$9.16 Billion ($88.8B total)
Prior Fiscal: $8.94 Billion
Percentage Change: +2.4%
R&D Expenditure: $3.7B (MedTech total)
Best FY24 Quarter: Q1 $2.34B
Latest Quarter: Q2 $2.3B
No. of Employees: 139,800 (total)
Global Headquarters: New Brunswick, N.J.

“Societies have always been shaped more by the nature of the media by which men communicate than by the content of the communication.” —Marshall McLuhan

Marshall McLuhan knew the world was destined for connectivity.

It was inevitable, he posited, based on the natural order of human interaction. In his landmark 1962 book, “The Gutenberg Galaxy: The Making of Typographic Man,” McLuhan analyzes mass media’s impact on European culture and mortal cognizance, and traces mankind’s centuries-long communications journey from the spoken, then written word to finally electronic (broadcast) dialogue.

He views technologies as a means to re-invention, famously proclaiming in the book, “The medium is the message”—a principle that has become particularly relevant in the modern digital world. “The Gutenberg Galaxy” associates the printing press with the rise of nationalism, dualism, uniformation, dominant rationalism, scientific research automation, culture standardization, and individual alienation. In addition, McLuhan contends the discovery of electromagnetic waves—the core technology of radio and television—have created a “global village” that allows humanity to live “pluralistically in many worlds and cultures simultaneously.”

“We live in a single constricted space resonant with tribal drums,” McLuhan declares in the book. “Instead of tending towards a vast Alexandrian library the world has become a computer, an electronic brain, exactly as in an infantile piece of science fiction. And as our senses have gone outside us, Big Brother goes inside. So, unless aware of this dynamic, we shall at once move into a phase of panic terrors, exactly befitting a small world of tribal drums, total interdependence, and super imposed co-existence.”

“The Gutenberg Galaxy” was an immediate success, winning McLuhan Canada’s highest literary honor in 1962 and popularizing his “global village” concept. And while it helped mainstream the concept of interconnectivity, the book did not, in fact, introduce McLuhan’s idea to the world. That introduction occurred two years prior during a broadcast interview on Canadian television, where the media theorist gave the world a preview of its new media-induced state of interconnection. The interviewer, incidentally, was the one who used the words “global village” in discussing the world’s “new” electronic gadgets. McLuhan never uttered the phrase, preferring instead to expound upon the creation of “tribal man.”

“These new media of ours have made our world into a single unit. The world is now like a continually sounding tribal drum where everybody gets the message all the time,” he noted. “A princess gets married in England and ‘boom, boom, boom’ go the drums. We all hear about it. An earthquake in North Africa, a Hollywood star gets drunk, away go the drums again. Everything we’ve observed [tonight] about the media points in the direction of tribal man and away from individual man. We’re retribalizing. Involuntarily, we’re getting rid of individualism…we’re in the process of making a tribe. We’re more concerned with what the group knows, feeling as it does—acting with it, not apart from it.”

That concern and desire to act “with it” has only intensified over the last six decades as the “new” electronic media McLuhan referenced in his televised interview has since been replaced by a newer, more disruptive electronic media source. Alas, the Internet has turned McLuhan’s global village vision into a burgeoning reality that to some extent, is overcompensating for millennia of individualistic ideology.

The tribal drum beats louder (and faster) than ever now. A princess gets married in England and—boom-boom-boom, it’s streamed in real-time.

An earthquake or tsunami occurs in Indonesia and—boom-boom-boom, the news circles the planet in seconds.

Boom-boom-boom. The drums beat wildly, incessantly, triggering information overload. The world not only is (much) smaller these days, it’s also less reclusive, less mysterious…more intrusive and overt. Every global villager is now both an observer and observee, a contributor to the massive data and digital networking vortex spawning unprecedented levels of global connectivity.

Despite such planetary interdependence, the world’s tribal members increasingly are feeling isolated. And therein lies the paradox: the technology designed to facilitate human connections and communication is creating a disconnected, lonely populace.

“We have access to more information than ever before and the ability to stay connected with friends and family across the globe. Making connections with potential partners, friends, and groups is possible thanks to dating apps and other platforms. Additionally, virtual communities can be powerful outlets, representing a vital hub for support and information sharing,” states an April 2024 blog on Humantold Management’s website. The mental health organization provides administrative and management services to mental healthcare practices, primarily in New York. “…we are more digitally connected than ever before and also more lonely. With every technological advancement designed to bring us closer, why do we find ourselves growing more disconnected?”

There are numerous reasons: convenience, online validation, social comparison, emotional vulnerability, lack of meaningful conversations, cultural shifts, and social media superficiality, among others.

FROM THE TOP: “Johnson & Johnson has an unrivaled portfolio and pipeline, with the financial muscle, global reach, and disease expertise to deliver the sustained pace of innovation and growth that is our hallmark. I am proud of the remarkable strides we made in 2024 and energized by our boundless potential to improve and save lives.”

—Joaquin Duato, Chairman and CEO

This disconnect is not exclusive to any specific citizen group or industry. In healthcare, it is perhaps most evident in the telehealth sector, where connectivity has helped improve care access—at the expense of in-person interactions. A similar disconnect exists in medtech, as digital tools help people better manage their health (at home) but dilute the patient-provider relationship.

Johnson & Johnson is aiming to bridge the healthcare disconnect by uniting its two core elements. “Healthcare has become disconnected. At Johnson & Johnson, we want to restore it and the answer is in those two simple words—health and care,” states a video posted to the company’s website last fall. “Connecting the best of both to deliver innovations for patients. Smarter solutions that are personal. Advanced treatments for today. Unlocking cures of tomorrow. Let’s connect the best of health and care and show all the amazing things those two simple words can do.”

Some of those amazing things include innovations like Johnson & Johnson’s VARIPULSE Pulsed Field Ablation platform, its CEREGLIDE 71 Intermediate catheter, the CARTO 3 Electro-Anatomical mapping system, the MatrixSTERNUM Fixation System, its TECNIS Odyssey next-generation intraocular lens, the VOLT Plating System, the OTTAVA Robotic Surgical System, and the Impella heart pumps, among others. These products (and more) helped Johnson & Johnson MedTech surpass $30 billion in sales for the second consecutive year.

The $31.85 billion in sales the company’s MedTech segment generated last year was 4.8% higher than its 2023 total ($30.4 billion). More than half of 2024’s revenue was generated by the Surgery and Orthopaedics franchises, which together pulled in $19 billion, according to Johnson & Johnson’s 2024 annual report. Both franchises ended the year (Dec. 31) with similar sales totals—Orthopaedics grossed $9.16 billion and Surgery brought in $9.84 billion, the latter slipping 1.9% from its 2023 aggregate ($10 billion) due to losses in both its reporting divisions.

“2024 was a year of progress and transformation for Johnson & Johnson. And while we have been through a period of transformation, the fundamentals of our company remain the same,” Johnson & Johnson Chair/CEO Joaquin Duato told analysts during a 2024 earnings call earlier this year. “Our success is rooted in two things. First, we are a purpose-driven company guided by our credo. And second, we are broadly diversified, meaning that we can truly lead where medicine is going. No other company has the span of expertise and capabilities that Johnson & Johnson has. No other company can impact the entire patient journey as we do. We are not just a pharma company or a medtech company. We are a healthcare company, and our strategies are disease-centric focused on end-to-end solutions.”

One of those disease-centric solutions could single-handedly impact patients’ orthopedic journeys. The VELYS ACTIVE Robotic-Assisted System, which gained FDA 510(k) clearance last summer for both spinal and partial knee surgery, aims to enhance surgical precision by integrating computed tomography (CT)-free technology to optimize implant placement. Developed by DePuy Synthes and eCential Robotics, VELYS SPINE is intended for use in spinal fusion procedures in the thoracolumbar, cervical, and sacroiliac backbone regions. The system can be used with Johnson & Johnson MedTech’s core spine products, including the SYMPHONY occipito-cervico thoracic system, TriALTIS spine system and navigation-enabled instruments, the VIPER PRIME system, and EXPEDIUM VERSE systems.

The dual-use VELYS SPINE system features both standalone navigation and an active robotics platform that gives surgeons flexibility in their approach and planning. The system also enables clinicians to address complex challenges, thanks to its pathology-specific workflows, VELYS adaptive tracking technology, and VELYS trajectory assistance. “Today’s landscape of enabling technologies features first-generation robotics systems that may face challenges in adapting to individual surgeon needs,” DePuy Synthes Worldwide President of Spine Russell Powers said when announcing VELYS SPINE’s debut. “We believe the unique features and capabilities of active robotics technology will set a new standard in surgical care for spine patients everywhere.”

VELYS also could help set a new financial performance standard for the Orthopaedics franchise’s long-struggling Spine, Sports & Other business, which lost $21 million last year compared with FY 23. Overall, Orthopaedics sales climbed 2.4% to $9.16 billion, driven by strong demand for existing products and new innovations.

Such demand fostered a 5% jump in Hip sales (to $1.64 billion) and a 6.1% spike in Knees revenue (to $1.54 billion) in 2024. Specifically, market need for Johnson & Johnson MedTech’s range of Anterior approach offerings boosted Hip performance, while interest in the company’s ATTUNE platform drove profitability in Knees.

Conversely, demand for new products accounted for the 2.3% increase in Trauma sales last year (to $3.05 billion). Johnson & Johnson MedTech debuted two new solutions in August 2024, with the first released just six days after VELYS SPINE’s unveiling.

The TriLEAP Lower Extremity Anatomic Plating System offers a range of low-profile, procedure-specific titanium plates for forefoot and midfoot reconstructive and trauma procedures, targeting bone fixation and fusion in adults and adolescents. TriLEAP’s contoured and conventional titanium plates can accommodate multiple screw shaft options to allow for rescue screws, and its harmonized, color-coded instruments are ergonomically functional and easy to use.

ANALYST INSIGHTS: ”Johnson & Johnson MedTech continues to take strides in enabling technologies to keep up with Stryker and Zimmer Biomet’s robotic platforms. They seem to be a slow follower, so the question is can J&J MedTech become a real leader in this space?”

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

“There’s a growing need for plating systems that offer greater precision and customization. Foot and ankle anatomy varies widely among patients, and having plates that can adapt more precisely to individual anatomy can lead to better outcomes,” Michael Campbell, M.D., a paid Johnson & Johnson MedTech consultant and board-certified orthopedic surgeon specializing in foot/ankle conditions, said upon the TriLEAP’s release. “I’m excited the TriLEAP System is now available for first ray surgery and foot and ankle reconstruction. The complete and specific set of tools for different procedures means we have a system that truly meets the diverse demands of the operating room, helping us provide even better care for our patients.”

Another (trauma) care enhancement solution hit the market three weeks after TriLEAP’s release. The MatrixSTERNUM Fixation System helps stabilize and secure the front chest wall after procedures like open-heart and chest surgery. The advanced plate and screw fixation system provides stronger locking strength, faster chest fixation, and thinner, low-profile plates compared with competitive offerings. Johnson & Johnson MedTech claims the MatrixSTERNUM Fixation System delivers three times greater locking strength compared to the market-leading product, improving sternum fixation during post-surgical healing. Its multi-hole screw guides allow for a more rapid and precise plate fixation process, significantly reducing procedure time, and the system’s 1.5 mm low-profile plates—which are both thin and highly contourable— make the plates less noticeable under the skin.

Six weeks after introducing the MatrixSTERNUM System to market, Johnson & Johnson MedTech released the VOLT Variable Angle Optimized Locking Technology Plating System, a product designed to improve fracture care through better stability, enhanced performance, and increased efficiency.

In addition to its locking technology, the VOLT Plating System comprises an expanded range of plate shapes, lengths, and screw lengths to accommodate different fracture reduction and fixation needs. The implants aim to minimize prominence to reduce soft tissue irritation risk. The system also features a versatile tray design that allows for multiple set configurations based on clinical requirements, and color-coded instruments simplify identification to help improve surgical workflow efficiency for OR staff.

Engineered with precision threaded locking, the VOLT Plating System offers enhanced construct stability. Unlike competitive systems that rely on screw threads to cut into the plates for locking, the VOLT mechanism uses tightly toleranced screw hole threads to improve plate-to-screw engagement, according to the company. This advanced design provides the stability of the Locking Compression Plating while allowing for flexible variable angles; it is available in both stainless steel and titanium.

The system was designed with input from a global team of expert surgeons. “The VOLT system is a huge accomplishment,” Michael Raschke, M.D., chairperson of the AO Technical Commission Executive Board and AO Technical Commission Trauma, noted. “It’s a comprehensive system that combines well-established AO principles with state-of-the-art functionality. I believe it will quickly become the standard of care in treating skeletal fractures.”

About a month after the VOLT Plating System launch (first phase), Johnson & Johnson MedTech announced an exclusive commercial distribution agreement in the United States with Responsive Arthroscopy, a medical device firm specializing in sports medicine soft tissue repair.

“Our relationship with Responsive Arthroscopy is a significant step in expanding our leadership in orthopaedics and advancing our sports soft tissue offerings,” said Aldo Denti, company Group Chairman, Orthopaedics, Johnson & Johnson MedTech. “This collaboration allows us to deliver a broader range of cutting-edge tools that empower surgeons in shoulder, foot and ankle procedures. We’re excited to drive value in this rapidly growing segment and remain committed to advancing patient care in meaningful ways.”

While it may indeed advance patient care, Johnson & Johnson MedTech’s collaboration with Responsive Arthroscopy arrived too late in the year to meaningfully advance the company’s 2024 Spine, Sports & Other revenue. Sales slid 0.7% to $2.92 billion due to competitive pressures and impacts from China volume-based procurement, but the decline was partially offset by U.S. market growth.

$8.94 Billion
Prior Fiscal: $8.59 Billion
Percentage Change: +4.1%
R&D Expenditure: $3.1B (MedTech total)
Best FY23 Quarter: Q4 $2.27B
Latest Quarter: Q1 $2.34B
No. of Employees: 134,400 (total)

During its 2023 fiscal year, the J&J MedTech business experienced several shifts among its top executives, but none was likely as impactful as the departure of its leader. In October, Ashley McEvoy—executive vice president, worldwide chairman of MedTech—informed the organization she would be leaving after a 27-year term of service. During that time, she was involved with the Consumer Products group (which included brands such as Tylenol and Zyrtec), and became president of McNeil Consumer Healthcare. Upon joining MedTech in 2009, she was the worldwide president of Ethicon and then company group chairman of Vision and Diabetes Care. Upon her announcement, she was also serving as chair of the AdvaMed Board of Directors, which she vacated with her departure.

Tim Schmid was named as McEvoy’s replacement at the time of the announcement—a 30-year veteran of the company. Prior to the promotion, he was serving as company group chairman of J&J MedTech Asia Pacific, where he helped to deliver above-market growth from the segment. Before that, Schmid held leadership positions in sales, strategic marketing, and general management across multiple businesses and geographies.

Schmid took the helm of a firm that became only the third finished medical device manufacturing organization to crack $30 billion in annual revenue. It ended the 2023 year with a sales tally of $30.40 billion. That achievement accounts for approximately three-eighths of J&J’s total revenue for the fiscal (Innovative Medicine sales finished at $54.76 billion). The amount reflected a 10.8% rise over the prior year and was further celebrated with positive increases across every franchise and segment within MedTech.

The second highest-producing J&J MedTech franchise, Orthopaedics (more commonly known as DePuy Synthes), enjoyed mid-single digit percentage gains across all its portions. Its 2023 tally of $8.94 billion represented a modest 4.1% increase over the year prior. Among the four units that comprise the business, Trauma led in sales with a figure just shy of $3 billion (3.8% growth); rise in procedure volume and new product adoption were provided as the reasons behind the gains. Following close behind at $2.95 billion was Spine, Sports & Other. This increase of 3.7% over the previous year was driven by Digital Solutions, Shoulders, Sports, and Craniomaxillofacial products. Of the two large joint units, Hips notched $1.56 billion (3.0% growth) with increasing procedures as the primary reason for the rise. With positive response to new ATTUNE products and the VELYS Robotic assisted solution, Knees’ 7.1% increase translated into $1.46 billion in sales.

Keeping future growth at top of mind, DePuy proudly declared a trio of U.S. FDA clearances during the fiscal—all coming just a few days apart in October.

The first couple of agency nods were for the combination of the TriALTIS Spine System and the TriALTIS Navigation Enabled Instruments. The former is a next-generation posterior thoracolumbar pedicle screw system that offers a comprehensive implant portfolio and advanced instrumentation designed for integration with enabling technology. The latter includes drills, taps, and screwdrivers that can be operated manually or under power for navigated and non-navigated use. Combining a new portfolio of implants with a digital ecosystem, the TriALTIS Spine System was developed to address unmet clinical needs and help surgeons achieve more consistent outcomes in treating complex spine conditions, including degenerative, tumor, trauma, and deformity pathologies.

“When it comes to treating complex spinal pathologies, each patient is different, and each case requires its own unique treatment decisions,” said Daniel Sciubba, MD, MBA, chair and professor of neurosurgery at Northwell Health/Hofstra (also, a paid DePuy Synthes consultant who was involved in the system’s development). “The TriALTIS Spine System offers a comprehensive implant portfolio that complements different anatomies and procedures and can help to streamline surgical workflows and enable intraoperative flexibility—all with the potential to improve clinical experiences.”

Then, the company’s TriLEAP Lower Extremity Anatomic Plating System—a comprehensive yet modular, procedure-specific system designed to meet the complex needs of orthopedic surgeons, doctors of podiatric medicine, and foot and ankle specialists—garnered its clearance. This system provides a mix of contoured and conventional plates that can accommodate multiple screw diameters and instruments that can be used during the reduction, internal fixation, and fusion of bones and bone fragments. The procedure-specific plate options cover a wide range of needs, while the procedure-specific implants with multiple screw shaft diameters offer surgeons various options for intraoperative decisions.

In addition, with renewed interest around supply chain given the challenges experienced during recent years, DePuy ensured its customers were well-informed. As such, it gained recognition from the Healthcare Industry Resilience Collaborative (HIRC) with a Transparency Badge for its Trauma products. According to DePuy, the achievement demonstrates the organization’s commitment to building a transparent and resilient supply chain that best serves its customers.

