Q4 2024 Johnson & Johnson Earnings Call
We reported a third consecutive quarter of sales exceeding 14 billion with turnkey brands growing double digits across the 40 year, we achieved strong growth in oncology neuroscience and pulmonary hypertension with immune order you performing well despite the MTO by you'll see me less 40 state.
In the EU equally impressive is that what the pace of innovation, which in 'twenty 'twenty four resulted in 27 approvals in major markets, including if the Blue was of three and five year for the treatment of a seductive call Ids and I believe on the last clues for first line treatment for pace.
<unk> with Egfr mutated advanced non small cell lung cancer in 'twenty 'twenty four we reported a deemed positive readouts for Registrational studies initiated 16 phase III studies and submitted 49 filings across major markets and as you'll have seen over the last three weeks.
We're off to a fast start in 'twenty or 'twenty five.
But in that last group showed significant improvement you know what I sort of Bible in first line treatment of advanced or metastatic non small cell lung cancer will receive FDA approval of a spread right. After the first and only mono therapy for adults with treatment resistant depression will receive but I read.
What have you for Calumet for the treatment of generalized myasthenia could I be in addition to the FDA breakthrough therapy and fast track designations for all the indications received last year.
Last week, we announced a new drug application with the FDA for about 200 at our intra vesicle that I could really since system for the treatment of non muscle invasive bladder cancer and a D O a significant unmet need impacting as many as 1 million patients per year.
Turning to <unk> and for the full year, we reported a second gear or phototherapy video and he says with growth across most parts of the business, including particularly strong momentum in cardiovascular ambition.
The pace of Med Tech innovation also continues to accelerate with 15 major products launched in 'twenty 'twenty for me.
Highlights of the year include the approval of our body pose pulse field ablation platform in several major markets and FDA clearance of our bellies robotic assisted solution for the use in unit compartmental knee arthroplasty procedures as well as an expanded FDA indication.
For Impella heart pumps to treat pediatric patients and if the clearance of shockwaves javelin Betty fear at Ivy Hill catheters for the treatment of tight difficult to gross benefit of lesions.
We also achieved the full market release of the mature products, including this shouldn't we get a benefit of Ivy Hill as it did in the U S. That's unit of they've got three electro anatomical mapping system and our techniques all D. C. In the alcohol elements and we progressed 18 clinical trial programs in June.
The I D E approval of our October robotic surgical system, which allows clinical trials to begin I'd do a site last year, we fortified our future by making significant value creating investments in their money. These investments enable us to further shift our portfolio.
So whether it's a man needs in high growth high innovation markets.
These included deck, which issuance of Shockwave M D wave in med Tech and analytics Braudel logics.
In EM twenty-six bio specific antibody in innovative medicines and building on our nearly 70 year legacy neuroscience, we announce last week plans to acquire at intra cellular therapies, a biopharmaceutical company focused on the development and commercialization of therapeutics for central.
Nervous system disorders.
Unique opportunity to add intra cellular therapies reflect our commitment to transforming care and advancing research in mental health.
It also further solidifies sales growth above analysts expectations now on through deep reminded over the decade.
Together these transactions represent industry, leading levels of investment for the company, providing strategic near our long term growth catalyst for Johnson <unk> Johnson.
Turning to 2025 and as previously guided back at the end of 'twenty to 'twenty three we expect to deliver operational sales growth of 3% overcoming headwinds associated with U S. Biosimilar entry support Este Lauder and the impact of the body, the leidy sign and continuous macroeconomic pressures.
In China, but perhaps even more impressive we are planning for adjusted operational earnings per share growth of nearly 9% I kind of think of any other company that would be able to deliver growth through the first year of evolution. The exclusivity of a multibillion dollar program.
We are able to achieve these results because of the diversification of our business.
Trends of our commercial assets as well as the breadth of our pipeline with additional launches in 'twenty to 'twenty five including three in finding an IBD right, but it might not last groups in lung cancer and body pulse and the dual energy CT smart attached SF catheter in electrophysiology in closing.
I want to thank everyone at Johnson <unk> Johnson for all that they do to help patients. We're starting the year from a portion of a strength and we have confidence in our sales growth and EPS guidance for 2025.
That I will turn the call over to Jess.
Jess: Thank you Joaquin moving to our financial results unless otherwise stated the results and guidance highlighted today reflect the continuing operations of Johnson <unk>. Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation.
Jess: With Q4, 'twenty 'twenty four sales results.
Jess: Worldwide sales were $22.5 billion for the quarter sales increased six 7% with growth of 10% in the U S and 2.5% outside of the U S worldwide growth was negatively impacted by 290 basis points due to still Ara and positively impact.
I'd buy 100 basis points due to acquisitions and divestitures.
Jess: It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of the Lora and the COVID-19 vaccine.
Jess: Turning now to earnings.
Jess: For the quarter net earnings were $3 $4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago.
Jess: Excluding after tax intangible asset amortization expense and special items for both periods.
Jess: Adjusted net earnings for the quarter were $4 $9 billion and adjusted diluted earnings per share was $2.04 representing decreases of 11, 1% and 10, 9%, respectively compared to the fourth quarter of 2023.
Jess: Earnings per share in the quarter was negatively impacted by 22 cents of acquired IP R&D expense related to the Z wave acquisition.
Jess: For the full year 2024 sales were $88 $8 billion sales grew five 9% with growth of eight 3% in the U S and 2.9% outside of the U S. So lora and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points.
Jess: Acquisitions, and divestitures positively impacted worldwide growth by 50 basis points.
Jess: Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of still Ara.
Jess: Net earnings for the full year 2024 were $14 $1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago.
Speaker Change: Your 'twenty 'twenty four adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of four 6% and an increase of 0.6% respectively versus full year 2023.
Speaker Change: Earnings per share in the year was negatively impacted by 67 cents due to acquired IP R&D charges on various transactions throughout the year.
Speaker Change: I will now comment on business sales performance in the quarter.
Speaker Change: Beginning with innovative medicine.
