Johnson & Johnson (JNJ) stock is tumbling even after the healthcare giant raised its forecast again for full-year earnings and revenue.Â
Investors are focused on the company’s medtech unit, which posted disappointing sales growth of 2.5%.
Johnson & Johnson stock was up more than 27% this year before Tuesday’s pullback. That trails only Merck (MRK) among the biggest stocks in the iShares US Pharmaceuticals ETF (IHE), which has gained almost 16%.
The stock was down over 5% at Tuesday’s close.
248.61 -15.12 (-5.73%)
At close: 4:00:02 PM EDT
249.36 +0.75 (+0.30%)
JNJ MRK IHE
Johnson & Johnson CFO Joe Wolk explained to Yahoo Finance (video above) that the business is facing a two-pronged challenge: a study earlier this year in the UK questioning the company’s heart pump benefits in some high-risk procedures, and geopolitical conflict affecting sales.
“If you think about the war in the Middle East, it’s not that the demand isn’t there,” Wolk said. “It’s just that budgets are now being allocated from some of the surrounding countries on defense versus healthcare. But because the demand is there, we think that passes over time, because we know these are countries that do prioritize top, premium healthcare. So we think that’ll remedy itself as we move into 2027.”
Part of Johnson and Johnson’s medtech unit is its orthopedics business. The company had been weighing options for that unit, and there were reports that J&J was in talks with Apollo Global Management to sell it. Wolk now says he prefers a spin-off, in part because J&J’s strong cash position gives it flexibility. (Disclosure: Yahoo is a portfolio company of funds managed by affiliates of Apollo Global Management.)
“As we moved forward and through the process, we do appreciate that medtech valuations are down,” Wolk said. “And so if you think about potential acquirers, they’re going to utilize those valuations to their advantage. That’s not optimal for the long-term J&J shareholder. We think that’s a stock that will trade as a premier orthopedics global player in the years to come. And so we’re going to take advantage of that.”
‘That has not slowed down in demand at all’
Sales at Johnson & Johnson’s much larger pharmaceutical unit rose 7.7% to about $16.8 billion, driven by double-digit gains in its multiple myeloma franchise and in newer drugs to treat psoriasis and schizophrenia.Â
The biggest of those is Tremfya, an injectable biologic for psoriasis and inflammatory bowel disease, whose sales grew 68%. Wolk said he expects it to keep climbing.
“We think this is going to be better than a $10 billion product for us going forward,” he said, adding that “it’s still a very underpenetrated market when it comes to inflammatory bowel disease, both ulcerative colitis and Crohn’s.”
