Johnson & Johnson (NASDAQ:JNJ) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Operator
Good morning and welcome to Johnson & Johnson’s first 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 call over to Johnson and Johnson. You may begin.
Darren Snellgrove (Vice President of Investor Relations)
Hello everyone, this is Darren Snelgrove, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company’s review of business results for the first 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@https://investor.jnj.com Please note that this presentation contains forward looking statements regarding, among other things, the Company’s future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward looking statements which are based on the current expectations of future events using the information available as of the date of this recording, and are subject to certain risks and uncertainties that may cause the Company’s actual results to differ materially from those projected. The description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2025 Form 10K, which is available at https://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 Duarto, our Chairman and CEO, will discuss our business performance and growth drivers. I will then review the first quarter sales and P and L results. Joe Walk, our cfo, will then close by sharing an overview of our capital allocation priorities and updated guidance for 2026. Jennifer Talbot, executive Vice President, Worldwide Chairman, Innovative Medicine John Reed, Executive Vice President, Innovative Medicine Research and Development and Tim Schmid, Executive Vice President, Worldwide Chairman, MedTech will be joining us for Q and 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)
Good morning everyone and thank you for joining us. We said 2026 would be a year of accelerated growth and impact for Johnson and Johnson, and with our strong Q1 performance, including our bid on consensus and raised guidance, you can see we are delivering on that promise. In the first three months of the year, we delivered operational sales growth of 6.4%. Our focus on areas of high innovation, higher met need and high growth is delivering results today and for the future. Across each of our six key businesses oncology, Immunology, Neuroscience, Cardiovascular surgery and vision, we have multiple differentiated assets to drive sustained growth and a strong competitive advantage. Our success is fueled by the strongest portfolio and pipeline in the history of Johnson and Johnson. We currently have 28 platforms or products that generate at least $1 billion in annual revenue and we are aiming to add even more. Our unique combination of innovative medicine and medtech together with strong execution and industry leading investment in innovation is delivering resilient growth. We are on track to meet our 2026 target of $100 billion in annual revenue for the first time and we are confident our progress will continue to improve into 2027 with line of sight to double digit growth by the end of the decade. Let’s start with Innovative Medicine where we delivered operational sales growth of 7.4% in the quarter. With 10 brands growing double digits in oncology, we are aiming to cure and treat more cancers. With the world’s leading portfolio and pipeline. Darzalex remains the gold standard in multiple myeloma and and our number one product with sales of $4 billion and operational sales growth of 18%. Harvichti Tech, Bile and Talbe also continue to deliver high double digit growth reflecting the importance of our multiple myeloma portfolio across the full treatment journey. Progress in our pipeline accelerated in Q1 with the FDA approval of Tecvayli plus Darzalex Faspro for relapsed or refractory multiple myeloma that positions the regimen as a potential new standard of care as early as second line in solid tumors. Ribera and Faspro received FDA approval for subcutaneous monthly dosing for patients with EGFR mutated non small cell lung cancer. Ribrovan also received FDA Breakthrough Therapy designation in advanced head and neck cancer with new data showing 56% overall response rate in first line recurrent or metastatic head and neck cancer when combined with immunotherapy. The treatment is being further evaluated in the ongoing phase 3 origami 5 study and in high risk non muscle invasive bladder cancer Inlexo is outperforming all recent launches based on based on unique patients treated in the first six months post approval. In immunology we continue to raise the bar in a category we have built for more than three decades from single innovations like Remicade and Stellara to now a dual powerhouse of ICOTIDE and Tremphya. Tremphya had another very strong quarter with sales up 64%. It continues to be the fastest growing IL23 therapy in the US and is now the cheerleader for new patient starts in inflammatory bowel disease. And with last month’s FDA approval of Icotide for the first line treatment of plaque psoriasis, we are once again transforming the standard of care. Only IL23 targeted oral peptide and has the potential to fundamentally change how psoriatic disease is treated by offering a convenient once daily pill. The full launch of Icotide took place the same day as approval with the first patient receiving treatment that very day. While it is just the beginning, we are already seeing strong demand through our patient hub. Together Icotide and Tremphya create a complementary category shaping portfolio. Icotide is the first choice systemic treatment and Tremphaya is the first choice biologic treatment for patients with moderate to severe plaque psoriasis. Icotide has the potential to be one of our largest products