filings.toolsItem 2. Management’s discussion and analysis of financial condition and results of operations
47K characters. Original on sec.gov · Markdown
Item 2. Management’s discussion and analysis of financial condition and results of operations
Results of operations
Sales to customers
Analysis of consolidated sales
For the fiscal first quarter of 2025, worldwide sales were $21.9 billion, a total increase of 2.4%, which included operational growth of 4.2% and a negative currency impact of 1.8% as compared to 2024 fiscal first quarter sales of $21.4 billion. In the fiscal first quarter of 2025, the net impact of acquisitions and divestitures on worldwide operational sales growth was a positive 0.9%. In the fiscal first quarter of 2025, the impact of the Stelara sales decline, due to biosimilar competition, on the worldwide operational sales was approximately negative 4.7%.
Sales by U.S. companies were $12.3 billion in the fiscal first quarter of 2025, which represented an increase of 5.9% as compared to the prior year. In the fiscal first quarter of 2025, the net impact of acquisitions and divestitures on the U.S. operational sales growth was a positive 1.5%. In the fiscal first quarter of 2025, the impact of the Stelara sales decline, due to biosimilar competition on the U.S. operational sales was approximately negative 4.9%. Sales by international companies were $9.6 billion, a total decrease of 1.8%, which included operational growth of 2.1% offset by a negative currency impact of 3.9%. In the fiscal first quarter of 2025, the net impact of acquisitions and divestitures on international operational sales growth was a positive 0.2%. In the fiscal first quarter of 2025, the impact of the Stelara sales decline, due to biosimilar competition, on the international operational sales was approximately negative 4.6%.
In the fiscal first quarter of 2025, sales by companies in Europe experienced a sales decline of 1.0%, which included operational growth of 2.2% offset by a negative currency impact of 3.2%. Sales by companies in the Western Hemisphere, excluding the U.S., experienced a sales decline of 2.3%, which included operational growth of 9.2% offset by a negative currency impact of 11.5%. Sales by companies in the Asia-Pacific, Africa region experienced a sales decline of 2.8%, which included an operational decline of 0.6% and a negative currency impact of 2.2%.
Q1 2025 Sales by Geographic Region (in billions)
Q1 2025 Sales by Segment (in billions)
Note: values may have been rounded
| 38 |  |
Analysis of sales by business segments
Innovative Medicine
Innovative Medicine segment sales in the fiscal first quarter of 2025 were $13.9 billion, an increase of 2.3% as compared to the same period a year ago, including an operational increase of 4.2% and a negative currency impact of 1.9%. U.S. Innovative Medicine sales increased 6.3% as compared to the same period a year ago. International Innovative Medicine sales decreased by 2.9%, including an operational increase of 1.5% offset by a negative currency impact of 4.4%. In the fiscal first quarter of 2025, the net impact of acquisitions and divestitures on the worldwide Innovative Medicine segment operational sales growth was a negative 0.2%. In the fiscal first quarter of 2025, the impact of the Stelara sales decline, due to biosimilar competition, was an approximate negative 8.1% on the worldwide, U.S. and international Innovative Medicine segment operational sales.
