Cancer drugs boost performance, Johnson & Johnson's Q1 results exceed expectations, raising full-year revenue forecast | Earnings Report Insights

Thanks to the strong sales performance of its cancer treatment drugs, including the multiple myeloma drug Darzalex, Johnson & Johnson's revenue and profit both exceeded Wall Street expectations.

On Tuesday before the market opened in the Eastern Time Zone, Johnson & Johnson announced an earnings report that surpassed expectations:

EPS: Q1 adjusted earnings per share increased by 2.2% year-on-year to $2.77, higher than the market expectation of $2.60;

Revenue: Q1 revenue increased by 2.4% year-on-year to $21.9 billion, exceeding the expected $21.58 billion;

Dividend: Johnson & Johnson raised its quarterly dividend by 4.8%, from $1.24 per share to $1.30 per share;

R&D Expenses: Q1 R&D expenses were $3.23 billion, estimated at $3.61 billion.

Performance Guidance:

• The company currently expects full-year sales to be between $91.6 billion and $92.4 billion, higher than the previous forecast of $90.9 billion to $91.7 billion, reflecting the contribution of the schizophrenia drug Caplyta to the product portfolio.
• The forecast for full-year adjusted earnings per share remains unchanged at $10.50 to $10.70, which includes potential tariff costs, the dilutive impact of the acquisition of Intra-Cellular Therapies, and currency fluctuations.
• Since releasing a disappointing sales outlook for 2025 in January, Johnson & Johnson has completed the approximately $15 billion acquisition of Intra-Cellular Therapies, a company focused on treating bipolar disorder.

Specific Business:

• The innovative pharmaceuticals division of Johnson & Johnson saw a year-on-year sales increase of 2.3% this quarter, reaching $13.87 billion, exceeding the market expectation of $13.43 billion;
• The medical technology division's sales increased by 2.5% year-on-year to $8.02 billion, slightly below the market expectation of $8.17 billion.
• Wolk noted that the company maintains its guidance given in January, indicating that the medical technology business will perform better in the second half of the year.

Specific Products:

Growth Products:

• Darzalex: Q1 revenue was $3.24 billion, a year-on-year increase of 20%, far exceeding the market expectation of $3.05 billion;

• Xarelto: Q1 revenue was $690 million, a year-on-year increase of 33%;

• Simponi: Q1 revenue was $659 million, a year-on-year increase of 19%;

• Remicade: Q1 revenue was $467 million, a year-on-year increase of 7.6%;

Declining Products:

• Major product Stelara: Q1 revenue was $1.63 billion, a year-on-year decrease of 34%, although the decline was significant, it was still higher than the market expectation of $1.42 billion;

• Zytiga: Q1 revenue was $125 million, a year-on-year decrease of 31%;

• Imbruvica: Q1 revenue was $709 million, a year-on-year decrease of 9.6%

After the earnings report was released, Johnson & Johnson's stock price rose over 1% in pre-market trading before turning to decline. By the close on Monday, the company's stock price had cumulatively risen nearly 7.6%. Previously, it benefited from pharmaceutical products being excluded from the first round of reciprocal tariff lists, and was largely unaffected by significant market fluctuations. In contrast, the S&P Healthcare Index has only risen about 1% this year.

Executives Say They Are Not Afraid of Drug Tariffs

Against the backdrop of Trump announcing an investigation into the pharmaceutical industry regarding imported drugs and plans to impose tariffs, Johnson & Johnson raised its full-year revenue expectations while maintaining its adjusted earnings per share forecast for the year.

According to Xinhua News Agency, the U.S. government's relevant online platform quietly released information last Friday night, exempting electronic products such as smartphones, laptops, and chips from the so-called "reciprocal tariffs." Trump suggested on Monday that he is exploring the possibility of exempting tariffs on imported cars and parts, but also hinted at imposing new tariffs on chips and drugs.

Additionally, media reports indicated that on April 14 local time, the U.S. Department of Commerce announced in two notices that it has begun investigating the impact of imports of "semiconductors and semiconductor manufacturing equipment" as well as "drugs and drug ingredients, including finished pharmaceuticals" on U.S. national security.

Even more surprisingly, Johnson & Johnson's Chief Financial Officer Joe Wolk stated that this investigation might actually be beneficial for the company, as the results may reveal that most of the drugs imported into the U.S. are cheap generics, while Johnson & Johnson sells high-end, innovative drugs, such as cancer treatments, thus limiting the company's impact. Wolk said:

"To some extent, this might even be good news. No one wants cancer patients to be without lifesaving drugs."

Billions in Drug Patents Set to Expire

First, Johnson & Johnson faces the issue of billions of dollars in drug patents expiring.

Johnson & Johnson's second-best-selling drug, Stelara, which treats psoriasis, is losing patent protection and is beginning to face competition from generics. Therefore, it needs to rely on new drugs like Darzalex for blood cancer treatment and Tremfya for autoimmune therapy to fill the performance gap. The good news is that Darzalex's revenue for this quarter was $3.2 billion, exceeding expectations, and Tremfya's revenue for this quarter was $956 million, also exceeding expectations.

However, not all business lines performed well. Johnson & Johnson's medical device segment reported revenue of $8 billion this quarter, slightly below expectations.

Secondly, Johnson & Johnson also faces multiple legal risks. On April 1 local time, media reports indicated that Johnson & Johnson attempted to use bankruptcy protection to settle tens of thousands of lawsuits related to the carcinogenicity of baby powder, but this was rejected by the court. This means that Johnson & Johnson will continue to face claims from approximately 60,000 women in the future What has drawn more market attention is the Trump administration's tough stance on pharmaceutical companies. President Trump has repeatedly accused drug companies of moving manufacturing out of the United States while selling overpriced drugs domestically. Although drugs were initially not included in the tariff list, the government has clearly stated that tariffs on the pharmaceutical industry will be imposed in the coming months.

Wolk stated that the Department of Commerce's investigation into drug imports may help Johnson & Johnson prove that its products do not pose a national security threat, thereby avoiding the most severe impacts. However, market analysts do not fully agree:

"The medical devices account for a relatively high proportion of Johnson & Johnson's product structure, and these devices also face tariff pressures, so the company's risk exposure cannot be ignored."

To this end, Johnson & Johnson pledged last month to invest over $55 billion in the United States over the next four years, covering areas such as manufacturing, research and development, and technology. However, the company has not disclosed how this substantial amount will be specifically allocated