Johnson & Johnson (NYSE:JNJ) is strategizing to invigorate its medical devices business, historically a slower-growth sector for the company.
Over the past decade, medical devices have shown stagnation compared to the company’s pharmaceuticals division, which has consistently outpaced it in growth.
In its recent earnings report, J&J disclosed revenues exceeding $21 billion, with the medtech segment, comprising surgical equipment and monitoring devices, contributing $7.8 billion.
To bolster its presence in this arena, J&J made significant investments, including a $13 billion acquisition of heart device manufacturer Shockwave this year and a $16 billion purchase of Abiomed in 2022. Abiomed operates as an independent entity within J&J’s medtech division.
Joe Wolk, the company’s CFO, highlighted the potential for growth in the medtech sector. He noted that while the segment faced challenges in the past, recent years have seen promising expansion, with growth climbing from 1.5% in 2017 to 7.8% in the previous year.
Historically, J&J’s medtech portfolio led its performance until around 2010 when the focus shifted more towards pharmaceuticals. However, Wolk emphasized the company’s commitment to balancing its portfolio, recognizing the significant opportunity in the cardiovascular disease space.
With a focus on cardiovascular health, driven by the recent acquisitions, J&J aims to capitalize on existing profit drivers. The company’s intensified interest in medtech comes after it spun off its consumer health segment last year, now operating independently as Kenvue.
Regarding recent market trends, Wolk noted a slowdown in demand for bariatric surgery equipment due to the growing popularity of GLP-1s, diabetes and weight-loss drugs. However, he sees potential synergy between GLP-1s and the medtech sector, anticipating broader eligibility for surgical procedures as more individuals benefit from these drugs.
While uncertainties persist, particularly around the impact of GLP-1s on surgical demand, J&J remains optimistic about the complementary role these drugs could play in revitalizing the medtech space.
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