Good morning, and welcome to Johnson & Johnson's Third quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode until the question and answer session of the conference. This call is being recorded.
If anyone has any objections, you may disconnect at this time. You experience any technical difficulties during the conference, you may press 0 to reach the operator. We will now turn the conference call over to Johnson & Johnson.
You may begin.
Hello, everyone. This is Ryan Koors, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of business results for the third quarter of 2026 and our financial outlook for the full year.
First, a few logistics. As a reminder, today's presentation and associated schedules are available on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward looking statements regarding among other things, the company's future operating and financial performance, market position and business strategy.
You are cautioned not to rely on these forward looking statements which are based on the current expectations of future events using the information available as of the date of this recording. They are subject to certain risks and uncertainties, that may cause the company's actual results to differ materially from those projected. The description of these risks, uncertainties, and other can be found in our SEC filings including our 2025 Form 10-K, which is available at investor.jnj.com and on the SEC's website.
Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, Joaquin Duato, our chairman and CEO, will discuss our business performance and growth drivers.
I will then review the third quarter sales and P&L results. Joe Wolk, our CFO, will then close by sharing an overview of our capital allocation priorities and updated guidance for 2026. Tom Cavanaugh, Executive Vice President, Worldwide Chairman, Innovative Medicine, John Reed, Executive Vice President, Innovative Medicine Research and Development and Timothy Schmid, Executive Vice President, Worldwide Chairman, MedTech will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes.
With that, I will now turn the call over to Joaquin.
Thank you, Ryan, and good morning, everyone. Our strong performance in the third quarter reinforces our confidence in 2026 as a year of accelerated growth and impact for Johnson & Johnson. In Q3, we reported operational sales growth of 6%, ahead of analyst consensus.
And increased sequential growth compared to the second quarter. With 6 strategic focus areas oncology, immunology, neuroscience, cardiovascular surgery ambition, we are leading in areas of higher medical need where innovation can make the greatest difference for patients. Our powerful combination of innovative medicine and med tech expertise strengthens our competitiveness. 29 of our products and platforms now generate at least $1 billion in annual sales.
Our marketed portfolio continues to perform Our launches are gaining significant traction and we are advancing our new product pipeline that will sustain our growth into the next decade. With sales in the quarter of more than $25 billion we are on track to meet our guidance and exceed $100 billion in annual revenue for the first time in our company's 140 year history. As we advance our differentiated portfolio and pipeline, we have a clear path to double digit growth by the end of the decade.
In Innovative Medicine, we delivered operational sales growth of 7.9% with 8 brands growing double digits. Let's start with oncology. We are making progress to redefine care from treatment to cure.
In the third quarter, our oncology business grew by approximately 17%. Our multiple myeloma portfolio and pipeline are unmatched with 80% of patients receiving a Johnson & Johnson therapy as part of their treatment journey. We continue to strengthen the body of evidence supporting our recently launched multiple myeloma therapies and combination regimens.
New Phase 3 results announced in July demonstrated that the combination of the Gvali plus Talvay reduced the risk of disease progression or death by 89% as early as the second line of treatment. In solid tumors, sales of RYBREVANT increased by 64%. Reflecting its strength in lung cancer.
And by the end of the year, we expect to receive US FDA approval for RYBREVANT Faspro in advanced head and neck cancer, a disease with significant unmet needs. In bladder cancer, INLEXZO has rapidly emerged as a market leader for new patient share. Just 1 year after its launch.
Nearly 1 in 3 eligible patients started on an INLEXZO regimen in the third quarter. Demonstrating its growing role in transforming care in high risk non muscle invasive disease. During the quarter, we also invested to bolster our oncology pipeline.
We completed our acquisition of Firefly Bio adding a promising new degrader antibody conjugate platform that targets drivers of difficult to treat cancers, including KRAS. Our ambition is to become the number 1 oncology company by 2030 with sales projected to exceed $50 billion Turning to immunology, we are building on our 25-year legacy to drive industry leading innovation for patients. Tremfya delivered exceptional sales growth of 68% in the quarter, reflecting strong momentum across its indications.
In the U.S., it is now the number 1 IL-23 inhibitor in new to brand share in Crohn's disease, ulcerative colitis and psoriatic arthritis. And we continue to generate evidence that reinforces Tremfya's clinical differentiation based on the landmark STARS study, Tremfya is the first and only IL-23 inhibitor to demonstrate positive outcomes in axial disease clinical trials. Including significant improvement in spinal pain, stiffness and inflammation in patients with psoriatic arthritis.
This momentum reinforces our conviction in Tremfya as a foundational medicine in inflammatory bowel and psoriatic diseases and our belief that it can grow into a $10 billion-plus franchise. ICOTYDE, our first in class targeted oral peptide for plaque psoriasis, continues to outpace recent competitor launches. More than 20 thousand patients have initiated therapy through nearly 9 thousand prescribers, since ICOTYDE's launch in the U.S. We continue to make strong progress on commercial access with ICOTYDE now broadly covered across all national plans.
Also this quarter, IMDEE was approved as the first advanced treatment specifically for warm autoimmune hemolytic anemia, a rare life threatening disease that causes severe anemia and fatigue. This new indication builds on IMDEE's momentum in generalized myasthenia gravis. And reflects its broad potential across autoantibody diseases.
And we continue to pursue next generation therapies, In July, we announced a collaboration with Cell BioMedicines to advance in vivo CAR T approaches for immune mediated diseases. Next, in neuroscience, we aim to transform the future of brain health by addressing complex nervous system disorders. Today, we are the definitive leader in neuropsychiatry.
CAPLYTA reached $1 billion in year to date sales making it our 29th billion-dollar platform. Driven by strong uptake as an adjunctive treatment for major depressive disorder, CAPLYTA is now the fastest-growing oral branded therapy in this space. And last month, we presented pivotal Phase 3 data that showed CAPLYTA significantly and rapidly improved symptoms of bipolar mania.
