AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Patent rights and differentiated products support a narrow structural advantage, corroborated by adoption and upgrades. Relative superiority and the breadth of defensible protection are incompletely documented.
durability · 1/4 · Advantages require repeated innovation and defense of finite intellectual property. STELARA sales decline is realized evidence of erosion; remaining protection periods and durable replacement economics are absent.
customer dependency · 2/4 · Continued contact-lens performance, Wound Closure upgrades and robotic-system pull-through indicate product preference and some ecosystem dependence indirectly. They do not demonstrate contractual lock-in or quantified switching friction.
erosion resilience · 2/4 · New-product adoption and Vision growth coexist with STELARA erosion, procurement offsets and device competition. The portfolio shows some ability to absorb pressure, without establishing durable protection against it.
Pricing power44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · Strategic price actions contributed to contact-lens growth in both reporting periods, supporting selective realized pricing power. Price magnitude and net realization are undisclosed, and procurement pressure limits broader pricing strength.
retention · 2/4 · Continued ACUVUE performance and product upgrades provide indirect evidence of sustained demand alongside price actions. Adoption and sales growth cannot isolate repeat purchasing from launches, market growth or inventory movements.
margin resilience · 2/4 · Second-quarter gross margin increased from 67.9% to 68.2%, while pretax margin declined from 27.3% to 26.7%. Earlier product-mix and input-cost pressure makes resilience mixed. Litigation-related accounting effects also limit interpretation of headline annual earnings changes.
contractual freedom · 1/4 · Implemented Medicare pricing and realized volume-based procurement effects demonstrate constrained price-setting freedom. Contact-lens price actions show some discretion, but commercial contract terms are not supplied.
Predictability93
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 6.37
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.42
Financial strength71
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 79.52
- netDebtEbitGrade
- 83.17
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 22.21
- Debt / FCF (x)
- 2.43
- Net debt / operating income (x)
- 0.84
- Current ratio (x)
- 1.03
Capital allocation94
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 24.70
- 3-year average dilution (%)
- -2.82
- 3-year average SBC / revenue (%)
- 1.38
- cashConversionGrade
- 76.01
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · 2025 operating cash flow of $24.530 billion exceeded $4.832 billion of capital expenditure, supporting funding capacity. However, $17.5 billion of acquisitions, substantial settlement obligations and compensation-related repurchases require consideration; acquisition returns remain unproven.
incentive alignment · 3/4 · Actual three-year performance awards combine operational EPS and relative shareholder return, with performance-dependent payouts and a completed 2023–2025 payout. Anti-hedging rules reinforce alignment. Adjusted metrics and discretionary assessments temper the conclusion; executive ownership compliance is missing.
execution · 2/4 · Adoption, upgrades and Vision growth support execution through indirect operating evidence rather than compensation payouts or leadership claims. Competitive offsets and the Committee's disclosed mixed supply-chain performance prevent a stronger assessment.
governance · 2/4 · A Lead Independent Director, independent approval of CEO compensation and related-person transaction controls provide substantive safeguards. The combined Chairman and CEO role and compensation discretion leave a mixed assessment; effective oversight outcomes are not comprehensively demonstrated.
Evidence
Shockwave sales growth was driven by strong adoption of Coronary and Peripheral portfolios and new product launches.
MedTech operating results: Shockwave adoption and launches · Filed 23/07/2026
The operational growth in General Surgery was primarily driven by technology penetration and upgrades within the differentiated Wound Closure portfolio coupled with market expansion partially offset by China volume-based procurement.
MedTech operating results: Wound Closure penetration and upgrades · Filed 23/07/2026
The Contact Lenses/Other operational growth was driven by strong performance in the ACUVUE OASYS 1-Day family of products including recent launches and strategic price actions partially offset by inventory dynamics.
Vision operating results: contact-lens performance and price actions · Filed 23/07/2026
Contact Lenses/Other growth was primarily driven by market growth, continued strong performance in the ACUVUE OASYS 1-Day family of products (including recent launches) and strategic price actions.
2025 Vision operating results: contact-lens performance and price actions · Filed 11/02/2026
Form 10-Q 45 Table of Contents 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.
Economic and market factors: challenges to pharmaceutical patents · Filed 23/07/2026
The operational growth in Knees was driven by the strength of the ATTUNE portfolio driven in part by pull through related to the VELYS Robotic assisted solutions.
