Johnson & Johnson

Good morning and welcome to Johnson & Johnson's second quarter 2025 earnings conference call. All participants will be in listen-only mode until the question and answer session of the conference. This call is being recorded. If anyone has any objections, you may disconnect at this time. If you experience technical difficulties during the conference, you may press star zero to reach the operator. I will now turn the conference call over to Johnson & Johnson. You may begin.

Hello, everyone. This is Darren Snellgrove, Vice President of Investor Relations for Johnson & Johnson. I am excited to be here today and to lead the investor relations team moving forward. Welcome to our 2025 second quarter review of business results and updated financial outlook. First, a few logistics. As a reminder, today's presentation and associated schedules are available on the investor relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position, and business strategy. You are cautioned not to rely on these forward-looking statements. which are based on the current expectations of future events using the information available as of the date of this recording, and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2024 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, Joaquin Duato, our Chairman and CEO, will discuss our business performance and key catalysts. I will then review the second quarter's sales and P&L results. Joe Wolk, our CFO, will then close by sharing an overview of our cash position and guidance update for 2025. Jennifer Talbot, Executive Vice President, Worldwide Chairman, Innovative Medicine, John Reed, Executive Vice President, Innovative Medicine Research and Development, and Tim Schmidt, Executive Vice President, Worldwide Chairman, MedTech, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. With that, I will now turn the call over to Joaquin.

Thank you, Darren, and hello, everyone. I'm excited to talk about our very strong second quarter. Today's results showcase the strength of our uniquely diversified business as the only major healthcare company operating in both the medtech and innovative medicine sectors. In the second quarter, we delivered operational sales growth of 4.6% across our business. In innovative medicine, we reported 3.8% operational sales growth delivering more than $15 billion in quarterly sales for the first time. No other healthcare company has grown through the loss of exclusivity of a multi-billion dollar product in the first year. In our case, Stellara. And yet, that is exactly what we are doing, and for the second quarter in a row. Our performance was driven by double-digit growth across 13 brands, including Tarsalex, Carvicti, Tecvaili, and Talve, as well as Ribraman plus Lasclus, Trenfaya, Caplaita, and Spravato. And in MedTech, we delivered 6.1% operational sales growth with particularly strong momentum in cardiovascular surgery and vision. Based in our strong performance in the quarter, we are pleased to raise our full-year sales guidance by $2 billion and EPS guidance by 25 cents from $10.60 to $10.85. Results like these are a direct result of our deep and resilient portfolio. It's what makes Johnson & Johnson unique. Today, we'll focus on the remarkable ways we are driving innovation and creating value for patients and shareholders. We'll highlight the depth of our portfolio and pipeline, focusing on six areas of unmet need and where we are delivering significant growth. Oncology, immunology, neuroscience, cardiovascular, surgery, and vision. These are spaces where we are moving the conversation from treatment to cure and where we are extending and improving lives in meaningful ways. Let's start with innovative medicine and oncology where we have a bold vision to eliminate cancer. Our leading products for the treatment of blood cancers and solid tumors are built from on cutting-edge scientific platforms that are transforming outcomes for patients. With more than 10 products in market across 26 approved indications and over 25 treatments in late stage development, we expect to become the number one oncology company by 2030 with sales of more than $50 billion. And when you look at our quarterly results in oncology, with operational sales growth of 22.3%, you can see that we are well on our way to achieving that. I'll draw your attention to three key areas of Q2 progress. First is multiple myeloma, where we have treatments in every line of therapy. Approximately 80% of myeloma patients today receive a Johnson & Johnson medicine at some point in their treatment journey. And in Q2, we presented several important sets of data. They include new five-year data showing a single treatment of our CAR-T therapy, CARVIC-T, has the potential to deliver long-term remission. We also presented the first data from our investigational tri-specific antibody, which showed an unprecedented 100% overall response rate in heavily pretreated patients. With results like this, we are closer than ever to our ambition of curing multiple myeloma. Second is lung cancer, where our chemotherapy-free combination of Ribraman plus Lasclus has a projected overall survival of at least a year over the current standard of care in frontline non-small cell lung cancer with EGFR gene mutations. Intent to prescribe continues to grow among healthcare professionals, which you can see in our strong quarterly sales. This is a life-changing advancement for patients, and one we are building on with a pipeline of novel therapies. And third is bladder cancer, where we are excited to share that we have received FDA priority review for TAR200, a first-of-its-kind drug-releasing system. We anticipate launching TAR200 for high-risk, non-muscle invasive bladder cancer later this year, a transformational product that harnesses our unique expertise in both innovative medicine and medtech. We expect TAR200 to generate at least $5 billion in annual peak year sales. In immunology, We have a 25-year legacy of redefining the standard of care, and we are just getting started. With six products in market across 14 approved indications and many treatments in late-stage development, we are expanding treatment options for