SPRAVATO also delivered impressive growth of 36% this quarter, reflecting strong demand in treatment resistant depression. Now let's turn to medtech where we deliver Q3 operational sales growth of 2.5%. While we fell short of our expectations for the segment, our conviction in our future direction has not changed.
Starting with cardiovascular, we continue to invest in heart recovery, circulatory restoration, heart rhythm disorders to address the leading global cause of death. This was another strong quarter for Shockwave, Our circulatory restoration business, which grew 17%. The ongoing global launch of Shockwave C2 Aero continues to broaden the reach of our intravascular lithotripsy platforms.
VARIPULSE, our pulsed field ablation platform, reached a major milestone this quarter with more than 100 thousand AFib patients treated worldwide. VARIPULSE Pro, which delivers 5x faster ablation speed, has been very well received in Europe where it is driving double digit growth. And just last week, we received approval for VARIPULSE Pro in Japan.
With increasing clinical experience, we are seeing differentiated benefits from VARIPULSE In a recent retrospective analysis, VARIPULSE demonstrated a 68% lower risk of adverse cardiac events compared to a competing pulsed-field ablation platform. And in heart recovery, while physician select continued to affect the Abiomed performance we remain confident in the technology and focus on supporting appropriate patient selection. In surgery, we are poised to shape the next era of care through robotics, digital innovation, and advanced instrumentation.
In July, the US FDA granted de novo authorization for OCAVA, the world's first stable and integrated soft-tissue robotic system. This is 1 of the most significant med tech innovations we will bring to market this decade. Ottava's unique architecture, automated features, and next generation robotic instruments to help address surgeon needs for operating room space and better surgical workflows.
Its connection to our open digital ecosystem, Polyphonic, turns procedure data into actionable insights for clinicians. We already signed our first commercial customer for OTTAVA, and we are progressing our development program. Our investigational device exemption trial is already underway in inguinal hernia repair.
With future plans for indication expansion into urology and gynecology. Finally, in vision, we are advancing life long eye health to bring better sight to more than 40 million people each year. The recent US launch of TECNIS PureSee further strengthened our portfolio of intraocular lenses.
During the quarter, TECNIS PureSee and Technis Odyssey surpassed 1 million implants worldwide. Reflecting continued surgeon adoption and our leadership in personalized vision solutions. We also received CE marking for ACUVUE OASYS MAX 2-week reusable lenses.
Expanding our ACUVUE portfolio in Europe. Overall, this quarter's strong results demonstrate the impact of the choices we have made to build a foundation for durable growth. We have sharpened our portfolio to focus on innovation with the greatest potential to change lives.
We have proved our ability to grow through a significant loss of exclusivity. Our strategic investments in high growth areas are delivering results. And our innovation engine continues to drive breakthroughs for patients.
That is why we have the confidence to say that we will finish 2026 strong and that 2027 will be an even better year for Johnson & Johnson. I will now turn the call back over to Ryan.
Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the percentages quoted represent operational results.
And therefore exclude the impact of currency translation. Starting with Q3 2026 sales results. Worldwide sales were $25.4 billion for the quarter increasing 6%.
Growth in the U.S. was 9.1%, 1.8% outside the U.S. Acquisitions and divestitures had a net negative impact on worldwide growth of 10 basis points. Now turning to earnings. For the quarter, net earnings were $210 million and diluted earnings per share were $0.09 versus $2.12 a year ago.
Results in the quarter were impacted by the proposed talc litigation resolution, as well as expenses associated with the Firefly Bio transaction and Cell BioMedicines collaboration amounting to approximately $7 billion. Adjusted net earnings for the quarter were $6.3 billion and adjusted diluted earnings per share were $2.59 representing a decrease of 6.8%, 7.5% respectively compared to the third quarter of 2025. Adjusted earnings in the quarter were also impacted by expenses associated with the Firefly Bio transaction and Cell BioMedicines collaboration.
I will now comment on business sales results in the quarter. Focusing on the 6 key areas where meaningful innovation and strong commercial execution are driving our performance and fueling long term growth. Beginning with innovative medicine, where our financial results reflect the depth of our expertise and innovation in areas of high unmet need across oncology, immunology and neuroscience.
Worldwide sales of $16.8 billion increased 7.9% which underscores the continued strength of our key brands and new launches. Growth in the U.S. was 11.1% and 3% outside the U.S. Divestitures had a negative impact of 10 basis points. on worldwide growth. In oncology, starting with multiple myeloma, DARZALEX growth was 15.6%, primarily driven by strong share gains of 5 points across all lines of therapy, with 10 points in the frontline setting.
As well as continued market growth. Partially offset by O-U.S. pricing headwinds. PRAVYCTI achieved growth of 35.2%, driven by share gains across earlier lines of therapy and continued site expansion.
TECVAYLI growth was 77.3%, driven by launch uptake and share gains across earlier lines of therapy following last quarter's approval in the U.S. TALVEY plus DARZALEX FASPRO U.S. growth was over 100%. TALVEY growth was 42.1%, driven by share gains due to increased depth of prescribing in the community setting. In lung cancer, RYBREVANT plus lazertinib delivered growth of 63.5%.
With strong share gains in the first and second lines driven by continued launch uptake in all regions, along with rapid uptake in RYBREVANT FASPRO. In prostate cancer, ERLEADA delivered growth of 9.4%, with continued share gains and market growth, partially offset by unfavorable patient mix. Within immunology, Tremfya delivered impressive growth of 68.2%, driven by continued momentum from the IBD launch with 4 points of share growth in both ulcerative colitis and Crohn's disease alongside continued market growth.
