Johnson & Johnson at RBC Healthcare: Navigating Growth Amid Challenges

On Tuesday, 20 May 2025, Johnson & Johnson (NYSE:JNJ) presented at the RBC Capital Markets Global Healthcare Conference 2025. The company outlined its strategic direction amidst economic challenges, including tariffs and healthcare policy changes. Despite hurdles, Johnson & Johnson remains committed to growth, leveraging innovative medicine and MedTech improvements.

Key Takeaways

• Johnson & Johnson is navigating economic challenges, including tariffs and healthcare policy changes, while maintaining a growth trajectory.
• The company is investing $55 billion in the U.S. over the next four years to drive future growth.
• MedTech division improvements are crucial for achieving targeted growth rates.
• Strategic acquisitions like Abiomed and Shockwave are performing well and expected to contribute to growth.
• The company remains optimistic about its innovative medicine pipeline, with several promising products in development.

Financial Results

• Johnson & Johnson is absorbing $400 million in tariff-related impacts, down from initial estimates due to reduced tariffs.
• Despite economic headwinds, the company achieved approximately 4% growth in Q1.
• The company faced a $40 million loss on Stellar and a $2 billion impact from Part D redesign discounts.
• Committed to investing $55 billion in the U.S. over the next four years, reflecting a 25% increase related to tax policy.

Operational Updates

• MedTech division aims for a 5-7% compound annual growth rate (CAGR).
• Growth observed in surgical advancements, particularly in wound closure and biosurgery.
• Vision care is recovering following 2023 supply chain issues.
• Electrophysiology (EP) faces challenges, especially with PFA adoption and competition.
• Recent acquisitions, Abiomed and Shockwave, are performing well.

Future Outlook

• Johnson & Johnson is targeting 5-7% growth from 2025 to 2030, with confidence in reaching the upper range.
• The innovative medicine sector is expected to drive significant growth, with products like Tremfya and Ribrovant showing potential.
• MedTech improvements are necessary to meet growth targets.
• Strategic acquisitions and investments in R&D remain priorities.

Q&A Highlights

• Tariffs: The company is absorbing impacts but continues to monitor the situation.
• Pricing: Emphasis on ensuring discounts reach patients to improve access.
• Innovative Medicine: Optimism about new drugs, including Tremfya for UC and Crohn’s, and Ribrovant for lung cancer.
• MedTech: Plans to address EP competition with new technologies.
• Talc Litigation: Confidence in managing risks without hindering strategic goals.

For further details, readers are invited to refer to the full transcript below.

Full transcript - RBC Capital Markets Global Healthcare Conference 2025:

Shagun Singh, Senior Research Analyst, RBC: Hello, everyone. I am Shagun Singh, senior research analyst at RBC, and I’m very happy to host the next session with Johnson and Johnson. Joining us from the company is Joe Walk, chief chief financial officer of the company. Joe, thank you so much for being here today. We really appreciate your time.

Joe Walk, Chief Financial Officer, Johnson and Johnson: Oh, my pleasure, Shigen. Pleasure to be here.

Shagun Singh, Senior Research Analyst, RBC: Great. So I thought we could open it up with a brief state of health care discussion given the current environment. Maybe start off with tariffs. So, you know, we are in an unprecedented time with respect to tariffs and all the policy rhetoric that has been going on.

Joe Walk, Chief Financial Officer, Johnson and Johnson: Of the year so far with respect to tariffs. I I do think it’s important as well as part d redesign, which is another $2,000,000,000 in discounts. Most companies would be looking to contract or at least moderate their growth expectations on both the top and bottom line. We’re looking to grow through that. So I call it kind of a a gutting it out type of year, and I’m really pleased with what happened in the first quarter, specifically how the overall business performed.

In our first quarter results, we did talk about tariffs. I’ll get a little echo. About about $400,000,000 based on what we knew back at that that date in April. That considered a ninety day pause. That considered China retaliatory tariffs.