Major Innovative Medicine therapeutic area sales — Fiscal First Quarter Ended
| (Dollars in Millions) | March 30, 2025 | March 31, 2024 | Total Change | Operations Change | Currency Change | ||||||||||||||||||
| Oncology | $5,678 | $4,814 | 17.9 | % | 20.4 | % | (2.5) | % | |||||||||||||||
| CARVYKTI | 369 | 157 | * | * | * | ||||||||||||||||||
| DARZALEX | 3,237 | 2,692 | 20.3 | 22.5 | (2.2) | ||||||||||||||||||
| ERLEADA | 771 | 689 | 11.9 | 14.6 | (2.7) | ||||||||||||||||||
| IMBRUVICA | 709 | 784 | (9.5) | (6.7) | (2.8) | ||||||||||||||||||
| RYBREVANT/ LAZCLUZE(1) | 141 | 47 | * | * | * | ||||||||||||||||||
| TALVEY(1) | 86 | 58 | 48.4 | 50.2 | (1.8) | ||||||||||||||||||
| TECVAYLI | 151 | 133 | 13.3 | 15.0 | (1.7) | ||||||||||||||||||
| ZYTIGA/ abiraterone acetate | 125 | 181 | (30.9) | (28.3) | (2.6) | ||||||||||||||||||
| Other Oncology | 89 | 73 | 21.7 | 24.7 | (3.0) | ||||||||||||||||||
| Immunology | 3,707 | 4,247 | (12.7) | (10.9) | (1.8) | ||||||||||||||||||
| REMICADE | 467 | 434 | 7.5 | 9.3 | (1.8) | ||||||||||||||||||
| SIMPONI/ SIMPONI ARIA | 659 | 554 | 18.9 | 22.9 | (4.0) | ||||||||||||||||||
| STELARA | 1,625 | 2,451 | (33.7) | (32.3) | (1.4) | ||||||||||||||||||
| TREMFYA | 956 | 808 | 18.2 | 20.1 | (1.9) | ||||||||||||||||||
| Other Immunology | 1 | 0 | * | * | — | ||||||||||||||||||
| Neuroscience | 1,647 | 1,803 | (8.6) | (7.0) | (1.6) | ||||||||||||||||||
| CONCERTA/ methylphenidate | 148 | 177 | (16.3) | (13.4) | (2.9) | ||||||||||||||||||
| INVEGA SUSTENNA/ XEPLION/ INVEGA TRINZA/ TREVICTA | 903 | 1,056 | (14.5) | (13.5) | (1.0) | ||||||||||||||||||
| SPRAVATO | 320 | 225 | 41.9 | 42.9 | (1.0) | ||||||||||||||||||
| Other Neuroscience | 277 | 345 | (19.6) | (16.7) | (2.9) | ||||||||||||||||||
| Pulmonary Hypertension | 1,025 | 1,049 | (2.3) | (1.2) | (1.1) | ||||||||||||||||||
| OPSUMIT/ OPSYNVI(2) | 522 | 524 | (0.5) | 0.6 | (1.1) | ||||||||||||||||||
| UPTRAVI | 451 | 468 | (3.6) | (2.9) | (0.7) | ||||||||||||||||||
| Other Pulmonary Hypertension | 52 | 56 | (7.2) | (4.3) | (2.9) | ||||||||||||||||||
| Infectious Diseases | 802 | 821 | (2.2) | 0.1 | (2.3) | ||||||||||||||||||
| EDURANT/rilpivirine | 358 | 323 | 10.7 | 14.3 | (3.6) | ||||||||||||||||||
| PREZISTA/ PREZCOBIX/ REZOLSTA/ SYMTUZA | 403 | 418 | (3.7) | (2.3) | (1.4) | ||||||||||||||||||
| Other Infectious Diseases(3) | 41 | 78 | (47.6) | (45.9) | (1.7) | ||||||||||||||||||
| Cardiovascular / Metabolism / Other | 1,013 | 829 | 22.3 | 23.4 | (1.1) | ||||||||||||||||||
| XARELTO | 690 | 518 | 33.3 | 33.3 | — | ||||||||||||||||||
| Other | 323 | 311 | 3.9 | 6.7 | (2.8) | ||||||||||||||||||
| Total Innovative Medicine Sales | $13,873 | $13,562 | 2.3 | % | 4.2 | % | (1.9) | % |
*percentage greater than 100% or not meaningful
| Form 10-Q | 39 |
(1) Previously in Other Oncology
(2) Opsynvi was previously in Other Pulmonary Hypertension
(3) Includes the Covid-19 Vaccine in 2024
Oncology products achieved operational sales growth of 20.4% as compared to the same period a year ago. Strong sales of DARZALEX (daratumumab) were driven by continued share gains and market growth. Growth of ERLEADA (apalutamide) was due to continued share gains and market growth partially offset by the impact of Medicare Part D redesign (Part D). Increased sales of CARVYKTI (ciltacabtagene autoleucel) were driven by continued share gains and capacity expansion. Additionally, sales from the ongoing launches of TECVAYLI (teclistamab-cqyv), TALVEY (talquetamab-tgvs) and RYBREVANT (amivantamab)/LAZCLUZE (lazertinib) contributed to the growth. Growth was partially offset by ZYTIGA (abiraterone acetate) due to loss of exclusivity and IMBRUVICA (ibrutinib) declines due to competitive pressures and the impact of Part D.