Speaker Change: Worldwide sales of $14 $3 billion increased six 5%, excluding the COVID-19 vaccine with growth of 11, 1% in the U S and a decline of <unk>, 3% outside of the U S still.
Speaker Change: Still our end negatively impacted worldwide growth by 490 basis points.
Speaker Change: Innovative medicine growth was driven by our key brands and continued uptake from recently launched products with Turner assets delivering double digit growth.
Speaker Change: So it's across the portfolio continue to be positively impacted by price adjustments associated with Argentina, hyperinflation consistent with market practice.
Speaker Change: Starting with oncology, we continue to drive strong sales growth across our multiple myeloma portfolio.
Speaker Change: <unk> growth was 23, 5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson <unk> Johnson's first brand to achieve over $3 billion in sales in a quarter.
Speaker Change: Perfect. He achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17, 3% aligned with our expectations of accelerating growth in the back half of the year.
Speaker Change: Daily sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapse refractory setting demand remained strong despite continued adoption of longer duration dosing intervals.
Speaker Change: Finally within our multiple myeloma portfolio Tau. They continued its launch trajectory with another quarter of strong growth as a reminder, we anticipate disclosing tell they sales in the first quarter of 2025, which are currently reported in the category other oncology.
Speaker Change: Our leader continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time.
Speaker Change: Our bi specific antibody for non small cell lung cancer contributed to growth in the category. Other oncology as we continue to expand approved indications. We also anticipate disclosing reiber event sales in the first quarter of 2020 five.
Speaker Change: Within immunology, we saw sales growth in Trumpf via a 5.6% driven by strong market growth and share gains and P. S. O N P. S. A partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent U C launch and expect to see strong uptake.
Speaker Change: Of the IBD indications in 2020 five.
Speaker Change: Still our declined 13, 6% driven by the impact of current and anticipated Biosimilar competition. As a reminder, biosimilar competition has entered the U S. In January 2025.
Speaker Change: Remicade in Symphony worldwide sales were positively impacted by return of distribution rights in Europe.
Speaker Change: And neuroscience is provide a growth of 45, 3% continues to be driven by increased physician and patient demand as Joaquin mentioned provider has exceeded $1 billion in annual sales for the first time.
Speaker Change: Other neuroscience decline was driven by the loss of a spin rozzer tender in Europe.
Speaker Change: And pulmonary hypertension summit grew 2.5% driven by market growth and share gains, partially offset by inventory dynamics in the U S and austerity measures in Europe, starting in 2025 will lead again to report ops M. D, which is currently reported in the category other.
Speaker Change: Minera hypertension and off summit.
Speaker Change: I've traveled grew 12, 1% driven by market growth patient mix and share gains finally zero Alto sales growth was driven by favorable patient mix.
Speaker Change: I'll now turn your attention to Mantech.
Speaker Change: Worldwide sales of $8 $2 billion increased seven 6% both in the U S and outside of the U S.
Speaker Change: Acquisitions, and divestitures had a net positive impact of 300 basis points on worldwide growth 430 basis points in the U S and 150 basis points outside of the U S.
Speaker Change: Overall med tech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive P. F. A pressures in the U S. Electrophysiology and continued headwinds in Asia Pacific primarily in China.
Speaker Change: In cardiovascular electrophysiology delivered growth of seven 3% performance was driven by global procedure growth.
Speaker Change: New product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the U S. N V B P in China.
Speaker Change: Despite the IV sailing shortage in the U S. Abiomed delivered growth of 13, 2% driven by strong growth in all regions and continued adoption of Impella five five and Impella RP technology.
Speaker Change: Or do you vascular results also included $258 million associated with the acquisition of Shockwave.
Speaker Change: Contact lenses and other grew seven 4% driven by trade inventory dynamics continued strategic price actions strong performance and ask you have you Oasis one day family of products as well as lapping prior year impacts from Russia sanctions.
Speaker Change: Surgical vision growth of 13, 6% was driven by technical pure C and techniques I hands commercial execution, partially offset by competitive pressures in the U S.
Speaker Change: Whereas the pdx grew 2.5% inclusive of hits growth of five 6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation impacts of China V P and competitive pressure.
Speaker Change: Yes.
Speaker Change: Lastly, surgery grew <unk>, 4% with the claret divestiture negatively impacting results by approximately 130 basis points performance was driven primarily by commercial execution.
Speaker Change: <unk> of new products across the wound closure in biosurgery and continued price adjustments, primarily associated with hyper inflation consistent with market practice.
Speaker Change: Growth was partially offset by competitive pressures in energy and Endo cutters as well as V B P and the anti corruption campaign in China.
Speaker Change: Now turning to our consolidated statement of earnings for the fourth quarter of 'twenty 'twenty four I.
Speaker Change: I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year.
Speaker Change: We continue to invest strategically in research and development at competitive levels to fortify our future investing $5 $3 billion or nearly 24% of sales, which includes $540 million of acquired IP R&D expense associated with the Z wave acquisition.
Speaker Change: Selling marketing and administrative expense as a percent of sales de leveraged 150 basis points driven by increased commercial investment and the innovative medicine business.
Speaker Change: Interest income and expense was a net income of $144 million as compared to $212 million of income last year, driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance.
Speaker Change: Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities a lower benefit related to employee benefit programs due to the discount rate partially offset.
Speaker Change: Set by lower litigation expense in 2024.
Speaker Change: Regarding taxes in the quarter, our effective tax rate was 11, 7% versus 14, 4% in the same period last year.
Speaker Change: This decrease was primarily driven by post acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes, as well as the resolution of prior tax matters.
Speaker Change: Both in jurisdictions outside of the U S.
Speaker Change: Excluding special items, the effective tax rate was 8.8% versus 10, 8% in the same period last year I encourage you to review our upcoming 'twenty 'twenty four 10-K filing for additional details on specific tax related matters.
Speaker Change: Lastly, I'll direct your attention to the box section of the side, 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.
Speaker Change: Now, let's look at adjusted income before tax by segment for the quarter.
Speaker Change: Innovative medicines margin declined from 37, 4% to 32.5%, primarily driven by strategic commercial investment and R&D pipeline advancement.
