Joseph J. Wolk
Executive Vice President, Chief Financial Officer at Johnson & Johnson
Thank you Jessica and thanks everyone for joining us today. As you've heard already, we delivered solid overall fourth quarter and full year results in 2024 above the operational guidance we set at the beginning of the year when excluding acquisition costs we incurred to fortify our business for the future. We are particularly pleased with advancements made throughout the year, strengthening our pipeline, achieving key milestones across core therapeutic areas and platforms.
We continue to prioritize investment in innovation, forge strategic partnerships that further enhance our differentiated business and focus on improving margins, positioning the company for near and long term growth. Additionally, we've made progress toward resolving the TALC litigation. As many of you are aware, our prepackaged bankruptcy plan received overwhelming support from current claimants and the Futures Claims Representative, and that support has only increased in recent months. The next milestone is the scheduled confirmation hearing commencing on February 18th in the southern District of Texas Bankruptcy Court.
Now let's get into the numbers, starting with cash and capital allocation. We ended 2024 with approximately $25 billion of cash and marketable securities and approximately $37 billion of debt for a net debt position of approximately $12 billion. Our focus on cash flow resulted in the company delivering approximately $20 billion of free cash flow during 2024, $1.6 billion more than in 2023. Despite having higher litigation settlement payments during 2024, higher TCJA toll tax, and eight months of contribution from Consumer Health in 2023. Our ability to strategically invest and deploy capital that unlocks value has made Johnson and Johnson successful in the past and will be as important for our success moving forward.
We value a strong credit rating, which underscores the strength of Johnson and Johnson's financial discipline and enables us to execute against our capital allocation priorities. In research and development, we invested more than $17 billion, or 19.4% of sales. We remain one of the top investors in R and D across all industries.
2024 marked the 62nd consecutive year of dividend increases. We know this use of capital is a priority for our investors and we plan to continue to increase our dividend annually. We also deployed, announced or committed to over $32 billion in strategic value creating inorganic growth opportunities in the last 12 months. This amount includes larger transactions such as shockwave proteologics, the NM26 bispecific antibody V wave, the planned acquisition of intracellular therapies, as well as more than 40 smaller early stage collaborations and partnerships to complement our businesses that are much more common for us than larger transactions. As we look ahead to 2025, we will maintain a heightened focus on cash flow generation to build on our strong financial foundation and judiciously deploy capital on behalf of shareholders to create value.
Let's now discuss our full year guidance for 2025. It is important to note that guidance at this time excludes the impact from the planned acquisition of intracellular therapies, but I will provide some comments on that transaction in a few moments. We anticipate operational sales in the range of 2.5% to 3.5% with a midpoint of $91.3 billion or 3.0%, in line with the expectation outlined at our late 2023 Enterprise Business Review. As Joaquin noted, acquisitions and divestitures are expected to favorably impact operational growth by approximately 50 basis points, resulting in an adjusted operational sales growth midpoint of 2.5%.
Sales growth across our innovative medicine businesses will be driven by our proven assets such as Darzalex, Erleada and Spravato, our recently launched products Carvycti, Tegveli and Talvay, and our new launches of Tremphya in IBD and Ribiramp plus Las Clues in lung cancer. The strength of our portfolio enables innovative medicine to grow despite expanded Stelara biosimilar competition and approximately $2 billion negative impact from Part D redesign.
Medtech sales growth will be driven by our recent acquisitions Shockwave and Abiomed, as well as continued uptake of our recently launched products such as Varipulse, Technos, Odyssey, acuvue, Oasis, Max, the Velis portfolio of enabling technology, and our Barb Suture and Hemostat portfolio. We continue to expect China to remain a headwind through 2025. Regarding Veripulse in the US we are working diligently to complete our investigation and will provide an update when we have additional information to share. As a reminder, there's no impact to commercial activity to veripulse outside of the United States.
As you know, we don't speculate on future currency movements. For today's call, we are utilizing yesterday's Euro spot rate relative to the US dollar of 1.04, significantly below last quarter's euro spot rate of 1.10. This results in an estimated unfavorable foreign currency impact on sales of $1.7 billion or 2.0%. As such, we estimate reported 2025 sales of $89.6 billion or 1% growth at the midpoint.
Turning to other items on the P and L Despite stelara biosimilar competition and the impact of Part D redesign, we expect our 2025 adjusted pre tax operating margins to increase by approximately 300 basis points, of which approximately half is driven by operating spend management and the remainder from reduced acquired IPRD expense. This is about 50 basis points better than we discussed on the Q3 earnings call in October. We anticipate net other income to be $900 million to $1.1 billion for 2025. The reduction versus last year is primarily driven by a lower benefit related to employee benefit programs based on discount rate assumptions, the non recurring monetization of royalty rights in 2024, and no longer receiving a can view dividend. Due to higher debt incurred associated with 2024 acquisitions and the reduction in interest rates earned on cash, we expect net interest income between 0 and $100 million.
Finally, we are projecting an effective tax rate for 2025 in the range of 16.5% to 17.0% based on current tax laws and our anticipated geographic income mix across our businesses. Given all these factors, we expect adjusted operational earnings per share to grow 8.7% at the midpoint for a range of $10.75 to $10.95. While not predicting the impact of currency movements utilizing the recent exchange rate previously referenced, our reported adjusted earnings per share for the year now estimates a full year impact of $0.25. As such, we expect reported adjusted earnings per share of $10.60 at the midpoint. When adjusting for this impact, it becomes clear that our operational EPS performance is considerably stronger than consensus assumed as only about half the analysts incorporated the impact of foreign currency into their models. A few initial considerations outlined on this chart regarding the planned acquisition of intracellular therapies, a transaction we plan to finance mainly with debt.
We are not planning for material near term cost synergies. Rather, we expect to accelerate penetration of Caplida in existing markets, explore additional geographies to commercialize the portfolio and potentially accelerate research and development to expand into new indications and disease areas where high unmet need exists. Given this, and assuming a close subject to regulatory review early in the second quarter, we anticipate an acceleration of our sales growth of approximately 80 basis points. Inclusive of the impact of financing costs, the transaction is expected to have a dilutive impact on adjusted eps of approximately $0.30 to $0.35 in 2025. Again, these are very preliminary thoughts which will be influenced by when the transaction closes and borrowing rates. We will be sure to provide an update to our full year guidance shortly after the acquisition is complete.
I'll now provide some qualitative considerations on the phasing of notable events for your modeling. We expect both Innovative Medicine and Medtech operational sales growth to be higher in the second half of the year versus the first half. Regarding Innovative medicine, we anticipate stelaro biosimilar competition to accelerate throughout the year as the number of biosimilar entrants increase. Humira's erosion curve, once faced with material biosimilar competition, continues to be the best proxy for stelara erosion with the additive impact of Part D redesign. The impact of Part D redesign as a percent to sales will be consistently applied throughout the year. We expect a more pronounced benefit from our newly launched products as we progress throughout 2025. To counter these headwinds.
In MedTech for the first half of the year and more prominently in Q1, we faced tougher year over year comparisons. Excluding the positive impact associated with the shockwave acquisition. We anticipate acceleration of our newly launched products to build throughout the year. As we've said before, we continue to expect normalized procedure volume and seasonality. Regarding the P and L, it is important to consider one time items that impacted our EPS results in 2024. Specifically, the benefit of Kenview dividend in the first two quarters of 2024 is not repeating higher interest income prior to the Shockwave acquisition closure in May, the monetization of royalty rights recorded in Q3 and IPR and D expense associated with the NM26 bispecific antibody in Q3 and V wave acquisition in Q4. Given these factors and aligned with sales, we expect higher earnings per share growth in the second half of the year versus the first half.
Moving the discussion beyond financial commitments, we are excited for the pipeline progress planned for 2025 in Innovative Medicine. This includes expected approvals for Tremphya subcutaneous for Crohn's disease, nipocalumab for generalized myasthenia gravis and subcutaneous ribavant for non small cell lung cancer. We expect to file for regulatory approval of TAR 200 in non muscle invasive bladder cancer and Ichotrachondra in psoriasis, and planned data readouts for ribrovant lung cancer overall survival as well as data in head and neck and colorectal cancer and Icotrachondra in ulcerative colitis as well as head to head data versus Cetic2 in psoriasis.
In MedTech. Building upon the 15 major product launches in 2024, we anticipate a submission to the FDA for Impella ECP regulatory approval, continue progress on our OTAVA robotic surgical system, and advancements across our cardiovascular portfolio including electrophysiology, heart recovery and circulatory restoration.
So, to summarize, we are well positioned to tackle the challenges in 2025, continue to advance our pipeline, deliver on our financial commitments, and create long term sustainable value for shareholders. Our success is the result of the hard work and dedication of our colleagues who share a sincere passion to successfully serve patients around the world. We are extremely grateful for their efforts. With that, we are happy to take your questions. So I will now turn it to Kevin to provide instructions for those seeking to participate in the Q and A.
