10-K: J&J Reports Strong 2025 Growth, Plans Orthopaedics Spin-Off

Johnson & Johnson reported robust financial performance in fiscal year 2025 with 6.0% sales growth and a significant increase in earnings before taxes, while advancing its strategic plan to separate its Orthopaedics business.

Summary

• Worldwide sales increased 6.0% to $94.2 billion in fiscal year 2025, compared to a 4.3% increase in 2024.
• Volume growth contributed 8.4% to sales, offset by a price decline of (3.1)%, with a positive currency impact of 0.7%.
• The net impact of acquisitions and divestitures on worldwide sales growth was a positive 1.1% in 2025, primarily from CAPLYTA and Shockwave.
• Innovative Medicine segment sales reached $60.4 billion, an increase of 6.0% (5.3% operational growth).
• MedTech segment sales were $33.8 billion, an increase of 6.1% (5.4% operational growth).
• Earnings before provision for taxes on income significantly increased to $32.6 billion in 2025 (34.6% of sales) from $16.7 billion in 2024 (18.8% of sales).
• Net earnings from continuing operations more than doubled to $26.8 billion in 2025, up from $14.1 billion in 2024.
• Diluted earnings per share from continuing operations were $11.03 in 2025, compared to $5.79 in 2024.
• Research and development expense decreased to $14.7 billion in 2025 (15.6% of sales) from $17.2 billion in 2024 (19.4% of sales).
• The company plans to separate its Orthopaedics business, targeting completion within 18-24 months of the October 2025 announcement.
• Approximately $7.0 billion was reversed from the previously accrued talc reserve in 2025, reducing the total present value of the reserve to $3.4 billion.
• Acquired Intra-Cellular Therapies, Inc. and Halda Therapeutics OpCo, Inc. for a total of $17.5 billion in 2025.
• Issued senior unsecured notes for approximately $9.2 billion in the first fiscal quarter of 2025 to fund the Intra-Cellular acquisition and for general corporate purposes.
• The company increased its dividend for the 63rd consecutive year, with cash dividends paid at $5.14 per share in 2025.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong report, demonstrating robust financial growth and strategic execution, particularly in high-growth segments, despite ongoing litigation and biosimilar challenges. The significant increase in earnings and the strategic acquisitions are positive indicators.

Positives

• Worldwide sales grew strongly by 6.0% to $94.2 billion in 2025.
• Net earnings from continuing operations more than doubled to $26.8 billion in 2025.
• Diluted EPS from continuing operations nearly doubled to $11.03 in 2025.
• Earnings before provision for taxes on income increased significantly to $32.6 billion (34.6% of sales) from $16.7 billion (18.8% of sales) in 2024.
• Oncology sales achieved robust growth of 22.1% to $25.4 billion, driven by CARVYKTI (up 95.9%), DARZALEX (up 23.0%), ERLEADA (up 19.2%), TECVAYLI (up 22.1%), and TALVEY (up 61.3%).
• SPRAVATO sales increased 57.4% due to continued increased physician and patient demand.
• Cardiovascular sales grew 15.8% to $8.9 billion, with strong performance in Electrophysiology (up 7.0%), Abiomed (up 17.1%), and significant contributions from Shockwave sales.
• Vision sales increased 6.3% to $5.5 billion, driven by market growth, strong performance in ACUVUE OASYS 1-Day products, and surgical innovations.
• Approximately $7.0 billion was reversed from the previously accrued talc reserve in 2025, reducing the total present value of the reserve to $3.4 billion.
• Successful acquisitions of Intra-Cellular Therapies, Inc. for $14.5 billion, adding CAPLYTA and a promising CNS pipeline, and Halda Therapeutics OpCo, Inc. for $3.05 billion.
• The company increased its dividend for the 63rd consecutive year, paying $5.14 per share in 2025.
• Strong cash flow from operations of $24.5 billion was generated in 2025.
• The company maintains investment grade credit ratings.