Speaker Change: Med Tech margin declined from 15, 5% to 10, 8%, primarily driven by acquired IP R&D expense related to the V wave acquisition. Please note that the med Tech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of lamina.
Speaker Change: When adjusting for these one time items Med Tech margin was relatively flat.
Speaker Change: As a result adjusted income before tax for the enterprise as a percentage of sales decreased from 29, 2% to 24, 1% with the V wave acquired IP R&D expense impacting results by 240 basis points.
Speaker Change: When looking at the full year innovative medicine Med Tech I mean enterprise adjusted income before tax.
Speaker Change: <unk> relatively flat year over year when adjusting for the one time items highlighted on the slide mainly acquired IP R&D expenses on various transactions across both years.
Joe: This concludes the sales and earnings portion of the call I am now pleased to turn it over to Joe. Thank.
Joe: Thank you Jessica and thanks, everyone for joining us today as you've heard already we delivered solid overall fourth quarter and full year results in 2024 above the operational guidance, we set at the beginning of the year when excluding acquisition costs, we incurred to fortify our business for the future.
Joe: We are particularly pleased with advancements made throughout the year strengthening our pipeline achieving key milestones across core therapeutic areas and platforms. We.
Joe: We continue to prioritize investment in innovation forged strategic partnerships that further enhance our differentiated business and focus on improving margins positioning the company for near and long term growth.
Joe: Additionally, we've made progress towards resolving the talc litigation as many of you are aware our pre package bankruptcy plan received overwhelming support from current claimants and the futures claims representative and that support has only increased in recent months. The next milestone is the scheduled confirmation hearing.
Joe: Commencing on February 18th in the Southern District of Texas bankruptcy Court.
Joe: Now, let's get into the numbers, starting with cash and capital allocation.
Joe: We ended 2024 with approximately $25 billion of cash and marketable securities and approximately $37 billion of debt for a net debt position of approximately $12 billion.
Joe: Our focus on cash flow resulted in the company delivering approximately $20 billion of free cash flow during 'twenty 'twenty four $1.6 billion more than in 2023.
Joe: Having higher litigation settlement payments during 'twenty 'twenty four higher T C. J, a toll tax and eight months of contribution from consumer health in 2023.
Joe: Our ability to strategically invest and deploy capital that unlocks value has made Johnson and Johnson and successful in the past and we will be as important for our success moving forward, we evaluate strong credit rating, which underscores the strength of Johnson <unk> Johnson's financial discipline and enables us to execute against our capital allocation priorities.
Joe: In research and development, we invested more than $17 billion or 19, 4% of sales we remain one of the top investors in R&D across all industries.
Joe: 2024 marked the 62nd consecutive year of dividend increases.
Joe: We know this use of capital is a priority for our investors and we plan to continue to increase our dividend annually.
Joe: We also deployed announced or committed to over $32 billion in strategic value, creating inorganic growth opportunities in the last 12 months.
Joe: This amount includes larger transactions such as Shockwave proteolix the N M twenty-six bi specific antibody.
Joe: D wave the planned acquisition of intracellular therapies as well as more than 40 smaller early stage collaborations and partnerships to complement our businesses that are much more common for us than larger transactions.
Joe: As we look ahead to 2025, we will maintain a heightened focus on cash flow generation to build on our strong financial foundation and judiciously deploy capital on behalf of shareholders to create value.
Joe: Let's now discuss our full year guidance for 2025. It is important to note that guidance at this time excludes the impact from the planned acquisition of intracellular therapies, but I will provide some comments on that transaction in a few moments.
We anticipate operational sales in the range of 2.5% to three 5% with a midpoint of $91 $3 billion or 3.0% in line with the expectations outlined at our late 2023 Enterprise business review as Joaquin noted.
Joe: Acquisitions, and divestitures are expected to favorably impact operational growth by approximately 50 basis points, resulting in an adjusted operational sales growth midpoint of two 5%.
Joaquin: Sales growth across our innovative medicine businesses will be driven by our proven assets such as doors will exit or leader and provide O. Our recently launched products car victim take daily until they are new launches of term fire in IBD and arrive a ramp plus last clues in lung cancer the strength of our portfolio enables.
Joaquin: <unk> medicine to grow despite expanded still are a biosimilar competition and approximately $2 billion negative impact from part D redesign.
Joaquin: Med Tech sales growth will be driven by our recent acquisitions of Shockwave in Abu Med as well as continued uptake of our recently launched products such as viral pulse technical Odyssey Ackee view Oasis Max developed portfolio of enabling technology, and our Barb suture and he must have that portfolio. We continued to expect.
Joaquin: China to remain a headwind through 2025.
Joaquin: Regarding Vera pulse in the U S. We are working diligently to complete our investigation and we will provide an update when we have additional information to share as a reminder, there is no impact of commercial activity to buy repulse outside of the United States.
Joaquin: As you know, we don't speculate on future currency movements.
Joaquin: For today's call, we are utilizing yesterday's euro spot rate relative to the U S. Dollar of 1.04 significantly below last quarter's euro spot rate of 1.10.
Joaquin: This results in an estimated unfavorable foreign currency impact on sales of $1 $7 billion or 2.0% as such we estimate reported 2025 sales of $89 $6 billion or 1% growth at the midpoint.
Joaquin: Turning to other items on the P&L.
Joaquin: Despite still are a biosimilar competition and the impact of part D. Redesign, we expect our 2025 adjusted pre tax operating margins to increase by approximately 300 basis points of which approximately half is driven by operating spend management and the remainder from reduced acquired IP R&D expense.
Joaquin: This is about 50 basis points better than we discussed on the Q3 earnings call in October.
Joaquin: We anticipate net other income to be $900 million to $1 $1 billion for 2025, the reduction versus last year is primarily driven by a lower benefit related to employee benefit programs based on discount rate assumptions, the nonrecurring monetization of royalty rights in 2024 and no long.
Joaquin: Receiving I can view dividend.
