How J&J's Innovative Medicines Segment is Poised Ahead of Q3 Results

Johnson & Johnson JNJ, through its Innovative Medicine division, markets several blockbuster drugs across diverse therapeutic areas, including neuroscience, cardiovascular and metabolism, immunology, oncology, pulmonary hypertension (PH), and infectious diseases. The company is set to announce its third-quarter results on Oct. 14, and investors will be closely watching the performance of the Innovative Medicine segment. Below, we highlight some key factors that may have influenced the segment’s sales during the quarter.

J&J expects operational sales growth in its Innovative Medicine segment to be higher in the second half of the year than in the first, despite the loss of exclusivity (LOE) of its multi-billion-dollar product, Stelara, and the negative impact of the Part D redesign.

The segment’s sales rose 2.4% in the first half of 2025 on an organic basis. J&J expects continued growth in the second half of 2025 to be driven by higher sales of key products, such as Darzalex, Tremfya and Erleada, due to strong market growth and share gains. While sales of some other drugs like Xarelto and Simponi/Simponi Aria are likely to have risen, new drugs like Carvykti, Tecvayli, Talvey, Rybrevant plus Lazcluze and Spravato are also expected to have contributed to growth.

However, lower sales of key drugs, Stelara and Imbruvica, and generic/biosimilar competition to drugs like Zytiga and Remicade are likely to have hurt top-line growth.

Several biosimilar versions of Stelara have been launched in the United States in 2025. According to patent settlements and license agreements, Amgen AMGN, Teva, Samsung Bioepis/Sandoz and some other companies have already launched Stelara biosimilars this year. The Stelara LOE negatively impacted Innovative Medicines segment growth by 1170 basis points. We expect the negative impact to have been steeper in the third quarter as the number of biosimilar entrants is expected to have increased.

Rising competitive pressure in the United States due to new oral competition is likely to have hurt sales of Imbruvica.  Sales of some drugs are being hurt by the impact of the Medicare Part D redesign under the Inflation Reduction Act (IRA). Among other measures, the IRA requires the U.S. Department of Health and Human Services (HHS) to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D. The Part D redesign has been mainly hurting sales of drugs like Stelara, Imbruvica, Tremfya and Erleada.

Our estimates for the Innovative Medicines unit suggest a CAGR of around 5% over the next three years.

J&J Key Competitors

Immunology and oncology are J&J’s key areas. Other large drugmakers with a strong presence in the oncology market include Novartis, AstraZeneca AZN, AbbVie ABBV, Amgen, Merck, Bristol-Myers, Roche and Pfizer. In immunology, AbbVie, Amgen, Sanofi, AstraZeneca and Pfizer hold a strong position.

JNJ’s Price Performance, Valuation and Estimates

J&J’s shares have outperformed the industry year to date. The stock has risen 30.5% in the year-to-date period compared with an 8.6% increase of the industry.

From a valuation standpoint, J&J is reasonably priced. Going by the price/earnings ratio, the company’s shares currently trade at 16.77 forward earnings, higher than 15.96 for the industry. The stock is also trading above its five-year mean of 15.64.

The Zacks Consensus Estimate for 2025 earnings has remained unchanged at $10.86 per share, while that for 2025 has risen from $11.36 per share to $11.37 per share over the past 60 days.

J&J has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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