Johnson & Johnson looks to new spine technology, robotics after reporting 1.6% Q2 orthopedic sales drop


Johnson & Johnson reported orthopedic sales dropped 1.6 percent year-over-year during the second quarter to $2.2 billion. But the company remains excited about technology and robotics for the future, according to Executive Vice President and CFO Joe Wolk and Vice President of Investor Relations Chris DelOrefice, who spoke during the company's second quarter earnings call.

U.S. sales were flat while international sales were down 3.8 percent. For the six month's end, orthopedic sales were down 2 percent to $4.4 billion year over year. Spine sales dipped 3.1 percent to $818 million for the quarter, and knee sales were also down 2.8 percent. Worldwide hip sales were up slightly, 0.9 percent, worldwide. However, the company remains committed to the orthopedics business.

"We remain intent on improving our performance in orthopedics and the [medical devices] segment at large," said Mr. Wolk during the call, as transcribed by Seeking Alpha.

From the first quarter to the second quarter of 2019, orthopedics sales were relatively flat, growing at 0.6 percent or 0.9 percent after adjusting for the company's acquisitions, divestitures and selling days. "We continue to make progress to improve growth in the franchise and we remain committed to executing our innovation and commercial plans that aim to improve performance," said Mr. DelOrefice.

The company's new products including Viper Prime and Expedium Verse for deformity procedures drove the spine business's performance stabilization, which was flat on an adjusted basis quarter over quarter. The company plans to continue to seek growth in spine and launch its Symfony product for complex cervical spine during the second half of the year.

As for the knee line, Mr. DelOrefice said Johnson & Johnson's U.S. market portfolio has gaps that the company is addressing and plans to fully launch its cementless offering later this year. Overall, Mr. DelOrefice cited pricing pressures for the flat U.S. orthopedics sales at $1.3 billion.

"Pricing pressure continued to impact all categories in orthopedics but was relatively stable overall compared to Q1," said Mr. DelOrefice. "For the quarter, U.S. pure price was negative across all platforms."

Johnson & Johnson acquired Auris Health in February, adding new technology to its portfolio as well as Fred Moll, MD, who is a pioneer in robotic surgery. Auris Health is a robotic technologies developer that initially focused on lung cancer technology and has an FDA-cleared platform, Monarch. At the time of acquisition, Johnson & Johnson said the purchase would help it accelerate entry into the robotics space. The company already had Orthotaxy, a software-enabled technologies company with a robotic-assisted surgery solution for orthopedic procedures, in its portfolio. Johnson & Johonson Medical Devices Companies acquired Orthotaxy in February 2018.

"We think it's prudent of us to utilize that expertise to look at not just what we're doing for the Monarch platform in lung cancer and bronchoscope but also to take a look at Orthotaxy as well as our partnership with Verily to see how we can make sure that it's not a matter of coming to market fast," said Mr. Wolk. "We want to make sure that we've got a differentiated product, one that competes with the current product offerings that are out in the marketplace for the next three, five, 10 years down the road."

The company is advancing to a 2020 regulatory submission of the Orthotaxy technology. Johnson & Johnson has received positive feedback about the technology's small footprint and imageless system that allows surgeons to move within robotic cutting plan. Mr. Wolk said the company is on track to launch Orthotaxy in late 2020 or early 2021.

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