STELARA declined 5.4%, which reflects continued competitive pressures from biosimilars and the ongoing shift towards novel classes. Growth in other immunology is driven by IMDEE and ICOTYDE launch uptake in the U.S. In neuroscience, SPRAVATO grew 36%, driven by continued share gains reflecting strong physician adoption and increased patient demand. CAPLYTA showed significant growth of 66.1%,, driven by strong continued launch momentum in adjunctive major depressive disorder and continued demand increases across bipolar disorder and schizophrenia.
Now moving to med tech. Worldwide sales of $8.6 billion increased 2.5% with growth of 4.8% in the U.S. and 0.1% outside the U.S. Overall cardiovascular grew 4.1%, including 20 basis points related to acquisitions. Electrophysiology delivered growth of 4.4%,, driven by procedure expansion, commercial execution and new product performance.
Partially offset by competitive PFA pressures, which were more pronounced in Asia-Pacific this quarter. As well as the lapping of prior-year O-U.S. inventory dynamics. Abiomed saw a decline of 1.5% due to lower patient volume.
There are encouraging signals in the U.S. performance with improvement in the quarter. Supported by acute myocardial infarction, cardiogenic shock, and Impella 5.5 continuing to gain adoption. Shockwave grew double-digits at 17.2%,, driven by continued adoption of coronary and peripheral products as well as new product launches, and the reimbursement in the office-based lab setting within the U.S. Surgery saw a decline of 1% including a negative impact of approximately 30 basis points from divestitures.
The decline is more notably driven by ongoing expansion of VBP in China, the surgery transformation program outcomes across the portfolio, and Middle East disruption which impacted tender timing and ordering patterns. The decline was partially offset by portfolio strength, driven by recent innovations such as Echelon 400 and Duo as well as commercial execution in biosurgery. Vision growth was 5.1%, Driven by premium innovation, strong execution and global reach.
Contact lenses and other products grew 4.3%,, driven by strong performance in the ACUVUE OASYS 1-Day family of products, further solidifying our leadership position, partially offset by US inventory dynamics. Surgical vision delivered growth of 7.1%, driven by new product innovations, robust demand for premium IOLs and strong commercial execution. Partially offset by market specific factors such as disruptions in The Middle East.
Orthopedics growth for the quarter was 3.4%,, primarily driven by new product launches such as VOLT in Trauma and EMPHASYS in Hips, including strong commercial execution in Velis pull through and knees. Now turning to our consolidated statement of earnings for the third quarter of 2026. I would like to highlight a few noteworthy items that have changed compared to the same quarter of last year.
Cost of goods sold deleveraged by 150 basis points driven by unfavorable product sales mix and increased intangible asset amortization expense in the Innovative Medicine segment for intracellular partially offset by the impact of tariff recoveries in the medtech business. Selling, marketing and administrative expenses were flat as a percent of sales, reflecting consistent commercial investments in the Innovative Medicine business. We continue to invest strategically in research and development, deploying approximately $4.7 billion or 18.3% of sales which includes $1 billion related to the acquisition of Firefly Bio.
In process research and development impairment of $339 million in the quarter is related to the write off of Precardia, a non core asset acquired as part of the broader Abiomed transaction. Other income and expense was a net expense of $5.8 billion compared to $478 million of income in the third quarter of 2025. With the change primarily driven by the proposed talc litigation resolution and orthopedic separation related costs.
The tax rate was a small net benefit in the quarter. Primarily related to the positive tax effect associated with the accrual for the proposed talc litigation resolution. More information can be found in our upcoming 10 Q for changes in taxes.
Lastly, I will direct your attention to the box section of the slide where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense, and special items. Now let's look at the adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 44.3% to 35.4%,, primarily due to acquired in process research and development expense of approximately $1 billion related to the acquisition of Firefly Bio, transaction cost for Cell BioMedicines, and unfavorable product sales mix and cost of products sold.
MedTech margin increased from 21% to 22.9%, driven by the impact of tariff recoveries partially offset by increased strategic investments in commercial capabilities. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 35.2% to 30.2%. This concludes the sales and earnings portion of the call.
I will now turn the call over to Joe.
Thanks, Ryan. Hello, everyone, and thank you for joining us today. As you heard from Joaquin and Ryan, our third quarter results were driven by the strength of our Innovative Medicine business.
This performance more than offset headwinds in certain areas of MedTech enabling us to exceed expectations on both the top and bottom line, while continuing to invest in our pipeline and future growth. We are clear on where med tech performance needs to improve. Specifically cardiovascular and surgery outside The U.S. and are taking action to strengthen results.
While disappointing, the underlying fundamentals of the med tech business remains strong, supporting our confidence in the long term for that business. Across Johnson & Johnson, the drivers underpinning our outlook remain firmly in place. As a result, we are raising our guidance for 2026 versus our most recent update in July.
The depth of our portfolio, momentum from new product launches, and upcoming pipeline catalysts further reinforce our conviction in achieving double digit growth by the end of this decade with sustainable growth beyond. Turning to financial metrics and our cash position. We ended the third quarter with approximately $17 billion of cash and marketable securities approximately $45 billion of debt for a net debt position of approximately $28 billion, generating more than $6 billion in free cash flow in the third quarter.
We remain confident in our full year free cash flow guidance of $21 billion. During the quarter, we completed the $1 billion acquisition of Firefly Bio, deepening capabilities in oncology with next generation antibody engineering to address complex tumor biology. As Joaquin referenced earlier, we also entered into a collaboration with Cell BioMedicine to advance in vivo CAR T therapies for immune mediated diseases.
