that will continue to drive growth and drive opportunities for Johnson and Johnson down the road.

And we are committed to this space and to understand and analyze what is the best combination of therapies for patients. So we are gonna be looking at all information coming from electronic medical records, real world evidence, to really understand the impact of using one technology or another and help the electrophysiology see what is the best option depending on the type of lesion and the type of patient. So we are we are very much focused on retaining our leadership in cardiac ablation. And as I said before, that is my number one priority in our medtech business.

Lee Hambrite, US med tech analyst, Bernstein: Very good. Very good. Probing on one thing you said, related to mapping. You know, with the advent of really effective and safe, single shot catheters, you know, some people think maybe mapping is less important than it used to be. It’s not happening as much in Europe, as it used to.

How do you how do you see that trend going forward?

Joaquin Guato, Chairman and CEO, Johnson and Johnson: As I said before, all the data that we have, and we have done real world evidence studies to analyze the effect of mapping and ultrasound show that mapping and ultrasound technologies improve the outcomes for patients with atrial fibrillation, with RF or PFA. So saying the contrary is going against the evidence. So when I see evidence of that, then I will change my mind. The evidence that we have today, it’s clear that mapping and ultrasound improve the outcomes of cardiac ablation.

Lee Hambrite, US med tech analyst, Bernstein: Very good. Okay. The surgery business, you announced a, $900,000,000 2 year restructuring program, in surgery. Can you just talk a little bit about the key goals for that program and and, you know, why was now the the right time?

Joe Wall, CFO, Johnson and Johnson: Yeah. I think, Lee, similar to what I said earlier, we’re looking at gross margin improvement across our entire our entire network, pharmaceuticals included. In surgery, we saw some of the success we were having in early days with the orthopedic program that we announced about two years ago and thought that was a very good template to follow. So we’ve got the core competency built up on a pilot basis. We think surgery was the next logical area to go to, and and to get that business ready for when we have Ottava down the road.

Lee Hambrite, US med tech analyst, Bernstein: Great. Maybe you could just touch on Ottava timing. I think you mentioned that the trial started, and you announced first cases in April.

Joe Wall, CFO, Johnson and Johnson: What’s the timeline look like on Atava? We’re continuing the clinical studies now. We would hope to file, either late this year or early next year.

Lee Hambrite, US med tech analyst, Bernstein: Great. Okay. Turning to orthopedics. Lots of moving parts, this last quarter with the ortho transformation program, some revenue recognition, timing changes, and selling days and stuff, some competitive pressures in spine and sports. How do you think about ortho performance in the in the back half of the year?

Joaquin Guato, Chairman and CEO, Johnson and Johnson: We see ortho performance in the back half of the year improving. There were a number of headwinds in the first quarter, that we communicated, and we provided even a chart in our first quarter results in order to be able to reconcile, you know, the onetime items. It was related to the walk in implants. It was related to less selling days. And it’s also related to our restructuring program that Joe was mentioning.

So you’re going to see an improvement in orthopedics in the second half of the year. And I’m very excited about the opportunities that we have in orthopedics. We now have about 25% of the knees, primary knees that are utilizing our Bellis system, and we are launching, two new robotic systems in orthopedics. One is the Uni Knee and also, Velis Spine in spine surgery. We had the first clinical cases in The U.

S. Very recently. So I am excited about the opportunities that we have there in orthopedics, especially in robotics, to continue to, improve the outcomes of, you know, joint replacement or spine surgery based on the precision that robotics can offer.

Lee Hambrite, US med tech analyst, Bernstein: Very good. Just a question from the audience on China. You know, you’ve talked about China as a headwind in the in the med tech business, BBP, anticorruption, etcetera. You know, when do you see China turning back to a growth tailwind?

Joaquin Guato, Chairman and CEO, Johnson and Johnson: Yeah. Let me tell you that long term, not being a company with a presence in China is myopic. We are the largest med tech company in China. And as a consequence, the movements in the China market affect us too. Right?

So, we are seeing now, headwinds due to VBP that eventually would be an anniversary. So today, the China business as opposed to it was in the past that was a major growth driver for us. It’s been more a headwind in our overall medtech profile. But we see our China business continue to grow in the rest of the decade once we anniversary the value based procurement, headwinds. And we have the strength to be able to remain with our innovation in the China market.

