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Product / Company Performance

DePuy Synthes Reports 2Q18 Orthopaedic Revenue -1.4% YoY -

DePuy Synthes reported 2Q18 orthopaedic revenue of US $2,261.0MM, -1.4% vs. 2Q17, and 1H18 revenue of $4,511.0MM, -1.2% vs. 1H17.

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

  2Q18  2Q17  $ Change  % Change 
 Joint Reconstruction $867.5  $867.0  $0.6  0.1% 
   Knee  $389.4  $394.0  -$4.6  -1.2% 
   Hip  $367.4  $361.2  $6.2  1.7% 
   Extremities  $110.7  $111.8  -$1.0  -0.9% 
 Trauma $644.1  $614.4  $29.7  4.8% 
 Arthroscopy/Soft Tissue $172.4  $174.5  -$2.1  -1.2% 
 Spine $359.0  $390.9  -$31.9  -8.2% 
 Orthobiologics $103.9  $112.7  -$8.8  -7.8% 
 Other (CMF) $114.1  $133.5  -$19.4  -14.5% 
 Total  $2,261.0  $2,293.0  -$32.1  -1.4% 

 

  1H18  1H17  $ Change  % Change 
 Joint Reconstruction $1,735.5  $1,736.9  -$1.4  -0.1% 
 Knee  $782.6  $802.3  -$19.7  -2.4% 
 Hip  $736.6  $719.5  $17.1  2.4% 
 Extremities  $216.2  $215.1  $1.1  0.5% 
 Trauma $1,308.0  $1,239.7  $68.3  5.5% 
 Arthroscopy/Soft Tissue $339.9  $345.1  -$5.2  -1.5% 
 Spine $719.5  $792.7  -$73.2  -9.2% 
 Orthobiologics $205.1  $217.8  -$12.7  -5.8% 
 Other (CMF) $202.9  $235.7  -$32.8  -13.9% 
 Total  $4,511.0  $4,567.9  -$56.9  -1.2% 

 

While Trauma remains to be called out as one of the primary contributors to growth per the earnings call, management observed a slowdown in the U.S. market vs. 1Q18. Nevertheless, continued uptake of new products like the TFN-ADVANCED nail contributed to sales, as did ex-U.S. demand growth, leading with the Asia Pacific region.

Hips remain supported by DePuy’s market leading share in the anterior approach and demand for the ACTIS stem. Within the quarter, the company announced acquisition of assets of Medical Enterprises Distribution, developer of the automated ME1000 Surgical Impactor for use in hip replacement. That transaction closed, and the technology is now called Concise Surgical Automated System.

CFO Joseph Wolk acknowledged share losses in knees and spine. With knees, competitive pressure continues in the U.S. (e.g. Stryker) and sales are declining in the EMEA region. Management believes that these forces will be mitigated by the U.S. ATTUNE revision launch and other planned launches (for example, the cementless knee, ATTUNE ex-U.S., the eventual contribution from Orthotaxy robotic-assisted surgery technology, etc.).

While some of the issues with spine are market-driven, management continues to reference portfolio gaps and salesforce destabilization due to the integration of DePuy and Synthes. (DePuy acquired Synthes in 2012.) In spine, too, new product launches should benefit, such as PROTI 360 interbody devices; guidance systems; additional nails, plates and screws, etc. Growth is anticipated in 2H18 and into 2019.

When asked directly if JNJ would consider divesting the spine line, CEO Alex Gorsky responded, “while we still have got work to do, we maintain the number two position globally. We think that it’s a very strong complement to the rest of our portfolio. But we are very, very focused on getting that business turned around and move it in the right direction.”

Onward!

Sources: DePuy Synthes Companies of Johnson & Johnson; ORTHOWORLD estimates

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