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Product / Company Performance

DePuy Synthes Reports 1Q18 Orthopaedic Revenue -

DePuy Synthes reported 1Q18 orthopaedic revenue of US $2,250.0MM, -1.1% vs. 1Q17.

ORTHOWORLD estimates 1Q18 segment sales and growth on an as-reported basis as follows.

  1Q18  1Q17  $ Change  % Change 
 Joint Reconstruction $867.9  $869.9  -$2.0  -0.2% 
   Knee  $393.2  $408.3  -$15.0  -3.7% 
   Hip  $369.2  $358.3  $11.0  3.1% 
   Extremities  $105.5  $103.4  $2.1  2.1% 
 Trauma $663.9  $625.3  $38.7  6.2% 
 Arthroscopy/Soft Tissue $167.6  $170.6  -$3.1  -1.8% 
 Spine $360.5  $401.7  -$41.2  -10.3% 
 Orthobiologics $101.3  $105.1  -$3.9  -3.7% 
 Other (CMF) $88.9  $102.2  -$13.4  -13.1% 
 Total  $2,250.0  $2,274.9  -$24.9  -1.1% 

An important note: In reporting its 1Q18 revenue, JNJ reclassified all prior 2017 quarterly revenues for its self-reported Spine & Other category to conform to current product revenue disclosure. To wit: all sales related to the Cerenovus business, which were previously reported within Spine & Other, were reclassified to Interventional Solutions (previously called Cardiovascular). The Cerenovus business had included Codman Neurovascular as well as recently-acquired Neuravi and Pulsar.

I’m sharing all of this to explain that throughout 2017, we were not accounting for Cerenovus in our DePuy orthopaedic revenue reporting. We have learned that we under-reported DePuy’s 2017 orthopaedic revenue to the tune of about $270MM (which works out to about 3% of its orthopaedic revenue for the whole year). As we progress through 2018, we’ll use the new, reclassified 2017 Spine & Other numbers that JNJ offered in its latest supplemental schedule. We believe that Spine & Other reflects revenue for spine, sports medicine, shoulder, craniomaxillofacial and power tools, as was indicated in the 4Q15 file, “New Medical Devices Segment Sales Reporting Format.”

You may be thinking, Why don’t you just report them the way they report themselves? As we’ve shared in the past, ORTHOWORLD estimates take revenue reported by diversified companies and equalize that into five segments, so that one can observe trauma product revenues all together, extremity joint reconstruction all together, orthobiologics all together, and so on. We strive to report these estimates to the best of our abilities, and constantly refine them based on new information.

To sum up: you’re going to see a change in our DePuy 2017 revenue numbers as we report 2018 revenue—and this is why you will see that. Onward.

Segment Performance: Trauma’s Back

Trauma was called out among primary contributors to worldwide Medical Devices growth in 1Q18; this is its first appearance on that list since the 2016 year-end call. Trauma growth was attributed to strength of the market itself, with continued uptake of the TFN-ADVANCED nail in the U.S. plus new products in Japan and tender timing in the Middle East.

Spine did not fare well, affected by share losses arising from portfolio gaps. Joint recon was a mixed bag; market softness in hip was partially offset by leadership in the anterior approach and the ACTIS stem, while U.S. knees face competitive pressure plus declines in the EMEA region. Further, leadership mentioned anecdotal indications that a bad flu season affected revenue.

Gaps in spine and knee portfolios are expected to narrow as new products launch throughout 2018, such as the ATTUNE revision knee (ATTUNE S+) and a cementless version.

The acquisition of Orthotaxy, developer of a robotic-assisted surgery solution, will be highlighted in the Medical Devices Review day next month.

Global Supply Chain Initiative

Leadership announced a cost-cutting initiative that will, after April 2018, affect its global supply chain, trimming up to $800MM in pre-tax savings by 2022. We don’t yet know how this may impact suppliers that work with DePuy’s orthopaedic teams, though it’s logical to assume that suppliers serving JNJ don’t just work on one market segment. Any detail on this initiative that is shared in the Medical Devices Business Day next month will be collected and shared with you.

Source: DePuy Synthes Companies of Johnson & Johnson

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