“Our position as supplier Leadership Members in the HIRC reflects our commitment to advancing healthcare and ensuring continuity of supply across our products and services,” said Kristyn Harkins, vice president MedTech Deliver, Americas. “Achieving the Transparency Badge is an important step in creating visibility to the priority we place on reliable supply, business continuity, and collaboration with our customers.”

$8.587 Billion
Prior Fiscal: $8.588 Billion
Percentage Change: 0%
R&D Expenditure: $14.6B (total)
Best FY22 Quarter: Q1 $7.0B
Latest Quarter: Q1 $7.5B
No. of Employees: 152,700 (total)

The orthopedics franchise of Johnson & Johnson MedTech began its 2022 fiscal year by welcoming two newly acquired companies into its family. The first, a hip-spine analysis firm. The second, a Tennessee-based foot and ankle company.

CUPTIMIZE was purchased last February. CUPTIMIZE hip-spine analysis is a tool to understand and address the impact of abnormal motion between the spine and pelvis in select patients needing total hip replacement. It doesn’t need advanced imaging or an engineering staff to operate—a simple, digital screening tool analyzes patient x-rays when they stand or sit to identify abnormal motion as a result of pelvic tilt.

Abnormal pelvic tilt, according to the company, affects about 20% of patients who require total hip arthroplasty, and 485 of hip revisions are due to suboptimal cup positioning because of pelvic tilt.

CUPTIMIZE enhances DePuy Synthes VELYS hip navigation’s intra-operative capabilities to allow more personalized care.

“The CUPTIMIZE Analysis is easy to use and allows me to make pre-operative decisions regarding a patient’s unique spinopelvic characteristics in a simple way before surgery,” Dr. Jonathan Vigdorchik, an orthopedic surgeon, New York, NY said in a press release. “It is an efficient tool to execute my plan during the operation.”

CrossRoad Extremity Systems entered DePuy Synthes’ fold a month later. The foot and ankle company added miniBunion 3D, dynaBunion 4D, and DynaForce staple compression plates to DePuy Synthes’ portfolio.

ANALYST INSIGHTS: With two major portfolio moves under its belt in the past 12 months (spin-off of Kenvue and the acquisition of AbioMed), J&J is a work in process in its main Ethicon and DePuy Synthes business units. While each major group is behind in robotics (Ethicon to Intuitive and MDT; DPS to Stryker), they should see an upswing in procedures due to a post-pandemic rebound of so-called “elective procedures.” For the future, the question is, “Can they catch-up with the market leaders with their Velys digital platforms across all market segments?”

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

The miniBunion system allows minimally invasive metatarsal bone osteotomy, which is performed to manage mild to moderate hallux valgus, and reduces incision size compared to traditional techniques, according to the company. The dynaBunion lapidus system is an option for lapidus bunionectomy, a procedure to manage moderate to severe hallux valgus, and features instrumentation and implants to correct bunions in four dimensions through smaller incisions. DynaForce staple compression plates combine stability with dynamic continuous compression at the fusion site.

CrossRoad also brought the EcoSMART instrument service with it, providing sterilized, reusable instruments for surgical cases, along with post-surgery instrument recovery and processing to minimize operating room waste and inefficiencies.

“Healthy feet are a foundational element of overall good health, and we are thrilled about the acquisition of CrossRoads and the opportunity to accelerate meaningful innovation by strengthening our offering for elective foot and ankle procedures, enabling us to provide more comprehensive and leading-edge options to surgeons and patients,” Oray Boston, Worldwide President, DePuy Synthes Trauma, Extremities, Craniomaxillofacial and Animal Health, told the press.

DePuy Synthes posted flat revenue of $8.587 billion—with a very small decline from the previous year—in 2022. J&J’s annual report attributed operational growth in hips—which grew sales 2.3% to $1.51 billion—to continued portfolio strength, including the Actis stem and enabling tech Kincise and VELYS hip navigation. Impacts of volume-based procurement in China and timing of tenders outside the U.S. tempered this growth.

Knees proceeds grew 2.6% to $1.36 billion due to procedure recovery, Attune portfolio strength, and pull-through related to VELYS. Trauma product sales fell 0.5% to $2.87 billion, and Spine, Sports & Other sales fell further, dropping 1.9% to $2.84 billion. J&J cited that operational growth in the business was driven by procedure recovery and new product introductions, tempered by competitive pressures in Spine and impacts of volume-based procurement in China.

DePuy Synthes announced the Attune cementless, fixed-bearing knee with Affixium 3D printing tech and the Attune medial stabilized knee last March. The first in the Attune portfolio to use Affixium 3D printing, the cementless knee was engineered to meet the demands of an active lifestyle and features a 3D-lattice structure to create a porosity similar to natural bone. The Attune medial knee touts asymmetric anatomic inserts with a raised medial lip and TruARC lateral path for natural knee function. It addresses a range of posterior cruciate ligament (PCL) management and surgical philosophies. The knee is compatible with the VELYS robotic-assisted solution.

The company achieved FDA clearance for its Inhance shoulder system to be used in reverse total shoulder arthroplasty in May, adding to the system’s cleared use in anatomic shoulder replacement. The reverse system features a 135° neck shaft angle with lateralized options and sizing options to address a full range of patients. Its 3D-printed R/SPEED baseplates and modular baseplates have central screw and central post options. Reverse Inhance also touts a cross-linked, vitamin E polyethylene liner and One Step Prep glenoid reamers.

October saw FDA 510(k) clearance for the Teligen platform to enable minimally invasive surgical transforaminal lumbar interbody fusion (MS-TLIF) using digital visualization and access tools. The system is comprised of a camera control system, VueLIF-T procedure with disposable HD camera, Teligen clear discectomy device, and patient-based disposable ports. The Teligen Vue camera is at the distal end of the patient-specific port to remove the need for a microscope for unobstructed surgical site view, and Teligen’s heads-up display lets surgeons keep ergonomic posture during the surgery. It integrates with DePuy spine’s Unleash bundle of implant solutions.

October also saw FDA clearance for its AltaLyne ultra alignment system for adolescent spinal deformities like scoliosis. It touts a 5.5 mm profile with 36% greater resistance to rod flattening (thanks to a greater bend yielding strength in a lower profile) than a standard, 6-mm cobalt chromium rod, according to the company. A specific cobalt chromium alloy was engineered for the product, and DePuy Synthes said it was the first application of this metal in spinal rods.

$8.58 Billion
Prior Fiscal: $7.76 Billion
Percentage Change: +10.6%
R&D Expenditure: $2.37B (Medical Devices total)
Best FY21 Quarter: Q2 $2.22B
Latest Quarter: Q2 $2.16B
No. of Employees: 18,000

It was an intriguing question, to say the least.

And a surprising one, considering the source.

Nearly three years ago, Haworth President and CEO Franco Bianchi asked about the proper pace of innovation. Should it progress at warp speed, he wondered, as it did at the pandemic’s start (remember all those COVID-19 assays and makeshift ventilators?), or should it proceed more slowly, as his own company has often done in the past?

The answer, it seems, is not so simple.

“How do you strike the balance between the time needed to come up with an innovative idea and the time needed to develop and launch that idea into the market?” industrial designer and author Ayse Birsel asked in an October 2019 Inc.com column. “It’s a great question. Time is relative when it comes to innovation. Just like in Einstein’s Theory of Relativity, it’s both slow and fast, depending on where you are in the process.”

And like the gravity in Einstein’s famous theory, innovation often warps time, influencing the motion of other bodies at play.

Makes sense. Consider, for example, the rapid rate at which SARS-CoV-2 tests and vaccines were created. Assays were available within two months of the virus’s U.S. arrival, while ventilator development time—due largely to open-source designs—fell from years to weeks (Australian engineers reportedly built a model in 16 days).

Vaccine development was equally as fast. Barely three months after the deadly virus first surfaced in China, 52 vaccine candidates were in trial stages—among them, Pfizer-BioNTech’s Comirnaty, Moderna’s Spikevax, and Johnson & Johnson’s one-shot Janssen antidote, all of which received U.S. Food and Drug Administration (FDA) emergency use authorization in December 2020 and February 2021, respectively.

“…we’ve worked at breakneck speed during the Ebola crisis, but now we are working at lightning speed,” Seema Kumar, global head, Office of Innovation, Global Health and Scientific Engagement at J&J, said in an April 2020 Advisory Board daily briefing.

Clearly, such velocity was necessary to battle COVID-19. But J&J did not accelerate immediately; like other vaccine developers, the healthcare behemoth proceeded gradually, first spending decades researching the structure, genome, and life cycle of existing coronaviruses and mapping out potential defense strategies.

Thus, it was able to innovate expeditiously once SARS-CoV-2 showed up.

J&J applied part of that same tactic to its contact lens technology. In 2011, the firm’s Vision franchise embarked on designing a multifocal lens that would provide clear sight from any distance, near or far (slightly more near than far, actually, owing to increased digital device use). Researchers meticulously studied the correlation between pupil size, age, and vision impairment to create unique, pupil-optimized designs for 183 different prescription types. Pupil Optimized Design lenses feature near vision power in the center and distance vision power on the periphery, much like the natural eye. In addition, its “hybrid back curve” mimics the cornea’s curvature, minimizing any distortion on the front part of the lens.

Pupil Optimized Design contact lenses entered the market last March under J&J’s ACUVUE brand.

“During the past few years, governments and regulators, private companies, and esteemed academics have all partnered together in unprecedented ways to deliver results at a speed and scale never before seen in our history…” former J&J CEO and Chairman Alex Gorsky wrote in his final shareholder letter, contained within the company’s 2021 annual report. “Forward-looking investments made years or even decades ago were the seeds for successful innovations that flowered across all our segments in 2021.”

Those blooms produced quite a lush (and profitable) garden for J&J last year despite lingering reverberations from the COVID-19 pandemic. Overall sales swelled 9.6% to $93.77 billion, gross profit ballooned 18%, and net earnings surged 41.9%—its largest increase in four years. The company reseeded its garden, too, with a record $14.7 billion investment in research and development.

“R&D isn’t just the foundation of growth for our company—it’s the engine driving scientific progress in creating a healthier world,” Gorsky’s letter read. “The resources we are allocating to R&D now are what will help us move even more quickly in creating increasingly personalized medicines, advancing robotic surgery, deploying artificial intelligence, and leveraging data in ways that will benefit the patients, consumers, and families we serve for many years to come.”

In sowing its garden for future blooms, however, J&J modified its soil.

The 136-year-old company announced plans last fall to spin off its Consumer Health division to focus on Pharmaceuticals and Medical Devices (now renamed MedTech), which accounted for nearly 85% of total FY21 revenue. J&J expects the tax-free transaction to cost $500 million to $1 billion and be completed by November next year.

The spinoff ends years of speculation about a J&J breakup and follows the lead of General Electric and Toshiba, both of which divulged restructuring plans shortly before J&J last fall. GE’s plans entail hiving off its healthcare business in early 2023, and turning its renewable energy, power, and digital divisions into independent entities in 2024, leaving aviation as a standalone unit. Similarly, Toshiba is cutting ties with its energy infrastructure and computer devices businesses.

Like its comrades, J&J’s spinoff strategy is intended to streamline operations and boost overall growth. Separating consumer health from pharmaceuticals and medical devices will allow the firm to offload its liabilities from ongoing talc-related litigation (more than $2 billion in settlements thus far) and better support its drug and medical device research. “Our goal here,” Gorsky said in discussing the spinoff, “is to continue to drive great performance in each of the segments that Johnson & Johnson will … compete in.”

Each of the segments have already been driving such a performance: All three turned a profit in FY21 as the medtech industry recovered from major pandemic-induced sales losses in 2020. Consumer Health revenue rose 4.1% to $14.63 billion while Pharmaceutical sales mushroomed $14.3% to $52.08 billion and Medical Devices proceeds jumped 17.9% to $27.06 billion. Empowering the Medical Devices segment to its best-in-company performance were double-digit rebounds in each of its four reporting divisions.

Orthopaedics posted the smallest growth yet made significant progress in reclaiming its pre-pandemic sales aggregate. The segment generated an additional $825 million last year, boosting its total 10.6% to $8.58 billion, but that sum is still well below the division’s previous high—$9.67 billion in 2014.

Nevertheless, Orthopaedics enhanced its overall value last year with a new Compression Plate Clavicle System, new shoulder implant, and advanced power tools for trauma and small bone procedures. The division also shored up net future value via an acquisition, FDA clearance, and exclusive distribution agreement.

The latter two moves occurred just two weeks apart in early 2021. The division’s DePuy Synthes subsidiary gained FDA clearance in mid-January to use its robotic-assisted orthopedic surgical platform for total knee replacements. The VELYS digital joint reconstruction system, also used for hip and shoulder procedures, employs advanced planning capabilities to help surgeons make precise bone cuts and accurately position the replacement joint relative to the knee’s surrounding muscles, tendons, and ligaments.

“I’ve used the VELYS Robotic-Assisted Solution in several of my ATTUNE Knee procedures and have found the VELYS Robotic-Assisted Solution to be accurate, fast, and efficient,” Dr. Mark Clatworthy, orthopedic surgeon at MercyAscot Hospital in Auckland, New Zealand, said when the FDA clearance was made public last January. Clatworthy performed the first ATTUNE Knee procedure using the VELYS Robotic-Assisted Solution. “The device enables me to evaluate the bony anatomy and soft tissue envelope of the knee to plan the optimal implant position and then use the robotic-assisted solution to deliver and execute the plan. I’ve found my knees to be well balanced at the end of the procedure and my patients are doing well post-operatively.”

DePuy designed the VELYS solution from technology it acquired through J&J’s 2018 buyout of French surgical technology firm Orthotaxy. VELYS mounts onto an OR table and links to joint assessment data to help clinicians correctly balance the implant and verify its position.

Two weeks after receiving the VELYS clearance, DePuy Synthes forged an agreement to distribute Expanding Innovations Inc.’s X-Pac Expandable Lumbar Cage in the United States. The cage, which supplements DePuy’s lumbar degenerative and minimally invasive spine portfolio, provides controlled height and lordosis expansion to allow for intraoperative adjustment, depending on patient anatomy. A lock ramp-feature built into the endplates offers a large graft space inside the cage for post-graft packing.

DePuy bookended the VELYS clearance and X-Pac distribution pact with the $79.5 million purchase of OrthoSpin Ltd. in December 2021. The Israeli firm’s robot-assisted external fixation system is used in conjunction with DePuy Synthes’ Maxframe multi-axial correction system, an external ring fixation system designed to rectify bone or soft tissue deformities in the leg, foot, or ankle. The FDA cleared OrthoSpin’s G2 fixation system in January last year.

“DePuy Synthes is committed to patients who need deformity correction surgery,” Oray Boston, worldwide president of DePuy Synthes Trauma, Extremities, Craniomaxillofacial and Animal Health, said in announcing the OrthoSpin deal. “The acquisition of OrthoSpin demonstrates our desire to help these patients navigate their recovery with more confidence and less uncertainty with their strut adjustments. It also demonstrates our commitment to bringing transformative medtech advancements to the industry through the application of automated technology that addresses a wide range of orthopedic challenges.”

DePuy addressed some of those challenges through non-automated technology as well. Last summer, it launched the 2.7mm Variable Angle Locking Compression Clavicle Plate System and INHANCE Shoulder System; the Clavicle Plate System features thinner plates, a more accurate plate-to-bone fit, and reduced prominence while the INHANCE System has an intuitive stemless-first surgical approach that offers surgeons the ability to seamlessly transition from stemless to stemmed implants during procedures.

The INHANCE system preserves bone, provides immediate and long-term fixation, and facilitates intra-operative flexibility to simplify preparation for surgical treatment options. It includes reusable instruments, a comprehensive size range of anatomic stemless and stemmed inlay humeral implants, and a circular anatomic glenoid component that is compatible with any sized humeral head.

Additional features of the system include:

• • 3D laser printed implant designs that incorporate the UNITI Porous Structure, which was created specifically for biological fixation in the shoulder.

• • Only two reusable instrument cases, eliminating the need to reprocess, store, and retrieve multiple cases.

• • Advanced cross-linked Vitamin E polyethylene for desired wear characteristics and oxidative stability, which can help reduce the risk of revision and complications and in turn, potentially cut costs and decrease the economic burden to the healthcare system.

“Advancements in shoulder arthroplasty have enabled a broader range of surgical treatment over the past decade but have increased the complexity and cost of preparing for each surgical case,” J. Michael Wiater, M.D., vice chairman, chief of Shoulder Surgery, and professor of Orthopedic Surgery at Oakland University William Beaumont School of Medicine, said upon the INHANCE system’s release last August. “The INHANCE Shoulder System can empower surgeons to seamlessly alter their surgical flow, while simultaneously keeping their focus on the patient, and has the potential to reduce OR time.”

DePuy’s other product launch—the UNIUM System—bolstered both the company’s power tools portfolio and the Trauma franchise’s 2021 revenue. Trauma sales swelled 10.4% to $2.88 billion due to new product introductions and the global market recovery.

Those same factors drove a 13.3% increase in Knee revenue (to $1.32 billion) and 7.2% expansion in Spine, Sports & Other proceeds (to $2.89 billion). Hips sales, on the other hand, benefitted from existing technologies, including the ACTIS stem, KINCISE Surgical Automated System, and VELYS Hip Navigation, which helps enhance precise implant selection and placement. Hips revenue surged 16% to $1.48 billion.

$7.76 Billion ($82.58B total)
Prior Fiscal: $8.83 Billion
Percentage Change: -12.2%
No. of Employees: 18,000

Stronger together.

That was the message touted last summer by the Pan American Health Organization and Caribbean Development Bank as the two agencies worked to buoy mental wellness and resiliency in the West Indies region.

Inspired by the historic 2017 Atlantic hurricane season (17 named storms, $294.92 billion damage total) and launched two years later, the “Stronger Together” campaign aims to bolster sound mental health and coping strategies during crises. The initiative also attempts to allay the stigma surrounding mental health treatment, and improve publicly available pyscho-social support.

Such support was critical last year as COVID-19 lockdowns forced the planet’s populace into months of unbroken solitude, leaving individuals battling loneliness, depression, fear, anxiety, irritability, and post-traumatic stress disorder. Many of these feelings have snowballed among Caribbean island folk whose lives have been upended in recent years by five (consecutive) unusually active hurricane seasons.

