Johnson & Johnson (J&J) recently reported its Q2 earnings, providing insights into the performance of its core divisions, Innovative Medicines and MedTech, following the spin-off of its consumer arm, Kenvue. This report will focus on the Innovative Medicines division, which accounts for approximately two-thirds of J&J's total sales.

Immunology and Oncology: Key Growth Drivers

Oncology and Immunology are the two largest segments of J&J's BioPharma business, contributing nearly two-thirds of the segment's sales. Both segments have promising developments in their respective pipelines, with two notable highlights:

Immunology: Tremfya's Potential in Crohn's Disease

In June, J&J announced an additional FDA filing for Tremfya, an IL-23 inhibitor, for the treatment of moderately to severely active Crohn's disease. Tremfya has the potential to be the only IL-23 inhibitor with a fully subcutaneous regimen, which could significantly improve patient access.

Recent data from the GALAXI trial demonstrated superior outcomes for Tremfya compared to J&J's current immunology blockbuster, Stelara, in Crohn's disease. In the phase 3 data presented in May, 37% of patients on Tremfya achieved remission based on endoscopic observation, compared to 24.7% for Stelara.

However, the improvement was less pronounced when considering clinical remission, defined as a Crohn's Disease Activity Index (CDAI) score of <150, where Tremfya achieved 70.3% remission versus 62.9% for Stelara.

As Stelara is expected to face competition in 2025, any growth J&J can achieve with Tremfya in Crohn's disease will be particularly helpful in maintaining its position in the immunology market.

Oncology: Rybrevant's Potential in Lung Cancer

One of the more promising parts of J&J's oncology portfolio is Rybrevant, currently approved for the rare exon 20 EGFR mutation in lung cancer, which accounts for only 1 in 30 lung cancer cases.

J&J is progressing multiple clinical trials to demonstrate Rybrevant's potential in the more common exon 19 and 21 mutations. Initial data showed that Rybrevant plus its associated medicines reduced the risk of disease progression or death by 30% compared to AstraZeneca's Tagrisso.

However, the final verdict is still pending, as more comprehensive overall survival benefits data is needed. Tagrisso has a clear first-mover advantage, having achieved over $5B in sales last year, and is an easier-to-take oral drug with a more tolerable side effect profile, as demonstrated in the recent MARIPOSA study.

Overall Performance and Corporate Profile

J&J has delivered solid growth, close to 8% with constant currency, which is impressive given the size and complexity of its BioPharma segment. Its corporate profile is relatively unique, as it maintained its substantial MedTech division after spinning off its consumer division, providing additional stability and diversification to its overall performance.