Immunology products experienced an operational decline of 10.9% as compared to the same period a year ago primarily due to the decline of STELARA (ustekinumab) sales driven by the impact of biosimilar competition and Part D. The growth of TREMFYA (guselkumab) was due to share gains and market growth partially offset by the impact of Part D. The SIMPONI/SIMPONI ARIA sales increase was primarily driven by the Merck, Sharp & Dohme return of rights in Europe in the fiscal fourth quarter of 2024. The REMICADE (infliximab) sales increase was due to a one-time favorable patient mix, market growth, and the Merck, Sharp & Dohme return of rights in Europe, partially offset biosimilar competition.
Sales of STELARA in the United States were approximately $6.7 billion in fiscal 2024. Third parties have filed abbreviated Biologics License Applications with the FDA seeking approval to market biosimilar versions of STELARA. The Company has settled certain litigation under the Biosimilar Price Competition and Innovation Act of 2009. According to patent settlement and license agreements, the Company expects continued launches of biosimilar versions of STELARA in Europe and the United States in 2025 which will impact the Company’s sales of STELARA.
Neuroscience products experienced an operational decline of 7.0% as compared to the same period a year ago. The decline was driven by INVEGA SUSTENNA / XEPLION / INVEGA TRINZA / TREVICTA primarily due to the impact of Part D and Other Neuroscience primarily due to RISPERDAL/RISPERDAL CONSTA and the PONVORY divestiture. The decline was partially offset by the growth of SPRAVATO (esketamine) driven by the ongoing launch and increased physician and patient demand.
Pulmonary Hypertension products experienced an operational decline of 1.2% as compared to the same period a year ago. Sales growth of OPSUMIT (macitentan)/ OPSYNVI (macitentan/tadalafil) were driven by share gains and market growth partially offset by the impact of Part D redesign. The sales decline of UPTRAVI (selexipag) was driven by the impact of Part D partially offset by market growth.
Infectious disease products achieved operational sales growth of 0.1% as compared to the same period a year ago primarily driven by EDURANT/rilpivirine partially offset by declines across the portfolio including COVID-19 vaccine revenue in Other Infectious Diseases.
Cardiovascular / Metabolism / Other products achieved operational growth of 23.4% as compared to the same period a year ago. The growth of XARELTO (rivaroxaban) sales was primarily driven by one-time favorable patient mix and the impact of Part D.
The Company maintains a policy that no end customer will be permitted direct delivery of product to a location other than the billing location. This policy impacts contract pharmacy transactions involving non-grantee 340B covered entities for most of the Company’s drugs, subject to multiple exceptions. Both grantee and non-grantee covered entities can maintain certain contract pharmacy arrangements under policy exceptions. The Company has been and will continue to offer 340B discounts to covered entities on all of its covered outpatient drugs, and it believes its policy will improve its ability to identify inappropriate duplicate discounts and diversion prohibited by the 340B statute. The 340B Drug Pricing Program is a U.S. federal government program requiring drug manufacturers to provide significant discounts on covered outpatient drugs to covered entities.
| 40 | |
MedTech
MedTech segment sales in the fiscal first quarter of 2025 were $8.0 billion, an increase of 2.5% as compared to the same period a year ago, which included operational growth of 4.1% and a negative currency impact of 1.6%. U.S. MedTech sales increased 5.1%. International MedTech sales decreased by 0.2%, including operational growth of 3.0% offset by a negative currency impact of 3.2%. In the fiscal first quarter of 2025, the net impact of acquisitions and divestitures on the MedTech segment operational sales growth was a positive 2.8%, primarily related to the Shockwave acquisition.