patients and restoring health for millions of people around the world. From Remicade and Sympony to Stellar and Trenfaya, and now exploring targeted oral peptides and future combinations, the growth potential of our immunology portfolio and pipeline continues to be significant. For immunology, I will draw your attention to two key areas of Q2 progress. First is Trenfaya, which has recently expanded into inflammatory bowel disease. Trenfaya grew 30% in the quarter. With strong uptake in Crohn's disease and ulcerative colitis, we expected to generate at least $10 billion annually in peak year sales. We also made important progress in our pipeline in Q2 and expect to file icotroquinra with the FDA in the third quarter as the first targeted oral peptide to selectively block the IL-23 receptor with similar efficacy to a biologic. As a once-a-day pill, this molecule has the potential to set a new standard in the treatment of plaque psoriasis and we look forward to sharing more in the coming months. In neuroscience, we are building on a 70-year legacy and expect to be the number one company by the end of the decade. We are pushing boundaries in diseases like schizophrenia, depression, and Alzheimer's, which together affect one in eight people worldwide. In Q2, Spravato grew 53%, delivering sustained double-leaded growth and demonstrating the power of this medicine for patients living with difficult-to-treat depression. We also completed the acquisition of intracellular therapies this quarter. Intracellular Scapulita is approved to treat adults with schizophrenia and bipolar depression, and we are excited about the anticipated major depressive disorder approval later this year. With the addition of Caplita, we now have five neuroscience products in market across six approved indications and eight treatments in late-stage development. Caplita adds to Johnson & Johnson's robust lineup of therapies with $5 billion-plus potential in peak-year sales, and further solidifies sales growth above analyst expectations through the rest of the decade. Turning to MedTech and in cardiovascular specifically, we are leaders in heart recovery, circulatory restoration, and electrophysiology. Cardiovascular has some of the largest unmet needs in healthcare and is one of the fastest growing spaces in MedTech. In Q2, we delivered over 22% operational sales growth over the quarter, driven by new product performance in a biomed, shockwave, and strength in mapping in electrophysiology. Today, we're a leader in four of the largest and highest growth medtech segments within cardiovascular intervention, impacting more than one million patients each year. Now, let me highlight three areas of important progress from Q2. First is electrophysiology, which delivered close to 10% operational sales growth over the quarter, driven by new product performance and strength in mapping. We have now completed more than 10,000 body pulse cases globally, with a reported neurovascular event rate of less than 0.5%. consistent with published rates across other PFA platforms. Second, we continue to advance a suite of cardiovascular solutions to expand our market leadership, including our dual-energy thermo-cooled Smartouch SF catheter, where we performed our first cases in Europe this quarter. It also includes Omnipulse, where we presented strong early data that will expand our portfolio of tools for safe and streamlined ablation procedures. Third is ShowWave's unique intravascular lithotripsy technology, or IVL, which has transformed the treatment of atherosclerotic cardiovascular disease and is driving significant growth. ShowWave is expected to be our $13 billion MedTech platform by the end of the year, a position that is further strengthened by a compelling body of evidence on the benefits of this technology. This includes data showing an IVL-first approach can achieve excellent outcomes in female patients with complex calcified coronary artery disease. In surgery, we have spent 140 years advancing the standard of care, and today our surgical technologies are used in most operating rooms around the world. Q2 highlights include the introduction of the Ethicon 4000 surgical stapler, the newest advancement in our surgical portfolio. Featuring advanced stapling technology and reloads, the Ethicon 4000 minimizes surgical leaks and bleeding, which are common and costly surgical complications for patients and hospitals. This advanced stapling technology will be harnessed for future use exclusively on the Otava robotic surgery system. And as mentioned on a warning call in April, Otava completed its first clinical cases, gastric bypass surgeries performed in Houston. In our conversations with surgeons who have spent time on Otava, they tell us that they are eager for the system's sophisticated architecture, design features like TwinMotion, the surgeon-entrusted Ethicon advanced instrumentation only available in Otava, and the future connection to our open digital ecosystem, Polyphonic. We plan to submit for an FDA de novo approval next year. And finally, vision, where we have a deep legacy in developing transformational innovation. With quarterly growth of 4.6% across the business and 8.9% in surgical vision, the portfolio has a robust growth trajectory driven by our Acuvue Oasis Max one-day family of contact lenses and our Technis Odyssey and Technis Pure-C intraocular lenses. and with the Q2 release of the first disposable multifocal lenses for people with astigmatism, we have high expectations. You know, few other healthcare companies can talk about their impact across as many high-growth areas as Johnson & Johnson, and none spanning both innovative medicine and medtech. These six examples are only a cross-section of our cutting-edge portfolio. This depth and breadth is who we are at Johnson & Johnson. It's how we grow through a major loss of exclusivity, how we have reinvented ourselves time and time again, and how we will deliver strong financial performance through the end of the decade and beyond. The bottom line is this. Johnson & Johnson's relentless focus on innovation yields results. Quarter after quarter, year after year. I will now turn the call back over to Darren.

Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Starting with Q2 2025 sales results. Worldwide sales were $23.7 billion for the quarter. Sales increased 4.6% despite an approximate 710 basis point headwind from Stellara. Growth in the U.S. was 7.8% and 0.6% outside of the U.S. Worldwide growth was positively impacted by 160 basis points, primarily due to the intracellular and shockwave acquisitions. Turning now to earnings. For the quarter, net earnings were $5.5 billion with diluted earnings per share of $2.29 versus diluted earnings per share of $1.93 a year ago. Adjusted net earnings for the quarter were $6.7 billion with adjusted diluted earnings per share of $2.77 representing a decrease of 2.1% and 1.8%, respectively, compared to the second quarter of 2024. The decrease is driven by interest associated with incremental debt from the intracellular acquisition and GP erosion from Stellara. I will now comment on business sales performance in the quarter, with a focus on the six areas Joaquin discussed that will drive significant growth for the enterprise. beginning with innovative medicine, where our results demonstrate the depth of our expertise in oncology, immunology, and neuroscience. Worldwide sales of $15.2 billion increased 3.8%, despite an approximate 1,170 basis point headwind from Stelara, demonstrating the strength of our key brands and new launches. Growth in the U.S. was 7.6% and minus 1.6% outside the U.S. Growth outside of the U.S. was negatively impacted by Stelara biosimilars and the COVID-19 vaccine. Acquisitions and divestitures had a net positive impact of 140 basis points on worldwide growth due to the intracellular acquisition. In oncology, starting with myeloma, Darzalex growth was 21.5%. primarily driven by continued strong share gains of approximately 4.1 points across all lines of therapy, with close to 8 points in the frontline setting, as well as market growth. Carvicti achieved sales of $439 million, with growth of over 100%, driven by share gains and capacity expansion. This reflects continued strong sequential growth of 17.9%, as we expand outside of the U.S. Tecvali and Talve growth was 22.4% and 54.3%, respectively, bolstered by continued expansion into the community setting. Patient demand remains strong, despite continued adoption of longer dosing intervals. In prostate cancer, Aleda delivered strong growth of 21%, with continued share gains and market growth. In lung cancer, ribavant plus lasclus delivered sales of $179 million and growth over 100%, with sequential growth of 26.5%, driven by continued strong launch uptake. We continue to see share gains in both first and second lines of therapy. Within immunology, TREMFIRE delivered growth of 30.1%, primarily driven by share gains with continued strong uptake across recently launched IBD indications and overall market growth. Stelara declined by 43.2%, driven by the impact of biosimilar competition and Part D redesign, which is in line with our expectations. In neuroscience, bravado growth of 53% was driven by continued strong demand from physicians and patients. Long-acting injectables declined by 6.3% due to the impact of Part D redesign and unfavorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.5 billion increased 6.1%, with growth of 8% in the U.S. and 4.1% outside the U.S., driven by strong performance in three focus areas, cardiovascular, surgery, and vision. Acquisitions and divestitures had a net positive impact of 200 basis points on worldwide growth, primarily due to shockwave. In cardiovascular, electrophysiology delivered growth of 9.8% versus prior year, driven by strength and competitive mapping, new product performance, and procedure growth. Abiomed delivered growth of 16.9%, with continued strong adoption of Impella technology, and Shockwave delivered strong double-digit growth with the recent introduction of the Javelin and E8 catheters. As a reminder, the acquisition benefit of Shockwave was lapped at the end of May. Surgery grew 1.8% despite divestitures negatively impacting results by approximately 60 basis points. Performance was primarily driven by technology penetration in wound closure and the strength of the portfolio in biosurgery. Growth was partially offset by competitive pressures in energy and the negative impact of China VBP across the portfolio. In vision, contact lenses and other ocular products grew 2.9%, driven by strategic price actions and strong performance in the Acuvue Oasis 1-day family of contact lenses, including the recent launch of Oasis Max 1-day multifocal for astigmatism. Surgical vision growth of 8.9% continues to be driven by strong performance in Technus Odyssey, Pure C, and iHance. The orthopedics business declined by 1.6%, driven by competitive pressures, the transformation program, and China VBP. Now turning to our consolidated statement of earnings for the second quarter of 2025, I'd like to highlight a few noteworthy items that have changed compared to the same quarter a year ago. Cost of products sold deleveraged by 150 basis points driven by product mix and amortization related to the intracellular acquisition in innovative medicine, as well as medtech, macroeconomic factors, and VBP in China. Selling, marketing, and administrative expenses improved 50 basis points driven by corporate expense rationalization partially offset by increased investment in recent acquisitions. Research and development expenses leveraged by 50 basis points, primarily driven by portfolio rationalization and expense phasing in MedTech. We continued our strong investment in research and development with $3.5 billion or approximately 15% of sales in Q2. Interest income and expense was a net expense of $48 million. as compared to $125 million of income in the second quarter of 2024, primarily driven by lower rates of interest earned on cash balances and a higher average debt balance associated with the intracellular acquisition. Other income and expense was a net expense of $0.1 billion, compared to an expense of $0.7 billion in the prior year. primarily driven by lower talc litigation expense in 2025 and the $0.4 billion loss on the sale of the retained stake in ChemView shares recorded in 2024. Regarding taxes in the quarter, our effective tax rate was 14.7% compared to 18.5% in the same period last year. I encourage you to review our upcoming 10Q for details on the changes in taxes. Lastly, I'll direct your attention to the box section of the slide where we have also provided the company's income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. In support of our efforts to increase financial transparency, you will again find gap to non-gap reconciliations by segment in the supplemental schedules of our press release. Innovative medicine margin declined from 44.6% to 42.7%, primarily driven by negative mix in cost of products sold related to Solara. MedTech margin declined from 25.7% to 22.2%, driven by macroeconomic factors in cost of products sold, as well as other income. This concludes the sales and earnings portion of the call, and I will now turn the call over to John.

