By Mackenzie Tatananni

Johnson & Johnson stock slipped Tuesday, even after the company reported first-quarter earnings that surpassed expectations and boosted its full-year sales forecast.

The pharmaceutical and biotech giant reported adjusted earnings of $2.77 a share, beating the $2.69 analysts were anticipating, according to FactSet. Sales grew 2.4% in the quarter to $21.9 billion, narrowly topping the $21.6 billion Wall Street had forecast.

J&J also adjusted its 2025 guidance to reflect its completed acquisition of drug developer Intra-Cellular Therapies and the addition of Caplyta, a treatment for bipolar disorder and depression, to its portfolio.

The company said it now expects operational sales of $92 billion, versus a prior forecast of $91.3 billion. J&J also guided for estimated reported sales of $91.4 billion, up from a previous $91.4 billion.

J&J maintained its full-year adjusted earnings outlook of 6.2% growth at the midpoint, saying the figure reflects the impact of the acquisition, tariff costs, and foreign exchange.

The company saw 4.2% growth within its innovative medicine segment, which was fueled by sales of a handful of oncology drugs and treatments in the immunology, neuroscience, and cardiovascular fields. MedTech operational sales grew 4.1%, with net acquisitions and divestitures positively impacting growth by 2.8%.

Generally speaking, the company had a lot to celebrate. J&J notched several regulatory victories in the quarter, including Food and Drug Administration approval of Tremfya to treat Crohn's disease in adult patients. Over in Europe, Rybrevant was approved for the treatment of patients with certain types of non-small cell lung cancer.

Shares of Johnson & Johnson declined 0.9% to $152.99 in premarket trading, while futures tracking the S&P 500 and Nasdaq Composite were flat.

The losses came as uncertainty around pharma tariffs continued to weigh on investors. President Donald Trump said last week that "major" levies were on the way. Just Monday, officials announced an investigation into drug imports, paving the way for another round of tariffs.

While J&J shares have lagged behind the S&P 500 for the past three years, the stock remains up 6.7% in 2025 versus the broader market's 8.1% decline.

Part of the appeal is J&J's resilience in the face of a potential recession. The company offers a diverse product portfolio and spans the pharmaceutical, biotechnology, and medical technology sectors. Shares have fallen 0.6% since President Donald Trump's tariff announcement on April 2, while the S&P 500 has fallen 4.7%.

While latest the earnings beat is an encouraging sign, the company has bigger hurdles to clear than meeting Wall Street's expectations.

Patents for Stelara, the company's blockbuster psoriasis treatment, began to expire in 2023, allowing competitors to enter the market. Last year, biotechnology company Alvotech settled with Johnson & Johnson to launch a Stelara biosimilar in Canada and Europe.

And that isn't all. For years, J&J has faced lawsuits that stem from claims its talc-based baby powder, taken off the market in 2023, contained the carcinogen asbestos and was marketed without disclosing the risk to consumers.

The first lawsuit cropped up in 1999, when a woman alleged years of using the product led to her developing mesothelioma. It wasn't until 2020 that the company transitioned to a cornstarch formula.

Johnson & Johnson repeatedly sought to protect its assets by transferring the legal liability to a subsidiary and then having that unit file for bankruptcy protection. Just last month, a federal judge in Texas struck down the latest attempt.

Two separate cases were dismissed in New Jersey in 2023 after courts ruled that J&J's LTL Management subsidiary wasn't in financial distress and didn't qualify for bankruptcy protection.

In the latest ruling in March, a Texas judge determined that a different subsidiary, Red River Talc, didn't belong in Chapter 11 bankruptcy protection, clearing the way for plaintiffs to seek relief in state courts.

The company has vowed to return to the tort system to fight the "meritless talc claims." In a statement, J&J said the legal case was "premised on junk science and fueled by third party litigation financing including from foreign sovereign wealth funds."

The company also vowed to reverse around $7 billion of a previous litigation reserve, saying it had "no intent to settle or pay plaintiff lawyers on such meritless claims." Clearly, the fight is far from over.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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(END) Dow Jones Newswires

April 15, 2025 07:52 ET (11:52 GMT)

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