Johnson & Johnson MedTech is restructuring its DePuy Synthes orthopedic business, executives said today on a quarterly earnings call with investors.
J&J (NYSE: JNJ) CFO Joe Wolk said the two-year restructuring program will take the orthopedics unit out of “less profitable markets and product lines” to improve the segment’s profitability after it reported 2.6% sales growth in Q3.
“We [took] steps in the quarter to improve MedTech’s future margin profile, implementing a restructuring program designed to simplify and focus the operations of our orthopedic business,” Wolk said on the call.
He said the restructuring should be complete by the end of 2025 at a cost of $700 million to $800 million, but will improve the unit’s ability to meet product demand.
“Over the next two years, there will be some modest revenue disruption, but we actually do think these actions not only accelerate growth going forward, but will improve profitability,” Wolk said, estimating that revenue disruption at around $250 million.
The future of J&J orthopedics
CEO Joaquin Duato said he remains optimistic about DePuy Synthes and maintains that it will experience monumental growth in the coming years.
“We are on a journey of improvement in orthopedics,” he said. “We want to be No. 1 and No. 2 in every segment we compete. And that is a place where we are not there yet, but we are very confident that we are going to continue to make improvements by investing and by growing in the highest growth segments.”
Duato cited portfolio improvements, particularly on the knee side of orthopedics. The division has a “more complete portfolio” on the revision side and on the cementless side. He also said the company is launching its Velys orthopedics total robot for total knee surgery replacement in Europe. The system has already been used in 30,000 procedures.
“In orthopedics, we are determined to continue our journey of improvement. We are focusing on having the right portfolio. We have a very strong team in the field,” Duato said.
The DePuy Synthes restructuring announcement comes after J&J MedTech announced in March that it would lay off at least 1,000 employees in a reorganization. At the time, that reorganization included folding the company’s Mitek Sports Medicine business into another business, according to Rajit Kamal, the outgoing worldwide president of sports medicine and shoulder reconstruction.
J&J’s latest orthopedics device launch was just last week. DePuy Synthes most recently announced it received FDA 510(k) clearance for its TriLeap lower extremity anatomic plating system. On Oct. 9, the company said it won FDA clearance for its TriAltis spine system and navigation-enabled instruments. Before that, the last product news was in October 2022, according to the company’s website.
The DePuy Synthes business hasn’t been as busy as some of J&J MedTech’s other businesses. For example, Biosense Webster, the cardiac treatment division of J&J, has had a strong focus on innovation in the last year.
“We routinely, almost weekly meet on new opportunities that may complement our existing portfolio or our future pipeline in both MedTech and Innovative Medicines,” Wolk said in the earnings call.
J&J has increased its focus on growing its medtech and pharmaceutical businesses with the recent spinoff of its Kenvue consumer health segment.
Here’s all of the recent device or study data news out of J&J MedTech in 2023 so far:
