Stelara's Sales Slump and Biosimilar Surge: Can Johnson & Johnson Maintain Dominance in Immunology?

Johnson & Johnson (JNJ) faces a critical juncture in its immunology portfolio as Stelara (ustekinumab), a blockbuster drug for autoimmune diseases, grapples with a dramatic sales decline. In Q1 2025, Stelara's worldwide sales plummeted by 33.7% year-over-year to $1.08 billion, driven by a 29.8% drop in the U.S. and a steeper 38.9% decline internationally. This underperformance raises urgent questions: Is Stelara's dominance in psoriasis and Crohn's disease eroding irreversibly? Can J&J's pipeline offset these losses, or does the biosimilar wave spell long-term trouble?

The Sales Decline: A Warning Sign

Stelara's Q1 2025 sales collapse reflects mounting pressure from biosimilars, which began flooding the market after its key patent expired in September 2023. By mid-2025, eight biosimilars—including Amgen's Wezlana, Sandoz's Pyzchiva, and Biocon's Yesintek—had launched in the U.S., offering discounts of 46% to 90% versus Stelara's list price. Pharmacy benefit managers (PBMs) like CVS and Optum have excluded Stelara from formularies or relegated it to non-preferred tiers, prioritizing biosimilars to reduce costs.

The 810 basis point drag Stelara placed on J&J's Innovative Medicine segment growth underscores its strategic importance. While newer drugs like Tremfya (up 18.2%) and ERLEADA (up 11.9%) are compensating, Stelara's decline is a stark reminder of the risks of relying on legacy products.

Biosimilars and Legal Battles: The Perfect Storm

J&J's legal woes amplify the threat. A pending antitrust lawsuit accuses the company of unlawfully delaying biosimilar competition by acquiring patents fraudulently and settling lawsuits with competitors to push launch dates to 2025. If J&J loses, biosimilar adoption could accelerate further, exacerbating Stelara's decline.

The U.S. biosimilar market is now PBM-driven, with private-label products like Optum's Nuvaila and CVS's Cordavis dominating formularies. These strategies prioritize cost savings over brand loyalty, signaling a permanent shift in how biologics are managed.

J&J's Counteroffensive: Diversification or Distraction?

To offset Stelara's losses, J&J is betting on:
1. Pipeline Innovations:
- Icotrokinra: A once-daily pill for psoriasis and Crohn's disease, which could displace injectable therapies like Stelara.
- Tremfya in Crohn's Disease: Recently approved, this biosimilar-resistant biologic could capture market share.
2. Strategic Acquisitions: The $16.6B purchase of Abiomed (cardiovascular devices) and the $13B spinoff of consumer health division Kenvue have bolstered J&J's financial flexibility.
3. Global Expansion: Biosimilars face slower adoption in markets like Japan and Europe due to regulatory hurdles, offering a temporary shield.

However, J&J's success hinges on whether these strategies can outpace biosimilar-driven erosion. The Inflation Reduction Act's price negotiation rules, which target Stelara for a 66% price cut by 2026, add another layer of uncertainty.

Investment Implications: Caution Amid Resilience

Investors must weigh J&J's strengths against its vulnerabilities:
- Buy Signal: J&J's diversified portfolio, including oncology (Darzalex, Carvykti) and neuroscience (Spravato), provides a safety net. Its $15B annual R&D budget positions it to innovate beyond Stelara.
- Hold/Reduce Signal: Stelara's sales decline and biosimilar competition could drag down margins. If the antitrust case escalates or formularies fully exclude Stelara, JNJ's stock could face downward pressure.

Final Analysis

Stelara's dominance is unquestionably waning, but J&J's broader pipeline and financial strength suggest resilience. Investors should monitor two key metrics:
1. Biosimilar Adoption Rates: If U.S. biosimilars capture >50% of Stelara's market by 2026, J&J's immunology segment could face structural declines.
2. Legal Outcomes: A ruling against J&J could unlock faster biosimilar competition, accelerating Stelara's decline.

For now, JNJ remains a hold, but investors should be prepared for volatility. The road ahead is clear: J&J must prove its newer therapies can fill the Stelara-sized hole or risk becoming a cautionary tale in the era of biosimilars.