ever. Tremphaya is projected to deliver more than $10 billion in peak year sales. In neuroscience, we are focused on meaningfully improving outcomes in mental health. The US launch of Caplita in adjunctive major depressive disorder is building momentum and Spravato continues its strong growth trajectory. Now let’s turn to Medtech where we reported Q1 operational sales growth of 4.6%. With growth at across all of our key focus areas in cardiovascular, we are investing in the growing need for complex interventions. Johnson and Johnson is the market leader in heart recovery, circulatory restoration and electrophysiology and we continue to deliver sustained growth in heart recovery. Abiomed had another strong quarter as did Shockwave in circulatory restoration and in electrophysiology. Varipulse, our pulsed field ablation platform for atrial fibrillation, keeps building momentum. Our confidence of continued leadership in electrophysiology was further strengthened by our recent launch of Baripulse Pro in Europe with 5 times faster ablation which helps streamline procedures and improve efficiency, as well as our recent BodyPure 12 month data presented just a few days ago which show a strong safety profile with zero reported strokes. We also continue to receive strong feedback in Europe for our dual energy Thermocool smarttouch SF catheter which we expect to launch in the US later this year having recently submitted the complete platform to FDA. And finally, we recently announced 12 month data for Omnipulse, our large focal tip PFA catheter showing positive outcomes, no safety events and 100% procedural success rate in surgery. Our strong performance reflects the deep levels of trust and our expanding presence in the operating room. In Q1, we made progress on our OTAVA robotic surgical system and we are building on our recent de novo filing for approval. With a second investigational device exemption trial now underway for inguinal hernia repair in vision, we are restoring sight to its healthiest state with expanding access globally for our Akiview OASIS MAX disposable lenses for for presbyopia, an astigmatism and our Technis intraocular lenses. Most significantly, we received FDA approval of Technis Pure C, the first and only extended depth of focus intraocular lens in the US to maintain contrast sensitivity comparable to a monofocal lens. 97% of patients reported no very bothersome visual disturbances like helos or or glare. As you can see, we are off to a fast start in 2026, building momentum that will accelerate our impact and growth throughout the year and for the balance of the decade. The depth of our portfolio and pipeline has never been stronger and I’m confident we’ll continue to deliver on our commitments for 2026 and beyond. And with that I will turn the call back over to Daren.
Darren Snellgrove (Vice President of Investor Relations)
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 Q1 2026 sales results Worldwide sales were $24.1 billion for the quarter. Sales increased 6.4% despite an approximate 540 basis point headwind from Stelara’s. Excluding Stelara’s, Johnson and Johnson grew double digits for the quarter. Growth in the US was 8.3% and 3.9% outside of the US acquisitions and divestitures had a net positive impact on worldwide growth of 110 basis points, primarily driven by the intracellular acquisition. Now turning to earnings for the quarter, net earnings were $5.2 billion and diluted earnings per share were $2.14 versus $4.54 a year ago. Adjusted net earnings for the quarter were $6.6 billion and adjusted diluted earnings per share were $2.70, representing a decrease of 1.4% and 2.5% respectively, compared to the first quarter of 2025. I will now comment on business sales performance in the quarter, focusing on the six key areas where meaningful innovation is 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 $15.4 billion increased 7.4% despite an approximate 920 basis point headwind from Stelara’s, which underscores the continued strength of our key brands and new launches. Growth in the US was 9.6% and 4.3% outside of the US acquisitions and divestitures had a net positive impact of 180 basis points on worldwide growth primarily due to the intracellular acqu in oncology starting with multiple myeloma. Darzalec’s growth was 17.8% primarily driven by strong share gains of 5.9 points across all lines of therapy, with nearly 12 points in the frontline setting as well as market growth. Calviti achieved sales of approximately $600 million with growth of 57.4% driven by share gains and continued site expansion. Tecvayli growth was 30.1% with sequential growth of 14.2% driven by launch uptake and share gains from expansion in the community setting as well as the US approval of Techvailey plus DarzaLex FastPro. Talve growth was 72.8% driven by share gains through expansion in the community setting. In lung cancer, Ribrovan Plus Lasculus delivered sales of $257 million and growth of 80.5% driven by continued launch uptake in all regions. Share gains and rapid uptake in Ribavant FastPro share gains in both the first and second lines continue to drive strong sequential growth of 18.8% in prostate cancer, Alida delivered strong growth of 16.2% due to continued share gains and market growth. Within immunology, Tremphiya delivered impressive growth of 63.8%. Our IBD launch is driving significant momentum and we continue to see share gains across all indications as well as market growth. Stelara’s declined 61.7% driven by share loss due to biosimilar competition, increasing adoption of novel classes and unfavorable patient mix. In neuroscience, Spravato grew 44.5% driven by continued strong demand from