“…as we grapple with COVID-19, we are in the middle of our 2020 hurricane season, which is predicted to be above normal,” Diedre Clarendon, division chief for the Caribbean Development Bank’s Social Sector Division, said in campaign kickoff remarks last July. “The impacts for these hurricanes are likely to include heightened stress, fear, depression, and anxiety across populations that are already coping with COVID-19 impacts…we have expanded the scope of our collaboration to include the pandemic. The call to action connecting to feel safe, calm, and hopeful aims to offer information and strategies to assist communities in promoting mental well-being and positive coping strategies, and raise awareness to reduce the stigma about seeking mental health and pyscho-social support while also considering social distancing guidelines. In this way, we will indeed be resilient and we are stronger together.”

Stronger indeed.

Though it targeted a specific audience, Clarendon’s underlying message had worldwide relevance last year in the global battle against SARS-CoV-2. It quickly became the healthcare industry’s mantra as companies temporarily set aside their rivalries and collaborated on coronavirus treatments and pandemic-induced supply shortages.

Johnson & Johnson, for example, partnered with Merck to manufacture its single-shot COVID-19 vaccine, while its Ethicon subsidiary teamed with non-profit firm Prisma Health on the latter’s ventilator expansion device. The product (dubbed VESper Ventilator Expansion Splitter) enables a single ventilator to be used by two patients; Ethicon manufactured and distributed the device at no cost to U.S. healthcare providers.

“Johnson & Johnson has been investing in and applying the best science to take on the most serious public health threats for more than a century—and there was never any question that we would contribute the full breadth and depth of our company’s expertise to global efforts to combat COVID-19,” Chairman and CEO Alex Gorsky told shareholders in the company’s 2020 annual report. “With this ambitious, urgent goal driving us forward, we set out to follow the science and to make our potential vaccine available on a not-for-profit basis for pandemic emergency use. This work was done around the clock, through innovative models of public-private partnerships and new heights of purpose-driven collaboration. At the start of 2020, no one could have imagined just how dramatically our world was about to change…By any measure, it was a year dominated by uncertainty—yet the pandemic helped to clarify our priorities and reinforce our values. And while the familiar yard signs may be faded now, their message is more resonant than ever: We’re all in this together.”

And together, the J&J enterprise—through its 260 subsidiary firms and 135,000 employees—survived the world’s worst health crisis in more than a century with just a few metaphorical bumps and bruises. Considering all the coronavirus-bred headwinds it faced last year (lockdowns, supply chain snafus, elective surgery postponements, tanking economies), the healthcare behemoth turned a profit in 2020, raising total sales 0.64 percent to $82.6 billion. Gross profit was flat at $54.1 billion ($346 million less than 2019) but net earnings fell 2.7 percent compared with fiscal 2019 to $14.7 billion. Earnings per share—both basic and diluted—also were down, slipping 2.3 percent and 2.1 percent respectively.

J&J’s Consumer Health and Pharmaceutical segments were cash cows last year, with the former increasing sales 1.1 percent to $14 billion, and the latter expanding revenue 8 percent to $45.6 billion.
Consumer Health benefited from higher public demand for oral care, wound care, and (outside-U.S.) skin health/beauty products, while Pharmaceutical proceeds grew from gains in nearly all therapeutic areas, save for cardiovascular/metabolism/other.

The Medical Devices segment, conversely, was J&J’s sole spoilsport, surrendering more than a decade of growth to the pandemic’s fiscal thrashing. Total revenue plummeted 11.6 percent in fiscal 2020 to a 13-year low of $22.95 billion as hospital volumes fell precipitously during the second and third quarters, and the medtech market shrunk between 30 percent and 70 percent. U.S. sales slid 11 percent to $11 billion, and international revenue contracted 12.2 percent to $11.92 billion.

Yet there were some bright spots amid the segment’s gloom: The company secured PPE for front-line workers, expanded its hip/knee and intraocular lens platforms, launched new solutions for stroke and arrhythmia treatments, and further developed its surgical robotics capabilities.

“Our Medical Devices business has made strong progress advancing our pipeline despite the pandemic, achieving and even accelerating certain key milestones throughout the year,” Gorsky told analysts during a Q4/2020 full-year earnings conference call in late January (2021). “We are developing an end-to-end digital ecosystem across three robotics platforms, and we achieved a significant milestone this month, receiving FDA clearance for our VELYS robotic-assisted solutions. We believe the industry is just starting to unlock the full potential and benefits of robotic and digital technologies. Johnson & Johnson is well-positioned to bring innovative, differentiated solutions to the surgery suite over the next 10, 20, and 30 years. Overall, we remain very confident in the long-term prospects around the medical device market.”

Those prospects will have to be quite propitious, however, for J&J to recoup its losses from the pandemic. Three of the Medical Devices segment’s four product franchises posted double-digit deficits due to significant hemorrhaging in all eight subdivisions.

The hemorrhaging was heaviest in J&J’s Vision franchise but somewhat blunted in Orthopedics (DePuy Synthes), which stemmed its losses better than its franchise brethren. The lower deficit total is quite surprising, really, considering the global orthopedics industry went dormant while elective surgeries were suspended.

DePuy Synthes’ total revenue fell 12.2 percent to $7.76 billion, driven by steep declines in all four product divisions. The 11 percent slide in Hips sales ($1.28 billion) was partially offset by strong demand for the Anterior approach (front of the hip), the ACTIS stem, and enabling technologies—KINCISE and VELYS Hip Navigation. The KINCISE Surgical Automated System is designed to replace the handheld mallet traditionally used in total hip arthroplasty, while VELYS aims to improve surgical accuracy.

Knees proceeds nosedived 21 percent last year to $1.17 billion, and Trauma sales slipped 3.9 percent to $2.61 billion. Spine, Sports & Other revenue declined 15.7 percent to $2.7 billion, but new product sales helped the division avert further losses.

Some of those new products included the FIBULINK Syndesmosis Repair System and Radial Head Replacement System, both of which launched last October in the United States.

The FIBULINK system treats traumatic syndesmosis injuries and restores the ankle’s physiologic motion. Developed by Durham, N.C.-based Akros Medical Inc. (acquired last year by DePuy Synthes), FIBULINK features a short high-strength suture bridge, which eliminates potential complications associated with broken syndesmotic screws. DePuy claims the product is the only flexible syndesmotic repair system that can fine-tune and readjust tension intraoperatively, allowing surgeons to tighten and reverse suture tension as necessary to optimize the final gap between the tibia and fibula.

FIBULINK implants are manufactured in stainless steel or titanium, and they are compatible with all DePuy Synthes distal fibula plates and any plate hole that accepts a 4 mm non-locking cortex screw. The system delivers biomechanical superiority over the Arthrex Syndesmosis TightRope XP Implant, with FIBULINK providing three times the fixation strength and 71 percent less elongation in a model simulating poor bone quality, according to DePuy Synthes Fatigue Loading and Static Failure data.

The FIBULINK Repair system eliminates the need for medial incisions or hardware in syndesmotic fixations, thus avoiding such complications as neurovascular structure damage or soft tissue entrapment that may occur with suture button constructs. The implant also helps improve procedural efficiency by delivering fixation through a single lateral incision.

“This launch allows us to bring a differentiated solution that combines the benefits of stability and flexibility in the treatment of these common injuries,” I.V. Hall, worldwide president of Trauma, Extremities, CMF, and Animal Health at DePuy Synthes, said upon the FIBULINK’s release. “The acquisition of Akros and subsequent launch of this key technology demonstrate a clear focus on accelerating meaningful innovation and strengthening DePuy Synthes’ Extremities portfolio—providing diverse solutions that enable customers to provide greater benefit to their patients.”

DePuy’s other new beneficial solution for patients last year was the Radial Head Replacement System, designed for patients with destabilized radial head fractures. The system includes side loading spacers and single-use instrument kits to save time in the operating room, improve efficiency, and reduce costs. It reportedly is the first system to use radiolucent trials that allow for better visualization of the elbow joint during trialing and more accurate implant sizing during surgery. The Radial Head Replacement System also offers smooth stemmed implants, which are designed to allow for unrestricted motion, allowing the stem to self-center inside the radial canal.

“We are pleased to integrate this technology into our portfolio alongside our current offerings and provide comprehensive solutions for the treatment of fractures and conditions in extremities,” Hall noted in a news release. “This launch allows us to bring a differentiated solution to surgeons treating the common injury of radial head fractures, while also providing greater efficiency and reducing costs.”

Differentiated solutions—both new and old—proved helpful in curtailing DePuy Synthes’ sales losses last year. Its SYMPHONY OCT System and CONDUIT Interbody platform, for example, slightly offset pandemic-induced shortfalls, but the gains were hardly enough to replenish the company’s near-depleted coffers.

Adding to DePuy Synthes’ troubles last year was the lingering safety issues surrounding its USS II Polyaxial 3D head rings. Last summer, United Kingdom regulators warned patients of problems associated with the rings, which are part of the USS II Polyaxial system, a posterior pedicle screw fixation solution designed to stabilize the spine in skeletally mature patients.

The Medicines and Healthcare Products Regulatory Agency (MHRA) alert (dated July 10, 2020) forewarned patients to the possibility of the Polyaxial 3D head rings cracking and potentially causing the system to loosen before the bone heals.

The MHRA issued its alert eight months after DePuy Synthes released a field safety notice warning users of the rings’ cracking potential and the possibility of resulting loose rods, poor spinal mechanics, non-union or malunion, pain, or dislocation. In the field safety notice, DePuy Synthes said the majority of implant failures occurred during procedures, but noted the problems could surface post-operatively.

The U.K. government urged affected customers to identify and quarantine all affected devices and consult with patients to determine whether they exhibit symptoms of the cracking rings. Those without symptoms should be monitored annually for symptoms for two years after their implantation surgery date, the government said.

$8.84 Billion ($82.05 Billion)
Prior Fiscal: $8.88 Billion
Percentage Change: -0.45%
No. of Employees: 18,000

Red is the color of passion. It is energizing, daring, intimidating; it denotes vitality and warmth. It can be intoxicating and empowering, all at once. Red is power. Red is strength. Red is never boring.

Red also commands attention: It can signify violence (blood), danger, and anger. It evokes compassion and curiosity, and is the prime spectrum color scientifically linked to a quicker pulse, higher blood pressure, and increased metabolism.

These physiological changes can partly be attributed to the eye’s photoreceptors, which are particularly sensitive to long-wavelength light (seen as red). “…red is the most visible color,” neuroscientist/artist/color expert Bevil B. Conway, Ph.D., of the National Eye Institute explained to Reader’s Digest. Conway has spent much of his career studying the ways in which color translates across languages.

“There’s overwhelming evidence that red is a special color,” he said. “Of all the colors, across all of the world, in all of the world’s languages, we communicate red most efficiently.”

And quite frequently: Red is one of the top colors of choice in marketing (second only to blue, foundr Magazine reports). Its popularity can partly be attributed to its powers of persuasion—red logos make for strong first impressions, and they can effectively influence consumer behavior. Case in point: Red has been shown to boost hunger; hence its predominance in the food industry (ergo, Arby’s, DQ, Hardees, KFC, Red Robin, Sonic, Wendy’s). The hue also connotes a sense of urgency, which can drive impulse purchases (think H&M, HomeGoods, KMart, Lego, Target, and TJ Maxx).

Indeed, few colors are as electrifying as red—it is efficient, yet dynamic; edgy, yet streamlined. But it can be contradictory too, conveying conflicting feelings of joy-anger, sensitivity-aggression, comfort-danger, and warmth-wrath, depending upon circumstances. Consequently, it takes a back seat to blue in the medical field.

Contrary to its fellow primary pigment, the color of sky, sea and spring starflowers lowers blood pressure and is an overall calming hue. It conveys strength as well as relaxation; it elicits trust and dependability while also imparting such medically important values as credibility, safety, and cleanliness.

“It should come as no surprise that the leading color used in healthcare marketing and branding is blue,” Deanna Garner, former creative services specialist at Gray Matter Marketing Inc., wrote in an August 2017 company blog. “With associations to trust, dependability, vitality and strength, all healthcare companies can make the argument that blue is a perfect color to represent their values.”

Perfect for some, but not for all. 3M, Aspen Surgical, Canon, Cardinal Health, and Thermo Fisher Scientific Inc. are all healthcare blue non-conformists, though they haven’t always sported red logos. Johnson & Johnson, on the other hand, has never bowed to marketing color theory convention.

Since its 1886 inception, J&J has incorporated red into its branding, either by name or by symbol. The distinctive cursive of J&J’s logo was modelled after co-founding brother James Wood Johnson’s written signature on an 1887 check; the timing and reasons for making the pseudo-autograph red remain unclear, though it may have been influenced by the company’s use of the American Red Cross symbol during its formative years.

Since its early days, J&J’s affinity for the color of fire, hearts, and roses has only grown; truth be told, the hue is actually more visible than ever now—emblazoned on products (Band-Aids, Tylenol), painted on (office) walls, preserved in furniture, incorporated online (website), and immortalized in the company’s sacred scroll, a.k.a., The Credo.

Created in 1943, the Credo is a blueprint of J&J’s principles—a moral compass, so to speak, that guides its collective actions. Chairman and CEO Alex Gorsky has called the Credo (pronounced Cray-dough) the “red thread” that connects the company’s heritage, workplace culture, and corporate DNA.

That thread remained quite strong in 2019 but showed some signs of fraying. Although J&J increased its shareholder dividend for the 57th consecutive year and boosted pharmaceutical sales 3.5 percent, overall company growth slowed to a crawl, climbing just 0.58 percent—a far cry from the 6.3 percent increase recorded in 2017 and the 6.7 percent expansion registered in FY18. Gross profit ebbed as well, flatlining at $54.5 billion, and net earnings (basic and diluted) barely budged, rising just two cents (to $5.72 and $5.63, respectively).

ANALYST INSIGHTS: Having bought out Google Verily’s share in Verb Surgical, J&J continues on its quest toward having a comprehensive digital surgery platform in all major segments. They will seek to compete with Intuitive in general surgery while creating initiatives in orthopedics to compete with Zimmer Biomet, S&N, and others.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

Those dismal statistics are largely a matter of interpretation, though. J&J’s “official” 2019 performance review (filed with the U.S. Securities and Exchange Commission) differs substantially from the version touted publicly by company executives. Their rendition analyzes the numbers from an operational standpoint, thus instantly improving last year’s pecuniary output. For example, the 0.6 percent sales growth J&J recorded with the SEC swells to 2.8 percent operationally, and its 0.7 percent increase in international revenue balloons to 5.3 percent, with currency impacting results by 4.6 percentage points. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 4.5 percent worldwide, 2.3 percent in the United States, and 6.7 percent internationally.

Earnings improved as well in the operational universe: FY19 net earnings totaled $15.1 billion and diluted earnings per share (EPS) was $5.63. But on an operational basis, adjusted diluted EPS grew 8.8 percent.

“I’m proud to highlight that 2019 marked our 36th consecutive year of adjusted operational earnings growth for Johnson & Johnson. We delivered strong revenue and earnings growth in 2019, exceeding the financial performance that we set at the beginning of the year,” J&J Chairman and CEO Alex Gorsky told investors during a fourth-quarter and full-year 2019 earnings call in late January 2020. “Now we accomplished this while also making strategic investments that advance the pipeline of opportunities and innovation across all three of our business segments.”

One of J&J’s most significant strategic investments last year was the February purchase of surgical robotics developer Auris Health Inc. The $3.4 billion deal—historic from both a robotics and private investment perspective—accelerated the company’s entry into the digital surgery ecosystem.

J&J plans to leverage Auris Health’s FDA-cleared Monarch Platform to expand its digital portfolio across various surgical specialties. Currently used in lung diagnostic and therapeutic procedures, the system features a controller interface for navigating an integrated flexible robotic endoscope into peripheral lung nodules, and combines traditional endoscopic views with computer-assisted navigation based on 3D patient models.

“Consistent with our historical pioneering spirit…we are focused on the next frontier of surgery,” Gorsky noted in J&J’s 2019 annual report. “The acquisition of Auris Health Inc., a developer of robotic technologies…accelerated our entry into robotics as part of a digital surgery ecosystem designed to make medical intervention smarter, less invasive, and more personalized to elevate the standard of care. This is a critical component of a digital surgery ecosystem that we are creating.”

Another critical building block of that digital surgery ecosystem is Verb Surgical Inc., a sibling company of Google’s Verily Life Sciences. The entity is now under J&J’s full command following a buyout initiated in December 2019 (terms were undisclosed). The duo joined forces five years ago to incorporate robotics, visualization, advanced instrumentation, connectivity, and machine learning analytics into a digital surgical platform (Surgery 4.0). Verb Surgical subsequently unveiled a robot prototype in late 2016.

In their final months as separate entities, Verb and J&J were preparing for validation studies and had discussed their digital platform with American and European regulatory authorities. The platform itself also was involved in “end-to-end procedures” in multiple general surgery indications, according to J&J executives.

“With Verb Surgical, we set out with an ambitious mission to successfully harmonize the talent and expertise of two  pioneers to design a platform with the potential to transform surgery,” Verily CEO Andrew Conrad said in a Dec. 20, 2019, statement announcing the buyout. “This evolution in the collaboration recognizes the significant achievement toward that mission and I’m excited for the future of this technology in Johnson & Johnson’s hands.”

And in those hands, a promising future is likely to emerge —a world in which customized tools, personalization, predictive analysis, minimally invasive robotics, and artificial intelligence (AI) converge to redefine solutions in cancer diagnostics, soft tissue repair, and orthopedics, among other specialties. J&J’s DePuy Synthes unit has gradually been bolstering its prowess in the latter genre in recent years, first acquiring Orthotaxy, Medical Enterprises Distribution LLC, and JointPoint Inc. in 2018, then teaming with Chinese firm TINAVI Medical Technologies last fall to locally co-market and distribute that company’s robotic arm for spine and trauma procedures, and finally tapping Zebra Medical Vision in  December 2019 to develop and commercialize three-dimensional imaging technology for orthopedic surgery. The new technology is intended to be an addition to DePuy’s Velys Digital Surgery platform.

