Johnson & Johnson (JNJ) Earnings Call Transcript & Summary

All right. I think we'll jump in here. So thanks, everybody, for joining. I'm Lee Hambright, U.S. MedTech analyst at Bernstein. We're thrilled to hope -- to host Company Group Chairman, Johnson & Johnson, Innovative Medicine North America, Tom Cavanaugh. Tom, thanks so much for being here.

Thank you for having me.

So we're scheduled for a 40-minute fireside chat. You should all have the pigeonhole link if you want to submit questions. We've got the iPad up here. So Tom, you've been in the Chairman role here for almost 2 years now. Maybe you can just kick us off with some opening remarks on how you see the state of the business at J&J.

Yes, I'd be happy to. Hello, everyone. Pleasure to be here with all of you. It's an exciting time at our company at Johnson & Johnson. I'm happy to share some major catalysts for our business and outlook for the coming quarters and years. Look, I think Johnson & Johnson, what sets us apart is really our depth and breadth and strength of our portfolio against any of our industry peers. And we are what we like to say, in a new era of growth in the innovative medicine business. I think as many of people had realized, we were facing the loss of exclusivity of STELARA, the biggest asset that we had in Johnson & Johnson. And I would tell you, that's behind us. I think we've proven ourselves to be able to what we set out to do is grow through loss of exclusivity of STELARA in the coming years. In the first 2 quarters, we've proven just that. We're quite excited about our portfolio, the breadth and depth of it. But also some of the most recent launches that we have. Just recently, we got the approval for INLEXZO for bladder cancer. We're anticipating the launch of CAPLYTA for aMDD. In fact, we just closed that acquisition for Intra-Cellular earlier this year and excited to welcome the employees on board to Johnson & Johnson, and they're ready to launch this product for major depressive disorder. We're also quite excited about the momentum that we had in some of our most critical launches, whether they be TREMFYA in IBD, that's off to an incredible start. RYBREVANT LAZCLUZE for non-small cell lung cancer, those with an EGFR mutation, again, off to a very strong start as well as some of our underlying base business and portfolio, really the in-line markets growing above expectations, really centered around DARZALEX, really the gold standard for multiple myeloma and the foundational therapy across all lines of therapy in multiple myeloma. And I have to tell you, it's going to be an exciting time to be at Johnson & Johnson Innovative Medicine. And I will say, based on all of this, we are really confident to live into our long-term projections of 5% to 7% compound annual growth through the remainder of the decade. And quite frankly, we feel we're on the upper range of that where we have the momentum going.

Excellent. Excellent. A great kickoff, lots to dig into there. So maybe we start with some macro. Just a lot of moving parts over the last year or so, MFN Medicaid cuts, expiration of the exchange subsidies, PBM reform, changes in HHS, cuts at FDA and CDC tariffs, all these things. How would you just frame your latest thinking on all that policy uncertainty?

That's a lot. Look, there has been a lot going on. A lot of discussions taking place, especially from a policy perspective. I can tell you, at Johnson & Johnson, we have an experience in navigating these times, a 140-year-old company. We've dealt with 24 administrations with different complexity, different policy reforms, our proposed policy reforms. I'd tell you, we've been able to weather the storm. I think first and foremost, on the foundation of the strength of our portfolio, the breadth and depth of our portfolio allows us the ability to navigate these uncertain times as people would call it. I'll tell you, giving you more confidence, due to these uncertain times, we've raised our guidance. So it just reassures your confidence in our ability to grow through this. And it's not without some potential challenges that we might face. I will say, as we think about the administration, the current administration, it really comes to be about finding commonalities, common grounds, ways in which we can work together. And we're quite pleased with an open door policy that we see on both ends, both from a pharma perspective, whether through our trade groups, whether it be pharma or bio, but also the administration. They're willing and able to work with us and are listening to us. Sometimes that wasn't in the case in some of our previous administrations. And with that said, I do think as we come together and able to have those open dialogues, we got to find common ground. You mentioned a few things, MFN, IRA, effectuation, some other things with regards to macro policy changes. I would tell you, I do think there's some more alignment than not. I'll say, one thing as we you think about it, some of the things we just recently announced earlier this year, Johnson & Johnson committed to $55 billion in manufacturing here in the U.S., kicking off our state-of-the-art biologics facility down in Wilson, North Carolina. This is something the administration was very focused on, bringing U.S. economy and jobs back to the U.S. as well as manufacturing to the domestic -- domestic manufacturing. And we are committed to that. And we are already working along the way, even during this first term when he made some tax changes to allow and incentivize us to come back to the U.S. I will tell you, a lot of our industry peers are doing that. So here we are, it brings resilience to our supply chain as well, but bringing the economy back to the U.S. and really domestic manufacturing is one area, I think we saw eye to eye with and are moving forward. Other areas, I think we talk about lowering health care costs. And really, what it comes down to is the consumer or the patient, and we are fully committed to that as well. One of the things you think about MFN is pricing is looking at quality across some of the countries or the intent is everybody paying the fair share, so to speak. I think at the end of the day, if you think about list versus net price, some of the things in the intermediaries is where we need to focus on. And the administration is willing to work with us on that, whether it be PBM reform or 340B reform. Just recently, they allowed HRSA to move forward with our industry to do a rebate model for 340B, really to understand the transparency in the system, ensure the right patients are getting the right discounts or the providers are giving those discounts to be appropriate patients. And I think that's important. If we can really reduce those costs in the intermediaries, I mean, we have our transparency report, the 10th-year, we've published it online. I welcome anybody to go to it. But $0.58 to every dollar goes to the intermediaries. So if you can reduce that, you can reduce overall health care costs and consumption, ultimately hit the consumer and lower the out-of-pocket cost for them as well.

