Abbott, J&J post rebounds in surgical sales, while COVID testing remains a cash cow for now

Medical device companies continue to see their surgical sales recover to pre-COVID levels, and they're now delivering the first quarterly results that compare earnings to the earliest stages of the pandemic.

At the same time, coronavirus testing continues to drive billions in quarterly sales, turning a segment that once propped up companies during 2020’s hospital lockdowns into 2021’s icing on a still-grim cake. However, analysts and manufacturers alike expect that demand to wane this year as vaccination rates rise and infection rates (hopefully) begin to fall.

Johnson & Johnson’s medical device companies grew international revenues by 8.8% in the first quarter compared to the same period of 2020, reaching $6.58 billion outside of its past acquisitions and selloffs.

This includes a 26.4% boost in its interventional solutions division, excluding currency effects, to a total of $949 million. Increasing procedure volumes and new products in the atrial fibrillation market drove most of that growth.

Meanwhile, the companies’ surgical offerings—including powered cutting tools and biological blood stopping products—grew by nearly 10% to $2.3 billion, primarily powered by expansions in China, which saw the earliest lockdowns last year.

Its orthopedics business is taking longer to recover. While posting $2.1 billion in revenues and 1.2% growth, Johnson & Johnson cited declines in spine and knee sales, driven by COVID-19 and changes in distribution channels, with partial offsets coming from new products.

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At Abbott, global COVID-19 testing sales topped $2.2 billion, with a lion’s share of $1.8 billion claimed by its rapid diagnostic platforms such as the portable ID NOW hardware and its card-sized Panbio and BinaxNOW antigen tests, the latter of which just hit retail store shelves and can now be purchased over-the-counter as a two-pack for $24.

Analysts at Jefferies earlier this month said data from the Centers for Disease Control and Prevention and other industry leaders point toward “a precipitous decline” in the broader COVID-19 testing market, with quarterly drops of 20% to 30% until levels resemble seasonal flu sales, with future averages of about $150 million to $250 million annually.

But if testing demand is decreasing already, Abbott’s revenues have only ebbed a little so far: The company reaped $2.4 billion in diagnostic sales over the fourth quarter of 2020, while delivering more than 300 million tests. It’s previously projected $6.5 billion to $7 billion in COVID-19 test sales by the end of this year, up from the nearly $4 billion it made in 2020.

Compared to the same period last year, Abbott’s 2021 testing sales were up 114.8%. And if COVID-19 diagnostics are excluded entirely, the company’s core laboratory and molecular diagnostics portfolios grew by 10.7% and 31.5%, respectively, as more people returned to the clinic for routine health screenings.

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Abbott’s medical device divisions saw 8.8% growth as well, with gains in structural heart procedures, rhythm management, electrophysiology and neuromodulation overtaking declines in heart failure and vascular treatments.

The company’s diabetes offerings, meanwhile, grew by 35.7% in the U.S. and 19.5% internationally, with its FreeStyle Libre and Libre Sense glucose monitoring systems bringing in $829 million alone and topping 3 million users.