Johnson & Johnson (JNJ) Earnings Call Transcript & Summary

Good morning and welcome to Johnson & Johnson's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded. [Operator Instructions] I will now turn the conference call over to Johnson & Johnson. You may begin.

Hello, everyone. This is Ryan Koors, Vice President of Investor Relations for Johnson & Johnson, I'm excited to be here today and to lead the Investor Relations team moving forward. Welcome to our company's review of business results for the second quarter of 2026 and our financial outlook for the full year. 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. They 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 2025 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 growth drivers. I will then review the second quarter sales and P&L results. Joe Wolk, our CFO, will then close by sharing an overview of our capital allocation priorities and updated guidance for 2026. Jennifer Taubert, 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, Ryan, and welcome to your new role. I'm pleased to share the top line results from our strong second quarter. We said 2026 would be a year of accelerated growth and impact for Johnson & Johnson and with our Q2 beat on the top and bottom line and raised guidance we are delivering across oncology, immunology, neuroscience, cardiovascular surgeon ambition. The strength of our business is built on our unique combination of scientific expertise, scale and disciplined execution. We have the strongest portfolio and pipeline in our 140-year history with 28 products and platforms that each delivered more than $1 billion in annual sales. In Q2, we reported operational sales growth of 5.6%. Excluding STELARA, we grew double digits in the quarter. With sales in the quarter of more than $25 billion, we are on track to meet our 2026 target of more than $100 billion in annual revenue for the first time in our company's 140-year history. We are pleased with the progress of our new launches including ICOTYDE, INLEXZO and RYBREVANT instilling confidence that momentum will accelerate into 2027 and beyond with line of sight to double-digit growth by the end of the decade. ICOTYDE, in particular, has significant early launch momentum with uptake accelerating and performance outpacing competitors at comparable points in the launches. Since launch, more than 10,000 patients have initiated therapy on ICOTYDE, underscoring the unmet need for patients seeking first-line systemic treatment with a unique combination of efficacy, safety and the simplicity of our once-daily pill. In innovative medicine, we delivered operational sales growth of 6.8% in the quarter, with 8 brands growing double digits. In oncology, our commitment to transform patient outcomes has never been stronger. We are on track to be the #1 oncology company by 2030, with sales projected to exceed $50 billion. Leading the way in Q2 is DARZALEX, the foundational treatment for multiple myeloma, which continues to be our largest product. Once again, DARZALEX delivered sales of more than $4 billion, growing close to 18%. When we talk about the depth of our portfolio, nowhere is that more evident than in multiple myeloma. We have treatments in every line of therapy with 80% of patients receiving one or more of our medicines during the treatment journey. CARVYKTI, TECVAYLI and TALVEY continue to deliver high double-digit growth. And we are not standing still with the new data this quarter showing the combination of TALVEY and DARZALEX delivered deep and durable responses with more than 80% of patients progression-free at 2 years, and overall survival up to 89%. In solid tumors, we continue to see strong performance from ERLEADA and RYBREVANT, and we shared important new data for both at ASCO that could change clinical practice. For ERLEADA, we opened the ASCO plenary with our Phase III PROTEUS study showing that treatment before and after surgery significantly reduces the risk of metastasis or death in high-risk localized prostate cancer. And with RYBREVANT, we demonstrated durable responses in head and neck cancer, an area with limited options and have submitted a filing to the FDA to build on existing lung cancer indications. While we are not yet reporting quarterly sales for INLEXZO in bladder cancer we are encouraged by the early momentum during the second quarter, nearly 1 in 3 