Johnson & Johnson (JNJ) Earnings Call Transcript & Summary

It's -- look, we have work with 24 different presidential administrations. And we are willing to work with every presidential administration. We work with the past Trump administration before, and we are looking forward to work with this administration too. So it's difficult for me to estimate what's going to happen. What I can tell you is that we are going to be willing to be able to discuss how we can have a pro-innovation, pro access policies here in the U.S. and our ability to work with multiple administrations has been demonstrated. So we plan to work with all administrations.

Okay. Maybe pivoting to the pharma business in a little more detail. Just immunology first. STELARA facing biosimilars this year is one of your largest products, latest on erosion curve and how we should think about analogies to think about as STELARA starts to see competition?

So again, rest-assured that the erosion of STELARA, it's already embedded in our guidance. But I think the best estimate to try to foresee the erosion of STELARA, given the changes that have occurred in the biosimilar market since we have REMICADE going out of patent, it's clearly the Humira erosion curve. So that's the one we have guided, and that's the one that I would recommend people to use as a proxy, as an analog of how the STELARA biosimilar entry could affect us. Now when you talk about that, I immediately have to tell you, we are very excited about our possibilities in immunology with our pipeline immunology. We are launching TREMFYA in inflammatory bowel disease. It's already approved in ulcerative colitis. We expect the approval in Crohn's disease in 2025. We are very excited about sharing our data on icotrokinra both in psoriasis and in ulcerative colitis in this case in Phase II. And staying in immunology, next year we will be launching also nipocalimab. This year, we will launch in nipocalimab in myasthenia gravis, we just received priority review. So we are very excited about the possibilities that we have in immunology to create a standard of care that is better than STELARA and that is a driver of our confidence in our guidance.

Just one follow-up here. Just as I think about the IL-23 market, TREMFYA versus the oral IL-23. How do you see those 2 playing off against each other?

That's a great question. We believe that the availability of an oral IL-23 that has the efficacy and the safety of a biosimilar, but the patient preference of oral, it's going to be a game changer in this market. Why is that? And why do I say that? Because generally speaking, patients prefer orals. And we have a number of proof points. For example, we recruited the oral IL-23 trials in 1/3 of the time that trials in this area take us. So normally, when you have trials recruiting faster, that's a good predictor of the success of a medicine of patient preference. So we feel very confident on the ability to be able to change the market with the oral that has the efficacy and the safety similar to biologic. You're going to see some data this year as I described before. And we believe that there is still about 5 million patients that because of different situations connected with not having all else are as effective as a biosimilar and not receiving advanced treatment. So I believe that this is not only going to compete with the existing treatments, both in the oral and in the injectable space, but most importantly, it's going to bring more patients that have psoriasis or IBD into treatment due to the availability of this oral.

Great. Maybe looking at one of your big franchises, myeloma. It seems like one of these end-to-end opportunities that you were talking about earlier. Just talk about the prospects for growth when you think about the portfolio of assets the company has put together?

Absolutely. Multiple myeloma is a great example of our disease-centric approach. During the last decade, more than half of the treatments in multiple myeloma have been developed by Johnson & Johnson. And I'm proud that this is one of the examples we have been able to change the conversation from treating to progression to treating to cure. Not only that, we have even take things a step further, and we have gone into disease interception in multiple myeloma, we just file in smoldering myeloma, both in the U.S. and in EMEA late last year. So this is an area where really our disease-centric approach shines. We see our multiple myeloma franchise becoming a $25 billion franchise by the end of the decade. We see about 50% share of Johnson & Johnson regimens by the end of the decade. And our goal is to have a Johnson & Johnson regimen for every line of therapy in multiple myeloma. So what is the foundation of our existing franchise today, DARZALEX, we see continued growth of DARZALEX in newly diagnosed multiple myeloma, we have strong overall survival data there. CARVYKTI. CARVYKTI is doing very well. You saw in the third quarter, sequential growth of more than 50%. We are expanding our manufacturing capacity we have presented data CARTITUDE-4 in 2 prior lines with very strong overall survival data. And then we are also having increased penetration of our bispecifics, TALVEY and TECVAYLI. Physicians are getting more confident with them. They are using them in the community. And we have Phase III studies that are going to move both TALVEY and TECVAYLI into earlier line of therapy into second line. Today, there was a publication in the New England Journal of Medicine with excellent results combining TECVAYLI and TALVEY. So I'm very confident on our multiple myeloma franchise and our ability to continue to drive growth there. I think we have an unrivaled one. But we are not staying there. We're also developing the next generation of treatments in multiple myeloma, and we are going in the clinic with a tri-specific antibody combining GPR5CD and also BCMA with CD3. So that's going to be the next generation of treatments, and we are going to live not only today, but also moving into the next decade.

Great. Maybe one last one on the pharma side. You obviously have a broad portfolio of assets in the pipeline. Where do you see the most significant disconnects between J&J's internal view and how The Street is thinking about the pharma business?

