Good morning. I'm Josh Jennings from the TD Cowen Medical Devices research team. We are thrilled to have Executive Vice President and CFO Johnson & Johnson, Joe Wolk, joining us. Joe, it's great to see you in person. Thank you for participating this year. It's been a little while since I've seen you in person.
Yeah.
great to see you.
It's nice to see you, Josh. Thank you for your interest in Johnson & Johnson. Certainly do appreciate it.
Absolutely. We're gonna focus a little bit on the high-level strategy and the med tech franchise.
Okay.
That's our wheelhouse. I know you guys have a much bigger wheelhouse with the pharma unit. It's been an incredible stock performance year in 2025 for Johnson & Johnson, and a lot of that was driven by both med tech and Innovative Medicine.
Yeah.
Innovative Medicine's kinda battling through this STELARA LOE headwind was quite impressive. You guys had laid that out that that was probable and you executed and delivered.
Yeah.
that's been a fantastic run. There's more to go. I don't know if there's any high-level thoughts or you wanna share on the Innovative Medicine franchise. We can just dive into some of my questions.
No, Josh. Thanks for the kind words. I do think it has been a nice run for Johnson & Johnson stock. If you think about the STELARA loss of exclusivity, some questions in our MedTech business, how would the pipeline and pharmaceuticals emerge? Those cards kind of flipped over about this time last year, they've all been flipping over with some face cards and some aces, as I like to say in there. You know, if I think about our pharmaceutical competitive set, you know, the LOE event is still in front of a lot of folks, where for us it's a rear view mirror event. It just speaks to the breadth and depth of our pharmaceutical team in terms of the products that they have, the products that are emerging.
If you take out the STELARA loss of exclusivity impact, that business grew close to 15% last year, right? We're still the only company, quite frankly, and we've done it twice now to overcome a loss of exclusivity of that size, the first time in 2018 with REMICADE, and now last year with STELARA. The MedTech story is also a good one, though. I think if a couple of years ago, we probably had some spotty performance. We made some really nice acquisitions with Abiomed and Shockwave to bolster our cardiovascular franchise. The growth is much more predictable now. We've got strongholds obviously in cardiovascular, in surgery and vision, and then we announced late last year that we would be separating our orthopaedics business. That's still a very good business.
It just doesn't fit into what Joaquin and the board desire to have in terms of our portfolio for higher growth, higher margin businesses going forward. In terms of share performance, I personally am pleased for the organization because there's been a lot of effort that's gone on over the years in advance of the STELARA loss of exclusivity and some of these other events. Make no mistake, we still have work to do, right? It was a great one -year return, but if you look on three and five years, we still have some ground to make up. We like to say, as Joaquin likes to say, 2025 was a catapult year.
We think it was a catapult to really have a nice series of years here ahead of us with a line of sight towards double-digit growth as an enterprise.
That's an intriguing and compelling metric, that double-digit growth target you guys put on the tape. We'll dig a little bit into it. you know, I think we wanna also venture into the discussion on the MedTech unit.
Sure.
Joaquin Duato has stated that he I think in early days of his tenure as CEO, that the turnaround of the MedTech unit would be a part of his legacy as CEO. I mean, you've mentioned some of the M&A initiatives, and you're building out that cardiovascular business, some high-growth assets, separating lower growth DePuy Synthes ortho business. Overall, you know, that should drive the weighted average market growth rate of the MedTech portfolio higher, both of those initiatives. I mean, how does this strategy evolve from here? You mentioned the focus on cardiovascular surgery and vision subsectors. I mean, do you double down on the cardiovascular build-out or consider additional silos outside of those three? Any just...
I mean, I'm sure there's multiple strategies that are being tossed around and discussed or. Any help just thinking through, as you talk about moving to that double-digit growth trajectory for the corporate overall?
