Johnson & Johnson: push on oncology. The unknown factor of tariffs

These included the tariffs chaos wanted by Trump. The topic was also addressed in the conference call with analysts. The group, as things stand, assumes an impact (around 400 million) mainly on MedTech. There are, among others, tariffs on imports from Canada and Mexico. Then, albeit to a lesser extent, the higher charges on steel and aluminium.

Lastly, and most importantly, tariffs on solutions exported to China and made in the US. Having said that, however, a certain calm seems to have emerged from the conference call with regard to the issue at hand. However, the Trump administration is in the process of concretising the Section 223 investigation.

Namely: the one concerning potential tariffs on pharma itself. A context in which new problems for the world of medicines could crop up. Concerning the latter front, the company first of all emphasised that generic medicines should be in the centre of the crosshairs.

Then - while still expressing concerns about possible disruptions in supply chains - he indicated that companies in the industry must work with Washington to mitigate vulnerabilities. In this regard, it may be recalled that in March Johnson & Johnson announced $55 billion in US investments in manufacturing, R&D and technology.

A four-year project, at the end of which all advanced drugs used in the US - the group always indicates - will basically be produced in America. In other words: the aim is to solve the problem at its root.

But it is not only a question of tariffs. Another aspect that is of interest to experts is that there has been a slowdown, again in the first quarter of 2025, in certain margins. For example, the Gross margin. Johnson & Johnson, on the front underlines a few aspects. The first is the negative impact of the revision of the Medicare Part D reimbursement structure on several drugs. In addition: some currency exchanges had an impact. Finally: there is the fact that Stelara - a high-margin product - lost its exclusivity. As a result, on the one hand competition from biosimilars is being felt; and on the other hand - by curbing its sales - margins may be negatively affected. Against this backdrop, the group nevertheless estimates an improvement in the adjusted pre-tax operating margin of around 300 basis points by 2025.

Beyond this, the general issue of competition - which takes the form of the advance of biosimilars 'against' Stelara - remains central. For its part, the multinational company - precisely with regard to this case - reiterates that - similar to what happened with AbbVie's Humira drug - the loss of revenue should be more gradual than expected. Which allows - among other things - for planning strategies to mitigate the negative impacts. Which ones? For example, the transition to new drugs such as Tremfya, whose sales rose to 956 million in the first quarter. This is the replacement of sales - which are being lost - with others generated by new molecules. A project that also relies on research and development. In the first quarter of 2025, Johnson & Johnson invested 3.2 billion in R&D (14.7% of revenues). This is down from both the figure for the same period in 2024 (16.6%) and the percentage for the entire past financial year (19.4%). Having said that, however, one must remember the investments in America, which - among other things - will make it possible to strengthen precisely research and innovation. A context which - while maintaining a high degree of diversification of the product portfolio - also allows the company to boast a certain resistance to the risk of recession.

So far, some evaluations on R+&D, and profit and loss figures. But what are the trends in the individual business areas? In Innovative Medicine - between last January and March - oncology (+17.9% reported growth) and Cardiovascular and other (+22.3%) gave the 'it'. On the other hand, other sub-sectors such as Neuroscience (-8.6%) and Immunology (-12.7%) were weak or slowing down. MedTech, for its part, was driven - partly in the wake of Shockwave's 2024 shopping spree - by Cardiovascular (+16.4) and Ophthalmology (+1.7%). On the other hand, Orthopaedics (-4.2%) slowed down. Flat, on the other hand, was Surgery (-0.8% reported).

Finally: the long-running talcum powder case. Barron's recalls that Johnson & Johnsons faced lawsuits stemming from allegations that its baby powder, which was withdrawn from the market, contained asbestos and was marketed without informing consumers. The group - rejecting the allegations - sought to protect its assets by transferring legal responsibility to a subsidiary, and then - Barron's points out - having that unit file for bankruptcy. Only last month, however, a federal judge in Texas rejected the latest attempt. The multinational corporation, for its part, has also indicated its willingness to write off some USD 7 billion from a previous reserve for litigation. It is clear that, beyond the specific lawsuits, the fight is far from over. Against this background, what then is the stock's situation on the stock exchange? According to the Bloomberg terminal, the P/e on 2025 is 14.8 while the P/book is worth 4.98. Beyond the individual values (the price-to-book value is not low), the saver - even remembering the coupon and the long-term investment character of such securities - must be very, very cautious. Also in view of Trump's moonlight.

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