Q4 Insights:
Johnson & Johnson, the second-biggest medtech firm after Medtronic, said on an earnings call Tuesday that it expects the $16.6 billion acquisition of heart assist device maker Abiomed to add to earnings in 2024 as it positions the company “as a global leader in heart recovery.”
J&J reported that fourth-quarter sales for the company as a whole dropped 4.4% from a year earlier. Medtech represented 29% of New Jersey-based J&J’s global sales for 2022.
In 2022, “in terms of innovation, we accelerated the cadence of new product launches, and significantly enhanced the quality of our medtech pipeline, including more than doubling the number of programs with over $100 million of net present value potential,” CEO Joaquin Duato said on the call.
Medtech sales decline
Worldwide medtech sales fell 1.2% to $6.8 billion in the fourth quarter from a year earlier, with growth of 7.1% in the U.S and a decline of 8.6% outside of the U.S., excluding foreign-exchange fluctuations, CFO Joe Wolk said on the call. For the full year, medtech sales rose 1.4% to $27.4 billion. Currency fluctuations accounted for 4.8-percentage-point decrease in the value of those sales.
Innovation and investment to continue
Duato noted that the company invested nearly $15 billion into R&D during 2022, increased its dividend for the sixth consecutive year, instituted a share repurchase program and deployed over $17 billion in M&A, including the acquisition of Abiomed.
“Very few companies have the capability on the balance sheet to take such significant action,” he added.
Analysts at Stifel said the medtech division faces “several dynamic cross currents,” noting that the currency outlook has sharply improved, and that COVID-19 disruptions in China hurt the overall growth of the medtech division.
Analysts at BTIG noted that medtech growth came largely from electrophysiology in interventional solutions, contact lenses in vision, and wound closure in general surgery.
Forecast: J&J expects operational growth in the first half of 2023 to be lower than in the second half, due to ongoing procedure recovery, the lingering COVID impact in China and the cost of new product launches. The company set full-year guidance for 2023 with estimated reported sales rising 4.5% to 5.5%, to between $96.9 billion and $97.9 billion, and adjusted earnings per share rising from 3% to 5%, or $10.45 to $10.65.
Shares in J&J fell 0.94% or $1.6 to $166.73 in early trading on the New York Stock Exchange Tuesday.
