Johnson & Johnson

Johnson & Johnson ($JNJ)
CEO: Alex Gorsky
Based: New Brunswick, NJ
2015 sales: $25.1 billion
2014 sales: $27.5 billion
Change: -8%

Johnson & Johnson has been under pressure from investors issuing calls to free the company's high-performing Therapeutics business from its laggards, Consumer and Medical Devices.

The conglomerate took a first step toward sorting out its low-performing businesses early in 2016 with a massive restructuring of the Medical Devices business. Since then, it's been working to make the case that it can turn the company around. J&J has largely confined itself to a steady drip of small, innovative deals. But it certainly has the cash to make some major acquisitions, if it likes.

"What are the fastest growing markets in medical device that have scale?" queried J&J Worldwide Chairman of Medical Devices and EVP Gary Pruden at a May investor meeting. "These are markets that are growing 10% and above. So, the ones that are growing 10% and above, with scale, that are key. So, one is EP [electrophysiology], the other one by the way is robotics, the other one is neurovascular, the other one by the way is Endocutters, and the last one is in structural heart.

"So, we're in three of the four already, we're going to make an entry in the fourth one--we're just not in structural heart right now," he summed up.

Consumer medical devices--which could help it reconcile problems with both businesses--also seem likely to be a focus for J&J moving forward, as well as an area where it could stake a big claim through acquisitions, benefitting the sector by offering its vast regulatory infrastructure to legitimize oft-sketchy consumer devices that are skirting FDA regulation but promising diagnostic relevance.

Its most recent, ambitious effort on the medical device front has been a robotic surgery joint venture it's formed with Verily, which is part of Google parent Alphabet, that's known as Verb Surgical. It's headed by Scott Huennekens, the former leader of therapeutic catheter-based lighting device player Volcano that was snapped up by Royal Philips ($PHG). It's supposed to have a working prototype by year end.

J&J and Alphabet haven't disclosed how much they're investing in Verb, but robotic surgery is a technically ambitious and expensive field to enter. And Verb is scarcely alone. Auris Surgical Robotics, headed by Intuitive Surgical founder Dr. Fredric Moll, has entered the fray with a splash, raising about $235 million, according to SEC filings. Neither Verb nor Auris have divulged much yet about what they're working on.

-- Stacy Lawrence (email | Twitter)

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