Johnson & Johnson scores $260M+ DOD orthopedics contract

J&J's hip and knee units grew year over year, but trauma stayed flat and spine was down.

The Department of Defense awarded Johnson & Johnson a contract worth up to $260.5 million to supply it with orthopedic products.

The deal will see J&J providing orthopedic products to the Army, Navy, Air Force, Marine Corps and the DOD’s federal civilian agencies, according to a statement. The one-year agreement could be extended one year at a time for another four years, the DOD said.

In the first quarter, J&J reported (PDF) $6.3 billion in medical device sales for the first quarter, with its Orthopaedics group and Surgery units leading the pack. The Orthopaedics business, which includes hips, knees, trauma and spine, reeled in $2.33 billion in sales, slightly down from the $2.34 billion reported the previous year.


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The company reported 2.3% growth in its knee business, largely due to uptake of its Attune Knee System in China, the Middle East and Africa. Its hip unit posted 2.9% growth, thanks to a product launch in China and continued uptake of its CORAIL hip system in the U.S. Meanwhile, its trauma segment remained flat with $642 million, mirroring its sales a year prior, and with $933 million in sales, its spine group was down 3.6% from the $968 million it reported in Q1 2016.

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Outside of orthopedics, J&J revealed it was pondering what to do with its diabetes device businesses, with joint ventures, operating partnerships and/or divestitures on the table. These businesses are the insulin pump maker Animas, Lifescan, which makes blood glucose monitors, and Calibra, which makes a mealtime insulin patch.

At the time, Chief Financial Officer Dominic Caruso said pricing pressure led to the new considerations. “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,” he said.

But J&J hasn’t made a move yet and is still mulling its options, Caruso said on the 2017 first-quarter earnings call.

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