Thank you, Darren, and glad to see your first earnings call is off to a good start. I look forward to you leveraging your recent experience leading the innovative medicine finance team to benefit Johnson & Johnson's investor relations function. Hello, everyone. Thank you for joining us today. As already highlighted, we delivered a very strong second quarter, exceeding expectations on both the top and bottom line. While our currently marketed products and platforms drove this quarter's performance, the progress across our pipeline in the first half of the year heightens our conviction to achieve, and I'd be willing to bet likely beat, the upper end of the growth targets we conveyed at our 2023 Enterprise Business Review. As previously mentioned by Joaquin and Darren, the innovative medicine business continues to grow through Stolar's loss of exclusivity, driven by our in-market portfolio. We continue to advance our pipeline, attaining significant clinical and regulatory milestones that will help drive sustained and accelerating growth through the back half of the decade. In MedTech, while we still have work to do, we saw improvement over first quarter results. driven by strong performance in the cardiovascular portfolio, surgical vision, and wound closure in surgery. We remain focused on higher growth markets, enhancing competitiveness to gain market share, and executing against our transformation initiatives to improve margins. Let's get into some of the financial commentary, starting with our cash position. Free cash flow through the first half of 2025 exceeded $6 billion, which accounts for elevated tax payments related to the final annual TCJA toll tax payment when compared to the first half of 2024. We ended the second quarter with $19 billion of cash and marketable securities and $51 billion of debt for a net debt position of $32 billion. These figures include the debt raised for the $14.5 billion intercellular acquisition, which closed on April 2nd. Regarding talc litigation, we expect the Daubert hearing to commence this fall and look forward to the court reexamining the junk science the Mass Tort Plaintiffs Bar has funded to promote baseless talc claims against Johnson & Johnson. Turning to our full year guidance for 2025. Driven by the strength of our first half performance, we are increasing our operational sales guidance for the full year by approximately $900 million. We are now expecting operational sales growth for the full year to be in the range of 4.5% to 5%, with a midpoint of $92.9 billion, or 4.8%, representing a full point better when compared to prior guidance. Excluding the impact from acquisitions and divestitures, our adjusted operational sales growth is now expected to be in the range of 3.2% to 3.7% compared to 2024. As you know, we don't speculate on future currency movements, and last quarter, we utilized the euro spot rate relative to the U.S. dollar of 1.11. The U.S. dollar has weakened across all major currencies since April. Last week, the euro spot rate relative to the U.S. dollar was 1.17. We estimate an incremental positive foreign currency impact of $1.1 billion versus previous guidance. As such, we now expect reported sales growth between 5.1% to 5.6%, with a midpoint of $93.4 billion, or 5.4%. Currently, our guidance does not include the impact of the most favored nation concepts. With respect to MFN, we share the administration's goal that American patients should pay less by addressing the real drivers of higher US costs, including middlemen driving up prices and foreign markets not paying their fair share. Turning to other notable items on the P&L. At the beginning of the year, we guided to an approximate 300 basis points improvement in operating margin. Despite what you may have calculated on a year-to-date basis, we remain confident and reiterate our operating margin guide for the full year. This is due to efficiency programs designed for margin improvement, as well as non-recurring one-time IPR&D charges that occurred in the second half of 2024. This expected improvement also takes into consideration the dilution from the intercellular transaction, as well as what we know today about the impact of tariffs on our business. During our first quarter conference call, we anticipated an impact from tariffs in 2025 to be approximately $400 million. Based on the current tariff landscape, we now anticipate the impact to be approximately $200 million, exclusively related to our MedTech business. We will look to reinvest the differential to continue to accelerate our pipeline and further power the launch of our new products, those on the market with new indications and those with near-term anticipated approvals. We continue to monitor what the future year's impact could be from tariffs on our business. For net interest expense, we now project between $0 and $100 million, an improvement from the previous guidance, primarily driven by higher interest earned on cash balances. Our effective tax rate is now expected to be in the range of 17% to 17.5% for the full year. with the increase largely due to an adjustment to the company's global tax reserves. We are pleased that the One Big Beautiful Bill Act provides certainty for our previously announced $55 billion commitment to invest here in the United States. This includes provisions such as permanent expensing for domestic R&D spend, permanent bonus depreciation, and 100% expensing of qualified production property, including our newly planned facility in North Carolina. we also welcome the improvements that were made to the international tax system. For your modeling, it is worth noting that the tax rate on foreign earnings, known as GILTI, is increasing by approximately 2% from a statutory rate of 10.5% to 12.6%. This will result in an approximate 1% increase to our global effective tax rate in 2026. Turning to earnings per share, We are pleased to increase our reported adjusted earnings per share estimate by 25 cents to $10.85 or 8.7% at the midpoint for a range of $10.80 to $10.90, which is a combination of operational improvement and the favorable foreign currency dynamics I referenced earlier. Embedded in that is $0.08 of adjusted operational earnings per share, increasing our guidance to $10.68, or 7% at the midpoint. I'll now provide some qualitative considerations on phasing for your models. We continue to expect both innovative medicine and medtech operational sales growth to be higher in the second half of the year versus the first half. Regarding innovative medicine, We maintain the assumption that Stellar's biosimilar competition will accelerate throughout the year with erosion similar to Humera's in year two, which is still our proxy, with the additive unfavorable impact of Part D redesign. Turning to MedTech, we anticipate an acceleration in growth to be driven by the increased adoption of newly launched products in cardiovascular, surgery, and vision. we continue to expect normalized procedure volumes and typical seasonality patterns throughout the remainder of the year. Beyond our financial commitments and what Joaquin has already referenced, we are excited for the expected pipeline progress in the remainder of 2025. In innovative medicine, this includes expected approvals in TAR200 in non-muscle invasive bladder cancer, subcutaneous ribavant for non-small cell lung cancer in the U.S., Tramphyia subcutaneous induction for ulcerative colitis, and Caplita for adjunctive major depressive disorder. Anticipated filings for approval include icotrichendra in psoriasis and Tramphyia in psoriatic arthritis. As far as data readouts, we are planning for Ribrovant in head and neck cancer and icotrichendra in ulcerative colitis, as well as head-to-head data versus Sutictu in psoriasis. In MedTech, We continue to make progress with our clinical trials for our Otava robotic surgical system. In our cardiovascular portfolio, we are planning regulatory submission for dual energy thermo-cool smart touch SF catheter for cardiac arrhythmia in the U.S., and Impella ECP submission in heart recovery, as well as Javelin and Shockwave E8 launches in circulatory restoration outside of the U.S. In orthopedics, we will be launching a tuned revision hinge and a new plating system called Volt in the U.S. We will also be launching the Ethicon 4000 stapler with 3D reloads in surgery and the AccuView Oasis Max in vision for astigmatism. In summary, I trust you agree the results delivered in the first half are evidence that our portfolio has the breadth and depth that enables us to attain growth, even in the face of a major LOE where very few, if any, other company could. The clinical advancements provide a robust base for accelerated top line growth, not just for the remainder of this year, but for the back half of the decade. We're confident that the strength of our business model enables Johnson & Johnson to navigate a dynamic external environment while delivering on our financial commitments. This is directly attributable to the hard work and dedication of our 138,000 colleagues who focus daily on advancing our pipeline increasing market share, and progressing breakthrough treatments to patients that create long-term value for our shareholders. Thank you. And with that, we are happy to take your questions. Kevin, will you please provide instructions for those seeking to participate in the Q&A?