eligible patients started on an INLEXZO regimen. And new patient insertions grew approximately 75% versus prior quarter. And building on our recent acquisition of Halda Therapeutics, we also announced plans to acquire FireFly Bio, adding another antibody platform that strengthens our leadership in next-generation oncology innovation. We expect the transaction to close during the third quarter. In immunology, we have built one of the deepest and most differentiated portfolios in the industry. TREMFYA remains the fastest-growing advanced therapy in both Crohn's disease and ulcerative colitis, delivering exceptional overall sales growth of 71% in the quarter. With the dual powerhouse of TREMFYA and ICOTYDE in psoriasis, we now have a complementary portfolio of both first-line biologic and first-line systemic treatments. We continue to see strong uptake of IMAAVY in generalized myasthenia gravis and recently received FDA priority review status in warm autoimmune hemolytic anemia. In neuroscience, we are developing treatments to transform care for complex brain and nervous system disorders. SPRAVATO and CAPLYTA both performed strongly in the quarter. CAPLYTA new patient starts were up 122% versus prior year, significantly outpacing the market leader and with FDA approval for the prevention of relapse in schizophrenia, we have continued momentum. Now let's turn to MedTech, where we delivered Q2 operational sales growth of 3.6%. In cardiovascular, we are the global leaders in electrophysiology, circulatory restoration and hard recovery. VARIPULSE, our post-field ablation platform for at fibrillation continues to build momentum with more than 85,000 Afib patients now treated worldwide. In Q2, our position was further strengthened with the debut of CARTO Sound Sonata bringing new AI-powered imaging and mapping capabilities to electrophysiology. We also received FDA authorization for our dual energy THERMALCOOL SMARTTOUCH SF platform which intakes pulse field and radio frequency energy in a single system to give physicians greater flexibility in tailoring ablation treatments for patients. In circulatory restoration, the Q2 global launch of Shockwave C2 AERO expanded our ability to treat more complex coronary disease and broadens the reach of our intravascular lithotripsy platform. And in a recovery, while Abiomed growth slowed in Q2 as a result of increased decision selectivity weighing on procedural volumes, we are working to strengthen the confidence in our extensive clinical evidence and real-world experience. In surgery, we are unlocking a new era powered by robotics and digital innovation. We are progressing towards potential FDA authorization of a the world's first stable integrated robotic surgical system. This is one of the most significant MedTech innovation we will bring to market this decade. OTTAVA's unique architecture automated features and next-generation robotic instruments help address surgeons unmet needs, while integration with our polyphonic open digital ecosystem provides data-driven insights and analytics to better support surgical teams. This quarter, we also received CE Mark approval for the Ethicon 4000 Stapler the latest advancement in our line of surgical technologies. In vision, we have a bold ambition to make vision possible for more than 40 million people each year. In Q2, we announced the expanded U.S. availability of TECNIS PureSee as we accelerate the rollout of this extended depth of focus intraocular lens. Our ACUVUE portfolio delivered strong quarterly growth across all regions. And as a part of our $55 billion U.S. commitment we recently announced an investment of more than $1 billion to scale our U.S. vision manufacturing packaging and distribution capabilities as we expand capacity to meet growing demand for these products. Our progress in Q2 reflects what makes Johnson & Johnson unique, a company innovating across the full spectrum of health care delivering strong performance today while building a pipeline that will transform care for patients tomorrow. As we look ahead, our confidence is rooted in the breadth of our innovation from transformational medicines to next-generation medical technologies. That combination of science, scale and disciplined execution is what uniquely positions Johnson & Johnson to lead the next wave of health care innovation. I will now turn the call back over to Ryan.