And being a strong player in the in the China market is a strength moving into the long term.

Lee Hambrite, US med tech analyst, Bernstein: Mhmm. Very good. Okay. Bigger picture. You know, ever since you spun out consumer, you’ve gotten lots of questions about whether it makes sense to keep med tech and pharma together under one roof.

You’ve made some progress on drug device synergies like TERIS and bladder cancer and Monarch and lung cancer, but these haven’t been a real material driver of growth yet. Just wondering, has your thinking evolved at all on keeping on the benefits of keeping pharma and med tech together? So, I mean,

Joaquin Guato, Chairman and CEO, Johnson and Johnson: I I told you before, why have we been able to deliver 28 consecutive quarters that we have met or exceed analyst expectations? Why have we been able to deliver sixty three consecutive years of dividend increases is because we are a well diversified company that can go where medicine is going, that can span the entire patient journey. No other company can do what we do, and that’s the secret of our longevity. It gives us the financial strength to have a strategic optionality. We are the only, you know, together with another company here in The US, triple a rated.

We have significant scale in every aspect that we want to invest. We are always a preferred partner based on our scale and our reach. So I think it does have tremendous advantage over the long term. I think it’s great not to be a one trick pony company. I know investors, some of them like one trick pony companies because they may have some upside in the short term.

In the long term, the longevity is not with one trick pony companies, and I can give you multiple examples of that. One of the questions that I get frequently is, okay. But show me show me one product in which you are gonna be able to combine your drug and device expertise. You know what? I’m gonna be able to show you one.

So I’m gonna be able to address that question. We, this fall, are gonna be launching our first drug device combination, or it’s the platform that we call TARIS. It’s a drug eluting stent that is going to release gemcitabine for localized bladder cancer, has two breakthrough designations. We just presented data at the American Rural Association, eighty percent response rates in localized bladder cancer. Patients continue disease free a year after about half of them.

This is gonna be a more than a $5,000,000,000 platform, and it’s only the beginning of our interventional cardiology sprint. So that’s only possible because we are a med tech and a pharmaceutical company. So it has advantages in the longevity of the long term. There’s no question about it. But it also it’s gonna bring significant products platforms of more than a $5,000,000,000 like the tariffs platform that we are going to launch in the second half of this year in The US.

So there you go. A demonstration of that. I’m glad I can answer that questions for all investors that have been asking me that for many years. You have a demonstration of that now. I I think we’ve got

Joe Wall, CFO, Johnson and Johnson: a a really timely example too. If you would think about just Stellara and the pending biosimilar, we don’t we don’t wake up and it, well, all of a sudden went biosimilar. We would have been planning for that two or three years and probably had to cut some investment. Right? But yet we have a robust pipeline for lung cancer, bladder cancer.

We’ve got a Kotropinra for psoriasis and perhaps other IBD, inflammation diseases. I don’t think you could have done that without having the complimentary med tech business. It doesn’t mean we don’t prioritize. We still make choices. You saw last year, we exited infectious diseases and vaccines.

We still prioritize, but it gives us a lot more flexibility to manage for that long term and have the robust pipeline and the growth outlook we have for the balance of this decade.

Lee Hambrite, US med tech analyst, Bernstein: Very good. On that topic of flexibility and financial strength, you know, Joaquin, from the from the start of your tenure, you’ve talked about getting more acquisitive, particularly in med tech. You’ve had some time to digest Chalkwave and Abiomed. Going forward, do you see potential for more medium to large size deals in med tech?

Joaquin Guato, Chairman and CEO, Johnson and Johnson: So let me start by saying that, our goal in med tech, clearly, our strategy is to move into higher growth markets. So if you ask me, what is your number one strategy in medtech? We want to move into higher growth markets, and that’s translated into our ability to bring new technologies, into those markets. So, one of the areas that we see as a higher growth market is cardiovascular. Clearly, that’s an area where you have significant mortality and morbidity and where medical technologies make a significant difference.