Joaquin: Due to higher debt incurred associated with 2024 acquisitions and the reduction in interest rates earned on cash we expect net interest income between zero and $100 million.
Joaquin: Finally, we are projecting an effective tax rate for 2025, and the range of 16, 5% to 17.0%.
Joaquin: Just on current tax laws, and our anticipated geographic income mix across our businesses.
Joaquin: Given all these factors, we expect adjusted operational earnings per share to grow eight 7% at the midpoint for a range of $10.75 to $10 95.
Joaquin: While not predicting the impact of currency movements utilizing the recent exchange rate previously referenced our reported adjusted earnings per share for the year now estimates a full year negative impact of 25 cents.
Joaquin: As such we expect reported adjusted earnings per share of $10 60 at the midpoint.
Joaquin: When adjusting for this impact it becomes clear that our operational EPS performance is considerably stronger than consensus assumed is only about half the analyst incorporated the impact of foreign currency into their models.
A few initial considerations outlined on this chart regarding the planned acquisition of intracellular therapies, a transaction, we plan to finance mainly with debt.
Joaquin: We are not planning for material near term cost synergies, rather we expect to accelerate penetration of cap later in existing markets explore additional geographies to commercialize the portfolio and potentially accelerate research and development to expand into new indications and disease areas, where high unmet need exists.
Joaquin: Given this and assuming a close subject to regulatory review early in the second quarter, we anticipate an acceleration of our sales growth of approximately 80 basis points.
Joaquin: Inclusive of the impact of financing cost the transaction is expected to have a dilutive impact on adjusted EPS of approximately 30 to 35 cents in 2025.
Joaquin: Again, these are very preliminary thoughts, which will be influenced by when the transaction closes and borrowing rates, we will be sure to provide an update to our full year guidance. Shortly after the acquisition is complete.
Joaquin: I'll now provide some qualitative considerations on the phasing of notable events for your modeling.
Joaquin: We expect both innovative medicine, and med tech operational sales growth to be higher in the second half of the year versus the first half.
Joaquin: Regarding innovative medicine, we anticipates the Lora biosimilar competition to accelerate throughout the year as the number of Biosimilar entrants increase.
Joaquin: Mirrors erosion curve once faced with material Biosimilar competition continues to be the best proxy for Stillwater erosion with the additive impact of part D redesign.
Joaquin: The impact of part D redesign as a percent of sales will be consistently applied throughout the year.
Joaquin: We expect a more pronounced benefit from our newly launched products as we progressed throughout 'twenty 'twenty five to counter these headwinds in.
Joaquin: In Med Tech for the first half of the year and more prominently in Q1, we face tougher year over year comparisons excluding the positive impact associated with the Shockwave acquisition, we anticipate acceleration of our newly launched products to build throughout the year.
Joaquin: As we've said before we continue to expect normalized procedure volume and seasonality.
Joaquin: Regarding the P&L. It is important to consider one time items that impacted our EPS results in 'twenty 'twenty four specifically the benefit of can view dividend in the first two quarters of 2024 it is not repeating.
Joaquin: Interest income prior to the Shockwave acquisition closure in May the.
Joaquin: The monetization of royalty rights recorded in Q3.
Joaquin: In IP R&D expense associated with the N M twenty-six bi specific antibody in Q3 and fee waiver acquisition in Q4, given these factors and aligned with sales, we expect higher earnings per share growth in the second half of the year versus the first half.
Joaquin: Moving to discussion beyond financial commitments, we are excited for the pipeline progress planned for 2025 and.
Joaquin: An innovative medicine. This includes expected approvals for Trumpf via subcutaneous for Crohn's disease.
Joaquin: The calamander for generalized myasthenia gravis and.
Joaquin: Subcutaneous <unk> for non small cell lung cancer.
Joaquin: We expect to file for regulatory approval of Tar 200, and non muscle invasive bladder cancer and a coach Kendra and psoriasis.
Joaquin: And planned data readouts for Rai prevent lung cancer overall survival as well as data in head and neck, and colorectal cancer, and I cultural Kendra and ulcerative colitis as well as head to head data versus just took too in psoriasis.
Joaquin: In Med Tech building upon the 15 major product launches in 'twenty 'twenty four we anticipate a submission to the F. D. A for Impella E C P regulatory approval.
Progress on our ottava robotic surgical system and advancements across our cardiovascular portfolio, including electrophysiology heart recovery and circulatory restoration.
Joaquin: So to summarize we are well positioned to tackle the challenges in 2025 continued to advance our pipeline deliver on our financial commitments and create long term sustainable value for shareholders.
Joaquin: Our success is the result of the hard work and dedication of our colleagues who share a sincere passion to successfully serve patients around the world. We are extremely grateful for their efforts.
Joaquin: With that we're happy to take your questions. So I will now turn it to Kevin to provide instructions for those seeking to participate in the Q&A.
Kevin: Thank you and I will be conducting a question answer session, ladies and gentlemen, let's ask a question at this time. Please press Star then one on your telephone keypad.
Kevin: If you'd like to withdraw your question Press Star then two.
Kevin: We ask you please limit yourselves to one question only one moment, please while we poll for questions.
Speaker Change: Our first question is coming from Terence Flynn from Morgan Stanley. Your line is that life.
Speaker Change: Great. Thanks, so much for taking the questions I appreciate it.
Speaker Change: In myeloma franchise is a very important growth driver as we think about you know history, but also 2025. So just wondering if you can kind of frame for us how you're thinking about that both from a bi specifics as well as car T and maybe a broadening into the community setting and the pace of our growth here as we think about the ramp in 25. Thank you.
Speaker Change: Great well good morning parents, and Hello, everybody I'd like to start by thanking all of our innovative medicine colleagues around the world for a very strong quarter. This was our third quarter with sales over 14 billion with.
Speaker Change: With 10 key brands, achieving double digit growth and Terence I'll come back to that that includes brands like doors or lacks car victory Calvey in tech daily as well as ones such as our latest provide oh and up Trabi, we're making really nice progress on our launches, including Trumpf fire and ulcerative colitis and ride prevent plus last.