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 2026 sales results. Worldwide sales were $25.3 billion for the quarter. Sales increased 5.6% despite an approximate 460 basis point headwind from STELARA. Excluding STELARA, Johnson & Johnson grew double digits for the quarter. Growth in the U.S. was 7.3% and 3.4% outside of the U.S. Acquisitions and divestitures had a net negative impact on worldwide growth of 10 basis points. Now turning to earnings. For the quarter, net earnings were $5.5 billion and diluted earnings per share were $2.27 versus $2.29 a year ago. Adjusted net earnings for the quarter were $7.1 billion, adjusted diluted earnings per share were $2.90, representing an increase of 5.7% and 4.7%, respectively, compared to the second quarter of 2025. I will now comment on business sales results in the quarter. focusing on the 6 key areas where meaningful innovation and strong commercial execution are driving our performance and fueling long-term growth. Beginning with innovative medicine, where our financial results reflect the depth of our expertise and innovation in areas of high unmet need across oncology, immunology and neuroscience. Worldwide sales of $16.4 billion increased 6.8% despite an approximate 760 basis point headwind from STELARA, which underscores the continued strength of our key brands and new launches. Growth in the U.S. was 8.9% and 3.6% outside of the U.S. divestitures had a negative impact of 10 basis points on worldwide growth. In oncology, starting with multiple myeloma. DARZALEX growth was 17.6%, primarily driven by strong share gains of 5 points across all lines of therapy with nearly 11 points in the frontline setting as well as continued market growth. CARVYKTI achieved growth of 47.7% driven by share gains and continued site expansion. TECVAYLI growth was 56.1% with worldwide sequential growth of 29.2% and an impressive U.S. sequential growth of 46.2% driven by launch uptake and share gains across earlier lines of therapy following last quarter's approval in the U.S. for TECVAYLI plus DARZALEX FASPRO and from expansion in the community setting. TALVEY growth was 62.6%, driven by share gains due to increased depth of prescribing in the community setting. In lung cancer, RYBREVANT plus LAZCLUZE delivered growth of 61.6%, driven by continued launch uptake in all regions, share gains in the first and second lines with rapid uptake in RYBREVANT FASPRO. In prostate cancer, ERLEADA delivered growth of 7.6%, with continued share gains and market growth, partially offset by unfavorable patient mix and inventory dynamics. Within immunology, TREMFYA delivered impressive growth of 71% as the IBD launch is driving significant momentum and we continue to see share gains across all indications as well as continued market growth. STELARA declined 55.7%, driven by share loss due to biosimilar competition, increasing adoption of novel classes and unfavorable patient mix. Growth in other immunology is driven by U.S. new product launches, IMAAVY and ICOTYDE. In neuroscience, SPRAVATO grew 40%, driven by continued strong demand from physicians and patients and strong sequential growth of 24.8%. CAPLYTA showed significant growth of 70.9%, driven by strong continued launch momentum in adjunctive major depressive disorder. Now moving to MedTech, where we delivered growth across each of our key focus areas, cardiovascular surgery and vision. Worldwide sales of $8.9 billion increased 3.6% with growth of 3.9% in the U.S. and 3.2% outside the U.S. Acquisitions and divestitures had a net negative impact of 10 basis points on worldwide growth. Overall, cardiovascular grew 3.1%, which is lower than our recent trend primarily due to headwinds in electrophysiology and Abiomed. In electrophysiology, growth of 3.1% was driven by procedure growth, commercial execution, and new product performance, partially offset by competitive PFA pressures. There was also a negative impact from China inventory, which we estimate to be 400 basis points. Abiomed saw a decline of 2% due to pressures on U.S. procedures driven by usage patterns. The downturn came as physicians evaluated the results of a recent external clinical trial, which increased selectivity within the quarter, particularly in the U.S. The decline was partially offset by continued OUS growth, including sustained adoption of Impella 5.5. Shockwave grew double digits at 14.7%, driven by continued adoption of coronary and peripheral products as well as new product launches. Surgery grew 2.3%, including a negative impact of approximately 40 basis points from divestitures. Growth was driven by strength of the portfolio and commercial execution in biosurgery and enclosure, partially offset by VBP in China and surgery transformation across the portfolio as well as competitive pressures in energy and endocutters. Envision growth was 5.6%, driven by premium innovation, strong execution and global reach. Contact lenses and other products had a strong quarter with 6% growth, driven by strong performance in the ACUVUE OASYS 1-Day family of products, further solidifying our leadership position. Surgical vision grew 4.7%, driven by new product innovations robust demand for premium IOLs and strong commercial execution, partially offset by competitive pressures in the U.S. Orthopaedics growth for the quarter was 4.2%, primarily driven by new product launches such as Volt and Trauma and strong commercial execution across the portfolio. Now turning to our consolidated statement of earnings for the second quarter of 2026. The I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of goods sold leveraged by 30 basis points, driven by favorable operational drivers in currency, partially offset by unfavorable product mix in the Innovative Medicine business as well as the impact of tariffs in the MedTech business. Selling, marketing and administrative expenses deleveraged by 60 basis points, driven by increased investments in our new product launches. Research and development leveraged by 40 basis points, primarily driven by expense phasing in the innovative medicine business, partially offset by increased investment in med tech. Interest income and expense was a net expense of $62 million as compared to $48 million of expense in the second quarter of 2025. Other income and expense was a net expense of $331 million as compared to $107 million of expense in the second quarter of 2025 with the change primarily driven by higher litigation expense, restructuring related asset impairments and orthopedic separation-related costs partially offset by higher gains on securities. For taxes, on a GAAP basis, the effective rate in the second quarter of 2026 was 18% compared to 14.7% in the second quarter of 2025. More information can be found in our upcoming 10-Q for changes in taxes. Lastly, I'll direct your attention to the box section of the slide where we also have provided our 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 cement for the quarter. Innovative Medicine margin declined from 42.7% to 42.5%, primarily driven by unfavorable mix and heavier investments in new product launches, partially offset by expense phasing in research and development. MedTech margin declined from 22.2% to 22%, primarily driven by commercial investments, increased research and development and the increased impact of tariffs, partially offset by favorable operational drivers in currency and cost of products sold. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 34.5% to 34.2%. This concludes the sales and earnings portion of the call, and I will now turn the call over to Joe.

