Johnson & Johnson (NYSE:JNJ) FY 2025 Conference December 03, 2025 11:15 AM ET Company ParticipantsMichael Bodner - Company Group Chair, Electrophysiology and NeurovascularJoanne Wuensch - Managing Director and Head of US Healthcare ResearchJoanne WuenschDineer, and I'm really ready to do that, but I am Joanne Wuensch. I am the medical technology analyst here at Citigroup, and thrilled to have with us Michael Bodner from Johnson & Johnson.Michael BodnerThank you.Joanne WuenschMichael, thank you for joining u ...

Johnson & Johnson (NYSE:JNJ) FY 2025 Conference December 03, 2025 11:15 AM ET Company ParticipantsMichael Bodner - Company Group Chair, Electrophysiology and NeurovascularJoanne Wuensch - Managing Director and Head of US Healthcare ResearchJoanne WuenschDineer, and I'm really ready to do that, but I am Joanne Wuensch. I am the medical technology analyst here at Citigroup, and thrilled to have with us Michael Bodner from Johnson & Johnson.Michael BodnerThank you.Joanne WuenschMichael, thank you for joining u ...

Core Insights - The inclusion of atrial fibrillation (AF) catheter ablation in the ASC Covered Procedures List (CPL) marks a significant shift towards outpatient treatment for cardiac electrophysiology, effective January 1, 2026 [2][33] - This regulatory change is seen as a watershed event, driven by multiple trends converging between 2023 and 2025, facilitating the outpatient transition for electrophysiology [11][33] Group 1: Impact on Companies - The three leading companies in the PFA space—Boston Scientific, Medtronic, and Johnson & Johnson MedTech—are expected to be the primary beneficiaries of this reimbursement update [5][21] - Boston Scientific is focusing on its Farapulse brand as a key growth engine, with the ASC payment change enhancing its operational pathways [6] - Medtronic views the ASC setting as an additional market expansion opportunity, with its Affera and PulseSelect systems driving revenue growth [7] - Johnson & Johnson MedTech supports the decision, emphasizing its goal to shape the future of cardiac ablation in the ASC environment [8] Group 2: Trends in Outpatient Electrophysiology - The ASC model is expanding in the U.S., recognized for its efficiency, predictability, and cost control, making it a suitable environment for cardiac ablation procedures [2] - The transition to PFA technology has reduced operation times and complication risks, aligning with the ASC's safety and high turnover logic [14][18] - The payment system is evolving towards outpatient pathways, with CMS opening reimbursement for complex procedures since 2021 [15][21] Group 3: Market Dynamics and Future Outlook - The inclusion of AF ablation in the CPL is expected to increase patient access to treatment, breaking through previous capacity constraints in the healthcare system [22] - Competition is shifting from technology leadership to scene leadership, with companies focusing on comprehensive solutions rather than just energy source differences [23] - The ASC environment may reshape physician skill requirements, favoring standardized processes over complex decision-making [24] - Companies are likely to accelerate the development of differentiated product lines tailored for ASC settings, leading to a more outpatient-oriented business model [25][30]

Core Insights - The healthcare sector is considered recession-resistant due to the inelastic demand for medical services, making it a stable investment during economic fluctuations [1] - Established healthcare companies, particularly in pharmaceuticals and medical devices, have strong profits and cash flows that support consistent dividend payments and growth [2] Company Analysis: AbbVie - AbbVie has a 53-year history of increasing dividends, recently announcing a 5.5% increase, with a current yield of approximately 3.3% [3] - The company is experiencing significant growth from its immunology drugs Skyrizi and Rinvoq, which saw sales growth of 47% and 35% respectively in Q3 2025, contributing to projected combined sales exceeding $25 billion for the year [4] - AbbVie's neuroscience portfolio is also growing, with over 20% sales growth driven by drugs like Ubrelvy and Vraylar, leading to total net revenue of nearly $15.8 billion in Q3, a 9% year-over-year increase [5] - Despite a 38% year-over-year decline in diluted earnings due to increased R&D charges, AbbVie's adjusted EPS of $1.86 surpassed Wall Street expectations [6][8] - The company has been actively acquiring firms to diversify its portfolio, including a recent $2.1 billion acquisition of Capstan Therapeutics, enhancing its immunology pipeline [7] Company Analysis: Johnson & Johnson - Johnson & Johnson has increased its dividend for 63 consecutive years, reflecting a strong commitment to shareholder returns [10] - The company generated approximately $20 billion in free cash flow in 2024, with a manageable dividend payout ratio of around 50%, allowing for future increases [11] - Johnson & Johnson holds a rare AAA credit rating, indicating exceptional financial strength [12] - The company is focusing on six priority growth areas: oncology, immunology, neuroscience, cardiovascular, surgery, and vision products, with Q3 2025 sales reaching about $24 billion, a 6.8% increase year-over-year [14] - Key growth products include Darzalex, Tremfya, and Carvykti, with the oncology segment showing nearly 20% operational sales growth [15][16]