So we have, we have worked in order to identify companies that would have, technologies that would make a significant difference in the standard of care and also have a significant competitive moat. And we have identified two great companies, Abiomed in heart recovery and Shockwave in calcified arterial disease. Both of these companies, are working ahead of our DL models, and we are especially pleased of the results that they are delivering. With Abiomed, we have more than two years trajectory. With Shopwave, we’re gonna go into our first year.

We are very glad of these two acquisitions, and they are exceeding analyst models and doing really well for us. So I am pleased with what we have been able to do that, and it has enabled us to be in three of the most attractive markets in cardiovascular, heart recovery, calcified arterial disease, and cardiac ablation. So we are well positioned to be a leader in cardiovascular. Are we thinking about more acquisitions? Look, it depends on the opportunities that are out there.

I mean, basically, our focus is in cardiology and in robotics, as we have commented multiple times. Two areas that we see as growing areas within medtech, where medical innovation can make a difference for patients. And, we’re always looking for things that are going to be, that are going to combine, improving the standard of care, in which we have enough expertise to understand what’s good, what what is may not be as good. So we have internal expertise. And and finally, that we have a good competitive mode that can give us the opportunity to develop those markets.

You know, we continue to look for them, and, that’s as much as I can tell you about it. Right? But it’s an important tool. Now our focus now both in medical and in pharmaceuticals is to make our platforms work, to make what we have in house work. I mean, we have multiple opportunities in medtech.

We just commented about EP. We are we spoke about OTAVA, which is the other big priority for us. We have Abiomed and Shop. We’re doing well. We have our vision franchise coming back strong.

So we want to make sure that we make the things that we have organically, work well. In pharmaceuticals, we have multiple opportunities, multiple opportunities. I mean, are launching Tremfya in ulcerative colitis and in Crohn’s disease. We’re launching RIBER1 and LASCLUS in lung cancer. We are launching imavib, nipocalimab in myasthenia gravis.

We are launching our drug device combination, Tharis, which is going to be branded in Lexo in localized bladder cancer. We are going to have the approval of CAPLYTA in adjunctive therapy of, of major depressive disorder, which is a relatively big market. And we are gonna be filing this year for our next block Baxter, which is called icotrokinra, which is an IL IL twenty three oral. That’s gonna be groundbreaking. This is the first time, difficult to understand, is the first time that you’re going to have an oral medicine that is going to have an efficacy and a tolerability like an advanced biologic.

That’s going to transform the treatment of immune mediated inflammatory diseases and that’s going to be a real groundbreaking. So we have enough opportunities internally to be able to deliver in our 5% to 7% growth, both in medical and in pharmaceuticals. And we are going to be, you know, focused on trying to develop those opportunities. And we don’t exclude that some if something comes our way that checks all the boxes, we can also pursue that. Yeah.

Most of our innovation comes from smaller deals. When you think about, our drug device combination now, that was a small deal that we did for a company in the hundreds. When you think about ICOTROKINRA, that was a small deal that we did with a company in the hundreds. So most of our innovation comes from small deals.

Lee Hambrite, US med tech analyst, Bernstein: Sometimes we do larger deals like a BioMed, shortwave, and intracellular. That’s a that’s a great comment. You know, any any other, opportunities or areas where you could do smaller tuck in deals, to augment internal programs, maybe in EP or maybe in some areas in, in pharmaceuticals?

Joe Wall, CFO, Johnson and Johnson: I think it’s across all of our franchises, both sides of the house in terms of med tech and pharmaceuticals. So we did last year well, the Eviomed, Shockwave, Intrushelda gets the headlines, we did about 40 deals last year for less than $5,000,000,000. Right? And and those are some of the big blockbuster products that we’ve had in the past. You think about going back to the IMBRUVICA, DARZALEX wasn’t all that much capital upfront.

So we continue to do those. We’ve got the ecosystem with our JLABS facilities. We’ve got a a venture arm, Johnson and Johnson Development Corp. It’s over $1,000,000,000 in investments scattered around. So we’re always looking for that next new opportunity and how that could tuck into our business, whether it be in the the medium term or the long term, next decade type of stuff.

Joaquin Guato, Chairman and CEO, Johnson and Johnson: And, look, another benefit of being a large company is that everybody wears Johnson and Johnson at the table. That’s a benefit of being a large med tech and and pharma arms is that every single deal that is out there, you know, they want Johnson and Johnson at the table. Yeah. So can you can you

Lee Hambrite, US med tech analyst, Bernstein: speak quickly to to the venture capital, portfolio? You know, you do quite a bit of earlier early stage investment as well. Can you can you comment a little bit on the importance of of those deals?