Excellent. Okay. Great. One policy question from the crowd. Just somebody wondering what's the tenor of the conversations with the government with respect to IRA. I think there's a little bit of a thought that maybe the negotiations get a little harder this next time around. Any comment on that?

Yes. I can tell you, we went through the first round. We had 2 products ourselves, and we're looking -- we're preparing and working with the government, CMS on effectuation so the model to be able to effectuate the prices in the system. Very open dialogue, willingness to work with us. We haven't seen anything from a single standpoint that they're going to be harder on negotiations. I think some may say the first round was not necessarily negotiations. That was in the first [indiscernible] other administration. So it's always going to be dynamic. We expect that. For us, it's continued to recognize the value and defend the value because we are really changing the lives of many patients worldwide.

Excellent. Okay. Great. Let's talk about targets. At your last EBR, December 2023, you set a target to hit $57 billion in pharma sales by 2025, and you got there a year early in '24. I think you're proving that you can grow the business through STELARA LOE, as you said. Consensus now expects almost $60 billion in sales for 2025. Maybe talk a little bit about the drivers that enable you to fill that gap.

Yes. Thanks for recognizing that. We did hit it a year ahead of expectations. And hopefully, now maybe you can get a little change, maybe an upgrade coming out of this conversation like Guggenheim did yesterday. But I would say people are starting to realize our growth and our opportunity ahead of us, and we are quite excited about where that growth is coming from. A few areas I'll focus on, TREMFYA. TREMFYA, we have said we believe TREMFYA will be a $10 billion-plus asset. And I don't necessarily say the Street is recognizing all of that and realizing all of that. If you look at like the underlying source of business, predominantly has been in psoriatic disease. We're about $4 billion worldwide in 2024. And now we just launched in the last year globally, our indications in IBD. So both in ulcerative colitis about a year ago, Crohn's disease in the U.S. earlier this year and now fully a subcutaneous induction therapy for both Crohn's and ulcerative colitis. And I'll tell you why that's important. But I bring this up because if you think about a proxy, I talked about STELARA as the largest asset or was the largest asset in Johnson & Johnson, a $11 billion peak year sales, 75% of that was IBD. So if you just think about that, the promise that we have for TREMFYA in IBD, we are off to an incredibly good start. We foresee absolutely every chance to be able to achieve the $10 billion plus, really with the best-in-class asset that we see, our customers are saying that, simplicity and ease of administration, the subcutaneous formulation based on our customers' reaction is a game changer. No other IL-23 has that, and our growth -- and we're starting to see that growth already. And IL-23 in ulcerative colitis is the fastest-growing class or the fastest-growing assets. So we feel very confident in our ability to deliver TREMFYA and that also helps close that gap as we think about the $60 billion that you highlighted. Another area I would talk about is lung cancer. RYBREVANT plus LAZCLUZE, we've launched across multiple patient types in lung cancer with EGFR mutation. I'll tell you, with the positive data, the overall survival advantage that we've communicated earlier this year, nothing has shown a survival advantage of that magnitude versus standard of care, OC chemo or OC, I would say. And we do believe RYBREVANT plus LAZCLUZE has the ability to become a $5 billion-plus peak year sales asset. So we're well underway to achieving that. And then not to mention the underlying growth of our in-line business, really back on the DARZALEX FASPRO. I think you can continue to see momentum there and the breadth of our portfolio. We do believe in oncology, by 2030, we're going to see a $50 billion peak year sales really based on the backbone of our multiple myeloma franchise. So I feel more than confident we're going to be able to live into the 5% to 7% and achieve more than what we expect.