Thank you, Ryan, and congratulations on your first earnings call. Your experience across all parts of Johnson & Johnson's business will be a real asset to our company as well as the investment community. We're glad you're in the role. . Hello, everyone, and thank you for joining us today. As Joaquin highlighted earlier, we delivered a solid quarter, supported by the depth of our in-market portfolio and strong execution across our new product launches with particularly good growth in innovative medicine. In MedTech, results were not to our standards in cardiovascular, primarily heart recovery However, we remain confident in our long-term projections for the med tech business. A quarter like this, I believe, underscores the strength of Johnson & Johnson. Even with a notable headwind, we still delivered performance that exceeded your expectations and enabled us to confidently raise our full year 2026 financial outlook. We are not dependent on 1 or 2 products. We have a broad durable portfolio that has 28 platforms, each generating more than $1 billion in annual revenue that we are intent on adding to in the coming years. It is that foundation that gives us clear line of sight to double-digit growth by the end of the decade. Turning to results with our cash position. We ended the second quarter with approximately $21 billion of cash and marketable securities and approximately $49 billion of debt for a net debt position of approximately $28 billion. You may recall in Q1 that free cash flow is light, but as expected, we had significant improvement in the second quarter year-to-date totaling approximately $8.7 billion and are on track for our full year free cash flow outlook approaching $21 billion. Our capital allocation priorities remain unchanged. We continue to prioritize investments with a focus on supporting our commercial launches and advancing future innovation. As stated previously, acquisitions are an enabler of growth, but they are not a requirement to deliver on our near- and long-term objectives. Our financial strength allows us to continue investing in R&D while pursuing opportunities where our scientific and commercial capabilities can accelerate innovation and create differentiated value. A good example of that is the recently announced agreement to acquire Firefly Bio. The planned acquisition expected to close in the third quarter of 2026, will add a proprietary platform designed to target KRAS driven solid tumors, which are typically more difficult to treat and further diversifies our oncology pipeline. We also remain committed to returning capital directly to shareholders primarily through our dividend. Turning to full year guidance for 2026. As always, our outlook reflects what we know today regarding foreign exchange rates, tariffs, the broader macroeconomic environment and other external factors. Driven by second quarter performance and uptake of new product launches we are increasing operational sales growth by $400 million, now expecting operational sales growth for the full year to be in the range of 6.5% to 7.1%, with a midpoint of $100.6 billion. As a reminder, our financial calendar in 2026 includes a 53rd week, which provides a benefit of approximately 100 basis points in 2026. We do not speculate on future currency movements. Last quarter, we utilized a euro spot rate to the U.S. dollar of $1.17. As of last week, the euro spot rate to the U.S. dollar was $1.14. Based on all major currency movements, we estimate a negative total foreign currency impact of $100 million versus prior guidance. As a result, we now expect reported sales growth of 7.0% to 7.6%, with a midpoint of $101.1 billion or 7.3%. As we look at the remainder of the year, based on year-to-date performance and updated guidance, we anticipate operational sales growth to improve in the second half of the year. As a reminder, fourth quarter growth should be higher due to the benefit from the 53rd week. Turning to other notable items on the P&L. At the beginning of the year, we guided to more than a 50 basis point improvement in adjusted pretax operating margin. We now expect approximately a 75 basis point improvement supported by continuing operating