Listen, I think we feel really good, let's stick with MedTech, about the portfolio that we have in MedTech. If you think about vision, the end of 2023 and 2024, that business was lagging. We have market leadership in contact lenses, but we didn't have a lot of new innovation coming out. Last year, we were able to build upon the ACUVUE brand, with our ACUVUE OASYS MAX 1-Day MULTIFOCAL, and then multifocal for astigmatism. That is kind of how people live. It's still a very under-penetrated market, with only 10% of people needing corrective lenses using contact lenses. We think there's still a big opportunity. We are significantly the market share leaders, but that market share is going to depend on the innovation that we continue to bring forward. We saw some of those results last year.
On the surgery side in vision, I would say, we had a really nice year, approached double-digit growth, with TECNIS, again, another traditional brand. Launching Odyssey and PureSee overseas, and then PureC will come later this year, for people who suffer from cataracts, the most prevalent surgery of all surgeries out there. Again, a very under-penetrated market. We think we've got the right cadence in vision. With cardiovascular, Abiomed and Shockwave, I think were very strategic acquisitions. It did bolster our position, I think in a responsible way with respect to adding to the cardiovascular portfolio, adding to our success in EP at the time, and acquiring businesses that, quite frankly, were clinically differentiated and had nice competitive moats around them, right?
What we like about those two units is they continually are looking to innovate. probably the best example I've seen of innovation and just having that constant mindset has been Isaac out at Shockwave. They're always thinking about how can they make that outcome better. With respect to electrophysiology, I think it was, you know, after Q1 results last year, I think people were writing off our EP business for fourth or fifth place.
You saw how Tim, and Michael Bodner, Tim Schmid and Michael Bodner kind of focused the team to make sure that we found our footing within the fastest-growing segment of Pulsed Field Ablation, to complement our leading position in RF, that is tied to our CARTO system, as well as some ultrasound capabilities. We're still number one today, and we have every intention to maintain that position. With surgery, I think you've seen kinda the business has done well on the wound closure side, the biosurgery side. Maybe where we've lacked a little bit in recent years is the instrument side of the business, and that's been impacted by robotics.
We were proud to announce the filing of a De Novo submission to the FDA for OTTAVA, our soft tissue surgical robot, which we hope will get approved later this year, certainly no later than early next. We were late to the game on that one. You know, given the presence that the Ethicon brand had in the OR, we should have been there sooner. It's a very complex machinery to develop. We've now developed the expertise. Really a tremendous credit to Tim focusing the organization to make sure we set a timeline, we hit it, and we think we're gonna come out with a differentiated product. If you think about what that's set up to do, there's integrated architecture, so the arms are part of the table.
That reduces the overall footprint in the OR. There's no carts. There's no booms. We think that's an advantage. It's got twin motion. The arms and the table move together. That means there's no repositioning or stoppage. The patient is kind of positioned as they need to be, making surgeries more efficient. We do have that instrumentation that I spoke about at Ethicon. It's still highly revered in the operating room. Matter of fact, most robotic procedures today still utilize some form of a Ethicon Johnson & Johnson instrument. Lastly, we're gonna surround it with some digital capabilities and digital ecosystem, we like to call it, with Polyphony, where we collect not just value from the hardware, but also the data and the insights that come from these procedures, making the next procedure better than the last.
We feel pretty good about where that all stands. While it's important to have the OTTAVA robot approved later this year, we're not overly hyped up or overly counting on it from a financial performance point of view. We think it's much more important to get the launch right, get the feedback from 10-25 accounts, whatever we place it in early on, to create that buzz in the market as opposed to have a failed launch. We're gonna go slow to go fast. I think that's critically important when you think only 8% today of surgeries are done with some robotic capability. There's a lot of room to run yet. These are early days. We're aiming to make sure that that's a significant pillar of growth for the next decade.
No, the It's been a nice turnaround, and there's clearly some momentum in play as we're moving here or already, or already in 2026.
Yeah.
Credit to your team and Tim's leadership. Just getting back to the out year, you know, corporate-wide double-digit.