Certainly. Well, I'll be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad. If you'd like to withdraw your question, please press star to the number 2. Please limit your questions to one question only. Once again, that's star 1 to be placed into question queue, and please ask one question and then return to the queue. Our first question is coming from Chris Schott from J.P. Morgan. Your line is now live.

Great. Thanks so much for the question. J&J obviously reported a very strong top-line beat despite the Stellar LOE, and I'd just be interested, Joe, in any color you might hire up in terms of the driver's of upside to the guidance for the year as we think about how much of this is the innovative business versus med tech and any particular franchises in those businesses that's driving guidance raise. Thank you.

Yeah, good morning, Chris, and thank you very much for the question. I would say both are contributing in terms of the strong performance. And, in fact, I would say this is a great opportunity for Jennifer and Tim to address some of the strength that we saw in our second quarter results, as you saw, and credit to Jennifer and her team, achieving the first $15 billion quarter despite $1.2 billion of losses. year-on-year erosion in the quarter from Stellar. I don't think any other company can do that. And then, Tim, a notable improvement from what we reported in Q1 that gives us a lot of enthusiasm for the balance of this year. As you heard in my earlier comments, we expect both businesses to actually continue that momentum and grow better in the second half than the first half. But why don't I turn it over to Jennifer and Tim to give you some insights from their perspective.

Thanks so much, Joe, and good morning, everybody. Joe, you stole my thunder on the over $15 billion in our first $15 billion quarter. Importantly, if you take a look at the 90% of our business that is not Stellara, we actually had extraordinarily robust growth, 15.5% growth, really demonstrating the strength across our portfolio. We had 13 brands that were growing double digits. And as we take a look at those, the vast majority of those are not only our growth drivers for today and tomorrow, but are also key growth drivers out through the end of the decade. So a few of the notable drivers there. So first in oncology, Darzalex continues to perform very well. Carvicti performed well. Erleada. And we're really pleased with the launch uptakes thus far on Ribrovent plus Lasclues. in non-small cell lung cancer. In immunology, Tramphia is off to a great start in ulcerative colitis and also Crohn's disease. And across neuroscience, both Spravato and Caplida both had really, really strong performance for the quarter. So as I mentioned, 13 brands with double-digit growth. I won't go into all of those, but really, really strong across the base of our business. And we're really excited throughout the rest of this year because we've got a number of additional catalysts that are coming through with additional approvals and such.

Tim? Thank you, Jennifer. And Chris, to your question, I mean, for MedTech, we were happy with our Q2 operational growth of 6.1%. This is a 4.4% sequential improvement over the first quarter. I think you know the primary contributors, certainly cardiovascular, 22% growth. We are by far and away now one of the largest and certainly the fastest-growing medtech company in cardiovascular, not only on the back of the success of the AbiaMed and Shockwave acquisitions, but also the tremendous improvements you saw in our electrophysiology business, which, by the way, has a $5 billion base. and so tremendous performances there. We also saw great results in vision, primarily driven both by contact lenses as well as almost double-digit growth in surgical vision, and then continued solid growth in surgery, especially on the back of our performance in wound closure and biosurgery. Both of those businesses, multi-billion dollar businesses, by the way, growing close to 7%. And as we look to the back half, What gives us confidence in continued acceleration is a couple of things. Firstly, it's important to remember that Q1 and Q2 had difficult prior year competitors. But more importantly, what gives us confidence is the further acceleration as we continue to shift our portfolio into higher growth markets. really bring truly differentiated innovation to market. In cardiovascular, that will continue with Abiomed, which continues to add to our portfolio. But more importantly, the evidence base around the benefits of Impella continues to impress, both with the danger shock study and the recent ACC and AH guidelines supporting Impella. use in patients with cardiogenic shock. Shockwave, two new products this launch, E8 as well as Javelin, which will further drive our performance specifically in the peripheral space. And then with EP, you're going to see continued performance of varipulse, and we'll add to that with the addition of the dual energy STSF catheter in the European Union. In vision, this is a true turnaround story. You know, we're seeing tremendous results, especially with our Technus and Pure-C IOLs. You know, and just to put that in context, in the U.S., we had our second consecutive year of quarter of double-digit growth growing 13%. And then in the back half of the year, you'll also see the launch of the AccuView Oasis Max one-day multifocal for astigmatism. I know there's a lot there. Well, this is the world's first and only daily disposable lens for people with both astigmatism and presbyopia. Surgery, we continue to see performance, expect continued performance on the back of Surgiflo, Ephesia, and Stratafix. And then I will call out that while our ortho performance was softer than we would like, we have strong reasons to believe in continued acceleration through the remainder of the year. with roughly 18 510K approvals last year, close to 40 outside of the U.S., and so big launches coming our way, especially in the areas where we face the most competition in hips and knees. We have the VELUS Uni knee, a tuned revision hinge, as well as Kinsize 2.0, and then also in spine. We're seeing the rollout of our spine VELUS robot, as well as Trialtus, which we are confident that will continue to bolster our growth and competitiveness. And so I think in summary, Do the easier comps as well as significant new products, we're confident in continued acceleration in the back half?

Chris, as you can see, it's hard to pick one particular product that gives us reason for our enthusiasm in the back half. But if I had to point and maybe pick a couple of favorite children, I would say Tramphia. We're just getting started with our inflammatory bowel disease, and we grew 30% in the quarter. Those indications will provide further growth. As a reminder, Stelars had 70% of their prescriptions within IBD. Looking forward to getting the subcutaneous administration approval. for lung cancer with Ribervant and Last Clues. And then on the MedTech side, I think the really shining star, well, maybe not the highest number, is the EP energy that we have going forward, either maintaining or recapturing that market leadership position, as well as expected improvement in our contact lens business. You saw about 3% growth this quarter with the launch of one-day AccuView Oasis Max that treats presbyopia and astigmatism. We think there's even higher growth ahead on the horizon.

