08.14.19
AT A GLANCE
Rank: #2 (Last year: #2)
$8.88 Billion
Prior Fiscal: $9.05 Billion
Percentage Change: -1.91%
No. of Employees: 18,000
Global Headquarters: Warsaw, Ind.; Raynham, Mass.; and West Chester, Pa.
KEY EXECUTIVES:
Alex Gorsky, Chairman and CEO
Joaquin Duato, Vice Chairman
Paulus Stoffels, Vice Chairman, Chief Scientific Officer
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
Ronald A. Kapusta, Corporate Controller, Chief Accounting Officer
There’s no escaping the Credo.
It’s literally everywhere in Johnson & Johnson’s world headquarters building—inscribed on an 8-foot-tall limestone slab in the structure’s expansive front lobby, mounted in all offices and conference rooms, supersized for reference within the CEO’s workspace, posted at all significant company-sponsored events, and featured prominently in the annual report. It’s also present at all employee work stations and in the homes of most long-serving staff (that practice ended in 2006). Moreover, the Credo (pronounced “cray-dough”) appears in book form (a compilation of 65 copies from various countries), and the document itself has been translated into 35 languages/dialects for placement in 800 facilities worldwide.
The Credo truly is everywhere. But its purpose extends well beyond sheer decoration. The document serves as inspiration for regular company-wide events like “Credo challenges,” (similar to corporate crisis drills) where executives analyze business decisions through Credo parameters, and biennial surveys that solicit input on J&J’s overall consummation of Credo standards.
“Our Credo has been a guiding light for our entire organization...” J&J Chairman/CEO Alex Gorsky said in a company-sponsored Q&A late last year. “Through periods of immense change, it clearly conveyed a set of values that influenced not only what we needed to achieve, but also the actions we needed to take to reach those achievements.”
Indeed, J&J’s Credo is a blueprint of the company’s principles—a moral compass, so to speak, that guides all collective actions. Although its origins can be traced to J&J’s founding, the Credo didn’t become an official document until 1943, when the late President/Chairman Robert Wood Johnson II reluctantly decided to take the company public. Concerned that market pressures and sales would eventually compromise corporate values, Johnson penned a 308-word mission statement establishing J&J’s now-iconic “patients before profits” ideology.
Such a hierarchy—patients first, followed by employees, communities, and shareholders (in that order)—might seem counterproductive to the very notion of capitalism, particularly considering J&J’s $81.5 billion healthcare empire wasn’t built entirely on goodwill. Yet history has clearly proven the value of adhering to Credo dogma.
It was the Credo, after all, that turned one of J&J’s darkest moments into perhaps its greatest triumph, rescuing the company’s sullied reputation after cyanide-laced extra-strength Tylenol capsules killed seven Chicago-area residents in the fall of 1982; the deaths, consequently, reduced J&J’s share of the $1.2 billion global analgesic market by five-fold (from 35 percent to 7 percent).
Guided by its patient-first philosophy, J&J initiated a $100 million national recall of Tylenol and re-launched the product two months later in tamper-proof packaging. The company’s honest, transparent approach to the ordeal is considered the gold standard in corporate crisis management, and has served as the basis for numerous business school case studies over the last three decades. More importantly, however, the Credo-inspired remedy saved both J&J’s reputation and the Tylenol brand: By the end of 1983, J&J (via Tylenol) had reclaimed its 35 percent share of the worldwide analgesic market.
“The Credo is structured in such a way that if we serve the patient, we will always do well. If you truly want to serve your shareholders, you should keep the patient in mind,” Kate Merton, head of Johnson & Johnson Innovation, JLABS New York, Boston and Philadelphia, told Forbes in January. “If you want to help your employee base, you should keep the patient in mind. If we lose track of what we are really here for, then both of those groups will fail, and we will fail as a business to generate revenue and give a return to our shareholders.”
J&J reinforced its allegiance to patients and employees last year by giving the 75-year-old Credo a 21-century makeover, tweaking the document’s language to foster better job fulfillment, and a more diverse, healthy, inclusive workforce. The company also added phrasing to address the changing healthcare ecosystem and the importance of improved global access to medical care.
“...Our Credo is a living and breathing document. It’s both timely and timeless. Several times over the years, we’ve revised it slightly to ensure it remains just as forward-thinking as the day it was introduced,” Gorsky noted in the company Q&A. “In 1987, the last time changes were made, the word ‘fathers’ was added to accompany ‘mothers’ in the first paragraph, and a nod to work/life balance was included...Each time Our Credo has been updated, it has reflected the changing world in which we live and operate.”