Yeah
... performance level that you guys said it is attainable. I mean, it. By our math, you guys have kind of laid out a current 5%-7% growth rate for that MedTech unit. Ex Ortho, that can move to the high end of the range.
potentially seems like it may need to accelerate to contribute at the level to get.
Yeah
... entire franchise to double digits.
Yeah.
I mean, is that the right assumption? That potentially you guys can get north of 7% for MedTech, and does that include any external business initiatives and assets that you guys are bringing in through the M&A channel?
At the risk of not getting Tim mad at me, I won't sign him up for any numbers. We're gonna have an investor day in December of this year. You know, the orthopedic separation does add about 75 basis points of growth, about 75 basis points of margin to the overall outlook, as you mentioned. You know, that's still a very good business, I will say. It just doesn't fit into the portfolio that Joaquin and the board are desiring to have with higher growth, higher margin businesses. You think about what they were able to do just in the fourth quarter alone, right? I think a lot of people were probably expecting some distraction after the announcement. They were able to post 4% growth, I think with the right focus.
Believe me, Nirmal Rewana is a really good leader for this space. He's already demonstrated that. He has the organization energized and focused. I think with the right focus, they could be 6%, and they won't battle against the rest of J&J for capital deployment, right? This is a strong business. It's profitable. It's got good cash flow. It's gonna do probably better on its own than it would under the guise of Johnson & Johnson. You know, I realize I didn't answer one of your questions about M&A and broader. You know, the way I like to answer that, for us, it's more opportunistic than it is a particular time in the market macro, right? A lot of times we'll hear, "Well, it's a bad environment for M&A.
It's a good environment for M&A. We kind of look at it very simplistically, 80% of the discussion with our board of directors is about what's the strategic fit. Why does Johnson & Johnson have some unique scientific expertise, scientific capability, maybe it's a commercial capability or global reach, that makes that asset better in our hands than where it currently resides? Then, if that kind of boxes checked, then we'll go to the financial discussion, making sure that we reward shareholders for the risk that we're bearing on their behalf. The great advantage I have, Josh, in my role is we have a lot of conviction and confidence in the assets that we have to be number one or number two in the market, but we're very disciplined in the pursuit of new assets, right? We consider ourselves portfolio managers.
That's a key responsibility for the executive committee. We don't do things out of desperation, and that's a really nice place to be. Especially when you have a Triple-A rating, you're generating, you know, more than $20 billion of free cash flow. We have license to do just about anything we want, but we wanna make sure that we do that in a way that people can look back a few years later, like we are doing with Abiomed Shockwave, and although it's early days, Intellia Therapeutics, and saying, "Boy, they made the right move, and that asset is performing better.
Great. Just on the opposite side of M&A, just, you know, portfolio optimization, some pruning. You guys have been doing that annually, I know, in some bigger moves than others, including the separation of Ortho. That's not necessarily a pruning, as you just described. All right. What I wouldn't label pruning, but, I mean, is that part of the portfolio, you know, being active portfolio managers and could other lower growth units find a new home or?
You know, I guess over time.
How do you approach that?
Right now, we really like the construct of the, you know, the three franchises, if you will, in Innovative Medicine Pharmaceuticals and then the three franchises in MedTech. All of them right now represent really solid growth with really strong margin performance. We like the construct of our portfolio today. Will we always look to add? Yes. I mean, you could just look back over the last three years or so. We deployed about $56 billion in capital on acquisitions. Three of them made up $45 billion. We did 20-plus acquisitions with the remaining $8 billion-$9 billion. Those are the ones that really drive value, and those are earlier stage. They don't get headlines when we do the deal, but they often make headlines when the product launches or when we have success with the product.
You know, we're gonna look to continue to do that balance of earlier, smaller stage deals to tuck into our business, but could become very, very big platforms.
Maybe we could hone in a little bit on the near term. At your fourth quarter call, you issued 2026 guidance. I think for the MedTech unit, the message, and you don't guide specifically to Innovative Medicine and MedTech, but 2026 could be better than 2025 for the MedTech unit. You already kind of described some of the-
Yeah.
the drivers within cardiovascular vision and surgery. Maybe just review some of the fundamental assumptions on the, on the macro side. Procedure volume growth, I think your message is that there should be sustainable-
Yeah.