Great. Thanks, Chris, for the question. And, Kevin, next question, please.

Certainly. Our next question is coming from Terran Slim from Morgan Stanley. Your line is now live.

Great. Thanks so much for taking the question. You mentioned oncology target of $50 billion by end of the decade. It looks like that's well above consensus. Just wondering if you could point us to the largest deltas that you see there. I know you've talked about TAR 200 in the past, but maybe any other areas. And then on ribrevinsubq, can you just confirm that you've responded to the CRL and what the target review date would be for that approval? Thank you.

Thanks. Hi, it's Jennifer again. We feel really confident in that $50 billion target for our oncology business. It's really based on the strength across the base of our business. You can take a look at multiple myeloma with Darzalex and a lot of continued growth opportunity. Carvicti, also a $5 billion plus brand. We've got Tecvali and Talve. We might come to it later, a tri-specific that we've started outlining and presenting data on. So multiple myeloma, we anticipate to continue to be a stronghold. We've got a really nice franchise in prostate cancer right now with Erlita that is growing very well. You mentioned TAR200. That is probably the asset that has the biggest disconnect between our internal forecasts and what the street expects. We're really excited for this product and to be launching it in the second half of the year with the ability to truly transform the treatment for non-muscle invasive bladder cancer. There has not been much innovation there in a very, very, very long time and we think we're going to bring new hope. The data that we've presented there looks fabulous. We've really designed this product by urologists for urologists to seamlessly fit into routine clinical practice, and we really think that we've got a winner there. And just take a look. I think, boy, we see, if you take a look at 2028 consensus, we actually see our numbers at least three times higher. So that's a big disconnect. And then, again, this is oncology. There's a lot to talk about last on Ribrovent plus Lasclues. So quick update, the launch is going very well. As a reminder, Ribrovent plus Lasclues is the first and only regimen that provides really clinically meaningful overall survival to patients greater than probably 12 months versus Ocimertinib. If you think about new patients, newly diagnosed patients, they want to live longer. And they do not want to be using chemo in a first line setting. And so we think we've really got the winning combination and are poised to become the new standard of care in that frontline lung cancer, EGFR mutated lung cancer. And so this is another one of our $5 billion plus assets. In terms of the launch, while we're still early in it, as Joaquin had noted, the intent to prescribe has grown consistently, and we're now the number one regimen that providers are claiming that they intend to prescribe for those frontline patients. We've done a great job of penetrating. We're already in nearly 100% of our high-priority accounts. And if we take a look really across the lines of therapy, one out of every four patients across those lines of therapy is now being initiated on a Ripervant plus Lascluse combination. So making really nice progress here. So key to that continued growth is the sub-Q dosage. And so we have responded to the agency. This was not anything where the agency required any further clinical studies or clinical data. This was a manufacturing-related question or two. So we've responded, and we're looking forward to the second half and hopefully getting approval on that.

Terrence, John Reed here. If I could build just a little bit on Jennifer. We've had really great momentum in the oncology pipeline in the last 18 months, last year and a half, I think we've had eight what we would call proof-of-concept readouts that then gave us the confidence to now move into late-stage pivotal studies across the portfolio. Since you asked about riboband, I would also remind you that we're in advanced studies now for colorectal cancer, which will be a a huge opportunity for patients and for our portfolio. We're now moving into head and neck squamous cell carcinoma with really exciting data there in our early development program. On the bladder cancer side, of course, TAR200 is the star of the portfolio now, but right on its heels is TAR210 with a targeted therapy where we've seen complete responses north of 90%. That is an entire platform for us, and we'll be putting other payloads in those devices in the future. And then in myeloma, we've got a tri-specific now coming, Romantamig. We're never satisfied with the status quo, building on TEC and TAL. And in that, at the recommended phase two dose, for patients who had never seen a BCMA or a GPRC5D, 100% overall response rate. So we really see great opportunity there to continue to elevate the standard care of myeloma. And then finally, in prostate cancer, we have great momentum across our pipeline. Most recently reporting, for example, an exciting bispecific T-cell engager, PASRIDAMAG, that we think has enormous potential to really transform the practice of medicine in prostate. So the momentum across oncology is very robust.

Great, thanks. Next question, please.

Our next question is coming from Larry Beagleson from Wells Fargo. Your line is now live.

Good morning. Thanks for taking the question. So, Joe, the guidance implies an acceleration in the top line growth in the second half of this year. Do you see the 3.5% adjusted operational growth this year as something you could accelerate from next year? And do you see room to improve the operating margin next year beyond the implied, I think, 32.8% in the 2025 guidance? Thanks for taking the question.

Yeah, good morning, Larry. Thanks for the question. In terms of overall sales guidance, we're obviously not going to provide that today, but I think when you look at these quarterly results and the momentum that we have with our inline brands receiving new indications, And then you complement that with what Jennifer, John, and Tim have outlined in terms of new product introductions. We certainly see 26 being better than 25 in terms of the growth rate based on what we know today. In terms of margin accretion, I'll reserve and keep the powder dry until we get a little bit further into this year. We still have some of the effects of Part D redesign that is impacting margins this year. We'll have to see how tariffs play out. The raise of $0.25 per share in the outlook incorporates $200 million of costs for this year. But there's an accounting function, and I don't want to get too wonky here, in that some of that gets hung up on the balance sheet. So I'd like to see a little bit more things come into view. before we really comment on margins. But we certainly appreciate and live by the principle that you have come to know us for, and that's growing our bottom line consistent, if not better than our top line.