Negatives

• Worldwide sales experienced a price decline of (3.1)% in 2025.
• Immunology sales declined 11.8% to $15.7 billion, primarily due to a 41.3% decline in STELARA sales ($6.078 billion in 2025 vs. $10.361 billion in 2024) driven by biosimilar competition and Medicare Part D redesign.
• IMBRUVICA sales decreased by 7.1% due to competitive pressures and the impact of Medicare Part D redesign.
• ZYTIGA sales declined 20.4% due to loss of exclusivity.
• INVEGA SUSTENNA/XEPLION/INVEGA TRINZA/TREVICTA sales declined 9.8% primarily due to the impact of Medicare Part D redesign.
• Infectious disease product sales declined 4.6%, driven by portfolio-wide decreases, including COVID-19 vaccine revenue.
• Orthopaedics sales growth was modest at 1.1%, negatively impacted by restructuring, China volume-based procurement, and selling days, with Spine, Sports & Other declining 2.5%.
• Net debt position increased to $27.8 billion at the end of 2025 from $12.1 billion in 2024, reflecting a higher total debt balance of $47.9 billion (up from $36.6 billion in 2024).
• A litigation expense of $0.8 billion was recorded for the Auris shareholder litigation in 2025.
• Higher restructuring related costs of $0.5 billion were incurred in the MedTech segment in 2025, compared to $0.2 billion in 2024.
• Increased cost of products sold as a percentage of sales was driven by unfavorable product mix, transactional currency in Innovative Medicine, and tariffs, transactional currency, and macroeconomic factors in MedTech.
• Foreign currency translation resulted in a loss of $5.506 billion in other comprehensive income in 2025.

Risks

• Challenges and uncertainties inherent in innovation and development of new products, including clinical outcomes, regulatory approvals, and commercial success.
• Difficulty in securing and maintaining adequate patent and other intellectual property rights, and the impact of patent expirations and aggressive challenges by competitors (e.g., biosimilar versions of STELARA and generic competition for OPSUMIT).
• Product efficacy or safety concerns, potentially leading to product withdrawals, recalls, regulatory action, declining sales, and reputational damage.
• Impact of significant litigation or government action adverse to the company, including product liability claims (e.g., talc, opioids) and allegations related to pharmaceutical marketing practices.
• Increased scrutiny of the healthcare industry by government agencies and state attorneys general, carrying risks of significant civil and criminal penalties.
• Potential changes to applicable laws and regulations affecting U.S. and international operations, including those related to product approval, pricing, reimbursement, environmental protection, and sourcing of raw materials.
• Pricing pressures resulting from trends toward healthcare cost containment, managed care, government as primary payors, and the impact of legislation like the Inflation Reduction Act of 2022 (IRA) on drug pricing and reimbursement.
• Challenges in realizing strategic benefits from planned or completed acquisitions or divestitures, and the potential for expected benefits from restructuring actions to not be realized.
• Uncertainties and potential delays in completing the planned separation of the Orthopaedics business, and the risk that anticipated benefits may not be achieved.
• Financial, economic, legal, social, and political risks associated with conducting business internationally, including foreign currency exchange rate fluctuations, inflation, currency devaluation, and restrictive economic policies.
• Difficulties and delays in manufacturing operations, both internal and through third-party providers, potentially leading to product shortages, recalls, and regulatory action.
• Interruptions and breaches of information technology systems or those of vendors, including cybersecurity threats, which could result in reputational, competitive, operational, or financial harm.
• Reliance on global supply chains and production and distribution processes that are complex and subject to increasing regulatory requirements.
• Inability to recruit and retain talented and highly skilled employees, and unsuccessful implementation of succession plans.
• Impacts of climate change, extreme weather, and natural disasters on operations, supply chains, and product demand.
• Risks associated with the increasing use of Artificial Intelligence (AI) and other emerging technologies, including unintended consequences, obsolescence, and new regulatory requirements.
• Breach of privacy laws or unauthorized access, loss, or misuse of personal data, leading to fines, penalties, and reputational damage.

