- Johnson & Johnson's medical device business continued its rebound in the fourth quarter of 2020, with sales declining year over year by 2.2% on an operational basis but up compared to the second and third quarter of the year. Worldwide sales declined 10.5% when excluding the net impact of acquisitions and divestitutres.
- Chris DelOrefice, vice president of investor relations, said during a Tuesday fourth-quarter earnings call the coronavirus pandemic limited the medical device business in the quarter, particularly the global decline of elective care.
- Overall revenue of $6.69 billion missed Wall Street expectations by about $59 million, according to J.P. Morgan. The analysts wrote that Johnson & Johnson missed estimates for orthopaedics by $92 million, with misses for hips by $12 million, knees by $38 million, and spine and other by $56 million.
The results come after a rebound of sorts for the company in the third quarter. While Johnson & Johnson's medical device business sales still saw a loss of roughly 4% in the third quarter, it was a significant improvement over the nearly 33% hit taken in the second quarter of last year.
The pullback in elective care has been a challenge in 2020 and impacted nearly every aspect of the healthcare industry, particularly procedure-dependent companies like hospitals and large medtechs. While the early months of the pandemic brought the biggest hits to elective care, volume rebounds were sporadic in the second half of the year as different regions of the U.S. and the rest of the world became new hot spots.
DelOrefice said that elective care declines varied geographically as different countries implemented strategies to limit the spread of the virus. For example, sales in China grew by double digits in the quarter, sales declined by low single digits in the U.S., and sales also declined in Europe, where "some of the strictest restrictions were deployed," he said.
Three of Johnson & Johnson's four orthopaedics businesses — hips, knees, and spine and others — all saw sales declines in the quarter. Hips declined by 2.7% on an operational basis, while knees and spine declined by 13.9% and 9.7%, respectively.
The orthopaedic trauma business, however, increased by 3.6% on an operational basis. Interventional solutions had the strongest performance among medical devices with $893 million in sales, representing year-over-year growth of 12.8%.
Despite somewhat of an improvement in the second half of 2020, full-year results were still down by billions of dollars. Worldwide sales declined from about $26 billion in 2019 to roughly $23 billion in 2020, a decline of 11.4% on an operational basis.
CEO Alex Gorsky said that the company expects elective care challenges throughout 2021, with the largest impact coming in the first quarter. However, the company expects 2021 sales to return to 2019 levels of mid-single-digit growth as hospital volumes normalize.
"There are certainly regions and hospitals around the world, let alone in the United States, where you see a tremendous strain on the systems. But overall, we're seeing hospital volumes decrease no more than about 10 or 15% ... for example in the U.K., [and] a couple of other places in Europe," Gorsky said. "But overall, the resiliency and the ability of hospital systems to continue with elective surgeries has improved quite significantly."
The CEO added that due to the significant hit Johnson & Johnson took in the second quarter, year-over-year comparisons there should be favorable.
SVB Leerink analysts were surprised by the company's bullish stance on procedures normalizing so quickly but wrote that it could be a positive sign for the industry.
Johnson & Johnson's "commentary is more optimistic than what we've been hearing from other MedTech companies over the last few weeks and could ultimately have a positive read-through for the MedTech market as whole," they wrote.
Gorsky also touted the company's newly-cleared robotic surgery assisted product Velys, which recently received 510(k) clearance from the FDA. Velys is designed to work with the company's Attune total knee system. The product will be rolled out throughout 2021 and while the knee business took one of the largest hits in 2020, the CEO predicted volumes would return this year.