Johnson & Johnson Shuts Down San Francisco Bay Innovation Campus After Less Than 18 Months of Operation

Feb 27, 2024 00:02 CST Updated 00:02

Johnson & Johnson

Healthcare Product Manufacturers, Health Service Providers

Source: Siyu MedTech

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Recently, Johnson & Johnson announced the closure of a nearly 200,000-square-foot R&D facility located in Brisbane, California.San Francisco BayGardenDistrict（SFBC）。

Since its official opening in September 2022, the base has been operational for less than 18 months., it faced the fate of closure. This news sparked widespread discussions about Johnson & Johnson's strategic adjustments and business restructuring.

# This base was once highly valued.

The R&D base was originally planned to accommodate up to 400 employees, more than twice the size of Johnson & Johnson's existing R&D operations in the Bay Area.Since 2014, Johnson & Johnson's innovation center in California has been dedicated to promoting investment and collaboration with academic and industry partners to accelerate early-stage healthcare innovations (with a primary focus on emerging gene and RNA therapies, as well as research in retinal diseases and infectious diseases).

It is reported that Johnson & Johnson is gradually reducing the priority of its pharmaceuticals division within the group, particularly affected isInfectious Diseases and Vaccines Business: The company has significantly increased the reduction in R&D for the aforementioned projects.

The former head of the infectious disease sector, Dr. James Merson, isSan Francisco Bay Campus (SFBC)The original on-site leader, but he left the company after the department merged with the vaccine team in the first half of 2023.

However, the closure of this important R&D base today is undoubtedly a major blow to Johnson & Johnson's innovation strategy.

A Johnson & Johnson spokesperson confirmed the news and stated that the company’s pharmaceutical and medical technology divisions will continue to play a significant role in California. The spokesperson said,Johnson & Johnson to Establish New California Innovation Center to Continue Driving Innovation and R&D Efforts. However, this decision has raised concerns about whether Johnson & Johnson can maintain its leading position in the new innovation center.

According to informed sources, the decision to close the San Francisco Bay Campus (SFBC) was communicated to the staff on Thursday. Many employees have invested a great deal of effort and time into this base, hoping to play a significant role in Johnson & Johnson's innovation strategy. However, they are now facing the risk of unemployment.

It is worth mentioning that the facility was highly anticipated at its opening. Johnson & Johnson CEO Joaquin Duato stated in a press release at the time that the campus represented a commitment to investing in cutting-edge technology and new research.He emphasized the important role of this campus in addressing the greatest health challenges facing society and expressed that Johnson & Johnson will expand its R&D capabilities and market influence.. However, all of this now seems to have become an illusion.

Johnson & Johnson stated in its announcement,The closure of this site is to better adjust and optimize its R&D operations in California.However, this decision has also raised some doubts and concerns. Some analyses suggest that Johnson & Johnson may be reevaluating its R&D strategy and priorities to adapt to the ever-changing market environment and industry trends. Meanwhile, others believe that Johnson & Johnson may be facing financial and performance pressures, prompting it to take this measure in order to cut costs and improve efficiency.

# Splitting Consumer Health Business

Not long before the R&D base was closed,Johnson & Johnson MedTechInAugust-September 2023A series of brand重塑 and business分拆 were carried out.This includes spinning off the consumer health business into an independent company named Kenvue, and renaming Janssen Pharmaceuticals to Johnson & Johnson Innovative Medicine.。

These changes further indicate Johnson & Johnson's efforts to adjust its business structure and strategic direction. However, these changes also bring some challenges and risks. For example, spinning off the consumer health business may lead to confusion in brand image and ambiguity in market positioning; renaming Janssen Pharmaceuticals as Johnson & Johnson Innovative Medicine might raise concerns and unease among employees and partners.

Janssen was originally a Belgian company, founded in 1953 by local chemist Paul Janssen. In October 1961, Janssen Pharmaceuticals was acquired by the American company Johnson & Johnson, but retained its name and logo for several decades until recently. To align with the parent company Johnson & Johnson's business integration, while undergoing the name change, Xi'an Janssen will also be integrated as the pharmaceutical division under Johnson & Johnson alongside Johnson & Johnson MedTech.