Thanks, Larry, for the question. And, Kevin, next question, please.

Certainly. Next question is coming from Asad Haider from Goldman Sachs. Your line is now live.

Great. Thanks for taking the questions, and congrats on a very solid performance in the quarter. Maybe just going back to the external environment, double-click a little bit more on your comments on pharma tariffs specifically, given this announcement last night from the president that we're going to see something by the end of the month that's going to start off with a low tariff rate and give companies a year to build. So what do you make of this announcement, and do you have sufficient capacity today to manufacture for the U.S. market in the U.S.? And how flexible is your manufacturing supply chain in the U.S. as it relates to adjusting for any impact in 2026? Thank you.

Thank you for the question. This is Joaquin. It's hard to know what is going to happen ultimately with tariffs, but what we do know for sure is that the tax policies that just passed are already creating American jobs and driving innovation. are these very policies that just passed are the ones that have enabled our commitment to invest $55 billion in the U.S. in the next four years. And our goal is to be able to manufacture in the U.S. all the medicines that are consumed in the U.S. at the completion of that plan, and we are on our way of being able to do that.

Great, thanks. Next question, please.

Thank you. Next question is coming from Shugun Singh from RBC Capital Markets. Your line is now live.

Well, great. Thank you so much. So just two product questions on the MedTech side. On Otava, it looks like you pushed out the submission timeline to 2026. Can you just elaborate on what's going on there? And then on your EP strategy, you know, you did talk about low neuro rates. But I was just wondering if you could share some feedback that you're getting from doctors around appetite for adoption of Verapulse. Just what are you hearing? Thank you.

Well, thank you, Shagun. And just to clarify, we haven't pushed out our timelines at all. In fact, we've met all of the milestones that we've communicated to the market, both in terms of submission late last year, approval late last year, starting the clinical trials and patients in the first quarter of this year, and our expectation that we will file for de novo submission in the first quarter of next year. And so I feel very confident about the progress that we're making on OTAVA. I think you know clearly why we feel that we have strong differentiation in that program both on the robot itself as well as our digital environment and we'll continue to provide updates as that comes to fruition. I would like to touch a little on EP and I appreciate you asking that question because when we look at our performance in the second quarter clearly that was a major contributor And it wasn't just the EP, it was the 22% that we enjoyed across the cardiovascular portfolio, which is a combination of the performance, by the way, double-digit growth in both Abiomed and Shockwave, ahead of our deal model expectations, and improved performance in electrophysiology. And I have to say, Shagun, that, you know, given that we created the EP category, for us, this one is very personal. And while I know that several analysts were quick to write us off earlier this year, you know, we continue to remain very confident in our ability to retain our global market leadership position over the long term. And, you know, that growth you saw in the second quarter, 10%, keep in mind that's of a $5 billion base, and that represented a sequential growth of over 9% versus Q1 and acceleration within the quarter. And to your question, what drove this? It really was the continued adoption of varipulse as we expanded in all commercial regions. We also started first cases in new markets like China, which is a major market for us, and Australia. And the feedback from physicians has been phenomenal. We've now surpassed 10,000 cases globally with a reported neurovascular event rate of below 0.5. This is well below what we observed in the ADMIRE-IDE trial and consistent with published rates across other competitive PFA platforms. We're also further optimizing the catheter based on real-world evidence and partnership with clinicians. In fact, we recently received FDA approval for an IFU update to incorporate an optimized flow rate, which further advances the product's performance. We're also evaluating new ways for Varipulse to maximize ablation efficiencies and potentially widen its therapeutic window. I will say, and I'll say it very bluntly, we are confident that we have a highly competitive catheter in varipulse. You know, it provides excellent safety and proficient and precision. It's efficient with only four ablations per vein and a smooth learning curve even for first-time users. And it's also important to mention that Varipulse accommodates competitive advantages like the only approved zero-fluoro solution and deep sedation workflows, which we know are a major benefit to hospitals and patients. You know, and as we look beyond VeriPulse, we are bringing to market a comprehensive portfolio of next-generation PFA catheters to address a broad range of workflows and patient needs. I think you know already that we received EU approval for our dual-energy STSF catheter, the first catheter offered both PFA and RF technology, and we're also working on an OmniPulse large tip focal catheter and announced positive trials in the month of April. I do think it's also worth reinforcing that our strength, as we've said from the very beginning, is not just down to ablation catheters, but rather the breadth of our portfolio and the end-to-end solutions we provide to our electrophysiology customers. It's our entrenched footprint and installed base of 5,000 Cardo systems, which is widely recognized as the benchmark in mapping software. It's our broad network of highly trained mappers, which we continue to expand And just to highlight this point, you know, the strategic differentiation of CARDO and our mappers has, even in light of the competition we face here in the U.S., enabled us to retain our leadership in mapping U.S. PFA cases. And finally, it's our market-leading navigation in ultrasound catheters, further strengthened with the recent launch of the Soundstar Crystal ultrasound catheter earlier this year. You know, EP is currently, I think it's fair to say, probably the most exciting category in med tech. And let me be clear, we are not rolling over. We are, in fact, increasingly confident that our 30 years of experience and our full portfolio of offerings positions us well to continue to retain our global leadership position over the long term. Thank you, Shugun.

Thanks, Shugun. And Tim, next question, please.

Thank you. Next question today is coming from Alex Hammond from Wolf Research. Your line is now live.

Thanks for taking the question. For TAR200, can you walk us through J&J's launch strategy? Are there Salesforce training, supply chain, patient access, and neurologist education programs in place? And as a follow-up, how are you thinking about the ultimate patient penetration here?

