TenQ

The Johnson & Johnson story

Johnson & Johnson makes prescription drugs and medical devices after separating its consumer brands, with growth depending on whether oncology and newer medicines can outweigh STELARA's erosion from biosimilar competition.

Written from Johnson & Johnson's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $271.95share price, last close
  • $655.4Bmarket value
  • 24/36TenQ Score checks passed
  • 13.8%growth a year the price assumes

The story in brief

  • Medicines lead growth. Innovative Medicine grew 6.8 percent operationally in the quarter to June 2026, despite STELARA reducing segment growth by approximately 760 basis points.
  • Cash generation improved. Estimated free cash flow through June 2026 was approximately $8,700 million, compared with $6,214 million in the prior year period.
  • A higher growth assumption. The reverse DCF implies annual growth in free cash flow after stock pay of 13.8%, compared with the company's historical pace of 2.4%.

What drives the business

  • Following its consumer brands spinoff, Johnson & Johnson is focused on Innovative Medicine and MedTech, with a planned Orthopaedics separation announced in October 2025 marking another change in its business mix.
  • DARZALEX and DARZALEX FASPRO together accounted for approximately 15.0% of fiscal 2025 revenue, and the exclusive license to Genmab patent families carries royalties ranging from 12% to 20% of DARZALEX net sales, with approximately $2.4 billion paid in fiscal 2025.
  • Innovative Medicine generated $16.4 billion, or 65% of revenue, in the quarter to June 2026, with operational growth driven by DARZALEX, CARVYKTI, TECVAYLI, RYBREVANT/LAZCLUZE, TREMFYA, SPRAVATO and CAPLYTA.
  • MedTech generated $8.9 billion in the quarter to June 2026 across cardiovascular care, orthopaedics, surgery and vision, with growth led by products including electrophysiology devices, Shockwave, wound closure products and contact lenses.
  • The July 2026 acquisition of Firefly Bio for $1 billion in cash added a degrader antibody conjugate platform to the oncology pipeline, extending the company's investment in cancer treatments.

What the price assumes

At $271.95, the reverse DCF implies that free cash flow after stock pay grows 13.8% a year for ten years, using a 10.2% discount rate.

Johnson & Johnson delivered 2.4% annual growth on that measure over the last 10 years, while the TenQ check sets a 3.2% bar.

The implied cash growth therefore requires a substantial acceleration from that record, while the free cash flow yield of 3.4% is below its historical comparison of 6.2%.

Value JNJ on your own assumptions

What could change the story

  • STELARA accounted for approximately 6.5% of fiscal 2025 revenue, and continued biosimilar launches are expected by the company to further reduce its sales.
  • The Genmab patent families licensed for DARZALEX expire in the United States in 2029, although Johnson & Johnson owns separate patent portfolios related to DARZALEX FASPRO and DARZALEX IV.
  • The proposed ovarian talc litigation resolution announced in July 2026 remains conditional on, among other things, participation by at least 95% of remaining claims, so the announcement does not establish a completed resolution.
  • Profit growth over the last twelve months was -7.2% despite revenue growth of 8.1%, showing that stronger sales have not translated into higher reported profits over that period.
  • Total debt of $49.0 billion exceeds cash and short-term investments of $20.8 billion, while the liquidity ratio of 1.09 falls below the TenQ check's 1.50 bar.

What to watch next

  • The next releases will show progress against raised full-year 2026 guidance for reported sales of $100.8 billion to $101.4 billion and adjusted EPS of $11.60 to $11.75.
  • Innovative Medicine's operational growth and STELARA's drag will show whether oncology demand and expanded uses for TREMFYA and CAPLYTA continue to offset older product declines.
  • Subsequent cash flow reporting will test whether the estimated improvement through June 2026 carries through, against free cash flow of $22.2 billion over the last twelve months.
  • Further disclosures on talc claimant participation and the Orthopaedics separation will clarify the conditional litigation resolution and progress toward the company's planned completion within 18 to 24 months after its October 2025 announcement.

Sources

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