Orthopaedics operating results: ATTUNE growth and VELYS pull-through · Filed 23/07/2026
Percentages in chart are as a percent to total sales) 2025 Annual Report 29 Cost of products sold: Cost of products sold increased as a percent to sales driven by: •Unfavorable product mix driven by the decline of STELARA sales and unfavorable transactional currency in the Innovative Medicine business •Tariffs, unfavorable transactional currency and macroeconomic factors in the MedTech business partially offset by •Non-recurring, acquisition related fair value Inventory step-up of $0.1 billion in 2025 versus $0.4 billion in 2024 related to the business combination accounting associated with the Shockwave acquisition in the MedTech business The intangible asset amortization expense included in cost of products sold was $4.6 billion in fiscal 2025 and $4.5 billion in fiscal 2024.
Earnings analysis: STELARA decline, product mix and cost pressures · Filed 11/02/2026
This was partially offset by China volume-based procurement across all platforms, the impact of the surgery transformation program in Biosurgery and Energy and competitive pressures in Endocutters.
Surgery operating results: procurement and Endocutter competitive pressures · Filed 23/07/2026
The Surgical operational growth was primarily driven by the strength of recent product innovations, robust demand and strong commercial execution partially offset by competitive pressures in the U.S.
Vision operating results: surgical demand and U.S. competition · Filed 23/07/2026
While 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, CMS has publicly announced the maximum fair price for each of the selected drugs and has recently begun implementing the program.
Economic and market factors: implementation of Medicare negotiated pricing · Filed 11/02/2026
Risks and uncertainties include, but are not limited to: Risks related to product development, market success and competition •Challenges and uncertainties inherent in innovation and development of new and improved products and technologies on which the Company’s continued growth and success depend, including uncertainty of clinical outcomes, additional analysis of existing clinical data, obtaining regulatory approvals, health plan coverage and customer access, and initial and continued commercial success; •Challenges to the Company’s ability to secure and maintain adequate patent and other intellectual property rights for new and existing products and technologies in the United States and other important markets; •The impact of patent expirations, typically followed by the introduction of competing generic, biosimilar or other products and resulting revenue and market share losses; •Increasingly aggressive and frequent challenges to the Company’s patents by competitors and others seeking to launch competing generic, biosimilar or other products and increased receptivity of courts, the United States Patent and Trademark Office and other decision makers to such challenges, potentially resulting in loss of market exclusivity and rapid decline in sales for the relevant product sooner than expected; •Competition in research and development of new and improved products, processes and technologies, which can result in product and process obsolescence; •Competition to reach agreement with third parties for collaboration, licensing, development and marketing agreements for products and technologies; •Competition based on cost-effectiveness, product performance, technological advances and patents attained by competitors; and •Allegations that the Company’s products infringe the patents and other intellectual property rights of third parties, which could adversely affect the Company’s ability to sell the products in question and require the payment of money damages and future royalties.
Risk disclosures: innovation, patent expiry and competitive entry · Filed 23/07/2026
Table of Contents Part I — Financial information Item 1 — Financial statements Johnson & Johnson and subsidiaries consolidated balance sheets (Unaudited; Dollars in Millions Except Share and Per Share Data) June 28, 2026 December 28, 2025 Assets Current assets: Cash and cash equivalents (Note 4) $20,422 19,709 Marketable securities 336 393 Accounts receivable, trade, less allowances $171 (2025, $183) 19,046 17,178 Inventories (Note 2) 15,144 14,191 Prepaid expenses and other 4,826 4,153 Total current assets 59,774 55,624 Property, plant and equipment at cost 55,518 54,364 Less: accumulated depreciation (31,936) (31,195) Property, plant and equipment, net 23,582 23,169 Intangible assets, net (Note 