Johnson & Johnson (JNJ) is looking at ways to continue what it sees as a strong opportunity in the medical devices business — historically a slow growth area for the company.
For the past decade, medical devices have been an area of stagnation for the company. It lags pharmaceuticals quarter over quarter.
On Tuesday, the company reported earnings of more than $21 billion, of which medtech — surgical equipment and monitoring devices — accounted for $7.8 billion.
Earlier this month, J&J announced an investment of more than $13 billion to acquire heart device maker Shockwave this year, and in 2022, it acquired Abiomed, which operates as a standalone company in J&J’s medtech segment, for more than $16 billion.
The company’s CFO, Joe Wolk, joined Yahoo Finance to talk about the company’s results and growth areas. “If you look at where our opportunity lies, I think you’d have to say [it’s] in medtech. It was an area that was somewhat unreliable or unpredictable many years ago, and certainly, it was slower growth. In 2017 our growth was 1.5%, last year we enjoyed 7.8% growth,” he said.
Medtech used to be a stronger portfolio for the company and led the company’s performance for years — up until around 2010, when the focus became more about the pharmaceutical business, according to Wolk.
Currently, J&J’s performance is mostly driven by pharmaceutical drugs, which accounted for $13.6 billion of the $21.4 billion reported in the first quarter. The company spent about $3 billion on 50 smaller deals in the space last year. Its blockbuster drugs include Stelara, which brought in $2.4 billion, and is slated to face biosimilar competition next year.
“We are trying to balance that out. But not out of a mathematical need … just because that’s where we think the opportunity lies. If you look at where we’ve beefed up lately, it’s been cardiovascular disease, the No. 1 killer, even more than cancer,” he said.
With the acquisitions of Abiomed and Shockwave, the company is investing in businesses that are already profit drivers, Wolk noted.
The attention on the medtech sector is growing after J&J spun off its consumer health segment last year, which now operates independently as Kenvue (KVUE), and looks to rebuild its pipeline and boost revenues for the future.
GLP-1 impact
J&J indicated last October that it was seeing slower demand for its bariatric surgery equipment, including staples, due to the buzz around GLP-1s — the diabetes and weight-loss drugs that have become popular for their record-breaking weight-loss success.
That trend continued in the first quarter of the year, Wolk said.
“Bariatric surgery is a little bit soft this quarter because some people are waiting and seeing if the GLP-1s are working for them. But we see longer-term that GLP-1s could actually improve the medtech space,” Wolk said.
For example, individuals who have not been candidates for bariatric surgery or knee or hip surgery could qualify after seeing weight-loss benefits from GLP-1s. The two largest players in the GLP-1 space, Novo Nordisk (NVO) and Eli Lilly (LLY), are struggling to meet demand and have a number of competitors racing to catch up — which will further increase demand and use of these drugs.
“I think we need a little bit more time to see how this plays out. I think it can be very complimentary,” Wolk said.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
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