ANALYST INSIGHTS: With its shared $450 million investment (with Google Verily) in robotic company Verb Surgical, J&J is another entity with a heavy commitment to robotics in its future. In orthopedics and spine segments, its competitors are ahead in robotic assist platforms—creating pressure on the DePuy division to continue to make investments for its future ability to compete in these areas.
The Credo’s most recent updates likely were inspired by the rapid rise of digital health and data analytics—the building blocks of connected, personalized care solutions. J&J has invested heavily in these areas in recent years to remain on the forefront of the digital revolution, devising mobile apps for joint pain and blood glucose management, as well as an online ecosystem for knee surgery consults. The company also is developing a digital surgery platform through its well-publicized partnership with Alphabet’s life sciences arm, Verily; details of the project are scant, but the technology reportedly combines robotics, visualization, advanced instrumentation, data analytics, machine learning, and Cloud-based connectivity to create a solution that will rival the likes of Intuitive Surgical’s da Vinci robotic system.
Currently slated for debut next year, the Verily innovation is destined to become a cornerstone of J&J’s digital surgery platform and boost the company’s role in the burgeoning medical robotics arena. J&J fortified that role last year with the February 2018 acquisition of Orthotaxy, a privately held developer of software-enabled surgical technologies, including a robotic-assisted surgery solution.
Like its Verily-developed counterpart, the Orthotaxy robotic system has a 2020 launch date. And while it certainly qualifies as a medical “robot,” the device in no way resembles other systems currently in use: It’s small, portable, and does not use disposable instruments (a potential cost savings of $1,500-$2,500 per procedure). Also, no CT scans or special technicians are required to design and execute the surgical plan.
“We took our time looking at robotics. What we were looking for in robotics was something that really would move the needle in terms of outcomes, without interrupting workflow or adding to the complexity of a procedure,” Euan Thompson, Ph.D., J&J’s global head of R&D, Digital Technology, and Innovation, told In Vivo last July. “We see large, cumbersome systems in the million-dollar range that have to be wheeled into the OR for each procedure, get in the surgeon’s way and very often require support from a dedicated team to enable the surgeon to operate it. We didn’t want to go in that direction. When we found the Orthotaxy system, we believe we saw a very different type of robot—a platform rather than a system.”
“The concept can be applied to different techniques,” he continued. “In total knee replacement, the end effector is a guide system that is continually adjusting the guide block, with the surgeon remaining in control and using the saw through the guide block. The surgeon is doing the cut, but the accuracy is being controlled by the robotic alignment assisted by the continuously updating Orthotaxy system. In spine procedures, the saw guide block would be replaced with a drill guide component—the system refreshes in the same way for, say pedicle screws, to continuously guide alignment. It’s a modular concept. It doesn’t get in the way of work flows. We’ve found it easy to use, intuitive and extremely accurate. This is what we feel is the future.”
J&J is banking heavily on that future to rescue its underwhelming Medical Devices business. Despite increasing its total sales last year, the struggling unit posted the lowest growth rate among the healthcare behemoth’s three major product segments—total revenue rose just 1.5 percent (1.1 percent operational) to $26.99 billion in 2018, trailing the 1.8 percent hike in Consumer proceeds and the 12.4 percent jump in Pharmaceutical sales.
Growth was inconsistent throughout the segment, with solid gains in Surgery, Vision, and Interventional Solutions (previously Cardiovascular) offset by losses in Orthopaedics and Diabetes Care. The latter product franchise posted the largest deficit in 2018 ($606 million), thanks primarily to the $2.1 billion divestiture of J&J’s LifeScan business last spring.
Flat Specialty Surgery finances ($1.34 billion)—owing to stagnant revenue in Ethicon Inc.’s Advanced Sterilization Products (ASP) business—ultimately inspired another round of portfolio molting last summer. With negotiations barely underway in the LifeScan deal, J&J agreed to unload the ASP unit to Everett, Wash.-based Fortive Corporation for $2.8 billion. The sale—which closed only three months ago—marked the company’s fifth major divestment in as many years and further proves J&J’s dedication to portfolio optimization. Since 2014, the company has shed underperforming business units like Ortho-Clinical Diagnostics, Cordis, Codman, and Animas in order to focus on more profitable medical technologies.