3) 48,229 50,403 Goodwill (Note 3) 48,479 48,772 Deferred taxes on income (Note 5) 6,728 6,874 Other assets 14,269 14,368 Total assets $201,061 199,210 Liabilities and shareholders’ equity Current liabilities: Loans and notes payable $11,692 8,495 Accounts payable 9,223 11,991 Accrued liabilities 9,464 8,594 Accrued rebates, returns and promotions 19,990 19,124 Accrued compensation and employee related obligations 3,475 4,534 Accrued taxes on income (Note 5) 1,051 1,388 Total current liabilities 54,895 54,126 Long-term debt (Note 4) 37,344 39,438 Deferred taxes on income (Note 5) 6,608 6,791 Employee related obligations (Note 6) 6,657 6,957 Long-term taxes payable (Note 5) 485 486 Other liabilities 10,101 9,868 Total liabilities $116,090 117,666 Commitments and Contingencies (Note 11) Shareholders’ equity: Common stock — par value $1.00 per share (authorized 4,320,000,000 shares; issued 3,119,843,000 shares) $3,120 3,120 Accumulated other comprehensive income (loss) (Note 7) (13,951) (14,930) Retained earnings and Additional paid-in capital 171,665 168,978 Less: common stock held in treasury, at cost (711,615,000 and 711,904,000 shares) 75,863 75,624 Total shareholders’ equity $84,971 81,544 Total liabilities and shareholders’ equity $201,061 199,210 See Notes to Consolidated Financial Statements Form 10-Q 1 Table of Contents Johnson & Johnson and subsidiaries consolidated statements of earnings (Unaudited; Dollars & Shares in Millions Except Per Share Amounts) Fiscal Second Quarter Ended June 28, 2026 Percent to Sales June 29, 2025 Percent to Sales Sales to customers (Note 9) $25,310 100.0 % $23,743 100.0 % Cost of products sold 8,051 31.8 7,628 32.1 Gross profit 17,259 68.2 16,115 67.9 Selling, marketing and administrative expenses 6,432 25.4 5,889 24.8 Research and development expense 3,653 14.4 3,516 14.8 Interest income (219) (0.9) (260) (1.1) Interest expense, net of portion capitalized 281 1.1 308 1.3 Other (income) expense, net 331 1.3 107 0.5 Restructuring (Note 12) 34 0.2 64 0.3 Earnings before provision for taxes on income 6,747 26.7 6,491 27.3 Provision for taxes on income (Note 5) 1,213 4.8 954 4.0 Net earnings $5,534 21.9 % $5,537 23.3 % Net earnings per share (Note 8) Basic $2.30 $2.30 Diluted $2.27 $2.29 Avg.
Consolidated balance sheets and second-quarter earnings · Filed 23/07/2026
($ millions) Cash flow from operating activities $24,530 Additions to property, plant and equipment (4,832) Free cash flow 19,698 Other unbudgeted adjustments, including significant acquisitions and tax law changes 132 Adjusted free cash flow 19,830 2026 Proxy Statement 79 Details on 2025 annual incentive non-GAAP performance measures •Adjusted operational EPS growth.
Compensation reconciliation: 2025 operating cash flow and capital expenditure · Filed 11/03/2026
(Intra-Cellular) for a total of $17.5 billion, net of cash acquired.
Acquisitions: combined 2025 acquisition spending · Filed 23/07/2026
Halda Therapeutics On December 26, 2025, the Company completed the acquisition of Halda Therapeutics, a clinical-stage biotechnology company with proprietary Regulated Induced Proximity TArgeting Chimera (RIPTACTM) platform to develop oral, targeting therapies for multiple types of solid tumors, including prostate cancer, in an all-cash merger transaction for total consideration transferred of approximately $3.05 billion, net of cash acquired.
Acquisitions: Halda clinical-stage platform and purchase consideration · Filed 23/07/2026
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 $3.7 billion related to talc matters, $1.7 billion related to the current portion of Corporate bonds due and the remaining approximately $0.9 billion related to opioid settlements.
Liquidity: disclosed settlement balances and near-term bond obligations · Filed 23/07/2026
Price Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs March 30, 2026 through April 26, 2026 5,054 235.42 — — April 27, 2026 through May 24, 2026 — — — — May 25, 2026 through June 28, 2026 965,196 229.51 — — Total 970,250 229.54 — — (1)During the fiscal second quarter of 2026, the Company repurchased an aggregate of 970,250 shares of Johnson & Johnson Common Stock in open-market transactions, all of which were purchased as part of a systematic plan to meet the needs of the Company’s compensation programs.
Share repurchases: purchases supporting compensation programs · Filed 23/07/2026
Performance shares were granted with two equally-weighted goals that directly align with or help drive long-term total shareholder return: adjusted operational earnings per share and relative total shareholder return.