The Velys offerings will focus first on joint reconstruction procedures by incorporating existing products like the Kincise automated surgical mallet system and JointPoint’s hip navigation and planning software. DePuy plans to add new technologies to the Velys platform over time, including sensors, apps, robotics, and patient selection tools to address each point along a continuum of orthopedic care, from pre-op planning to post-op rehabilitation and monitoring.

Zebra Medical will work with DePuy’s Ireland-based subsidiary to co-develop and commercialize programs that create 3D models from cheaper 2D X-ray images, thereby enabling surgical planning without needing an MRI or CT scan.

TINAVI’s TiRobot arm incorporates 3D imaging as well, but it also uses optical navigation to pinpoint the precise anatomical location of a surgical procedure. Designed for maximum clinical reach, the arm also can drill holes and insert screws; can function in motorized or manual mode, is surgeon-driven, and has a small footprint. A third-generation form of the machine was approved in China four years ago, around the time of a phase III trial in spinal fusion procedures. J&J claims the TiRobot is the only arm-based robotic technology with multiple indications approved for use in China for spine and trauma fixes.

“I couldn’t be more bullish around how J&J is going to create value in the [digital surgery] space, and really kind of the goal that we’re trying to achieve is really to make medical interventions smarter, less invasive, more personalized, quite frankly to change the standard of care, not just for the next 10 years, but the [next] 20 and 30 years,” Ashley McEvoy, executive vice president and worldwide chairman, Johnson & Johnson Medical Devices, noted during a Q3 conference call last October. “I think we’re seeing the investments we made…having an effect…and clearly in innovation, both in digital surgery, through the Auris acquisition, and what we’re continuing to do with Verb and Orthotaxy, and some robotic programs in spine. We’ve invested about $12 billion in M&A since 2017 in Medical Devices to make sure that we’re playing in the most attractive spaces.”

Those spaces and investments have yet to pay off, though. Profits have historically been fickle in J&J’s Medical Devices business as the company struggles to define its role in a fast-changing healthcare market. Growth has been nominal in the last two fiscal years, with revenue rising 1.5 percent in 2018 (vs. 2017) then slipping 3.8 percent in FY19 to $25.96 billion.

The gains have been equally as negligible within Orthopaedics (DePuy Synthes), a franchise handicapped of late by saturated large-joint replacement markets, generic implant startups, shrinking reimbursement rates, and value-based care. Total sales have fallen 2.4 percent over the last three years, from $9.06 billion in fiscal 2017 to $8.84 billion in FY19.

Revenue remained flat against 2018 (declining $50 million), but the stalemate failed to cloud the sunny portrait Gorsky painted of DePuy Synthes’ fiscal performance last year. Analyzing results through non-GAAP-colored lenses, he touted the franchise’s 180 basis point rise and 1.2 percent operational growth, and claimed each major platform “accelerated” versus the previous year.

Creatively perhaps, but not financially.

Only two platforms “accelerated” fiscally in 2019—Hips and Trauma, though most product divisions advanced innovation during the year. Trauma, for example, added to its portfolio with the January 2019 launch of the Femoral Neck System, a solution for repairing femoral neck fractures. Combining stable fixation in a compact design with a minimally invasive approach, the System uses a smaller incision and offers a minimal bone footprint; it also features an articulated blade and screw to limit rotational movement on the femoral head, and is protective of an anatomic provisional reduction.

DePuy Synthes’ Trauma lineup also received a boost from economic viability data for the Universal Small Fragment System, a streamlined network of instruments and implants for small bone trauma. The system consists of a core set of instruments, screws, and standard implants as well as modular anatomic implant trays for small fragment anatomy. In addition, the core instrument set can support all 2.7 mm/3.5mm DePuy Synthes non-locking, LCP and VA LCP plating technologies.

DePuy markets the Universal Small Fragment System as an economic asset for hospitals; data released last fall indicate the system can save the average level 1 trauma center in the United States $72,685 annually via reduced numbers of instrument trays. Such streamlining translates into ecological savings too, as the system reduces water and energy consumption by 56 percent annually.

Although useful as a marketing tool, the data have had no effect on sales. Total Trauma revenue rose just 0.8 percent last year to $2.72 billion, with sales faring better at home than abroad (U.S. proceeds expanded 3.3 percent; international revenue fell 2.9 percent).

Hips sales rose 1.4 percent to $1.43 billion on strong demand for the ACTIS stem, the KINCISE surgical automated system, and the anterior approach to THR.

Hips’ increase, however, was offset by a foreign exchange fueled 1.4 percent dropoff in Knees revenue ($1.48 billion total). The currency conundrum single-handedly overpowered strong global sales of the ATTUNE Revision knee and a fourth-quarter surge in cementless knee proceeds that was driven in part by a new addition to the ATTUNE portfolio.

DePuy Synthes enhanced its ATTUNE lineup last fall with the September launch of the ATTUNE Cementless Knee, an implant featuring several patented technologies for improving knee function, including the ATTUNE GRADIUS Curve to provide stability through range of motion, and GLIDERIGHT Articulation to more accurately replicate the normal patella-femur relationship.

“With the ATTUNE Cementless Knee, we have carried forward technologies and learnings from clinically proven devices like the LCS Knee and combined that with ATTUNE Knee patented technologies to provide customers a solution to meeting emerging patient needs,” Rajit Kamal, vice president and global franchise leader, Knees, DePuy Synthes, said when the ATTUNE cementless option debuted. “Our strong hope and belief is that this implant system will help younger, more active patients get back to doing what they love if their surgeon feels they are the right candidate.”

Regaining activity also is the main goal of the CONDUIT Interbody Platform and SYMPHONY Occipito-Cervico-Thoracic (OCT) System, two new innovations that joined DePuy Synthes’ spinal portfolio last fall. The 3D printed CONDUIT implants, launched in September, are made using Emerging Implant Technology (EIT).

Cellular Titanium, a material with an elasticity modulus comparable to the cancellous tissue found in human bones. Manufactured in various shapes and sizes, the CONDUIT implants feature a latticed center that makes the structures more porous than natural bone (80 percent vs. 50-90 percent natural porosity). The CONDUIT’s porous composition thus promotes natural bone grafting during healing.

The SYMPHONY OCT System, released in November, is designed to help align and stabilize the thoracic, cervical, and occipital bones during posterior cervical fusion procedures for complex spine disorders. The system is intended to address the potential causes of screw failures in patients with suboptimal bone quality, using new hardware and threading.

SYMPHONY OCT also can cross the cervical-to-thoracic junction at the neck’s base while reducing the number of necessary instrument trays for a procedure by more than half (six to two). The implant combines aspects of DePuy Synthes’ low-profile SYNAPSE and MOUNTAINEER OCT systems for the head and neck, and is compatible with components from those systems.

Despite its benefits to both patients and surgeons, neither the SYMPHONY nor CONDUIT systems could help the Spine & Other franchise turn a profit last year. The division posted the largest loss in Orthopaedics, as revenue tumbled 2 percent to $3.2 billion.

COVID-19 Consequences

Q2 2020 Revenue: $1.45 Billion
Q2 2019 Revenue: $2.22 Billion
Percentage Change: -34.7%

The novel coronavirus has spared no one or nothing in its wake. And that includes one of the world’s largest orthopedic manufacturers.

Like countless other orthopedic firms worldwide, DePuy Synthes succumbed to the economic turmoil wrought by SARS-CoV-2, posting high double-digit losses in each of its four product franchises. Trauma sales fell 17.8 percent to $553 million, while Hips proceeds nosedived 37.8 percent, garnering $226 million for the period ending June 28. Spine & Other revenue plunged 39 percent to $499 million, and Knees took the biggest hit, plummeting a staggering 53.1 percent to $174 million.

Overall Medical Devices proceeds sank 34 percent to $4.28 billion, driven mainly by widespread elective procedure deferrals within the Surgery, Orthopaedics, Vision, and Interventional Solutions franchises. Despite the disastrous results, however, Johnson & Johnson management is optimistic the company can escape the coronavirus carnage with minimal damage, estimating an annual loss of 0.8 percent to 2.6 percent (on total revenues of $79.9 billion-$81.4 billion).

Chairman/CEO Alex Gorsky is confident J&J (DePuy Synthes’ parent company) can weather the COVID-19 storm: [J&J] was built for times like this. We have a century-plus history of leading in times of great challenge. We’ve done it before and we can do it again. We are leveraging our scientific expertise, operational scale, and financial strength in the effort to advance the work on our lead COVID-19 vaccine candidate.”

J&J is spending $500 million to develop and manufacture a SARS-CoV-2 vaccine built around an engineered version of adenovirus 26 (Ad26), a disabled, non-replicable version of the common cold virus. The company expects to begin human testing in September in hopes of having the vaccine ready for emergency use early next year.

J&J also has pledged to scale up its global vaccine manufacturing capacity so more than 1 billion doses of a vaccine can be made “at risk”—i.e., before its ultimate design is finalized and approved by the FDA. Production is expected to occur in both The Netherlands and the United States.

AT A GLANCE
$8.88 Billion
Prior Fiscal: $9.05 Billion
Percentage Change: -1.91%
No. of Employees: 18,000

There’s no escaping the Credo.

It’s literally everywhere in Johnson & Johnson’s world headquarters building—inscribed on an 8-foot-tall limestone slab in the structure’s expansive front lobby, mounted in all offices and conference rooms, supersized for reference within the CEO’s workspace, posted at all significant company-sponsored events, and featured prominently in the annual report. It’s also present at all employee work stations and in the homes of most long-serving staff (that practice ended in 2006). Moreover, the Credo (pronounced “cray-dough”) appears in book form (a compilation of 65 copies from various countries), and the document itself has been translated into 35 languages/dialects for placement in 800 facilities worldwide.

The Credo truly is everywhere. But its purpose extends well beyond sheer decoration. The document serves as inspiration for regular company-wide events like “Credo challenges,” (similar to corporate crisis drills) where executives analyze business decisions through Credo parameters, and biennial surveys that solicit input on J&J’s overall consummation of Credo standards.

“Our Credo has been a guiding light for our entire organization…” J&J Chairman/CEO Alex Gorsky said in a company-sponsored Q&A late last year. “Through periods of immense change, it clearly conveyed a set of values that influenced not only what we needed to achieve, but also the actions we needed to take to reach those achievements.”

Indeed, J&J’s Credo is a blueprint of the company’s principles—a moral compass, so to speak, that guides all collective actions. Although its origins can be traced to J&J’s founding, the Credo didn’t become an official document until 1943, when the late President/Chairman Robert Wood Johnson II reluctantly decided to take the company public. Concerned that market pressures and sales would eventually compromise corporate values, Johnson penned a 308-word mission statement establishing J&J’s now-iconic “patients before profits” ideology.

Such a hierarchy—patients first, followed by employees, communities, and shareholders (in that order)—might seem counterproductive to the very notion of capitalism, particularly considering J&J’s $81.5 billion healthcare empire wasn’t built entirely on goodwill. Yet history has clearly proven the value of adhering to Credo dogma.

It was the Credo, after all, that turned one of J&J’s darkest moments into perhaps its greatest triumph, rescuing the company’s sullied reputation after cyanide-laced extra-strength Tylenol capsules killed seven Chicago-area residents in the fall of 1982; the deaths, consequently, reduced J&J’s share of the $1.2 billion global analgesic market by five-fold (from 35 percent to 7 percent).

Guided by its patient-first philosophy, J&J initiated a $100 million national recall of Tylenol and re-launched the product two months later in tamper-proof packaging. The company’s honest, transparent approach to the ordeal is considered the gold standard in corporate crisis management, and has served as the basis for numerous business school case studies over the last three decades. More importantly, however, the Credo-inspired remedy saved both J&J’s reputation and the Tylenol brand: By the end of 1983, J&J (via Tylenol) had reclaimed its 35 percent share of the worldwide analgesic market.

“The Credo is structured in such a way that if we serve the patient, we will always do well. If you truly want to serve your shareholders, you should keep the patient in mind,” Kate Merton, head of Johnson & Johnson Innovation, JLABS New York, Boston and Philadelphia, told Forbes in January. “If you want to help your employee base, you should keep the patient in mind. If we lose track of what we are really here for, then both of those groups will fail, and we will fail as a business to generate revenue and give a return to our shareholders.”

J&J reinforced its allegiance to patients and employees last year by giving the 75-year-old Credo a 21-century makeover, tweaking the document’s language to foster better job fulfillment, and a more diverse, healthy, inclusive workforce. The company also added phrasing to address the changing healthcare ecosystem and the importance of improved global access to medical care.

“…Our Credo is a living and breathing document. It’s both timely and timeless. Several times over the years, we’ve revised it slightly to ensure it remains just as forward-thinking as the day it was introduced,” Gorsky noted in the company Q&A. “In 1987, the last time changes were made, the word ‘fathers’ was added to accompany ‘mothers’ in the first paragraph, and a nod to work/life balance was included…Each time Our Credo has been updated, it has reflected the changing world in which we live and operate.”

ANALYST INSIGHTS: With its shared $450 million investment (with Google Verily) in robotic company Verb Surgical, J&J is another entity with a heavy commitment to robotics in its future. In orthopedics and spine segments, its competitors are ahead in robotic assist platforms—creating pressure on the DePuy division to continue to make investments for its future ability to compete in these areas.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

The Credo’s most recent updates likely were inspired by the rapid rise of digital health and data analytics—the building blocks of connected, personalized care solutions. J&J has invested heavily in these areas in recent years to remain on the forefront of the digital revolution, devising mobile apps for joint pain and blood glucose management, as well as an online ecosystem for knee surgery consults. The company also is developing a digital surgery platform through its well-publicized partnership with Alphabet’s life sciences arm, Verily; details of the project are scant, but the technology reportedly combines robotics, visualization, advanced instrumentation, data analytics, machine learning, and Cloud-based connectivity to create a solution that will rival the likes of Intuitive Surgical’s da Vinci robotic system.

Currently slated for debut next year, the Verily innovation is destined to become a cornerstone of J&J’s digital surgery platform and boost the company’s role in the burgeoning medical robotics arena. J&J fortified that role last year with the February 2018 acquisition of Orthotaxy, a privately held developer of software-enabled surgical technologies, including a robotic-assisted surgery solution.

Like its Verily-developed counterpart, the Orthotaxy robotic system has a 2020 launch date. And while it certainly qualifies as a medical “robot,” the device in no way resembles other systems currently in use: It’s small, portable, and does not use disposable instruments (a potential cost savings of $1,500-$2,500 per procedure). Also, no CT scans or special technicians are required to design and execute the surgical plan.

“We took our time looking at robotics. What we were looking for in robotics was something that really would move the needle in terms of outcomes, without interrupting workflow or adding to the complexity of a procedure,” Euan Thompson, Ph.D., J&J’s global head of R&D, Digital Technology, and Innovation, told In Vivo last July. “We see large, cumbersome systems in the million-dollar range that have to be wheeled into the OR for each procedure, get in the surgeon’s way and very often require support from a dedicated team to enable the surgeon to operate it. We didn’t want to go in that direction. When we found the Orthotaxy system, we believe we saw a very different type of robot—a platform rather than a system.”

“The concept can be applied to different techniques,” he continued. “In total knee replacement, the end effector is a guide system that is continually adjusting the guide block, with the surgeon remaining in control and using the saw through the guide block. The surgeon is doing the cut, but the accuracy is being controlled by the robotic alignment assisted by the continuously updating Orthotaxy system. In spine procedures, the saw guide block would be replaced with a drill guide component—the system refreshes in the same way for, say pedicle screws, to continuously guide alignment. It’s a modular concept. It doesn’t get in the way of work flows. We’ve found it easy to use, intuitive and extremely accurate. This is what we feel is the future.”

J&J is banking heavily on that future to rescue its underwhelming Medical Devices business. Despite increasing its total sales last year, the struggling unit posted the lowest growth rate among the healthcare behemoth’s three major product segments—total revenue rose just 1.5 percent (1.1 percent operational) to $26.99 billion in 2018, trailing the 1.8 percent hike in Consumer proceeds and the 12.4 percent jump in Pharmaceutical sales.

Growth was inconsistent throughout the segment, with solid gains in Surgery, Vision, and Interventional Solutions (previously Cardiovascular) offset by losses in Orthopaedics and Diabetes Care. The latter product franchise posted the largest deficit in 2018 ($606 million), thanks primarily to the $2.1 billion divestiture of J&J’s LifeScan business last spring.

Flat Specialty Surgery finances ($1.34 billion)—owing to stagnant revenue in Ethicon Inc.’s Advanced Sterilization Products (ASP) business—ultimately inspired another round of portfolio molting last summer. With negotiations barely underway in the LifeScan deal, J&J agreed to unload the ASP unit to Everett, Wash.-based Fortive Corporation for $2.8 billion. The sale—which closed only three months ago—marked the company’s fifth major divestment in as many years and further proves J&J’s dedication to portfolio optimization. Since 2014, the company has shed underperforming business units like Ortho-Clinical Diagnostics, Cordis, Codman, and Animas in order to focus on more profitable medical technologies.

Such a strategy is likely to continue as J&J strives to reinvigorate growth in its languishing medtech unit. Hence, Orthopaedics might be next on the chopping block unless the franchise can stop hemorrhaging profits: Annual sales have tanked 8.17 percent since 2015, with Spine the worst offender (down 16.4 percent). Last year, Orthopaedics revenue fell 1.9 percent to $8.88 billion, as losses in Knees and Spine offset gains in Hips and Trauma. Knee proceeds slipped 1.4 percent to $1.5 billion due to U.S. competition, but the decline was somewhat muted by growth in Asia-Pacific, according to J&J’s annual report. Spine’s 7.3 percent sales slide (to $3.26 billion) resulted mostly from market share loss and lingering effects of the Codman Neurosurgery divestment in 2017. Contrarily, new products fueled Hip and Trauma sales growth—1.7 percent and 3.2 percent, respectively.

Abetting the Hip revenue increase ($1.41 billion total) was the March 2018 debut of DePuy Synthes’ ACTIS Total Hip System, and the addition of a dual-mobility acetabular cup to the company’s lineup. The ACTIS Total Hip is designed to increase joint stability immediately after surgery by means of a medial collar, triple-taper geometry, and 12 sizes (for a more precise anatomical fit). Optimized for an anterior approach, the implant can be used with both tissue-sparing and traditional total hip replacement approaches.