Future Outlook

The company expects continued launches of biosimilar versions of STELARA globally, which will negatively impact STELARA sales. Generic competition for OPSUMIT is anticipated in 2026, likely resulting in a significant reduction in future sales. The planned separation of the Orthopaedics business is targeted for completion within 18 to 24 months after the October 2025 announcement. The company anticipates that operating cash flows, external funding, existing credit facilities, and commercial paper access will provide sufficient resources for operating needs, including remaining litigation reserves. Continued scrutiny on drug pricing and government price reporting is expected, potentially leading to additional regulations. An increased risk of information security or cybersecurity incidents is foreseen due to global tensions. New privacy laws and greater privacy enforcement are expected globally, particularly on data localization and transfers. The application of AI in the business is emerging and evolving, with new laws and regulations potentially entailing significant costs or limiting its use.

Management Comments

• "The Company believes that its employees are critical to its continued success and are an essential element of its long-term strategy."
• "Management is responsible for ensuring that its policies and processes reflect and reinforce the Company's desired corporate culture, including policies and processes related to strategy, risk management, and ethics and compliance."
• "With Our Credo as the foundation, the Company believes health is everything. The Company's strength in healthcare innovation empowers us to build a world where complex diseases are prevented, treated, and cured, where treatments are smarter and less invasive, and solutions are personal."
• "Through the Company's expertise in Innovative Medicine and MedTech, the Company is uniquely positioned to innovate across the full spectrum of healthcare solutions today to deliver the breakthroughs of tomorrow, and profoundly impact health for humanity."
• "Our approximately 138,200 employees are critical drivers of the Companys success. Employees are empowered and inspired to lead with Our Credo and purpose as guides."
• "The Company remains committed to investing in research and development with the aim of delivering high quality and innovative products."
• "The Company anticipates that operating cash flows, the ability to raise funds from external sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will continue to provide sufficient resources to fund operating needs."
• "The Company closely monitors these proposals [changes to tax laws] as they arise in the countries where it operates."
• "The Company believes it is possible that tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions outside of the United States."
• "The Company continues to believe that it has strong legal grounds to contest all the talc verdicts that it has appealed."
• "Notwithstanding the Companys confidence in the safety of its talc products, in certain circumstances the Company has settled cases."
• "The Company continues to defend ELMIRON product liability lawsuits and continues to evaluate potential costs related to those claims."
• "Although these subsidiaries believe that they have substantial defenses to these challenges and allegations with respect to all significant patents, there can be no assurance as to the outcome of these matters."

Industry Context

StockSavvy.ai notes that Johnson & Johnson's strong performance in Innovative Medicine, particularly Oncology, aligns with broader industry trends of high growth in specialized therapeutic areas. The decline in Immunology sales due to biosimilar competition for STELARA reflects the increasing pressure on blockbuster drugs as patent exclusivity expires, a common challenge across the pharmaceutical sector. The planned separation of the Orthopaedics business is consistent with a trend among diversified healthcare conglomerates to streamline operations and unlock shareholder value by focusing on core, high-growth segments, similar to recent spin-offs seen with other large pharmaceutical companies. The increased debt for acquisitions like Intra-Cellular Therapies and Shockwave Medical indicates a strategic focus on expanding high-growth portfolios in both pharmaceutical and MedTech sectors, a common strategy for maintaining competitive advantage.

Comparison to Industry Standards

• StockSavvy.ai observes that Johnson & Johnson's 6.0% sales growth in 2025, while solid, is below the S&P 500's 14.4% 5-year CAGR and the S&P Pharmaceutical Index's 13.5% 5-year CAGR, but significantly above the S&P Healthcare Equipment Index's 4.9% 5-year CAGR.
• The company's R&D investment of $14.7 billion (15.6% of sales) is substantial and competitive within the pharmaceutical industry, where leading players like Pfizer and Merck also invest heavily in drug discovery and development.
• The significant growth in CARVYKTI (95.9%) and DARZALEX (23.0%) in Oncology demonstrates J&J's ability to capture market share in high-value therapeutic areas, comparable to the success of other oncology leaders like Bristol Myers Squibb's Opdivo or Novartis' Kymriah.
• The impact of biosimilar competition on STELARA (41.3% decline) is a common industry challenge, similar to the revenue erosion experienced by companies like Amgen with Neulasta biosimilars or AbbVie with Humira biosimilars.
• The acquisition of Shockwave Medical for $12.6 billion reflects a strategic move into high-growth, minimally invasive cardiovascular technologies, mirroring similar M&A activities by MedTech giants like Medtronic or Abbott Laboratories to expand their interventional portfolios.

