Johnson & Johnson

J&J's revenue grew 6.6% to $25.3 billion in the second quarter, driven by 7.8% growth in Innovative Medicine and 4.5% in MedTech. Management increased the midpoint of 2026 guidance by $300 million on the top line and $0.13 on the bottom line. Shares fell 2% intraday on July 15.

Why it matters: J&J's strong momentum in oncology and immunology provides plenty of growth to cushion some areas of weakness in MedTech as well as the ongoing Stelara patent cliff headwind. Darzalex's dominance in multiple myeloma and continued share gains are likely to drive double-digit sales growth of J&J's biggest product until the end of the decade, and Tremfya's share gains over AbbVie's Skyrizi in gastrointestinal indications open up a long runway for immunology growth. In MedTech, we expect temporary weakness from the narrowed use of Impella heart pumps until J&J has more data from the Protect-IV study in 2027. More broadly, J&J isn't seeing signs of lower procedure volumes for its products, which tend to focus more heavily on less discretionary areas.

The bottom line: We're maintaining our $190 fair value estimate for wide-moat J&J, as raising our 2030 sales forecasts for Darzalex (from $22 billion to $24 billion) and Tremfya (from $14 billion to $16 billion) did not significantly change our valuation. While we think J&J is one of the lowest uncertainty names in the large-cap biopharma universe and in the healthcare sector overall, its ability to navigate the Stelara patent cliff and its popularity as a defensive stock investment have pushed shares above their intrinsic value, in our view.

Coming up: We're waiting for data to help size opportunities for some of J&J's pipeline drugs, with a couple of key readouts in immunology (Icotyde) and cardiology (milvexian) expected this year.

BLANK PAGENew oral therapy Icotyde is already launching in psoriasis, and upcoming data in psoriatic arthritis later this year could help us further determine how much this could add to J&J's IL-23 franchise (including injectable biologic Tremfya). Bristol and J&J share rights to next-generation cardiology drug milvexian, and phase 3 data in stroke prevention for atrial fibrillation should be available around the end of the year. Pfizer's Eliquis sets a high bar, which limits our milvexian forecast, but differentiated data could provide upside.

For more information on J&J's portfolio and pipeline, please see our recent in-depth report, "Biopharma Product Pipelines Rise to Meet Steeper Patent Cliffs."

We are maintaining our J&J fair value estimate at $190 per share.

While J&J is one of the most diversified healthcare names we cover, we highlight new products like Inlexzo (bladder cancer, $3 billion peak) and Icotyde (immunology, $7 billion peak), as well as share gains for immunology drug Tremfya ($16 billion peak) as some of the key drivers of growth in our model.

With broad strength in J&J's innovative medicine and medtech segments, we expect average annual growth of 6.4% on the top line and 7.5% on the bottom line over the 2025-30 period, despite headwinds from moving past its biggest patent cliff beginning in 2025 (immunology drug Stelara, 12% of 2024 sales).

In the drug unit, strong innovative new drug launches are helping to offset increasing patent pressures. In immunology, J&J looks well positioned to mitigate the patent loss for Stelara with recently launched drugs that hold the potential to expand in approved indications and gain traction in new indications. We view Tremfya as well-positioned for growth, with peak annual sales of $16 billion in 2030. While the drug was approved in 2017 for moderate to severe psoriasis, new gastrointestinal indications are helping to drive robust sales.

In oncology, J&J continues to report strong data, suggesting increased potential for several of its drugs. Adding to the firm’s strong entrenchment in multiple myeloma with Darzalex, we expect CAR-T drug Carvykti and bispecific antibodies Tecvayli and Talvey to post solid gains. Also, the firm's Rybrevant/Lazcluze combination targeting EGFR-mutated lung cancer looks increasingly well positioned to develop into blockbuster sales in 2026.

We expect strong growth in new pipeline drugs to offset relatively limited near-term patent losses in the pharmaceutical division, although uncertainty in growth picks up in the 2030s as patent expiration of Darzalex Faspro approaches and as growth becomes more dependent on programs currently at an earlier stage. We expect fairly flat operating margins over the next several years as cost-containment efforts across the firm help offset margin pressure from the loss of patent protection on several high-margin drugs, including Stelara.

Under our updated discount-rate framework, we've raised our J&J weighted average cost of capital estimate to 7.4% from 7.2%. Our beta of 0.5 reflects our view of both biopharma's defensive nature as well as J&J's own fundamentals and market returns. The change does not reflect a new view of the business, but a more granular expression of our existing risk assessment.

We believe Johnson & Johnson has one of the widest moats in the healthcare sector, supported by intellectual property in the drug group and intellectual property and (to a lesser extent) switching costs in the device segment. The company's diverse revenue base, strong pipeline, and robust cash flow generation create a very wide economic moat. An extensive salesforce makes J&J a powerful candidate for a smaller biotechnology company looking to partner on a new drug, which strengthens J&J's ability to bring new products to market.

Johnson & Johnson's diverse operations are a major pillar supporting the wide moat. The company holds a leadership role in a number of drug and device markets. It is not overly dependent on one particular operating segment; the pharmaceutical business and medical device group represent close to 65% and 35% of total sales, respectively. Additionally, within each segment, no one product dominates sales. The largest drug by sales, Darzalex, accounted for only 15% of total sales in 2025.

Johnson & Johnson's R&D efforts support its robust revenue base. In pharmaceuticals, the firm recently launched several new blockbusters, which should allow it to escape largely unscathed from its biggest patent headwinds, led by immunology drug Stelara (12% of 2024 sales). Its efforts in MedTech, including robotics and digital data, should help maintain leadership in several medical device areas as well as support strong pricing power. Switching costs remain high with several of the device products. For example, physicians switching vendors for hip and knee devices could take weeks if not months to learn the new products, which keeps physicians tied to J&J's products.

We think the firm does face environmental, social, and governance risks, particularly related to potential US drug price-related policy reform (39% of 2025 sales were generated by prescription drugs in the US) to increase access by lowering drug prices. Ongoing product governance issues, including litigation related to side effects and patents, also weigh on the company. While we have factored these threats into our analysis, we don't see them as material to the company's moat rating.

J&J's strong position in oncology (Darzalex and Carvykti) and next-generation immunology product Tremfya (following Stelara) create a foundation of innovative drugs.

Diverse healthcare segments help insulate J&J from downturns in the overall economy, offering a defensive growth opportunity with a steady and likely growing dividend.

Several of J&J's key next-generation pipeline drugs are specialty drugs that tend to carry strong pricing power as well as lower regulatory hurdles for approval.

J&J's late-stage drug pipeline could face significant competitive threats, as oncology and immunology remain popular areas for biopharma investment.

Biosimilar competition to Stelara is rapidly eroding sales of the drug, putting pressure on the rest of the portfolio to compensate.

J&J's orthopedics segment is struggling to maintain share against more focused players like Stryker and Zimmer Biomet, and the economics of the separation are still up in the air.