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Product / Company Performance

DePuy Synthes 3Q17 Orthopaedic Revenue +0.5% YoY -

ORTHOWORLD estimates DePuy Synthes’ 3Q17 orthopaedic revenue at US $2,120.6MM, +0.5% vs. 3Q16, with 9 months 2017 revenue of $6,545.8MM, +0.4% vs. the prior year.

ORTHOWORLD estimates segment sales and growth on an as-reported basis, as follows for 3Q17 and 9 Months Ended 9/17.

  3Q17  3Q16  $ Change  % Change 
 Joint Reconstruction $776.0  $779.1  -$3.1  -0.4% 
   Knee  $348.6  $360.8  -$12.1  -3.4% 
   Hip  $333.6  $325.8  $7.9  2.4% 
   Extremities  $93.8  $92.6  $1.2  1.3% 
 Trauma $634.7  $605.8  $28.9  4.8% 
 Arthroscopy/Soft Tissue $174.8  $169.7  $5.0  3.0% 
 Spine $357.1  $376.1  -$19.0  -5.0% 
 Orthobiologics $96.8  $97.0  -$0.2  -0.2% 
 Other (CMF) $81.2  $82.7  -$1.5  -1.8% 
 Total  $2,120.6  $2,110.4  $10.2  0.5% 

 

  9 Mo 17  9 Mo 16  $ Change  % Change 
 Joint Reconstruction $2,480.4  $2,460.3  $20.1  0.8% 
 Knee  $1,143.8  $1,146.4  -$2.6  -0.2% 
 Hip  $1,047.8  $1,028.4  $19.4  1.9% 
 Extremities  $288.8  $285.5  $3.3  1.2% 
 Trauma $1,855.1  $1,818.2  $36.8  2.0% 
 Arthroscopy/Soft Tissue $527.5  $519.4  $8.1  1.6% 
 Spine $1,124.6  $1,161.5  -$36.9  -3.2% 
 Orthobiologics $303.5  $299.4  $4.1  1.4% 
 Other (CMF) $254.8  $257.9  -$3.2  -1.2% 
 Total  $6,545.8  $6,516.7  $29.1  0.4% 


Our estimates for Codman neuro revenue, which was formerly reported by JNJ with its orthopaedic revenue, have been removed from our figures for 2016 and 2017.

For JNJ, Worldwide Medical Devices sales overall grew +7.1% in the quarter—but the orthopaedic division is not one of itsstrong drivers, coming in with another quarter of flat growth. (Orthopaedics has not risen past single digits throughout 2016 and within 2017, to date.)

Declines in knee and spine sales were somewhat offset by increases in hip and trauma, for 3Q17. The CORAIL primary stem in U.S. hips and the TFN-ADVANCED nail in U.S. trauma maintain their status as growth drivers for the two segments. The 3Q addition of a trauma-specific PMMA cement system should help keep the TFNA uptake going; the company also launched MAXFRAME™, a computer-assisted circular ring fixation system for multi-axial correction in the arm, leg, foot or ankle. Further, trauma benefited from strength in Latin America and Asia Pacific regions during 3Q.

The company continues to cite portfolio gaps as the drain on spine segment growth. During 3Q, steps were taken such as the debut of the VIPER PRIME™ pedicle screw (full EMEA commercial launch is slated for early 2018) and the sell-off of prodisc artificial disc assets to Centinel Spine—the latter presumably to concentrate efforts elsewhere. Leadership mentioned a believe that spine procedures are down for the industry overall for the last couple of quarters.

Knees, usually supported by ATTUNE sales, were affected ex-U.S. by legislation in India as of August that dictates a price ceiling on implants. This is not exclusive to JNJ, and we expect other quarterly calls to cite this. For DePuy, the impact was $10 million—representing retroactive charges for the whole year. On a positive note, the first ATTUNE revision case was completed in the U.S.

Additionally, in Europe, a one-time incident with an ordering and distribution system affected about a week’s worth of sales, impacting spine and knee. Per analysts, this was another $10 million loss.

During the quarter, JNJ shared results of real-world evidence studies indicating that the CareAdvantage Perioperative Efficiency approach yielded improvements for hip and knee procedures, such as reductions in instrument trays (down 57%), number of instruments used (down 29%) and number of open trays (down 46%), leading to an estimated annual cost savings of >$262,000 for its partner, UCSF Health. Though UCSF was already above benchmarks for overall procedure set-up time, the CareAdvantage capability reduced set-up by 3 minutes for hip procedures and 6 for knees. The service, launched at the beginning of 2017, identifies the customer/health system’s needs and objectives pertaining to the delivery of value-based care. This feeds into an action plan that includes metrics to measure results.

After the quarter’s close, JNJ announced its intent to purchase Surgical Process Institute (SPI), a German software company that specializes in tools that help to minimize variability of workflows in the O.R. We expect the company to continue investments like this and like CareAdvantage, to respond to voice of customer. SPI tools will be available in EMEA regions in 2018, while pilots begin everywhere else. Full global launch is slated for 2019.

Weather was mentioned as having a modest negative impact on JNJ’s Hospital Medical Device business overall, during 3Q. This was not attributed to supply disruption, but rather lost surgery days.

Sources: Johnson & Johnson; ORTHOWORLD estimates

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