Our disciplined approach to capital allocation is principled on prioritizing investments that support key commercial launches accelerating future innovation, increasing our annual dividend and strengthening our pipeline through strategic value creating inorganic opportunities. In July, we announced an agreement for a resolution of the ovarian talc litigation for $5.5 billion, which is reflected in our third quarter GAAP results. The agreement is conditioned upon the express participation of at least 95% of claimants, and meeting a 95% threshold.
Let me now turn to full-year 2026 guidance. As always, our outlook reflects what we know today regarding foreign exchange rates, the broader macroeconomic environment, and other external factors. Based on our year to date performance and expectations for the fourth quarter, we are raising the midpoint and tightening the range of our operational sales guidance.
We now expect full year operational sales growth in the range of 6.7% to 7.1%, which represents operational sales of $100.7 billion at the midpoint or growth of 6.9%. We do not speculate on future currency movements. As of last week, the euro spot rate to the US dollar was 1.12, However, the average rate for the fiscal year stands at 1.15.
Based on that average rate, we estimate reported sales growth of 7.2% to 7.6%, With a midpoint of $101.2 billion or 7.4%. Assuming the current spot rate holds into next year, could expect currency to be a headwind. Turning now to other items of the P&L. Regarding operating margin, we now expect a decline of approximately 60 basis points This is an improvement from the 75-basis points decline reflected in our updated July guidance that included the impact of the Firefly Bio and Cell BioMedicines transactions, which had a unfavorable impact of 150 basis points.
Absent those deals, we continue to deliver base margin improvement. As a reminder, our pretax adjusted operating margin outlook also reflects the cost associated with the 53rd week of operations and our previously announced agreement with the US government to improve access to medicines. For net interest expense, we are lowering our guidance to $150 million to $200 million.
We are also tightening the range of our effective tax rate guidance Based on our year to date results, we now expect a full year effective tax rate of 17.0% to 17.5%. Given those updates, we now expect adjusted operational earnings per share in the range of $10.95 to $11.05, or 2% at the midpoint. We expect reported adjusted earnings per share of $11.05 to $11.15, with a midpoint of $11.10, or growth of 2.9%.
Excluding the impact of Firefly Bio and Cell BioMedicines transactions of $0.64, reported EPS growth would approach 9%. As a reminder for your 2027 modeling, we expect Firefly Bio and Cell BioMedicines to have a combined dilutive impact of $1.36 per share on a full year adjusted earnings per share next year. We will provide more details on our 2027 outlook later this year at our enterprise business review.
Let me now highlight several upcoming developments that reinforce our growth outlook and performance for the remainder of the year. In oncology, we expect several important data readouts in the fourth quarter These include data for pasaritomab, a first in class bispecific antibody in patients with advanced prostate cancer who have progressed after multiple lines of therapy. We also expect data for JNJ-6.11 thousand an investigational first in class once daily oral therapy for metastatic castration resistant prostate cancer.
We continue to see strong adoption for INLEXZO with year to date sales of approximately $200 million, and expect to build on that momentum with a data read out in high risk non muscle invasive bladder cancer later this year. We also expect US approval of RYBREVANT FASPRO in advanced head and neck cancer. In immunology, as Joaquin referenced earlier, ICOTYDE is off to a strong start, and we look forward to presenting data in psoriatic arthritis later this year.
In MedTech, we expect US approval of VARIPULSE Pro in the fourth quarter, further complementing last week's approval in Japan. In heart recovery, we are taking corrective action to improve Abiomed's performance. We continue to invest in clinical evidence and expect results from the HR PCI PROTECT IV trial in 2027.
The trial will have 1.25 thousand patients, 4x more than the SHOCK-III study. This large scale study will evaluate the safety and efficacy of Abiomed's Impella CP pump during high risk percutaneous coronary intervention. In surgery, we are focused on commercializing OTTAVA following its recent FDA de novo authorization.
We expect adoption and revenue contribution to build over time with the goal of establishing Ottava as a significant pillar of our surgery portfolio by the end of the decade. Regarding orthopedics, we remain on track for the planned separation of the DePuy Synthes by mid-2027. I am really proud of the team working to evaluate all separation vehicles and all options are better positioned today than when we announced our intentions with this business.
Given the way DePuy Synthes is performing and the momentum Nimesh Nana and his team are generating, we are leaning towards a spin as being the best option to create long term value for Johnson & Johnson shareholders. That has always been our base plan, and we are confident that it can be successfully executed. We will provide additional updates as appropriate and when there is more information to share.
Finally, I am really looking forward to and hope you join us for the enterprise business review on December 8th. At that event, we will provide additional perspective on our 2027 outlook and the key drivers that reinforce our conviction in achieving double digit growth by the end of the decade. Perhaps more importantly, we will highlight our earlier stage pipeline and how it represents the next wave of growth into the next decade.
Attendees will also have the opportunity to experience firsthand some of our latest innovations. Such as Ottava. 2026 is on track for another successful year. Exceeding expectations set at the beginning of the year.
We look forward to closing out 2026 strong and setting up 2027 for continued success. Thank you to our colleagues whose dedication and commitment continue to advance innovation improve patient outcomes, and create long term value for shareholders. With that, we are ready to answer your questions.
Kevin, can you please open the call for Q&A?
Certainly. We will now be conducting a question and answer session. If you would like to withdraw your question, please press *, then 2.
We ask you please limit yourselves to 1 question only. First question today is coming from Asad Haider from Goldman Sachs. Your line is now live.
Great. Thanks for taking the question and congrats on all the progress. I have 1 point of clarification.
On the double digit growth by the end of the decade, the vocabulary in the press release references the progress in the underlying business, quote, together with strategic investments I just want to be clear that refers to internal investments and not M&A. that is a question we are getting this morning. And then, Joe, on your comments that you are not satisfied with the med-- with MedTech performance and are taking action to strengthen that growth, Is the implication there that you are now-- you now feel more urgency to add to high growth areas via M&A and med tech do you think that you have the product portfolio today to drive the improved performance you are looking for? Thank you.
