Analyzing Johnson & Johnson’s Medical Devices Segment

Johnson & Johnson’s (JNJ) Medical Devices segment deals with vision care, cardiovascular care, specialty surgery, orthopedics, surgical care, and diabetes care.

The medical devices business includes various brands as follows:

• Animas – diabetes products
• Biosense Webster – advanced cardiac diagnostic, therapeutic, and mapping tools
• DePuy Synthes – orthopedic and neurological business
• Ethicon – surgical technologies and solutions including sutures, staplers, trocars, hemostats, and much more
• Janssen Diagnostics – diagnostic and health IT solutions
• JNJ Vision Care – disposable contact lenses and other products
• LifeScan – blood glucose monitoring system under OneTouch brand
• Mentor business – global aesthetics products including breast implants and facial aesthetics

The expectations from each franchise in the medical devices business during 1Q17 are discussed below.

Cardiovascular care franchise revenues are estimated to remain flat during 1Q17—compared to 1Q16. The estimate includes growth driven by electrophysiology products including Thermocool—a smart touch contact force sensing catheter.

Diabetes care franchise revenues are expected to fall due to pricing pressure and competition in self-monitoring blood glucose (or SMBG) devices, partially offset by the strong performance of Animas Vibe and SMBG devices during 1Q17.

Surgery franchise revenues are estimated to increase due to higher demand of endocutters, biosurgical and energy products in advanced surgery, ASP and mentor products in specialty surgery, and sutures and topical adhesives in general surgery during 1Q17.

The orthopedics franchise is expected to report revenue growth in 1Q17 due to the strong performance of Attune Knee System and TFN Advance Nail in the US markets and other products like Orthovisc and Monovisc.

Vision care franchise revenues are expected to increase following the strong performance of new products in all of the major markets worldwide during 1Q17.

To divest the risk, investors can consider ETFs like the VanEck Vectors Pharmaceutical ETF (PPH), which holds 10.3% of its total assets in Johnson & Johnson. PPH also holds 5.2% of its total assets in Merck & Co. (MRK), 4.9% in Sanofi (SNY), and 4.7% in Abbott Laboratories (ABT).