Core Insights - Baron Health Care Fund reported a 5.39% increase in Q3 2025, slightly outperforming the Russell 3000 Health Care Index which gained 5.05% [1] - The fund's performance was impacted by stock selection and negative effects from active sub-industry allocations and cash holdings during a rising market [1] Company Performance - Boston Scientific Corporation (NYSE:BSX) achieved a consolidated revenue of $5.065 billion in Q3 2025, reflecting a 20.3% growth compared to Q3 2024 [4] - The stock of Boston Scientific Corporation rose 15.26% over the last 52 weeks, with a one-month return of 2.81% [2][4] - As of November 3, 2025, Boston Scientific's stock closed at $98.59, with a market capitalization of $146.154 billion [2] Competitive Landscape - Boston Scientific faces increasing competition in the pulsed field ablation (PFA) market from Medtronic, Johnson & Johnson, and Abbott, which have launched competing products [3] - Despite the competitive pressures, Boston Scientific is viewed as a strong compounder with a double-digit earnings per share growth profile and ongoing operating margin expansion [3]

Core Insights - The demand for medical devices used in innovative drug development remains strong, with cardiovascular medical devices and surgical robots being key growth drivers, while the diagnostic testing market continues to show weakness [1] Group 1: Company Performance - Thermo Fisher Scientific raised its annual profit forecast, citing strong demand for drug development products, leading to a 12% increase in its stock price [3] - Danaher also raised its annual profit forecast, highlighting a stable demand from pharmaceutical clients for bioprocessing services, with monoclonal antibodies accounting for over 75% of its bioprocessing revenue [3] - Boston Scientific increased its annual profit forecast due to strong demand for cardiovascular medical devices and reduced its tariff-related cost impact from $200 million to $100 million [4] - Johnson & Johnson reported over 6% growth in medical device sales, reaching $8.54 billion, driven by strong performance in cardiovascular devices [4][5] - Intuitive Surgical reported better-than-expected profits and revenues, with a 17% year-over-year increase in global da Vinci surgical procedures [5] Group 2: Market Trends - The cardiovascular medical device market is experiencing robust growth, with companies like Boston Scientific and Johnson & Johnson leading the way [4][5] - The surgical robotics sector is becoming a critical growth engine for medical technology companies, benefiting from increased accessibility in minimally invasive therapies [5] - The diagnostic business is facing challenges, as evidenced by Abbott's downward revision of profit expectations due to declining demand [5]

Johnson & Johnson (JNJ) 2025 Conference Summary Industry Overview - The healthcare industry is currently facing unprecedented challenges related to tariffs and policy changes, impacting growth expectations for many companies [3][4] - Johnson & Johnson is committed to investing $55 billion over the next four years, representing a 25% increase, primarily influenced by tax policy changes [8] Key Financial Insights - In Q1, Johnson & Johnson absorbed an estimated $400 million impact from tariffs, primarily affecting the med tech segment, but this impact has since been reduced to approximately $200 million due to changes in the tariff landscape [5][6] - The company reported a 4% growth in Q1 despite losing a significant product, Stellar, which had a $10 billion market value [27] Innovative Medicine Segment - Johnson & Johnson's innovative medicine segment is projected to grow at a CAGR of 5-7% from 2025 to 2030, driven by transformative drugs [30][34] - Key products include: - Tremfya for psoriasis, projected to generate $4 billion by 2027-2028, with expectations of 25% higher sales than market estimates [23][24] - Ribrovant for lung cancer, anticipated to exceed $2 billion in the same timeframe, with potential for improved patient outcomes [24] - New oral formulation for psoriasis, expected to file for approval later this year [25] - A promising bladder cancer treatment projected to significantly outperform analyst expectations [26] Med Tech Segment - The med tech segment is also expected to grow at a CAGR of 5-7% from 2023 to 2028, although current performance is not meeting expectations [34] - Key developments include: - Progress in wound closure and biosurgery, with advancements in the OTAVA robotic surgical solution [35] - Strong uptake of the Vellus knee solution, with expectations for mid-single-digit growth in orthopedics [36] - Continued leadership in vision care, with plans to reinvigorate growth through commercial efforts [38] - Challenges in electrophysiology (EP) due to increased competition and regulatory pauses, but efforts are underway to regain market position [39][42] Pricing and Access Issues - Johnson & Johnson's average net price has decreased by 3-4% annually over the past six years, limiting pricing power [22] - The company emphasizes the need for discounts and rebates to reach patients effectively, with an average discount of 55-60% off list prices in the U.S. [14][15] - Access to oncology drugs in the U.S. is significantly higher than in other G20 countries, highlighting the importance of maintaining access to innovative treatments [16] Litigation and Financial Management - The company has reversed a $7 billion accrual related to talc litigation, expressing confidence in its legal position and financial stability [49][52] - Johnson & Johnson generates $20 billion in free cash flow, allowing for continued investment in R&D and acquisitions despite litigation risks [52] Investor Outlook - Johnson & Johnson is positioned as a reliable investment with significant growth potential in the second half of the decade, despite current headwinds [55] - The company is focused on delivering sophisticated treatments and maintaining investor returns [55]