Speaker Change: Clues and non small cell lung cancer and just an important note we hit our $57 billion target. This year a year early for those that were here back at our enterprise business review, we had made that commitment to hit the 57 billion by 2025, and we cleared that goal this year in 2024.
Speaker Change: So multiple myeloma is really an extraordinary franchise for us and maybe I'll I will start with <unk> because our quarter was over 3 billion. It was $3 1 billion and 22% growth and we continue to really build out share across the frontline settings in both trans.
Speaker Change: Plant eligible and ineligible patients and then triplet and quad regimens and so were performing very well for doors of lax and anticipate that to continue.
Speaker Change: And in fact, with what's ours, Alexa or it's our first brand to to hit $3 billion in quarterly sales. So important to note that milestone to car victory had a really really robust quarter as well as a year nearing $1 billion for the year of 963 million as we continue.
Speaker Change: To see very strong demand in that second line plus setting as well as very strong capacity expansion in the U S. In Europe and also with a contract manufacturer and so we've talked before about that being more of a stair step rather than a direct linear line.
Speaker Change: And it is performing very very well and we're seeing nice continued expansion in the first quarter of this year that will also continue throughout the year for tech Intel both products did well we report a sales or we break out sales on tech we don't yet on how both of these agents.
Speaker Change: Our buys are best in class by specifics, they're performing very well from a competitive share standpoint, we've got them nicely.
Speaker Change: <unk> utilized in the academic setting and we're working that out into more of the community setting which will be important for their continued growth and uptake. So in total in multiple myeloma really is a stronghold for us and we're not stopping there because of the strength that we have the assets that we have we're also working.
On multiple additional types of combinations, John maybe you want to address what we're doing with the bi specifics on specific thank you Jennifer maybe before I jump in or follow your lead and just offer my appreciation and thanks to our colleagues in innovation and R&D.
Speaker Change: We had a heck of a year for the pipeline twenty-seven approvals 49 submissions 15 out of 17 positive phase three years more than 90% success rate.
Speaker Change: Out of 12 P. O sees came in positive exceeding the industry benchmarks by approximately doubled temperature in humans tend to new enemies added to the pipeline from internal research at a price point well below the industry median.
Speaker Change: And quite an impressive year on the BD front with five bolt on acquisitions in six new molecules added to the pipeline. So my congratulations to the team now on the point around our broad portfolio of myeloma medicines. This is where we are now bringing them together to reinvent the next frontline therapies and if you were at the edge.
Speaker Change: Congress and the American Society of Hematology.
Speaker Change: So somebody early tantalizing data where in early lines of therapy from first second line myeloma, we're bringing dara together with either tech or a tau and we've been getting 100% minimal reserves minimal residual disease negativity them or do you need activity.
Speaker Change: Showing the impressive potential of these new combinations mind, you last year, the FTAA declared M D and minimal residual disease negativity array Mardi.
Speaker Change: As a surrogate endpoint within myeloma that could form the basis for accelerated approvals. So we're really excited about bringing these into earlier lines and then I would also remind you of the court victory. We are now doing studies in frontline transplant eligible and ineligible and asking whether we can replace I'll probably go stems.
Speaker Change: Cell transplant with our car T therapy, as a new opportunity there to breakthrough with.
Speaker Change: Unprecedented outcomes for patients.
Speaker Change: Were a big payer of cortisol Arabia has to go to regimen in the second line setting the one week or two for myeloma approved in that setting and last year. We reported overall survival data for <unk> in a randomized setting with an impressive hazard ratio of 0.55, so really feel great about bringing in court victory into earlier lines of therapy.
Speaker Change: He is well.
Speaker Change: Maybe hot off the press last night. The team was very excited to come tell me, we've actually completed and reached our 5000th patient infused with car victory.
Speaker Change: Well across the clinical and commercial settings and it is the most successful cell therapy launch in the industry.
Speaker Change: Thank you. Our next question today is coming from Josh Jennings from TD calendar. Your line is now live.
Speaker Change: Uh huh.
Josh Jennings: Good morning, Thanks for taking the questions.
Josh Jennings: I was hoping to just ask about the medical device.
Josh Jennings: Yep.
Josh Jennings: Sector.
Josh Jennings: The business excuse me and just the acquisition strategy.
Josh Jennings: You've had a couple of pre revenue swings this phenomenon Z wave and some other more established.
Josh Jennings: The more established businesses.
Josh Jennings: Could you just talked about the strategy on a go forward basis, I mean is it going to continue to be a mix between pre revenue companies.
Yes.
Josh Jennings: Status.
Josh Jennings: Or are you going to be.
Josh Jennings: There'll be a shift.
And that strategy. Thanks for taking the question.
Josh Jennings: Thank you Joseph walking in and good morning, everyone.
Josh Jennings: External innovation has always been a very important part of our capital allocation stuff people Johnson unusual for the enterprise and in fact, we are one of the top investors not only in M&A, but also in R&D.
Josh Jennings: We are always looking for opportunities to be able to enhance our portfolio.
Josh Jennings: Our pipeline I mean, 'twenty 'twenty four alone we completed more than 40, a business development transaction. Some of them were big some of them were small.
Josh Jennings: But all of them complement both our innovative about med tech portfolio. Many of these are smaller acquisitions. We're also in our mid tier portfolio you have to think that a lot of good acquisitions like the case of show wave or in the innovative medicine site intracellular automotive outliers.
Josh Jennings: Our go forward, it's always been focused on this as smaller opportunities like the ones you mentioned like laminate or V wave or some of that once we have completed the innovative medicines like <unk> or our high.
Josh Jennings: IL 23, blocker, which are more than 5 billion of opportunities, that's where we are able to create value larger opportunities have to be see more like outliers. Some finally I want to underline that our both our OBO made on show wave are progressing really well.
Josh Jennings: Head of the deal model delivering on our financial commitments. There that we are looking for work up on closer to start working on the intracellular acquisition, two which is an opportunity to put enforced our position of leadership in the neuroscience space, which has been always a strength of Johnson <unk> Johnson.
Josh Jennings: And also an opportunity to do a bad old too.
