Johnson & Johnson Took the 2025 Crown Amidst a Resurgence of the Pharmaceutical Industry
By spinning off household staples and doubling down on acquisitions, Johnson & Johnson has reclaimed an identity built on sitting at the forefront of innovation.
2025 turned out to be a rebirth for the entire pharmaceutical world, with the sector finally outperforming the broader market. Eli Lilly continued its historic run, becoming the first healthcare company ever to hit a trillion-dollar valuation with a 39% gain. The M&A market underwent a resurgence, posting over 100 billion in deal value, more than doubling 2024’s activity, according to RBC Capital Markets.
What is fascinating about the performance, however, is the outstanding Irony. The industry got hit with the lion’s share of tailwinds, and was shoved against the wall, but somehow the NYSE Arca Pharmaceutical Index emerged superior to the S&P 500.
Monday, April 14, 2025, the trump administration opened a section 232 investigation into how importing pharmaceuticals from other countries affects national security. Prior to this the president had explicitly mentioned numerous times how one of his core desires was to bring manufacturing back to the U.S.
The official ultimatum was a 100% duty on all imported branded pharmaceuticals, effective October 1, 2025. While this policy invoked a proliferating urgency by exempting only those firms already breaking ground on domestic plants, the industry’s response had already been reshoring for months, and that started with Eli Lilly back in February, announcing around $27 billion investment across four new domestic facilities. Impressive, was the velocity and scale of the reaction. By November, the sector had already pledged over $480 billion for new domestic manufacturing to secure its standing in the American market.
Strategic deals were struck to trade price cuts for regulatory certainty, with Pfizer’s inaugural agreement on September 30, 2025, setting the precedent for subsequent deals. List prices will be cut by an average of 50% and up to 85% across a substantial portion of its primary care treatments and certain specialty branded drugs, to ensure U.S. patients and Medicaid programs receive rates on par with the lowest prices paid in other developed economies.
Pfizer also committed to a $70 billion reshoring and R&D initiative, which is dedicated to expanding U.S. manufacturing facilities. In exchange, they secured a three-year grace period exempting its products from pharmaceutical tariffs.
By December 19, 2025, 14 of the world’s biggest drugmakers had finalized deals with the Trump administration, which include industry leaders such as Eli Lilly, Novo Nordisk, Amgen, Merck, and GSK, and mirror the framework established by Pfizer. Each company committed to “most-favored-nation” pricing for state Medicaid programs and offered discounts for direct-to-patient purchases via TrumpRx.gov.
Then came relief, and a culmination of a plan to rebalance the burden of drug prices. On December 1, 2025, the U.K. government promised to increase the net price they pay for patented drugs by 25% in exchange for the avoidance of tariffs.
In my view, this offers vital relief for the industry. Whether the massive return of manufacturing to U.S. soil is beneficial in the long run is a question for another time. The immediate fact is that regulatory uncertainty was erased, creating a situation where investors see companies delivering financially while still trading at attractive valuations.
One company managed to move the needle further than anyone else, which might come as a surprise, is none other than Johnson & Johnson. They led large-cap pharma with a 43% surge over 2025, finally breaking out after years of stagnation. That momentum has carried into 2026, with the stock climbing 54% over the last 12 months.
This was the result of years spent positioning for the future. While the rest of the industry was in the spotlight, they were busy reinforcing a foundation. Relentless discipline is a trait that has defined the company since its very first day, long before it was a giant.
Robert Wood Johnson in 1876 attended the World’s Fair in Philadelphia. It was there that he heard a lecture by Dr. Joseph Lister, the British surgeon who pioneered antiseptic surgery. At a time when surgeons often operated in their street clothes without washing their hands, Lister’s talk about using carbolic acid to kill bacteria was seen as a “radical” turning point that redefined Johnson’s entire career.
Inspired by Lister’s vision, Robert Wood Johnson partnered with his two brothers, James Wood Johnson and Edward Mead Johnson, founding the company in 1886. Operating out of a small former wallpaper factory in New Brunswick, New Jersey, they started with just 14 employees. Their mission was clear, to create the world’s first mass-produced, ready-to-use sterile surgical dressings and sutures. Before this, surgeons had to prepare their own dressings, which were often far from sterile, leading to pernicious outcomes. By 1887, Johnson & Johnson were at the forefront of innovation, manufacturing absorbent cotton, gauze, and bandages that were hermetically sealed to ensure they remained germ-free until the moment they reached the surgeon’s hands.
The company took on the role of educator as well, to ensure their innovations actually saved lives. In 1888, they published Modern Methods of Antiseptic Wound Treatment, a how-to guide that quickly became the standard text for sterile surgery worldwide. They distributed over 85,000 copies to doctors and pharmacists within months, essentially teaching the medical world how to “scrub in” and use sterile tools.