-kind of momentum, maybe not a surge in 2026, but maybe not a real decel, CapEx environment, purchasing environment in the United States by hospitals. Anything else you can just review and share any updates to the macro thinking?
Yeah. I think in terms of our business, I would say we do benefit from just an accounting calendar phenomena with a 53rd week. We've got almost a point of growth there. Even with when we subtract that out, it still portends to be. We expect a better year out of MedTech. One, I would go to the cardiovascular platform, specifically in electrophysiology, right? It took us a couple quarters to find our way in Pulsed Field Ablation. Despite all the mapping capabilities that we have, despite our leadership in RF, we were slower to the market with PFA, and then we had a little bit of a misstep with a pause at that point in time. You know, just to speak about that pause, that was the responsible thing to do.
As it turned out, there was nothing malfunctioning with the unit itself. It was a matter of updating the IFUs, the instructions for use. I think that built credibility, not just for the platform, but for Johnson & Johnson with electrophysiologists. That was a smart move. We continue to innovate on that platform, but we will do better than what we did the first half of last year in EP, specifically in PFA. With respect to vision, I think you're gonna continue to see the growth, the market leadership. I know on the contact lens sides, we're looking to parlay some of that innovation we launched last year into better market share, even though we already are the market leaders. That's where I would point to in terms of our improved performance.
That makes sense.
Well, you know, listen, I shortchanged orthopedics there.
Yeah, sure.
Orthopedics was flat last year for our business. They will be part of our 2026 results.
Right.
We expect something better than that out of them.
There is unfortunately a conflict in the Middle East ongoing.
Yeah.
I know it's very early days, but is anything to share just in terms of Johnson & Johnson's business over there? We hope and.
Yeah.
Everyone's safe from the J&J franchise.
Yeah.
-and others, but-
Yeah. That hasn't really... It is early days, Josh. I can't comment really with respect to the impact on the business. you know, some of the being so geographically diverse, having 28 platforms or products that generate more than $1 billion in revenue. We're not subject to any one dynamic per se, but our priority since Saturday night has really been, the safety of our employees and people in the region, and that's really where we're still focused at this point in time. I wouldn't anticipate material impacts to our financial performance.
Okay. Okay, thanks. Maybe just to circle back on some of your comments on your PFA franchise and the Biosense Webster franchise as a whole, you know, doing better than last year. I mean, as you described, there was some pauses in the PFA launch, and you guys made some corrections. I guess my follow-up question is really is on the pipeline. I think you have Dual Energy STSF and OMNYPULSE.
Yeah
...in development and coming on board in the coming quarters or even next year. Is that enough to build out your portfolio? I mean, I'm sure there's other pipeline initiatives ongoing, maybe new waveforms, new modes of energy delivery. Is the message that you guys are comfortable with your current arsenal of ablation catheters? Clearly, you guys are still number one and super strong on the mapping side...
Yeah
... and some of the ancillary technologies like intracardiac ultrasound. Focusing on the ablation catheter side of the portfolio, is, you guys have what you need for the next, two years to maintain that market leadership position?
Yeah. I do think so. You mentioned STSF dual energy. That's already launched in Europe. We're getting some really good feedback in terms of the familiarity with how it's handled. Certainly, it's important for extending our leadership in point-to-point ablation, giving the users that dual modality for energy selection. We expect in the first half of this year that we will be able to launch that. With OMNYPULSE, the IDE trial will be completed likely again in the first half of this year. You might have seen in recent weeks up here in Boston at an AFib conference, some really compelling safety data. No safety events whatsoever. There was no MRI detection of cerebral lesions or emboli, no worsening, no new neuro events.