And at that point in time, we were able to absorb that additional impact in our 2025 outlook of about $400,000,000. That was mostly on the med tech side impacting our business. Since that time, there’s been a little bit of retrenchment in terms of the the Chinese tariffs, both retaliatory as well as what The US is levying. And so I I would estimate that that impact as it currently stands today is probably half of the $400,000,000. I’m reticent to kinda give that number or or say that’s that’s what we can go with from here.

Because as you know, on the pharmaceutical side, there is still the section two thirty two reviews that are occurring, and it seems to be very much a moving target. I think what I’d like all of you to take away, though, is that our business is strong enough to absorb impacts like that and still continue to perform to meet expectations. So we’ll have to see where the tariff landscape goes. Obviously, what we’ve had discussions with the administration and I’d like to actually complement the administration in terms of the level of engagement. I can’t think of a time, certainly in my career, and I think many executives would say this across pharmaceuticals, trying to understand the landscape, not only on tariffs, but also pricing.

There is obviously a sense of renewed optimism from the industry with respect to investments. John Johnson and Johnson stood up about two months ago, committed to $55,000,000,000 over the next four years, which is a 25% increase. That’s really related to tax policy, though. If you look at the biopharmaceutical industry, before the passage of 2017 TCJA, there was about 1,000 biopharma manufacturing factories in The US. Today, there’s 1,600, and that’s the result of having a tax policy that’s not necessarily advantaged, but it’s not so disproportionately disadvantaged the way it was.

And so that’s where we try to have the administration, when when we have discussions with them, focus on the next dollar invested. We can’t disrupt supply chains to a significant degree because that’s going to impact patients. And quite frankly, some of it because it takes so long to build a manufacturing facility. Sure. By the time you get some of these parts over, they’ll be end of life anyway.

So let’s focus on the the next new cell therapy, gene therapy. We’ve got a a facility, a drug supply in North Carolina that we announced on that same day. And focusing on those newer therapies, I think, will continue to enable The US to be a leader in life sciences.

Shagun Singh, Senior Research Analyst, RBC: No. Fair enough. Good point. Can you maybe talk to us about you mentioned the $55,000,000,000 investment in The US. Can you talk to us about how you are looking at your global manufacturing footprint as well as the supplier side of the equation, and and where does pricing fit in?

Joe Walk, Chief Financial Officer, Johnson and Johnson: Yeah. That’s a good question. Where does pricing fit in? Let’s talk about manufacturing first. I I think the key there is because of the products that we supply, they’re so instrumental to critical health issues.

We always had to have that contingency plan in place. So we have more manufacturing facilities in The US than any other country in the world, and we’re very well positioned. I think the whole industry, maybe industry at large, took a a look at that when COVID hit and we had supply shortages, where are we getting some of our key components from? I would say we’re largely well covered no matter where we are in the globe. So if you think about Asia, China specifically, we manufacture there kind of for the Chinese market or at least for the Asian market.

So we don’t we don’t have a lot of risk in that regard. Our ability to put new facilities here in The US is really tethered to the tax reform and a rate of 21% versus the 35 plus state tax that we were looking at a few years earlier and tapping into the innovation ecosystem, the university system, the the the labor force here in The US, that that’s that’s enough to kinda have that middle of the road tax rate, which, again, is truly middle of the road based on OECD and make make a really good business decision. In terms of pricing, it seems like the conversation these days is is all over the place. We had announcement this morning about MFN kind of building on the executive order, I believe, of last week. We hear a lot from the administration about middlemen, which, again, too, I I do wanna compliment because we had not heard that before.

And so we take our opportunities to educate. If you think about the pricing problem in The US, patients go to the pharmacy counter, and they’re experiencing not only higher insurance premiums, but a co pay of a hundred dollars on a chronic monthly med that maybe five years ago was 10 or $15. Right? We need to our average discount is somewhere between 55 to 60% off of list price here in The US at Johnson and Johnson. That’s pretty emblematic of what we see across the industry, and we publish these in a transparency report.

