Johnson & Johnson's Strategic Resilience: Darzalex and Acquisitions Counter Tariffs and Biosimilars

Johnson & Johnson (JNJ) has long been a bellwether of stability in healthcare, but its recent Q1 2025 earnings report underscores a new layer of strategic agility. Despite lingering macroeconomic headwinds—including trade tariffs and biosimilar competition—the company's 20% sales surge for its multiple myeloma drug Darzalex and the timely acquisition of Caplyta (for schizophrenia and bipolar disorder) have positioned it to withstand these challenges. With a revised 2025 sales forecast and a diversified pipeline, J&J's blend of pharmaceutical innovation and disciplined M&A activity suggests it is primed to outperform in an uncertain market.

Darzalex: A Growth Engine Amid Global Challenges

Darzalex's Q1 2025 performance was nothing short of exceptional. U.S. sales rose 24.9% to $1.8 billion, while international sales increased 14.7% to $1.4 billion. Combined, worldwide sales hit $3.2 billion—a 20.3% year-over-year jump—driven by strong demand for its quadruplet regimen approved by the European Commission. This formulation, which combines Darzalex with three other therapies, has expanded its use in earlier-stage multiple myeloma patients, a critical demographic for long-term revenue.

The drug's operational growth of 22.5% (excluding currency impacts) signals underlying demand strength, even as J&J navigates tariffs and currency headwinds. This resilience is vital, as Darzalex now accounts for nearly 15% of the Innovative Medicines segment's sales, making it a cornerstone of the company's oncology portfolio.

Caplyta: A Strategic Acquisition to Offset Biosimilar Risks

The $2.3 billion acquisition of Intra-Cellular Therapies, completed in Q1 2025, brought Caplyta into J&J's fold. While specific Caplyta sales figures for Q1 are unavailable, its inclusion in J&J's revised 2025 sales guidance is telling. The company raised its operational sales growth midpoint to 2.5%, up from previous estimates, with Caplyta's neuroscience franchise now bolstering an area vulnerable to biosimilar competition.

Stelara, J&J's blockbuster psoriasis drug, faces biosimilar threats in key markets like Europe starting in 2026. Caplyta's acquisition signals a proactive move to diversify revenue streams, particularly in mental health—a segment with strong long-term growth potential. The neuroscience portfolio now includes not just Caplyta but also recent advancements in Alzheimer's and depression therapies, creating a shield against Stelara's eventual erosion.

Strategic M&A and Pipeline Diversification

J&J's recent deals—such as the acquisition of Shockwave Medical for cardiovascular therapies—highlight its focus on diversification. The Shockwave deal, while smaller in scale, adds a non-invasive treatment for calcified arteries, addressing a high-margin, growing market. Meanwhile, the robotic surgical system OTTAVA, now in clinical trials, signals ambition in digital health—a sector where J&J has lagged peers like Medtronic.

Other Q1 milestones, like Tremfya's approval for Crohn's disease, further expand J&J's dermatology and gastrointestinal franchises. These moves reflect a deliberate strategy to balance legacy products with next-gen innovations, ensuring steady cash flow while investing in high-potential areas.

Mitigating Macroeconomic Risks

Trade tariffs and currency fluctuations continue to pressure J&J's top line. The company's reported sales grew just 2.4% in Q1 2025, but operational growth (excluding currency impacts) hit 4.2%, underscoring its ability to manage external shocks. J&J has also leaned into cost discipline, with R&D spending up only 1% year-over-year, while maintaining its 2025 EPS guidance midpoint of 6.2%.

Investment Thesis: A Buy for Long-Term Resilience

J&J's Q1 results reaffirm its status as a defensive healthcare stock with growth catalysts. Darzalex's dominance in oncology, combined with Caplyta's mental health focus and a robust pipeline, positions the company to offset biosimilar risks and macroeconomic volatility. The revised sales guidance and maintained EPS targets suggest management's confidence, while its dividend yield of ~2.8% adds stability for income-focused investors.

For long-term investors, J&J's valuation—trading at ~17x forward earnings—remains reasonable relative to its growth prospects and defensive profile. Risks, including Stelara's biosimilar timeline and regulatory hurdles for OTTAVA, are mitigated by its diversified portfolio and balance sheet strength.

In a market bracing for recession risks and trade wars, J&J's blend of innovation and operational resilience makes it a compelling buy. Its ability to grow core franchises while acquiring strategically ensures it will remain a leader in healthcare's evolving landscape.

Recommendation: Hold or initiate a long position in JNJ for investors with a 3-5 year horizon. Monitor Darzalex's market share in Europe and Caplyta's U.S. adoption rates for near-term catalysts.