physicians and patients. Caplita, which was acquired in Q2 of 2025 as part of the intracellular acquisition, delivered sales of $270 million for the quarter with continued strong momentum in our AMDD launch. Since AMDD approval in the U.S. caplitre has had its highest ever new patient start volumes across all indications. Now moving to Medtech where we delivered growth across each of our key focus areas cardiovascular surgery and vision. Worldwide sales of $8.6 billion increased 4.6% with growth of 5.9% in the US and 3.2% outside of the US divestitures had a net negative impact of 10 basis points on worldwide growth in cardiovascular. Electrophysiology delivered growth of 9.5% driven by our newly launched products including Varapulse and commercial execution. Abiomed delivered growth of 14.4% with continued strong adoption of the Impella technology. Shockwave delivered strong double digit growth of 18.1% driven by continued adoption of coronary and peripheral products. Surgery grew 1.2% despite a negative impact of approximately 30 basis points from divestitures. Growth was driven by strength of the portfolio and commercial execution in biosurgery and wound closure, partially offset by planned surgery transformation impacts and competitive pressures in energy and endo cutters as well as VBP in China. Across the portfolio in vision, contact lenses and other products grew 2.7% driven by strong performance in the Acuvue Oasis one day family of products as well as strategic price actions, further solidifying our leadership position. Surgical vision grew 6% 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 this quarter was 3.2%, primarily driven by new product launches and strong commercial execution. Now turning to our consolidated statement of earnings for the first 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 deleveraged by 10 basis points, driven by the impact of tariffs and other operational drivers in the medtech business, an unfavorable mix in the innovative medicine business. This was partially offset by favorable translational currency in the innovative medicine business. Selling, marketing and administrative expense deleveraged by 180 basis points, driven by heavier investment in new launches early in the year and increased investment related to the acquisition of intracellular. In the innovative medicine business, research and development remained flat at 14.7% of sales. Interest income and expense was a net expense of $43 million as compared to $128 million of income in the first quarter of the decrease in income was driven by a lower average cash balance and a higher average debt balance. Other income and expense was a net expense of $294 million as compared to $7.3 billion of income in the first quarter of 2025, with the change primarily driven by the approximate $7 billion talc reserve reversal in the first quarter of 2025. Tax rate on a GAAP basis in the first quarter of 2026 was 12.6% compared to 19.3% in the first quarter of 2025. This was primarily driven by the reversal of the talc settlement accrual in the first quarter of 2025, which did not reoccur, and discrete tax benefits associated with employee equity programs in the first quarter of 2026. Lastly, I’ll direct your attention to the box section of the slide where we have also 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 42.5% to 39.7%, primarily driven by heavier investment in new launches early in the year, unfavorable product mix and certain favorable one time items recorded in 2025 partially offset by favorable translational currency. MedTech margin declined from 25.9% to 22.3%, primarily driven by the impact of tariffs in cost of products sold and certain favorable one time items recorded in 2025. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 36.6% to 32.5%. This concludes the sales and earnings portion of the call and I will now turn the call over to Joe.
Joe Wolk (Chief Financial Officer)
Thanks Darren hello everyone. We appreciate you joining us today. As Joaquin noted, we are seeing good momentum across our business powered by our industry leading portfolio, sustained investment in innovation and disciplined execution. We continue to advance our pipeline by bringing innovative new treatments to patients which will meaningfully improve patient outcomes and fortify future performance, giving us a clear line of sight to double digit growth by the end of the decade. Turning to cash and capital allocation, we ended the first quarter with approximately $22 billion of cash and marketable securities and and $55 billion of debt. For a net debt of approximately $33 billion, free cash flow in the first quarter was approximately $1.5 billion. Clearly, this suggests a run rate below our full year projection as Q1 reflects payment timing changes on certain U.S. rebate programs and increased U.S. capital expenditures. However, these were expected and we remain confident in our full year free cash flow outlook of approximately $21 billion. Our strong financial position and cash flow generation provides a competitive advantage enabling us to maintain a consistent approach to capital allocation and investment in future innovation. Since announcing our plans to invest $55 billion in US based manufacturing technology and research and development through early 2029, we are well on our way to reaching that target through the end of 2025, we invested roughly $12 billion, or 22% of the 55 billion, with significant investment already underway in 2026. Our manufacturing investments include facilities in North Carolina and Pennsylvania, and we will have more announcements to come in upcoming quarters. Lastly, we recognize our shareholders value …