That's great. Excellent. Okay. Great. Let's go one by one and try to jump into some of these. So maybe starting with immunology on STELARA. It's been a few months now. The biosimilar launches are out there. Last quarter, J&J sales grew 3% organic despite the 710 bps headwind from STELARA LOE. Can you just talk a little bit more about how the erosion curve is playing out versus your expectations?

Yes, as expected. I think we gave -- we felt a proxy for STELARA erosion would be Humira year 2 erosion, and we're tracking along those lines. So as I said before, we do believe STELARA is in the back seat or in their rearview mirror, and we are ready to grow well above where we were with STELARA in our hands.

Yes. Could that move even faster as TREMFYA really starts to take off?

You raised a very good point. You have molecular erosion of the molecules, so the branded within the molecule, but then you also have erosion of the actual class, let's call it, the IL-12/23. With TREMFYA and the momentum that we have, we can also cut that erosion by really growing through it with our launch in UC as well as CD and across the other indications such as psoriatic disease.

Yes. Excellent. So you talked -- you highlighted TREMFYA already as a key driver, 30% growth last quarter, great feedback for the IBD indication, strong start in Crohn's and UC. What are you hearing in the field? I mean, what do you hear from physicians?

Yes. I can tell you, I think, first and foremost, they are recognizing TREMFYA is differentiated. It's the only dual-acting IL-23 on the marketplace. As I highlighted, they do believe in ulcerative colitis, really best-in-class endoscopic remission and histological endpoints, similar to that in Crohn's disease, first head-to-head study against in a registration trial versus STELARA and definitely winning on multiple endpoints there that are very important to the patient, but also the provider. As you think about it, we feel it is a best-in-class asset. We have fulfillment, so the patients to be able to receive the product is simple and easy as we were launching it. It's the first time they've seen it where in 24 hours, the patient will be able to receive the product. And why is that important? And why were they able to do that? One, subcutaneous induction, so self-administration. They can go directly to their house and they can administer versus the other IL-23s and quite frankly, what we had with STELARA, where you actually have to have it infused for induction and then you go to maintenance where it's subcutaneous and self-administered. So that is really what physicians are calling game changer. Like when we just got approval in UC for subcutaneous induction, we sent out communications to many of our thought leaders and customers and they were just like, "This is just practice-changing, game changer." These are actual quotes. So incredible enthusiasm and why we are so confident and excited about this. And so confident, we also went forward with a head-to-head study against Skyrizi in Crohn's disease. So we just recently announced that as well. So we feel very confident in the molecule to really get us well beyond $10 billion plus.

So that was a PR just 5 days ago or so announcing the head-to-head trial. I know -- so it demonstrates superiority of TREMFYA over Skyrizi. And I think, as you mentioned, you like your chances given the fully subcu regimen. Can you just elaborate maybe a little bit on what you're trying to achieve with that study?

It is just what you said, like we do believe in Crohn's disease, we are differentiated. We want to show that clinically. I think everybody cross compares trials, but until you go head-to-head, it's really where you can proof is in the pudding.

Yes. Great. So you've highlighted this is a $10 billion-plus asset. Any chance you might be willing to offer sort of a time line to that number.

It's hard to speculate. I think we're still in the early phases of the IBD launch. I think we need a little bit more time to really reassure the timing of that. But I will say just knowing the unmet medical need in this disease, still in this disease, the need for complete and histological remissions is very important. And that bar is raised and we're raising that bar each and every day. And we have a pipeline of assets that come on after that as well. So I'd say it's definitely within reach before 2030, but give us some time.

Okay. Got it. Speaking of pipeline, you filed icotrokinra 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. So this is a once-a-day pill, potential to set new standard of treatment in plaque psoriasis. Maybe can you just talk about the market expansion opportunity with icotrokinra.

