Could JNJ’s Medical Device Business Report Strong Growth in Q3?

Johnson & Johnson’s Medical Device performance expectations

Johnson & Johnson’s (JNJ) Medical Device business has posted steadily improving performance in recent quarters. The company experienced a downturn over the last few years due to competition and macroeconomic factors. Since then, Johnson & Johnson has efficiently implemented a restructuring plan for its Medical Device business, which resulted in significant growth in the segment’s performance.

In the second quarter, Johnson & Johnson’s Medical Device business reported sales of ~$7.0 billion, which contributed 33.5% to the company’s total sales of $20.8 billion. Its second-quarter sales represented year-over-year growth of ~3.7%.

Could JNJ’s Medical Device Business Report Strong Growth in Q3?

Major growth drivers for Johnson & Johnson’s Medical Device business

According to Johnson & Johnson (JNJ), the company is one of the world’s top two medical device players, alongside Medtronic. Twelve of its medical device business platforms are worth more than $1.0 billion, seven of which have posted growth rates at or above the market’s average growth rate.

The company has implemented aggressive portfolio management strategies, focusing on high-growth businesses and exiting loss-making or low-growth areas. The company has seen accelerated growth in the first two quarters of fiscal 2018. Johnson & Johnson plans to launch 15–20 new products in 2018 and 20–25 in 2019.

Johnson & Johnson has seen strong growth in areas including electrophysiology, biosurgery, and vision care. However, Johnson & Johnson’s spine, knees, and diabetes care businesses are posting weak performance. The company is working on strategic portfolio optimization plans for these businesses.

On October 2, Johnson & Johnson announced the completion of the divestiture of its LifeScan business to Platinum Equity. The divestiture was aimed at exiting the company’s ailing diabetes business due to the intense competition from Medtronic (MDT), DexCom (DXCM), and Insulet (PODD).

Medtronic offers a market-leading insulin pump system Minimed 670G, which utilizes its Guardian CGM (continuous glucose monitoring) system. Medtronic’s Guardian CGM faces tough competition from DexCom’s G6 CGM. Insulet is developing an automated insulin delivery system.

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