08.12.22
Rank: #2 (Last year: #2)
$8.58 Billion
Prior Fiscal: $7.76 Billion
Percentage Change: +10.6%
R&D Expenditure: $2.37B (Medical Devices total)
Best FY21 Quarter: Q2 $2.22B
Latest Quarter: Q2 $2.16B
No. of Employees: 18,000
Global Headquarters: West Chester, Pa.; Raynham, Mass.; and Warsaw, Ind.
KEY EXECUTIVES:
Alex Gorsky, Board Chairman
Joaquin Duato, CEO, Executive Committee Chairman, Board Director
Joseph J. Wolk, Executive VP and CFO
Ashley McEvoy, Executive VP, Worldwide Chairman, Medical Devices
Kathryn E. Wengel, Executive VP, Chief Global Supply Chain Officer
Michael H. Ullmann, Executive VP, General Counsel
Robert J. Decker Jr., Corporate Controller, Chief Accounting Officer
Matthew Orlando, Corporate Secretary and Worldwide VP, Corporate Governance
It was an intriguing question, to say the least.
And a surprising one, considering the source.
Nearly three years ago, Haworth President and CEO Franco Bianchi asked about the proper pace of innovation. Should it progress at warp speed, he wondered, as it did at the pandemic’s start (remember all those COVID-19 assays and makeshift ventilators?), or should it proceed more slowly, as his own company has often done in the past?
The answer, it seems, is not so simple.
“How do you strike the balance between the time needed to come up with an innovative idea and the time needed to develop and launch that idea into the market?” industrial designer and author Ayse Birsel asked in an October 2019 Inc.com column. “It’s a great question. Time is relative when it comes to innovation. Just like in Einstein’s Theory of Relativity, it’s both slow and fast, depending on where you are in the process.”
And like the gravity in Einstein’s famous theory, innovation often warps time, influencing the motion of other bodies at play.
Makes sense. Consider, for example, the rapid rate at which SARS-CoV-2 tests and vaccines were created. Assays were available within two months of the virus’s U.S. arrival, while ventilator development time—due largely to open-source designs—fell from years to weeks (Australian engineers reportedly built a model in 16 days).
Vaccine development was equally as fast. Barely three months after the deadly virus first surfaced in China, 52 vaccine candidates were in trial stages—among them, Pfizer-BioNTech’s Comirnaty, Moderna’s Spikevax, and Johnson & Johnson’s one-shot Janssen antidote, all of which received U.S. Food and Drug Administration (FDA) emergency use authorization in December 2020 and February 2021, respectively.
“...we’ve worked at breakneck speed during the Ebola crisis, but now we are working at lightning speed,” Seema Kumar, global head, Office of Innovation, Global Health and Scientific Engagement at J&J, said in an April 2020 Advisory Board daily briefing.
Clearly, such velocity was necessary to battle COVID-19. But J&J did not accelerate immediately; like other vaccine developers, the healthcare behemoth proceeded gradually, first spending decades researching the structure, genome, and life cycle of existing coronaviruses and mapping out potential defense strategies.
Thus, it was able to innovate expeditiously once SARS-CoV-2 showed up.
J&J applied part of that same tactic to its contact lens technology. In 2011, the firm’s Vision franchise embarked on designing a multifocal lens that would provide clear sight from any distance, near or far (slightly more near than far, actually, owing to increased digital device use). Researchers meticulously studied the correlation between pupil size, age, and vision impairment to create unique, pupil-optimized designs for 183 different prescription types. Pupil Optimized Design lenses feature near vision power in the center and distance vision power on the periphery, much like the natural eye. In addition, its “hybrid back curve” mimics the cornea’s curvature, minimizing any distortion on the front part of the lens.
Pupil Optimized Design contact lenses entered the market last March under J&J’s ACUVUE brand.
“During the past few years, governments and regulators, private companies, and esteemed academics have all partnered together in unprecedented ways to deliver results at a speed and scale never before seen in our history...” former J&J CEO and Chairman Alex Gorsky wrote in his final shareholder letter, contained within the company’s 2021 annual report. “Forward-looking investments made years or even decades ago were the seeds for successful innovations that flowered across all our segments in 2021.”
Those blooms produced quite a lush (and profitable) garden for J&J last year despite lingering reverberations from the COVID-19 pandemic. Overall sales swelled 9.6% to $93.77 billion, gross profit ballooned 18%, and net earnings surged 41.9%—its largest increase in four years. The company reseeded its garden, too, with a record $14.7 billion investment in research and development.
