Benefiting from strong performance in its medical technology division and new drug momentum, Johnson & Johnson delivered third-quarter results that exceeded market expectations. The company plans to separate its slower-growing orthopedic business from its other operations within 18 to 24 months, aiming to provide more breathing room for its innovative drug and device businesses as the Trump administration pressures U.S. pharmaceutical companies to reduce prices.

Johnson & Johnson released robust financial results in Tuesday's pre-market trading. Revenue increased 6.8% year-over-year to $23.99 billion in Q3. Net profit surged 91.2% year-over-year to $5.1 billion. Adjusted earnings per share rose 91% year-over-year to $2.12.

For guidance, the company raised its full-year revenue forecast to $93.7 billion, representing a midpoint growth of 5.7%. In specific business segments, innovative medicines global operational sales grew 5.3% year-over-year to $15.6 billion, driven primarily by oncology products DARZALEX, CARVYKTI, ERLEADA and RYBREVANT/LAZCLUZE, immunology products TREMFYA and SIMPONI/SIMPONI ARIA, and neuroscience product SPRAVATO. Medical technology global operational sales increased 5.6% year-over-year to $8.4 billion, propelled by electrophysiology products, cardiovascular offerings from Abiomed and Shockwave, wound closure products in general surgery, and surgical vision products.

Johnson & Johnson shares rose as much as 2.4% in pre-market trading.

**Tariff Issues Remain Unresolved**

The healthcare industry faces tariff threats from Trump, who has threatened to impose tariffs on companies that don't take steps to reduce U.S. healthcare costs. Pfizer and AstraZeneca have already agreed to supply certain drugs to the U.S. market at significant discounts or at parity with other wealthy countries in exchange for three-year tariff exemptions.

Johnson & Johnson CFO Joseph Wolk stated that negotiations with the Trump administration continue, and he is "fully confident" the company can find common ground on pricing issues. He previously expressed in an interview: "We're very pleased with the government engagement."

**Orthopedic Business Spinoff Underway**

Johnson & Johnson is planning to spin off its orthopedic business, which has slower growth and profitability compared to its other operations. CFO Joseph Wolk indicated the company is still evaluating how to divest the orthopedic business. The orthopedic division focuses on hip and knee replacements and spinal devices, with approximately $9.2 billion in sales in 2024.

Johnson & Johnson stated that the orthopedic company, named DePuy Synthes, would become the world's largest orthopedic company. Wolk noted that while it "remains a great business," it doesn't grow as fast or generate as much profit as Johnson & Johnson's other businesses, so independent operation could yield greater returns. The spinoff would also benefit Johnson & Johnson by allowing it to shift its portfolio toward faster-growing, higher-margin markets.

**Innovative Medicines Breakthrough Provides New Growth Momentum**

Johnson & Johnson achieved important breakthroughs in innovative medicines this quarter, developments that could expand the company's growth prospects in coming years. TREMFYA received FDA approval for a subcutaneous formulation for inflammatory bowel disease indications, becoming the first and only fully subcutaneous IL-23 formulation. This differentiated advantage is expected to help the product capture greater market share in the highly competitive inflammatory bowel disease market. TREMFYA sales reached $1.42 billion this quarter, up 41.3% year-over-year.

INLEXZO was approved for treating high-risk non-muscle invasive bladder cancer, a relatively niche but high-value indication. More importantly, Johnson & Johnson submitted a marketing application for icotrokinra for psoriasis treatment. Clinical data shows this product outperformed deucravacitinib in head-to-head trials, and if approved, it would provide the company with an important tool in the dermatology field.