- Johnson & Johnson's medtech segment continued its rebound in the first quarter despite pandemic surges around the world from the omicron variant and, more recently, the BA.2 subvariant.
- The business, which J&J now calls medtech rather than medical devices, brought in about $7 billion in the quarter, representing year-over-year growth of roughly 6%. Ashley McEvoy, worldwide chairman of medtech, said during a Tuesday earnings call that there were positive signs of market recovery in the first quarter as the healthcare industry is better managing the effects of the pandemic. "Clearly, while COVID has not disappeared, health systems around the world are becoming increasingly more resistant with each passing wave, and as we know, the world is a lot more equipped to manage the pandemic, and quite frankly, so is Johnson & Johnson," McEvoy said.
- McEvoy, however, told investors that the company was seeing pressure in China due to the country's recent COVID-19 surge and subsequent lockdowns in Shanghai and other regions. After businesses were impacted in March, McEvoy said the company expects the effects to continue through April and May as well, adding that "China might come down a bit faster but it comes back faster too."
As the first major procedure-dependent medtech reporting this earnings season, J&J provided a glimpse at whether the omicron surge had a meaningful impact on procedures at the beginning of the year or if companies were able to continue their recovery.
The medtech reported growth in every quarter of last year — although, those results were compared to some of the hardest-hit quarters of the pandemic.
In 2021, international markets were recovering faster than the U.S. and fueling the rebound across the company's overall business. However, that trend did not hold in the first quarter of 2022. After growing at .8% and 1% in the U.S. in the third and fourth quarters of last year, respectively, the medtech segment grew by 5.6% last quarter.
The orthopaedics business struggled in the U.S. over the second half of 2021 as international markets came back, dropping year over year by 4.5% in the third quarter and 3.5% in the fourth. But the business bounced back in the first quarter of 2022, growing by 3.2% in the U.S. and 4.1% in international markets compared to the prior year's quarter.
McEvoy attributed part of the recovery to the continued growth in procedures being conducted in ambulatory surgery centers. The movement out of hospitals and into ASCs and other outpatient settings was occurring before the pandemic, but procedure shutdowns and COVID-19 protocols at hospitals have accelerated the change.
Companies like J&J, Stryker and Zimmer Biomet have leaned into the movement to ASCs while procedure volumes at hospitals remained volatile.
Overall, J&J's first-quarter performance beat consensus estimates by $251 million and J.P. Morgan's projection by $653 million, according to a Monday report from J.P. Morgan.
Joseph Wolk, J&J's CFO, told investors that while the medtech business had a "faster recovery than we anticipated" in the first quarter, full-year projections remain intact.
McEvoy said that J&J expects the rebound to continue throughout 2022, particularly in the U.S., explaining that diagnostic volumes and surgical volumes were trending up, two key data points the company focuses on.
In the lowest points of the pandemic, according to McEvoy, diagnostic volumes were flat and surgery volumes were down double digits. Coming out of March, diagnostic volumes were up in the high single digits and surgery volumes were coming in line with pre-pandemic levels.
"I expect, in the month of April in the U.S., to see it go north of 2019 levels, really driven by cardiac ablation, bariatrics and colorectal surgery," said McEvoy.