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Product / Company Performance

DePuy Synthes Reports 4Q17 and 2017 Revenue -

ORTHOWORLD estimates DePuy Synthes’ 4Q17 orthopaedic revenue at US $2,245.7MM, +0.3% vs. 4Q16, with 2017 revenue of $8,791.5MM, +0.4% vs. 2016.

ORTHOWORLD estimates segment sales and growth on an as-reported basis as follows for 4Q17 and 2017.

  4Q17  4Q16  $ Change  % Change 
 Joint Reconstruction $869.9  $855.2  $14.7  1.7% 
   Knee  $402.6  $401.1  $1.5  0.4% 
   Hip  $369.6  $356.1  $13.5  3.8% 
   Extremities  $97.7  $98.1  -$0.3  -0.3% 
 Trauma $635.9  $620.8  $15.1  2.4% 
 Arthroscopy/Soft Tissue $183.0  $177.0  $6.0  3.4% 
 Spine $373.9  $397.0  -$23.1  -5.8% 
 Orthobiologics $100.6  $102.9  -$2.3  -2.2% 
 Other* $82.5  $86.9  -$4.4  -5.1% 
 Total  $2,245.7  $2,239.8  $6.0  0.3% 


  2017  2016  $ Change  % Change 
 Joint Reconstruction  $3,350.2  $3,315.4  $34.8  1.1% 
 Knee  $1,546.4  $1,547.4  -$1.1  -0.1% 
 Hip  $1,417.4  $1,384.4  $32.9  2.4% 
 Extremities  $386.5  $383.5  $3.0  0.8% 
 Trauma $2,491.0  $2,439.1  $51.9  2.1% 
 Arthroscopy/Soft Tissue $710.5  $696.4  $14.1  2.0% 
 Spine $1,498.5  $1,558.5  -$60.0  -3.8% 
 Orthobiologics $404.0  $402.3  $1.8  0.4% 
 Other* $337.2  $344.8  -$7.6  -2.2% 
 Total  $8,791.5  $8,756.5  $35.1  0.4% 

*Other includes CMF. Estimates for remaining Codman revenue, divested after 3Q17, are removed.

DePuy/JNJ’s slowdown in spine revenue was attributed to product launch delays (with a reminder that spine was the area most impacted by the integration of Synthes after the 2012 acquisition, resulting in disruption) as well as an overall market impact from reimbursement issues. Spine product launches slated for 2H18 include a cage, plates and screws as well as what were termed “visioning devices.”

The ATTUNE revision knee system, initially launched in 1Q17, is expected to have increased uptake in 2018. Other cited growth drivers at the close of 2017 included the CORAIL primary hip stem, leadership in the anterior approach in U.S. hips, the TFN-ADVANCED nail in U.S. trauma plus strength in Latin America trauma and gains in MONOVISC sales. Growth offsets came from U.S. competition in knees, the impact of a knee implant price freeze in India (that one to the tune of $2MM to $3MM in 4Q, per analysts), spine product portfolio gaps and U.S. trauma share loss.

Throughout 2017, JNJ remained faithful in launching services to support its orthopaedic surgeon customers, like CareAdvantage and the Orthopaedic Episode of Care Approach for health systems, and the Health Partner platform of digital tools to prepare patients for hip or knee surgery. Acquisitions included the Surgical Process Institute, a German software company that specializes in tools that help to minimize variability of workflows in the O.R.; Tissue Regeneration Systems’ 3D printing technology to offer patient-specific, bioresorbable implants to treat orthopaedic and CMF deformities and injuries; Sentio/nerve localization technology used in minimally invasive spine surgery and Interventional Spine’s expandable fusion cages and facet screw system.

In 2017, strategic partnerships included an exclusive U.S. agreement with JointPoint to co-market a surgical navigation platform for total hip replacement, rights to exclusively co-market Medical Enterprises' ME1000™ Surgical Impactor for total hips, an exclusive agreement with Pacira Pharmaceuticals for U.S. co-promotion of EXPAREL® local analgesic across its joint reconstruction, spine, sports medicine and trauma businesses and a research collaboration with Orthocell for its Ortho-ATI® stem cell treatment for tendon and ligament regeneration.

Launches throughout the year included the ATTUNE® Revision Fixed Bearing Tibial Base; EMEA launch of Continuous Compression Implants for foot/ankle and the CONCORDE™ Clear MIS discectomy device; PUREVUE™ Visualization for minimally invasive arthroscopic soft tissue procedures; VIPER PRIME™ system and EXPEDIUM® Fenestrated Screw Systems; TFNA Augmentation, a PMMA cement system with specific trauma device indications; MAXFRAME™, a computer-assisted circular ring fixation system for multi-axial correction in the arm, leg, foot or ankle; a Distal Radius Sterile Kit; ViviGen Formable™ Cellular Bone Matrix; wound closure kits customized for orthopaedic surgery and a suite of knee arthroscopy implants and instruments for anterior cruciate ligament and meniscus repair.

For its Medical Devices segment, in which orthopaedic revenue is reported, JNJ leadership plans to “accelerate growth through innovation, partnerships, portfolio management and new business models.” Will any of this touch the DePuy Synthes companies in 2018? We may not get details until JNJ’s Medical Device Business Review in May 2018. We do know that orthopaedics performance for 2017 was “below where we aspire to be,” as affirmed by Joe Wolk, Vice President of Investor Relations in the 4Q call.

Execution in robotics and digital surgery solutions may mean something for our industry segment, but to what extent is unclear right now. CEO Alex Gorsky noted that the company’s U.S. surgical robot project remains on-track, and he has seen a prototype, but details weren’t forthcoming on which specific segment the robot is for. (You may recall that a partnership with Google was announced in 1Q15 to support visualization and robotics. From what I was able to deduce from the last Medical Device Business Review day in 2016, the resulting Verb surgical robotics initiative does not appear to pertain to the orthopaedic segment. I look forward to learning more in May, though.)

Sources: Johnson & Johnson; ORTHOWORLD estimates

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