Josh Jennings: To fortify the revenue projections that you have looking today and also into the future.
Josh Jennings: Thank you.
Josh Jennings: And Josh maybe just building on what Ken's comments relative to med tech, while the big acquisitions get a lot of attention to Watkins point, we have a tremendous amount of business development activity across all of our businesses.
Josh Jennings: As I think most notably evidenced by almost 40 transactions just in 'twenty four alone I did want to point to the excitement we have around the significant investments we've made both in Abu Ahmed and Shockwave that'd be a med group grew 15% for full year 2024, and we are seeing constant acceleration driven by it.
Josh Jennings: Firstly, the tremendous portfolio, we have I think we could not be more excited about the danger shock results, which really bring more validity to the evidence base around around this portfolio. This is the first study in 20 years to actually demonstrate a survival benefit in fact, a 12, 7% mortality.
Movement versus the standard of care, we also I'm not a big commercial opportunity received FDA approval in the fourth quarter of last year for the use of Impella in pediatric community, which I think is just further evidence of the building confidence around the safety profile of this product are.
Josh Jennings: We also mentioned earlier that we are excited to be planning a submission for E. C. P to the FDA in the first half of this year. This will just be the first and actually the smallest a pump in the world. This is a nine French insert at insertion, which expense to about 21, French inside the heart, a lower profile, which we believe that well.
Josh Jennings: Along with its ease of use reduce further barriers to adoption and then finally, you know a smaller transaction, but certainly important to our goal to play a bigger role in heart failure is the acquisition of <unk>, which reinforces our commitment to building our leadership in heart failure.
Josh Jennings: And really allows for the active shunting or blood across the N. Tradeshow septum, a quick a couple of comments on Shockwave as our latest acquisition. We closed that in May of last year. This delivered $564 million of growth last year. It is the leading and first to market pioneer in IV old technology, and we're confident that while <unk>.
Josh Jennings: Certainly theres a lot of excitement around this category, we have at least a five to eight year first mover advantage and this comes down to the fact that we have an easy to use system with now six available catheters. We've also recently announced the addition of two additional catheters are E. H catheter, which is our work horse within peripheral as well as <unk>.
Josh Jennings: Gaveled on them, which is a novel non balloon based IV catheter designed to modify calcium and cross extremely narrowed vessels and so we feel enormously confident that a while big investments they will make tremendous impact on patients and continue to drive our business. Thank you Josh.
Speaker Change: Thank you next question today is coming from Alexandra Hammond from Wolfe Research. Your line is now live.
Alexandra Hammond: Thanks, so much for taking the question and congrats on the intracellular Ikea last week forget laid out how should we be thinking about the cadence of sales growth to the forecast since the other $5 billion and I guess on the acquisition should we expect a de prioritization of health or accident.
Speaker Change: Thank you so much.
Speaker Change: Good morning. Thanks, so much for the question and we are so excited to be able to welcome. The intercellular colleagues to Johnson <unk> Johnson and they have done such an extraordinary job bolt in developing capped lighter and their pipeline, but also commercializing and bringing cap lighter to patients currently for.
Speaker Change: Schizophrenia, as well as for bipolar one and bipolar two depression I think you can take a look at their current sales trajectory, which is a really nice growth curve and then also take into account.
Speaker Change: The filing that has been done for a M. D D major depressive disorder and the filing that's been done with the regulatory authorities that we anticipate approval for later in the year I E. M. D. D. We believe to ultimately be the largest of those three indications for cap later, and so we think that that.
Speaker Change: I'll be an additional catalyst for growth. So you can factor that into your thinking we're really excited about cap later I know that the company had guided to it being a $5 billion plus asset we definitely think that it will be as well and think that together, we're going to be able to do even more for patients.
Speaker Change: With mental health issues. We're also really excited about their pipeline and 12, 84 and potential and Alzheimer's psychosis general anxiety disorder and other so we see intercellular as both the near term as well as long term growth catalyst for us.
Speaker Change: Yes about your question, though around whether will be prioritized other things in the portfolio absolutely not let me just remind everyone that depression is a very heterogeneous disorder and it's not a disease.
Speaker Change: Accommodates two a one size fits all.
Speaker Change: We see each of these.
Speaker Change: Molecules that we're developing having a unique mechanisms that can play in different subpopulations and we're developing those took a broom self direction for example, using a precision neuroscience strategy. So we see this broad portfolio, which includes of course bravado.
Speaker Change: As a.
Speaker Change: Repertoire of different mechanisms that we can bring to bear there 260 million people worldwide that suffer from chronic depression is the leading cause of disability and more than 30% of those do not get relief from your ongoing medicines.
Speaker Change: Other thing that I really like about our portfolio is the side effect profiles are so benign compared to the standard of care.
Speaker Change: With all four of the mechanisms, whether its cap lighter, which we hope to welcome into the portfolio, whether it should take our brands sell direct centers provider. You don't have weight gain you don't have sexual dysfunction, you don't have the tardive dyskinesia or extra pyramidal effects that are so common with many other medicines to do so.
Speaker Change: This is really exciting for us maybe also while I am talking about our depression Board ROE I would just to acknowledge and congratulate the team on the recent approval of <unk> in the monotherapy context.
Speaker Change: This indeed allows us to offer provider was a solution for patients with treatment resistant depression without necessity to use it on top of standard of care and therefore, avoiding those side effects that I just mentioned that the standard of care medicines, often bring I'm very excited about that approval we had.
Speaker Change: We received priority review from the FDA for that submission that's.
That's the second time spur Bader, who had received prior to review the only entered president ever to do so and but it was also the only anti depressant to ever received breakthrough designation from the FDA, So great momentum and a long term commitment to patients suffering with depression.
Thank you. Your next question today is coming from Tim Anderson from Bank of America. Your line is now live.
Speaker Change: Well. Thank you very much part of the question on immunology franchise and compliance. So we still are facing Biosimilars I'm wondering.
Speaker Change: If it might play out like how it has with Abbvie.
Speaker Change: So that'd be they said the Biosimilar humira has actually driven the volume shifts in favor of other brands like Sky Rosy.