The new acetabular cup came courtesy of an agreement between DePuy Ireland Unlimited Company and Société d’Etude, de Recherche et de Fabrication (SERF), a French orthopedics firm that developed the dual-mobility concept in the 1970s.

Dual-mobility acetabular cups are designed to increase hip implant stability in patients with a higher risk of dislocation. They feature a standard femoral head articulating within a large polyethylene liner; that liner also articulates within a metal shell. These two articulation points can help reduce the risk of dislocation as well as the incidence of costly revisions.

Three months after announcing the SERF agreement, DePuy bolstered its Trauma portfolio with the June 2018 launch of the Femoral Recon Nail System, a fixation platform that uses an intramedullary nail to repair femoral shaft fractures. Designed to improve stability and enable post-surgical movement, the product offers surgical entry point and locking options to accommodate surgeons’ varying preferences. The system also has radiolucent insertion handles to help reduce procedural complexity, facilitate intraoperative and X-ray visualization, and assist with guidewire placement.

In an effort to improve clinical outcomes, DePuy designed the Femoral Recon system to address a potential operative complication called distal cortical impingement, which occurs when a patient’s femoral anatomy curvature is greater than the nail curvature. The Femoral Recon system attempts to avoid this issue by reducing the rate of the nail curvature to more closely match the patient’s anatomy.

“I believe the DePuy Synthes Femoral Nail System offers the most streamlined insertion instruments on the market,” Pete Nowotarski, M.D., professor of Orthopaedic Surgery, University of Tennessee College of Medicine, Chattanooga & Orthopaedic Trauma director, Erlanger Health Systems, said when the product launched. “This system, coupled with the most advanced design features in both the piriformis fossa and greater trochanter entry points, offers greater versatility in treating complex femur fractures.”

The Femoral Nail system helped boost overall Trauma sales 3.2 percent last year to $2.69 billion. That product segment posted the greatest Orthopaedics franchise increase in 2018, though the hike was somewhat tempered by losses in the Knees and Spine & Other divisions.

DePuy tried its best to minimize the losses in Knees (albeit, unsuccessfully) by launching the ATTUNE Revision Knee System at the American Academy of Orthopaedic Surgeons 2018 Annual Meeting in early March. The ATTUNE Revision Knee incorporates improved kinematics, fixation, and patient fit to address the challenges typically associated with revision procedures. It has both fixed-bearing and rotating platform options; moreover, its GRADIUS Curve aims to prevent unnatural femoral sliding on the tibia and create smooth motion and stability during everyday activities (stair climbing, walking uphill/downhill, getting up from a chair). The implant’s GLIDERIGHT Articulation, meanwhile, enables the ATTUNE knee design to more accurately replicate the normal patella-femoral kinematics of the patient’s native joint.

The Knees segment’s subpar performance last year was eclipsed only by the larger decline in Spine & Other revenue. That loss, however, was partly stymied by new product launches.

Among the ventured sales saviors was the titanium interbody implants inherited from Johnson & Johnson Medical’s mid-September acquisition of Emerging Implant Technologies GmbH (EIT), and the PROTI 360° line of titanium integrated interbody implants.

EIT’s products consist of an advanced cellular titanium with an open and interconnected porous structure, while the PROTI 360° is reportedly the only titanium-integrated polyetheretherketone (PEEK) to offer 360 degrees of titanium integration. Released in the United States in April, the PROTI 360° is made for patients suffering from neck and back degenerative disc disease; its surface promotes bone-forming cell growth and attachment. Company data show calcium deposition—an indicator of early bone formation—was 470 percent higher with the PROTI 360° technology than PEEK alone and 305 percent higher than titanium alone just one day after device testing.

DePuy engineers built the PROTI 360° implants for better bond strength between the materials, using fortified titanium edges and no exposed corners. The design, according to the company, is intended to prevent delamination, a process in which titanium coatings separate from the PEEK implant where the two materials meet.

The PROTI 360° family of implants includes the ACIS PROTI 360° System for cervical fusion and the T-PAL PROTI 360° System and CONCORDE PROTI 360° System for lumbar interbody fusion. The PROTI 360° Systems are also compatible with ACIS, T-PAL, and CONCORDE Systems instrument sets.

Three months after debuting the PROTI 360° implant line, DePuy introduced the United States to its CONCORDE LIFT Expandable Interbody device, part of its UNLEASH MIS TLIF (Transforaminal Lumbar Interbody Fusion) Procedural Solution. UNLEASH—comprising the CONCORDE Clear MIS Discectomy Device and VIPER PRIME System for percutaneous pedicle screw insertion—aims to support surgical efficiency and simplify key stages of the procedure, to wit.

The single-use CONCORDE Clear device allows the degenerated disc-clearing process to occur with fewer instrument passes while increasing the amount of disc material removed compared to standard discectomy tools. The CONCORDE LIFT Expandable Interbody Device is inserted once the disc has been cleared. With this implant, the surgeon can expand the cage to specifically fit individual patient anatomies. A streamlined instrument set provides tactile feedback during expansion, and the system itself enables surgeons to backfill the space with bone graft (if necessary) after the cage has been fully expanded.

“It works like a ship in a bottle, so it [CONCORDE LIFT] enters the space between the vertebrae in a smaller, collapsed state,” Sean Saidha, senior Research and Development Group Manager, DePuy Synthes, explained on the company’s website. “And then once it’s in the right spot, surgeons can expand it to the desired height.”

The CONCORDE LIFT helps maximize bone graft placement, which increases the potential for vertebral fusion and spine stabilization. “Until now, you couldn’t fill expandable cages with bone grafts after expanding them,” Saidha said, “so this is a game-changer.”

As is SENTIO MMG, a digital mechanomyography platform used to find peripheral nerves during minimally invasive and open spine surgery. Unveiled last fall at the North American Spine Society Annual Meeting, SENTIO MMG uses smart sensor technology with real-time feedback to help clinicians identify and avoid peripheral nerves during spinal procedures; the system features a touchscreen tablet, control unit, probes, and smart sensors—all of which can be set up with a minimal OR footprint.

“The addition of SENTIO MMG to our enabling technologies portfolio will provide value to surgeons performing spine procedures in a variety of care settings, including both hospital and outpatient surgery,” Nadav Tomer, worldwide president, Spine, DePuy Synthes, said upon the product’s release. “This platform underscores our commitment to digital technologies that advance care for patients…”

DePuy reinforced that commitment with its deal for the assets of Medical Enterprises Distribution, including the firm’s automated ME1000 surgical impactor for hip replacements. The battery-powered device is designed for automated bone preparation, implant assembly, and positioning during total hip arthroplasty procedures; it aims to replace handheld mallets for more consistent clinical outcomes and reduced surgeon fatigue. DePuy claims the ME1000 can be used in various surgical approaches, including the anterior approach.

The Medical Enterprises Distribution purchase occurred amid the debut of two new extremities products last spring. In May 2018, DePuy launched the Global Unite Reverse Fracture Shoulder implant—a product specifically designed to treat shoulder fractures in patients with a damaged rotator cuff. The Global Unite system features numerous suture holes and pockets to enhance bone fixation around the implant, a Porocoat porous coating, and a streamlined instrument kit to improve compatibility with the company’s other shoulder offerings.

Four weeks after unveiling the Global Unite Reverse Fracture device, DePuy launched the DYNACORD suture for soft tissue repair. Available on Healix Advance anchors, the suture responds to changes in repair tension that occur over time to promote stability during the healing process. The suture shortens when tension is lost to maintain strong tissue to bone compression (approximation) throughout the healing period and reduce loss of suture tension and gap formation.

$9.3 Billion
Number OF EMPLOYEES: 18,000

Some companies chase the future. Others shape it.

Apple clearly falls into the latter category. From its first computers—the rudimentary but revolutionary pre-assembled Apple 1 and graphical user interface-touting Lisa (the one that introduced the “mouse”)—to the pocket-sized iPod, touch computing iPhone and netbook-killing iPad, Apple truly has changed the way humans socialize and communicate.

Google and Tesla are top morrow moulders as well. The former entity essentially cataloged the Web, giving structure to the jumbled mess of digital data that once littered the information superhighway. Its algorithms and index updates over the last 20 years have turned the tech giant into the go-to source of information (and quite a popular transitive verb). Tesla, on the other hand, is transforming the auto industry with its electric cars and autonomous (self-driving) vehicles, while also becoming a poster child for sustainability (its Powerwall rechargeable home battery system is guaranteed to store 70 percent of its rated power output at 10 years).

Johnson & Johnson considers itself a future forger too. Actually, the company’s chief executive claims the multinational conglomerate has dedicated its life to defining healthcare’s future. “Through the decades, Johnson & Johnson has advanced with the evolution of science and technology…” Chairman and CEO Alex Gorsky reminds shareholders at the start of the firm’s 2017 annual report. “In fact, every year for the past 132 years, Johnson & Johnson has been involved in defining the future of healthcare.”

Maybe not every year, admittedly. But certainly more often than not, J&J has been at the forefront of significant medical breakthroughs: It introduced the world to sterile surgical dressings and sutures (1887); first aid kits (1888); affordable dental floss (1898); BAND-AID adhesive bandages (1921); synthetic sterile sutures (1969); a disposable skin stapler (1978); coated sutures (1979); extended-wear disposable contact lenses (1987); minimally invasive gall bladder removal (1988); low-temperature gas plasma sterilization (1992); and a topical skin adhesive glue (1998).

The company picked up the pace of innovation with the millennium’s arrival, developing a coated antibacterial suture (2003); silicone gel implants (2006); a tissue expander with suturing tabs (2008); and a single-handed balloon sinuplasty device (2012), among others. Over the last few years, however, J&J has somewhat shifted its focus to better target (and shape) both digital healthcare and value-based medicine. In 2015, for example, the company teamed up with IBM’s Watson Health unit to create consumer-focused virtual coaching apps for knee replacement patients. Using Watson’s cognitive computing, the app predicts outcomes, suggests treatment plans, and provides personalized encouragement to patients during recovery.

Through its Ethicon subsidiary, J&J also has partnered with Alphabet Inc.’s Verily Life Sciences to develop a new robotic-assisted surgical solutions platform for improved access to minimally invasive surgery, greater hospital efficiency, and enhanced patient outcomes. Since the pairing, the partners have developed a surgical platform prototype encompassing robotics, visualization, advanced instrumentation, data analytics, and connectivity—an innovation the duo is calling “Surgery 4.0.”

J&J’s value-based healthcare initiatives aim to ease the transition to alternative reimbursement models and reinforce patient engagement, preventative care, and operational efficiency. Its CareAdvantage initiative is a holistic, data-driven approach designed to help companies shift to payment models tied to quality and/or value. The plan uses data-driven analysis and insights, on-site assessments, and focused action plans to improve operational efficiency in various medical fields—including orthopedics—based on goal-specific targeted metrics.

CareAdvantage’s orthopedic component combines a cloud-based platform for patient interaction; episode data analysis; infection risk reduction best practices; pre- and post-operative care (setting) expectations; and a standardized hip fracture care program. Its Patient Athlete plan helps patients prepare for and recover from orthopedic surgery through science-based principles from the Johnson & Johnson Human Performance Institute.

“…we are convinced that technology will not replace but rather will extend human caring…Ahead we see a future that lies beyond the intersection of science and technology,” Gorsky wrote in his shareholder letter. “We are rocketing toward that future, toward the very edge of imagination and possibility. That’s exciting, of course, and just a little daunting at the same time. Getting to that future will require urgency, boldness and vision—characteristics most often attributed to very successful startups. However, I believe it is also a great description of this company today—a 132-year-old startup.”

Not many “startups,” however, are as fiscally fruitful as J&J. Last year, the New Brunswick, N.J.-based company increased its total revenue 6.3 percent to $76.4 billion and grew its per-share stock price by $24.51, or 21.3 percent (ending 2017 at $139.72). Gains occurred in each of J&J’s three product franchises, with Pharmaceutical posting the largest rise (8.3 percent) followed by Medical Devices (5.9 percent) and Consumer (2.2 percent).

The sales surge in Medical Devices is a redemption of sorts, for past franchise sins. Declining revenue in recent years prompted the company to implement a massive restructuring in 2016 and replace its slower-growing businesses with more profitable technologies—a strategy that surely induced the $1.045 billion sale of DePuy Synthes’ Codman Neurosurgery business last February and the $4.33 billion purchase of Abbott Medical Optics in September 2016. The swap-out scheme also was responsible for a handful of smaller bolt-on acquisitions last year that augmented DePuy Synthes’ minimally invasive surgical solutions portfolio and expanded its capabilities in expandable spinal cage technology, 3D printing, and bone defect remedies.

The spinal cage technology came from Interventional Spine Inc., an Irvine, Calif.-based developer of expandable cages and minimally invasive surgical techniques. The company’s cage technology provides optimal tactile feedback for surgeons and features an adjustable design that customizes the device height to individual patient anatomy. The implants are designed to maximize bone graft contact and containment, which helps promote bone growth and fusion. In addition to the expandable cage technology, DePuy picked up Interventional Spine’s facet screw system designed for percutaneoous spine surgery, a minimally invasive procedure that uses small skin incisions without cutting the underlying muscle. Clinical data show such surgeries can help reduce the risk of complications and improve spinal fusion outcomes.

DePuy turned to Tissue Regeneration Systems Inc. to personalize healthcare solutions in Trauma, cherry picking the early-stage firm’s 3D printing and implant coating technologies for patient-specific, bioresorbable implant development. Tissue Regeneration Systems’ (TRS) devices are based on computed tomography (CT) scans for optimal customization and feature a strong, porous scaffold that integrates into bone as well as supports heavy loads during the healing process. The implants’ mineral coating (dubbed a “plate-like nanostructure”) resembles living tissue and helps regrow new bone.

“The acquisition of TRS technology by DePuy Synthes is a testament to our ability to identify and work collaboratively with promising early-stage companies and entrepreneurs to accelerate bringing innovative new products to market,” Robert G. Urban, global head of Johnson & Johnson Innovation, said in disclosing the April 2017 deal. “We are excited at the potential this technology holds to help improve patient outcomes.”

That excitement level rose precipitously last June upon DePuy’s entrance into the nerve localization market via its purchase of Innovative Surgical Solutions LLC, conducting business as Sentio LLC. The deal strengthened DePuy’s spine portfolio in both decompression and lateral operative procedures, and bolsters its ambulatory surgical reach, as Sentio’s platform has a minimal OR footprint. The system provides real-time nerve location feedback to surgeons using adhesive skin sensors; in animal models, Sentio’s technology found nerves faster than one competitive system and at lower levels of stimulation.

“We’ve been divesting slower-growth areas or areas that we think are better off in someone else’s hands and investing in higher growth areas and new technologies,” executive vice president and CFO Dominic J. Caruso told investors last spring. “Our entire medical devices business has largely been grown by these smaller, tuck-in, bolt-on acquisitions with technologies that advance the standard of care…”

Indeed, bolt-on acquisitions proved valuable to J&J last year, as did a 5.7 percent operational increase, 0.2 percent positive currency impact, and 21.3 percent spike in market share price. The company’s Medical Devices business also benefited from solid gains in three divisions (Cardiovascular, Vision, and Surgery) to achieve a 6 percent sales increase (to $26.6 billion).

The Cardiovascular and Surgery franchises posted double-digit growth (46 percent and 13.4 percent, respectively) but Orthopaedics barely budged from its 2016 total, slipping $76 million (0.8 percent) to $9.26 billion. Just two of the four franchise segments increased sales—Hips and Trauma—yet neither hike could completely offset stagnant knee and declining spine proceeds.

Hips revenue swelled 2.4 percent to $1.4 billion, aided in part by two summertime co-marketing agreements and the autumn launch of a hip repair system. One of the agreements covered JointPoint Inc.’s surgical navigation software platform, featuring non-invasive computer guidance, pre-operative digital templating, case planning, and feedback for total hip arthroplasty (THA). The other pact involved the ME1000 surgical impactor from Medical Enterprises Distribution LLC, a battery-powered device designed to replace handheld mallets used in THAs. The impactor delivers constant, stable energy to automate bone preparation, implant assembly, and positioning; it is only compatible with DePuy Synthes hip systems, with adapters available for anterior or posterior approaches.

Two months after negotiating the co-marketing agreements, DePuy Synthes launched its TFNA augmentation system, designed specifically for hip fracture patients with poor bone quality. The solution—billed as the “first and only” polymethylmethacrylate cement with indications for specific traumas—aims to enhance implant fixation in potential cut-out cases.

DePuy debuted its TFNA system around the same time it launched its Maxframe multi-axial limb correction solution for bone/soft tissue deformity treatment in the arm, leg, foot, or ankle.

Maxframe features 3D planning software that creates accurate patient treatment plans and reduces both the number of required X-rays and the procedural complexity of treatments.

Reduced procedural complexity is also the goal of DePuy’s PUREVUE Visualization System, launched in December 2017. Designed for minimally invasive endoscopic surgery, PUREVUE combines a light source, image processor, and local image management for a reduced operating room footprint; it also includes an autoclavable camera head, touch-screen navigation, and customizable settings for minimally invasive surgical procedures.

“With Americans living longer and seeking shorter recovery times, the call for minimally invasive procedures is accelerating,” Stephanie Chamberlain, vice president and global platform leader of DePuy Synthes Mitek Sports Medicine, said when the PUREVUE system was unveiled. “We are committed to bringing forward innovation that responds to evolving patient needs…”

One such innovation that also acknowledges surgeons’ needs is the TRUMATCH Titanium 3D-Printed maxillofacial implants for facial reconstruction and orthognathic (corrective jaw) procedures. Debuting in the United States last fall, the personalized implants are based on CT skull scans and the outcomes of computer-aided surgical planning. The devices are part of a total solution—TRUMATCH Orthognathics, and are the first 3D-printed titanium maxillofacial implants to receive U.S. Food and Drug Administration (FDA) clearance.