We need to get those discounts and rebates into the hands of the patients to ensure good access. If you think about some of the systems that are out there that are probably commingled with most favored nation status and lower prices. Often, the disparity in price uses the list price here in The US, not net, and the net price overseas. There is a disparity, but that creates greater access here in The US. Specifically, if you think about let’s go with oncology drugs.

In the g 20, since 2014, I believe there’s been a 30 oncology drugs approved. US citizens have access to about 96% of those drugs. In the g 20, so developed countries, that access rate is only about 46%. We certainly don’t want to limit access for good medicines. I I heard about we were traveling last week as an executive committee to Canada last week.

Cataract surgery, you could be diagnosed today here in The US and have your cataract lens by Tuesday. What’s today? Today is Tuesday? You probably could have it this afternoon or at least by Thursday. In Canada, they wait eighteen months.

Right. What could happen there is blindness. So we were just in the conference here at RBC listening to Alex Azar as a executive at Lilly. He never launched a a product in The UK First or Germany First because it was just not a good business proposition. That’s not the kind of health care system we want in The US.

So does the the the pharmaceutical industry need to do their part? I believe so, and I think we have done that throughout time. But I do think focusing on the middleman who puts no capital at risk in terms of discovery or manufacturing facilities is a is a good place to start and actually more impactful on the American Builders wallet.

Shagun Singh, Senior Research Analyst, RBC: Great. No. That’s that’s really helpful. I guess just sticking to the topic and and thinking about your innovative medicine franchise. So so there is it looks like there could be opportunities as well as some risks.

So, you know, you think about tariffs. You know, you discussed MFN. There is IRA. You know, how should we think about, you know, I guess, G and A’s pricing power specifically on innovative medicine as well as, you know, the margin structure as we move forward?

Joe Walk, Chief Financial Officer, Johnson and Johnson: Yeah. That that’s a good question. So our growth over the last decade plus has been built on innovative medicine that transform the standard of care, and that’s what’s the promise going forward if you think about some really interesting areas that I’ll get to in a second. But if you look at our average price net price over the last six years, we’ve gone down on average three to 4% each and every year. So we haven’t we don’t have the ability to take price certainly within our segment of the portfolio.

But I’m very excited about what the promise is for not only our core products. If you think about Tremfya, it’s been a $4,000,000,000 drug for psoriasis. We launched UC in the fourth quarter, ulcerative colitis of 2024. We just received approval about a month and a half ago for Crohn’s disease subcutaneous formulation. Seems like that’s going to be very, very promising.

So for Johnson and Johnson, where the street has that projected at approximately, I think it’s $4,000,000,000 in 2728, we see that probably at least twenty five percent higher. Let’s go to lung cancer where we’ve recently had an approval probably about a year ago now, Ribrovant Ribrovant plus Last Clues. We see that as something that the street is calling 2728, around $2,000,000,000 drug. We see that two times higher in that same time period with higher peak cycles down the road. And you think about what why why do we think that?

It’s changing the standard of care. Lung cancer patients usually have, on average, a three year survival rate. Eighty percent of those patients don’t get a second line of therapy because they don’t make any time. Our data with sub q formulation that we presented recently has the proposed potential of having one year plus of mortality, and that that could build from here. If you think about icotrikinje or something that’s not yet launched but in the pipeline, that’s an oral formulation for psoriasis.

We expect to file that for approval later this year. We see that as about I think you guys have it for roughly about $700,000,000 in 2728 time frame. We see that much higher as well, two times higher, two to three times higher. Part 200, bladder cancer. Bladder cancer impacts newly diagnosed patients six hundred thousand per year.

It’s a horrible disease, usually leads to the removal of the bladder. Current current treatments aren’t sufficient. This is a very simple procedure that has a device that provides the drug exactly to the tumor. We don’t have all the systemic side effects. It’s, I think, a two or three minute insertion, a one minute removal a few weeks later, and that has great promise for folks with bladder cancer.