Such a strategy is likely to continue as J&J strives to reinvigorate growth in its languishing medtech unit. Hence, Orthopaedics might be next on the chopping block unless the franchise can stop hemorrhaging profits: Annual sales have tanked 8.17 percent since 2015, with Spine the worst offender (down 16.4 percent). Last year, Orthopaedics revenue fell 1.9 percent to $8.88 billion, as losses in Knees and Spine offset gains in Hips and Trauma. Knee proceeds slipped 1.4 percent to $1.5 billion due to U.S. competition, but the decline was somewhat muted by growth in Asia-Pacific, according to J&J’s annual report. Spine’s 7.3 percent sales slide (to $3.26 billion) resulted mostly from market share loss and lingering effects of the Codman Neurosurgery divestment in 2017. Contrarily, new products fueled Hip and Trauma sales growth—1.7 percent and 3.2 percent, respectively.
Abetting the Hip revenue increase ($1.41 billion total) was the March 2018 debut of DePuy Synthes’ ACTIS Total Hip System, and the addition of a dual-mobility acetabular cup to the company’s lineup. The ACTIS Total Hip is designed to increase joint stability immediately after surgery by means of a medial collar, triple-taper geometry, and 12 sizes (for a more precise anatomical fit). Optimized for an anterior approach, the implant can be used with both tissue-sparing and traditional total hip replacement approaches.
The new acetabular cup came courtesy of an agreement between DePuy Ireland Unlimited Company and Société d’Etude, de Recherche et de Fabrication (SERF), a French orthopedics firm that developed the dual-mobility concept in the 1970s.
Dual-mobility acetabular cups are designed to increase hip implant stability in patients with a higher risk of dislocation. They feature a standard femoral head articulating within a large polyethylene liner; that liner also articulates within a metal shell. These two articulation points can help reduce the risk of dislocation as well as the incidence of costly revisions.
Three months after announcing the SERF agreement, DePuy bolstered its Trauma portfolio with the June 2018 launch of the Femoral Recon Nail System, a fixation platform that uses an intramedullary nail to repair femoral shaft fractures. Designed to improve stability and enable post-surgical movement, the product offers surgical entry point and locking options to accommodate surgeons’ varying preferences. The system also has radiolucent insertion handles to help reduce procedural complexity, facilitate intraoperative and X-ray visualization, and assist with guidewire placement.
In an effort to improve clinical outcomes, DePuy designed the Femoral Recon system to address a potential operative complication called distal cortical impingement, which occurs when a patient’s femoral anatomy curvature is greater than the nail curvature. The Femoral Recon system attempts to avoid this issue by reducing the rate of the nail curvature to more closely match the patient’s anatomy.
“I believe the DePuy Synthes Femoral Nail System offers the most streamlined insertion instruments on the market,” Pete Nowotarski, M.D., professor of Orthopaedic Surgery, University of Tennessee College of Medicine, Chattanooga & Orthopaedic Trauma director, Erlanger Health Systems, said when the product launched. “This system, coupled with the most advanced design features in both the piriformis fossa and greater trochanter entry points, offers greater versatility in treating complex femur fractures.”
The Femoral Nail system helped boost overall Trauma sales 3.2 percent last year to $2.69 billion. That product segment posted the greatest Orthopaedics franchise increase in 2018, though the hike was somewhat tempered by losses in the Knees and Spine & Other divisions.
DePuy tried its best to minimize the losses in Knees (albeit, unsuccessfully) by launching the ATTUNE Revision Knee System at the American Academy of Orthopaedic Surgeons 2018 Annual Meeting in early March. The ATTUNE Revision Knee incorporates improved kinematics, fixation, and patient fit to address the challenges typically associated with revision procedures. It has both fixed-bearing and rotating platform options; moreover, its GRADIUS Curve aims to prevent unnatural femoral sliding on the tibia and create smooth motion and stability during everyday activities (stair climbing, walking uphill/downhill, getting up from a chair). The implant’s GLIDERIGHT Articulation, meanwhile, enables the ATTUNE knee design to more accurately replicate the normal patella-femoral kinematics of the patient’s native joint.
The Knees segment’s subpar performance last year was eclipsed only by the larger decline in Spine & Other revenue. That loss, however, was partly stymied by new product launches.
Among the ventured sales saviors was the titanium interbody implants inherited from Johnson & Johnson Medical’s mid-September acquisition of Emerging Implant Technologies GmbH (EIT), and the PROTI 360° line of titanium integrated interbody implants.