Another double-duty innovation introduced in 2017 was the Distal Radius Sterile Kit for wrist fracture treatment. The kit consists of pre-sterilized single-use instruments and implants, including the Variable Angle LCP Two-Column Volar Distal Radius Plate, sizing templates, T-8 screwdriver, 2.4mm Cortex and variable angle locking screws, L-Plates, and T-Plates. Besides eliminating sterilization costs, the kits are designed to drive repeatable, streamlined, more consistent procedures, and help improve operating room efficiency.

The Distal Radius kit was the only new product launch last year within the Trauma franchise, which increased sales 1.8 percent to $2.6 billion. The small gain, however, was neutralized by losses in Spine (down 4 percent to $3.72 billion) and Knees sales (sinking $1 million from 2016 to $1.52 billion). DePuy Synthes attributed the loss in spinal revenue to pricing and competitive pressures, but the deficit is somewhat surprising considering the number of product launches/reveals that occurred during 2017.

In February, DePuy Synthes—in collaboration with LifeNet Health—released its ViviGen Formable cellular bone matrix, a second-generation cellular allograft used for bone formation in spinal fusion surgery. The matrix consists of onsteoinductive, demineralized fibers that create a connected, putty-like consistency to achieve formable handling for open void cases such as posterolateral fusion. This handling reportedly allows surgeons to mold the allograft, helping the ViviGen Formable matrix to conform to the surgical site.

Four months after introducing the ViviGen matrix, DePuy Synthes launched the Viper and Expedium fenestrated screw systems in the United States (the products received FDA clearance in late January). When used with the company’s Confidence high-viscosity spinal cement, the screws can help stabilize spinal columns impaired by advanced stage tumors. Both systems have a hollow shaft and fenestrations above the screw tip to better control cement delivery into the vertebra and ensure immediate fixation; the products also are designed for open or percutaneous spinal fusion.

DePuy Synthes’ two other spinal product freshmen bowed in the final quarter of 2017: The VIPER PRIME System, which made its entrance during the EUROSPINE Congress in Ireland in October, combines multiple instruments into one pedicle screw inserter tool to reduce the number of instrument passes. The CONCORDE Clear MIS Discectomy Tool, meanwhile, hit the EMEA market in mid-December. CONCORDE allows surgeons to complete the degenerated disc-clearing process faster on average and more efficiently compared to traditional discectomy tools while increasing the amount of disc material removed.

“2017 was a year of transition in our Medical Devices business. We’ve taken a lot of action regarding innovation, we’ve taken a lot of action pruning our portfolio, and we’ve taken action as well to improve execution in the field,” Gorsky said in a January 2018 earnings call. “What we are pleased about is the fact that we saw an increase in the number of [product] launches, and improved execution.”

The increase in product launches, however, didn’t always result in higher sales. Knees revenue suffered a similar fate to Spine despite its various innovations in 2017. At the American Academy of Orthopaedic Surgeons (AAOS) Annual Meeting in March, Mitek Sports Medicine unveiled a new suite of knee arthroscopy solutions to improve OR efficiency, simplify ACL and meniscus repair, and make the surgeries more reproducible. The platform included:

The SPEEDTRAP Graft Prep System, which allows surgeons to easily and quickly (within 20 seconds) whipstitch, or suture, one tendon end without using a needle. The timeframe is at least 77 percent faster than traditional techniques, according to DePuy Synthes, and offers strong tension.

The TRUESPAN Meniscal Repair System, which streamlines arthroscopic meniscal repair through a unique delivery system featuring an ergonomic handle, single trigger, and auto-reloading mechanism for quick, simple one-handed use. The TRUESPAN System also features the only 24-degree curved needle option on the market, which may provide better access to challenging tear locations.

The TWISTR Retrograde Reamer, used to drill the tunnels for graft placement during ACL reconstruction. The TWISTR Reamer can be set to drill 13 different tunnel diameters making it the only one-size-fits-all device of its kind on the market. The adjustable design simplifies inventory management by eliminating the need to stock multiple reamer sizes and helps reduce cost during cases where more than one size reamer is needed.

The RIGIDLOOP Adjustable Cortical System, a titanium cortical button and adjustable loop implant that holds a graft in place in the femoral tunnel. The design with adjustable loops eliminates need for multiple size implants. Its one-handed tensioning technique allows surgeons to advance graft to completely fill the socket with stronger fixation and less graft displacement compared to similar adjustable loop devices.

The INTRAFIX ADVANCE Tibial Fastener System provides rigid fixation of the graft in the tibial tunnel. The sheath and screw implant duo is designed to protect soft tissue grafts and promote integration with the surrounding bone to achieve a strong and stable fixation.

DePuy also showcased its ATTUNE Revision Knee System at AAOS. The System features the GRADIUS Curve (to address femur-tibia sliding) and GLIDERIGHT Articulation, which enables the ATTUNE design to mimic the normal patellofemoral kinematics of a human knee.

Any hopes DePuy executives had for ATTUNE’s revenue-generating potential ended abruptly in the spring after a Journal of Knee Surgery study showed a high rate of ATTUNE tibial loosening at the implant-cement interface. Researchers identified 15 cases from three hospitals and referenced 21 additional reports of tibial loosening in the MAUDE database within a two-month period as well as “numerous other tibial failures” also reported without the mechanism for failure specified.

DePuy, of course, questioned the study’s accuracy, noting the absence of a rate calculation and radiographic technique or positioning. The company also took issue with the researchers’ use of MAUDE database statistics, claiming it conflicts with the intent of the database and FDA guidance. “The FDA’s guidance is that, ‘MDR data alone cannot be used to establish rates of events, evaluate a change in event rates over time or compare event rates between devices. The number of reports cannot be interpreted or used in isolation to reach conclusions about the existence, severity, or frequency of problems associated with devices,’ “DePuy said in a formal response to the study.

More bad publicity surfaced for ATTUNE in the fall with the filing of a federal lawsuit alleging the system to be defective and “unreasonably dangerous.” The Louisiana patient who filed the suit attributed ATTUNE’s defect to mechanical loosening, which typically is caused by a weakened or failing bond between the tibial baseplate and implant-cement surface. When such loosening occurs, the artificial knee can detach from existing bone, resulting in failure.

Although DePuy did not respond directly to the lawsuit, the company has released volumes of ATTUNE study data confirming low revision rates and high implant survivorship. Statistics from the National Joint Registry for England, Wales, Northern Ireland and the Isle of Man, for example, show an estimated cumulative revision rate of 1.3 percent at four years (98.7 percent implant survivorship) for 10,605 ATTUNE knees, which compares favorably to the 1.9 percent cumulative revision rate (98.1 percent implant survivorship) for the overall class of knee replacements.

In addition, a radiostereometric (RSA) analysis conducted by the Canadian RSA Network found the ATTUNE tibial base to be stable, moving only 0.17 mm between one and two years. The results are consistent with implants that have acceptable revision rates due to aseptic loosening. A second, randomized-controlled RSA study conducted in the Netherlands compared ATTUNE implant migration to patients implanted with SIGMA knees and reported no difference in implant migration.

$9.3 Billion
NO. OF EMPLOYEES: 18,000

“In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.”

— Charles Darwin

Great innovation is seldom hatched in isolation. That Eureka! moment—long exemplified through lightbulbs and thought bubbles—is just as fictional as the iconic symbols themselves. Consider for a moment the classic yarns of solitary genius forever etched in American folklore: A young Steve Jobs inventing the home computer in his parents’ Silicon Valley garage; Alexander Graham Bell shouting for his assistant upon creating the telephone; Thomas Edison perfecting the lightbulb in a deserted laboratory; and Isaac Singer working interminably to patent the sewing machine.

All transformative inventions. All born independently in a spontaneous moment of creative brilliance.

All myths.

Jobs certainly had a hand in transforming the computer industry, but his role has been considerably romanticized over the years. The first Apple computer, actually, was neither the product of rudimentary garage work nor Jobs’ engineering savvy but rather the ingenuity of Apple Inc. co-founder Steve Wozniak. A self-proclaimed geek, Wozniak built the machine—duly named the Apple-1—after work hours in his northern California apartment and his tiny Hewlett-Packard cubicle (he designed calculators for the company in the early 1970s).

“Actually, there was no design nor construction of this computer in any garage,” he told Gizmodo in a comment section of a 2014 post about the Apple-1. “The designs were passed out freely with no copyright notice so that others could build a useful computer at low cost. Others even had hand-built versions of this computer before Steve Jobs even knew it existed…Steve Jobs did do the business end of getting the thing productized, but at first it was just to be a PC board alone, with no parts on it…The Apple 1 wasn’t designed to be a computer as much as modifying my hand-built terminal (Arpanet days) to be a computer. Jobs did all the business, getting parts, getting sales, getting publicity, from his bedroom. The manufacturing was done in Santa Clara at the same place the PC boards were made. The garage had a bench but it was only really needed part of a day each week to check out the boards and make sure they worked.”

So much for the legend. Jobs’ true role in digitizing the planet was not one of inventor but of visionary. Like most gifted leaders, he recognized good ideas and successfully refined them, creating life-changing technology in the process. He accomplished this not only with the Apple-1, but with the Macintosh as well. Jobs’ stroke of genius for the Macintosh occurred not in a secluded garage or private bedroom but during his now-infamous 1979 visit to Xerox PARC, the R&D arm of Xerox Corporation, where engineers had built a computer featuring a graphical user interface, bitmapping, and a “mouse” (in truth, PARC couldn’t legitimately take credit for the mouse concept, as it technically improved upon a 1963 invention by a Stanford Research Institute computer scientist).

Jobs experienced similar “a-ha” epiphanies in developing the iPod (based on primitive portable digital music players of the mid- to late 1990s, which he contended “truly sucked”), the iPhone (a vast improvement from the first class of smartphones), and the iPad (the brainchild of a Microsoft engineer who was married to a Jobs family friend and invited the Apple executive to his 50th birthday party). He was, as author Walter Isaacson asserts in his 2011 biography, “Steve Jobs,” a master “tweaker.”

“In the eulogies that followed Jobs’s death…he was repeatedly referred to as a large-scale visionary and inventor,” New Yorker writer Malcolm Gladwell noted in a November 2011 review of Isaacson’s book. “But Isaacson’s biography suggests that he was much more of a tweaker. Jobs’s sensibility was editorial, not inventive. His gift lay in taking what was in front of him—the tablet with stylus—and ruthlessly refining it. Jobs was someone who took other people’s ideas and changed them. He was a tweaker to the last, endlessly refining the same territory he had claimed as a young man.”

History is replete with such resourceful refinement. Some of the most renowned inventions, in fact, have been fostered through collaborative “tweaks” rather than solo creativity (namely, the spinning mule, telephone, sewing machine, and lightbulb, among others). The magic of innovation, it seems, is best conjured in groups.

Buoyed by recent research, companies are increasingly embracing the concept of collective creativity, harnessing innovation from their employees as well as from outsiders such as suppliers or competitors. Procter & Gamble was an early proponent of the idea: Seventeen years ago, the consumer goods manufacturer first took a collaborative approach to innovation by splitting new idea development evenly between its own laboratories and outside sources. One of the most successful descendants of the program was the Swiffer, a handheld dusting solution developed by Unicharm Corporation, a Japanese manufacturer of disposable hygiene products, household cleaning goods, and diapers (both for infants and adults). Rather than develop a rival product, P&G purchased the rights to Unicharm’s duster outside of Japan and collected $100 million in sales within the first four months of the Swiffer’s market release.

“…innovation and collaboration are not mutually exclusive; they feed and build upon each other. It’s not an ‘either-or.’ Innovation happens through collaboration,” Forbes contributor Kate Vitasek wrote in 2015. “Today’s business models are more dependent than ever on complex, cross-company collaboration for business innovation. The future will likely be won by those who don’t wait for lightbulb moments from a single genius, but rather develop highly collaborative win-win relationships that leverage the collective power of many.”

Johnson & Johnson is aiming to become one of those prospective champions as it battles for market share and relevancy in an industry fraught with change. Fundamental shifts in reimbursement, consumer empowerment, healthcare delivery models, digital engagement, and the competitive landscape are blurring the lines between medtech, health IT, and therapeutics. Moreover, the switch from volume- to value-based care has created a clear demand for real-world metrics and service- driven solutions, prompting medtech firms to revamp their traditional business models.

JNJ, of course, is no stranger to business model revision, having overhauled its corporate template countless times over its 131-year history to adapt to an evolving environment. In 2016, for example, the global healthcare conglomerate streamlined its consumer and medical devices operations in an effort to centralize hospital product services and create bundled packages for customers. JNJ realigned its formerly decentralized and autonomously managed Medical Devices business under one Medical Device Management unit with three global franchises (Ethicon Surgical, Biosense Webster Cardiovascular, and DePuy Synthes Orthopaedics), a single research and development segment, and one supply chain unit.

The realignment is just one of the strategies JNJ is implementing to revitalize its underwhelming Medical Devices business, which reported flat sales of $25.1 billion last year. Weak product demand, volatile exchange rates, and dwindling international revenue exacerbated the devices unit’s 2016 woes, though the performance represented a significant improvement from the 8.7 percent sales slide recorded in 2015.

ANALYST INSIGHTS: While having an enviable global sales and marketing organization, J&J’s Medical Devices franchise has struggled to get new products to market as rapidly as its competition. There’s been disruption and some innovative thinking in the development groups, manufacturing, and among supply chain partners. While J&J and Alphabet’s Verb Surgical robotic devices capture headlines, Medical Devices will have to consistently deliver product in a timely manner if it wishes to defend its market position. Recent signs are positive but Medical Device managers know that J&J corporate is under pressure to consider the sale of the unit if growth can’t be accelerated. Gary Pruden’s departure indicates results must come soon.

—Tony Freeman, President, AS Freeman Advisors LLC

“Our near-term priority in Medical Devices is to accelerate growth through innovation, portfolio management, and new business models,” JNJ Chairman and CEO Alex Gorsky told shareholders in the company’s 2016 annual report. “Our company’s structure allows us to interconnect our breadth and depth to drive innovation, and to take advantage of growth opportunities wherever they may be. Our Medical Devices business refocused and accelerated our pace of innovation and developed novel commercial models to meet the evolving needs of today’s heathcare system.”

One of those models evolved from a strategic alliance with Tucson, Ariz.-based Value Stream Partners LLC to design, develop, and implement a bundled payment program for hip and knee replacements, in compliance with the Comprehensive Care for Joint Replacement (CJR) Model of the Centers for Medicare & Medicaid Services. Implemented April 1, 2016, the CJR holds acute care hospitals in 67 U.S. areas financially accountable for the quality and cost of entire care episodes (admission through discharge). The plan incentivizes increased coordination of care among hospitals, physicians, and post-acute care providers as opposed to separate payments for the procedure and patient recovery phase.

Another “novel” business model introduced by JNJ last year was CareAdvantage, an assortment of value-based service offerings and risk-sharing opportunities for hospitals. The initiative enables healthcare institutions to work with JNJ as both a supplier and value-based care provider on surgical, cardiovascular, and orthopedic care improvement; the program mobilizes the service capabilities of JNJ’s businesses under a coordinated, branded framework—making it easier for hospital systems to engage with the company as a strategic partner.

“As healthcare continues to change, health systems and their suppliers must work in close alignment to find ways to meet the opportunities and challenges of value-based care,” Tim Schmid, JNJ Medical Device Companies chief strategic officer, said when CareAdvantage debuted. “CareAdvantage begins by listening to and understanding individual health system needs, leading to a customized plan of action to help deliver value at every point along the care pathway.”

JNJ’s value dispatch system, however, was not solely dependent upon business model innovation in 2016. The company also embraced the tried-and-true methods of collaboration and M&A to amplify its market presence in the fast-growing 3D printing, neurovascular and extremities sectors.

JNJ buttressed its 3D printing footprint last year by expanding a longstanding partnership with Belgian firm Materialise to provide patient-specific titanium craniomaxillofacial (CMF) implants under the DePuy Synthes TRUMATCH product line. Pooling resources since 2010, the pair’s latest joint effort helps clinicians precisely match patient shape and size requirements through virtual surgical planning, intraoperative patient-specific tools, and custom 3D-printed implants. The implants are comprised of either pure titanium or PEEK Optima-LT (polyetheretherketone), and are produced both as single and multiple pieces using DePuy Synthes’ PROPLAN CMF virtual surgical planning software.

The custom CMF implants are available in Australia, the Middle East, Africa, and most of Europe (with the exception of France).

The ZERO-P NATURAL Plate from DePuy Synthes helps maintain stability and support bone growth in spinal fusion procedures in the neck. Debuting in October 2016, the Plate is designed for use with the CC Natural spacer, an allograft spacer that offers structural support and fusion potential. Image courtesy of DePuy Synthes.

Several months after firming up the Materialise partnership, DePuy Synthes’ Codman Neuro business bolstered its parent firm’s presence in the neurovascular market with a late-year deal for Pulsar Vascular Inc., a Los Gatos, Calif., company founded in 2005 that developed a product for treating brain aneurysms. The firm’s proprietary device, the PulseRider, is a minimally invasive, self-expanding nitinol implant used to bridge the neck of cerebral aneurysms during treatment of unruptured wide-neck intracranial aneurysms originating on or near a bifurcation. A patented “saddle” shape stent leaves minimal metal in the parent artery, enabling easy access to the aneurysm for coiling while maintaining support. Codman Neuro was previously the exclusive distributor of the device in Europe, where it was awarded CE Mark approval in 2013. Pulsar Vascular has completed a U.S. investigational device exemption clinical trial and is awaiting humanitarian device exemption approval.

“We’ve been divesting slower-growth areas or areas that we think are better off in someone else’s hands and investing in higher-growth areas and new technologies,” JNJ executive vice president and CFO Dominic Caruso told analysts during a spring 2017 conference call.

One of those new technologies is nitinol, a shape memory alloy comprised of equal parts nickel and titanium. Under certain (high) temperatures, the material can become stronger, more flexible, and change shape, making it ideal for musculoskeletal applications. San Antonio, Texas-based BioMedical Enterprises Inc. (BME) has claimed market leadership in this field, having used the metal to manufacture implants for treating various foot, ankle, hand, and wrist conditions, including bunions and hammertoes.

