Dive Brief:

• Johnson & Johnson reported a close to 4% decline in medical device sales in third-quarter results posted Tuesday, beating the target it set three months ago when it warned the coronavirus pandemic could wipe 10% to 25% off sales.

• That slight dip in year-over-year medtech sales came as a double-digit rise in interventional solutions sales and return to growth at the hip and trauma units was offset by ongoing headwinds in parts of the orthopaedic and surgery franchises.

• The pace of the recovery led J&J to tweak its outlook for 2020. The company now expects fourth-quarter device sales to suffer a flat to negative 10% impact due to the pandemic, suggesting a total hit of around $4 billion to the medical device business in 2020 versus the worst-case-scenario $7 billion outlined at the outset of the COVID-19 crisis.

Dive Insight:

J&J is the earliest major medtech to report quarterly earnings, potentially serving as a bellwether for its peers disclosing third quarter results in the coming weeks.

In July, J&J indicated the medtech industry may bounce back from COVID-19 faster than expected by reporting that sales picked up throughout the second quarter. The company at that time revised its forecast to a decline of 10% to 25%, better than the 15% to 35% drop predicted in April.

Ultimately, J&J outperformed even its most optimistic assessment but the 4% overall drop in third quarter device sales masks variation between different device businesses. Interventional solutions led the way, recording 12% operational growth as physicians began carrying out more atrial fibrillation procedures. By comparison, sales in that business were down roughly 20% in the second quarter. 

None of J&J's other device businesses grew in the third quarter, although there were pockets of growth in particular product lines. In orthopaedics, hip and trauma returned to growth but, with knees down and spine flat, the overall business closed down 3%. 

The picture in surgery was similar. Biosurgery grew 5% thanks to Surgiflo hemostatic matrix share gains. However, the negative impact of COVID-19 and competitive pressures caused sales of endocutters and energy products to fall, resulting in a 7% drop in overall surgery sales. Vision performed worse still, recording a close to 10% drop in sales. 

J&J attributed the better-than-expected device results, which add to positive signs for the broader industry based on preliminary revenue numbers from Smith & Nephew, to the return of elective procedures around the world. The U.S. device business returned to growth in the third quarter, while the China business posted a double-digit increase.

The company has seen significant improvements in most other ex-U.S. markets, although the situation varies from country to country based on differences in healthcare systems and the imposition of restrictions in response to COVID-19. For example, while German medical device revenues came in just below the target J&J set before the pandemic began, sales in the U.K. fell 40% short of the original goal. The U.K. continues to report more cases of COVID-19 than Germany.

J&J updated its fourth quarter medical device outlook in response to its latest results. Sales are now expected to fall 0% to 10% short of the original forecast, compared to a decline of 0% to 15% under its prior guidance. 

The recovery means J&J now expects COVID-19 to have a negative impact on 2020 medical device sales of $3.5 billion to $4.2 billion, having warned early in the crisis that the pandemic could wipe as much as $7 billion off annual sales.