EIT’s products consist of an advanced cellular titanium with an open and interconnected porous structure, while the PROTI 360° is reportedly the only titanium-integrated polyetheretherketone (PEEK) to offer 360 degrees of titanium integration. Released in the United States in April, the PROTI 360° is made for patients suffering from neck and back degenerative disc disease; its surface promotes bone-forming cell growth and attachment. Company data show calcium deposition—an indicator of early bone formation—was 470 percent higher with the PROTI 360° technology than PEEK alone and 305 percent higher than titanium alone just one day after device testing.
DePuy engineers built the PROTI 360° implants for better bond strength between the materials, using fortified titanium edges and no exposed corners. The design, according to the company, is intended to prevent delamination, a process in which titanium coatings separate from the PEEK implant where the two materials meet.
The PROTI 360° family of implants includes the ACIS PROTI 360° System for cervical fusion and the T-PAL PROTI 360° System and CONCORDE PROTI 360° System for lumbar interbody fusion. The PROTI 360° Systems are also compatible with ACIS, T-PAL, and CONCORDE Systems instrument sets.
Three months after debuting the PROTI 360° implant line, DePuy introduced the United States to its CONCORDE LIFT Expandable Interbody device, part of its UNLEASH MIS TLIF (Transforaminal Lumbar Interbody Fusion) Procedural Solution. UNLEASH—comprising the CONCORDE Clear MIS Discectomy Device and VIPER PRIME System for percutaneous pedicle screw insertion—aims to support surgical efficiency and simplify key stages of the procedure, to wit.
The single-use CONCORDE Clear device allows the degenerated disc-clearing process to occur with fewer instrument passes while increasing the amount of disc material removed compared to standard discectomy tools. The CONCORDE LIFT Expandable Interbody Device is inserted once the disc has been cleared. With this implant, the surgeon can expand the cage to specifically fit individual patient anatomies. A streamlined instrument set provides tactile feedback during expansion, and the system itself enables surgeons to backfill the space with bone graft (if necessary) after the cage has been fully expanded.
“It works like a ship in a bottle, so it [CONCORDE LIFT] enters the space between the vertebrae in a smaller, collapsed state,” Sean Saidha, senior Research and Development Group Manager, DePuy Synthes, explained on the company’s website. “And then once it’s in the right spot, surgeons can expand it to the desired height.”
The CONCORDE LIFT helps maximize bone graft placement, which increases the potential for vertebral fusion and spine stabilization. “Until now, you couldn’t fill expandable cages with bone grafts after expanding them,” Saidha said, “so this is a game-changer.”
As is SENTIO MMG, a digital mechanomyography platform used to find peripheral nerves during minimally invasive and open spine surgery. Unveiled last fall at the North American Spine Society Annual Meeting, SENTIO MMG uses smart sensor technology with real-time feedback to help clinicians identify and avoid peripheral nerves during spinal procedures; the system features a touchscreen tablet, control unit, probes, and smart sensors—all of which can be set up with a minimal OR footprint.
“The addition of SENTIO MMG to our enabling technologies portfolio will provide value to surgeons performing spine procedures in a variety of care settings, including both hospital and outpatient surgery,” Nadav Tomer, worldwide president, Spine, DePuy Synthes, said upon the product’s release. “This platform underscores our commitment to digital technologies that advance care for patients...”
DePuy reinforced that commitment with its deal for the assets of Medical Enterprises Distribution, including the firm’s automated ME1000 surgical impactor for hip replacements. The battery-powered device is designed for automated bone preparation, implant assembly, and positioning during total hip arthroplasty procedures; it aims to replace handheld mallets for more consistent clinical outcomes and reduced surgeon fatigue. DePuy claims the ME1000 can be used in various surgical approaches, including the anterior approach.
The Medical Enterprises Distribution purchase occurred amid the debut of two new extremities products last spring. In May 2018, DePuy launched the Global Unite Reverse Fracture Shoulder implant—a product specifically designed to treat shoulder fractures in patients with a damaged rotator cuff. The Global Unite system features numerous suture holes and pockets to enhance bone fixation around the implant, a Porocoat porous coating, and a streamlined instrument kit to improve compatibility with the company’s other shoulder offerings.
Four weeks after unveiling the Global Unite Reverse Fracture device, DePuy launched the DYNACORD suture for soft tissue repair. Available on Healix Advance anchors, the suture responds to changes in repair tension that occur over time to promote stability during the healing process. The suture shortens when tension is lost to maintain strong tissue to bone compression (approximation) throughout the healing period and reduce loss of suture tension and gap formation.
