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| Johnson & Johnson CEO Alex Gorsky |
While Johnson & Johnson ($JNJ) touts another strong quarter of device and diagnostics sales, subtracting the effects of its blockbuster deal for Synthes, the company charted almost no med tech improvement over the past year.
Counting Synthes and its huge share of the orthopedics market, J&J's device and diagnostics segment grew 9.6% on the quarter, pulling in $7.2 billion. Without Synthes, however, the business grew just 0.5%, reflecting losses in diagnostics, middling sales in surgical technology and a deep slump in diabetes.
Orthopedics, fueled by the still-in-process Synthes integration, grew 46.5% over the same period last year, grossing $2.4 billion thanks to growth in hips, knees and trauma. And cardiovascular care, J&J's most successful med tech unit, grew 5% to $529 million, growth CEO Alex Gorsky credited to well-executed catheter launches from its Biosense Webster business.
And then there are the other segments. Diagnostics slipped 6% to $483 million in the second quarter, and diabetes devices tanked 12.5% total and 23.1% in the U.S. alone, pitching in $589 million. Surgical care slid 3.2% to $1.6 billion, while vision care stayed exactly flat at $730 million.
On a conference call with investors, Gorsky said J&J's med tech business is facing economic and pricing pressures around the globe. But the company is transforming how it approaches the market, Gorsky said, making sure to study and demonstrate the economic value its pipeline devices provide before launching them, adapting to a changing healthcare climate.
All the while, J&J is in the midst of deciding whether to sell off its diagnostics business, which pulled in about $2.2 billion in revenue last year, but Gorsky said the company is still in the early stages of that process and declined to speculate on the future.
Devices and diagnostics again made up J&J's largest segment last quarter, contributing 40% of total revenue while pharma kicked in 39% and consumer products accounted for the rest. While top-line revenue growth of nearly 10% looks fine at first glance, it won't be long before each quarter is compared to a Synthes-inclusive one from the past, and investors may not be so tolerant if J&J keeps posting flat sales in its biggest business.
But Gorsky said J&J is yet to reap the full benefits of its $21.3 billion Synthes deal, and the company expects its acquisition to drive device growth over the next few years.
"While we still have work to do in certain areas of the integration, we have built a compelling growth combination that has solidified our leadership in the $40 billion orthopedic marketplace," Gorsky said.
- read J&J's statement
- check out the full results (PDF)