Thank you. I hope now with the acquisition of Intra-Cellular, we are able to live the Street view of our pharma business. but there's 3 major assets where I see a disconnect. And those are 3 core assets in our portfolio. One is RYBREVANT and LAZCLUZE. Clearly, I mean, we've been able to show overall survival versus the current standard of care of a year or more. In a disease like lung cancer, where life expectancy is 3 years. This is a change in practice data. We are in the process of having the review of our subcu formulation, and we believe this is going to be eventually the standard of care in treating first-line EGFR-mutated non-small cell lung cancer. And this is something that is still underestimated in The Street models. Beyond that, we see RYBREVANT playing a role also in other C-Met or EGFR mutated cancers like in colorectal or in head and neck, and we plan to go into Phase III in those 2 cancers as RYBREVANT. So that's 1 that is underestimated. And as a reminder, RYBREVANT and LAZCLUZE are 2 different medicines that are built separately. If I go to the second one, is TREMFYA in IBD. Clearly, that's underestimated. We have best-in-class efficacy in ulcerative colitis with a match and match endoscopic remission. We have encouraged this is the only double-blind head-to-head comparative trial with bionaive and bioexperience patients. And we are the only ones that are going to be able to provide full subcu regimen. So you won't have to do 2 prescriptions IV and subcu, you will be able to have a full subcu regimen. So we feel very strong about the potential of TREMFYA. To give you some reference, if you use STELARA as the analog. STELARA sales were 75% in IBD, 25% in psoriasis and psoriatic arthritis. TREMFYA sales, 12-month sales. Today, only in psoriasis and psoriatic arthritis are $3.5 billion. So if I make that equation, TREMFYA is going to be more than a $10 billion product. That's not in any analyst models. I think there is a disconnect between TREMFYA because if you use STELARA as an analog, your total sales of TREMFYA should be at least 3x your psoriasis and psoriatic arthritis sales. Then finally, the other 1 that there's a big disconnect in Part D because there's lack of understanding of how the product is going to work, it TARIS 200, our targeted release system. Still people -- some people are thinking it's going to be a medical device. No, this has been filed as a medicine and it's going to be billed and reimbursed as a medicine. So TAR-200, what is the population that goes into bladder cancer. There is about 600,000 newly diagnosed bladder cancer patients and about 400,000 that relapsed. So in total, you're talking about a population of about 1 million people per year. About 70% of them are non-muscle-invasive bladder cancer, and the majority of them are high risk. So that's exactly the population that we are addressing with our SunRISe program. Our first indication is going to be in non-muscle-invasive high risk cancer in patients that are BCDN responsive. As I said, that indication has already breakthrough designation . It's been accepted and it's in the process of being filed in a rolling submission through the real-time oncology review, and we think this is going to be a game changer in the treatment of bladder cancer. I have been myself in urology offices to see firsthand how TARIS was implanted. And I can tell you, it takes about 3 minutes to implant TARIS in the bladder, and it takes about a minute to be able to remove TARIS. It doesn't require any particular conservation. You can have it at room temperature, and it fits squarely in the urology workflow. So we feel very confident that the full suite of TARIS, it's going to be more than a $5 billion product. So those 3 assets in itself have significant disconnects with The Street. I'm confident that as we get those assets approved and data flows and you start to see the commercial results, this is going to change, helping moving analysts expectance above where they are today and gaining more confidence in our ability to deliver in 2025 and also in the rest of the decade.

Great. Maybe pivoting over to MedTech. I know improving the growth prospects and kind of positioning this franchise was 1 of your key priorities during your tenure as CEO. A few years into this process, we'd just like to get your sense of where we are in that process, kind of like what inning in the repositioning do you feel J&J is at this point?