We feel pretty good about the next two year to three year timeframe that you mentioned. I do appreciate you mentioning CARTO too. We do think that is the gold standard in terms of mapping. We think that that is important with all the catheters we've launched, that there is, it's easily integrated into what that mapping system does. Because it's so important, we call it the backbone of our electrophysiology franchise, we continue to innovate there as well. We've got Sonata coming out, CARTO EDGE, likely over the coming quarters. That will add additional computing power. It will provide AI enhancements, better visualization, and it all leads to better outcomes. Some of the data that was recently shared in a publication was that there.
They took 2,900 procedures that utilized CARTO, 2,000 that utilized our competitor's mapping, and there was a 61% reduction in terms of readmission for arrhythmia events just post 30 days after the initial procedure. We think that really speaks to just the outcomes that the CARTO mapping system drives. It goes with something that's probably understated from us, and that's really the mappers and the clinicians that support these systems. We've got 5,000 mappers. They are part and parcel to the success of all these procedures, and they're highly respected in those settings, and that is a great advantage for Johnson & Johnson.
I think your team made the decision to open CARTO to integrate.
We did.
... competitors' ablation catheter technologies I think maybe in 2025. I think by the time of HRS, you guys have made that move and with your installed base, you know, that's been a nice win, I think, is our understanding. I mean, is that the expectation going forward that the CARTO mapping revenues will be able to also be enhanced by when other competitors' ablation catheter technology?
Yeah. I mean, hopefully it's with our catheters, right?
Right. No, absolutely. That's.
That's, you know.
That's the best scenario.
I'll be candid with you, that's kinda the goal here. Yeah, I think that's one way to benefit. There is a just a nice seamless interchangeability integrated with our CARTO platform with all of our catheters. Yeah, we thought it was the right thing to do to open that up.
Understood. Wanted to circle back to some of your comments on OTTAVA and the overall robotics-
Yeah
... effort or initiatives by Johnson & Johnson. You have MONARCH as well.
You have VELYS, and VELYS will go with the orthopedic separation. I think earlier this year, Joaquin relayed that, you know, in terms of revenue contributions from OTTAVA and MONARCH. I know you have MONARCH in a pulmonary indication already, but becoming more meaningful, maybe kicking off in 2028. Is that the right way to think about it? Maybe just walk us through. You submitted, you get approval.
Yeah.
You need to have the launch, but maybe 2028 is the year where you start to see, you know, impactful contributions for revenues.
See, that's what makes Joaquin so good, 'cause he's pushing the team. From a financial perspective, that line of sight to double-digit growth is not heavily dependent on OTTAVA.
Okay.
Right? I know Joaquin's thinking this way too, as is Tim Schmid and the leadership team. We wanna make sure those early launches are done extremely well. That will create the buzz in the market. Given there's only 8% penetration today, we're thinking about this as a pillar of growth for the next decade. When you hear a line of sight to double-digit growth, you don't have to be overly concerned about that coming from OTTAVA. We've got so many other platforms on both the pharmaceutical and MedTech side that's gonna drive that growth. It will be a contributor, don't get me wrong, 'cause you're going from zero to something.
Getting it right out of the gate, I think is much more important in terms of creating a longer term buzz, longer term value for the franchise overall.
Yeah. In the recent past, I think over the last couple of years, you and your team have called out some Assets in the Innovative Medicine business.
Yeah
... that were underappreciated by the Street as you guys peruse the out year estimates that were in play. I was hoping you'd be willing to maybe do that same exercise for the MedTech franchises. Are any product lines or pipeline products that are underappreciated and just not being incorporated into the revenue growth...
Yeah
trajectory of this MedTech franchise?
I'll partially answer that. I'll do a little bit of an advertisement for December 8th, we'll have an investor day. As long as I get license from the investor relations team to show a chart like that, I will certainly do that on the pharmaceutical side, and I plan to do it for the MedTech side as well. I would say, it's a different equation, you know, because hundreds of millions of matter on the MedTech side, where it's difference of billions on the pharmaceutical side. In looking at that in advance, and some of the preparation that Darren and I have done for that investor day, I would say consensus is a little bit shy on the cardiovascular side. I would also say probably a little bit shy on the surgery side.
