Johnson & Johnson Announces Restructuring Plans for Orthopedics Business
October 17, 2023
Johnson & Johnson (J&J) has revealed its two-year restructuring program for its orthopedics business following lower-than-expected third-quarter medical device sales. The company’s decision to narrow its focus after spinning off its consumer health unit has prompted the need for changes in its orthopedics division.
As part of the restructuring program, J&J plans to exit certain markets and discontinue the sale of specific orthopedic products. This move comes as the company aims to reach its goal of $57 billion in drug sales by 2025. However, without the consumer health unit and with the ongoing restructuring, pressure on J&J’s pharmaceutical unit is expected to intensify. Furthermore, the company is anticipated to face new competition in 2025 from biosimilar versions of its popular psoriasis treatment, Stelara.
Despite the challenges in the medical devices sector, J&J raised its annual profit forecast propelled by strong sales from its pharmaceutical business. The company’s shares saw a modest decline of about 1%.
Analysts have pointed to weakness in the medical devices unit as a possible factor for the stock’s movement. Vamil Divan, an analyst from Guggenheim Partners, commended the impressive performance of J&J’s pharmaceutical sales for the quarter.
Following the spin-off of its consumer health unit, J&J now expects adjusted profit for 2023 to be between $10.07 and $10.13 per share, an increase from its previous projection of $10.00 to $10.10.
J&J registered a $21 billion gain in the third quarter from the spin-off of its consumer health business.
The pharmaceutical segment of J&J reported quarterly sales of $13.89 billion, with Stelara contributing over 20% at $2.86 billion, surpassing analysts’ estimates of $2.61 billion.
J&J has reached settlements that delayed the market entry of biosimilar rivals for Stelara until 2025. This development should help the drug continue to make a significant contribution to overall sales. However, J&J’s Chief Financial Officer, Joseph Wolk, mentioned that European sales of Stelara could start declining next year after a key patent expires.
Sales from J&J’s medical device unit amounted to $7.46 billion, lower than the Wall Street estimate of $7.58 billion. The orthopedic business accounted for approximately 29% of the company’s medical device sales in the third quarter.
The slowdown in demand for procedures like bariatric surgery, due to the popularity of weight-loss drugs like Novo Nordisk’s Wegovy and Ozempic, led to a decline in sales of J&J’s devices used in abdomen surgeries.
However, Wolk believes that the use of these weight-loss drugs could eventually lead patients to consider other procedures that involve J&J products.
J&J stated that it currently lacks the scientific expertise to enter the obesity drug market. Nevertheless, the company remains open to exploring opportunities if a suitable differentiated product arises.
In August, J&J completed its historic spin-off of its consumer health business. The company maintained a 9.5% stake in this iconic division.
Excluding items, J&J reported a profit of $2.66 per share, surpassing analysts’ expectations by 14 cents.
Reporting by Bhanvi Satija and Sriparna Roy in Bengaluru and Patrick Wingrove in New York; Editing by Shounak Dasgupta and Bill Berkrot
(Source: Reuters)
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Bhanvi Satija is a journalist specialized in pharmaceutical companies and the healthcare industry in the United States. She holds a postgraduate degree in International Journalism from City, University of London.
– Reuters