BME’s supremacy in the nitinol implant market most likely convinced DePuy Synthes Companies to align itself with the startup. The larger entity, after all, considers itself an extremities sector leader, and has been actively broadening its orthopedic portfolio of late. Last March, for instance, DePuy negotiated a deal with Israeli investment firm Rainbow Medical Ltd. to co-develop a minimally invasive implant for treating spinal degenerative disc disease, and in November 2015, the company introduced a new joint replacement offering to meet growing demand in outpatient reconstructive surgeries.

BioMedical Enterprises tucked itself under DePuy’s corporate umbrella in May 2016. “BME’s technology is an excellent complement to our portfolio of solutions that spans all of orthopaedics,” Ciro Römer, company group chairman at DePuy Synthes, said in announcing the acquisition. “The BME portfolio will be integrated into our trauma platform, where we will be able to expand the availability of these solutions, increase the pace of innovation in this area, and reach more patients around the world.”

Incorporating BME’s nitinol products into DePuy’s trauma portfolio proved fiscally prudent, as trauma product revenue rose 1.6 percent to $2.57 billion last year. Contributing to the upturn was the mid-July debut of the Variable Angle Locking Hand System, an amalgam of 40 basic and specialty plates for various hand fractures and sizes. The system is the first to feature 1.3 mm locking screws for hand plating, with 1.5 mm and 2 mm variable angle locking plates that feature anatomic contours and smooth surfaces designed to reduce soft tissue irritation as well as screw heads designed to become recessed once locked into the plates. The Variable Angle system’s instruments include Reduction Forceps to help reduce lag screw application; Plate Holding Forceps to hold the plate intraoperatively; and Self-Retaining Screwdrivers to reduce procedural complexity.

The trauma division’s increase, along with modest gains in artificial hips and knees, lifted DePuy Synthes’ overall sales 0.8 percent ($72 million) to $9.33 billion in the year ended Dec. 31, 2016. Notable growth drivers included the TFN-Advanced Proximal Femoral Nailing System, DePuy’s primary hip stem platform, and the Attune knee system, which boasts a clinically proven 98.61 percent survivorship at three years (United Kingdom joint registry data) and 0.5 percent/0.4 percent cumulative revision rates (Australian joint registry results).

Large-joint sales, by and large, kept the Orthopaedics business in the black in 2016: Hip and knee proceeds climbed 2.2 percent and 1.9 percent, respectively, to $1.36 billion and $1.52 billion. The gains helped offset another poor showing from the languishing spinal franchise, where sales were off 0.7 percent, though the loss slowed dramatically from the previous year’s 5.5 percent revenue slide.

DePuy Synthes tried stemming the bleeding in its faltering spine unit with several new product launches but the debuts occurred too late in the year (near Halloween) to truly salvage sinking sales. Still, the newcomers might help Gorsky fulfill his shareholder pledge to return the Medical Device segment to market growth this year.

Among the future all-stars is a portable spine imaging system, a lower back implant, and an anterior plate with allograft spacer—all unveiled at the North American Spine Society’s 2016 Annual Meeting in Boston.

ANALYST INSIGHTS: The future of Medical Devices continues to be a hot topic at J&J. Do they spin it off? Do they invest and acquire? Newly appointed Hospital Medical Devices Leader Sandi Peterson has bold decisions to make in the coming year.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

The KICK System aims to improve access to affordable advanced imaging technology, used by only 11 percent of North American and European spine surgeons despite the innovation’s advantages of accurate screw insertion and reduced likelihood of revision surgery. DePuy Synthes partnered with Brainlab to expand access to advanced visualization through the KICK System.

The image-guided technology enables real-time intra-operative viewing of instruments and implants relative to patient anatomy to permit proper pedicle screw placement. Using a small, portable infrared camera with a computer and monitor, the system moves between operating rooms and works with existing X-ray equipment to support surgical workflow. The monitor displays up to four different X-ray images at one time to eliminate the need for equipment repositioning and ultimately helps reduce radiation exposure as well as procedure time. The KICK System is compatible with the Viper System and Expedium Spine System of implants.

Improving surgical outcomes is also the focus of the Zero-P Natural Plate, which is designed for use with a CC Natural spacer (an allograft spacer offering structural support and fusion potential). The anterior plate and CC Natural spacer are assembled together outside of the operating room and then inserted simultaneously into the disc space during anterior cervical discectomy fusion (ACDF) procedures. The Zero-P product is anchored by four locking screws that help form a rigid bone wedge for stability.

“Compared to ACDF with a traditional plate and allograft, there is no need to expose the vertebral bodies beyond their endplates, resect anterior osteophytes, or remodel the anterior surface of the vertebral bodies,” Peyman Pakzaban, M.D., FAANS, of Houston MicroNeurosurgery, said when the Zero-P plate debuted. “The insertion of a pre-fabricated allograft and the zero-profile plate is performed in one combined step.”

Surgical efficiency and stability likewise form the bedrock of the SYNFIX Evolution System, an implant for standalone anterior lumbar interbody fusion (ALIF). Offering a range of options for various patient anatomies, the SYNFIX system is designed to deliver biomechanical stability to promote fusion, restore function, and optimize surgical workflow.

The SYNFIX system consists of a PEEK spacer coupled with a titanium zero-profile plate and four divergent locking screws, all of which create a wedge of bone that helps anchor the implant during the healing process. DePuy claims the system increases surgical efficiency by reducing the number of instruments and increasing screw insertion speed. Product engineers designed a thread lock sleeve to capture the screw to the screwdriver and prevent it from becoming disengaged during surgery.

$9.3 Billion
NUMBER OF EMPLOYEES: 23,000

“Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.”

— Peter Drucker

Innovation is a woefully misunderstood concept. Ubiquitous, mysterious, and stubbornly elusive, that darling of business buzzwords has become synonymous with the loftiest of human ambitions: power, fame, and wealth. Like its counterpart, “leadership,” the word can stand firmly on its own but also pairs well with many adjectives; it signifies both everything and nothing, assuming various meanings depending on interpretation.

Yet despite its popularity (Amazon lists more than 70,000 book titles on the subject), innovation is, at best, a vague, loosely-defined concept within most corporate circles. Its basic definition—systematically finding, encouraging, and implementing new ideas—has become buried beneath all the variations, nuances, tools, techniques, models, frameworks, and paradigms associated with the word.

Even in its most elemental form, though, innovation isn’t quite so simple. It’s certainly not as basal as the old adage alleges—necessity is not always the sole spawn of invention. “We can all agree that a problem can be a catalyst for a solution, and that many business innovations are born of business challenges,” author/speaker/business strategist/consultant/entrepreneur Larry Myler wrote in a June 2014 Forbes column. “But is it really that simple?”

Not really. Myler contends there are four distinct levels of innovation, the first being problem-solving. Deemed a “reactive” approach to innovation, this method can be both powerful and prolific as long as the problems and solutions are chosen and crafted carefully, Myler claims.

Preventing problems (Level No. 2) is an effective approach as well, though it can be difficult to find and rally the proper resources for executing change. Likewise, “continuous improvement” (Level No. 3) helps companies evolve with the market, but it also can endanger their past progress. “If it ain’t broke, break it is a fun maxim…” Myler writes in his column, “but…replacing a perfectly good business system, albeit for the greater good in the end, creates real problems in the near-term.”

Or, it can act as a springboard to the final level (four), where innovation is achieved through reinvention, or “creation of a new future.” This method, however, is one of the most challenging ways to innovate, as it requires companies abandon traditional ideation discovery processes in favor of unconventional practices. The Henry Ford Innovation Institute and companies like Google and Facebook, for instance, are banking their futures on impromptu workforce “collisions” designed to encourage random (but slightly orchestrated) encounters and idea-sharing among employees. Similarly, Yahoo banned telecommuting in 2013 to boost its grassroots thinktank prowess.

Such forward-thinking strategies, of course, are not foolproof, but without them companies risk possible extinction. “With today’s unprecedented pace of change, the pressure on companies to reinvent themselves is relentless,” Myler noted. “It is sobering to consider the number of companies…that have fallen into mediocrity or worse. Disruptive forces are constantly lurking in the shadows, ready to pounce on unwary, and therefore unprepared, successful companies. Staying relevant and competitive is no easy task.”

The job can be particularly difficult for large multinationals, which often fall victim to their own complacency, inflexibility, and tunnel vision. Johnson & Johnson currently is struggling with professional relevancy as it wrestles with a medtech market slowdown driven by cost-conscious hospitals and group purchasing organizations.

The $381 billion global market for medical devices is growing 3 to 4 percent annually, down from a double-digit rate in the early part of the millennium, according to various industry reports. JNJ’s medical device sales have slowed dramatically in the last few years, falling 7.3 percent and 3.3 percent respectively, in the final two quarters of 2015.

Despite the downturn, the 130-year-old company is confident it can remain a formidable force in the medical device sector by tackling innovation on several different levels.

DePuy Synthes launched the TFN-Advanced Proximal Femoral Nailing System at the American Academy of Orthopaedic Surgeons 2015 Annual Meeting. The product is designed to improve patient outcomes by more closely matching the anatomy of patients undergoing hip fracture surgery. (Courtesy of DePuy Synthes)

With overall sales down 5.7 percent and its medical device revenue falling 8.7 percent in 2015, JNJ is taking a reactionary approach to innovation, integrating its Surgery and Orthopaedics businesses into a single Medical Devices Group under the leadership of Gary Pruden. The company also is cutting about 3,000 jobs within the Group over the next two years, or roughly 4 to 6 percent of the division’s global workforce in an effort to generate as much as $1 billion in annual savings by the end of 2018. JNJ executives claim the sum potentially could boost earnings growth.

“For 130 years, our company has been driving breakthrough innovation in health care—from revolutionizing wound care in the 1880s to developing cures, vaccines, and treatments for some of today’s most pressing diseases in the world,” CEO and Board Chairman Alex Gorsky wrote in his 2015 annual letter to shareholders. “We are acutely aware of the need to evaluate our business against the changing health care environment and to challenge ourselves based on the results we deliver. At Johnson & Johnson, we believe the most important contribution we can make to the dynamic challenges we are facing is innovation—innovation in products, services, solutions and in everything we do.”

Some of those solutions have been crafted using Myler’s second-level approach to innovation (i.e., problem prevention). Over the last few years, the company has steadily been streamlining its Medical Device division, a former pecuniary powerhouse that once generated significant profits from its sales of stents, artificial joints, and surgical tools. But pricing pressure and strong competition from Medtronic plc, Abbott Laboratories, Boston Scientific Corp., and lesser-known firms has gradually eroded JNJ’s market share.

Consequently, the company has all but abandoned the stent business it had pioneered, and has been selling small, slower-growing units. Last March, for example, JNJ sold its Cordis business to Cardinal Health for $1.9 billion in cash, and in June 2014, hawked its Ortho-Clinical Diagnostics unit to private equity firm The Carlyle Group for $4.2 billion. Yet even with those two transactions, the company still has 11 different medical device businesses, including BioSense Webster, the troubled orthopedic and neurological-focused DePuy Synthes, Janssen Diagnostics, and advanced surgical care units Ethicon and Ethicon Endo-Surgery.

“We have to put the patient in the center and reward innovations that drive better outcomes and long-term value,” Gorsky told investors at the start of JNJ’s 2015 annual report. “The promise of innovation in health care is great, but it comes with the need for forward-focused investment in R&D, a holistic approach to evolving global health care markets and bold future-facing strategies.”

Those strategies could potentially help JNJ reinvent itself, thereby helping the New Brunswick, N.J.-based company attain the fourth level of innovation. JNJ’s multi-faceted gameplan involves revamping its selling strategy, focusing on key markets (China, Japan, and the United States), infiltrating high-growth areas (e.g., staplers and surgical robotics), and collaborating to develop professional education programs as well as patient data collection and surgical care initiatives.

The company’s partnership with International Business Machines Corp. (IBM)—announced last spring—will leverage the computing giant’s Watson cognitive computation and analytics platform to create a personal concierge service that prepares hip and knee replacement candidates for surgery and post-operative care. Similarly, JNJ’s union with the AO Foundation is designed to deliver professional education and develop innovations to improve both patient outcomes and efficiency of care, a journey both entities jointly began in 1960. The two organizations are collaborating on new innovation and will work to certify DePuy Synthes products by the AO Technical Commission for use in the foundation’s educational activities, in which more than 200,000 healthcare professionals are expected to participate during the next five years.

JNJ is also forging a new future through M&A. Its DePuy Synthes division, for example, added new capabilities to its lineup with the purchase of Salt Lake City, Utah-based Olive Medical Corporation in February 2015. Founded in 2009, Olive Medical manufactures high-definition visualization systems for minimally invasive surgery; its camera control unit and camera head capture full HD video, and illuminate consistent white light to the surgical site.

The deal gives DePuy Synthes Mitek Sports Medicine full use of Olive Medical’s imaging technology in its arthroscopy product line, presumably improving visualization in patients with shoulder, hip, knee, and small-joint maladies. It could also help JNJ simplify supplier networks for clinicians and medical service providers, company officials noted.

“Because of our broad base across healthcare, we are uniquely positioned to be a partner of choice,” Gorsky said during a 2015 earnings conference call earlier this year. “We’re collaborating more than ever before to meet the world’s most pressing public health challenges…being broadly based in healthcare has been and will continue to be a significant factor in Johnson & Johnson’s success, as it positions us well to lead and grow our business with the evolving healthcare landscape.”

Most of the time, anyway. Last year, JNJ’s broad-base growth strategy encountered a setback, as sales were down in each of the company’s three business segments. The Medical Devices segment posted the most sizable loss, resulting mostly from a 1.4 percent operational decline, a 7.3 percent negative currency impact, and divestitures of the Ortho-Clinical Diagnostics and Cordis businesses—all of which contributed to a $2.38 billion decrease in the unit’s 2015 total revenue. U.S. sales slipped 1 percent to $12.1 billion, while international proceeds fell 14.8 percent to $13 billion due to a 1.7 percent operational decrease and a 13.1 percent negative currency impact.

The Medical Devices segment’s losses were sweeping: Deficits occurred in all six franchises and six of the seven divisions (only Advanced Surgery escaped with a 1.2 percent improvement on its 2014 performance). The Orthopaedics franchise fared best in the carnage, keeping its year-over-year shortfall to 4.3 percent, or half of JNJ’s 2015 total sales descent. Proceeds declined by $413 million amid soft product demand, pricing pressures, and inventory level reductions (mostly in China), according to annual report data.

Orthopaedics did, however, find some traction in the Attune Knee System, trauma TFNA nailing system, and Orthovisc/Monovisc sports medicine products.
DePuy Synthes touts its Conform Flex with Q-PACK technology as the only pre-hydrated demineralized cancellous bone tissue matrix designed for use in trauma-related extremity procedures, including fusion, and for filling bone voids. (Courtesy of DePuy Synthes)

The Attune’s rotating platform design increases the level of conformity to provide stability while delivering freedom of mobility. Rotating platform knees aim to restore more natural movement to the joint by allowing the bearing to rotate in the same manner as an anatomical knee. Rotating knees also are designed to reduce stress and wear on the implant by 94 percent.

Despite the growth in Attune sales, total knee revenue fell 2.4 percent to $1.49 billion. Similarly, the March launch of the TFN-Advanced Proximal Femoral Nailing System and October debut of the Conform Flex pre-hydrated bone biologic did little to stop the 4.2 percent slide in 2015 trauma proceeds, which totaled $2.52 billion.

Unveiled at the 2015 Orthopaedic Trauma Association Annual Meeting, the Conform Flex with Q-Pack technology was developed specifically for trauma-related extremity cases (foot, ankle, hand, wrist), including fusion, and for filling bone voids. Both osteoconductive (provides a natural scaffold for new bone growth) and osteoinductive (stimulates new bone formation), the biologic implant remains stationary once it is implanted; readily absorbs and retains bone aspirate, blood, and saline; and can help accelerate bone growth when mixed with bone marrow aspirate. The implant is also highly flexible and can be compressed up to 50 percent of its original size.

“What I appreciated about Conform Flex was the ease of use and its ability to conform easily in the joints that I had prepared for fusion,” Stephen Carley, M.D., with Mary Washington Hospital in Fredericksburg, Va., noted in a news release. “I was especially impressed by the way it maintained its position and integrity during positioning and compression of the fusion sites with internal fixation.”

Christopher Finkemeier, M.D., of Roseville, Calif., was equally as impressed by the TFNA nail, a sturdy titanium alloy product intended to better fit the anatomy of hip fracture patients. Curved to help surgeons avoid impingement in the lower inside part of the femur, the nail features a lateral relief cut and small diameter at the top to better preserve bone and ensure a proper fit, according to JNJ. The nail also comes equipped with a Helical blade that secures it to the femur head, allowing for proper healing, as well as a design that compresses bone around the implant during insertion, improving implant fixation.

“A big concern, especially in elderly patients with hip fractures, is matching patient anatomy to help avoid complications such as anterior cortical impingement, and the radius of curvature of the TFNA Nail may help reduce that risk,” Finkemeier, co-director of the Acute Care Orthopaedic Service at Sutter Roseville Medical Center (Roseville, Calif.) and member of the AO TK Intramedullary Nailing Expert Group, said upon the product’s release. “Having one system with both a screw and blade and simplified instrumentation are important for the surgeon as well. This system may help improve outcomes and minimize complications, with less time and cost in the O.R.”

The VAPR radiofrequency (RF) devices released by Mitek Sports Medicine last summer are designed to improve outcomes as well. The VAPR Tripolar 90 Suction Electrode—made for shoulder arthroscopy—is touted by the company as the first RF device with a proprietary tip design that independently optimizes ablation and coagulation performance. The product incorporates integrated suction control to help surgeons better visualize and target tissue for resection or coagulation, according to Mitek.

The VAPR Arctic Suction Electrode, on the other hand, is designed for hip arthroscopy. It combines bipolar energy flow, integrated suction and the ability to flex up to 110 degrees—features that help eliminate the need for additional saline suction ports or use of multiple electrodes during the same procedure, while providing access to previously hard-to-reach areas of the hip. The device also enhances operational efficiency: A study conducted by Mitek showed the Arctic Suction Electrode ablated 216 percent more soft tissue per minute than other RF electrodes.

While impressive, the Arctic’s exemplary ablation rate couldn’t rouse JNJ’s sagging hip sales. Revenue slipped 2.6 percent last year to its 2013 total of $1.33 billion.