Major MedTech franchise sales — Fiscal First Quarter Ended
| (Dollars in Millions) | March 30, 2025 | March 31, 2024 | Total Change | Operations Change | Currency Change | ||||||||||||||||||
| Surgery | $2,396 | $2,416 | (0.8) | % | 1.1 | % | (1.9) | % | |||||||||||||||
| Advanced | 1,073 | 1,087 | (1.2) | 0.5 | (1.7) | ||||||||||||||||||
| General | 1,323 | 1,330 | (0.5) | 1.6 | (2.1) | ||||||||||||||||||
| Orthopaedics | 2,241 | 2,340 | (4.2) | (3.1) | (1.1) | ||||||||||||||||||
| Hips | 409 | 422 | (3.1) | (1.9) | (1.2) | ||||||||||||||||||
| Knees | 389 | 401 | (3.0) | (1.7) | (1.3) | ||||||||||||||||||
| Trauma | 772 | 765 | 0.9 | 2.1 | (1.2) | ||||||||||||||||||
| Spine, Sports & Other | 671 | 752 | (10.8) | (9.7) | (1.1) | ||||||||||||||||||
| Cardiovascular | 2,103 | 1,806 | 16.4 | 17.7 | (1.3) | ||||||||||||||||||
| Electrophysiology | 1,323 | 1,344 | (1.6) | (0.2) | (1.4) | ||||||||||||||||||
| Abiomed | 420 | 371 | 13.3 | 14.0 | (0.7) | ||||||||||||||||||
| Shockwave(1) | 258 | — | * | * | — | ||||||||||||||||||
| Other Cardiovascular | 103 | 92 | 12.5 | 14.1 | (1.6) | ||||||||||||||||||
| Vision | 1,279 | 1,258 | 1.7 | 3.7 | (2.0) | ||||||||||||||||||
| Contact Lenses/Other | 919 | 910 | 1.0 | 2.7 | (1.7) | ||||||||||||||||||
| Surgical | 361 | 348 | 3.7 | 6.2 | (2.5) | ||||||||||||||||||
| Total MedTech Sales | $8,020 | $7,821 | 2.5 | % | 4.1 | % | (1.6) | % |
(1) Acquired on May 31, 2024
*Percentage greater than 100% or not meaningful
The Surgery franchise achieved operational sales growth of 1.1% as compared to the prior year fiscal first quarter. The operational growth in Advanced Surgery was primarily due to the strength of the portfolio and recovery from U.S. supply challenges in Biosurgery as well as commercial execution in Biosurgery and Endocutters and strategic price actions in Endocutters. The growth was partially offset by competitive pressures in Energy and Endocutters as well as the negative impact of China volume-based procurement. The operational growth in General Surgery was primarily driven by technology penetration and upgrades within the differentiated Wound Closure portfolio and tender timing outside the U.S. The growth was partially offset by the impact from divestitures.
The Orthopaedics franchise experienced an operational sales decline of 3.1% as compared to the prior year fiscal first quarter. All platforms were impacted by one-time events: the lapping of the prior year one-time revenue recognition timing change related to certain products in the U.S., fewer selling days, and revenue disruption from the previously announced Orthopaedics restructuring. The operational decline in Hips reflects the aforementioned one-time events partially offset by the continued strength of the portfolio. The operational decline in Knees was driven by the aforementioned one-time events and tender timing outside the U.S. partially offset by procedure growth, strength of the ATTUNE portfolio and pull through related to the VELYS Robotic assisted solution. The operational growth in Trauma was primarily driven by the continued adoption of recently launched products, procedure growth, and commercial execution, partially offset by the aforementioned one-time events. The operational sales decline in Spine, Sports & Other reflects the aforementioned one-time events, competitive pressures, price pressures in the U.S. Early Interventional segment, and China volume-based procurement partially offset by growth in Shoulders.
The Cardiovascular franchise, which includes sales from Shockwave Medical (Shockwave) acquired on May 31, 2024, achieved operational sales growth of 17.7% as compared to the prior year fiscal first quarter. Abiomed sales growth was driven by the continued strong adoption of Impella 5.5 and Impella CP. Electrophysiology sales declined due to competitive pressures in Pulsed
| Form 10-Q | 41 |
Field Ablation catheters and lapping of prior year inventory build in Asia. The decline was mostly offset by global procedure growth, new products and commercial execution.
The Vision franchise achieved operational sales growth of 3.7% as compared to the prior year fiscal first quarter. The Contact Lenses/Other operational growth was driven by price actions and continued strong performance in the ACUVUE OASYS 1-Day family of products (including recent launches). The Surgical operational growth was primarily driven by the continued strength of recent innovations and commercial execution partially offset by competitive pressures in the U.S.
Analysis of consolidated earnings before provision for taxes on income
Consolidated earnings before provision for taxes on income for the fiscal first quarter of 2025 was $13.6 billion representing 62.3% of sales as compared to $3.7 billion in the fiscal first quarter of 2024, representing 17.4% of sales. The fiscal first quarter of 2025 includes the reversal of approximately $7.0 billion, a significant portion of the previously accrued talc reserve. The fiscal first quarter of 2024 includes charges for talc matters of approximately $2.7 billion.