“R&D isn’t just the foundation of growth for our company—it’s the engine driving scientific progress in creating a healthier world,” Gorsky’s letter read. “The resources we are allocating to R&D now are what will help us move even more quickly in creating increasingly personalized medicines, advancing robotic surgery, deploying artificial intelligence, and leveraging data in ways that will benefit the patients, consumers, and families we serve for many years to come.”
In sowing its garden for future blooms, however, J&J modified its soil.
The 136-year-old company announced plans last fall to spin off its Consumer Health division to focus on Pharmaceuticals and Medical Devices (now renamed MedTech), which accounted for nearly 85% of total FY21 revenue. J&J expects the tax-free transaction to cost $500 million to $1 billion and be completed by November next year.
The spinoff ends years of speculation about a J&J breakup and follows the lead of General Electric and Toshiba, both of which divulged restructuring plans shortly before J&J last fall. GE’s plans entail hiving off its healthcare business in early 2023, and turning its renewable energy, power, and digital divisions into independent entities in 2024, leaving aviation as a standalone unit. Similarly, Toshiba is cutting ties with its energy infrastructure and computer devices businesses.
Like its comrades, J&J’s spinoff strategy is intended to streamline operations and boost overall growth. Separating consumer health from pharmaceuticals and medical devices will allow the firm to offload its liabilities from ongoing talc-related litigation (more than $2 billion in settlements thus far) and better support its drug and medical device research. “Our goal here,” Gorsky said in discussing the spinoff, “is to continue to drive great performance in each of the segments that Johnson & Johnson will ... compete in.”
Each of the segments have already been driving such a performance: All three turned a profit in FY21 as the medtech industry recovered from major pandemic-induced sales losses in 2020. Consumer Health revenue rose 4.1% to $14.63 billion while Pharmaceutical sales mushroomed $14.3% to $52.08 billion and Medical Devices proceeds jumped 17.9% to $27.06 billion. Empowering the Medical Devices segment to its best-in-company performance were double-digit rebounds in each of its four reporting divisions.
Orthopaedics posted the smallest growth yet made significant progress in reclaiming its pre-pandemic sales aggregate. The segment generated an additional $825 million last year, boosting its total 10.6% to $8.58 billion, but that sum is still well below the division’s previous high—$9.67 billion in 2014.
Nevertheless, Orthopaedics enhanced its overall value last year with a new Compression Plate Clavicle System, new shoulder implant, and advanced power tools for trauma and small bone procedures. The division also shored up net future value via an acquisition, FDA clearance, and exclusive distribution agreement.
The latter two moves occurred just two weeks apart in early 2021. The division’s DePuy Synthes subsidiary gained FDA clearance in mid-January to use its robotic-assisted orthopedic surgical platform for total knee replacements. The VELYS digital joint reconstruction system, also used for hip and shoulder procedures, employs advanced planning capabilities to help surgeons make precise bone cuts and accurately position the replacement joint relative to the knee’s surrounding muscles, tendons, and ligaments.
“I’ve used the VELYS Robotic-Assisted Solution in several of my ATTUNE Knee procedures and have found the VELYS Robotic-Assisted Solution to be accurate, fast, and efficient,” Dr. Mark Clatworthy, orthopedic surgeon at MercyAscot Hospital in Auckland, New Zealand, said when the FDA clearance was made public last January. Clatworthy performed the first ATTUNE Knee procedure using the VELYS Robotic-Assisted Solution. “The device enables me to evaluate the bony anatomy and soft tissue envelope of the knee to plan the optimal implant position and then use the robotic-assisted solution to deliver and execute the plan. I’ve found my knees to be well balanced at the end of the procedure and my patients are doing well post-operatively.”
DePuy designed the VELYS solution from technology it acquired through J&J’s 2018 buyout of French surgical technology firm Orthotaxy. VELYS mounts onto an OR table and links to joint assessment data to help clinicians correctly balance the implant and verify its position.
Two weeks after receiving the VELYS clearance, DePuy Synthes forged an agreement to distribute Expanding Innovations Inc.’s X-Pac Expandable Lumbar Cage in the United States. The cage, which supplements DePuy’s lumbar degenerative and minimally invasive spine portfolio, provides controlled height and lordosis expansion to allow for intraoperative adjustment, depending on patient anatomy. A lock ramp-feature built into the endplates offers a large graft space inside the cage for post-graft packing.
DePuy bookended the VELYS clearance and X-Pac distribution pact with the $79.5 million purchase of OrthoSpin Ltd. in December 2021. The Israeli firm’s robot-assisted external fixation system is used in conjunction with DePuy Synthes’ Maxframe multi-axial correction system, an external ring fixation system designed to rectify bone or soft tissue deformities in the leg, foot, or ankle. The FDA cleared OrthoSpin’s G2 fixation system in January last year.
“DePuy Synthes is committed to patients who need deformity correction surgery,” Oray Boston, worldwide president of DePuy Synthes Trauma, Extremities, Craniomaxillofacial and Animal Health, said in announcing the OrthoSpin deal. “The acquisition of OrthoSpin demonstrates our desire to help these patients navigate their recovery with more confidence and less uncertainty with their strut adjustments. It also demonstrates our commitment to bringing transformative medtech advancements to the industry through the application of automated technology that addresses a wide range of orthopedic challenges.”
DePuy addressed some of those challenges through non-automated technology as well. Last summer, it launched the 2.7mm Variable Angle Locking Compression Clavicle Plate System and INHANCE Shoulder System; the Clavicle Plate System features thinner plates, a more accurate plate-to-bone fit, and reduced prominence while the INHANCE System has an intuitive stemless-first surgical approach that offers surgeons the ability to seamlessly transition from stemless to stemmed implants during procedures.
The INHANCE system preserves bone, provides immediate and long-term fixation, and facilitates intra-operative flexibility to simplify preparation for surgical treatment options. It includes reusable instruments, a comprehensive size range of anatomic stemless and stemmed inlay humeral implants, and a circular anatomic glenoid component that is compatible with any sized humeral head.
Additional features of the system include:
DePuy’s other product launch—the UNIUM System—bolstered both the company’s power tools portfolio and the Trauma franchise’s 2021 revenue. Trauma sales swelled 10.4% to $2.88 billion due to new product introductions and the global market recovery.
Those same factors drove a 13.3% increase in Knee revenue (to $1.32 billion) and 7.2% expansion in Spine, Sports & Other proceeds (to $2.89 billion). Hips sales, on the other hand, benefitted from existing technologies, including the ACTIS stem, KINCISE Surgical Automated System, and VELYS Hip Navigation, which helps enhance precise implant selection and placement. Hips revenue surged 16% to $1.48 billion.
$8.58 Billion
Prior Fiscal: $7.76 Billion
Percentage Change: +10.6%
R&D Expenditure: $2.37B (Medical Devices total)
Best FY21 Quarter: Q2 $2.22B
Latest Quarter: Q2 $2.16B
No. of Employees: 18,000
Global Headquarters: West Chester, Pa.; Raynham, Mass.; and Warsaw, Ind.
KEY EXECUTIVES:
Alex Gorsky, Board Chairman
Joaquin Duato, CEO, Executive Committee Chairman, Board Director
Joseph J. Wolk, Executive VP and CFO
Ashley McEvoy, Executive VP, Worldwide Chairman, Medical Devices
Kathryn E. Wengel, Executive VP, Chief Global Supply Chain Officer
Michael H. Ullmann, Executive VP, General Counsel
Robert J. Decker Jr., Corporate Controller, Chief Accounting Officer
Matthew Orlando, Corporate Secretary and Worldwide VP, Corporate Governance
It was an intriguing question, to say the least.
And a surprising one, considering the source.
Nearly three years ago, Haworth President and CEO Franco Bianchi asked about the proper pace of innovation. Should it progress at warp speed, he wondered, as it did at the pandemic’s start (remember all those COVID-19 assays and makeshift ventilators?), or should it proceed more slowly, as his own company has often done in the past?
The answer, it seems, is not so simple.
“How do you strike the balance between the time needed to come up with an innovative idea and the time needed to develop and launch that idea into the market?” industrial designer and author Ayse Birsel asked in an October 2019 Inc.com column. “It’s a great question. Time is relative when it comes to innovation. Just like in Einstein’s Theory of Relativity, it’s both slow and fast, depending on where you are in the process.”
And like the gravity in Einstein’s famous theory, innovation often warps time, influencing the motion of other bodies at play.
Makes sense. Consider, for example, the rapid rate at which SARS-CoV-2 tests and vaccines were created. Assays were available within two months of the virus’s U.S. arrival, while ventilator development time—due largely to open-source designs—fell from years to weeks (Australian engineers reportedly built a model in 16 days).
Vaccine development was equally as fast. Barely three months after the deadly virus first surfaced in China, 52 vaccine candidates were in trial stages—among them, Pfizer-BioNTech’s Comirnaty, Moderna’s Spikevax, and Johnson & Johnson’s one-shot Janssen antidote, all of which received U.S. Food and Drug Administration (FDA) emergency use authorization in December 2020 and February 2021, respectively.
