JNJ's Tremfya Shows Strong Long-Term UC Data, Reinforcing Growth Backfill Amid Lingering Risks

What happened

Johnson & Johnson announced new long-term data from the QUASAR extension study, showing TREMFYA (guselkumab) sustained clinical and endoscopic remission in ulcerative colitis patients through 140 weeks. This positive outcome is crucial as Tremfya is a key asset in JNJ's strategy to offset the steep sales decline from Stelara, which has faced biosimilar competition. The DeepValue report emphasizes that Tremfya must maintain high growth rates to backfill lost revenue, with ex-Stelara Innovative Medicine growth already in low double digits. However, this data comes from a company-sponsored press release and does not address competitive threats from drugs like AbbVie's Skyrizi or pricing pressures under the Inflation Reduction Act. While the results support Tremfya's durability, they do not alleviate broader risks such as talc litigation, rising net debt, or medium-term patent expiries for other key products like Darzalex.

Implication

The sustained remission data strengthens Tremfya's competitive profile in the inflammatory bowel disease market, potentially boosting its market share and supporting JNJ's 2026 growth guidance. This aligns with the base case scenario in the DeepValue report, where ex-Stelara growth offsets erosion, but the stock's ~21x P/E ratio already reflects much of this optimism. Talc litigation remains a significant overhang, with potential for reserve increases that could impact earnings and cash flow, while IRA-driven pricing concessions may further compress margins. MedTech challenges, such as lagging share in pulsed field ablation, add to the execution risks, and the orthopedics spin-off introduces uncertainty. Therefore, this news reinforces the growth narrative but does not materially improve the risk-reward balance, sustaining the 'WAIT' rating until a price pullback or clearer legal resolution emerges.

Thesis delta

The investment thesis is largely unchanged, as the Tremfya data confirms prior assumptions about its role in offsetting Stelara's decline and supports the bull case for oncology and immunology growth. However, it does not shift the core thesis because valuation remains elevated, talc litigation risks are unaddressed, and pricing pressures could dampen earnings upside. No actionable delta is identified without evidence of accelerated adoption or resolution of key overhangs.