Johnson & Johnson ($JNJ) provided a first glimpse of what its devices and diagnostics business will look like after the divestiture of the Ortho Clinical Diagnostics business. The conglomerate gained about $1.1 billion from its sale, which closed on June 30. Excluding the operational impact, the Ortho-Clinical deal boosted sales growth figures for the device and diagnostics unit, as well as the company overall.
During the third quarter, global medical device and diagnostics sales were $6.6 billion, accounting for about 36% of the $18.5 billion of total sales for the company. That was a decline of 5.2% from the same quarter a year earlier. But once the operational impact of the Ortho Clinical sale was taken into account, its worldwide medical device and diagnostics sales grew by 1.6%.
The company attributed most of the operational growth to its orthopedic products and 18% growth in sales of Biosense Webster's electrophysiology products in the cardiovascular business. It said its vision business was hurt by competitive pricing.
J&J Finance VP and CFO Dominic Caruso outlined its plans for medical devices and diagnostics, emphasizing surgery as a primary interest. "We're looking at areas where we think there will be strong market growth either because of demographics or because of innovation. Or because of our own ability to compete in the market bringing in new technologies with our current presence," he said on the quarterly conference call. "As you know, we made a determination some time ago we would focus on surgery, general surgery and specialty surgery and orthopedics and have less of a focus on cardiovascular."
Caruso continued, "Within the overall approach to medical devices, we believe surgery is the place to be. We are obviously very happy with our market position there. We made a big bet in orthopedics and were continuing to see the benefits of that combination with Synthes. We believe there are specific areas of focus within cardiology that are important, for example, electrophysiology where we are leader."
Orthopedics and surgical care were J&J's largest segments with the devices and diagnostics group; they accounted for $2.3 billion and $1.5 billion in sales, respectively, during the third quarter. Orthopedics grew by 2.7%, while surgical care lost 0.8% as compared to the same quarter a year prior. The fastest growing was cardiovascular, led by Biosense Webster, which reported growth of 8.2% on sales of $542 million.
Last quarter, J&J garnered European and Canadian approvals for and launched its Incraft AAA Stent Graft System. It also gained FDA approval for four additional versions of its Mentor MemoryShape Breast Implants. In addition, it had a global launch for ultrasonic surgical device Harmonic Focus with Shears and Adaptive Tissue Technology.
The company has said its ongoing $5 billion share repurchase plan is designed to help offset the earning impact of the Ortho Clinical divestiture. J&J raised its 2014 earnings guidance to a range of $5.92 to $5.97 per share. It cited the sales of recently launched hepatitis C drug Olysio as a major driver in sales growth.
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