“...we’ve worked at breakneck speed during the Ebola crisis, but now we are working at lightning speed,” Seema Kumar, global head, Office of Innovation, Global Health and Scientific Engagement at J&J, said in an April 2020 Advisory Board daily briefing.
Clearly, such velocity was necessary to battle COVID-19. But J&J did not accelerate immediately; like other vaccine developers, the healthcare behemoth proceeded gradually, first spending decades researching the structure, genome, and life cycle of existing coronaviruses and mapping out potential defense strategies.
Thus, it was able to innovate expeditiously once SARS-CoV-2 showed up.
J&J applied part of that same tactic to its contact lens technology. In 2011, the firm’s Vision franchise embarked on designing a multifocal lens that would provide clear sight from any distance, near or far (slightly more near than far, actually, owing to increased digital device use). Researchers meticulously studied the correlation between pupil size, age, and vision impairment to create unique, pupil-optimized designs for 183 different prescription types. Pupil Optimized Design lenses feature near vision power in the center and distance vision power on the periphery, much like the natural eye. In addition, its “hybrid back curve” mimics the cornea’s curvature, minimizing any distortion on the front part of the lens.
Pupil Optimized Design contact lenses entered the market last March under J&J’s ACUVUE brand.
“During the past few years, governments and regulators, private companies, and esteemed academics have all partnered together in unprecedented ways to deliver results at a speed and scale never before seen in our history...” former J&J CEO and Chairman Alex Gorsky wrote in his final shareholder letter, contained within the company’s 2021 annual report. “Forward-looking investments made years or even decades ago were the seeds for successful innovations that flowered across all our segments in 2021.”
Those blooms produced quite a lush (and profitable) garden for J&J last year despite lingering reverberations from the COVID-19 pandemic. Overall sales swelled 9.6% to $93.77 billion, gross profit ballooned 18%, and net earnings surged 41.9%—its largest increase in four years. The company reseeded its garden, too, with a record $14.7 billion investment in research and development.
“R&D isn’t just the foundation of growth for our company—it’s the engine driving scientific progress in creating a healthier world,” Gorsky’s letter read. “The resources we are allocating to R&D now are what will help us move even more quickly in creating increasingly personalized medicines, advancing robotic surgery, deploying artificial intelligence, and leveraging data in ways that will benefit the patients, consumers, and families we serve for many years to come.”
In sowing its garden for future blooms, however, J&J modified its soil.
The 136-year-old company announced plans last fall to spin off its Consumer Health division to focus on Pharmaceuticals and Medical Devices (now renamed MedTech), which accounted for nearly 85% of total FY21 revenue. J&J expects the tax-free transaction to cost $500 million to $1 billion and be completed by November next year.
The spinoff ends years of speculation about a J&J breakup and follows the lead of General Electric and Toshiba, both of which divulged restructuring plans shortly before J&J last fall. GE’s plans entail hiving off its healthcare business in early 2023, and turning its renewable energy, power, and digital divisions into independent entities in 2024, leaving aviation as a standalone unit. Similarly, Toshiba is cutting ties with its energy infrastructure and computer devices businesses.
Like its comrades, J&J’s spinoff strategy is intended to streamline operations and boost overall growth. Separating consumer health from pharmaceuticals and medical devices will allow the firm to offload its liabilities from ongoing talc-related litigation (more than $2 billion in settlements thus far) and better support its drug and medical device research. “Our goal here,” Gorsky said in discussing the spinoff, “is to continue to drive great performance in each of the segments that Johnson & Johnson will ... compete in.”
Each of the segments have already been driving such a performance: All three turned a profit in FY21 as the medtech industry recovered from major pandemic-induced sales losses in 2020. Consumer Health revenue rose 4.1% to $14.63 billion while Pharmaceutical sales mushroomed $14.3% to $52.08 billion and Medical Devices proceeds jumped 17.9% to $27.06 billion. Empowering the Medical Devices segment to its best-in-company performance were double-digit rebounds in each of its four reporting divisions.
Orthopaedics posted the smallest growth yet made significant progress in reclaiming its pre-pandemic sales aggregate. The segment generated an additional $825 million last year, boosting its total 10.6% to $8.58 billion, but that sum is still well below the division’s previous high—$9.67 billion in 2014.
Nevertheless, Orthopaedics enhanced its overall value last year with a new Compression Plate Clavicle System, new shoulder implant, and advanced power tools for trauma and small bone procedures. The division also shored up net future value via an acquisition, FDA clearance, and exclusive distribution agreement.