Hi, thanks so much for that question. So first of all, we think that there's an extraordinary opportunity here. There's 600,000 new patients that are diagnosed each year and another 400,000 that are recurrent, so we really see the opportunity as quite large. We'll be entering in the first indication in patients that are experienced or have failed BCG, but shortly then after we'll be expanding into that broad non-muscle invasive space. And so we do think that there's a lot of patients that are eligible for treatment. You know, I think this product really represents the best of what J&J can bring forward. And we have capitalized not only on the strength of innovative medicine in developing this, but also the strength of med tech with everything from the engineers to catheter development to the J&J Institutes, the training that they have run really, really best in class, best in industry, so that we can bring forward a product that will very, very quickly be able to work with urologists, with their practices, and to help get this product out to patients. So the launch, I'm not going to go into all the details around the launch planning, but suffice to say that the planning is very, very well underway, and the team is very excited for what we're optimistically think is going to be a very successful launch for patients here.

Thanks, Alex. Next question, please.

Thank you. Next question is coming from Danielle Antalfi from UBS. Your line is now live.

Hey, good morning, everyone. Thanks so much for taking the question and congrats on a really good quarter. Darren, what a great quarter to start. So just a question on MedTech. I mean, you guys are already growing closer or in line with the broader market. You do have some underperformers still in MedTech and surgery and orthopedics, but you've highlighted a few avenues from a new product launch perspective and improving execution to getting those back. to in line with market growth, you're weathering, you know, EP headwinds. So if we look ahead to 2026, 2027, is it fair to think of the med tech business as a closer to high single digit growth business? I mean, how do we think about the impact of these new product launches and some of the underperformers, the potential for them to re-accelerate and what that means, given that you're already back to sort of five plus percent growth in med tech, even with them continuing to underperform. I hope that question makes sense. Thanks so much.

No, it does, Danielle, and thank you. There's firstly a couple drivers that we're very confident will continue to perform extremely well and accelerate as we look to the next few years. Certainly our performance in cardiovascular, as I mentioned, the 22% growth in the second quarter, we believe that's going to be a constant growth driver. Surgery, while you pointed out, has been, you know, I'd say an underperformer relative to some of our new entrants in that space. We are very confident that we're going to build on our leadership position both in open and laparoscopic surgery with the launch of Otava, which you know is on the horizon. I'd say the two biggest growth drivers for MedTech going forward will be cardiovascular and our surgery business, especially as we enter the robotic space. We believe that our vision business will continue to be a mid-single-digit to high-digit performer. And then we continue, as I mentioned earlier, to look at how we continue to improve our performance in our orthopedics and getting that up to in-market performance. You know that in late 24, we mentioned that as part of the EBR, we would grow in that roughly 5% to 7% range at the upper range through 22 to 27 on an operational basis, and we're very confident in our ability to deliver that. I wouldn't want to speculate beyond that at this point in time. Thank you, Danielle.

Thanks, Daniel. We have time for one last question.

Thank you. Our final question today is coming from Pamela Devon from Guggenheim Securities. Your line is now live.

Great. Thanks for getting my question in. Again, congrats on the quarter and the performance. So I just had one pipeline question on the innovative medicine side, and that's on your co-antibody therapy 4-to-4. So I thought we might see some of the psoriatic arthritis data already this year. You are, but we didn't. see that, and we're hoping to see the IBD data later this year. So I'm just wondering if you could maybe give us an update on when we should expect to see those two readouts, and then just your general level of enthusiasm. I assume you have at least some of this data in-house that a chance to see how the competitive dynamics are playing out in the immunology space. So I'd love to just kind of get an update, a sense of your perspective on 4804's potential. Thank you.

Yeah, John Reed here. Maybe I'll start, and then others can supplement. But the 4804 Studies, these are Phase IIBs, one in Crohn's disease, another colitis. We'll be reading out sometime middle of this year, so it's nearing the time when the data may become available. And then based on that, we'll make decisions about next steps. As you know, in the earlier Phase IIA study, we saw really... compelling data there that it looked like this combination of an IL-23 inhibitor together with a TNF inhibitor, two products that have been in our pipeline but coming together could break through the traditional efficacy ceilings in patients with difficult to treat inflammatory bowel disease and give perhaps more than half those patients the chance at sustainable complete remission. So we're excited about this co-antibody therapeutic. It will be the first of many such approaches to trying to address these difficult-to-treat patients down the line. And so we're excited to be in a leadership role there, the first company to really begin this kind of foray of looking at going beyond monotherapies to dual therapies to address these really complex patients. I would say while I'm on that, though, I'm super excited about our IcoTrukinra, the oral-targeted a peptide inhibitor of the IL-23 receptor which did achieve a compelling proof of concept in ulcerative colitis. We'll be showing those data later this year at a medical meeting. We have begun gearing up now to do a broad phase three campaign in both UC and Crohn's disease based on those compelling data and we think we're on the cusp of being able to offer the convenience of a once a day pill together with efficacy on par with the best of the biologics and with a pristine safety profile. So, a lot of momentum in immunology across multiple indications, but IBD in particular.

Thanks, Famel, and thanks to everyone for your questions and your interest in J&J. I'll now turn the call over to Joaquin for some closing remarks. Thank you for joining the call today.

Our Q2 results reflect the depth and strength of our uniquely diversified business, and as you heard, we expect elevated growth in the second half of the year. We have a lot to look forward over the next six months with game-changing approvals and submissions anticipated in areas like lung and bladder cancer, major depressive disorder, psoriasis, surgery, and cardiovascular. These milestones will extend and improve lives in transformative ways and deliver significant value to patients and shareholders. Thank you for your continued interest in Johnson & Johnson and enjoy the rest of the day.

Thank you. This concludes today's Johnson & Johnson second quarter 2025 earnings conference call. You may now disconnect.