Johnson & Johnson Ordered to Pay $1 Billion Over Breach of Auris Health Acquisition Agreement

Recently, according to a report by Reuters, a judge in Delaware, USA, ruled thatJohnson & Johnson violatedThe agreement signed at the time of the acquisition of Auris Health requires payment to the shareholders of Auris Health.$1 billion (approximately RMB 7.1 billion) in compensation。

It is reported that in February 2019, Johnson & Johnson spent $3.4 billion to acquire Auris Health, a medical device company with cutting-edge surgical robot technology, and obtained Auris's star product, the Monarch robotic system for diagnosis and treatment through natural body cavities.

At the same time, Johnson & Johnson committed,If the acquired technology reaches specific milestones, it willAdditional payments of up to $2.35 billion to Auris shareholders.

However, after several rounds of disputes and trials, the judge found that,Johnson & Johnson failed to comply with the agreementProvided necessary support and resources to Auris Health's iPlatform surgical robot system, which was under development at the time, but the technology failed to meet the预定的监管和销售里程碑.

Moreover, the judge also ruledJohnson & Johnson by fraudulent meansPreventing Auris from achieving milestones for its Monarch platform. Ultimately, Johnson & Johnson was ruled to have violated the acquisition agreement with Auris Health and must pay over $1 billion (approximately RMB 7.1 billion) in compensation to Auris Health shareholders.

According to court records, Auris's investors include itsFounder Dr. Fred Moll, the largest shareholder Mithril Capital Management and Highland Capital Management. A division of Johnson & Johnson also invested in Auris.

Among them, Dr. Fred Moll is known as"Father of Surgical Robots", founded Intuitive Surgical, creating the renowned surgical robot Da Vinci, and is currently developingiPlatform RobotConsidered to be the next-generation successor to the da Vinci robot。

Following the acquisition by Johnson & Johnson, Auris Health, along with its developed iPlatform robot, was brought under Johnson & Johnson's umbrella, and Dr. Moll was also hired to join the team.

However, the once hefty acquisition did not secure Johnson & Johnson's unwavering favor for Auris Health, whose situation is gradually fading from its past glory.

In this ruling, the judge believed that, after the acquisition, Johnson & JohnsonRefusal to invest resourcesAdvance iPlatform technology and provide training to the Auris teamLayoffs and Resource Reallocation, forcing iPlatform technology to compete with its own subsidiary Verb. This eventually led to the iPlatform robot becoming a parts workshop for Verb.

In response, Johnson & Johnson expressed disagreement with the ruling and is considering an appeal.

At the same time, Johnson & Johnson stated that this ruling has no impact on its current robotics project, and the next step will focus on...Ottava Soft Tissue RobotThe system is investing in R&D and is expected to submit an Investigational Device Exemption (IDE) application to the U.S. Food and Drug Administration (FDA) for the Ottava soft tissue robot in the second half of this year.

Currently, the dispute over the acquisition of surgical robots and technology investment has not yet finalized, but Johnson & Johnson's strategic changes in core surgical robots also indicate a shift in its development direction.Major Adjustment。

In fact, in recent years, Johnson & Johnson has been making frequent moves in the surgical robotics business. On one hand, it acquires and invests in top surgical robotics companies to obtain technology, while on the other hand, it strategically reforms the relevant departments and technologies post-acquisition.

Last year, Johnson & JohnsonLaid off nearly 350 employees related to the surgical robotics businessThis includes the layoffs of 292 employees from Auris Health, which was acquired in 2019; 47 employees from Verb Surgical, also acquired in 2019; and 4 employees from Ethicon Endo-Surgery.

At the same time, after spending $3.4 billion to acquire Orthotaxy, a French developer of robotic systems for endoscopic surgery, research was once suspended.Change Surgical Robot Plan。

Besides, last year Johnson & Johnson also announced that it wouldReorganization。

So, under the consecutive resource shifts and restructuring layoffs in the surgical robotics field, what exactly is Johnson & Johnson's intention?

From Johnson & Johnson's revenue perspective, in nearly two years of financial reports from 2022 to the present, the company's net profit has experienced a significant decline, especially last year.Decreased by 18.6% year-over-year to USD 13.3 billionThe revenue of the two core sectors, internal and external surgery and orthopedics, is in a state of negative growth.

At the same time, Johnson & Johnson has made substantial investments in the surgical robotics field every year, but the returns from its business have failed to break even with the investments.

Despite the tremendous potential of surgical robotics in the medical field, market acceptance and payment feedback for such high-tech products remain uncertain. This was also a major reason why Johnson & Johnson carried out large-scale layoffs in its surgical robotics business last year to cut costs and improve efficiency.

