Johnson & Johnson

Good morning and welcome to Johnson & Johnson's third quarter 2025 earnings conference call. All participants will be in the 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 for 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. Welcome to our 2025 third 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. The 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 Duarte, our Chairman and CEO, will discuss our business performance and growth drivers. I will then review the third quarter sales and P&L results. Joe Wok, our CFO, will then close by sharing an overview of our cash position and capital allocation priorities, followed by additional details on our intended separation of the orthopedics business. He will also provide an update on 2025 guidance, key milestones, and qualitative considerations for 2026. Jennifer Talbot, Executive Vice President, Worldwide Chairman, Innovative Medicine, John Reed, Executive Vice President, Innovative Medicine Research and Development, and Tim Schmid, 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. We are looking forward to sharing our very strong third quarter results with you. They are a clear sign Johnson & Johnson is in a powerful new era of growth. The success of our portfolio and pipeline is proof that our relentless focus on innovation is doing more than fueling progress. It is accelerating it. In the third quarter, we delivered operational sales growth of 5.4% across our business. In innovative medicine, we reported 5.3% operational sales growth and a second consecutive quarter of sales of more than $15 billion. Some were not convinced we could grow through the loss of exclusivity of Stellara. but we were confident and we have now unequivocally answered that question. How did we accomplish that when other companies have failed? In Q3, we did it by delivering double-digit growth across 11 brands, including Darsalex, Carvicti, Talvei, Tecvaili, Erlida, Draibrevan, Plaslasklus, Kaplaitas, Pravato, Sympony, Remigate, and remarkable growth of 40% in Trenfaya. In MedTech, operational sales growth was even stronger, accelerating to 5.6%, with improvements across all businesses. And as you have seen from this morning's news, we have announced the planned separation of our orthopedic business. This decision further sharpens our focus as a healthcare innovation leader and accelerates the shift of our MedTech portfolio to areas of greatest unmet need and higher growth. which includes cardiovascular and robotic surgery. I will touch more on this later, but one thing is clear, Johnson & Johnson's momentum is strong and our achievements are multiplying. I will not focus on the progress we are making across our six priority areas, oncology, immunology, neuroscience, cardiovascular, surgery, and vision. These are areas where we have deep expertise and clear leadership positions. First, oncology, where Q3 operational sales grew nearly 20%. You have heard me say before that we are much more than a one-shot company, and our expertise in blood cancers and solid tumors in our oncology portfolio is a great example. Take multiple myeloma, where our competitiveness is unrivaled. No other company has the expertise or success in multiple myeloma that we do. We have treatments in every line of therapy, and Darcelex is the gold standard, with more than 50% market share across all lines of therapy. Q3 operational sales of Darzalex grew by 20% and its potential continues to build with the approval this quarter in Europe as a treatment for high-risk, smoldering, multiple myeloma, as well as promising new studies of Darzalex FastPro in combination with TecViley. I also want to say a word about CARVICTI, our CAR-T treatment for multiple myeloma. We have now treated more than 8,500 patients globally, making CARVICTI the most successful CAR-T launch ever. With operational sales growing by more than 80% this quarter, we are increasingly confident in CARVICTI's $5 billion peak year sales potential. Turning to solid tumors, we were thrilled to receive FDA approval for our bladder cancer treatment in Lexo last month. And Lexo highlights what is unique about Johnson & Johnson. Building on our unmatched capabilities in both innovative medicine and medtech, it is the first and only drug-releasing system to provide sustained local delivery of a cancer treatment directly into the bladder. It is transformative for patients and it is transformative for doctors. It will also contribute significantly to future growth with a targeted release platform projected to be another blockbuster treatment with at least $5 billion in annual peak year sales. through an early stage deal in Lexo is also an example of our outstanding business development model. In fact, in the last 18 months alone, we have completed more than 60 deals of this kind. And in lung cancer, we recently published results in the New England Journal of Medicine for Riberban plus Lasclose, showing a statistically significant reduction in the risk of death compared to Ocimertinib. We are now seeing the potential for patients to live significantly longer than anyone thought possible. The combination of Riberban plus Lasclose is another of our $5 billion peak year sales assets. Next, I want to talk about immunology, where we have been leaders for 25 years. From Remicade to Symfony and Stelara to Trenfaya, some of our biggest blockbusters have come from our immunology portfolio. We have long talked about Trenfaya as the next big innovation to follow the success of Stelara. Based on this quarter's performance, it looks like it could be both bigger and better, having delivered operational sales growth of 40% driven by new indications in inflammatory bowel disease. Trenfaya is the only IL-23 inhibitor to offer a fully subcutaneous regimen across ulcerative colitis and Crohn's disease. Even prior to the launch of our subcutaneous formulation, Trenfaya was capturing approximately half of all new patient starts for IL-23 alternative colitis