Johnson & Johnson Unveils Strategic MedTech Restructuring and Strong 2023 Performance

Jan 24, 2024 20:46 CST Updated 20:46

Johnson & Johnson

Medical Device R&D and Manufacturer

Image | Paixin Creative

Source | CPhI China

Writing| Dongtai

Johnson & Johnson Releases First "Report Card" After Brand Revitalization.

All Four Segments of Equipment Showed Full-line Growth

Electrophysiology business performs well, orthopedics exits some markets

On January 23, Johnson & Johnson announced its 2023 financial report.2023Johnson & Johnson's Sales in China for the Whole Year852USD billion, a year-on-year increase of6.5%。

Johnson & Johnson Medical Technologies' annual sales reached $30.4 billion, representing a year-on-year increase of 10.8%.Sales growth was mainly driven by electrophysiology products in the interventional solutions field, contact lenses in the vision field, wound closure products in the general surgery field, and biosurgery products in the advanced surgery field.

Among them,Johnson & Johnson Medical Technologies' Q4 2023 sales reached $7.673 billion, a year-on-year increase of 13.3%.

By business line,In 2023, Johnson & Johnson's interventional solutions sales reached $6.35 billion, increasing by 47.7% year-over-year; orthopedics sales amounted to $8.942 billion, growing by 4.1%; surgical sales reached $10.037 billion, increasing by 3.6%; and vision sales totaled $5.072 billion, rising by 4.6%.

In the fastest-growing interventional solutions sector,Electrophysiology business achieved remarkable performance, becoming the most significantly growing segment among Johnson & Johnson Medical Technology's various businesses this year.Total annual sales reached 4.688 billion US dollars, a year-on-year increase of 19.1%.In addition, Johnson & Johnson acquired Abiomed, a giant in artificial heart technology, in December 2022, contributing $1.306 billion in sales from this segment.

In the orthopedics sector, the knee joint segment saw the most growth, with annual sales reaching $1.456 billion, a year-on-year increase of 7.1%; the largest segment by volume, trauma, achieved sales of $2.979 billion, a year-on-year increase of 3.8%.

For the orthopedics restructuring plan, Johnson & Johnson disclosed that the company launched the MedTech department's orthopedics restructuring plan in the 2023 fiscal year.Simplify operations by exiting certain markets, product lines, and distribution network arrangements.ThisRestructuring charges for the quarter were $84 million (to date in Q4: $319 million)., mainly including inventory and tool reserves related to market and product discontinuation.

Performance of Surgical and Ophthalmology Departments is shown in the table below:

Johnson & Johnson's latest disclosure shows that the centralized procurement has an impact onThe performance growth of products such as electrophysiology, orthopedic spine and trauma, and some surgical products has been somewhat affected.

In the 2024 outlook, Johnson & Johnson noted that it expects relatively stable operational sales growth for Johnson & Johnson MedTech throughout 2024, with procedure volumes above pre-pandemic levels.At the same time, attention should be paid to the pricing of artificial crystals and sports medicine in the 2024 centralized procurement.

Setting Off Again After Adjustment: Senior Management Changes, Acquisitions, Production Line Adjustments…

In the past few months, Johnson & Johnson has advanced multiple adjustments in its medical device sector.

In terms of personnel, in October last year, Johnson & Johnson announced the resignation of Ashley McEvoy, Global Executive Vice President of Johnson & Johnson and Global Chair of Johnson & Johnson Medical Technologies.Tim Schmid Appointed as New Global Executive Vice President of Johnson & Johnson, Global Chair of Johnson & Johnson MedTech, and Joins the Company’s Executive Committee.

The acquisition of Laminar, Inc., a medical device company, was completed in the last quarter.Johnson & Johnson Medical Technologies acquired Laminar for a $400 million upfront payment, with potential additional clinical and regulatory milestone payments in 2024 and beyond, subject to customary adjustments.This acquisition will further complement Johnson & Johnson's strengths in electrophysiology and intracardiac ultrasound, bringing new opportunities in the left atrial appendage device field.

It is not difficult to see that Johnson & Johnson has paid considerable attention to its interventional business segment. At the end of 2022, Johnson & Johnson completed the acquisition of Abiomed, a cardiovascular medical technology company. As one of the largest acquisitions in Johnson & Johnson's history, this deal amounted to $16.6 billion, providing a strong complement to Johnson & Johnson’s existing device business layout in heart failure and cardiac recovery.

Johnson & Johnson Chairman and CEO Joaquin Duato recently revealed that Abiomed is making improvements to the existing Impella pump,Clinical research has been completed, and the plan is to submit Impella ECP in 2024.

In the field of orthopedics, a historic restructuring is underway.

According to reports,Johnson & Johnson's orthopedics business restructuring is expected to be completed by the end of 2025, at a cost of $700 million to $800 million.A relevant Johnson & Johnson executive previously stated that the two-year restructuring plan will lead to the company’s orthopedics division exiting "lower-margin markets and product lines." Considering the withdrawal from certain markets and product lines, DePuy Synthes’ total revenue is expected to decrease by approximately $250 million over the next two years. However, these actions will enhance Johnson & Johnson's ability to meet demand, accelerate growth, and improve profitability.

In addition, in December last year,Medical device supplier Integra LifeSciences announces $275 million upfront payment to acquire Acclarent, a subsidiary of Johnson & Johnson Medical Technologies, and pay an additional $5 million upon the achievement of future regulatory milestones. Acclarent was previously part of Johnson & Johnson's Ethicon division, with a product portfolio that includes balloon technology for sinus dilation and pediatric ear, nose, and throat procedures, as well as surgical navigation systems.

What Are the Considerations Behind Johnson & Johnson's Medical Device Business Adjustments? Where Is the Future Headed?

Joaquin Duato Shared the Future Drivers of Johnson & Johnson MedTech at the Recent J.P. Morgan Healthcare Conference.

First, continue to improve pipelines and capabilities, shift the portfolio to faster-growing markets, and keep delivering the pipeline.By 2027, one-third of Johnson & Johnson Medical Technologies' sales are expected to come from new products.Second, on a global scale, 50% of Johnson & Johnson's medical technology business sales come from regions outside the United States. Third, operational resilience is gained within the supply chain to improve profit margins and focus on areas with more room for improvement; the orthopedics restructuring plan is based on this consideration.

Overall, innovation-driven growth, global market expansion, and development in high-end fields will be the key drivers for the future development of Johnson & Johnson Medical Technology.

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Author: Dong Tai

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Editor: Qin Jiu

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