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Product / Company Performance

DePuy Synthes Reports 4Q18 Revenue of $2,205.1MM, -0.5% vs. 4Q17 -

By Mike Evers, ORTHOWORLD

DePuy Synthes posted 4Q18 orthopaedic revenue of $2,205.1MM, -0.5% vs. 4Q17, with full year 2018 revenue of $8,827.4MM, -1.8% vs. 2017. Leadership pointed to continued stabilization of orthopaedic performance and new products expected to drive 2019 growth. However, it may be worth noting Johnson & Johnson (JNJ) CEO Alex Gorsky’s omission of orthopaedics in his comments about the vital aspects of healthcare during this quarter’s earnings conference call.

The hip segment grew 2% operationally, a figure that leadership expects to be in line with market growth, but experienced negative foreign currency impact for reported growth of 0.3%. Hip sales were driven primarily by strong demand for the ACTIS primary stem. The knee segment showed sequential improvement, even considering one-time pricing adjustments in 3Q18 due to uptake of the ATTUNE Revision system, primarily in Asia.

The global trauma market grew, according to the company, driving just over 2% operational growth in that segment (0.7% reported). The operational growth was supported by strength in the Asia Pacific market was well as continued uptake of the TFN-ADVANCED nailing system.

The spine segment improved sequentially over 3Q18, but was aided by one-time pricing adjustments in the quarter. Stabilization in this segment was driven by new products like the CONCORDE LIFT expandable cage and MIS Viper Prime system. Partially offsetting the gains from new products was the divestiture of the Prodisc line.

As it was in 3Q18, price pressure in the U.S. was a headwind in all orthopaedic segments. Excluding the one time adjustment mentioned above, spine was impacted by -4.5%, hips by -3.5%, knees by -2.5% and trauma by -2%.

Leadership committed to improving the cadence of new products, particularly in orthopaedics where the rate of market releases has been uneven compared to the rest of the company’s portfolio. JNJ plans to launch 20 to 25 new medical device products in 2019, with many of them coming in orthopaedics, such as ATTUNE cementless knees in addition to new instrument sets. In spine, the company plans to focus on severe deformity and degeneration, as well as noting that biomaterials are an area of interest going forward. New products in the hip segment will continue to leverage the company’s anterior approach leadership position.

Gorsky stated that he is more confident than ever in the progress being made on the company’s Orthotaxy robotic assisted-surgery platform, slated for release in 2020. He said, “We’re taking the outlook that digital surgery will be an important dynamic for the next five, 10 and 15 years…Having options and platforms in General Surgery, minimally invasive surgery but also orthopaedics as well, we think is an additional benefit ultimately to the platform we’ll be rolling out.”

ORTHOWORLD estimates 4Q18 and full year 2018 segment sales and growth on an as-reported basis, as follows.

  4Q18 4Q17 $ Change % Change
Joint Reconstruction $863.9 $866.0 -$2.0 -0.2%
Knees $396.9 $402.1 -$5.2 -1.3%
Hips $370.4 $369.1 $1.3 0.3%
Extremities $96.6 $94.8 $1.9 2.0%
Spine $353.5 $364.9 -$11.3 -3.1%
Trauma $640.0 $636.0 $4.1 0.6%
Arthroscopy/Soft Tissue Repair $180.3 $179.2 $1.1 0.6%
Orthobiologics $95.8 $98.3 -$2.5 -2.6%
Other (CMF) $71.5 $71.6 -$0.1 -0.1%
Total  $2,205.1 $2,215.9 -$10.9 -0.5%

 

  FY18 FY17 $ Change % Change
Joint Reconstruction $3,387.0 $3,396.0 -$8.9 -0.3%
Knees $1,527.4 $1,555.7 -$28.3 -1.8%
Hips $1,443.9 $1,424.9 $19.0 1.3%
Extremities $415.8 $415.4 $0.4 0.1%
Spine $1,413.0 $1,535.0 -$122.0 -7.9%
Trauma $2,573.7 $2,513.4 $60.3 2.4%
Arthroscopy/Soft Tissue Repair $676.0 $697.3 -$21.4 -3.1%
Orthobiologics $392.9 $417.9 -$24.9 -6.0%
Other (CMF) $384.8 $428.3 -$43.5 -10.2%
Total  $8,827.4 $8,987.9 -$160.4 -1.8%

 

ORTHOWORLD estimates 4Q18 orthopaedic sales by geographic region as follows.

Geographic Region 4Q18 4Q17 $ Change % Change
US $1,312.02 $1,328.01 -$16.0 -1.2%
Ex-US $893.06 $887.93 $5.1 0.6%
   EMEA $401.88 $399.57 $2.3 0.6%
   Asia Pacific $317.04 $310.77 $6.3 2.0%
   Rest of World $174.15 $177.59 -$3.4 -1.9%
Total  $2,205.1 $2,215.9 -$10.9 -0.5%

 

Net earnings for all Johnson & Johnson 4Q18 revenue are as follows.

4Q18 Amount ($MM) % of Sales
Sales $20,394.0  
   Cost of Sales -$6,961.0 34.1%
   Administrative -$5,991.0 29.4%
   R&D -$1,176.0 5.8%
   Other -$3,224.0 15.8%
Net Earnings $3,042.0 14.9%

 

Sources: DePuy Synthes Companies of Johnson & Johnson; ORTHOWORLD estimates. All revenue is USD $MM unless otherwise noted.

Mike Evers is ORTHOWORLD’s Market Analyst. He can be reached by email.

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