Secondly, in the companyProduct DevelopmentAbove, Johnson & Johnson also onceEncounter Bottleneck, the clinical trial plan for the much-anticipated surgical robot system Ottava was originally expected to register for clinical trials in 2022, but in realityThe application has been postponed to the second half of 2024.. About 2 years later than the original plan.

Looking back at the surgical robot market, the current market competition is fierce. The da Vinci Surgical Robot has established a strong market position, and Johnson & Johnson must not only compete with the industry leader...Intuitive Surgical, Inc.Competition, also have to faceMedtronic, Stryker, Smith & Nephew, Zimmer BiometSurrounded by competitors.

Under the impact of multiple challenges, Johnson & Johnson has successively taken adjustment measures for its surgical robotics business. These includeRepositioning of Surgical Robotics Business, shifting the focus of development from the already saturated hard tissue robotics market to the more promising soft tissue market.

As early as 2019, after acquiring Auris Health, Johnson & Johnson began to lay out its soft tissue surgical robot, with Auris Health's core productMonarch is widely used in soft tissue surgeries such as urology and pulmonary bronchial procedures.After the acquisition by Johnson & Johnson, with this disruptive product, they successfully entered the market.United States, ChinaSoft tissue surgical robot markets in multiple regions.

Subsequently, Johnson & Johnson continued to acquire and invest in various companies to obtain their technologies, enhancing its own surgical robot technology.Complementarity and IntegrationFor example, Auris's Monarch system complements the Orthotaxy technology acquired by Johnson & Johnson in 2018, expanding its influence in the soft tissue surgical robot market.

In the second half of this year, when the highly anticipated Ottava system passes the clinical trial application submitted to the U.S. FDA, it will help Johnson & Johnson further advance the application of the company's soft tissue robotic technology in clinical settings.

According toJoaquin Duato, Chairman of the Board and Chief Executive Officer of Johnson & JohnsonA few months ago, it was stated in public that in the future, Johnson & Johnson will continue to improve its pipeline and capabilities, and shift its investment portfolio to faster-growing markets. It is expected that by 2027,One-third of Johnson & Johnson Medical Technology's sales will come from new products.This includes soft tissue robotic systems.

So, what is the market appeal of the soft tissue robotics track that has been highly favored and heavily invested in by Johnson & Johnson?

Hard Tissue RobotRelatively fixed, mainly used in orthopedics; andSoft Tissue Robotics(Laparoscopic surgical robots) have a wider range of applications and can be used in various surgical procedures across departments, including urology, gynecology, thoracic surgery, and general surgery.

Soft tissue surgical robots account for about 75% of the entire surgical robot market. In 2024, the global surgical robot market size is expected to reach 12 billion yuan, with the soft tissue robot market growing rapidly, maintaining an average annual compound growth rate of over 20%. In contrast, the hard tissue robot market is overly saturated and grows at a slower pace.

Taking the market growth of laparoscopic surgical robots and orthopedic surgical robots as an example:

According to Frost & Sullivan, by 2026, the global market size for endoscopic surgical robots is expected to reach$13.5 billion, the global orthopedic surgical robot market size will reach$4.69 billion.The market sizes of the two differ by nearly three times.

Based on this, in the pursuit of high-growth tracks and innovation frontiers,Soft tissue surgical robots will become an important chip and direction for Johnson & Johnson to maintain its leadership in the future., while also providing significant growth momentum for Johnson & Johnson's future business expansion.

As an important branch in the field of surgical robotics, soft tissue surgical robots possess significant market potential due to their high urgency, strong willingness to pay, and the considerable difficulty in implementation.

Representative companies in this fieldIntuitive Surgical, has been leading the way for years with the high technical barrier soft tissue surgical robot, Da Vinci.

With the growth of the soft tissue market and the increasing global patient demand, currently, several medical device giants worldwide have started to focus on this field, strategically shifting their surgical robot businesses.

In September 2019, Medtronic launched the Hugo Ras modular laparoscopic robotic surgical assistance system. This product is compatible with a combination of many companies' existing products. This design allows doctors to avoid spending energy adapting to new instruments, which is considered by industry insiders to be an important advantage for Medtronic in challenging da Vinci and capturing the soft tissue market.

In terms of corporate strategy, the CEO of Medtronic clearly stated last year,Soft tissue robotics is one of the five key areas for future investment by the company.

