Johnson & Johnson (JNJ) FY 2025 Conference May 28, 2025 09:00 AM ET Speaker0 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. Speaker1 Thank you. Thanks for having us. Speaker0 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 wo ...

Financial Data and Key Metrics Changes - In Q1 2025, Johnson & Johnson reported worldwide sales of $21.9 billion, reflecting a 4.2% increase year-over-year despite a 470 basis point headwind from Stellara [36][37] - Net earnings for the quarter were $11 billion, with diluted earnings per share at $4.54, significantly up from $1.34 a year ago, primarily due to the reversal of a $7 billion talc settlement proposal [38][39] - Adjusted net earnings were $6.7 billion, with adjusted diluted earnings per share at $2.77, representing increases of 1.9% and 2.2% respectively compared to Q1 2024 [38][39] Business Line Data and Key Metrics Changes - Innovative Medicine achieved worldwide sales of $13.9 billion, up 4.2%, with U.S. growth at 6.3% and international growth at 1.5% [40] - Oncology products like Darzalex grew by 22.5%, while Carvicti saw over 100% growth, achieving sales of $369 million [40][41] - MedTech reported worldwide sales of $8 billion, a 4.1% increase, with U.S. growth at 5.1% and international growth at 3% [46] Market Data and Key Metrics Changes - U.S. sales growth was 5.9%, while international sales growth was 2.1%, positively impacted by acquisitions and divestitures [37] - The MedTech segment faced challenges due to one-time events and competitive pressures, particularly in orthopedics, which declined by 3.1% [50][46] Company Strategy and Development Direction - The company plans to invest over $55 billion in the U.S. over the next four years to enhance manufacturing and R&D capabilities [19][20] - Johnson & Johnson aims to exit non-strategic product lines and optimize select sites to improve growth and profitability, with a restructuring program expected to be completed by 2027 [60][61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow despite challenges from Stellara biosimilars and Part D redesign, highlighting a 4.2% growth across Innovative Medicine [10][102] - The company anticipates higher growth in the second half of 2025, driven by new product launches and a strong pipeline [66][71] Other Important Information - The company announced a 4.8% increase in dividends, marking the 63rd consecutive year of dividend increases [22][64] - Johnson & Johnson reversed a $7 billion reserve related to the talc settlement, which is expected to positively impact capital allocation priorities [65] Q&A Session Summary Question: Impact of tariffs on guidance - Management explained that the $400 million in tariffs primarily affects MedTech and includes various tariffs from Mexico, Canada, and China, with limited price leverage available to mitigate these costs [82][86] Question: Gross margins in the quarter - Management noted that gross margins were impacted by Stellara's decline and Part D redesign, with expectations for improvement moving forward [93][96] Question: Stellara biosimilar erosion - Management confirmed that the impact of Stellara biosimilars was in line with expectations, with overall business growth remaining strong despite this headwind [99][102] Question: Recession impact on business - Management indicated that healthcare has proven to be more recession-proof than other industries, with a focus on monitoring job reports as a precursor to healthcare demand [110][112] Question: Section 232 potential pharma tariffs - Management is analyzing the potential impact of Section 232 tariffs and emphasized the importance of partnering with the administration to mitigate vulnerabilities in the healthcare supply chain [117][120]