Absolutely. Yes. We are incredibly excited about icotrokinra. If we think about the profile of this product, based on the data, whether it be head-to-head against deucravacitinib or against placebo and some even hard-to-treat populations, we've shown remarkable efficacy. You mentioned biologic like, but really complete clearance is what you're looking for, and we're seeing equally the amount of complete clearance with this drug. And it's from a profile of safety, which is very important in this patient population, similar to placebo from an AE rate. So I think if you think about safety and efficacy, it's there, and then the convenience of a once a day oral pill. We still see in this marketplace, basically, there's around 5 million patients that are eligible to receive advanced biologics that are not receiving advanced biologics. Some of it is safety. Safety is still a big concern. They don't want something in their body or they just may not feel comfortable with it. The other is needophobia or just for other reasons. And if you think about really the treatment journey for a patient, sometimes when they present with plaque psoriasis or moderate to severe, they might want to start with a topical. It depends on how many plaque psoriasis they have on their skin or how much lesions that they have, and then maybe go to an oral. Sometimes they go to do a methotrexate, conventional and then maybe some of these other orals that are in the marketplace. And then they think about the biologics. So icotrokinra is uniquely positioned in that to be the first-line systemic treatment based on the profile I acknowledged and highlighted. So I do think we have an opportunity to really not just expand the market, but penetrate the current marketplace of what's being used because there's a lack of satisfaction and there's absolutely a need from a patient convenience.

How do you think about like kind of market segmentation and development over time between the orals and the injectables? How big can orals get as a percentage of this market over time?

Yes. It really depends. I think that's where we're going to be able to really test it with icotrokinra because of the profile of the product. Unfortunately, the current orals don't satisfy the needs of the marketplace. And you see that based on share uptake and those that will be able to tolerate and go on long-term treatment. So that population, I talked about the $5 billion, you have also the population as you think about into the topicals. These are moderate-to-severe plaque psoriasis. It's still the same indication, but they're on topicals. Why are they on topicals? We need to understand that. So I do think there's opportunities to penetrate earlier. And then those that are not satisfied in the biologics, they just want the convenience, they see the safety and efficacy of this product and are ready to willing and switch.

Yes. Excellent. Okay. Can you just remind us the catalyst path or the time line on icotrokinra.

We're currently under FDA review right now for plaque psoriasis.

Yes. Got it. Excellent. So oncology, let's talk about DARZALEX. There's been some debate on IRS price negotiation inclusion. Maybe talk a little bit about J&J's position regarding when it could be potentially up for negotiation.

So DARZALEX FASPRO, we still remain committed based on the interpretation of the draft guidance for CMS of 2034. We truly believe DARZALEX FASPRO is clinically different than DARZALEX IV, and we feel very confident in that number.

Yes. Got it. No, Tom. No -- nothing soon. Great. So DARZALEX has done really well, obviously, 21% growth in the second quarter. It's clearly a foundational treatment for multiple myeloma. What are the growth expectations in '25 and beyond?

Yes, I can tell you, I've been in this space. I had the opportunity to launch some of the previous, I would say, standard of care in multiple myeloma in my previous company and then coming over to Johnson & Johnson, a little -- less than 8 years ago, I've not seen a drug like this in any other marketplace. I mean, DARZALEX FASPRO is truly unique. It is foundational therapy when we say that, combinable with most of our products. Every patient population, we're seeing survival rates where in multiple myeloma, it used to be 2 to 3 years survival overall. With DARZALEX whether in combination with a quad-based regimen or a triplet-based regimen like Revlimid-dexamethasone, we're seeing survival rates close to 8 years. And PFS rates in the decades. I mean, this is truly remarkable. I mean you're really talking about chronic care here. And DARZALEX is the backbone treatment across all lines of therapy, even with new products coming in, our own products, TECVAYLI, how they were combining with DARZALEX. So you'll see significant opportunities still to grow in the earlier lines of treatment, but half the patients are going on DARZALEX-based therapies in any line. So there's opportunities to grow as you could bring it in earlier. We just recently in Europe, got approval for CEPHEUS, which is in the transplant-ineligible population, and we're anxiously awaiting that also in the U.S. So there's opportunities to move earlier. The other area for growth with DARZALEX is duration as you think about this, whether it be in combinations or just continuing through a maintenance phase. Highly convenient, it gets to a monthly based dosing, quick injection, 5 minute -- less than 5-minute injection for the health care provider, subcutaneous. So we see tremendous opportunity and truly, it is -- has revolutionized the treatment of multiple myeloma.

Amazing. Okay. So hitting CARVYKTI, new 5-year data shows a single treatment of CAR-T therapy has the potential to deliver long-term remission. You have firm conviction, I think, in CARVYKTI as a $5 billion plus asset and the commercial ramp is moving along really nicely. What do you see as key to kind of keeping that current momentum for CARVYKTI?

