Can J&J Navigate Stelara, Talc Suits, Tariff & Other Headwinds?

Core Insights - Johnson & Johnson (JNJ) is facing significant challenges including patent expirations, legal issues related to talc products, and macroeconomic uncertainties impacting its sales and profits [1][11]. Patent Expiration and Sales Impact - JNJ lost U.S. patent exclusivity for its multibillion-dollar product Stelara in 2025, leading to the launch of several biosimilars by companies like Amgen and Teva [2][3]. - Stelara sales declined by 42.7% in Q2 2025, negatively impacting the Innovative Medicine segment's growth by 1170 basis points [3][11]. - Sales projections indicate a drop in Stelara revenue from nearly $11 billion in 2023 to approximately $2.7 billion by 2027 [4]. Medicare Part D Redesign - The redesign of Medicare Part D under the Inflation Reduction Act is expected to reduce JNJ's sales by about $2 billion in 2025, particularly affecting drugs like Stelara and Tremfya [5][6][11]. Legal Challenges - JNJ is currently facing over 62,000 lawsuits related to its talc-based products, with a bankruptcy plan to settle these lawsuits being rejected [7]. - The company will revert to the traditional tort system to address these lawsuits individually [7]. Economic and Trade Pressures - Uncertainty surrounding tariffs on pharmaceutical imports, with potential tariffs as high as 250%, poses additional challenges for JNJ [8]. - In the MedTech segment, sales in China are being negatively impacted by the volume-based procurement (VBP) program [9]. Operational Performance and Future Outlook - Despite the challenges, JNJ recorded strong operational performance in the first half of 2025, with expectations of higher sales growth in both the Innovative Medicine and MedTech segments in the second half of the year [12][13]. - The company has reduced its potential tariff impact estimate from $400 million to $200 million and plans to invest $55 billion over the next four years to enhance domestic manufacturing [14]. Stock Performance and Valuation - JNJ's shares have outperformed the industry, rising 25.7% year-to-date compared to a 0.3% decline in the industry [15]. - The company's shares are currently trading at a price/earnings ratio of 16.0, higher than the industry average of 14.56 [16]. Earnings Estimates - The Zacks Consensus Estimate for JNJ's 2025 earnings has increased slightly from $10.83 to $10.86 per share over the past 30 days [20].