Cost of products sold
(Dollars in billions. Percentages in chart are as a percent to total sales)
Q1 2025 versus Q1 2024
Cost of products sold increased as a percent to sales primarily driven by:
-
Unfavorable currency and product mix in the Innovative Medicine business
-
The fair value inventory step-up and amortization related to Shockwave
The intangible asset amortization expense included in cost of products sold for both the fiscal first quarters of 2025 and 2024 was $1.1 billion.
Selling, marketing and administrative expenses
(Dollars in billions. Percentages in chart are as a percent to total sales)
| 42 | |
Q1 2025 versus Q1 2024
Selling, Marketing and Administrative Expenses decreased as a percent to sales primarily driven by:
- Planned leverage and phasing of investments in the Innovative Medicine business.
Research and development expense
Research and development expense by segment of business was as follows:
| Fiscal First Quarter Ended | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||
| (Dollars in Millions) | Amount | % of Sales* | Amount | % of Sales* | ||||||||||||||||||||||||||||
| Innovative Medicine | $2,548 | 18.4 | % | $2,896 | 21.4 | % | ||||||||||||||||||||||||||
| MedTech | 677 | 8.4 | 646 | 8.3 | ||||||||||||||||||||||||||||
| Total research and development expense | $3,225 | 14.7 | % | $3,542 | 16.6 | % | ||||||||||||||||||||||||||
| Percent increase/(decrease) over the prior year | (8.9 | %) | ||||||||||||||||||||||||||||||
| *As a percent to segment sales |
Q1 2025 versus Q1 2024
Research and Development decreased as a percent to sales driven by:
- Reduced spending and phasing of investments in the Innovative Medicine business
partially offset by
- Investments associated with Shockwave and V-Wave in the MedTech business
Interest (income) expense
Interest (income) expense in the fiscal first quarter of 2025 was net income of $128 million as compared to net income of $209 million in the fiscal first quarter of 2024. Interest income in the fiscal first quarter of 2025 decreased slightly as compared to the prior year driven by lower interest rates earned on cash balances. Interest expense was slightly higher due to a higher average debt balance at higher interest rates. The balance of cash, cash equivalents and current marketable securities was $38.8 billion at the end of the fiscal first quarter of 2025 as compared to $26.2 billion at the end of the fiscal first quarter of 2024. The Company’s debt position was $52.3 billion as of March 30, 2025, as compared to $33.6 billion the same period a year ago.
Other (income) expense, net*
Q1 2025 versus Q1 2024
Other (income) expense, net for the fiscal first quarter of 2025 reflected an increase in income of $9.7 billion as compared to the prior year primarily due to the following:
| Fiscal First Quarter | ||||||||||||||||||||
| (Dollars in Billions)(Income)/Expense | March 30, 2025 | March 31, 2024 | Change | |||||||||||||||||
| Litigation related(1) | $ | (7.0) | 2.7 | (9.7) | ||||||||||||||||
| Acquisition, Integration and Divestiture related | 0.1 | 0.1 | — | |||||||||||||||||
| Employee benefit plan related | (0.1) | (0.2) | 0.1 | |||||||||||||||||
| Other | (0.3) | (0.2) | (0.1) | |||||||||||||||||
| Total Other (Income) Expense, Net | $ | (7.3) | 2.4 | (9.7) |
| Form 10-Q | 43 |
(1)The fiscal first quarter of 2025 includes the reversal of approximately $7.0 billion, a significant portion of the previously accrued talc reserve. The fiscal first quarter of 2024 includes charges for talc matters. For additional details related to talc refer to Note 11 to the Consolidated Financial Statements.
*Other (income) expense, net is the account where the Company records gains and losses related to the sale and write-down of certain investments in equity securities held by Johnson & Johnson Innovation - JJDC, Inc. (JJDC), changes in the fair value of securities, gains and losses on divestitures, gains and losses on sale of assets, certain transactional currency gains and losses, acquisition-related costs, litigation accruals and settlements, investment (income)/loss related to employee benefit plans, as well as royalty income.