The path to Johnson & Johnson’s status as a global conglomerate was paved by a relentless, century-long strategy of acquiring specialized expertise and scaling it. This evolution from a medical supply startup into a diversified powerhouse was anchored by the 1959 acquisition of McNeil Laboratories and the 1961 purchase of Janssen Pharmaceutica. These weren’t just business deals; they were the catalysts for Johnson & Johnson’s entry into modern pharmacology.
By bringing in Dr. Paul Janssen, one of the 20th century’s most prolific innovators, Johnson & Johnson secured the intellectual property that would eventually form their Innovative Medicine pillar. This blueprint of buying into “high science” was repeated decades later with the 1999 acquisition of Centocor, which gave them the biotechnology foundation needed to dominate the immunology and oncology markets.
While they were building a pharmaceutical empire, they were simultaneously using acquisitions to redefine the surgical landscape, moving far beyond their original sterile bandages. The 1998 acquisition of DePuy and the 2012 deal for Synthes combined to create one of the world’s most comprehensive orthopedics business, effectively cornering the market on bone and joint repair.
Then entering into the future of surgery in 2019 with the acquisition of Auris Health, providing the robotic surgery platform that is now central to their MedTech identity. By consistently absorbing world class innovators, they ensure that their global footprint is at the absolute forefront of the industry.
I wanted to start with their history because it gives you a real picture of who Johnson & Johnson is at their core. In this industry, the moment a company loses sight of its identity, it starts to drift.
If you just looked at the stock price between January 2020 and the end of 2024, you might have thought they were standing still. The price saw a sustained swell in the middle of those years, but eventually, gains were erased, leaving investors right back where they started. But underneath, the company was everything but stagnant. They weren’t deviating from their identity; they were reclaiming it. Those five years were a period of intense preparation; a time spent shedding the parts of the business that didn’t fit anymore and priming the engine.
Joaquin Duato took the helm as CEO in January 2022 and immediately began drafting the blueprint for a leaner, more aggressive powerhouse. This regime change was officially codified during the Enterprise Business Review in December 2023. Duato noted that ringing the NYSE bell that morning was the “starting bell for the new Johnson & Johnson,” signaling a pivot away from diversification for its own sake and toward structural disaggregation.
On August 23, 2023, they finalized the separation of Kenvue, the company’s consumer health business. Of course, you have to recognize the legacy they will leave behind, but it is not what made them who they are. They dominated that space and introduced inaugural products, but they redrew the contours of the industry and are now focused on doing it again. Duato cleared the path for what he termed an “exclusivity of focus.” He articulated the shift clearly:
“We have entered a new era, one that is exclusively focused on medical technology and innovative pharmaceuticals... with the separation of our consumer business, we have a stronger growth and margin profile, and we are more focused and more agile.”
This wasn’t merely a strategic slimming down; it was a deliberate restructuring. Through a massive exchange offer, Johnson & Johnson accepted over 190 million shares of its own common stock in exchange for its stake in Kenvue. This move drastically reduced its outstanding share count, effectively retiring billions in equity.
This new era was solidified in September 2023 with a refreshed brand identity that united its diverse segments under a modernized Johnson & Johnson name, officially retiring the Janssen pharmaceutical brand. Numerous acquisitions followed the rebranding, which began with a $16.6 billion acquisition of heart pump maker Abiomed in late 2022.
In April 2025, Johnson & Johnson completed a $14.6 billion acquisition of Intra-Cellular Therapies to secure the blockbuster drug CAPLYTA. Finally, a $13.1 billion purchase of Shockwave Medical. Their technology, known as intravascular lithotripsy (IVL), uses sonic pressure waves to safely crack the stubborn calcium buildup that blocks blood flow, effectively using sound to do what surgeons used to have to do with force.
The full 2025 results outlined the financial reality of this new structure, where cardiovascular sales, now including the Abiomed and Shockwave integrations, surged nearly 16% to top $8.9 billion. While other units saw modest growth, this segment became the only business unit to grow by double digits, providing the momentum for Duato’s catapult year to materialize into a 2030 pipeline expected to deliver more than 10 assets with over $5 billion each in peak annual sales.
With plans already in motion to spin out the orthopedics business by mid-2027, the company is swapping its slower-moving legacy parts for a future defined by high-margin technology like the OTTAVA robotic surgical system, which was recently submitted to the FDA for review. This shift has set a new baseline for the company’s scale, with 2026 guidance now projecting reported sales to cross the historic $100 billion milestone for the first time in its 140-year history.
Willingness to embrace the radical is the fundamental composition of the firm. At a time when the denizens of the medical community dismissed antiseptic theory as an unnecessary burden, Robert Wood Johnson was amenable to a vision that others lacked the foresight to see. Johnson & Johnson’s stark restructuring toward MedTech and Innovative Medicine provides a revitalized optimism for the long-term trajectory of the company, but most importantly, places them at the forefront of innovation again.