Johnson & Johnson Announces Strategic Restructuring of Aesthetic Surgery Business to Sharpen Focus on Pharmaceutical and MedTech Segments

SmartCom Finance APP learned that Johnson & Johnson (JNJ.US), the American medical giant, announced on Tuesday the launch of a two-year restructuring plan for its orthopedics business. The company's new strategic direction is to spin off its consumer health division in August, making it an independent company, while Johnson & Johnson will focus on pharmaceuticals and medical device businesses. The restructuring plan aims to enhance the company’s efficiency and competitiveness.

Johnson & Johnson stated that part of the restructuring plan involves exiting certain markets and ceasing sales of specific orthopedic products.

Without the support of a consumer health division and amid a reorganization of its orthopedics business, Johnson & Johnson's massive pharmaceuticals unit is under significant pressure as the company aims to reach a $57 billion drug sales target by 2025. By that time, the company will face competition from the first generic version of its blockbuster psoriasis treatment, Stelara.

Boosted by strong sales in its pharmaceuticals business, Johnson & Johnson raised its full-year profit forecast, but shares of the U.S. healthcare group still fell about 1%.

Guggenheim Partners analyst Vamil Divan said that the weakness in the medical device sector may have weighed on the stock performance to some extent, and he believed that the most impressive part of Johnson & Johnson's third quarter was its pharmaceutical sales.

After removing the consumer health division, Johnson & Johnson now expects adjusted earnings of $10.07 to $10.13 per share for 2023, up from the previous forecast of $10.00 to $10.10.

Johnson & Johnson Gained $21 Billion from the Spin-off of Its Consumer Health Division in Q3.

The pharmaceuticals business of the company reported quarterly sales of $13.89 billion, with Stelara contributing more than 20%, reaching $2.86 billion, surpassing analyst estimates of $2.61 billion.

Currently, Johnson & Johnson has reached a settlement agreement that will delay the market entry of Stelara biosimilar competitors until 2025, which will help the drug continue to make a significant contribution to total sales.

However, Johnson & Johnson's Chief Financial Officer Joseph Wolk indicated that sales of Stelara in Europe might start to decline by the middle of next year following the expiration of a key patent. "We may see a bit of an impact."

Johnson & Johnson's medical device segment sales were $7.46 billion, below Wall Street's estimated $7.58 billion. The company’s orthopedics business accounted for 29% of its medical device sales in the third quarter.

The company's sales of instruments for abdominal surgeries, such as bariatric procedures, have been affected by slowing demand, as many obese patients have turned to popular new weight-loss drugs like Wegovy and Ozempic from Novo Nordisk (NVO.US).

Wolk believes that obese patients using Novo Nordisk's new weight-loss drugs may in the future require other medical procedures involving Johnson & Johnson products. For instance, they might need plastic surgery, hip and knee replacements, or certain cardiovascular procedures, all of which involve the use of Johnson & Johnson's medical devices.

Wolk stated that Johnson & Johnson has not yet entered the obesity drug market. If there is a "suitable opportunity" to offer a differentiated product, Johnson & Johnson would consider it.

Johnson & Johnson completed the largest restructuring in its 137-year history in August, spinning off its consumer health division while retaining a 9.5% stake in its iconic consumer health business.

After excluding items, Johnson & Johnson's earnings per share were $2.66, 14 cents higher than analysts' expectations.