Stock compensation: performance-share goals · Filed 11/02/2026
The number of shares actually earned at the end of the three-year period will vary, based only on actual performance, from 0% to 200% of the target number of performance share units granted.
Stock compensation: performance-dependent award range · Filed 11/02/2026
Our 2023-2025 PSUs paid out at 113.6% of target.
Compensation Committee letter: actual 2023–2025 PSU payout · Filed 11/03/2026
No hedging, pledging or short selling of Company stock.
Compensation governance: prohibition on hedging, pledging and short selling · Filed 11/03/2026
We exclude any unbudgeted significant acquisition, divestiture, change in accounting rule, change in tax laws, and special items and intangible amortization expense if it impacted adjusted operational EPS by more than 1%.
Compensation metrics: exclusions from adjusted operational EPS · Filed 11/03/2026
Weinberger Regulatory Compliance & Sustainability Committee Chair Joaquin Duato Finance Committee Chair For 2026, the independent Directors decided to continue with a leadership structure composed of a combined Chairman and CEO partnered with a strong Lead Independent Director.
Board leadership: combined Chairman and CEO with Lead Independent Director · Filed 11/03/2026
38 Shareholder engagement topics Investor discussions in 2025 covered a wide range of corporate governance, environmental and social stewardship, compensation, and public policy issues, including the following (listed in alphabetical order): •Artificial intelligence •Board composition •Board oversight of risk •Board tenure and refreshment •Culture and human capital management •Executive compensation and performance metrics •Government engagement and oversight •Litigation •Orthopaedics business separation •Pharmaceutical pricing transparency and access •Product quality and safety •Separation of the Chairman and CEO roles •Shareholder proposals •Succession planning and talent development •Sustainability and environmental stewardship Related person transactions and Director independence Related person transactions Our Policy on Transactions with Related Persons requires the approval or ratification by the Nominating & Corporate Governance Committee of any transaction or series of transactions exceeding $120,000 in which our Company is a participant and any related person has a direct or indirect material interest (other than solely as a result of being a director or trustee or less than 10% owner of another entity).
Governance: engagement topics and related-person transaction approval policy · Filed 11/03/2026
•Approve the CEO’s compensation. CEO •Reviews and presents to the Committee the performance assessments and compensation recommendations for each of the other named executive officers.
Compensation responsibilities: independent approval of CEO compensation · Filed 11/03/2026
•We had mixed performance against our supply chain goals.
Committee assessment: mixed supply-chain performance · Filed 11/03/2026
Pricing Transparency Report transparencyreport.janssen.com Political engagement www.investor.jnj.com/political-engagement SEC filings www.investor.jnj.com/financials/sec-filings Talc www.factsabouttalc.com 2026 Proxy Statement 127 Non-GAAP reconciliation Johnson & Johnson and subsidiaries reconciliation of non-GAAP financial measures (Dollars in Millions Except Per Share Data) 2025 2024 2023 Net Earnings from Continuing Operations, after tax- as reported $26,804 $14,066 $13,326 Pre-tax Adjustments Litigation related (6,040) 5,450 7,152 Intangible Asset Amortization expense 4,621 4,526 4,532 Restructuring related1 512 269 798 Acquisition, integration and divestiture related 285 1,226 339 IPR&D impairments 81 211 313 Orthopaedics Separation related 48 — — (Gains)/losses on securities (427) 306 641 Medical Device Regulation — 204 311 COVID-19 Vaccine related costs — 100 663 Other 20 — — Tax Adjustments Tax impact on special item adjustments2 381 (2,135) (2,694) Tax legislation and other tax related (70) 19 28 Adjusted Net Earnings from Continuing Operations, after tax $26,215 $24,242 $25,409 Average shares outstanding (Diluted) 2,429.4 2,429.4 2,560.4 Adjusted net earnings per share from Continuing Operations (Diluted) $10.79 $9.98 $9.92 Notes: (1)In fiscal 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.
Non-GAAP reconciliation: litigation effects and adjusted earnings · Filed 11/03/2026
The Vision franchise achieved operational sales growth of 5.6% as compared to the prior year fiscal second quarter.
Vision operating results: second-quarter operational sales growth · Filed 23/07/2026
The Committee considers both quantitative and qualitative results and applies discretion when evaluating performance and determining the payout factor.
Compensation assessment: Committee discretion over strategic performance · Filed 11/03/2026