Yes, Assad. Thank you for your questions. On the first aspect, that is correct.
Your view of that being internal strategic investments is what will propel us to double digit growth by the end of this decade. In the coming years with increasing performance. So that is the correct interpretation.
It does not assume any inorganic additions at this moment in time. We always are on the lookout for strategic drivers that could complement our business. That makes sense to be in our hands versus where the asset would currently reside but also creates value for the risk we are bearing on behalf of shareholders With respect to the urgency, it is an urgency to fix what we currently have.
We like the portfolio and the construct. That currently exists with the 3 focus areas of vision care, of surgery, as well as cardiovascular. I think you are very familiar and maybe I will even hand it over to Timothy to talk about some of the things we are doing in heart recovery specifically to address that, what I would say is now a stable business, but we want to catalyze back to double digit growth.
We are very excited at what is on the horizon for surgery. With the addition of Ottava over time. That will be a significant contributor to growth by the end of the decade.
And then as I mentioned, earlier, Vision seems to be functioning well both the surgery side as well as the contact lens side where we are the market leader. But Tim, maybe you want to offer a comment or 2 around Abiomed?
Sure, Joe. So Assad, ultimately, Abiomed remains a temporary headwind as you saw in Q3, but our conviction in the long term opportunity has not changed at all. The slowdown we are seeing continues to be the same issue we highlighted in the quarter before, which is the study outside of the U.S. Focused on high risk PCI and importantly, we do not view these challenges as structural in nature and ones that will drive a long term impact on the business.
We are not seeing any changes in the patient need nor to reimbursement access or any meaningful competitive pressures. We also have highlighted some questions we have around the study as to whether best practices were used in the study. And so our focus today is really on education and advancing the clinical evidence based to show the incredible impact that has in both saving and improving lives.
And so we believe it is a short term headwind. it is important to recognize that in any emerging area of science, there is always going to be debate and discussion. And our responsibility is to continue to advance the evidence base to support in the best interest of patients. And in the case of Abiomed, we are doing exactly that.
And so the short term headwind but we are very confident this is going to be a strong platform for growth for Johnson & Johnson for the future.
Our next question today is coming from Larry Biegelsen from Wells Fargo. Your line is now live.
Good morning. Thanks for taking the question. Joe, I wanted to ask about the 2027 comments you made at Deutsche Bank.
On the top line, you said you expect reported sales growth to be similar to 2026 after adjusting 100 basis points for the extra week in both years, which I think would mean about 5.4% reported growth next year. And on EPS, how should we think about your ability to grow earnings excluding IPR and D? And just remind us of how much the Firefly, Sale dilution is IPR&D this year and next year.
Thank you.
So for this year, the IPR&D dilution is $0.64. And for next year, the combination of those deals is $1.36. And the way I would think about that, Larry, and you-- you have covered us long enough where you know that typically our income growth or EPS growth will be a little bit better than our sales growth. that is how you can think about that next year after adjusting for the $1.36 adjustment.
So we will continue to look at margin improvement as part of the orthopedic separation looking more holistically at our business. Some of the advances we are getting with technology and getting us more efficient across all parts of our business. But that is probably a good way to kind of frame in your thinking now for 2027, but we will be a little bit more explicit on December 8 at our Investor Day.
We will outline specifically kind of the components to that. And then even probably provide a pro forma with respect to the orthopedic separation should that occur at some point next year as well as a longer term outlook.
Thanks Next question is coming from Christopher Schott from JPMorgan Chase. Your line is now live.
Great. Thanks so much. Just wanted to touch base on ICOTYDE.
So just a 2-part question here. Can you just give us an update in terms of what you are seeing terms of patient uptake as we think about new to biologic versus oral switches versus injectable switches? And then bigger picture for the drug, are you talking about this as a $10 billion-plus asset?
But when you think about this very strong launch we have seen so far in psoriasis, you got a number of additional indications pending. I guess, how do you think about could this be a much larger asset than $10 billion as you think the peak sales opportunity for ICOTYDE? Thanks so much.
Great. Christopher, it is Tom. Good to hear from you.
First, I do want to start by recognizing Jennifer Taubert and thanking her for her tremendous leadership and partnership. Jennifer leaves Innovative Medicine incredibly well positioned as you see from our quarterly earnings. With strong momentum, outstanding portfolio and pipeline, and most importantly, a great team.
We are fortunate to build on that foundation she established and I am excited about what is ahead. And, really, what I am excited about is what you are touching on right now is ICOTYDE. We do foresee ICOTYDE to be 1 of our biggest assets.
In innovative medicine, and it is off to an incredibly great start. As you highlighted, as Joaquin highlighted on the call this morning, I think getting into some of the launch performance, you heard it from Joaquin Already to date, we have seen over 20 thousand patients initiated on therapy. With over 8 thousand prescribers or nearly 9 thousand prescribers,, I would say.
So absolutely tracking better than some of-- most all launches in psoriatic diseases. I think early prescribing trends is what you wanted to get at kind of as we think about-- and we are expanding the systemic marketplace. Approximately 60% of the patients are systemic naive.
So they have not received any systemic therapy. And the-- roughly, the remaining 40% remaining 20 percent are sourced from orals and 20 percent are sourced from other treatments, most likely biologics as we dig into the data. So I can say, as you are seeing with regards to the launch performance earlier, a bit expansion of the marketplace.
Absolutely an opportunity to continue to drive that Highlighted as well, as Joaquin highlighted earlier, I think it is important to point out, we do have broad commercial access now and preferred access in place on all national commercial plans or are actively engaged to expand that to the Medicaid. Medicare population. So I would say we are fairly-- very excited about the launch to date as equally as excited about the future.