Okay.
So-
Okay.
We'll give you some specifics. At least we're planning to give you some specifics in December, but that should give you appetite as to where there may be a disconnect in 2028, 2029.
Okay. We appreciate those early clues. you know, with the MedTech unit fully stabilizing and gaining momentum over these last couple of years, I was wondering if you could just talk about the commercial organization. I know it's big. There's number of the three MedTech silos and then business units within. Maybe just talk about the stability. Are you seeing any lower attrition rates from sales reps, general managers of businesses? I mean, I think with success you typically get more stability. Had that been an issue in years past, two, three, I mean, more like three, four years ago, and has that stabilized and have it contributed to some of this momentum that's being generated?
I think the simplest way I could put that is Tim Schmid doing a great job with his leadership team, right? You've got the right folks running our vision, our cardiovascular, and our surgery units. I will say that because of the orthopedic separation, we're very cognizant and mindful, just as we were with the consumer health separation of stranded costs. We are taking an opportunity to look at the organization. Are we right-sized for what the organization will be in the future? You may recall, we were pretty aggressive with the consumer health separation. We didn't even have a chance to talk about stranded costs after the separation because we had gotten rid of them.
It was a different, and I would say even easier separation because we were taking a segment out of Johnson & Johnson and a segment that really didn't have a lot of interdependencies with the other two segments. Here, we're taking certainly a business out of MedTech and then taking that business out of Johnson & Johnson. There's a lot more operational dynamics with that, but it also gives us the opportunity to look at our cost structure and make sure we're utilizing new capabilities, whether they be AI or just advancements in terms of the information that we receive, to get a little bit leaner in terms of supporting the R&D budget as well as improving EPS down the road.
Appreciate that. Just a couple of minutes left here. Wanted to touch on operating margin guidance for 2026 here.
Yeah.
You know, it's, You're, calling for, I think, at least 50 basis of improvement in that pre-tax margin. Maybe just walk through the major drivers of margin improvement and just, you know, this pre and post ortho separation for the MedTech. You know, I mean, there seems to be some outsized margin expansion potential from the MedTech business, especially as you get some benefits from stronger revenue growth volume...
Yep
... volume contributions, etcetera. Maybe overall corporate-wide and then maybe hone in on the MedTech business.
I think some of it relates to my prior answer with respect to getting a jump-start on some of these stranded costs. We'll be able to take some of those out this year. That will help improve margins. You know, I had higher hopes, I gotta be honest with you, in October for maybe something better on the margin profile. We, quite frankly, owed you guys 50 points from last year. We said it was gonna be around 300 basis points. We came in about 250. We just had so many good opportunities to invest in some newer launches on the pharmaceutical side, specifically Balversa for bladder cancer, Tremfya for psoriasis, Rybrevant and lazertinib for lung cancer, as well as getting a commercially ready organization for the launch of OTTAVA sometime in the near future, right?
We wanted to make sure we weren't being penny-wise and pound-foolish because we were meeting the other metrics, we said, "Let's make that decision to still meet targets that the Street expected from us, but have the opportunity to invest for the long term." We did that. I did have higher aspirations, I would say, in October, November. You've got to remember, we came out with 50 basis points of improvement. We still, I think, exceeded what consensus was for EPS for 2026 in our guidance. That was digesting probably higher tariff costs than what the analysts were assuming. It certainly didn't have any estimates for the MFN deal, and that's all price. That's all margin that's gone away, and that was not trivial. We felt pretty good about coming out with the guidance we did.
Although I'd hoped it was gonna be higher at one point, to be able to digest it really speaks to the strength, the breadth and depth of Johnson & Johnson these days.
Well, that's About to wrap it up there, Joe. Thank you so much for the discussion, taking my questions, delivering some on these answers. Helping us think about 2026 and beyond for Johnson & Johnson and specifically the MedTech franchise.
It's always a pleasure, Josh. Thank you very much for your interest.