Yes. So every year, they have a Congress. It used to be called the Myeloma Workshop, now it's called IMS, International Myeloma Society. I bring that up because it was just last week. So this is relatively new. In that, this is basically a Congress of world experts in multiple myeloma. They've been doing this for 20 years plus. They come together and they look at consensus, but the topic of this one was definition of cure. And they went down the list of what -- how to define cure and really what it comes down to is time. 5 years relapse-free. So in remission for over 5 years. I bring that up because we just recently released data with CARVYKTI in the CARTITUDE-1 trial. So this was line -- 5 lines of prior therapy, so very heavily refractory patient population. 1/3 of those patients are 5 years out remission-free. So based on that definition that was coming out from the IMS, they would call that cure. So that, to me, is really the goal of any oncology agent. So if you take that, that was in previous treated 5 lines of previous treatment. We have approval previously with line 1 and beyond. So CARTITUDE-4 data, lines 1 through 4 lines of therapy showing the only cell therapy to demonstrate overall survival advantage versus the standard treatment with a onetime infusion. So we do believe, as you think about CARTITUDE-4 or CARVYKTI to be able to move it up in earlier lines, the magnitude of benefit, not only for the patient, but if you think about the immune system being intact, the ability to really transfer lines is really going to be amazing. And we'll -- let's look at the long-term efficacy of that as that continues to play out just with time. But rest assured, we see ourselves having even greater impact in earlier lines. And we have ongoing trials in frontline as well. So we do believe CARVYKTI is well within reach of achieving greater than $5 billion peak year sales. it is truly the most efficacious treatment in multiple myeloma.

Amazing.

And you mentioned, I do give a lot of complements to our manufacturing supply chain. We were able to increase our supply, our scale, our consistency. So we're well within -- that would not be an impediment on any of our opportunities.

Then, it will be a manufacturing, not a gating item.

Not a gating item. We have over 8,000 patients infused with CARVYKTI in over 11 countries now. So that's the other expansion opportunity as we look outside of the U.S. and other markets.

What is the gating item at this point if it's not manufacturing?

It is the ability for sites to be able to step up. So that is part of the strategy. As you think about the community right now, it's been heavily concentrated in more academic centers, those that have infrastructure in place. So it's expanding beyond.

Yes. Can you just talk about the competitive environment there a little bit, maybe some stuff coming at some point? Do you feel like you got a good lead there?

Yes, we definitely feel we have a good lead there. I think as you said, like you really got to prove an improvement over the standard of care. So we are -- there's 2 that have registration trials, Phase III registration trials against comparator. There's another one that's being developed by another company that has a lot of time to go, I would say, before they can get into anywhere near the front line setting where we are at.

Okay. Great. All right. Let's talk about bladder cancer. You got FDA priority review for TAR-200, first of its kind drug releasing system. And INLEXZO just got FDA approval on September 9. So how is the kind of prep for launch early phase looking at this point?

Again, this is truly game changing, first of its class. This is the first time. So INLEXZO is, as you said, an intravesical drug release system. People refer to it as a pretzel. It looks like a pretzel. It's a simple procedure done in a urology practice. So this is another thing that's important about INLEXZO why we foresee INLEXZO to be a $5 billion-plus peak year sales asset. It's a product that then locally administers gemcitabine in the bladder. It's inserted within a 5-minute simple procedure through a catheter, and that's a [indiscernible] catheter, nonetheless. And it can be done by a nurse, an APP or advanced practice provider, or physician and then simply removal in the same period of time. I bring this up because of the simplicity of the procedure to be able to deliver that localized delivery also. The data that we've seen in non-muscle invasive, high-risk, BCG-exposed carcinoma in situ bladder case. It's more of a narrow indication first. It's truly remarkable. 82% complete remission, where over 50% of them were out for more than 12 months. So it's truly durable complete remission. That's really the game here for bladder cancer. The other alternative to these patients is the removal of the bladder. This is bladder preservation. So this was the first indication. We have ongoing trials. We have a robust development plan, looking at papillary disease, a much larger patient population. And they were going head to head against the standard of care. There hasn't been much innovation in bladder cancer, and that's BCG. So those that have been on BCG, what we hear from the patients is it's really a tough treatment to have. Sometimes they refer to it as a tiger clawing at the bladder. It's fluid that's injected into the bladder, and it needs to be held there for about 4 hours. So you can imagine your bladder really wants to get rid of that fluid. So highly complex, and it's something that we believe we want to displace and really maximize the potential for patients. There's roughly 1 million patients. It's the eighth largest tumor in 1 million patients suffering from bladder cancer, unfortunately, 600 of them are newly diagnosed, 400 reoccurring. So we see this to be a tremendous opportunity potential. And then we talk about the technology and this drug releasing system. We also have TAR-210. The TAR-210 is erdafitinib in this device, our drug-releasing system. And it's important because it's targeting FGFR mutations. And there's a high prevalence of FGFR mutation in intermediate-risk bladder cancer. So we're in high risk for TAR-200 or INLEXZO. We have the ability to have a portfolio of products. So we really are excited about what we can do in bladder cancer, significant unmet medical need, and we're bringing transformational medical innovation.