And we do foresee this to be, you know, 1 of our largest assets, as I pointed out, We are excited about the upcoming data readouts. Both with the PSA and Phase 3 data as well as the head-to-head STELARA data for Ascend that we should be releasing in the coming months. And as we look to expand beyond that, we will get into more of this at the EBR.
And IBD, and expansions into UC and CD, expecting similar results with regards to launch performance. As we go into those other indications. Thank you.
Next question is coming from Joanne Wuensch From Citi. Your line is now live. Joanne Wuensch: Good morning and thank you for taking the question.
I want to focus a little bit on MedTech here. When you use a phrase underlying fundamentals in med tech, MedTech are solid, I wanna confirm that you are thinking about all the good stuff, the patient volumes, the CapEx spending from the hospitals, and then what you are seeing in terms of just general flows. And then as a sister question to that, how do you.
Or what do you think needs to be done to improve the J and J franchise? Thank you.
Joanne, it is Timothy. Thank you very much for the question. Let me start by really putting the overall medtech Q3 results in context for you and all on the call.
And to be clear, our performance is below the standard. We have set internally and below the expectations we previously communicated to investors. Simply put, we can do better, and we absolutely will.
And right now, we are focused solely on the actions needed to deliver stronger results in the fourth quarter and beyond. And that said, to your question here, when we break down our results, you will see that the pressure was primarily concentrated actually in 2 very distinct areas. Firstly, our performance outside of the U.S. And secondly, Abiomed globally, which we have already touched on.
And to put it in perspective, growth in The U.S., which, you know, is the most important market, was in fact robust in the quarter and accelerated to almost 5%. Our performance outside of the U.S. Was a challenge and it reflected a combination of mostly known headwinds which we have discussed previously. For example, in surgery, the expected impact of the transformation program and the ongoing expansion of volume based procurement in China.
And in electrophysiology, competitive intensity, especially in Asia Pacific, which is a region that you know, is still relatively early in the adoption of PFA. We did introduce a new headwind, which is really the incremental pressure that we are seeing on the business due to the conflict in The Middle East. But when you actually step back and you look deeper into these results, we are seeing several encouraging indicators which give us confidence in a stronger Q4 and outlook beyond that.
For example, electrophysiology in markets like Europe, where we have already launched VARIPULSE Pro, which by the way is a faster and easier to use catheter, we are back to double digit growth. And we will launch VARIPULSE Pro in Japan shortly after receiving regulatory approval last week. You can also anticipate a U. S. Launch by the end of this year.
I think at Abiomed, we have already touched on the study in PCI, a study where we actually believe that the methodology employed did not follow well established practices, an issue which we are addressing through education. We think we are going to get through that because the evidence base is so solid, especially in areas like AMI shock and we are still seeing tremendous performance of 5.5. We did, by the way, already see some improvement sequentially throughout the quarter, and we do believe that, that business will be back to growth in short order.
Now while Q3 for MedTech was not a strong quarter, this should not distort the whole picture. As mentioned, the issues are primarily concentrated in the 2 areas I mentioned. it is also worth reinforcing to your question that the underlying procedure environment remains stable across key markets. I know there is been a lot of debate about that.
Our job now is to make sure that we convert that demand into more consistent performance. And so we remain confident in the combination of the momentum we are seeing in The U. S. And the moderation of these near term headwinds, which will support improved performance in Q4 while positioning us for stronger performances in 2027 and beyond. And as you have already heard from Joaquin and Joe, we will share more detail around what that looks like for 2027 and beyond specifically with a focus on new innovations like Ottava when we come together on December 8th.
Thank you. Thank you.
Next question today is coming from Jason Gerberry from Bank of America. Your line is now live.
Hello. This is Richard Wagner for Jason. I had a question regarding the ICOTYDE psoriasis launch.
Are there lessons that can be learned that would be useful when ICOTYDE launches an IBD specifically in IBD competitors are developing high efficacy combination programs and wondering how that could affect the efficacy perception by physicians of ICOTYDE. Thank you.
Hi, Richard. it is Tom addressing your question. A couple things I would point out, and I would obviously turn it over to John if he has any further remarks with regards to it. So I will say a couple of things.
We absolutely know the space very well. Whether it be in psoriasis or IBD. And you could tell by the launch that we had with Trimfya and IBD, it is off to an incredibly great start.
As you can see, over 70% growth year over year and heavily penetrated in becoming the-- actually the fastest growing biologic across all indications. In particular in IBD new patient starts. So we know this space very well.
With that said, I will say there is still significant unmet need in a large amount of patients that are untreated or not treated. Earlier in the course of their diseases. And we do see that to be a great opportunity for not only market expansion as we are seeing in psoriatic disease or psoriasis with ICOTYDE, but the profile of the product fits beautifully in that spot.
I would say. And, you know, obviously, the data will depend on how we look at it and positioning once it becomes on the marketplace. But I will tell you, we will have early access as 1 of the other keys, and we will see rapid uptake once we get the data results.
John?
Yeah. Maybe just to build on that a little bit, the I think the reason that we have had such a great start in psoriasis is because of that trifecta of biologics-like efficacy coupled with placebo like safety combined with the convenience of a once-a-day pill, and we think that will play very well across all indications, including IBD, where, as Tom referenced, still a large percentage of patients are not on an advanced therapy. You know, the data in our Phase 2 study were quite encouraging and look like ICOTYDE can deliver on par with the current monotherapy.
Of course, we are very aware that some patients need something more, that they need a combination therapy, and that is why we are developing JNJ-4.8 thousand which pairs our gosulcumab, our IL 23 inhibitor with galimumab, our TNF inhibitor, and that is in its Phase 3 studies now after really compelling Phase 2 data that show that in that refractory population that it failed 2 or more prior advanced therapies, this really delivers superior efficacy to the monotherapy. So we are actively pursuing that for those patients where a monotherapy is not enough. And could see then, you know, that opportunity to migrate patients if needed beyond the mono therapies to the dual therapies with our co-antibody therapeutic JNJ-4.8 thousand.