Joe Wall, CFO, Johnson and Johnson: Yeah. I mean, that it gives us really good insight. And many times, we will have at least board observer seats, and there’s been a few that we’ve actually went ahead and and acquired those businesses. Again, much smaller deals, but, it does provide us with real good insight. And there’s a really good strategic alignment with the businesses.

So that Development Corp isn’t really outrunning on its own saying, let’s go after the next speculative idea. They talk to a Jennifer Talbot or Tim Schmidt and their teams to say, hey. Does this fit into the portfolio as to how you’re seeing it go, whether it be in orthopedics, surgery, neuroscience?

Lee Hambrite, US med tech analyst, Bernstein: Yeah. Very good. Okay. Great. Maybe just one on, Part d.

You know, how how is the Part d benefit redesign, impacting J and J so far in 2025? How much of a net headwind could this be to to pricing this year?

Joe Wall, CFO, Johnson and Johnson: Yeah. So this year, we quantified it in January. That would be a $2,000,000,000 headwind. I would say the first quarter we’re still getting in some of the details from the actuals, but that first quarter number that we accrued, and it doesn’t seem to be too far off based on the actual results, is about what you would expect, about 25% of the the $2,000,000,000 coming in. So I think where we’ll probably need to get a little bit more detailed is around by product and informing analysts to that, but I I think it’s coming in in aggregate where we thought it would come.

Excellent.

Lee Hambrite, US med tech analyst, Bernstein: Okay. You’ve you’ve done a great job of highlighting some of the areas where consensus might be a little bit, off on expectations or a little a little too conservative. On on Stellara, obviously, LOE this year, maybe just can you give us a sense on, how is biosimilar competition coming along? Is it playing out the way you had expected it to play out so far?

Joe Wall, CFO, Johnson and Johnson: Yeah. So when you look at the first quarter results here in The US, I would say the first quarter came in as expected. We’ve been saying that HUMIRA’s second year was a really good proxy. You know, you have the added headwind of of part d and some discounting, but that that’s kinda played out right to script for q one. Q ’2 probably might even be a little bit less or more erosion, if you will, but that’s not to be unexpected either, and that’s what we plan for in our overall enterprise guidance.

So right now, based on one quarter worth of data, we feel pretty good about where it’s tracking. And then you complement that with some of the strength we have on the other side of our business, we feel good about the guidance that we put out there.

Lee Hambrite, US med tech analyst, Bernstein: Very good. Okay. Maybe wrapping up. Obviously, this is the strategic decisions conference. You know, maybe, Joaquin, when you look ahead over the next three years or so, what do think are the most important one or two strategic decisions that you’ll face?

Joaquin Guato, Chairman and CEO, Johnson and Johnson: One, we are, if I look at MedTech, two major things. One, continue retaining our leadership in cardiac ablation. The second one is entering into the robotic surgical market. So that’s clearly. So you think about our priorities in medtech, two priorities, cardiac ablation, robotic surgery.

In pharmaceuticals, you know, our number one priority is to show everybody that we are able to grow through the STELARA biosimilar entry. And I am glad to be able to be in front of you today, showing you that in the first quarter, we were able to grow 4.2% in pharmaceutical despite of a significant impact of eight ten basis points of STELARA. So those are our two, you know, major areas. I think this is a good time to enter into Johnson and Johnson. Some of the major questions that investors have about about Stellara Biosimilars, that was the number one question that we always got, are starting to be addressed.

You’re seeing that we are able to grow. We are gonna improve our results in MEDDEC in the second half of the year. So this is a good time to think about Johnson and Johnson, especially with the type of volatile environment that we are in because we are always to have more optionality than most of the companies based of our unique diversification. So I’m glad that the year is starting well for us. This is a good time to be at Johnson and Johnson.

Lee Hambrite, US med tech analyst, Bernstein: Very good. We’ll have to leave it there. Thanks so much, guys. Thank you. As always.

Joe Wall, CFO, Johnson and Johnson: Thank you.

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