efficiencies and anticipated reduction and recoupment of certain tariff rated costs based on the latest rulings. This pretax operating margin improvement also considers the expected cost from the 53rd week of operations and the previously announced agreement with the U.S. government to improve access to medicines and lower costs to the U.S. patients. For net interest expense, we now project $250 million to $300 million, slightly lower than previous guidance. Our effective tax rate is now expected to be lower in a range of 17.0% to 18.0% for the full year based on year-to-date results. Turning to earnings per share. We are pleased to increase our adjusted operational earnings per share range to $11.50 to $11.65, which equates to an increase of $0.18 at the midpoint. This represents a year-on-year adjusted operational EPS growth of 7.3%. Reported earnings per share is projected to be $11.60 to $11.75 or $11.68 at the midpoint, which represents an 8.2% increase over the prior year. The updated earnings per share guidance range includes a $0.05 reduction of favorable currency when compared to prior guidance. Our current outlook does not include the impact of any pending acquisitions such as Firefly Bio. We have several meaningful pipeline catalysts in the second half of the year. We anticipate FDA regulatory approval for main as the first-ever treatment for patients with warm autoimmune hemolytic anemia, a rare and serious auto antibody disease. We also have important data readouts across our innovative medicine pipeline, including Tech Valley in combination with TECVAYLI for patients with relapsed/refractory multiple myeloma who have received 1 to 4 prior lines of therapy. Pasritamig, a first-in-class bispecific antibody in patients with advanced prostate cancer who have progressed after multiple lines of therapy and J&J-6143, an investigational first-in-class once-daily oral therapy for metastatic castration-resistant prostate cancer. This will be the first clinical readout from an ongoing study from our recent Halda acquisition. We are also expecting data readouts for Eleo in high-risk non-muscle invasive bladder cancer ice in psoriatic arthritis and CAPLYTA in bipolar mania. Turning to MedTech. There are several important catalysts that we expect to generate momentum. In cardiovascular, we expect launches for the dual energy THERMOCOOL SMARTTOUCH SF platform as well as the Shockwave C2 AERO and Aerofly-IVL catheters. In electrophysiology, we expect continued adoption of Carto Sound Sonata cardiomapping in the U.S. and VARIPULSE Pro in EMEA with anticipated approval of VARIPULSE Pro in the U.S. later this year. In surgery, we anticipate FDA approval for the OTTAVA robotic surgical system and the EMEA launch of ETHICON 4000 and envision we continue to expand availability of TECNIS PureSee intraocular lens for cataract and presbyopia while driving adoption of ACUVUE OASYS Max lenses. Finally, the Orthopedics business under Namal Nawana's leadership had another quarter of improvement. We continue to evaluate all separation options that create shareholder value and set the DePuy Synthes business up for success long term. We are pleased with the progress made are on track for a mid-2027 separation and look forward to sharing updates later this year. So to wrap up before we take your questions, our first half performance illustrates the strength and resilience of our portfolio. The momentum we are building behind our new products and the steady progress we are making across our pipeline. Strategic focus, scale and financial flexibility to invest in opportunities we believe will create the greatest value for patients should translate into meaningful value for shareholders. We look forward to sharing more on strategy, growth catalysts and a longer-term outlook at our Enterprise business review on December 8. To our colleagues around the world, thank you. Your dedication and disciplined execution are what make our performance possible, and you continue to deliver meaningful innovation to more patients, improve outcomes and raise the standard of care. With that, we are pleased to take your questions. Kevin, can you please open the call for Q&A?