According to recent annual reports, among Johnson & Johnson's three major global businesses, the proportion of its consumer health business has been decreasing year by year, accounting for approximately 15.75% (US$14.95 billion) of sales in 2022; in the same year, medical device revenue accounted for 28.9% (US$27.4 billion), and pharmaceutical business revenue accounted for 55% (US$52.56 billion). The pharmaceutical and medical device businesses have become the pillars of Johnson & Johnson's performance growth.

This series of changes all mean that,Johnson & Johnson to Further Focus on Medical Devices and Pharmaceuticals Business Globally。

Reportedly, a company spokesperson contacted by foreign media on Sunday confirmed that the company plans to withdraw from the base but stated that the company will establish a new early-stage California Innovation Center at a secret location in the Bay Area and "will maintain an active presence at an undisclosed location in the Bay Area." The spokesperson did not disclose how many people would become unemployed after the project's closure, where in the Bay Area the California Innovation Center would be located, or the net number of jobs that would be lost or added due to the relocation.

Si Yu believes that for Johnson & Johnson, how to maintain its leading position and promote the development of R&D work in the new innovation center will be an important challenge it faces.At the same time, Johnson & Johnson also needs to carefully consider how to balance business adjustments with employee benefits to ensure its strategic transformation proceeds smoothly and successfully.

# $604.5 Billion! Johnson & Johnson's Latest Annual Report

On January 23, 2024, Johnson & Johnson (NYSE: JNJ) announcedFinished2023Full-year performance for the fiscal year, Company 2023 Fiscal YearSales amount to$85.2 billion (approximately 604.5 billion RMB), a year-on-year increase of 6.5%.

The main driver of annual sales growthFrom SubsidiaryAbiomed，Electrophysiology Business、Wound Closure、Contact Lenses、Biosurgery、Trauma、Knee Business、Ophthalmic Surgery、Buttock Business.

Sales amount to$85.2 billion (approximately 604.5 billion RMB), a year-on-year increase of 6.5%；
Sales in the U.S. region were $46.4 billion, an increase of 10.6% year-over-year, while sales in the international region were $38.7 billion, up 1.9% year-over-year.
Sales in the innovative pharmaceuticals sector reached $54.76 billion, representing a year-on-year increase of 4.2%.Sales of the medical technology department were$30.4 billion (approximately 215.7 billion RMB), a year-on-year increase of 10.8%；
Net profit was US$13.3 billion, a year-on-year decrease of 18.6%.
Operating growth increased by 7.4% year-over-year, adjusted operating growth increased by 5.9% year-over-year, and operating growth excluding the COVID-19 vaccine increased by 9.0% year-over-year.
The company has revised its financial guidance for the fiscal year 2024: operating sales growth of 5.0%-6.0%;

Medical Technology Department:

Medical Technology DepartmentSales reached $30.4 billion, a year-on-year increase of 10.8%.。

By region, sales in the U.S. were $15.28 billion, increasing 14.2% year-over-year, while sales in international regions were $15.13 billion, growing 7.7% year-over-year.

By department,Surgical ServicesSales reached $10.37 billion, a year-on-year increase of 3.6%;Orthopedic ServicesSales reached $8.942 billion, representing a year-on-year increase of 4.1%;Intervention PlanSales reached $6.35 billion, representing a year-on-year increase of 47.70%.Vision BusinessSales reached $5.072 billion, a year-on-year increase of 4.6%.

Global operational sales increased by 12.4%, of whichThe acquisition of Abiomed contributed 4.7%.After the department adjustment, the sales revenue increased by 7.8%, mainly driven by the following businesses: Interventional Solutions.Electrophysiology Products, Visual BusinessContact Lenses, General Surgery FieldWound Closure Productsand advanced surgical fieldsBiological Surgical Products。

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Editor-in-Chief | Zhao Qing Reviewed by | Yi He