J&J mulls selling off its diabetes device businesses

J&J
J&J is considering "strategic options" for its diabetes device businesses because pricing in the diabetes arena has been "challenging."

Johnson & Johnson is pondering what to do next with its diabetes device subsidiaries Animas, LifeScan and Calibra Medical. And while the formation of joint ventures, operating partnerships and divestitures are on the table, CEO Alex Gorsky cautioned that it doesn’t mean the conglomerate is committing to any transaction.

Animas markets insulin pumps, including one with a remote that wirelessly communicates with the pump to deliver insulin, while LifeScan manufactures blood glucose monitors for both hospital and consumer use. J&J acquired Calibra Medical in 2012 and announced last June that it would roll out the mealtime insulin patch it picked up in the deal.

On the fourth-quarter earnings call on Tuesday, Gorsky and Chief Financial Officer Dominic Caruso both said pricing pressure prompted the new considerations.

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“The diabetes pricing over the last several years has been challenging and although I think our team has done a nice job of adjusting the cost structure, the level of profitability that business has declined,” Caruso said on the call.

J&J’s diabetes devices posted $462 million in sales for the fourth quarter of 2016, down 3.8% from $480 million the year prior. As for full-year sales, diabetes devices reeled in $1.8 billion, down 7.2% from $1.9 billion the previous year. The medical devices division as a whole reported flat sales at $6.4 billion for the quarter and $25.1 billion for the year.

Whatever the fate of Animas, LifeScan and Calibra, Gorsky promised that J&J remains “very committed” in the diabetes sphere. The company’s Janssen subsidiary markets Invokana and the combo drug Invokamet, while its Ethicon unit makes surgical tools, including ones used in bariatric surgery.