[Operator Instructions] Our first question is coming from Chris Schott from JPMorgan.

Great. And congrats on all the progress. Maybe just, Joe, if you could dive a little bit more into the $400 million increase in operational sales guidance. I was just interested for a little bit more color of the balance of pharma versus the med tech components to this. I guess just bigger picture, is it fair to think about pharma moving higher here, maybe partially offset by a bit lower med tech growth assumptions? Or just any directional color there would be helpful.

Yes, thank you for the question. I would say that's probably a fair characterization. As you know, we always had a little bit better revenue growth projected in the second half of the year, irrespective of the extra week of sales that will occur in the fourth quarter when you think about products that are really in their infancy with respect to ICOTYDE, INLEXCO and just the emergence of TREMFYA continuing to do well with the IBD indications that were received over the last 18 months. It was always that projection. . I think really maybe to the heart of your question is we do expect MedTech to grow better in the second half than the first half as well. We have tempered expectations around the Abiomed business. with respect to that. So we see that recovery happening, but probably as we leave this year into next year. So not declines, but more modest growth until our PROTECT 4 data comes out, which I'm sure Tim will have an answer to in a future question to expand upon. Hopefully, that helps, Chris.

Our next question today is coming from Massad Haider from Goldman Sachs.

Maybe for Jennifer, John on ICOTYDE, just the launch seems to be progressing well. You noted 10,000 patients have now initiated therapy. Just wondering if you can provide any update on prescriber accounts relative to the last update of 4,500 prescribers that you called out in June. What can you tell us about sampling and free drug that you're providing and where you are with formulary negotiations? And when can we expect to see you break out sales? And then maybe just a second part on that. How are you positioning Tremfya and ICOTYDE together to the dermatologist community and psoriasis? Are there any synergies or advantages that you're seeing emerge from having both options?

Great. Well, thanks, [indiscernible]. This is Jennifer, and good morning, everybody. And I really want to start with a big thank you to all of our innovative medicine colleagues around the world for an outstanding quarter of delivering for patients. So over $16 billion in sales first $1 billion quarter, 6.8% operational growth, and it's also worth noting STELARA was only 4% of our innovative medicine business in the second quarter. And if you exclude that, the 96% of our business, 96% actually grew over 14%. And this is really based on the strong growth across our main key brands as well as our must-win launches, and the team has really done an outstanding job around the world on that. So glad to have the opportunity to talk about ICOTYDE because we are really thrilled the launch and how it's progressing. I think as we noted last time, we feel real good about the differentiated label that we got. ICOTYDE is the first and only targeted oral peptide that precisely block IL-23 inhibitor. If we talk about the U.S. launch and get into some details that you asked, it's really off to a strong start. As a reminder, ready day 1. And in fact, the first patient prescribed received ICOTYDE on that launch day and early physician and patient enthusiasm has been really great. If we get into numbers on it, to date, over 18,000 prescriptions have been written for a total of now 11,000 patients. So that's an update from the 10 just shortly. There are 6,000 unique prescribers. And if you take a look at those, over 50% are actually advanced practice providers, about 40% are dermatologists and the rest are primary care physicians. And so that tells us that there's really good confidence in the product in both the efficacy and safety profile as well as the simplicity of the simple once daily pill. We're already seeing a number of writers who are repeat. We're seeing patients getting repeat prescriptions. Can we take a look at the payer coverage? Within 90 days, we already have over 50% of commercial coverage. And we think that's great. That's actually a little bit ahead of our projections. So team is making really great progress on the payer average there. And so in total, we think the launch is going very well. You asked about ICOTYDE and TREMFYA. And I think really, really important to note, we've got this great uptick in ICOTYDE. This has not slowed down in psoriatic disease at all. So TREMFYA in psoriatic disease, psoriasis and PSA, that growth and market share gains has actually continued well above the market. And notable in the second quarter that we got approval for inhibition of structural damage for TREMFYA in PSA. And then in terms of really copositioning, ICOTYDE is the first choice systemic treatment. All of those patients who've been sickling on topicals who really need to have advanced, we think ICOTYDE sits right in that sweet spot as that first choice systemic. For TREMFYA, we think it's the first choice biologic, particularly for patients that have potential for or have any psoriatic arthritis involvement and many, many patients, a significant percentage with psoriasis actually progress the psoriatic arthritis as well. So we think really distinct and unique positions for both and well reflected in the results that we saw in the quarter with both products doing really well. Additionally, we are investing to win on ICOTYDE. This is one of our must-win launches in addition to what you've seen, we actually also started our direct-to-consumer advertising yesterday. Those of you who are watching World Cup or baseball had a chance to see that. And so we think this is even going to further bring more patients in to talk to their providers about new options for psoriasis.