Segment income before tax
Income (loss) before tax by segment of business for the fiscal first quarters were as follows:
| Income Before Tax | Segment Sales | Percent of Segment Sales | ||||||||||||||||||||||||||||||||||||
| (Dollars in Millions) | March 30, 2025 | March 31, 2024 | March 30, 2025 | March 31, 2024 | March 30, 2025 | March 31, 2024 | ||||||||||||||||||||||||||||||||
| Innovative Medicine | $5,210 | $4,969 | $13,873 | $13,562 | 37.6 | % | 36.6 | % | ||||||||||||||||||||||||||||||
| MedTech | 1,421 | 1,520 | 8,020 | 7,821 | 17.7 | 19.4 | ||||||||||||||||||||||||||||||||
| Segment total | 6,631 | 6,489 | 21,893 | 21,383 | 30.3 | 30.3 | ||||||||||||||||||||||||||||||||
| (Income) Expenses not allocated to segments(1) | (7,000) | 2,775 | ||||||||||||||||||||||||||||||||||||
| Earnings before provision for taxes on income | $13,631 | $3,714 | $21,893 | $21,383 | 62.3 | % | 17.4 | % |
(1)Amounts not allocated to segments include interest (income) expense, certain litigation expenses and general corporate (income) expense. The fiscal first quarter of 2025 includes the reversal of approximately $7.0 billion, a significant portion of the previously accrued talc reserve. The fiscal first quarter of 2024 includes charges for talc matters of $2.7 billion. For additional details related to talc refer to Note 11 to the Consolidated Financial Statements.
Innovative Medicine segment
The Innovative Medicine segment income before tax as a percent of sales in the fiscal first quarter of 2025 was 37.6% versus 36.6% for the same period a year ago. The increase in the income before tax as a percent of sales for the fiscal first quarter of 2025 as compared to the prior year was primarily driven by the following:
-
Lower restructuring related costs and amortization expense of $0.6 billion in 2025 versus $0.8 billion in 2024
-
Planned leverage and phasing of investments in Selling, Marketing and Administrative Expenses
-
Reduced spending and phasing of investments in Research & Development
partially offset by
-
Unfavorable currency in Cost of products sold
-
Product mix and Part D
MedTech segment
The MedTech segment income before tax as a percent of sales in the fiscal first quarter of 2025 was 17.7% versus 19.4% for the same period a year ago. The decrease in the income before tax as a percent of sales for the fiscal first quarter of 2025 as compared to the prior year was primarily driven by the following:
-
The fair value inventory step-up and amortization related to Shockwave of $0.1 billion in 2025
-
Increased investments in Research & Development associated with Shockwave and V-Wave
Restructuring
In the fiscal year 2023, the Company initiated a restructuring program of its Orthopaedics franchise within its MedTech segment to streamline operations by exiting certain markets, product lines and distribution network arrangements. The pre-tax restructuring expense was $55 million in the fiscal first quarter of 2025, of which $17 million was recorded in Restructuring, $8 million in Cost of products sold and $30 million in Other (Income)/Expense on the Consolidated Statement of Earnings primarily for costs related to asset impairments and market and product exits. The pre-tax restructuring expense was $27 million in the fiscal first quarter of 2024, of which $20 million was recorded in Restructuring and $7 million was recorded in Cost of products sold on the Consolidated Statement of Earnings. Total project costs of approximately $0.5 billion have been recorded since the restructuring was announced.
| 44 | |
In the fiscal year 2023, the Company completed a prioritization of its research and development (R&D) investment within the Innovative Medicine segment to focus on the most promising medicines with the greatest benefit to patients. The pre-tax restructuring charge of approximately $0.1 billion in the fiscal first quarter of 2024 included the termination of partnered and non-partnered program costs and asset impairments. The program was completed in the fiscal fourth quarter of 2024.
For further details related to the restructuring refer to Note 12 to the Consolidated Financial Statements.
Provision for taxes on income
The worldwide effective income tax rate for the fiscal three months was 19.3% in 2025 and 12.4% in 2024.
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework that was supported by over 130 countries worldwide. Several EU and non-EU countries have enacted Pillar Two legislation with an initial effective date of January 1, 2024, with other aspects of the law effective in 2025 or later. While countries continue to enact new provisions or issue new regulations this could have an impact to the Company’s effective tax rate.
For further details related to the fiscal 2025 provision for taxes refer to Note 5 to the Consolidated Financial Statements.