That's great. On the last earnings call, when you're talking about the Street's disconnect with your $50 billion oncology target, I think this is the one that came up first. You talked about it, I think it's a $5 billion plus, but maybe it's bigger than that.

Yes. Yes, you can model it. We're excited about it. I would say we're really excited about it. And you mentioned our ability, like we had the product available within 4 days. They're working through the systems. It's a buy-and-bill product. So people, temporary J-codes, who were able to work through the process with our providers. But there's tremendous excitement. There's a race to see who's going to be the first one to insert. We have people on the ground training on how to do the insertion, whether it's in practice, in office alongside of them. So this is some of the stuff where we see a little bit of the synergy and learning from our MedTech colleagues. This is something new for us from a pharma or innovative medicine that we're able to get the training, the catheter and things from our MedTech. So there was a bit of synergy there, and we're centrally capitalizing on the expertise from our MedTech colleagues.

That's great. Excellent. Okay. So moving on to RYBREVANT LAZCLUZE. So consensus estimates for '27-'28, a little bit over $2 billion. You've just suggested, I think, that it could be $4 billion by 2028. We're just getting started, just $180 million or so in Q2. So it was a steep ramp there to get to that $4 billion. Can you just talk a little bit about the path to get there over the next few years?

Yes. I would say, unfortunately, as many of you would know, lung cancer, the 5-year survival rate is still less than 30%. So the ultimate goal is survival. And with RYBREVANT LAZCLUZE, we do believe we're bringing a game-changing therapy, what will become the new standard of care in frontline EGFR non-small cell lung cancer. And I'll tell you why. One, it's a chemo-free regimen. Two, its targeting multiple targets. Not just EGFR, it's EGFR, cMET, and it harnesses the immune system. I bring that up, and that's important because it's changing the underlying biology of the disease. We just recently released data where the data because of this suppression of resistant mechanisms. As you think about resistant mechanisms, it's what needs to relapse and further relapse and resistance and ultimately death unfortunately. So the ability to be able to suppress that is very important as we think about it. And if you think about the Kaplan-Meier curve, so we have demonstrated at least a 12-month advantage over OC for overall survival. We haven't hit median. You're starting to see a little bit of a plateau of the curve. If you just use correlations to other lung cancer agents such as the checkpoint inhibitors, you saw that there. We saw it in the earlier indications with exon 20. So a tough -- difficult-to-treat disease population of EGFR, but you're actually seeing that as well. So we have significant promise. We do believe it's going to become the standard of care. And that's just in lung cancer. So we do believe RYBREVANT itself, we've seen already have preliminary data, both in head and neck cancer, significant unmet medical need as well as colorectal cancer. So we see tremendous opportunities for RYBREVANT overall. But RYBREVANT LAZCLUZE becoming the standard of care in lung cancer.

That's great. So AstraZeneca is marketing TAGRISSO plus chemotherapy as a way to raise the bar versus competition. I hear some investors who worry that they may be winning the narrative battle in some places. How do you respond to that competitive threat?

Yes. They just recently released data. I think we need to wait to see our longer-term data of overall survival because I do -- survival is really what it is. And I will say one of the other things that I think will be a catalyst for us. We have approval ex U.S., but RYBREVANT subcutaneous formulation. So we do recognize right now, they are accustomed. They're used to treating with OC and sometimes adding in chemo. And we have a lot of education that we had to do with RYBREVANT LAZCLUZE, and we're doing just that. We've had protocols in place to manage the AEs, they cause cocoon. We want to make sure that they're able to manage the rash and skin toxicity, the potential for that as well as IRRs, infusion-related reactions. Now with subcu, those are doses are significantly reduced. And what you'll also see is a convenience of a 5-minute injection just like DARZALEX. So you have that ability, much easier and simple for the provider. And then what we also saw that was uniquely different with RYBREVANT FASPRO, or I would say, the subcutaneous formulation versus IV improvement in duration of response and efficacy. So we do believe it to be a game changer. We're doing a clinical trial now with that treatment regimen in the frontline setting. We look forward to that to help differentiate the product.