Maybe one quick addition, John Reed here. We do expect to have pivotal data later this year. for ICOTYDE in psoriatic arthritis. And as Jennifer pointed out, there's overlap in the psoriasis and psoriatic arthritis populations psoriasis, the skin manifestations are often a comorbidity for patients with psoriatic arthritis. And our Phase III studies in ulcerative colitis and Crohn's are in full steam now. So we're moving ICOTYDE forward as a possible frontline therapy there as well.

Our next question is coming from Larry BIegelsen from Wells Fargo.

Tim, I'm sure you know there continue to be concerns about procedure growth in the U.S. What did you see in Q2? And how are you thinking about procedure growth the rest of the year? And regarding J&J, I heard Joe say the second half J&J MedTech growth would be better than the first half, which was 4.2%, I believe. Do you still expect MedTech to grow faster in '26, excluding the extra week?

Larry, thank you so much for the question, and let me before I get into procedure volume. And certainly, given the news that we've heard from hospital providers this week. I know it's a hot topic, but I'd like to put our second quarter performance in context for you and for others. When we step back and we look across the full portfolio, the underlying picture remains solid. Procedure volumes continue to be stable, and we're not seeing evidence of a broad-based slowdown in demand. And to be clear, Larry, 3 of our 4 businesses, Surgery, Vision and Orthopedics all accelerated in the quarter and performed above expectations. Surgery growth was driven by continued strong performance in we closure and almost double-digit growth in BioSurgery. Vision you would have noticed delivered meaningful acceleration in contact lens and continued momentum in IOLs. And in orthopedics, as you've heard already from Joe, we continue to see that business go from strength to strength electing stronger execution and the impact of multiple new products. I would like to turn quickly to CV. And let me first acknowledge that our Q2 growth is not where you wanted it. And frankly, it's the way we wanted it. That said, we know what happened and we know exactly what we're doing about it. In full transparency, CV growth was more muted this quarter in both EP and heart recovery partially offset by continued double-digit growth in Shockwave. In EP, as you already heard, we continue to see strong underlying demand. However, we did have an inventory dynamic in China, which impacted our growth by about 400 basis points that would have taken global growth up to north of 7%. And then heart recovery due to a recent neutral clinical trial in the U.K., Impella usage has slowed. We see this as a near-term dynamic, and we're actively engaging physicians and their teams to reinforce appropriate patient selection, leveraging significant depth of our clinical evidence base. So again, to put it all in context, 3 out of our 4 businesses performed well, and we're confidently addressing the fourth and nothing we see changes our conviction in the long-term growth thesis for both our CV business as well as J&J MedTech at large. To your question about procedure volumes. From our perspective, when we look across the breadth of our portfolio, we see that volumes are generally in line with market trends, and we're not currently seeing any evidence of a broad-based slowdown in activity. Demand remains consistent what we would expect given the fundamentals of these markets, which, as you know, continue to be driven by themes such as aging populations increasing disease [indiscernible] and ongoing innovation that is expanding our access more patients. We are acutely aware of the recent data that has been provided by a number of large U.S. hospital operators highlighting pressure on certain procedure volumes, particularly in more elective areas of care. And while we're monitoring these trends very closely, they are not reflected in what we're seeing across our portfolio today. As you know, our business is diversified across a broad range of categories, many of which are less dependent on discretionary elective procedures and our perspective, overall procedure trends remain consistent in the quarter with our expectations I will also point to, there has been a bunch of chatter about the potential impact of the ACA subsidy removals based on what we're seeing we're not -- we haven't observed any meaningful impact on procedure volumes across our portfolio related to the ACA. And while we expect that the expiration of -- the Affordable Care Act subsidies may create some affordability pressures for a small cohort of patients, we do not expect this to translate into a material impact on demand for med tech and procedures. And so to be clear, we would not attribute our med tech performance in Q2 to a systemic slowdown in procedures. As already mentioned, we do expect an acceleration of our performance in the second half driven by continued performance of our businesses in Vision in orthopedics and in surgery and certainly improvement on the back of our efforts to drive greater performance within cardiovascular.

