Johnson & Johnson (JNJ) was experiencing difficulties in its Medical Devices business and undertook initiatives to better align the segment with the company’s core business profile and medical device industry trends.
The company’s restructuring initiatives involve disposing of unprofitable and low-margin businesses and making direct investments in high-margin segments. Its Cordis and Ortho-Clinical Diagnostic business divestments and its acquisition of Synthes have helped it to achieve these goals.
Primary growth drivers
The company’s electrophysiology and endocutter sales have witnessed double-digit growth and have been consistently growing. The streamlining of its Surgery segment has also shown a significant benefit toward performance growth in the Medical Devices segment.
A robust pipeline and strong R&D (research and development) capabilities are expected to drive significant revenue growth for the segment. Moreover, the company’s entry into robotic surgery through a partnership with Verily, the life sciences subsidiary of Alphabet (GOOG), will help it to expand in the high-growth segment.
Recent launches including Attune, Corail, and TFNA are expected to register significant company sales. Also, the company‘s go-to-market models such as its cross-selling strategy are expected to expand its customer sales and boost its revenue. Thus, the company’s profitability and earnings are expected to rise amid a more robust Medical Devices business.
Johnson & Johnson’s major competitors include Medtronic (MDT) and Stryker (SYK), which are also looking at initiatives to enable more sustainable and lean business structures suitable to the changing medical device industry model.
Investors can consider investing in the iShares Russell 1000 ETF (IWB) to gain exposure to Johnson & Johnson. JNJ accounts for ~1.7% of IWB’s total holdings.