Rank: #2 (Last year: #2)
$8.88 Billion
Prior Fiscal: $9.05 Billion
Percentage Change: -1.91%
No. of Employees: 18,000
Global Headquarters: Warsaw, Ind.; Raynham, Mass.; and West Chester, Pa.
KEY EXECUTIVES:
Alex Gorsky, Chairman and CEO
Joaquin Duato, Vice Chairman
Paulus Stoffels, Vice Chairman, Chief Scientific Officer
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
Ronald A. Kapusta, Corporate Controller, Chief Accounting Officer
There’s no escaping the Credo.
It’s literally everywhere in Johnson & Johnson’s world headquarters building—inscribed on an 8-foot-tall limestone slab in the structure’s expansive front lobby, mounted in all offices and conference rooms, supersized for reference within the CEO’s workspace, posted at all significant company-sponsored events, and featured prominently in the annual report. It’s also present at all employee work stations and in the homes of most long-serving staff (that practice ended in 2006). Moreover, the Credo (pronounced “cray-dough”) appears in book form (a compilation of 65 copies from various countries), and the document itself has been translated into 35 languages/dialects for placement in 800 facilities worldwide.
The Credo truly is everywhere. But its purpose extends well beyond sheer decoration. The document serves as inspiration for regular company-wide events like “Credo challenges,” (similar to corporate crisis drills) where executives analyze business decisions through Credo parameters, and biennial surveys that solicit input on J&J’s overall consummation of Credo standards.
“Our Credo has been a guiding light for our entire organization...” J&J Chairman/CEO Alex Gorsky said in a company-sponsored Q&A late last year. “Through periods of immense change, it clearly conveyed a set of values that influenced not only what we needed to achieve, but also the actions we needed to take to reach those achievements.”
Indeed, J&J’s Credo is a blueprint of the company’s principles—a moral compass, so to speak, that guides all collective actions. Although its origins can be traced to J&J’s founding, the Credo didn’t become an official document until 1943, when the late President/Chairman Robert Wood Johnson II reluctantly decided to take the company public. Concerned that market pressures and sales would eventually compromise corporate values, Johnson penned a 308-word mission statement establishing J&J’s now-iconic “patients before profits” ideology.
Such a hierarchy—patients first, followed by employees, communities, and shareholders (in that order)—might seem counterproductive to the very notion of capitalism, particularly considering J&J’s $81.5 billion healthcare empire wasn’t built entirely on goodwill. Yet history has clearly proven the value of adhering to Credo dogma.
It was the Credo, after all, that turned one of J&J’s darkest moments into perhaps its greatest triumph, rescuing the company’s sullied reputation after cyanide-laced extra-strength Tylenol capsules killed seven Chicago-area residents in the fall of 1982; the deaths, consequently, reduced J&J’s share of the $1.2 billion global analgesic market by five-fold (from 35 percent to 7 percent).
Guided by its patient-first philosophy, J&J initiated a $100 million national recall of Tylenol and re-launched the product two months later in tamper-proof packaging. The company’s honest, transparent approach to the ordeal is considered the gold standard in corporate crisis management, and has served as the basis for numerous business school case studies over the last three decades. More importantly, however, the Credo-inspired remedy saved both J&J’s reputation and the Tylenol brand: By the end of 1983, J&J (via Tylenol) had reclaimed its 35 percent share of the worldwide analgesic market.
“The Credo is structured in such a way that if we serve the patient, we will always do well. If you truly want to serve your shareholders, you should keep the patient in mind,” Kate Merton, head of Johnson & Johnson Innovation, JLABS New York, Boston and Philadelphia, told Forbes in January. “If you want to help your employee base, you should keep the patient in mind. If we lose track of what we are really here for, then both of those groups will fail, and we will fail as a business to generate revenue and give a return to our shareholders.”
J&J reinforced its allegiance to patients and employees last year by giving the 75-year-old Credo a 21-century makeover, tweaking the document’s language to foster better job fulfillment, and a more diverse, healthy, inclusive workforce. The company also added phrasing to address the changing healthcare ecosystem and the importance of improved global access to medical care.
“...Our Credo is a living and breathing document. It’s both timely and timeless. Several times over the years, we’ve revised it slightly to ensure it remains just as forward-thinking as the day it was introduced,” Gorsky noted in the company Q&A. “In 1987, the last time changes were made, the word ‘fathers’ was added to accompany ‘mothers’ in the first paragraph, and a nod to work/life balance was included...Each time Our Credo has been updated, it has reflected the changing world in which we live and operate.”
