Johnson & Johnson has attributed an 8% drop in reported medical device sales to the impact of the COVID-19 pandemic.
In first quarter results posted Tuesday, J&J said the viral pandemic has caused the deferral of medical procedures involving devices sold by multiple device business units. Surgery took the biggest hit, recording a 12% drop in first quarter sales.
J&J expects the headwinds to continue to affect its business as 2020 goes on, wiping as much as $7 billion off annual device sales and leading it to predict company-wide revenue may fall 3% this year. In January, J&J predicted sales growth of up to 6%.
Ahead of anticipated surges in COVID-19 cases, hospitals around the world stopped carrying out elective surgeries and reallocated resources to the management of patients infected with the virus. Those actions had a big effect on demand for some medical devices sold by J&J.
On a reported basis, worldwide medical device sales fell 8%. The decline reflects the negative effect of COVID-19 on the use of many J&J medical devices. Asia Pacific accounted for around half of the negative impact. The U.S. accounted for 30%.
No unit escaped the fallout of the pandemic outbreak. Growth in atrial fibrillation procedures meant the interventional business fared best, with sales falling less than 1% on a reported basis, but even it suffered as a result of COVID-19.
At the other end of the spectrum, orthopedic and surgery sales fell 7% and 12%, respectively. J&J cited COVID-19 as a factor in falling demand for hip, knee, spine and trauma devices. Surgery took a similarly broad hit.
As the first quarter ended on March 29 and hospitals around the world remain focused on COVID-19, J&J is bracing investors for an ongoing negative impact, although it continues to be optimistic about its long-term device prospects.
"In medical devices, we are experiencing a near-term negative impact and expect this to continue while elective procedures are deferred and hospital resources are redeployed to address patients impacted by this pandemic. That said, medical devices has historically been a strong market and we believe the underlying fundamentals of the market remain intact,” J&J CEO Alex Gorsky told investors during Tuesday's first quarter results conference call.
The bleak set of financials contained some hints that J&J can get back on track. Notably, the decline in sales in Asia Pacific was partially offset by increased stocking of devices ahead of the anticipated restart of elective procedures.
J&J expects global procedures to start to recover by the end of the second quarter, with the trend continuing throughout the third and fourth quarter. If that happens, J&J will take the biggest hit in the second quarter, when deferrable procedures in major markets are expected to fall by up to 85%, before stabilizing and then recovering across the next two sets of results.
The outlook is underpinned by an assumption that the virus will not return with the same intensity in the fall. A second wave of COVID-19 cases could crush J&J’s hopes that the number of deferrable procedures performed in major markets will increase by as much as 15% in the fourth quarter, rendering even its downgraded expectations overly optimistic.
J&J’s results are the latest sign of the effect COVID-19 is having on medtech. Last week, Intuitive said the pandemic will have “a significant negative impact on our operations and financial results.” Before that, COVID-19 led Exact Sciences to pull its 2020 sales guidance. In the coming weeks, a slew of other major medtech companies will report results, starting with Abbott on Thursday.