- Looking to build a stronger surgery business, Johnson & Johnson has through one of its subsidiaries acquired robotic technologies developer Auris Health for $3.4 billion in cash.
- The deal gives J&J access to Auris' Monarch Platform, which is designed like an endoscopy but outfitted with micro-instruments and sensors to perform diagnostic tests and therapeutic bronchoscopic procedures. The platform's first disease target is lung cancer.
- In addition to the upfront payment, J&J is offering privately-held Auris up to $2.35 billion in milestones. The company expects the transaction to close next quarter.
Despite raking in $27 billion last year, J&J's medical devices unit hasn't been growing as much as its pharmaceutical counterpart, or even the company's lower margin consumer health business.
Executives promised a better medical devices performance in 2018, and in some ways they delivered. Excluding the impact of deals, namely the divestiture of LifeScan, the unit's adjusted sales growth was 3.3% worldwide during the fourth quarter. Helping drive growth were interventional solutions, vision and surgery.
In that latter segment, J&J highlighted how both advanced and general surgery saw growth during the quarter due to sales from biosurgery, endocutters and wound closures.
But the company has also been investing in digital surgery over the last few years. It linked up with Verily Life Sciences back in 2015 to create Verb Surgical, and more recently acquired Orthotaxy, a privately-held developer of software-enabled surgery technologies such as robot-assisted surgery.
On a Jan. 22 earnings call, J&J CEO Alex Gorsky said digital surgery, including robotics, "is a critical element to our future success, not just in the near-term, but as we look to the next decade and beyond." With close to $6 billion on the line, J&J is betting that Auris' technology will help achieve those longer goals.
J&J noted in a Feb. 13 statement that Frederic Moll, CEO and founder of Auris, will join J&J upon completion of the deal. The company said it will discuss the transaction further during its quarterly earnings call on April 16.
Credit Suisse analysts wrote they view the deal as "an incremental near-term positive, with potentially significant [long-term] positive impact as JNJ’s robotic surgery strategy unfolds," citing Johnson and Johnson's gains of three FDA-cleared robotic systems, a pipeline of additional applications and technologies, as well as "significant robotics IP."
The buy follows a $1.7 billion move by medtech competitor Medtronic in December to pick up Mazor Robotics, as more companies seek to challenge Intuitive Surgical's dominance in the robotic surgery space, a company Moll co-founded.