Speaker Change: Wondering if you expect that could occur with trumpf via on the volume side and then on the price side can you talk about incremental price erosion in 2025.
Speaker Change: Maintain access relative to whatever the price erosion was in 2024.
Thank you very much for the question and we're really excited about the great progress that we're making with Trump fire and in psoriasis, and psoriatic arthritis, but really particularly with inflammatory bowel diseases coming up with the launch in ulcerative colitis, now and Crohn's upcoming we've guided me and maybe this back.
Speaker Change: On <unk>, we've talked about the humira erosion curve being probably the best thing to model specific to your question about what should there or will there be patient switches I think there are a lot of patients in the immunology market right now that are in need of both advanced therapies or are in.
Speaker Change: Need of better therapies, then they're on now and so we do see across the board shifting of patients and movement into the newer and better products I would put Trump fire squarely in that camp. We've got lots of reasons, if we focus in on in IBD and the.
Potential growth for times like we've got a lot of reasons for great optimism, there and differentiation, it's the only dual acting.
Speaker Change: IL 23 agent in IBD axon, both IL 23, as well as the C. D. 64, we think it's got the potential to really set the next bar in efficacy and we know there are a lot of patients who need more and are ready for switch and we think with our sub Q induction dose, we're gonna have unrivaled flexibility so.
Speaker Change: The ability for fully sub Q induction and maintenance as well as the opportunity for for IV. So the the launch right now is going very well and you see and we're very excited and optimistic really looking forward to the upcoming launch and in Crohn's and sub Q and we've invested appropriately that last part of that.
Speaker Change: Question I think it was on on pricing, we've invested appropriately to make sure that we've got the right access for patients with Trumpf higher so that as we launch we've got the abilities when prescribers Wanna rights the right for patients. We've got the access to be able to do so and we're seeing that right now with various.
Speaker Change: Strong frontline commercial coverage for transpire in UC as well as our permanent J code. So so that is in and sort of factored into what we're seeing now.
Speaker Change: Thank you next question is coming from Larry <unk> from Wells Fargo. Your line is now live.
Speaker Change: Good morning, Thanks for taking the question Tim how are you thinking about the growth of the med Tech market in 2025, and J&J relative to the market and what are you assuming for the E. P business in Edinburgh pulse. Thanks for taking the question.
Speaker Change: Thank you Larry I appreciate your continued interest in our in our business, let me start with the market Larry we communicated at the enterprise business review that we so our end markets growing roughly 5% to 7%.
Speaker Change: As we look at our procedures within the year to come we believe that they have for the most part normalized you will recall that in the first half of last year, we expected some tail winds on the back of clearing of the backlog specifically in orthopedic procedures, we believe that for the most part around the world procedures have normally.
Speaker Change: Is it to pre COVID-19 levels.
Speaker Change: And we expect the same as we now move into a into 2025 mm specific to electrophysiology I did want to firstly acknowledge that out of out of an abundance of caution and we recently announced a temporary pause.
Speaker Change: Of all U S power pulse cases, while we investigate the root cause of four reported neurovascular events and Larry well disappointing. This is an easy decision for us Atlanta, our credo of patient safety is always an absolute priority for us and frankly, given that we are collaborating now with the FDA on this matter. This is all we will be sharing at this time, we will proactively.
Speaker Change: I'd further updates when we have additional information to share I do have I think it's important to remind everyone that this announcement is specific to the U S. And there is no expected impact to Vera pulse cases outside of the U S where the rollout the technology has been successful with approximately 3000 and commercial case.
Speaker Change: This completed I do think important it's important to reinforce that.
Speaker Change: You know, while we are facing a headwind today.
Speaker Change: We have tremendous opportunity in the electrophysiology space, it's an exciting market as you know with the relatively low global penetration well under 5% as you know and an expanding market size due to aging populations today, we have a $5 billion market, leading position in electrophysiology, which grew 14%.
Speaker Change: 2024, driven by commercial execution, and a significant portfolio of new product introductions from kudos to ultrasound, Colorado and more recently variables, partially offset by competitive PFA pressures, most notably here in the U S. Now we've been market leader as you know Larry for 20 years and have an entrenched.
Brent: Brent with an installed base of over 5000 cargo systems, which is widely recognized as the benchmark and mapping software and a broad network of highly trained mappers and building on our success in navigation catheter is and RF ablation in 2024, we launched our first PFA catheter variables with strong initial feedback.
Brent: In Europe, Japan, and Canada. Additionally, similar to our success and our RF portfolio, we are expanding beyond that and we recently announced EU approval of the dual energy S. T. SF catheter, which is modeled on the RF S. T SF catheter, which historic which historically is the most widely used ablation catheter in the world.
Speaker Change: We're also building on this and working on an omni pulse large tip focal catheter demonstrating our commitment to bring to market a comprehensive portfolio N. P. F E and so I will also say Larry it's not just an EP. We're also moving beyond Afib and we're working to enter the left atrial appendage closure market through the <unk>.
Speaker Change: Acquisition of of lamina, or which we announced in the fourth quarter of 2023 in summary, Larry while we're facing short term headwinds as you know, especially here in the U S. We are absolutely confident in our ability to retain our global market leadership position over the long term. Thank you.
Chris Schott: Thank you next question is coming from Chris Schott from JP Morgan. Your line is now live.
Chris Schott: Great. Thanks, so much I just had a two parter on operating margins like you mentioned in the remarks about 150 basis points of improvement this year.
Chris Schott: R&D, here's to elaborate a little bit more and what's enabling that despite the lower top line growth and some of the negative product mix from still Laura I guess I'm trying to get out should we be expecting opex to be down this year embedded in that guide and the second part was just beyond this year just help us think about the cadence of margin expansion as we think about 26 and beyond in topline reaccelerate. Thank you.
Chris Schott: Yeah. Thanks for the question, Chris with respect to the 150 basis improvement that wasn't related to year on year comparison from IP R&D I would say, that's really part and parcel to what we've been doing for a couple of years now when we had a chance to separate the consumer health business out into its own company we.