As a global leading orthopedic giant, Stryker's current layout in the soft tissue surgical robot field is still in its preliminary stage. However, during Stryker's latest earnings call, Chairman Kevin Lobo stated that they areSeeking to enter the soft tissue surgical robot market through mergers and acquisitions.The company has shown a strong interest in the soft tissue robotics field and believes there is enough space for multiple large enterprises.

In addition to overseas giant companies, China's various innovative medical enterprises have also joined forces with a surge of capital, numerousChinese-Made Soft Tissue Surgical RobotHave been approved one after another.

As the only surgical robotics company in China that simultaneously masters both intraoperative CT-based and intraoperative ultrasound-based dual technical pathways, Weide Precision achieves a surgical accuracy of nearly sub-millimeter level, placing it atThe first tier in the industry.

With top-notch technology, the company recently completed a 100-million-yuan Series A round of financing to accelerate the research and development and market construction of its multi-pipeline percutaneous interventional surgical robots.

Zhen Health is another key player in the field of soft tissue surgical robotics. Its percutaneous puncture surgical robot, "ZhenYiDa® Puncture Surgical Navigation and Positioning System," has been approved for use in the field of soft tissue organ surgery.The First in ChinaRegistration certificate for Class III innovative medical device, and rated as a pioneering product in China.

At the same time, the company's soft tissue surgical robot is planned to file for an IPO between 2024-2025, and is expected to become a leader in the soft tissue surgical robot field.The First Listed Company。

It can be seen that, driven by the huge market prospects, there are more and more participants in the competition, and a new round of contest in the surgical robot track has quietly begun.

However, it is not easy to create another da Vinci. A hot track often means that participants must have their own technical advantages to survive in the fierce competition in the future.

Looking globally, not all medical device companies in the surgical robotics field are winners, withWithdrawal and delisting ended in a bleak outcomeThere are quite a few such companies. Product technology has always been the key factor in determining the success or failure of surgical robots.

Regardless ofJohnson & JohnsonAdjusting the business direction of surgical robots, orMedtronicThe purpose of combining and upgrading existing surgical robot products is to achieve product innovation through technological iteration and enhance their own competitiveness. Companies that cannot keep up with the pace of technological iteration and lack innovation capabilities will inevitably be gradually eliminated from the market.

Even if it already occupies a dominant position in the marketIntuitive Company, the innovation of products has never stopped. Earlier this year, Intuitive launched the latest generation Da Vinci 5,Comprehensive technical upgrade of the previous generation of Da Vinci surgical robots,The addition of several new technologies that meet clinical needs also allows Intuitive to continue to maintain its technological dominance over competitors.

Returning to clinical value has always been the key to the development of surgical robot manufacturers.

For surgical robots, compared to research and development, what is even more brutal isCommercialization IssuesEven if the product has significant clinical value, it still needs to be purchased by hospitals and used by doctors. To achieve commercialization, someone must be willing to pay for it.

Unlike high-value consumables, the sales system and clinical communication of surgical robots naturally represent an entirely new path.

From the current market of surgical robots and the marketing status of mature companies in the industry, enterprises not only need to buildMature Enterprise Ecosystem, reduce the manufacturing and maintenance costs of surgical robots. Also, it is necessary toMarket DevelopmentAbove, accelerate application synergy, link products with hospitals, medical insurance policies, industry associations, and other forces to create core advantages.

For exampleChina-produced Tianji Orthopedic Surgery Robot by TIANYIZHANG, Due to the large investment in the early stage of R&D and the high cost of market promotion, the enterprise is still facingDifficult to Make a ProfitThe Dilemma.

In response, Tianzhihang is collaborating with medical institutions across China to establish "Clinical Application Centers for Orthopedic Surgical Robots" and conducting clinical application research on robotic surgeries in partnership with tertiary hospitals. On one handDrive clinical participation in product optimization design, making the product more aligned with real clinical needs, thereby being accepted by more markets; on the one handAccelerate Market Education, promote robotic surgery to become routine, and achieve product entry and payment in hospitals.

Looking globally, Intuitive Medical is the only surgical robot company that has successfully implemented a mature business model. Despite this, it faces a slowdown in the growth of urological surgeries.The Da Vinci surgical robot is also constantly exploring new procedures and new directions., in order to achieve new profit growth.

As a product that deeply integrates medical and engineering aspects, surgical robots face the main challenge of how to achieve a commercial closed loop while delivering clinical outcomes. This remains true in the promising field of soft tissue robotics.

In contrast, despite Johnson & Johnson's experience in mergers and acquisitions as well as orthopedic robots, it still has a tough battle ahead to capture the market in the soft tissue robotics sector.