ANALYST INSIGHTS: With its shared $450 million investment (with Google Verily) in robotic company Verb Surgical, J&J is another entity with a heavy commitment to robotics in its future. In orthopedics and spine segments, its competitors are ahead in robotic assist platforms—creating pressure on the DePuy division to continue to make investments for its future ability to compete in these areas.
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
The Credo’s most recent updates likely were inspired by the rapid rise of digital health and data analytics—the building blocks of connected, personalized care solutions. J&J has invested heavily in these areas in recent years to remain on the forefront of the digital revolution, devising mobile apps for joint pain and blood glucose management, as well as an online ecosystem for knee surgery consults. The company also is developing a digital surgery platform through its well-publicized partnership with Alphabet’s life sciences arm, Verily; details of the project are scant, but the technology reportedly combines robotics, visualization, advanced instrumentation, data analytics, machine learning, and Cloud-based connectivity to create a solution that will rival the likes of Intuitive Surgical’s da Vinci robotic system.
Currently slated for debut next year, the Verily innovation is destined to become a cornerstone of J&J’s digital surgery platform and boost the company’s role in the burgeoning medical robotics arena. J&J fortified that role last year with the February 2018 acquisition of Orthotaxy, a privately held developer of software-enabled surgical technologies, including a robotic-assisted surgery solution.
Like its Verily-developed counterpart, the Orthotaxy robotic system has a 2020 launch date. And while it certainly qualifies as a medical “robot,” the device in no way resembles other systems currently in use: It’s small, portable, and does not use disposable instruments (a potential cost savings of $1,500-$2,500 per procedure). Also, no CT scans or special technicians are required to design and execute the surgical plan.
“We took our time looking at robotics. What we were looking for in robotics was something that really would move the needle in terms of outcomes, without interrupting workflow or adding to the complexity of a procedure,” Euan Thompson, Ph.D., J&J’s global head of R&D, Digital Technology, and Innovation, told In Vivo last July. “We see large, cumbersome systems in the million-dollar range that have to be wheeled into the OR for each procedure, get in the surgeon’s way and very often require support from a dedicated team to enable the surgeon to operate it. We didn’t want to go in that direction. When we found the Orthotaxy system, we believe we saw a very different type of robot—a platform rather than a system.”
“The concept can be applied to different techniques,” he continued. “In total knee replacement, the end effector is a guide system that is continually adjusting the guide block, with the surgeon remaining in control and using the saw through the guide block. The surgeon is doing the cut, but the accuracy is being controlled by the robotic alignment assisted by the continuously updating Orthotaxy system. In spine procedures, the saw guide block would be replaced with a drill guide component—the system refreshes in the same way for, say pedicle screws, to continuously guide alignment. It’s a modular concept. It doesn’t get in the way of work flows. We’ve found it easy to use, intuitive and extremely accurate. This is what we feel is the future.”
J&J is banking heavily on that future to rescue its underwhelming Medical Devices business. Despite increasing its total sales last year, the struggling unit posted the lowest growth rate among the healthcare behemoth’s three major product segments—total revenue rose just 1.5 percent (1.1 percent operational) to $26.99 billion in 2018, trailing the 1.8 percent hike in Consumer proceeds and the 12.4 percent jump in Pharmaceutical sales.
Growth was inconsistent throughout the segment, with solid gains in Surgery, Vision, and Interventional Solutions (previously Cardiovascular) offset by losses in Orthopaedics and Diabetes Care. The latter product franchise posted the largest deficit in 2018 ($606 million), thanks primarily to the $2.1 billion divestiture of J&J’s LifeScan business last spring.
Flat Specialty Surgery finances ($1.34 billion)—owing to stagnant revenue in Ethicon Inc.’s Advanced Sterilization Products (ASP) business—ultimately inspired another round of portfolio molting last summer. With negotiations barely underway in the LifeScan deal, J&J agreed to unload the ASP unit to Everett, Wash.-based Fortive Corporation for $2.8 billion. The sale—which closed only three months ago—marked the company’s fifth major divestment in as many years and further proves J&J’s dedication to portfolio optimization. Since 2014, the company has shed underperforming business units like Ortho-Clinical Diagnostics, Cordis, Codman, and Animas in order to focus on more profitable medical technologies.