We see that three times higher than where the analyst models are. So there’s a lot of reasons to be optimistic. And, again, we’re we had roughly 4% growth in the first quarter. That was despite losing about 40 on Stellar, more than a $10,000,000,000 drug, and a quarterly apportionment of about $2,000,000,000 impact for Part D redesign discounts. So, again, most companies on the pharma side, when they lose a major product to patent, are looking to contract for a year.

There’s only been one other company that we know of that has done that to scale. That was Johnson and Johnson in 2018 with RamiCade. We’re gonna grow through this both top and bottom line.

Shagun Singh, Senior Research Analyst, RBC: No. Thank you so much for that color. In fact, I think, you know, all the products that you called out on the innovative medicine side, I think it adds up to almost $7,000,000,000 that you are ahead versus where the street the street is. And, you know, I guess, you know, I should ask you, you know, what level of conviction do you have that you can actually hit those?

Joe Walk, Chief Financial Officer, Johnson and Johnson: Yeah. So in 2023 in December, we had the opportunity to host many of you at our analyst day here in New York City, and Jennifer and the team committed to five to 7% growth from 2025, that that’s the CAGR, to 2030. When you consider we’ve just added a really nice asset with, the Intracellular Therapies acquisition, CAPLYTA, we think that’s a high growth asset. Our conviction is very high. Matter of fact, I’d I’d almost be disappointed if we don’t get to the at least the upper range of that that guidance that we gave.

Jennifer won’t like that I just said that publicly, but we’ll put a little bit of pressure on her. But if you just think about the the products we have, what we said in 2023, we did put up a similar slide, right, and said, here’s the disconnect. And at the time, I think the analyst community saw our growth rate over that period of time about one and a half percent in pharma. They’ve come up to about 3.3%. We stay still think there’s a way to go, and that’s why we we felt compelled to show that slide in in the first quarter earnings just to remind everybody that we’ve got more conviction now, and some of those things were speculative back in 2023.

We’ve gotten approvals that make those much more I’d say the technical risk is now

Shagun Singh, Senior Research Analyst, RBC: Yeah. No. Absolutely. That’s thank you for clarifying that. You know, as we think about the innovative medicine versus the med tech franchise, you know, it it feels like there’s a bit of a disconnect.

And, you know, I think there are a few factors at play on the med tech side. You know, there is increased competition on the EP, you know, segment. You know, you guys are working to get Otaava out into the market. There is also a restructuring underway on the orthopedic as well as now surgery segment. You know, can you parse that out for us and and talk to us about what the underlying growth is within medtech, and how do you see the underlying growth for both your franchises, innovative medicine and med tech?

Joe Walk, Chief Financial Officer, Johnson and Johnson: Yeah. So innovative medicine, I would stand by the the commitment of, you know, that five to 7%. I think it’s very much well in hand for 2025 to 2030. I think that’s what investors should expect from us because these drugs are truly transformational. In terms of med tech, Tim coincidentally came out with a similar I think it was from 2023 to 2028, a five to 7% CAGR.

And right now, we don’t our that franchise that portfolio is not where we want it to be. I think if you look at on the surgery side, we had a good first quarter with respect to wound closure. Biosurgery was good. We are making advancements, and we’re pleased to announce at that first quarter earnings call the completion of and the initiation of IDE for OTAVA, our soft tissue robotic surgical solution. We will continue to put that out there and hopefully have a filing in due course.

There’s a, obviously, a very formidable competitor there. But when I think about a few things, one, our unified architecture that allows the arms to move kinda with the bed, making it easier for surgeons, the smaller footprint, and quite frankly, the market research we’ve done with hospital administrators and surgeons looking for another option, that bodes very well in a marketplace that globally only has had about 6% penetration. When I think about orthopedics, we need to do better there as well. We have some really good uptake with our Vellus knee solution. That’s a robotic solution there.