Management Changes

Corporate Governance

Legal Proceedings

• **Talc Matters**: Numerous personal injury claims alleging talc causes cancer. The company reversed approximately $7.0 billion from the previously accrued talc reserve in 2025 after the Texas Bankruptcy Court dismissed the Red River Bankruptcy Case, reducing the total present value of the reserve to $3.4 billion. The company has returned to the tort system to litigate claims, with ovarian cancer trials scheduled for 2026 and beyond. A Special Master's report on general causation in the MDL was issued in January 2026, with an appeal planned by the company. A securities class action alleging failure to disclose asbestos contamination in talc products had class certification affirmed by the Third Circuit in July 2025, and the company filed a writ of certiorari with the U.S. Supreme Court in February 2026.
• **Opioids Matters**: Approximately 3,500 lawsuits related to opioid marketing. The company finalized a $5.0 billion settlement for state and subdivision claims (80% paid by end of 2025) and reached an agreement to resolve hospital cases in September 2024. Approximately 23 state court cases and 285 Ohio MDL cases remain. A Canadian class action was certified in January 2025, with an appeal heard in December 2025 and a common issues trial scheduled for 2028.
• **Product Liability (Other)**: Ongoing lawsuits related to DePuy ASR Hip Systems, PINNACLE Acetabular Cup System, Ethicon Pelvic Mesh devices, Ethicon Physiomesh Flexible Composite Mesh, PROCEED Mesh, PROLENE Polypropylene Hernia System, and ELMIRON. The company has settled or resolved a majority of these cases, with accruals established for remaining litigation and defense costs.
• **Intellectual Property**: Patent infringement lawsuits against generic manufacturers for XARELTO, INVEGA SUSTENNA, ERLEADA, SPRAVATO, CAPLYTA, and UPTRAVI. Many of these cases have seen dismissals, confidential settlements, or ongoing appeals/trials. A new suit was filed in January 2026 by 2seventy bio, Inc. against the company and its subsidiaries in the Unitary Patent Court alleging infringement of an EU patent related to CARVYKTI.
• **Government Proceedings**: Civil Investigative Demands from the DOJ to J&J Vision regarding alleged False Claims Act violations related to intraocular lenses. A qui tam complaint against J&J and Janssen Products, LP alleging off-label promotion of HIV products and anti-kickback violations resulted in a jury finding liability for off-label claims in June 2024, with the company appealing to the Third Circuit. A Civil Investigative Demand from the DOJ to Janssen Biotech, Inc. regarding management and advisory services for rheumatology and gastroenterology practices was closed in August 2019, but a qui tam lawsuit is ongoing.
• **General Litigation**: An Anti-Terrorism Act complaint alleging funding terrorist organizations through sales practices in Iraq was remanded by the Supreme Court in June 2024, with the D.C. Circuit affirming its reversal of dismissal in January 2026. An ERISA class action alleging mismanagement of prescription-drug benefits was dismissed in November 2025, with plaintiffs appealing. A $0.8 billion judgment against the company related to the Auris Health Inc. acquisition was affirmed in part by the Delaware Supreme Court in January 2026 and subsequently paid. An antitrust lawsuit against Biosense Webster, Inc. resulted in a jury verdict and permanent injunction against BWI in May/August 2025, which BWI appealed. Antitrust class actions against Actelion related to TRACLEER samples are scheduled for trial in March 2026. An antitrust class action against Janssen related to STELARA biosimilar competition had class certification granted in December 2025. Other ongoing litigation includes a ZYTIGA False Claims Act complaint and a breach of contract claim regarding TREMFYA commercialization.