Liquidity and capital resources
Acquisitions (net of cash acquired)
Proceeds from the disposal of assets/businesses, net
Dividends to shareholders
Cash flows
Cash and cash equivalents were $38.5 billion at the end of the fiscal first quarter of 2025 as compared with $24.1 billion at the end of fiscal year 2024. The primary sources and uses of cash that contributed to the $14.4 billion increase were:
| (Dollars In Billions) | ||||||||
| 24.1 | Q4 2024 Cash and cash equivalents balance | |||||||
| 4.2 | net cash generated from operating activities | |||||||
| (0.3) | net cash used by investing activities | |||||||
| 10.4 | net cash from financing activities | |||||||
| 0.1 | effect of exchange rate changes on cash and cash equivalents | |||||||
| $ | 38.5 | Q1 2025 Cash and cash equivalents |
In addition, the Company had $0.3 billion in marketable securities at the end of the fiscal first quarter of 2025 and $0.4 billion at the end of fiscal year 2024.
| Form 10-Q | 45 |
Cash flow from operations of $4.2 billion was the result of:
| (Dollars In Billions) | ||||||||
| $ | 11.0 | Net earnings | ||||||
| 4.2 | non-cash expenses and other adjustments primarily for depreciation and amortization, stock-based compensation, deferred tax provision, charge for in-process research and development assets and asset write-downs partially offset by the net gain on sale of assets/businesses | |||||||
| (1.1) | an increase in accounts receivable and inventories | |||||||
| (2.1) | a decrease in accounts payable and accrued liabilities | |||||||
| (1.3) | an increase in other current and non-current assets | |||||||
| (6.5) | a decrease in other current and non-current liabilities | |||||||
| $ | 4.2 | Net cash flows from operations |
Cash flow used by investing activities of $0.3 billion was primarily from:
| (Dollars In Billions) | ||||||||
| $ | (0.8) | additions to property, plant and equipment | ||||||
| 0.3 | proceeds from the disposal of assets/businesses, net | |||||||
| 0.3 | credit support agreements activity, net | |||||||
| (0.1) | Other (primarily capitalized licenses and milestones) and rounding | |||||||
| $ | (0.3) | Net cash used by investing activities |
Cash flow from financing activities of $10.4 billion was primarily from:
| (Dollars In Billions) | ||||||||
| $ | (3.0) | dividends to shareholders | ||||||
| (2.1) | repurchase of common stock | |||||||
| 15.1 | net proceeds from short and long term debt | |||||||
| 0.5 | proceeds from stock options exercised/employee withholding tax on stock awards, net | |||||||
| (0.1) | Other and rounding | |||||||
| $ | 10.4 | Net cash from financing activities |
The Company has access to substantial sources of funds at numerous banks worldwide and has the ability to issue up to $20 billion in Commercial Paper. Furthermore, in June 2024, the Company secured a new 364-day Credit Facility of $10 billion (expiration on June 25, 2025) which may be used for general corporate purposes including to support our commercial paper borrowings. Interest charged on borrowings under the credit line agreement is based on either Secured Overnight Financing Rate (SOFR) Reference Rate or other applicable market rate as allowed plus applicable margins. Commitment fees under the agreement are not material.
As of March 30, 2025, the Company had cash, cash equivalents and marketable securities of approximately $38.8 billion and had approximately $52.3 billion of notes payable and long-term debt for a net debt position of $13.5 billion as compared to the prior year fiscal first quarter net debt position of $7.4 billion. In the fiscal first quarter of 2025, the Company issued senior unsecured notes for approximately $9.2 billion. For additional details on borrowings, see Note 4 to the Consolidated Financial Statements. The net proceeds from this offering were used to fund the Intra-Cellular Therapies, Inc. acquisition for approximately $14.6 billion which closed subsequent to the quarter on April 2, 2025, and for general corporate purposes. The Company anticipates that operating cash flows, the ability to raise funds from external sources, borrowing capacity from existing committed credit facilities and access to the commercial paper markets will continue to provide sufficient resources to fund operating needs, including the Company’s remaining balance of approximately $4.2 billion related to talc matters and the remaining approximately $1.5 billion to settle opioid litigation (See Note 11 to the Consolidated Financial Statements for additional details). In addition, the Company monitors the global capital markets on an ongoing basis and from time to time may raise capital when market conditions are favorable.
Subsequent to March 30, 2025, the Company paid approximately $3.0 billion to the U.S. Treasury, including $2.5 billion related to the final installment due on foreign undistributed earnings as part of the TCJA charge (see Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2024) and $0.5 billion primarily
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related to the normal estimated payment for the fiscal first quarter of 2025. Additionally, the Company has paid $0.6 billion in income related taxes net of refunds in foreign jurisdictions in the first three months of fiscal 2025.