Thank you.
Our next question is coming from Vamil Divan from Guggenheim Securities. Your line is now live.
Great. Thanks for taking the question. Maybe 1 follow-up and then 1 actual question.
Following up on the ICOTYDE, I appreciate the comments you have made so far. Just curious if you would be willing to provide any commentary around the actual net sales. In the quarter or kind of how it compares to where consensus was.
We are just getting some questions from investors on that. Specifically. And then my other question is just around INLEXZO.
So appreciate the comments there you made around the sales. So far. I am wondering if you just quantify, I know you have the data coming up later this year as well.
How you see the market opportunity for that expanding based on the current indication? And then what sort of the Sunrise 5 data, what the size of that opportunity is relative to what you have currently? Thank you.
Yeah. Obviously, we have not disclosed any sales for ICOTYDE, but I am confident we are gonna be doing that next year, just based on the momentum and progress that we are seeing with the launch of ICOTYDE. Turning over to Inlexo, also another exciting product that we have or even a platform as we think about TAR-2 10 as well.
And the opportunity that exists for us. We are off to an incredibly great start. Joe disclosed that we are nearly $200 million in net trade sales for year to date.
And quite honestly, we have not reported quarterly sales, but I could say that Q3 was north of $90 million. So we are seeing great sequential growth. This quarter, we saw new patient starts grew 45% versus the previous quarter.
And I wanted to point out that this is in a population in non muscle invasive bladder cancer high risk with carcinoma in situ. It represents roughly 4 thousand patients in totality. So relatively small in nature, and we are still seeing 1 in 3 patients being put on INLEXZO in this patient population.
You touched on Sunrise 5, which is a broader patient population, roughly 15 thousand patients. What we call Sunrise 3, which is the BCG naive population, roughly 50 thousand. This is where we absolutely see a greater opportunity for us to live into the number of $5 billion-plus for the platform.
And I do believe we will do just that and above that given the unmet medical need, the simplicity of INLEXZO delivers and the high response. High durable complete remission rates that we are delivering with Inlexo. As we look to expand in the population.
Maybe I will turn it to John to talk to him a little bit of the clinical development program.
Indeed. As you know, the approval currently is for the cyst type of non muscle invasive bladder cancer, which spreads laterally. But the more common is the papillary And in our so called SUNRISE-1 study, we had a cohort devoted to patients with papillary cancers where those lesions which project outward from the bladder wall are excised by the urologist, and then INLEXZO is applied and 1 tries to prevent recurrence, and we show nearly 75% of patients had no recurrence after 1 year.
And that over 95% had no progression of their disease. In other words, they did not progress to more invasive types of disease. Based on that, the use of INLEXZO in that papillary form of the disease, which is the by far the more common, is already in the NCCN guidelines.
The FDA has invited us to submit for a expansion of our label into that population. Both ICOTYDE and INLEXZO are going to be together with RYBREVANT key drivers of our growth acceleration driving to double digit growth. So they will become 1 of our largest products, both of them.
Thank you.
Our next question is coming from Michael Yee from UBS Securities. Your line is now live.
Great. Thank you for the questions. Maybe 2 pipeline science questions.
On ICOTYDE, obviously, you have great data in psoriasis, a little bit lower than biologics, but great data. In IBD, the UC data was quite strong. Just wondering if you think that would be replicated to biologic-like efficacy as an oral and that differentiation there due to the release in the gut, is a reason for the potentially stronger data in IBD, which could be a bigger driver.
Second part question is on milvexian. I know you share in that partnership. SSP data is coming up, and I just wanted to check-in on your confidence that should be similar to Asundexian.
That should be a fairly de-risked indication. As a factor 11. Thank you.
John C. Reed here. Thanks for your questions. I will start off and then maybe Tom will want to supplement.
But on ICOTYDE and IBD, we get that question all the time, asking, might we see even greater efficacy with an oral because of the gut absorption? All I can say is to be determined. We were quite pleased with the Phase 2 data in ulcerative colitis.
I would also tell you the Phase III studies, as we saw with our psoriasis and psoriatic arthritis, studies are enrolling briskly. The prior studies, they enrolled in about a third of the time that it normally takes us to enroll in those indications, reflecting, I think, the real enthusiasm that both physicians and patients have for this oral option. So, you know, that is.
That theory about oral absorption and improved efficacy to be determined by the data. Moving to milvexian, now we remain confident in the studies underway. Particularly with the secondary stroke because of the Asundexan data.
As we know, in vitro, milvexian is a more potent inhibitor of factor 11. We also have been able to have a safety margin that allows us to push that dose to ranges that we are confident are quite effective. So we remain confident in the results and expect that perhaps the secondary stroke data will be available even this year. it is event driven, the study.
The atrial fibrillation, the larger population, will be next year. It will be exciting for us if we can prevail in both those indications. Because about 25 percent of patients who are candidates for secondary stroke have atrial fibrillation. that is probably why they had the stroke in the first place.
And so if we can benefit both of those populations, that will be exciting. We are confident in atrial fibrillation study as well. There, we were able to push the dose 4x higher given our safety margin in the drug.
And feel from monitoring of the anticoagulation of the blood with laboratory tests that we are in the right range to benefit patients and prevent thrombosis. So, thank you for the question.
Yeah. I just to reinforce what John has said. there is an absolute need for highly effective oral anticoagulation therapy with a reduced bleeding risk. In AFib alone, approximately 40% of the patients eligible for oral anticoagulants are not receiving oral anticoagulants, typically due to the concerns on potential safety and the bleeding risk associated with the current DOACs.
