Johnson & Johnson (JNJ) registered sales of approximately $6.4 billion in its Medical Devices segment in 2Q16. The segment’s sales contributed ~35% of the company’s total revenues. Johnson & Johnson’s Medical Devices business has been undergoing restructuring in order to establish a more efficient and profitable business structure. The company acquired Neuwave Medical and BioMedical Enterprises as part of this restructuring initiative.
The company aims to deliver around $800 million–$1 billion in annual savings from the restructuring efforts in its Medical Devices segment. The majority of these savings are expected to be realized by the end of 2018.
Johnson & Johnson’s major medical device competitors include Medtronic (MDT), Stryker (SYK), and Abbott Laboratories (ABT), which have also been taking initiatives to transition to better-aligned business models that are more sustainable and profitable in the evolving medical device industry. For diversified exposure to JNJ, you can consider the iShares Russell 1000 ETF (IWB), which invests ~1.6% of its total holdings in the stock.
Major growth drivers
The company’s electrophysiology sales witnessed strong growth of around 18%, which contributes significantly to the segment’s sales. The launch of the contact force sensing catheter THERMOCOOL SMARTTOUCH also impacted electrophysiology sales. Surgery, knee, and hip sales also showed strong growth. However, the sales in the diabetes care segment declined due to the impact of the SMBG (self-monitoring of blood glucose) price decline in the United States.
Additional, spine sales were negatively impacted by pricing pressures and intense competition in the market, which led to the 3% decline in 2Q16 spine sales. The Venezuela devaluation also negatively impacted operational sales in Johnson & Johnson’s Medical Devices business. This had a negative impact of around 30 basis points on worldwide sales.
In the next article in this series, we’ll discuss analysts’ latest recommendations for JNJ.