treatments in the U.S., which we achieved within one year from launch. We are confident Trenfaya will become a more than $10 billion asset. And in typical GNG fashion, we are deep in development of our next immunology innovation, icotrochinra, initially for moderate to severe plaque psoriasis. Historically, the most effective immunology treatments have been injectables. As the first oral peptide to selectively block the IL-23 receptor, icotroquindra has the potential to revolutionize the treatment of plaque psoriasis with a once-a-day pill. We submitted icotroquindra for plaque psoriasis to the FDA in July. And you know, this is just the beginning, as we have already presented data from our Phase II trials in ulcerative colitis. Let's now turn to neuroscience, with Spravato operational sales growing an impressive 61% in Q3. Spravato remains the only approved standalone therapy for treatment of depression, a major depressive disorder with suicidal ideation. Through Q3, we have now treated more than 180,000 patients, and I could not be prouder of the impact this team is having. Our leadership in neuropsychiatry was also strengthened by this year's acquisition of intracellular therapies with FDA approval for Kaplaita in major depressive disorder anticipated soon. Kaplaita is already FDA approved for the treatment of schizophrenia as well as depressive episodes associated with bipolar disorder 1 and 2. We project Kaplaita to reach $5 billion annually. Now, let's turn to Medtech, starting with our cardiovascular portfolio. In Q3, cardiovascular operational sales increased by approximately 12%, as we fortify our leadership in the fastest growing cardiovascular intervention segments. With operational sales growth of over 20%, Shockwave's unique intravascular lithotripsy technology is helping treat more atherosclerotic cardiovascular patients than ever before. In fact, in the last quarter, Shockwave supported their one millionth patient. And with the recent European approval of the Javelin peripheral intravascular lithotripsy catheter, we expect a strong momentum moving forward. we anticipate Shockwave becoming our 13th billion dollar medtech platform by year end. In electrophysiology, we are industry leaders, and with the strength of our mapping technology, that continues. In Q3, we again delivered close to 10% operational sales growth, and our position was further strengthened with real-world data showing body pulse achieved 99.7% acute effectiveness in nearly 800 patients with strong safety and no incidence of stroke. Our BioMed business also continues to perform strongly with more than 15% operational sales growth in the quarter. Our success reflects the impact that our Impella CP heart pump is having on the lives of patients, which you could see in the long-term survival data that was published in the New England Journal of Medicine this quarter. In the 10-year danger shock study, routine use of Impella CP in patients who have had a heart attack with cardiogenic shock reduced mortality by 16.3% compared to the standard of care, with patients gaining an average of 600 additional days alive. It is a perfect example of what we mean when we say Johnson & Johnson is delivering groundbreaking innovation. In surgery, we are making progress on multiple fronts. Our surgical technologies are used in most operating rooms globally. And in Q3, we delivered more than 9% growth in biosurgery and almost 7% in wound closure, driven by accelerating adoption of our latest innovations. We also continue to make positive progress with OTAVA as we anticipate FDA de novo submission in early 2026. And now to vision, where we grew more than 6% last quarter. Our Technis intraocular lenses are the fastest growing in the markets where we have launched, fueling our 13.8% operational sales growth in surgical vision. And after launching the world's first multifocal contact lens for people with astigmatism in the U.S. last quarter, we brought this latest member of the AccuView Oasis Max one-day family to Europe and Korea in Q3, further strengthening our momentum. And finally, to this morning's orthopedics news. As you know, the healthcare industry continues to evolve rapidly, and we are constantly evaluating our overall business and portfolio to ensure Johnson & Johnson remains best positioned to truly lead where healthcare is going. We continue to invest at industry-leading levels in our pipeline and portfolio while making disciplined decisions to exit businesses that we believe will be better able to thrive outside of Johnson & Johnson. For our orthopedic business, the plant separation creates new opportunities. Operating as the Pew Synthesis and led by Namal Nagwana, it would be the largest, most comprehensive orthopedics company with leading market share positions across major categories and addressing a more than 50 billion and growing market opportunity. We expect the Pew Synthesis to benefit from a more focused business model with greater flexibility to extend its market leadership invest in its commercial capabilities and capitalize on profitable growth opportunities. Following the completion of the plan separation, Johnson & Johnson will retain a leadership position in our six core growth areas across innovative medicine and medtech, oncology, immunology, neuroscience, cardiovascular, surgery, and vision, and be able to place even greater focus in our investment towards higher growth areas where we can meaningfully extend and improve lives. We are positioning each business to win and deliver for our stakeholders. As we move forward in the separation process, we will provide additional information as appropriate, and Joe will share more details shortly. As I said at the start of the call, we are in a new era of accelerated growth at Johnson & Johnson. This is more than just another strong quarter. It is proof that our momentum is building and that our impact is accelerating. Thank you very much, and I will now turn the call back over to Darren.