Thank you.
Our next question is coming from Jason Bedford from Raymond James. Your line is now live.
Good morning. Thanks for taking the question. I just want to go back to the international medtech business.
Is there any way to quantify the impact of the dynamics in the Middle East and VBP? And then, Timothy, I wanted to ask about international surgery. First, just to confirm your view is that there is been no change to the underlying demand profile internationally.
And then second, I think Joe mentioned taking actions internationally, for surgery. What are those actions? Thanks.
Thank you, Jayson. Let me try to get to all of those. Let me start with the Middle East.
And clearly, we have highlighted that as a new risk that has broadened over time. And really, the effect is no longer limited to a few markets as we initially thought. We have seen increased disruption to ordering patterns, tender timing in spending decisions across a wider group of countries, unfortunately.
And we have also seen governments and health care systems become more cautious in their spending priorities with some funding and procurement decisions taking longer than what we normally would expect. That has created a more meaningful impact on purchasing behavior than we saw earlier in the year. That said, I think it is important that we see this really as a short term factor.
I mean, underlying issues have not changed. The clinical need remains intact. And we would have we would expect many of these opportunities to be deferred rather than permanently lost.
I think that is an important factor as it relates to any form of conflict and certainly what we are seeing in The Middle East. On surgery, as I mentioned, we were actually really excited about the performance of the business in The U. S. Our issue really was outside of the U.S. And as you know, primarily driven by factors we have discussed before, such as the transformation program and volume based procurement And then, of course, the incremental pressure that we have just mentioned around The Middle East, I will say that despite those headwinds, we are focused on where we can have an impact and we have a lot of opportunities. Wound closure, growth continued to benefit.
This is a category where we absolutely dominate, and that is that growth has been driven by innovation such as StrataFix and Plus Sutures. Biosurgery, another north of billion-dollar platform delivered solid growth driven by key brands like FloSeal, SurgiCel, and Vistaseal, and we continue to see good traction with our endomechanical innovations such as ECHELON 3 thousand and the Duo And so we are confident that we will see continued growth in The U. S. And to your question, we will see acceleration in EMEA and return to growth overall in the fourth quarter. I do think it is also worth-- our confidence in this business going forward.
This was the core to how we started Johnson & Johnson Med tech, and we are absolutely committed to it for the long term. I would say the biggest reason for confidence is the fact that we will be entering the surgical robotic space. And combined with our leadership positions across wound closure, biosurgery and advanced instrumentation, we believe that Ottava gives us opportunity to participate more fully in 1 of the most attractive and underpenetrated areas of surgery.
And so as we continue to execute our portfolio transformation, advance innovation across the existing business and prepare for the launch of OTTAVA, we remain confident in the long term trajectory of the surgery franchise. We do get a lot of questions on Ottava. And rest assured that when you come together for the meeting on December 8, we will provide perspective on the outlook for that innovation and further build your confidence in what we believe will be a material contributor to Johnson & Johnson's growth over the long term.
Thank you. Thank you, Jayson.
We have time for 1 last question. Certainly. Our final question today is coming from Alexandria Hammond from Wolfe Research.
Your line is now live.
Thanks for squeezing me in. So I guess, with the CARTITUDE V and VI trials advance in newly diagnosed multiple myeloma, how is J and J preparing to educate physicians and treatment centers for the potential shift to use earlier into the treatment journey. I guess, how should investors think about potential to capture share from these existing frontline regimens?
Thank you.
Hi, Alexandria. it is Tom. Thanks for the question. I think first and foremost, yes, we are actually anxiously awaiting for those trials to read out.
I would say we are already doing that right now with CARTITUDE IV across the globe. CARTITUDE, or CARVYKTI is available in over 20 markets,, and we are seeing substantial share growth in the earlier line settings. And I would say roughly, in the U.S., 50% of the utilization of CARVYKTI lies in lines 2 and 3.
So there is becoming more familiarity with the product and access to the product and excitement about it, predominantly due to the unmatched overall survival as early as line 2 of therapy that we see in standard of care. So we are already educating health care providers on the product and how they can use it earlier. Some of the education that is centered around is appropriate patient selection, and the earlier, the better, as well as proper bridging and getting the patients to the highest level MRD negativity.
To be effectively treated with CARVYKTI.
Great. Maybe just to remind you, on top of that, that At the recent myeloma meetings, we showed 5-year follow-up data from the CARTITUDE study that is in the second line. Showing that about half of those patients enjoyed complete remission out to 5 years with no further treatment.
So 1-and-done. In 5 years of continued disease free survival. So very exciting data.
Great. Thank you, John.
And thank you, Alexandria, for the question. And thanks to everyone for your questions and continued interest in our company. I will now turn the call over to Joaquin for some brief closing remarks.
Thank you for your questions and your engagements in today's call. As you can see, we continue to build momentum. Growth improved sequentially in the third quarter.
We expect further acceleration in 2027, with a clear path to double digit growth by the end of the decade. In Innovative Medicines, growth will come from both our existing portfolio including DARZALEX and TREMFYA and newer products such as ICOTYDE, RYBREVANT, and INLEXZO as they begin to contribute more meaningfully. We see similar opportunities in MedTech, the potential from our cardiovascular launches including next generation PFA and IVL catheters, additional data supporting Impella and Ottava in robotic surgery are not yet fully reflected in our growth.
Taken together, these drivers position Johnson & Johnson as 1 of the cleanest growth stories in healthcare. We will provide more details about our portfolio and later stage pipeline at our enterprise business review later in December. Thank you very much, and enjoy the rest of your day.
Thank you. This concludes today's Johnson & Johnson's third quarter 26 earnings conference call. You may now disconnect.
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