Johnson & Johnson (NYSE:JNJ) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.

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Summary

Johnson & Johnson reported strong Q2 2026 financial performance with operational sales growth of 5.6%, reaching $25.3 billion, and raised full-year revenue guidance to exceed $100 billion.

The company highlighted significant growth in its Innovative Medicine segment, particularly in oncology, immunology, and neuroscience, with notable contributions from Darzalex and Tremphya.

Strategic initiatives included the acquisition of Firefly Bio to enhance its oncology pipeline and continued investments in MedTech innovations like the OTAVA robotic surgical system.

Net earnings for Q2 were $5.5 billion with adjusted EPS of $2.90, reflecting a 4.7% increase compared to the previous year.

Management expressed confidence in achieving double-digit growth by the end of the decade, driven by a diverse portfolio and disciplined execution.

Full Transcript

OPERATOR

Good morning and welcome to Johnson & Johnson's second quarter 2026 earnings conference call. All participants will be in the listen-only mode until the question and answer session of the conference. This call is being recorded. If anyone has any objections, you may disconnect at this time. If you experience technical difficulties during the conference, you may press Star zero to reach the operator. I will now turn the conference call over to Johnson & Johnson.

You may begin.

Ryan Coors, Vice President of Investor Relations

Hello everyone, this is Ryan Coors, 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 as well.

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 Walk, 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.

Joaquin Duato, Chairman and CEO

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 to bid on the top and bottom line and raised guidance, we are delivering across oncology, immunology, neuroscience, cardiovascular surgery, and vision. 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 delivered more than a billion dollars in annual sales. In Q2, we reported operational sales growth of 5.6%. Excluding Stellara, 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 Icotide in Lexo and Rybrebant, instilling confidence that momentum will accelerate into 2027 and beyond with line of sight to double-digit growth by the end of the decade. Icotide in particular has significant early launch momentum with uptake accelerating and performance outpacing competitors at comparable points in their launches. Since launch, more than 10,000 patients have initiated therapy on Nicotide, underscoring their unmet need for patients seeking first-line systemic treatment with a unique combination of efficacy, safety, and the simplicity of a once-daily pill.

In innovative medicine, we delivered operational sales growth of 6.8% in the quarter with eight brands growing double digits. In oncology, our commitment to transform patient outcomes has never been stronger. We are on track to be the number one 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 delivers 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. Carvicti, Techvaili, and Talvay continue to deliver high double-digit growth, and we are not standing still with the new data this quarter showing the combination of Talvay 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 Ribreband, 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 3 Proteus study showing that treatment before and after surgery significantly reduces the risk of metastasis or death in high-risk localized prostate cancer. With Riverband, 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 Inlexo in bladder cancer, we are encouraged by the early momentum. During the second quarter, nearly 1 in 3 eligible patients started on an elixir regimen, and new patient insertions grew approximately 75% versus the prior quarter. 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. Tremphya 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 Tremphya and icotide 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 Imavi in generalized myasthenia gravis and recently received FDA Priority review status in warm and autoimmune hemolytic anemia. In neuroscience, we are developing treatments to transform care for complex brain and nervous system disorders. Spravato and Caplita both performed strongly in the quarter. Caplita new patient starts were up 122% versus the prior year, significantly outpacing the market leader. With FDA approval for the prevention of relapse in schizophrenia, we 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 heart recovery. Varipulse, our pulsed field ablation platform for atrial 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 Cartos Sound Sonata, bringing new AI-powered imaging and mapping capabilities to electrophysiology.

We also received FDA authorization for our dual energy thermocool SmartTouch SF platform, which integrates pulse, field, and radio frequency energy in a single series to give physicians greater flexibility in tailoring ablation treatments for patients in circulatory restoration. The Q2 global launch of Sokwave C2 ERO expanded our ability to treat more complex coronary disease and broadens the reach of our intravascular lithotripsy platform. In heart recovery, while Abiomed growth slowed in Q2 as a result of increased physician 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 Otaba, the world's first stable integrated robotic surgical system. This is one of the most significant medtech innovations we will bring to market this decade. Otava'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 US availability of TechniSpirc 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 US commitment, we recently announced an investment of more than $1 billion to scale our US 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 healthcare, 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 healthcare 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 US was 7.3% and 3.4% outside of the US.

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 and 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 six 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 US was 8.9% and 3.6% outside of the US. 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. Carvicti achieved growth of 47.7% driven by share gains and continued site expansion. Tech Valley growth was 56.1% with worldwide sequential growth of 29.2% and impressive US sequential growth of 46.2% driven by launch uptake and share gains across earlier lines of therapy following last quarter's approval in the US for TechVale plus Darzalex, FastPro, and from expansion in the community setting.

Talva growth was 62.6% driven by share gains due to increased depth of prescribing in the community setting. In lung cancer, Ribavant plus Lasclus 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 Ribavant FastPro 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, Tremphya 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 US new product launches, Amave and Ictide. In neuroscience, Bravado grew 40%, driven by continued strong demand from physicians and patients and strong sequential growth of 24.8%.

Capilidis showed significant growth of 70.9% driven by strong continued launch momentum and adjunctive major depressive disorder. Now moving to MedTech where we deliver 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 US and 3.2% outside the US. 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 US 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 US.

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 wound closure, partially offset by VBP in China and surgery transformation across the portfolio as well as competitive pressures in energy and endocutters.

Vision 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 Oasis one-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. Orthopedics 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. 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 and 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 MedTech. Interest income and expense was a net expense of $62 million as compared to $48 million of expense in 2Q20. 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 10Q 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 segment 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 and 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.

Joe Walk (Chief Financial Officer)

Thank you, Joaquin. 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 MedTech 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 one or two 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 was light, but as expected, we had significant improvement in the second quarter with 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 US dollar of 1.17. As of last week, the euro spot rate to the US 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, and 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-related 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 US Government to improve access to medicines and lower costs to US 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 18 cents at the midpoint. This represents 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, an 8.2% increase over the prior year. The updated earnings per share guidance range includes a 5 cent 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 AMAVI as the first-ever treatment for patients with warm autoimmune hemolytic anemia, a rare and serious autoantibody disease. We also have important data readouts across our innovative medicine pipeline, including Tekveli in combination with Talva for patients with relapsed refractory multiple myeloma who have received one to four prior lines of therapy, pasridomig, a first-in-class bispecific antibody in patients with advanced prostate cancer who have progressed after multiple lines of therapy, and JJ6143, 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 Inlexo in high-risk non-muscle invasive bladder cancer, Icotide in psoriatic arthritis, and Capillita 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 CartoSound Sonata cardio mapping 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 OTAVA robotic surgical system and the EMEA launch of Ethicon 4000 and Envision.

We continue to expand availability of Tecnis Pure C intraocular lens for cataract and presbyopia while driving adoption of Acuvue Oasis Max lenses. Finally, the orthopedics business under Numal Nuana's leadership had another quarter of improvement. We continue to evaluate all separation options and.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.