Our next question today is coming from Terence Flynn from Morgan Stanley.

Great. Congrats on the quarter. I was just wondering, Jennifer, if you could expand on what you're seeing with TECVAYLI. Obviously, important new data that's been added to the label recently. So just wondering how that's impacting the growth dynamics. And then maybe you could expand on what you're seeing in terms of academic versus community use.

We had a great quarter for TECVAYLI with sales of $260 million, versus prior year. And really, that was driven by significant launch uptake and share gains across the earlier lines of therapy based on the approval that we got in the U.S. for TECVAYLI plus DARZALEX and also continued expansion in setting. So we're real excited about the approval of the combination regimen there. It's the first and only steroid-free, readily available immediate immunotherapy option that really has that best-in-class efficacy and the potential for cure for patients in that second-line setting. As a reminder on that data because we think it's truly extraordinary. It's 3 years, 83% of patients remained alive and progression free. And so this is really resonating with physicians. In terms of U.S. uptake, we're seeing really strong early U.S. demand following the rapid approval that we have for TECVAYLI plus DARZALEX. And so if you take a look quarter-to-quarter like quarter to second quarter, we saw a 29% increase in sequential growth there. And that's in terms of patients that were initiated in tech, and this is really due to new account adoption and increasing depth of prescribing. Furthermore, the vast majority of patients now with TECDERA are starting in the second to third line setting. And we continue to see increases in community site really set up an expansion in the U.S., they had a 25% quarter-over-quarter increase in community sites expanding there. And so we're feeling really good about what we're seeing in terms of TECVAYLI and TECVAYLI growth along with DARZALEX in that second and third line setting.

Next question today is coming from Joanne Wuensch from Citibank.

You have a fairly robust robotics portfolio that should be rolling out over the next couple of quarters and you did mention SRS. Could you please sort of give us an update on the lay of the land and what we might expect next week?

Joanne, thank you for the question and certainly your interest in robotics program. As you know, we have been worldwide leaders in open and laparoscopic surgery. And certainly, we are excited and very much committed to being a major player in the area of surgical robotics. I think you know that we are eagerly awaiting approval of OTTAVA. We submitted late last year. We are actively working on our second clinical trial, specifically focused on inguinal hernia, and we will provide much more detail around our exciting launch plans once approvals have been secured. That said, we are committed to the launch of 2, assuming approvals come our way, which we're very confident about. We are committed to 2 large robotic launches this year, both the launch of a which we believe is truly differentiated against the existing incumbent and of course, the launch of Monarch for urology, which will be a first-of-kind opportunity in that particular area. And so we will provide more information about those 2 launches at some more information next week. We'll also provide some update certainly on the FORTE trial our clinical trial, which was actually presented at the ASMBS conference about 1.5 months ago, and I actually had the opportunity to attend a meeting out in California with about 70 world -- actually would renowned robotic surgeons and got to see firsthand our surgeons not only listen to the discretion about the trial, but also to actually drive the robot and frankly, just seeing the looks on their faces, the feedback we received gives me even more confidence that we have a device that will absolutely compete against the current incumbent and so more to come on that.