Johnson & Johnson Forecasts Profit Growth Despite Drug Pricing Deal

Why this matters: J&J's ability to exceed expectations despite facing headwinds demonstrates the strength of its diversified portfolio and its success in bringing new, high-performing drugs to market. This is particularly important for investors and those in the healthcare industry, as it signals the company's resilience and potential for continued growth.

Background

Johnson & Johnson has been navigating a complex landscape of patent expirations, pricing pressures, and legal challenges. The company's Q4 earnings and 2026 forecast provide insights into how it is managing these challenges and positioning itself for future success.

Sales and Profit Growth

J&J's Q4 results showed a 9.1% increase in sales, reaching $24.56 billion, which surpassed analysts' estimates of $24.15 billion. Net earnings rose 20.8% to $5.12 billion, or $2.10 a share. The Innovative Medicine division saw a 10% increase in sales, while the medical devices business grew by 7.5%.

Impact of Stelara and New Drugs

The loss of patent protection for Stelara led to a nearly 48% plunge in its sales during the fourth quarter. However, strong growth in sales of newer drugs like Darzalex and Tremfya helped cushion the impact. This highlights J&J's successful strategy of developing and commercializing new products to offset revenue losses from patent expirations.

Drug Pricing Deal and Tariffs

J&J's CFO, Joseph Wolk, mentioned that a drug pricing deal with the Trump administration would cost the company hundreds of millions of dollars in annual sales. Additionally, tariff costs for 2026 are expected to double to around $500 million. Despite these challenges, J&J remains confident in its ability to achieve sales growth of over 6% for 2026.

Stock Performance

J&J shares have risen approximately 48% over the past 12 months, giving the company a market capitalization of over $500 billion. This strong stock performance reflects investor confidence in J&J's ability to navigate challenges and deliver growth.

J&J expects the drug pricing deal to cost the company hundreds of millions of dollars in annual sales, but it believes it can absorb the impact and still forecast sales growth.

Strong sales of newer drugs, particularly those for cancer and autoimmune conditions, are driving J&J's sales growth. Darzalex and Tremfya are key contributors.

J&J is focusing on developing and commercializing new products to offset revenue losses from patent expirations and biosimilar competition. The company's pipeline of new drugs is helping to mitigate the impact.

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