The latter two moves occurred just two weeks apart in early 2021. The division’s DePuy Synthes subsidiary gained FDA clearance in mid-January to use its robotic-assisted orthopedic surgical platform for total knee replacements. The VELYS digital joint reconstruction system, also used for hip and shoulder procedures, employs advanced planning capabilities to help surgeons make precise bone cuts and accurately position the replacement joint relative to the knee’s surrounding muscles, tendons, and ligaments.
“I’ve used the VELYS Robotic-Assisted Solution in several of my ATTUNE Knee procedures and have found the VELYS Robotic-Assisted Solution to be accurate, fast, and efficient,” Dr. Mark Clatworthy, orthopedic surgeon at MercyAscot Hospital in Auckland, New Zealand, said when the FDA clearance was made public last January. Clatworthy performed the first ATTUNE Knee procedure using the VELYS Robotic-Assisted Solution. “The device enables me to evaluate the bony anatomy and soft tissue envelope of the knee to plan the optimal implant position and then use the robotic-assisted solution to deliver and execute the plan. I’ve found my knees to be well balanced at the end of the procedure and my patients are doing well post-operatively.”
DePuy designed the VELYS solution from technology it acquired through J&J’s 2018 buyout of French surgical technology firm Orthotaxy. VELYS mounts onto an OR table and links to joint assessment data to help clinicians correctly balance the implant and verify its position.
Two weeks after receiving the VELYS clearance, DePuy Synthes forged an agreement to distribute Expanding Innovations Inc.’s X-Pac Expandable Lumbar Cage in the United States. The cage, which supplements DePuy’s lumbar degenerative and minimally invasive spine portfolio, provides controlled height and lordosis expansion to allow for intraoperative adjustment, depending on patient anatomy. A lock ramp-feature built into the endplates offers a large graft space inside the cage for post-graft packing.
DePuy bookended the VELYS clearance and X-Pac distribution pact with the $79.5 million purchase of OrthoSpin Ltd. in December 2021. The Israeli firm’s robot-assisted external fixation system is used in conjunction with DePuy Synthes’ Maxframe multi-axial correction system, an external ring fixation system designed to rectify bone or soft tissue deformities in the leg, foot, or ankle. The FDA cleared OrthoSpin’s G2 fixation system in January last year.
“DePuy Synthes is committed to patients who need deformity correction surgery,” Oray Boston, worldwide president of DePuy Synthes Trauma, Extremities, Craniomaxillofacial and Animal Health, said in announcing the OrthoSpin deal. “The acquisition of OrthoSpin demonstrates our desire to help these patients navigate their recovery with more confidence and less uncertainty with their strut adjustments. It also demonstrates our commitment to bringing transformative medtech advancements to the industry through the application of automated technology that addresses a wide range of orthopedic challenges.”
DePuy addressed some of those challenges through non-automated technology as well. Last summer, it launched the 2.7mm Variable Angle Locking Compression Clavicle Plate System and INHANCE Shoulder System; the Clavicle Plate System features thinner plates, a more accurate plate-to-bone fit, and reduced prominence while the INHANCE System has an intuitive stemless-first surgical approach that offers surgeons the ability to seamlessly transition from stemless to stemmed implants during procedures.
The INHANCE system preserves bone, provides immediate and long-term fixation, and facilitates intra-operative flexibility to simplify preparation for surgical treatment options. It includes reusable instruments, a comprehensive size range of anatomic stemless and stemmed inlay humeral implants, and a circular anatomic glenoid component that is compatible with any sized humeral head.
Additional features of the system include:
- 3D laser printed implant designs that incorporate the UNITI Porous Structure, which was created specifically for biological fixation in the shoulder.
- Only two reusable instrument cases, eliminating the need to reprocess, store, and retrieve multiple cases.
- Advanced cross-linked Vitamin E polyethylene for desired wear characteristics and oxidative stability, which can help reduce the risk of revision and complications and in turn, potentially cut costs and decrease the economic burden to the healthcare system.
DePuy’s other product launch—the UNIUM System—bolstered both the company’s power tools portfolio and the Trauma franchise’s 2021 revenue. Trauma sales swelled 10.4% to $2.88 billion due to new product introductions and the global market recovery.
Those same factors drove a 13.3% increase in Knee revenue (to $1.32 billion) and 7.2% expansion in Spine, Sports & Other proceeds (to $2.89 billion). Hips sales, on the other hand, benefitted from existing technologies, including the ACTIS stem, KINCISE Surgical Automated System, and VELYS Hip Navigation, which helps enhance precise implant selection and placement. Hips revenue surged 16% to $1.48 billion.