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    Johnson & Johnson (JNJ)

    Q3 2024 Summary

    Published Jan 6, 2025, 8:15 PM UTC
    Initial Price$146.07June 29, 2024
    Final Price$161.40September 29, 2024
    Price Change$15.33
    % Change+10.49%

    What went well

    • Despite headwinds in Asia Pacific, Johnson & Johnson expects adjusted operational growth of around 5% and north of 6% operationally for the year, driven by strong performance in Cardiovascular businesses and MedTech, as well as new product launches.
    • The MedTech segment is benefiting from the successful integration of Shockwave, delivering strong double-digit growth, with new products like the peripheral catheter within Shockwave and Abiomed's pump portfolio significantly contributing to growth.
    • TREMFYA showed robust growth with a 27% increase outside the U.S., and the company expects continued strong growth fueled by recent launches in ulcerative colitis and forthcoming launches planned for Crohn's disease, highlighting the strength of its pharmaceutical pipeline.

    What went wrong

    • STELARA sales declined by 5.7% due to unfavorable net patient mix and share loss; biosimilar competition has entered Europe as of July, with anticipated U.S. biosimilar entry in January 2025, potentially impacting future revenues.
    • Headwinds in the Asia Pacific region, particularly in China, due to volume-based procurement (VBP) and anti-corruption campaigns are causing disproportionate impacts on sales, expected to continue through 2024 and into 2025.
    • An increase in net expenses driven by a $1.75 billion charge related to the talc litigation settlement proposal resulted in other income and expense being a net expense of $1.8 billion compared to $0.5 billion in the prior year, impacting profitability.

    Q&A Summary

    1. Talc Litigation Resolution
      Q: What's the progress on resolving talc litigation?
      A: Management is making meaningful progress towards a responsible, final, and comprehensive resolution of the talc litigation, with 83% of claimants supporting their prepackaged reorganization plan. The court has ruled to keep the filing in Texas, and they anticipate a confirmation hearing at the beginning of next year.

    2. China MedTech Impact
      Q: How is China affecting MedTech business?
      A: The MedTech segment faces headwinds in China due to volume-based procurement (VBP) and anti-corruption campaigns. These factors, along with macroeconomic pressures and strikes in Korea, are impacting sales, and the company expects this to continue through 2024 and into 2025. However, China represents less than 5% of J&J's global sales, and they remain confident in the long-term growth potential in Asia Pacific.

    3. Replacing STELARA Sales
      Q: How will you replace STELARA sales?
      A: Management is confident that TREMFYA, along with pipeline products like JNJ-2113, will not only replace but exceed STELARA's sales. TREMFYA achieved $4 billion in sales, primarily in psoriasis and psoriatic arthritis, and has recently been approved for ulcerative colitis. They believe TREMFYA is a STELARA-sized asset or bigger.

    4. CARVYKTI Growth
      Q: Elaborate on CARVYKTI's growth in multiple myeloma.
      A: CARVYKTI sales reached $286 million, with 88% year-over-year growth and 53% quarter-over-quarter growth, driven by strong demand and capacity expansion. The product benefits from the CARTITUDE-4 approval for second-line use, and over 4,200 patients have been treated, making it the most successful CAR-T launch in the industry.

    5. MedTech Growth Acceleration
      Q: What drives MedTech acceleration in Q4?
      A: Management expects adjusted operational growth of around 5% and over 6% operationally for the year, bolstered by strong performance in Cardiovascular, double-digit growth in Shockwave, and improvements in the Vision business. New product launches and typically stronger fourth-quarter performance contribute to their confidence.

    6. Impact of Hurricanes and IV Shortage
      Q: Are hurricanes affecting volumes outside affected areas?
      A: The impact of Hurricane Helene is mostly confined to the affected regions, but there is concern that IV solution shortages could potentially impact surgical procedures more broadly if they persist. Management is monitoring the situation carefully.

    7. EP Business and PFA Launch
      Q: How does PFA launch impact EP business?
      A: Despite increased competition, the company remains confident in its leadership position in electrophysiology (EP). They are progressing with the launch of VARIPULSE in EMEA and Japan, and expect U.S. approval later this quarter or in Q1 next year. With over 5,500 installed Carto Systems and a full portfolio of products, they are well-positioned for growth.

    8. TREMFYA and STELARA U.S. Sales
      Q: What's causing lighter U.S. sales for TREMFYA and STELARA?
      A: The lighter U.S. sales were due to patient mix and accounting true-ups. TREMFYA's U.S. growth was over 9%, affected by these factors, while ex-U.S. growth was 27%. STELARA saw a decline due to similar issues and biosimilar competition in EMEA.

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