Excellent. Okay. I missed an audience question about immunology. How long is the induction period for your competitors in IBD?

It's 2 to 3 inductions, depending on the competitor.

Excellent. And we've got one more on what are your strategies for in-sourcing versus outsourcing clinical trials to adapt to the changing landscape?

We absolutely continue to look at ways that we should find efficiency in the model. I think that is one of the areas from an R&D perspective, we have a lot of focus. There are definitely times when you want to make sure it's in-sourced, but you definitely want to have a hybrid model for flexibility and scale.

Got it. Okay. Let's hit a couple of neuroscience things. SPRAVATO grew 53% last quarter, strong momentum. Maybe you could talk a little bit about its role in treatment-resistance depression and what's that opportunity look like?

Yes. The profile of SPRAVATO is truly unique. And it is absolutely a first in its class agent. And if you talk to any patients, it absolutely is a lifesaver, game changer. Many of them, their lives have been turned around because they've been on SPRAVATO. The efficacy can work within 24 hours of administration and the resolution of AEs in the same period with strong durability. Like once they're on it, they can see years of durability as long as they're taking the product. I would say if you think about it, and that was one area I think there was a disconnect also with the Street and rightly so, I would say, somewhat because when we launched SPRAVATO, this was not a simple administration, and we launched it during the time of COVID, so in-office procedures, not necessarily available to a provider base, which as psychiatries that are not typically accustomed to treating patients physically. Like this is where they need to sit there and administer the product and observe for over 2 hours. So from an infrastructure perspective, they didn't have -- if you think about some of the psychs, they have one office, that's where they see their patients. They don't have observation rooms. So they had to make sure they could be able to operationalize this. We've gotten that right. We've helped them out. We've worked a long the ways, and we have treatment centers all over the U.S. So site of care being able to get to these places is readily available. And that's where you've seen our growth really accelerate. They absolutely believe in the product for what I just said. It's truly differentiated. It's unique. It's both for monotherapy and adjunctive. We just recently got monotherapy approval, so highly flexible in how they want to administer it, but we really see that to continue with growth momentum.

Great. Great. And CAPLYTA is -- you've got a couple of indications there, schizophrenia, bipolar depression, maybe another indication coming later this year. What are the expectations there with CAPLYTA?

Yes. Yes. I would tell you for CAPLYTA, especially in the pending aMDD launch. Right now, it's currently approved for bipolar 1 and 2 as well as schizophrenia and growing quite nicely. I will tell you, we are anxiously awaiting. It's under FDA review right now, the adjunctive major depressive disorder indication. If you just think about the data right now, the effect size versus what you see in the marketplace is 2x from an efficacy standpoint. We've never seen anything like this in depression. And when you think about some of the traditional antipsychotics, right now, if you think about the marketplace, 21 million patients unfortunately suffering from depression. The penetration of the branded market is only about 10%. So about 90% are cycling through the generics. Some of it for convenience, some for what they were used to and the providers are used to using it. But a lot of the challenges with some of these treatments, even the branded ones are the side effects. There's the efficacy component, but we feel we've got that covered. So from a side effect perspective, one of the most side effects that they see is weight gain and what patients don't want to get is weight gain. Sexual dysfunction is another one as well as movement disorder. So all 3 of these, if you think about it, if you look at CAPLYTA, it's the ideal product because really zero effect versus placebo in those 3 areas. So you now have a simple once-a-day pill, no titration needed, so convenience. If you think about a primary care physician or advanced practitioner provider, they can simply administer the product and feel that they're going to get the [ Zaroxolyn ] and not get the weight gain that they might on some of the others. So we do believe this is going to be a catalyst for growth for CAPLYTA. We do believe CAPLYTA is going to be another $5 billion-plus asset. We're quite excited to have it in our portfolio and the entire Intra-Cellular organization. So that's another one that we foresee to be a significant growth opportunity and really would transform patients with major depressive disorder.

Awesome. Great. that's another one where there might be a little bit of a Street disconnect, I think.

I think there's a little bit.

Yes. $5 billion in that window maybe before 2030.

Let's see. We're excited about that. And we are ready. I would tell you this organization is ready to go.

Yes. Excellent. Excellent. Okay. Let's talk about pharma R&D. Pharma companies continue to spend more and more money on R&D. At the same time, you've got price pressure, regulatory scrutiny putting pressure on returns on investment. How do you think about returns on R&D investment in the pharma business? And do you expect the ROI to increase, decrease, stay the same next 5 or 10 years?