Such a strategy is likely to continue as J&J strives to reinvigorate growth in its languishing medtech unit. Hence, Orthopaedics might be next on the chopping block unless the franchise can stop hemorrhaging profits: Annual sales have tanked 8.17 percent since 2015, with Spine the worst offender (down 16.4 percent). Last year, Orthopaedics revenue fell 1.9 percent to $8.88 billion, as losses in Knees and Spine offset gains in Hips and Trauma. Knee proceeds slipped 1.4 percent to $1.5 billion due to U.S. competition, but the decline was somewhat muted by growth in Asia-Pacific, according to J&J’s annual report. Spine’s 7.3 percent sales slide (to $3.26 billion) resulted mostly from market share loss and lingering effects of the Codman Neurosurgery divestment in 2017. Contrarily, new products fueled Hip and Trauma sales growth—1.7 percent and 3.2 percent, respectively.
Abetting the Hip revenue increase ($1.41 billion total) was the March 2018 debut of DePuy Synthes’ ACTIS Total Hip System, and the addition of a dual-mobility acetabular cup to the company’s lineup. The ACTIS Total Hip is designed to increase joint stability immediately after surgery by means of a medial collar, triple-taper geometry, and 12 sizes (for a more precise anatomical fit). Optimized for an anterior approach, the implant can be used with both tissue-sparing and traditional total hip replacement approaches.
The new acetabular cup came courtesy of an agreement between DePuy Ireland Unlimited Company and Société d’Etude, de Recherche et de Fabrication (SERF), a French orthopedics firm that developed the dual-mobility concept in the 1970s.
Dual-mobility acetabular cups are designed to increase hip implant stability in patients with a higher risk of dislocation. They feature a standard femoral head articulating within a large polyethylene liner; that liner also articulates within a metal shell. These two articulation points can help reduce the risk of dislocation as well as the incidence of costly revisions.
Three months after announcing the SERF agreement, DePuy bolstered its Trauma portfolio with the June 2018 launch of the Femoral Recon Nail System, a fixation platform that uses an intramedullary nail to repair femoral shaft fractures. Designed to improve stability and enable post-surgical movement, the product offers surgical entry point and locking options to accommodate surgeons’ varying preferences. The system also has radiolucent insertion handles to help reduce procedural complexity, facilitate intraoperative and X-ray visualization, and assist with guidewire placement.
In an effort to improve clinical outcomes, DePuy designed the Femoral Recon system to address a potential operative complication called distal cortical impingement, which occurs when a patient’s femoral anatomy curvature is greater than the nail curvature. The Femoral Recon system attempts to avoid this issue by reducing the rate of the nail curvature to more closely match the patient’s anatomy.
“I believe the DePuy Synthes Femoral Nail System offers the most streamlined insertion instruments on the market,” Pete Nowotarski, M.D., professor of Orthopaedic Surgery, University of Tennessee College of Medicine, Chattanooga & Orthopaedic Trauma director, Erlanger Health Systems, said when the product launched. “This system, coupled with the most advanced design features in both the piriformis fossa and greater trochanter entry points, offers greater versatility in treating complex femur fractures.”
The Femoral Nail system helped boost overall Trauma sales 3.2 percent last year to $2.69 billion. That product segment posted the greatest Orthopaedics franchise increase in 2018, though the hike was somewhat tempered by losses in the Knees and Spine & Other divisions.
DePuy tried its best to minimize the losses in Knees (albeit, unsuccessfully) by launching the ATTUNE Revision Knee System at the American Academy of Orthopaedic Surgeons 2018 Annual Meeting in early March. The ATTUNE Revision Knee incorporates improved kinematics, fixation, and patient fit to address the challenges typically associated with revision procedures. It has both fixed-bearing and rotating platform options; moreover, its GRADIUS Curve aims to prevent unnatural femoral sliding on the tibia and create smooth motion and stability during everyday activities (stair climbing, walking uphill/downhill, getting up from a chair). The implant’s GLIDERIGHT Articulation, meanwhile, enables the ATTUNE knee design to more accurately replicate the normal patella-femoral kinematics of the patient’s native joint.
The Knees segment’s subpar performance last year was eclipsed only by the larger decline in Spine & Other revenue. That loss, however, was partly stymied by new product launches.
Among the ventured sales saviors was the titanium interbody implants inherited from Johnson & Johnson Medical’s mid-September acquisition of Emerging Implant Technologies GmbH (EIT), and the PROTI 360° line of titanium integrated interbody implants.