Chris Schott: Did take a look at the corporate infrastructure and as you know we also prioritized our investments in innovative medicine and med Tech specifically within those portfolios as well so became much more focused and you're starting to see the culmination of that this year you might have noticed in med Tech last year, we did have.
Chris Schott: Some restructuring charges related to some orthopedic moves that we made getting out of certain markets that were less profitable improving our infrastructure around manufacturing.
Chris Schott: Those are starting to come home.
Chris Schott: To roost so to speak in Hum innovative medicine, obviously prioritizing most of our investment into what I would call our our thoroughbreds within the stable. So oncology immunology neuroscience as you can tell and you know we have invested in technology over the last few years and a pretty.
Chris Schott: Significant way Theres still more investment to come but that's starting to yield some benefits as well in terms of efficiency around the organization. So we knew for a few years now that's the law would face Biosimilar competition and so we had to be prepared and this is kind of how the organization has gone about it.
Chris Schott: As far as 26 and beyond I think you know I'd go back to the comments I made with respect to operating margin and probably EPS growth overall that that'll be commensurate with sales so that should be a positive outlook. As you know this year, we're calling for 3% operational growth. Despite a multibillion dollar headwinds most organizations would be look.
Chris Schott: Two contract, both probably top and bottom line here, we are growing 3% on the topline operationally at about 9% on the bottom line I think you should look for maybe a little bit better equilibrium in 26 and beyond but with an expectation that we'd have some higher sales growth.
Speaker Change: Thank you next question is coming from that mix shift from Barclays. Your line is now live.
Speaker Change: Perhaps your phone is on mute Matt.
Speaker Change: Your line is now live.
Speaker Change: Our next question is coming from Dave Risinger from Leerink Partners. Your line is now live.
Speaker Change: Yeah.
Speaker Change: Oh pardon me just make sure here I mean, what are you.
Speaker Change: And the next analyst please.
Speaker Change: Our next question is coming from David Roman from Goldman Sachs. Your line is now live.
Speaker Change: Thank you good morning, everybody and son, Christopher on behalf of Christian Audi and myself here.
Speaker Change: Want to come back to just the overall med Tech strategy and appreciate that you exited the year over the 7% number that you had previously communicated at the high end of the range, but when you pick that apart a little bit clearly a big percentage of that does come from M&A I think with ex M&A, the organic number being below the <unk>.
5% to 7%.
Speaker Change: So could you maybe just walk through a little bit how you think about the organic investment in the business versus inorganic contribution to that number of long term, especially when you start to look at some of the more established franchises whether that surgery orthopedics.
Speaker Change: Your end market and then if I could just sneak in accounting one in here just want to confirm there is no revenue recognition reversal charges and the EPA numbers this quarter for for vehicles.
David Roman: David Thank you for the question and.
Speaker Change: We could not be more thrilled.
Speaker Change: Thrilled with the performance that we delivered in 2024 and while there are opportunities we delivered almost $32 billion of sales.
At an operational growth rate of six 2% when you take out the impact of Shockwave, That's four seven and let me be very clear that we remain very confident in our expectations communicated at the ABR and as a reminder, we expect our end markets to grow between five and 7% on a weighted average basis between 22 and 27.
Speaker Change: And we expect to deliver an operational CAGR in the upper end of the range over that period.
Speaker Change: In 2020, 462% as I mentioned and we're pleased with the continued double digit growth in cardiovascular both within our core electrophysiology business business and our new acquisitions in Abu Ahmed and Shockwave, which I referenced earlier. We're also proud of the continuous improvements and also this is a business that historically was a laggard for med tech.
Speaker Change: But tremendous improvements, especially with the mid single digit growth in hips, and knees and continued innovation with our enabling technologies and specifically in Venice. We're also encouraged by the continuous improvements envision another core business and as you know we had a slower start to 2024, but we saw that improve throughout the year, culminating in our operations.
Speaker Change: Growth rate in the fourth quarter of nine 1%.
Speaker Change: That said as you as you know too well, we do have some short term headwinds near term competitive pressures in U S. E. P. As one and secondly continued headwinds in China, which we've mentioned in 2025, we will continue to be a headwind and we have included that in our estimates as we look to the year ahead.
Speaker Change: We don't provide guidance by sector as you know, but we're confident that continued growth will be driven by our tremendous portfolio of new products specifically.
Speaker Change: Specifically Vera pulse, our Technet premium I OLS at QB Oasis Maxim contact lens Vela portfolio and also <unk>.
Speaker Change: Rather fixed portfolio and barbed sutures and a broad based hemostat in surgery. We also believe that our recent acquisitions of Shockwave and abiomed as I mentioned earlier will continue to perform exceptionally well fueled by multiple new products, new indications and a rapidly growing body of clinical evidence I will say that it is important as you think about <unk>.
Speaker Change: 25 to recognize as Joe mentioned earlier that we expect to see an acceleration in the back half we are seeing some a tough comparator when we compare to 2020 for a couple of factors will be positive one time change in revenue recognition in our ortho business inventory bills outside of.
Speaker Change: The U S and electrophysiology and finally headwinds related to selling days versus prior year and so we would recommend that that you can see we encourage you to consider these in your revenue and your statements for for the year ahead.
Speaker Change: Maybe David just to cap off you asked a specific question around the accounting reversal and whether that had any impact on the quarter. There was none relates to Vera pulse.
Speaker Change: Thanks, David and thanks to everyone for your questions and your continued interest in our company, we apologize to those we couldn't get to because of time, but don't hesitate to reach out to the investor relations team with any remaining questions that you may have I'll now turn the call over to Joaquin for some brief closing remarks. Thank you. Thank you Jason and thank you everyone.
Speaker Change: One for joining the call today as you have heard who are ready for 'twenty to 'twenty five idea that will solidify our strengths our lead.
Joaquin: To elevated performance for the balance of the decade enjoy the rest of the day.
Speaker Change: Thank you. This concludes today's Johnson <unk> Johnson's fourth quarter 2024 earnings Conference call you may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.