Healthcare · Pharmaceuticals
Johnson & Johnson (JNJ)
Johnson & Johnson, drugs plus MedTech: DARZALEX was ~15% of FY2025 revenue. Why patent risk runs product by product, and how a talc gain lifts the payout.
Selborne Research · · Equity Research Profile
Educational analysis for professional use. This profile is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
Snapshot
- FY2025 Revenue
- $94,193M
- DARZALEX
- 15.2% of revenue
- R&D Intensity
- 15.6% of sales
- Operating Margin
- ~27.1% (computed)
- Dividend / GAAP Payout
- $5.14/sh; ~46.2%
- STELARA Share
- ~6.5% (biosimilar headwind)
Patent Risk Spread Across Many Products
Johnson & Johnson is the diversification benchmark among large drugmakers. Innovative Medicine (its drugs business) and MedTech together produced $94,193M of revenue in FY2025. DARZALEX, a blood-cancer drug and the largest product, sold $14,351M, 15.2% of group revenue (the 10-K's own text says approximately 15.0%). STELARA, for psoriasis and Crohn's disease, was ~6.5% and TREMFYA, for similar immune diseases, ~5.5%.
Compare Keytruda at 48.7% of Merck's revenue, semaglutide at 73.9% of Novo Nordisk's and tirzepatide at 56.0% of Lilly's. DARZALEX sits below the 25-30% line for elevated concentration (see the concentration guide). MedTech is a second business: it cushions the group when a drug declines, and it dilutes group growth when the drugs grow faster than the devices.
Loss-of-exclusivity (LOE) exposure is disclosed product by product, with no total percentage. The 10-K names four items. STELARA faces biosimilars (sales down 41.3% in FY2025). DARZALEX patent families expire in the US in 2029. Generic competition is expected in 2026 for OPSUMIT, which treats high blood pressure in the lungs (OPSUMIT/OPSYNVI $2,325M, 2.5% of revenue). And at least two biosimilars are seeking US approval for the arthritis drug SIMPONI, with no date given. Forecast each product separately (see the LOE guide).
R&D, Margin and Payout
R&D was $14,665M, 15.6% of sales, below the 20.9% average in the survey by PhRMA, the US drug industry body. That figure spans drugs and devices. Innovative Medicine alone spent 19.6% of its sales, the number to set beside Merck's 24.3% (see the R&D intensity guide).
The ~27.1% operating margin is operating profit of $25,515M, before interest and other items, over revenue. Johnson & Johnson does not print an operating income line, so the figure is computed from filed components.
The dividend was $5.14 per share. Dividends paid were $12,381M against GAAP net income of $26,804M, a ~46.2% GAAP payout. That net income was lifted by the reversal of about $7.0B of the talc litigation reserve, so without it the GAAP payout would be well above 46%. On cash, the dividend took about 50% of operating cash flow of $24,530M. Pfizer (~126%) and AbbVie (~276%) show the opposite distortion, from non-cash charges (see the payout trap guide).
Valuation Framework
Johnson & Johnson is valued segment by segment. Innovative Medicine takes a DCF with each product's LOE date; MedTech is valued on device multiples and procedure volume. A single pharma multiple misstates the mix.
What to Watch in the Financials
STELARA biosimilars (~6.5%). A live decline on the immunology side, like AbbVie's Humira in mechanism though much smaller as a share of the group. Innovative Medicine growth has to clear that drag.
DARZALEX (15.2%). The one LOE date worth circling: US expiry in 2029. It matters, though nothing like Merck's Keytruda date. New combinations and uses still in trials belong in pipeline value, weighted by approval odds, and stay out of base-case revenue.
OPSUMIT generics in 2026, SIMPONI biosimilars undated. Near-term items with no filed aggregate percentage, so model each one separately.
Key Risks
Diluted drug growth. Diversification cuts single-drug risk, but it also holds back group growth when MedTech grows more slowly than the drugs.
STELARA erosion. Slower than generic erosion of a chemically made drug, it still weighs on the immunology business.
A base business, a drug at its patent cliff, a growing biologic and a Phase III asset, each valued year by year and summed to value per share.
- 15 sections, the patent ladder to a year-by-year sum-of-parts valuation and concentration screens
- 39 pages
- a small molecule at its cliff, a biologic growth driver and a pipeline asset weighted by its phase, plus a base business
- 3 drug schedules
- large-cap innovators on filed product concentration and loss-of-exclusivity dates
- 6-company screen
The Excel model is the primer's sum-of-parts valuation live across 13 sheets: a base-business DCF at an 8.5% WACC; three drug schedules, each set to marketed or pipeline and to a clinical phase that sets its odds; loss-of-exclusivity cliffs that settle on a generic floor; a calendar-year input that turns a filed patent date into a schedule year; the consolidated bridge to value per share; and patent-cliff, concentration and sensitivity views. Change a drug's LOE year, phase or peak sales, or the WACC, and the value moves.
See what's in the Pharmaceuticals Sector Primer →£25 PDF · £59 with the Excel model · £159 for all three Healthcare industries
Learn the Concepts
Understand the valuation frameworks and metrics used in this analysis.
The Pharma GAAP Payout Trap
Why Pfizer ~126% and AbbVie ~276% GAAP dividend payout ratios mislead: non-cash charges on acquired assets, one-off gains, and how to test pharma dividends against cash.
Pharma Revenue Concentration Risk
Largest-product revenue share as a risk screen: FY2025 ladder from Pfizer Eliquis 12.7% to Lilly tirzepatide 56.0%, with 25–30% and 40% concentration screens.
Patent Cliffs and LOE Erosion
How loss-of-exclusivity erodes branded drug revenue: generic unit-share curves, net-price erosion by competitor count, biosimilar contrast via Humira, and a worked fade on a $3,000M brand.
Pharma Patent Expiry Dates by Company
Patent and IRA Medicare price dates from six large drugmakers' filings, product by product: where the dates sit in a 10-K, what settled generic entry means, and why one revenue-at-risk figure misleads.
Pharma R&D Intensity by Company
R&D as a share of revenue at six large drugmakers: where acquired R&D and write-downs are booked, what the PhRMA industry average covers, and why spend is not output.