We just completed a case yesterday for the Vellus spine solution, and, hopefully, that new technology will propel that to the mid single digit growth that we should expect in orthopedics given the demographic landscape across the globe. In terms of vision care, I would say we are still the market leader in contact lenses. We need to recatalyze that growth. We had some supply chain issues at the end of twenty three that impacted our 2024 performance. The team assures us that those are largely behind us.

We will put some funding behind the commercial efforts to reinvigorate that top line growth. Again, we are the market leader. Second place competitor is somewhat distant, but we wanna get back to not just maintaining share but acquiring more share. And then on the vision surgical side of things, I was really pleased with what we saw out of the intraocular lenses, Technis Odyssey, Technis Pure C in the first quarter, I think, high single digit growth in The US, which we haven’t seen for some time. So those newer product launches are starting to take effect.

EP is the big one. It’s one that I think folks like you should have come to rely on Johnson and Johnson for being a steady performer over the last decade. We were behind with PFA. We were the third to launch. And then we had in the first quarter, I would say there’s a little bit of an inventory dynamic from prior year that maybe would have made that growth look a little bit better, but that’s not really the issue.

We had the Varipulse pause as from the FDA. It resulted in instruction for use labeling change, so there was no product defect. It was just how the physicians were using it. And so we we are now back on the market having success in, I would say, Japan, Europe, Canada, Seven Thousand cases globally. It seems like the data is starting to build that that is going to be a vulnerable competitor.

We are also working on a dual energy catheter, hopefully, for launch of the second half of in Europe of 2025, and then we continue to work on the Omnipulse. So we’re committed to PFA. The other thing I would mention too is that while the PFA market has exploded, we are still in about more than 50% of those cases because of the cardomapping presence. I think it’s it’s pretty generally accepted that cardomapping is the benchmark, the gold standard. And so we do have the opportunity with our clinical account specialists to be in the room while the procedure’s going on so that when these other when Varipulse has a little bit more conviction behind it from the community as well as some of these newer technologies on catheters, we will be well positioned to do what we did with the RF technologies.

Shagun Singh, Senior Research Analyst, RBC: So so EP is is a big investor focus. And I’m just curious, do you think the market has now shifted from the procedure being led by the mapping system of choice versus the catheter system of catheter of choice? And does that put you at a disadvantage? And how do you feel about that number one position in The US?

Joe Walk, Chief Financial Officer, Johnson and Johnson: Yeah. So we’re we’re we’re not giving up the number one position easily. Right? So we’re gonna continue to work on that. We’ll have to see how it plays out.

The the other catheters competitive catheters have been pretty popular to date, but we think that the Verapulse catheter, once used with the mapping system, will be able to ensure that we retain or recoup the the number one position should we ever lose it. The other thing I didn’t mention is the significant investments we’ve made in capital deployment around Abiomed and Shockwave. Those acquisitions continue to perform at or above the deal model. Those are obviously within the top five of J and J’s highest cost for acquisitions. Abiomed continues to do well.

We had the Danish German shock study, which improved mortality in the first study to do that. We’ve got the PROTECT IV study, which will show that Impella is has cardiovascular benefits, completing that enrollment as we speak. And then on the Shockwave side, we’ve just about anniversaried that acquisition. The closing was about May of last year. ’2 new launches there.

So e eight, which is for below the knee PAD, as well as a limb threatening chronic limb threatening ischemia, as well as Javelin, which is a non balloon catheter that gets those hard to reach peripheral lesions.

Shagun Singh, Senior Research Analyst, RBC: Got it. Just I guess, given the time, I wanted to get your thoughts on on m and a. You know, you you have, you know, reiterated commitment on both sides of the business, innovative medicine as well as medtech. You know, I guess, more specifically on the medtech side, I was curious, you know, what are your thoughts on TAVR TMTT markets that you’re not currently participating in? You know, RDN is an area that is really, you know, picking up as well in terms of pipeline projects.

