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Johnson & Johnson (JNJ +6%) is trading nicely higher after reporting strong upside results for Q2 for both EPS and revs. Revenue grew 5.8% yr/yr (+4.6% operational growth) to $23.74 bln. It also raised FY25 EPS and revenue guidance. JNJ saw yr/yr growth in both its Innovative Medicine (formerly known as Pharma) and MedTech segments.

• Innovative Medicine segment sales in Q2 grew 4.9% yr/yr (+3.8% operational) to $15.20 bln, topping $15 bln for the first time ever. JNJ noted that no other healthcare company has grown through the loss of exclusivity of a multi-billion dollar product in the first year. In JNJ's case, it was STELARA (psoriasis, psoriatic arthritis, Crohn's disease) as several biosimilars have been approved. And yet, overall segment sales still grew nicely. Segment performance was driven by double digit growth across 13 brands, including Darzalex.
• JNJ says it has a bold vision to eliminate cancer. It has more than ten products on the market across 26 approved indications and over 25 in late stage development. For example, in multiple myeloma, JNJ has treatments in every line of therapy. Approximately 80% of myeloma patients today receive a JNJ medicine. JNJ expects to become the #1 oncology company by 2030, with sales of more than $50 bln.
• Turning to its MedTech segment, reported sales grew 7.3% yr/yr (+6.1% operational) to $8.54 bln, a pretty significant acceleration from Q1's +2.5%/+4.1%. Growth was driven by three focus areas: cardiovascular, surgery, and vision. The acceleration relative to Q1 was driven by strong performances in its cardiovascular portfolio, surgical vision and wound closure in surgery. JNJ remains focused on higher growth markets. In cardiovascular specifically, JNJ is a leader in heart recovery, circulatory restoration and electrophysiology. Cardiovascular has some of the largest unmet needs in healthcare and is one of the fastest growing spaces in MedTech.
• JNJ continues to expect both its IM and MedTech segments will see higher operational sales growth in 2H25 relative to 1H25. For IM, JNJ assumes that Stelara's biosimilar competition will accelerate throughout the year. On the MedTech side, JNJ sees an acceleration in growth to be driven by increased adoption of newly launched products in cardiovascular surgery and vision. JNJ remains excited about pipeline progress in the remainder of 2025.

Overall, this was a good quarter for JNJ. It reported a large EPS beat and it rebounded from slow top line growth in Q1 to post strong growth in Q2. Clearly, losing exclusivity for Stelara, a multi-billion dollar product, will continue to be a headwind to top line growth in 2025, but JNJ seems to be managing it well. Also, we were pleased to see the raised FY25 guidance, which tells us 2H is going to see acceleration from 1H. What also stood out was JNJ lowering its estimate for the impact of tariffs on its MedTech segment to $200 mln from $400 mln, with no impact on the IM side. We think this is adding to today's gain in the stock price.