Dive Brief:
- Johnson & Johnson's medical devices business grew year-over-year sales in the third quarter despite the delta variant dragging the U.S. market, particularly within the orthopaedics business. While J&J's overall medical devices business grew sales by 8% on a reported basis to $6.6 billion, the majority of that growth came from international markets as the U.S. remained stagnate compared to last year.
- J&J also said its anticipated soft tissue robotics system, called Ottava, would be pushed back by two years, citing technical and supply chain challenges.
- Ashley McEvoy, J&J's worldwide chair for medical devices, told investors Tuesday procedure delays or shutdowns began in August and progressed into September as delta spread across the U.S. Hospitals have slowly restarted procedures over the last four weeks or so, but diagnostic visits in the U.S., an early indicator of future procedures volumes, are flat compared to pre-pandemic marks, McEvoy added.
Dive Insight:
Companies largely made it out of the second quarter with a minimal hit from delta as many surges began too late to make a meaningful impact. However, as the variant continued to spread across the U.S., medtechs cautioned that third-quarter businesses would be hit, primarily because hospitals and healthcare facilities were once again shutting down non-emergency care.
Medtronic, which reports one month later than most of the industry, was the first to signal that delta would slow or reverse the return to pre-pandemic levels device makers reported in the first half, and Zimmer Biomet, NuVasive and Boston Scientific followed.
J&J is the first procedure-dependent company to report this quarter, likely foreshadowing what others will report in the coming weeks.
"When I talk to hospital systems over the past three weeks, in particular in the United States, they are ramping up again and resuming elective procedures," McEvoy said. "We're keeping our eye on vaccination rates, patient sentiment, the cold weather. But we are planning for a strong recovery in quarter four versus how we exited quarter three."
J&J grew sales by 4% in the quarter compared to 2019 and has grown sales year-to-date by 5% compared to 2019, according to McEvoy.
The company's orthopaedic business was impacted the most from delta, continuing a trend of joint procedures being deemed more elective and therefore some of the first to be canceled or delayed.
Orthopaedics brought in $2.1 billion of sales in the quarter, in line with 2020 and 2019 third-quarter sales.
Nearly every segment showed overall growth last year, saved by international markets as most U.S. sales came under 2020 marks.
Overall, the orthopaedics business grew by 8.8% internationally and declined by 4.5% in the U.S. compared to last year.
J&J's orthopaedics unit boosted by international markets in Q3
| Reported U.S. change (YOY) | Reported Intl. change (YOY) | |
|---|---|---|
| Hips | -5.3% | 18.8% |
| Knees | -9.8% | 28.1% |
| Trauma | 5.3% | 2.4% |
| Spine, Sports & Other | -11.1% | 3.5% |
| Total Orthopaedics | -4.5% | 8.8% |
SOURCE: Johnson & Johnson
While some international markets are coming back slower than others, such as Japan or Australia, others like Spain, Italy and Germany are growing above pre-pandemic marks, according to McEvoy.
CFO Joseph Wolk said pandemic hotspots still remain in the U.S., U.K., Eastern Europe and Southeast Asia. Wolk agreed that volumes were trending back up in the last few weeks, but he was unable to give a specific recovery timeline for procedures heading into the end of the year.
"We do anticipate that those procedures will be recovered," Wolk told investors. "It's hard to say whether they'll be recovered in the fourth quarter or early next year."
J&J executives said staffing shortages at hospitals and other healthcare facilities were also constraining procedure volumes, a challenge not likely to be fixed in the near term.
Labor shortages are not expected "to get better in quarter four nor in 2022," according to McEvoy.
Ottava delayed
Nearly one year ago, J&J unveiled its soft tissue robotics system Ottava and told investors it was set to begin first-in-human trials in the second half of 2022. This date is now being pushed back by two years.
Wolk said that the delays are due to "technical development challenges" and COVID-19 disruptions, including supply chain constraints.
J&J is using its Ottava soft tissue robot to go after market leader Intuitive's da Vinci system. Medtronic is also taking on Intuitive with its Hugo system, which just gained CE mark last week.
The delay now puts J&J even further behind, leaving Intuitive time to tighten its grip on the market and Medtronic time to build its business with little competition from a newer entrant.