I think at Johnson & Johnson, we always disproportionately invest in R&D and then we do in sales and marketing. We do believe our strategy is built on 3 pillars, 3 therapeutic areas, oncology, immunology and neuroscience and some select area, disease area strongholds that we like to say. I bring that up because that allows us to really have end-to-end expertise from discovery, all the way through commercialization, customer intimacy and understanding of the business and all the way through that value chain. I bring that because we also then can leverage AI to understand the science and look for efficiencies. I do believe AI, machine learning are really going to help us drive better efficiency and better returns. So I foresee us continue to double down there. As we talked about some of the challenges, maybe macro challenges, the best way to weather those storms is to innovate.

Okay. Excellent. Maybe quickly on the M&A front. Obviously, you just closed Intra-Cellular, a bigger deal, almost $15 billion deal. Can you talk about the M&A strategy in pharma or just any areas of interest or priorities in terms of deal size?

I would say, since we have declared the 3 major therapeutic areas, we're always going to be looking within those, whether adjacencies and disease areas within those 3 therapeutic areas, but be opportunistic. We're going to follow the science. We have, I would like to call them drug hunters in the organization that understand the science and following the science and then we're going to be opportunistic. We typically -- our sweet spot is some of these tuck-ins, some of the early deals, some maybe pre-proof of concept or right around that area, where we can then develop a product and really take it to a full-fledged development. I mean DARZALEX FASPRO or DARZALEX is a great example of that, but we're able to do that. We saw a little signal, took that and did a robust development plan and demonstrated our success, and you see that with DARZALEX right now.

Excellent. Let's talk about modalities, new modalities briefly. You mentioned it. Do you think you have the necessary tools in the toolkit for those new modalities, cell therapy, mRNA, gene editing, gene silencing, all those? Where you have gaps, are you looking to fill those gaps via licensing deals or build those in-house capabilities? Like how do you think about the plan for modalities?

Yes. We don't look at a modality approaches. We look more at the disease areas or strategy approaches. And if we see the disease and an innovation, we'll find that modality and be able to make that modality work. I will say, if you think about it, we were the first products -- or first organization to have a biologic REMICADE and we've mastered that, I believe. We've already got bispecifics. And now I'd love to talk to you about our trispecifics that we're putting in the clinic, already have in the clinic. So if we think about modalities, we have expertise there. Cell therapy is another one. With CARVYKTI, now we have a Bi-CAR that we brought in. We've learned as we go. And then we also have ADCs and radioligand and things like that. So if the data is there and the technology, we'll find a way to bring it to the marketplace.

Okay. Great. All right. I'm a MedTech analyst, and I just went 38 minutes without talking about MedTech, even when you brought out TAR-200.

I tried to give you a little bit.

Maybe to that point, though, on TAR-200, obviously, you're showing the benefits of having pharma and MedTech under one roof. Should we expect more of that in other disease areas?

Yes. I would say we are already doing that organically. We like to say let's become #1 in our categories and then look for synergy. And I think that's what we're focused on doing. But I would tell you, naturally, as you think about one of the areas we have a partnered product for thrombosis, atrial fibrillation, for example, we have a significant presence there with MedTech. We're definitely leaning on them. We have XARELTO in the U.S. as well. So we're looking at areas and we can look at patients, data science, analytics, understanding customer intimacy. So we're absolutely doing it organically.

Yes. Excellent. Excellent. It's been a bunch of PRs just in the last few weeks. It's hard to keep up with all the things that you guys are up to. Anything we missed here, pipeline opportunities, or is there any sort of final comments you want to highlight?

Yes. Real quickly on the pipeline. I mentioned it. I think if we think about our end-to-end expertise in multiple myeloma, we learned a lot as the introduction of our bispecifics, TECVAYLI and TALVEY. We now have a trispecific that we have engineered. Kudos to our scientists who are able to engineer this to really look at reducing some of the AEs associated with these bispecifics to make it a more community-friendly therapy. We're able to space the dosing, have incredible efficacy, and you see that already in the preliminary results and it could really transform the treatment of multiple myeloma. We talked about milvexian. I'll just end and say, at the end of the day, we believe we're in another era of growth where exciting opportunities are ahead of us. We feel more than confident we're going to be able to deliver the 5% to 7% compound annual growth rate, even in the upper limit due to this transformational medical innovation that we're bringing, and we're excited to be there.

Awesome. Awesome. Thanks so much for being here.

Thank you, Lee.

Really appreciate it. Thank you.

All right.

Thanks, everybody.