EIT’s products consist of an advanced cellular titanium with an open and interconnected porous structure, while the PROTI 360° is reportedly the only titanium-integrated polyetheretherketone (PEEK) to offer 360 degrees of titanium integration. Released in the United States in April, the PROTI 360° is made for patients suffering from neck and back degenerative disc disease; its surface promotes bone-forming cell growth and attachment. Company data show calcium deposition—an indicator of early bone formation—was 470 percent higher with the PROTI 360° technology than PEEK alone and 305 percent higher than titanium alone just one day after device testing.
DePuy engineers built the PROTI 360° implants for better bond strength between the materials, using fortified titanium edges and no exposed corners. The design, according to the company, is intended to prevent delamination, a process in which titanium coatings separate from the PEEK implant where the two materials meet.
The PROTI 360° family of implants includes the ACIS PROTI 360° System for cervical fusion and the T-PAL PROTI 360° System and CONCORDE PROTI 360° System for lumbar interbody fusion. The PROTI 360° Systems are also compatible with ACIS, T-PAL, and CONCORDE Systems instrument sets.
Three months after debuting the PROTI 360° implant line, DePuy introduced the United States to its CONCORDE LIFT Expandable Interbody device, part of its UNLEASH MIS TLIF (Transforaminal Lumbar Interbody Fusion) Procedural Solution. UNLEASH—comprising the CONCORDE Clear MIS Discectomy Device and VIPER PRIME System for percutaneous pedicle screw insertion—aims to support surgical efficiency and simplify key stages of the procedure, to wit.
The single-use CONCORDE Clear device allows the degenerated disc-clearing process to occur with fewer instrument passes while increasing the amount of disc material removed compared to standard discectomy tools. The CONCORDE LIFT Expandable Interbody Device is inserted once the disc has been cleared. With this implant, the surgeon can expand the cage to specifically fit individual patient anatomies. A streamlined instrument set provides tactile feedback during expansion, and the system itself enables surgeons to backfill the space with bone graft (if necessary) after the cage has been fully expanded.
“It works like a ship in a bottle, so it [CONCORDE LIFT] enters the space between the vertebrae in a smaller, collapsed state,” Sean Saidha, senior Research and Development Group Manager, DePuy Synthes, explained on the company’s website. “And then once it’s in the right spot, surgeons can expand it to the desired height.”
The CONCORDE LIFT helps maximize bone graft placement, which increases the potential for vertebral fusion and spine stabilization. “Until now, you couldn’t fill expandable cages with bone grafts after expanding them,” Saidha said, “so this is a game-changer.”
As is SENTIO MMG, a digital mechanomyography platform used to find peripheral nerves during minimally invasive and open spine surgery. Unveiled last fall at the North American Spine Society Annual Meeting, SENTIO MMG uses smart sensor technology with real-time feedback to help clinicians identify and avoid peripheral nerves during spinal procedures; the system features a touchscreen tablet, control unit, probes, and smart sensors—all of which can be set up with a minimal OR footprint.
“The addition of SENTIO MMG to our enabling technologies portfolio will provide value to surgeons performing spine procedures in a variety of care settings, including both hospital and outpatient surgery,” Nadav Tomer, worldwide president, Spine, DePuy Synthes, said upon the product’s release. “This platform underscores our commitment to digital technologies that advance care for patients...”
DePuy reinforced that commitment with its deal for the assets of Medical Enterprises Distribution, including the firm’s automated ME1000 surgical impactor for hip replacements. The battery-powered device is designed for automated bone preparation, implant assembly, and positioning during total hip arthroplasty procedures; it aims to replace handheld mallets for more consistent clinical outcomes and reduced surgeon fatigue. DePuy claims the ME1000 can be used in various surgical approaches, including the anterior approach.
The Medical Enterprises Distribution purchase occurred amid the debut of two new extremities products last spring. In May 2018, DePuy launched the Global Unite Reverse Fracture Shoulder implant—a product specifically designed to treat shoulder fractures in patients with a damaged rotator cuff. The Global Unite system features numerous suture holes and pockets to enhance bone fixation around the implant, a Porocoat porous coating, and a streamlined instrument kit to improve compatibility with the company’s other shoulder offerings.
Four weeks after unveiling the Global Unite Reverse Fracture device, DePuy launched the DYNACORD suture for soft tissue repair. Available on Healix Advance anchors, the suture responds to changes in repair tension that occur over time to promote stability during the healing process. The suture shortens when tension is lost to maintain strong tissue to bone compression (approximation) throughout the healing period and reduce loss of suture tension and gap formation.