Mhmm. You know, how are you thinking about, you know, some of these med tech areas, you know, to further boost the growth rate?

Joe Walk, Chief Financial Officer, Johnson and Johnson: Yeah. I think if I just go back to when Joaquin started his tenure, he wants to focus med tech on high growth areas. I think right now from what we’ve seen from the TAVR market, it’s high single digit growth. I don’t know that it’s double digit growth. And if you look at AvioMed and Shockwave’s profile, they were not just double digit, but 20 plus at the time of acquisition.

As far as RDN, there’s one prominent name out there. We have an investment with respect to our Johnson and Johnson development court facility. I probably best not to say anything that given there were some of the rumors out there, But that’s that could be exciting technology, probably something for the next decade.

Shagun Singh, Senior Research Analyst, RBC: Got it. And with respect to the talc litigation, you know, how should we how should we handicap the risk around, you know, you’re going back to the tort system, and now you’ll have to fight case by case? You know, what about the headline risk? And I think in a lot of circumstances, you’ve gone back, appealed, and then won the case. So how should we think about the risk related to talc litigation going forward?

Joe Walk, Chief Financial Officer, Johnson and Johnson: Yeah. So as the CFO, I I certainly would have liked to have that uncertainty behind us. But also as a CFO, we were able to reverse $7,000,000,000 of an accrual. And I have a hard time thinking just based on the track record, based on the heightened standard for Daubert going forward, that we will pay out $7,000,000,000. So that was our best and final offer to the plaintiff’s attorney.

We had a bankruptcy proceeding where 86%, I believe, of the claimant says, yep. That’s what we wanna go down. The judge and his infinite wisdom decided otherwise. It was basically one holdout, and we’re gonna continue to expose some of the tactics of plaintiff’s attorneys in this case. It’s based on junk science.

There’s decades of independent research, including some from the FDA a couple decades ago that suggested talc was safe in this use, and we’re gonna continue to stand by that. But I have a hard time just from a financial perspective thinking we’re gonna pay out $7,000,000,000 going forward.

Shagun Singh, Senior Research Analyst, RBC: That’s helpful. I just wanna

Joe Walk, Chief Financial Officer, Johnson and Johnson: And any risk that we have, I think it’s important. We generate $20,000,000,000 in free cash flow. This is easily not easily manageable because I’d much rather spend the money on an innovation and r and d and and other things that bring novel solutions to patients. But it’s it’s not it hasn’t stopped us from making acquisitions like Abiomed Shockwave, now intracellular. It hasn’t stopped us from increasing our dividend.

It hasn’t stopped us from reaching record levels of internal r and d investment. And so I would hope investors would take that away. Like, well, this is a risk. It’s a nuisance. It’s not something that’s going to stop the company.

Shagun Singh, Senior Research Analyst, RBC: Fair point. I guess just in the last fifteen seconds or so, any key messages for investors? You know, you know, J and J is actually, you know, held okay so far in the market. Just what is underappreciated? We talked about innovative medicine, but any other areas you’d like to call out for investors?

Joe Walk, Chief Financial Officer, Johnson and Johnson: Yeah. I just think that we are in a time of uncertainty. Johnson and Johnson is a reliable investment, but I think there’s a ton of growth that we wait on the second half of the decade. I talked extensively about the innovative medicine portfolio, but I also think some of the execution that needs to get better in med tech is it’s not only possible. It’s very, very likely.

And so I would encourage investors to look at the second half of the decade. We’re going through right now absorbing some multibillion dollar headwinds. Again, not a many many companies can do that, and we’re doing that while still growing. I think that that bodes really, really well that we’ll continue to bring new sophisticated treatments and procedures to the marketplace and also continue to return to investors what they expect from us.

Shagun Singh, Senior Research Analyst, RBC: Great. Joe, thank you so much for your time. Really appreciate it.

Joe Walk, Chief Financial Officer, Johnson and Johnson: Appreciate it. Thanks.

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