Dive Brief:

• Digital surgery is receiving much of Johnson & Johnson's medical device R&D attention, the company said on an earnings call with investors Tuesday.
• The medtech heavyweight reported second quarter medical device revenues of close to $6.5 billion, which represents a nearly 7% decline from the prior year, taking into account divestitures of its diabetes and advanced sterilization businesses. But M&A activity aside, worldwide operational sales increased 3.2%, which J&J attributed to sales of electrophysiology products and strong demand in Asia-Pacific for endocutters. The results "indicate that [medtech] markets were largely stable" in the second quarter, Needham analyst Mike Matson wrote in a note to investors following the call.
• J&J said the $2.8 billion divestiture of Advanced Sterilization Products, which closed days before its first quarter earnings announcement, added approximately $2 billion in pre-tax gain in the most recent quarter.

Dive Insight:

Johnson & Johnson's progress on its three main robotic surgery ventures — Auris Health, Orthotaxy and its Verily partnership Verb Surgical — were topics of interest to medical device analysts on Tuesday morning's call with investors.

Company executives highlighted preliminary data presented in May from a small, in-human study of Auris' Monarch system that suggested the technology was successful in localizing targeted lung nodules in more than 90% of cases.

CFO Joseph Wolk said Frederic Moll, the CEO of Auris and founder of first mover Intuitive Surgical, whose services J&J gained through the Auris deal, has been consulting on the company's other robotics ventures. Whereas Monarch is focused on lung cancer diagnostics, J&J's acquisition of Orthotaxy, announced in February 2018, gives the company a robotic surgery platform for orthopaedic procedures. J&J expects a mid-2020 regulatory submission resulting from the Orthotaxy acquisition, Wolk said.

Growth in interventional solutions, J&J's smallest devices unit, slowed to about 16%, driven by atrial fibrillation ablation and diagnostic catheters, both of which were talking points following J&J's first quarter of 4.3% adjusted growth in medical devices.

Wolk said the company remains focused on improving its orthopaedics unit, which is second only to J&J's surgery business in terms of device revenues. The unit was more or less flat during the quarter, but future launches of the Orthotaxy platform and a cementless knee replacement product will be growth drivers for the category, Wolk said.

In its vision unit, J&J said a weak quarter in U.S. sales of surgical products was offset partly by strong international revenues from intraocular lenses, particularly in the Asia-Pacific region. The impact of Chinese tariffs on the company is "nothing that's noteworthy," Wolk said.

Executive acknowledged two supply disruptions during the quarter: One was related to the recall of curved intraluminal staplers used in endo-surgery, while the other was the result of an FDA inspection of a third-party manufacturer of J&J hemostatic matrix kit product Surgiflo that found a change in manufacturing processes.

Overall company sales of $20.6 billion beat analysts' expectations by about $200 million; J&J bumped up the 2019 guidance range by $400 million. Shares in J&J were down slightly Tuesday morning.