Johnson & Johnson (JNJ.US) raises full-year sales outlook and plans to spin off its orthopedic business.

Johnson & Johnson (JNJ.US) announced better-than-expected third-quarter sales and earnings, and raised its full-year revenue guidance. The company maintains its 2025 adjusted profit guidance, indicating that it is absorbing a higher tax burden. The financial report shows that Johnson & Johnson's third-quarter revenue was $24 billion, a 6.7% increase year-over-year, exceeding analysts' average expectation of $23.7 billion; earnings per share were $2.80, higher than the expected $2.76. The company also raised the midpoint of its 2025 sales forecast by $3 billion to $93.7 billion. Johnson & Johnson also announced plans to spin off the slow-growing orthopedic business from the company in the next 18 to 24 months, in order to create more room for growth in its innovative drugs and devices business. The Trump administration is continuing to pressure pharmaceutical companies to lower drug prices in the United States. The healthcare industry is facing the shadow of President Trump's tariff threat - he has warned that companies that do not take action to lower healthcare costs in the United States will face tariffs, which is a key policy in his second term. Competitors Pfizer Inc. and AstraZeneca PLC Sponsored ADR have agreed to significantly lower the prices of some drugs and unify drug prices with other wealthy countries in exchange for a three-year tariff exemption. Johnson & Johnson's Chief Financial Officer Joseph Wolk stated that negotiations with the Trump administration are ongoing, and he is "confident" about reaching a consensus on pricing issues. "We are very satisfied with the communication with the government." Orthopedic Business Divestment Wolk stated that the company is still studying specific divestment plans for the orthopedic business. The business mainly involves hip and knee joint replacements and spinal devices, with sales of approximately $9.2 billion in 2024. He stated that they are preparing for the possibility of divestment (the most time-consuming and resource-intensive option), and "we welcome other potential options that could create more value," including selling or other forms of transactions. Johnson & Johnson stated that the spun-off orthopedic company (DePuy Synthes) will become the largest company in the industry worldwide. Wolk pointed out that this is still a "high-quality business," but its growth rate and profitability are not as good as other segments of the company, and independent operation may be more conducive to development. Johnson & Johnson has appointed industry veteran Namal Nawana as the head of the orthopedic division. Nawana, a former executive of Johnson & Johnson, has served as CEO of Allergan and Xerox Holdings Corporation. The company stated that Nawana will report to Johnson & Johnson's CEO, lead the divestment process, and is expected to continue to lead the business after the divestment. Significance of Strategic Transformation The divestment will also benefit Johnson & Johnson, helping it to transform into higher-growth, higher-profit markets. The company is facing a decline in sales of its flagship psoriasis drug Stelara after the expiration of its core patent and facing competition from biosimilar drugs. New products such as daratumumab for multiple myeloma, Tremfya for psoriasis and other autoimmune diseases are expected to fill the gap. The company is also responding to Trump's "Made in America" demands by expanding its production layout in the United States: in March, it announced a $55 billion investment in manufacturing, research and technology in the United States over the next four years; in August, it committed to investing $2 billion in the Holly Springs production base in North Carolina over the next ten years, creating approximately 120 new jobs. Industry Barometer Role As a leading industry player, Johnson & Johnson reports earlier than its major competitors and is seen as an industry barometer. Its performance is closely watched to assess the survival status of pharmaceutical companies under Trump's tariff policy - including pressure to lower prices and demands for wider consumer discounts. Johnson & Johnson is one of the 17 drug companies that received a letter from Trump in July, asking them to lower drug prices to the levels of other wealthy countries. Pfizer Inc. and AstraZeneca PLC Sponsored ADR have reached agreements to lower prices for medical assistance programs for low-income and disabled populations, and to provide discounts directly to consumers in exchange for a tariff exemption.