Johnson & Johnson (JNJ.US) reported third-quarter sales and earnings that exceeded expectations and raised its full-year revenue guidance. The company maintained its 2025 adjusted earnings guidance unchanged, citing absorption of higher tax burdens.

The financial results showed Johnson & Johnson's third-quarter revenue reached $24.0 billion, up 6.7% year-over-year, surpassing analysts' average expectation of $23.7 billion. Earnings per share came in at $2.80, beating the expected $2.76. The company also raised the midpoint of its 2025 projected sales by $300 million to $93.7 billion.

Johnson & Johnson also announced plans to spin off its slow-growing orthopedics business from the main company within the next 18 to 24 months, aiming to create more development space for its innovative pharmaceutical and medical device businesses.

The Trump administration continues to pressure pharmaceutical companies to reduce drug prices in the United States. The healthcare industry faces the shadow of tariff threats from President Trump, who has warned of imposing tariffs on companies that fail to take action to reduce U.S. healthcare costs, making this a key policy focus for his second term.

Competitors Pfizer and AstraZeneca have already agreed to significantly reduce prices for some drugs and align pricing with other wealthy countries in exchange for three-year tariff exemptions.

Johnson & Johnson CFO Joseph Wolk stated that negotiations with the Trump administration are ongoing, and he is "confident" about reaching consensus on pricing issues. "We are very satisfied with the government's communication approach."

Regarding the orthopedics business spinoff, Wolk said the company is still studying specific spinoff plans for the business. The operation primarily involves hip and knee replacements and spinal devices, with approximately $9.2 billion in sales in 2024. He indicated preparation for the possibility of a spinoff (the most time-consuming and resource-intensive option), stating "we welcome other options that could create greater value," including sales or other transaction forms.

Johnson & Johnson stated that the spun-off orthopedics company (named DePuy Synthes) would become the largest enterprise in the global industry. Wolk noted that this "remains a quality business," but its growth rate and profitability no longer match the company's other segments, and independent operation might be more conducive to development.

Johnson & Johnson appointed medical technology industry veteran Namal Nawana to immediately assume leadership of the orthopedics division. This former Johnson & Johnson executive previously served as CEO of Alere and Smith & Nephew. The company statement indicated that Nawana will report to Johnson & Johnson's CEO, lead the spinoff process, and is expected to continue heading the business after the separation.

The spinoff would also benefit Johnson & Johnson by helping its transformation toward higher-growth, higher-margin markets. The company is addressing declining sales of its blockbuster psoriasis drug secukinumab, which faces biosimilar competition after core patent expiration. New products including multiple myeloma drug daratumumab and psoriasis and other autoimmune disease drug tezepelumab are expected to fill the gap.

The company is also responding to Trump's "domestic manufacturing" requirements by expanding its U.S. production footprint. In March, it announced a $55 billion investment in U.S. manufacturing, research and development, and technology over the next four years. In August, it committed to investing $2 billion over the next decade in its Holly Springs, North Carolina production facility, expected to create approximately 120 new jobs.

As an industry leader, Johnson & Johnson's financial results are released earlier than major competitors and are viewed as an industry bellwether. Its performance is being closely watched to assess how pharmaceutical companies are faring under Trump's tariff policies, including pricing pressure and requirements to expand consumer discounts.

Johnson & Johnson was one of 17 pharmaceutical companies that received a letter from Trump in July, requesting drug prices be reduced to levels comparable to other wealthy countries. Pfizer and AstraZeneca have already reached agreements, promising to reduce prices for Medicaid programs serving low-income and disabled populations and offering direct consumer discounts in exchange for tariff exemptions.