Thank you. So as I said before, our goal with MedTech was to be able to grow at the top end of our markets, in essence, become more competitive, and we are doing that both organically and inorganically. We are moving into higher growth markets. We are launching new products. Now 50% of our sales are going to be in markets that are growing more than 5%. By 2027, we plan to have 1/3 of our sales in new products. What are the catalysts of that, a number of them. One is in orthopedics, launching our full suite of VELYS products. Now we don't have a VELYS knee replacement robot. We have hip navigation with VELYS. And this year -- this past year, we got the approval of the Uniknee and also VELYS SPINE. So that's helping us being more competitive in the orthopedics space. If I move into the surgical space, we continue to make progress in our wound closure franchise. We continue to make progress in our biosurgical franchise with launching new hemostats and very importantly, we are making progress with the development of OTTAVA. We filed the IDE for OTTAVA, our soft tissue robotic systems, in the fourth quarter last year, and that's going to be a key priority for us entering into the surgical robotics market. In the area of Vision, I commented before that we are launching a new intraocular lens, and we continue to build in our leading position in contact lenses. And finally, look, our growth driver of cardiovascular. We are fully committed to be the leaders today and into the future in the area of atrial fibrillation. We have a strong position in RF. We have the best mapping system in the market. We have the best group of mappers and we are developing a portfolio of PFA catheters. We have launched VARIPULSE in Europe and we are in limited market release here in the U.S. We just got the approval of our dual energy catheter with PFA in Europe. So we are fully committed to remaining a leader in this area. And in the meantime, we are very satisfied with what we are doing with the acquisitions of Abiomed and Shockwave, both of them are performing above market, showing that we take it very seriously that when we deploy capital, we are going to hit the expectations. In the case of Abiomed, growth is driven by Impella CP, which is the main state of the CP of the heart failure solutions in Abiomed, but we are also launching our surgical pump which is Impella 5.5 and also our Rightside pump, which is Impella RP Flex. This year, we had 2 very good news in Abiomed. One was the publication in the New England Journal of Medicine of the DanGer trial, which is the first trial that is able to show a survival benefit in cardiogenic shock, and that is going to reinforce how the use of Impella in these settings improves cardiovascular outcomes. And also, we presented TCT data on our study on Impella ECP, which is the Impella smaller French 90 French for insertion, which was extremely positive. So I'm very confident on the continuation of the success of Abiomed into the future. I think they are doing a wonderful job, and we want to continue to do that. When it comes to Shockwave, we're delivering again ahead of the DL model, we are even launching 2 new products as we speak, 2 new catheters, 1 E8, which is for below-the-knee peripheral arterial disease. Another 1 is Javelin for peripheral arterial disease in lesions, which are difficult to grow. So we have a strong position there in calcified arterial disease, and we plan to build into that. And finally, I'm excited about V-Wave and atrial shunts which is another important contribution in interventional cardiology. And we are working hard to have a solution in atrial appendage. We have a program through the acquisition of Laminar in left atrial appendage elimination that we plan to eventually come to market and participate in this important area. So overall, I see multiple growth drivers in the future. And today, for our MedTech business, being able to deliver in our aspiration to grow at the top end of our markets, that means between 5% to 7%.

Maybe just 1 quick comment on VARIPULSE some of the recent news. What should we be watching there? And what are the next steps to think about?

Thank you. So we are in a limited market release in the U.S. in an external evaluation and in the process of the external evaluation, we have identified a number of neurovascular side effects, 4 cases in particular. In an abundance of caution, we have decided to stop our external evaluation as we communicated. And that's why we do an external evaluation to be sure that we have the right configuration. I have to be clear that VARIPULSE is approved outside of the U.S. in certain countries, we continue our commercialization of VARIPULSE outside of the U.S., and we're working very hard to be able to identify the root cause and bring VARIPULSE back into the U.S. external evaluation. Patient safety for us, it's the most important priority. And in abundance of caution, we are in connection with the investigators and the medical advisers that were working in the user external valuation. We are actually doing right that. We are fully committed to developing the best overall portfolio in PFA as well as in RF. And keep in mind, this is not only about 1 catheter, this is about the combination of your generator, your suite of catheters, your mapping system and your mappers. So we are fully committed to remain leaders in ablation in atrial fibrillation, both in RF and in PFA.

Great. Maybe in the last couple of minutes here. Obviously, we're coming off a big announcement of a deal today, but just the latest priorities for J&J as we think both MedTech and pharma from here. What should we be thinking about in terms of priorities for you as you think about kind of further expanding the portfolio via BD?

BD. So first of all, M&A and R&D are the ways we create significant value and we build our pipeline. It's not only about M&A. Sometimes we talk about M&A, but it's also about R&D. In the last 2 years, '23 and '24, we invested north of $30 billion in internal R&D. So it's a combination of both things. We have the financial strength to be able to have the optionality to do multiple deals. And at the same time, address all other capital allocation priorities like dividends. So when you think about deals moving forward, Intra-Cellular has been an important demonstration of what we do. But I also have to explain to everybody that these deals do not happen every day. And as a matter of fact, for us, larger deals are more outliers. The majority of the value that we create is through smaller deals, tuck-ins where we can use our scale. In the last year, we did 75 smaller deals. And that's where we create the majority of our value. So I want you to think about that in that context. Some of these smaller deals are the ones that are behind, for example, oral IL-23 or our targeted release system TARIS. Those were deals that when we announced them, didn't make any headlines. So that's where we are creating our value. And to end on that, I'm very focused on making sure that we continue with the successful integration of Abiomed, but also the successful integration of Shockwave and Intra-Cellular into our company. Those are high-quality companies with high-quality teams, with high-quality portfolios and it's a process on both sides. We bring our expertise, but we also learn from them, and I'm very proud of how we are integrating these companies, and that's a key priority for me today, making sure that we deliver on the premise of these 3 acquisitions.

Excellent. Well, I think we're just out of time. Joaquin, thanks so much for joining us. Really appreciate the comments today.

Thank you.

Thank you.