Dividends
On January 2, 2025, the Board of Directors declared a regular cash dividend of $1.24 per share, payable on March 4, 2025, to shareholders of record as of February 18, 2025.
On April 15, 2025, the Board of Directors declared a regular cash dividend of $1.30 per share, payable on June 10, 2025, to shareholders of record as of May 27, 2025. The Company expects to continue the practice of paying regular quarterly cash dividends.
Other information
New accounting pronouncements
Refer to Note 1 to the Consolidated Financial Statements for new accounting pronouncements.
Economic and market factors
In July 2023, Janssen Pharmaceuticals, Inc. (Janssen) filed litigation against the U.S. Department of Health and Human Services as well as the Centers for Medicare and Medicaid Services challenging the constitutionality of the IRA's Medicare Drug Price Negotiation Program. The litigation requests a declaration that the IRA violates Janssen’s rights under the First Amendment and the Fifth Amendment to the Constitution and therefore that Janssen is not subject to the IRA’s mandatory pricing scheme. The impact of the IRA on our business and the broader pharmaceutical industry remains uncertain, as litigation filed by Janssen and other pharmaceutical companies remains ongoing and while CMS has publicly announced the maximum fair price for each of the selected drugs, implementation of the program is still in progress. In April 2024, Janssen appealed the district court’s denial of its summary judgment motion to the Third Circuit.
Russia-Ukraine war
Although the long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time, the financial impact of the conflict in the fiscal first quarter of 2025, including accounts receivable or inventory reserves, was not material. As of the fiscal three months ending March 30, 2025, and the fiscal year ending December 29, 2024, the business of the Company’s Russian subsidiaries represented less than 1% of the Company’s consolidated assets and represented approximately 1% of revenues. The Company does not maintain Ukrainian subsidiaries.
In March of 2022, the Company took steps to suspend all advertising, enrollment in clinical trials, and any additional investment in Russia. The Company continues to supply products relied upon by patients for healthcare purposes.
Conflict in the Middle East
Although the long-term implications of the conflict in the Middle East are difficult to predict at this time, the financial impact of the conflict in the fiscal first quarter of 2025, including accounts receivable or inventory reserves, was not material. As of the fiscal three months ending March 30, 2025, and the fiscal year ending December 29, 2024, the business of the Company’s Israel subsidiaries represented less than 1% of both Company’s consolidated assets and revenues.
Other Macroeconomic Considerations
The Company operates in certain countries where the economic conditions continue to present significant challenges. The Company continues to monitor these situations and take appropriate actions. Inflation rates and currency exchange rates continue to have an effect on worldwide economies and, consequently, on the way the Company operates. The Company has accounted for operations in Venezuela, Argentina, Turkey and Egypt (beginning in the fiscal fourth quarter of 2024) as highly inflationary, as the prior three-year cumulative inflation rate surpassed 100%. In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and periodic price increases.
Governments around the world consider various proposals to make changes to tax laws, which may include increasing or decreasing existing statutory tax rates. In connection with various government initiatives, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries.
| Form 10-Q | 47 |
A change in statutory tax rate in any country would result in the revaluation of the Company’s deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted. This change would result in an expense or benefit recorded to the Company’s Consolidated Statement of Earnings. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to the statutory tax rate may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted.
The Company may be further impacted by the imposition of tariffs, trade protection measures or other policies adopted by any jurisdiction that favor domestic companies and technologies over foreign competitors.
The Company faces various worldwide health care changes that may continue to result in pricing pressures that include health care cost containment and government legislation relating to sales, promotions and reimbursement of health care products.
Changes in the behavior and spending patterns of purchasers of healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and foregoing healthcare insurance coverage, may continue to impact the Company’s businesses.
The Company faces regular intellectual property challenges from third parties, including generic and biosimilar manufacturers, seeking to manufacture and market generic and biosimilar versions of key pharmaceutical products prior to the expiration of the applicable patents. These challengers file Abbreviated New Drug Applications or abbreviated Biologics License Applications with the FDA or otherwise challenged the coverage and/or validity of the Company’s patents. In the event the Company is not successful in defending the patent claims challenged in the resulting lawsuits, generic or biosimilar versions of the products at issue may be introduced to the market, resulting in the potential for substantial market share and revenue losses for those products, and which may result in a non-cash impairment charge in any associated intangible asset. There is also risk that one or more competitors could launch a generic or biosimilar version of the product at issue following regulatory approval even though one or more valid patents are in place.
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