Related Party Transactions

• The company earns profit-share payments through collaborative arrangements for certain products, which are included in sales to customers.
• The company has licensing arrangements for products and compounds, including DARZALEX, licensed from Genmab A/S.
• Following the Kenvue separation, Johnson & Johnson and Kenvue entered into various agreements, including a separation agreement, transition services agreements (TSAs), transition manufacturing agreements (TMAs), trademark agreements, intellectual property agreements, an employee matters agreement, and a tax matters agreement. Amounts related to the TSAs and TMAs were immaterial for fiscal years 2025, 2024, and 2023, and amounts due to and from Kenvue for these agreements were not material as of December 28, 2025.

Stakeholder Impact

• **Shareholders**: Potential for increased value from the planned Orthopaedics separation, continued strong dividend payments ($5.14 per share in 2025), and the positive financial impact of the talc litigation reserve reversal. However, ongoing litigation risks and increased debt could introduce share price volatility.
• **Employees**: The company's human capital management strategy focuses on attracting, developing, retaining, empowering, and inspiring talent through competitive compensation, benefits, and health/wellness programs. Restructuring programs in the Surgery and Orthopaedics segments may lead to changes for employees in those areas.
• **Patients/Customers**: Continued focus on innovation and new product development in Innovative Medicine and MedTech aims to address evolving healthcare needs. However, product efficacy/safety concerns and recalls could impact patient trust and product availability. Access to medicines may be affected by pricing pressures and government programs like the IRA.
• **Suppliers**: The company's reliance on global supply chains and third-party manufacturers means suppliers are subject to disruptions and increasing regulatory requirements. Supplier finance programs are in place.
• **Creditors**: The increased total debt balance ($47.9 billion) and net debt position ($27.8 billion) will be a focus for creditors, though the company maintains investment-grade credit ratings and access to substantial funding sources.

Next Steps

• Completion of the planned separation of the Orthopaedics business within 18 to 24 months after the October 2025 announcement.
• Continued litigation of talc claims in the tort system and defense of product safety.
• Ovarian cancer trials are being scheduled in various state courts throughout 2026 and beyond.
• Remaining Daubert motions related to talc litigation are expected to be decided in the first half of 2026.
• Joint confirmation hearing for Imerys and Cyprus Chapter 11 plans scheduled to continue in February 2026.
• Briefing for the appeal of the Imerys Settlement Order expected to be completed in February 2026.
• Trial against Sandoz for SPRAVATO patent infringement scheduled to begin in February 2026.
• Oral argument for the federal claims appeal in the HIV off-label promotion case scheduled for March 2026.
• Trial for Maquet patent infringement case against Abiomed scheduled to begin in May 2026.
• Trial for Actelion antitrust case scheduled for March 2026.
• Common issues trial for Canadian opioid class action scheduled in 2028.
• The Surgery franchise restructuring program is expected to be substantially completed by the end of fiscal year 2026.
• The company will continue to monitor further developments regarding Pillar Two legislation and its potential impact on the effective tax rate.
• The IRS audit for tax years 2017 through 2020 has commenced.

Key Dates

Recommendation

Johnson & Johnson demonstrates strong operational performance in its core Innovative Medicine and MedTech segments, with significant growth in key product areas and strategic acquisitions. The substantial reversal of the talc litigation reserve is a positive financial development. However, ongoing challenges from biosimilar competition for major drugs like STELARA, continued litigation risks (talc, opioids, IP), and the increased debt load from recent acquisitions introduce elements of uncertainty. The planned separation of the Orthopaedics business, while potentially value-accretive long-term, also presents execution risks and near-term market volatility. A "hold" recommendation reflects the balance between strong underlying business performance and these material risks and strategic transitions.

Keywords

Johnson & Johnson, JNJ, Annual Report, 10-K, Financial Results, Innovative Medicine, MedTech, Orthopaedics Separation, Talc Litigation, Opioid Litigation, Acquisitions, Pharmaceuticals, Medical Devices, Healthcare, R&D, Earnings, Sales Growth, Debt Securities, Corporate Governance, Risk Management, Cybersecurity, Inflation Reduction Act, Patent Expiry, Biosimilars