Key insights
- Johnson & Johnson's Q1 2026 earnings reveal a successful navigation of the Stelara patent cliff, with overall revenue growing 10% despite a $1 billion loss in Stelara sales. This growth was driven by strong performances from Darzalex and Tremfya. However, adjusted EPS declined 2.5% due to increased spending on new drug launches and tariff impacts on the MedTech division. JNJ's ability to offset a major patent loss suggests resilience and potential for continued growth, making it moderately bullish for the US equity market.
I'm not very familar with this sector, but came across JNJ in many discussions. Many seem to be interested in it. So I just read their recent ER and use AI to catch up some domain knowledge about the industry. Am I too naive or JNJ has some unique competitive advantage? They just lost $1 billion in revenue from its biggest drug this quarter but filled the gap with other drugs.
Looking at JNJ's Q1 2026 numbers today, mostly expecting to see some serious damage because of the Stelara patent cliff. If you haven't been following, Stelara is JNJ's massive immunology drug that peaked around $11 billion. Biosimilars just hit the US market in January, so everyone knew the drop was coming.
And man, did it drop. I pulled the numbers, and Stelara went from $1.6B last Q1 down to $656M. A 60% haircut — almost $1 billion gone in a single quarter. Normally, a patent cliff of this size is a multi-year drag that sinks a pharma company's growth.
But here's what surprised me: JNJ's total revenue actually grew 10% to $24.1 billion.
How do you lose a billion dollars on your top drug and still grow double digits?
It turns out just two drugs completely filled the crater. Darzalex (multiple myeloma) and Tremfya (immunology) together added $1.38 billion in new revenue this quarter. So they basically covered the entire Stelara loss 1.4x over, all by themselves. On top of that, they have like seven other brands growing 30%+.
The revenue math is incredibly impressive. But the part that gets interesting is the profit math.
Despite the 10% revenue jump, their adjusted EPS actually declined 2.5%. Why? Because replacing a mature, peak-margin cash cow like Stelara with early-stage growth drugs isn't a 1-to-1 swap for profits. They're spending heavily on new launches, plus their MedTech division is taking a $400M hit from tariffs, which crushed margins there.
JNJ is trading at roughly 20x forward earnings right now, which is a bit below its 10-year average. They proved they have the portfolio depth to survive a $10B patent cliff, but it looks like the market is waiting for the profit margins to catch up before giving them any credit for it.
Anyone else watching this one? Curious if you think the margin squeeze is just a temporary transition phase.