Likewise, DePuy Synthes’ new spinal products were virtually useless in lifting Spine & Other proceeds in 2015 (year ended Dec. 31). Sales in that division took the biggest franchise tumble, falling 5.5 percent to $3.9 billion despite the introduction of the Expedium Verse Spinal system, described as an “all-in-one” pedicle screw system; the Expedium Osteotomy System, an instrument set for complex deformity correction surgeries; the Viper Cortical Fix X-Tab screw, designed for enhanced fixation in percutaneous surgery; the Synapse System, which uses 3.5-mm and 4-mm titanium alloy rods; and the Vivigen Cellular Bone Matrix, designed for use in the repair or reconstruction of musculoskeletal defects and for enhancements to the Synapse System of implants and instruments, enabling more surgical options during upper spine stabilization procedures.

Other unsuccessful (but still valiant) sales-boosting efforts involved the company’s newest platform of embolic coils for brain aneurysm treatment—MicrusFrame Coils for framing, Galaxy G3 Coils for filling, and DeltaXSFT Coils for finishing—as well as the MatrixWAVE MMF System, an adaptable, wave-patterned bone-borne plate and screw for the stabilization of mandibular and maxillary fractures and osteotomies.

The MatrixWAVE comprises short and tall plates with a wave pattern that allows surgeons to refine bone segment alignment after wiring without requiring them to reposition screws. The plates—which attach to the lower and upper jaw with 1.85-mm diameter screws with rounded heads—can be stretched or compressed for positioning away from tooth roots and nerves to help reduce the risk of soft tissue injury.

$9.67 Billion ($74.3B total)
NO. of EMPLOYEES: 23,000

“Creating a strong business and building a better world are not conflicting goals—they are both essential ingredients for long-term success.”

— William Clay Ford Jr., executive chairman, Ford Motor Co.

Milton Friedman remains as controversial a figure in death as he was in life.

Renowned for his free-market ideology and conservatism, Friedman’s antistatist views—mainly, the belief that unimpeded private competition produces better results than government—are still contentious subjects, nearly nine years after his demise. Yet the most fervent debates continue to revolve around his stance on corporate social responsibility, a concept he labeled “nonsensical” and harmful to the foundations of a free society. Writing in The New York Times Magazine in September 1970, the Nobel Prize laureate impenitently proclaimed that business has “only one social responsibility—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

Friedman believed corporations are inhuman entities that cannot possibly have real responsibilities. In the ideal free market, he contended, “all cooperation is voluntary…There are no values, no ‘social’ responsibilities in any sense other than the shared values and responsibilities of individuals.”

Friedman’s unconventional business strategy initially resounded with Americans (journalist/author George Will called him “the most consequential public intellectual of the 20th century”) but support for the doctrine has dwindled considerably as companies respond to consumer demands for reputational excellence.

Numerous studies have shown that corporate social responsibility (CSR) policies influence consumer purchasing decisions. A survey by branding firm Landor Associates concluded that 77 percent of consumers believe it is important for companies to be socially responsible. “There’s a heightened awareness of the need to be, and to be seen as, a good corporate citizen,” noted Robert Grosshandler, CEO of iGive.com, which allows consumers to support their favorite charities through shopping.

Johnson & Johnson realized the value of good corporate citizenship quite some time ago. The company bible, a.k.a. its 72-year-old Credo, pledges responsibility to the “world community” as well as those in which the diversified healthcare firm operates. “We must be good citizens—support good works and charities and bear our fair share of taxes,” the Credo reads. “We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.”

Like many companies, JNJ has refined its approach to CSR over the years by closely relating social causes to its core businesses, an approach scholars have dubbed “socially responsible capitalism.” Last year, for example, the company eliminated PVC (polyvinyl chloride) in its Enseal G2 Articulating Tissue sealers, and cut its energy and water consumption by 44 percent and 43 percent respectively, in disinfecting/sterilizing the DePuy Synthes TruMatch personalized Sigma Knee implants.

By embodying CSR initiatives into its business strategy, JNJ is both a good corporate citizen and a savvy investor—a combination that has helped the company continually boost its bottom line.

“Our credo is absolutely central to our culture and impacts everything we do. It reminds us that we are responsible to patients, medical professionals, consumers, families and communities worldwide, and it motivates our employees to come to work every day with the passion to make a difference in the world…” CEO/Board Chairman Alex Gorsky told Leaders Magazine last spring. “We share a belief that if we take care of those responsibilities, then everything else will take care of itself. Throughout our history, this has been true.”

And it was true last year as well. The New Brunswick, N.J.-based company grew net sales 4.2 percent in 2014 to $74.3 billion, bolstered mainly by a 15 percent jump in global pharmaceutical revenue ($32.3 billion). The increase in drug sales offset a 1.3 percent slide in worldwide Consumer sales ($14.5 billion) and a 3.4 percent decrease in Medical Devices proceeds ($27.5 billion). Excluding the net impact of M&A activity, including the June 2014 divestiture of Ortho Clinical Diagnostics, the medical devices segment had underlying operational growth of 1.5 percent.

JNJ’s Pharmaceutical segment traditionally has outperformed its brethren, but executives are planning to even the score a bit by seeking approval of more than 30 major products in its Medical Devices division by the end of 2016 while also focusing on fast-growing emerging markets. Much of that focus will be centered on China and Russia, where the medtech sector is growing three to four times faster than in developed markets.

“China is important to every medical device company given the number of people and the size of the market opportunity,” Glenn Novarro, an analyst with RBC Capital Markets in New York, told Bloomberg Business. “JNJ is one of the early investors in China and it’s paying off. They are ahead of the curve.”

And the company has managed to stay ahead of the curve by avoiding the bribery probes that have snared the likes of GlaxoSmithKline, and taking advantage of the Middle Kingdom’s growing middle class, government investments, and age-related conditions like arthritis, osteoporosis and degenerative joint disease.

For example, JNJ conducted clinical trials with bone repair devices manufactured at its Suzhou facility, and is branding them as locally made products to make them eligible for higher reimbursement from the Chinese government.

“My personal vision is to innovate more out of China, taking advantage of new thinking within R&D [research and development] to develop simpler, easier to use and more affordable products,” Michel Orsinger, worldwide chairman of JNJ’s global orthopedics group, told Bloomberg. “And we want to launch them not only in China but bring them into western countries, a reverse innovation.”

Orsinger’s vision could soon become a reality: Last fall, JNJ opened the Asia Pacific Innovation Center, a Shanghai-based medtech incubator with satellite hubs in Singapore, Australia and Japan. Armed with local science and technology experts and deal-making capabilities, the center is tasked with identifying and developing promising early-stage opportunities in drugs, medical devices/diagnostics, and consumer healthcare products.

The Center already has fostered several new collaborations in both Australia and China, including the establishment of a partnering office at Suzhou BioBAY, an incubator with more than 400 companies in the areas of drug discovery, biotech, in-vitro diagnostics, medical devices and nanotechnology. The office, according to executives, will function as an extension of the Center to work with academics and entrepreneurs on a more local basis. The Center’s partnering offices are part of a broader strategy to interact more directly with life science clusters worldwide.

“The Johnson & Johnson Family of Companies has a long standing presence in China extending back almost 30 years. Our on the ground presence across the region allows us to work side by side with our partners with speed, agility, and insight to translate innovations into new products,” noted Jesse Wu, chairman, Johnson & Johnson China. “The Asia Pacific Innovation Center supports our larger goal to address China’s specific healthcare needs, invest in local capabilities, and increase our external collaborations.”

JNJ’s Medical Devices division accounted for 37 percent of the firm’s total worldwide sales in fiscal year 2014 (ended Dec. 31). The segment houses 11 businesses under its roof, including BioSense Webster; the troubled orthopedic and neurological focused DePuy Synthes; Janssen Diagnostics; and advanced surgical care units Ethicon and Ethicon Endo-Surgery.

One of the division’s best performers was the DePuy Synthes orthopedic franchise, which grew sales 1.7 percent to $9.67 billion—more than one-third of the Medical Devices segment’s 2014 gross. Executives attributed the gain to robust sales of trauma, sports medicine, hip and knee products, some of which made their debut last spring.

Product Premieres

The company launched a bevy of new joint replacement parts within a two-month period last year, adding a rotating platform design and anatomic patella to the Attune Knee System lineup in March (at the American Academy of Orthopaedic Surgeons Annual Meeting) and debuting a hip system and anatomic shoulder in May.

The Attune rotating platform design increases the level of conformity to provide stability while delivering freedom of mobility, DePuy Synthes bigwigs noted. Rotating platform knees aim to restore more natural movement to the joint by allowing the bearing to rotate in the same manner as an anatomical knee. Rotating knees also are designed to reduce stress and wear on the implant by 94 percent.

The anatomic patella—unique to DePuy Synthes—works with the Attune knee femoral components and is compatible with both the Attune fixed bearing and rotating platform knees. It is designed to have more natural sagittal plane kinematics than traditional dome style patella components; the more natural kinematics can reduce soft tissue interaction with the femoral component and thereby help prevent soft tissue irritation, according to product spec sheets. Also, the unique kinematics of the anatomic patella are designed to increase quadriceps efficiency in deep flexion, allowing the knee to more easily flex and extend.

Less than 24 hours after unveiling its Attune enhancements, the company introduced the DePuy Synthes Advantage, a suite of provider-focused solutions that complement the firm’s product portfolio and help improve clinical and economic outcomes.

The Advantage suite features an exclusive licensing agreement with MedTrak to offer subscription-based services through a software solution called CareSense. The software allows healthcare providers to collect and analyze real-time data on the “triple aim” measures (patient outcomes, patient satisfaction and costs).

The suite also includes the Geriatric Fracture Program, a tool designed to streamline and standardize preoperative assessments to enable geriatric patients to undergo surgery within 24 hours of injury.

“By providing solutions that, for example, are designed to save time in the operating room, potentially reduce hospital stays or provide real-time analytics that lead to improved efficiency and patient satisfaction, we create value for the healthcare system as a whole,” said Gary Fischetti, company group chairman of Orthopedics.

In May, DePuy Synthes supplemented its Attune rotating platform system with the addition of the Trumatch Resection Guide and Pin Guide solution. The company also enhanced its hip and shoulder portfolios with the release of the Corail Revision Hip system and Global Unite Anatomic Shoulder.

The Corail hip is claimed to be the first tapered wedge revision stem in the United States, designed to help treat patients with mild to moderate femoral defects who need hip revisions, whereas the Global Unite shoulder allows surgeons to use the same humeral stem to repair shoulder fractures, perform total shoulder replacements or reverse total replacements using the previously implanted humeral stem without the use of a stack-on adaptor.

The Global Anatomic Shoulder allows surgeons to use the same humeral stem to repair shoulder fractures or perform a total shoulder replacement. For patients who might later need a reverse total replacement, the system’s already-implanted humeral stem converts to a total reverse construct without using a stack-on adaptor, which could over-stuff the joint and limit its range of motion.

Conversion with the Global shoulder system occurs by exchanging the top of the humeral stem with a reverse component that can be tailored to meet varying patient anatomies.

DePuy Synthes rounded out its joint reconstruction offerings in November with the introduction of the Gryphon Anchors with Proknot technology, an arthroscopic hybrid anchor solution for shoulder repair and hip instability. The Gryphon Anchor uses a proprietary pre-tied sliding knot that forms a construct that is up to 41 percent stronger than tested arthroscopic knots and knotless devices, and up to 64 percent smaller than standard arthroscopic knots. It also is touted as the only suture anchor that, with just one-half hitch, results in a secure knot, enabling surgeons to add incremental tension at any point in the repair.

The Gryphon Proknot Anchor is indicated for use in Bankart and SLAP lesion repair, capsular shift or capsulolabral shoulder reconstruction and hip capsular and acetabular labral repairs. It is manufactured either in non-absorbable PEEK (polyether ether ketone) or absorbable Biocryl Rapide material.

DePuy Synthes added to its Trumatch craniomaxillofacial (CMF) product line in April with the debut of patient specific plates for mandible (PSPM)—customized plates based on surgeon specifications and individual patient anatomy. The CMF PSPM contains a range of customizable design features that surgeons can select before procedures, including plate thickness and shape, screw hole locations, pattern and angulation. Designed and manufactured to the pre-planned patient anatomy, the plate is 3-D milled from a solid block of titanium to its final shape and never bent, thus eliminating the need for plate bending in the operating room, which can induce mechanical stress and increase its risk of breaking.

The CMF patient specific plate for mandible is ideal for use with Proplan CMF surgical guides. These guides have integrated drill markers for creating the bone holes, designed to align with the plate holes to facilitate transfer of the surgical plan to the operating room. Anatomic bone models can be created from original patient computed tomography scans or to the planned outcome to provide tactile and visual representation of the surgery.

DePuy Synthes manufactures its CMF PSPM in 2 millimeter- and 2.5 millimeter-thick profiles, both of which can better withstand fatigue over the firm’s 2.5 millimeter MatrixMandible flat plates; the 2 millimeter-thick plates offer greater strength with a lower profile compared with the 2.5 millimeter MatrixMandible flat devices.

The company beefed up its Spinal portfolio with the release of the Conform Sheet, the ViviGen Cellular Bone Matrix and the Anspach EG1 high-speed electric drill, the latter of which can be used in neurosurgical and otology procedures as well. DePuy Synthes claims its Anspach drill has 30 percent more power than the XMAX and EMAX 2 Plus models. The device is used to cut and shape bone, including the spine and cranium, and has various quick-coupling attachments, dissection tools and accessories for greater flexibility across procedures. The Anspach EG1 drill also features integrated air cooling, an operating speed of up to 80,000 rpms, minimal start-up kick, and is compatible with automated washing and sterilization.

The Conform Sheet is a hydrated, pliable and totally demineralized cancellous bone matrix that fils voids during posterolateral spinal fusion surgery and provides a natural scaffold for new bone formation. Processed by the Musculoskeletal Transplant Foundation, the allograft implant has both osteoinductive and osteoconductive properties. A demineralization process forces bone morphogenic proteins to be exposed, giving Conform Sheet its osteoinductive properties (the scaffold’s cancellous structure gives the Sheet its osteoconductive characteristics). The implant is wickable, readily absorbing various hydrating fluids including bone marrow aspirate, blood or saline; when combined with bone marrow aspirate, Conform Sheet becomes osteogenic.

Conform Sheet comes in four sizes, but it can be cut to fit irregular-shaped anatomies. The implant is compatible with DePuy Synthes’ Spine Matrix Minimally Invasive Pedicle Screw system and Expedium Spine system, among others.

ViviGen is a human cell, tissue and cellular/tissue-based product comprised of crypreserved live, viable cells within a cortical cancellous bone matrix and demineralized bone, delivering all of the properties required for bone formation. “The science behind VivGen, combined with the intraoperative flexibility it provides, drove me to try it initially,” said Kennedy Yalamanchili, M.D., of Christiana Care Hospital in Newark, Del., one of several institutions that has used the product. “My experience early on has shown that ViviGen has desirable handling characteristics and is an appropriate alternative to taking the patient’s own bone for many of my spinal procedures.”

In December, the company received U.S. Food and Drug Administration 510(k) clearance to market its Vertical Expandable Prosthetic Titanium Rib devices (VEPTR) for the treatment of Thoracic Insufficiency Syndrome, a rare congenital condition characterized by severe chest, spine or rib deformities that impair breathing and lung growth in children. The VEPTR products only were previously available under Humanitarian Device Exemption regulations.

The VEPTR/VEPTR II devices include a system of curved titanium rods that surgically are attached to the ribs, spine or pelvis to stabilize and straighten the spine, and to create a separation between ribs to potentially improve breathing and enable normal lung growth and development. After an initial procedure, VEPTR/VEPTR II are lengthened as the child grows. The rods are ideal for treating children with progressive congenital, neuromuscular, idiopathic or syndromic scoliosis.

In July, DePuy Synthes’ Mitek Sports Medicine unit unveiled the Monovisc High Molecular Weight Hyaluronan, a single-injection treatment for knee pain related to osteoarthritis, and the Peak Platelet Rich Plasma (PRP) System, a new device that produces high quality PRP in two-and-a-half minutes.

Monovisc is a single-injection hyaluronan treatment that can provide up to six months of pain relief and helps restore joint mobility in patients suffering from knee osteoarthritis pain. It is injected directly into the knee to help replace the naturally occuring hyaluronan found in healthy joint fluid, and to cushion, protect and lubricate the knee joint.

Monovisc is specifically for patients who have failed to respond adequately to conservative non-pharmacologic therapy and simple analgesics such as acetaminophen.

The Peak Platelet-Rich Plasma (PRP) system works by separating PRP from a sample of a patient’s own blood. The device consistently produces 3 mL of high-quality PRP from 27 mL of whole blood in two-and-a-half minutes, yielding up to seven times the normal concentration of platelets, according to DePuy Synthes.

The company’s Codman Neuro unit experienced a busy second half of 2014, releasing two catheters and  a disposable forceps, and securing approval in China, South Korea and Taiwan for its Revive SE Thrombectomy device, a next-generation self-expanding clot removal product intended to restore blood flow in patients with acute ischemic stroke secondary to intracranial occlusive vessel disease.

The Revive SE device is designed to ease navigation through small and tortuous blood vessels and arteries in the cerebral vasculature. The product enables rapid restoration of blood flow to the brain during an acute ischemic stroke.

DePuy Synthes debuted its catheters during the Society of NeuroInterventional Surgery 11th Annual Meeting last summer in Colorado. The Envoy DA XB Guiding Catheter enables access to more distal anatomy and is designed to provide additional proximal support of the catheter when more stability is required. It features end-to-end braided construction, a distal 10 centimeter hydrophilic coating, soft distal tip with a recessed metal marker, and Brite Tip  Technology for enhanced visibility.

The 7F Envoy Guiding Catheter is the largest-diameter guiding catheter the company has ever offered, expanding upon its 6F Envoy line. With stainless steel end-to-end hybrid braid technology and soft distal Brite Tip Technology, the new catheters are offered in multiple shape configurations to navigate and treat different anatomy.

Courtroom Drama

JNJ is no stranger to the judicial system. As the world’s largest and most diversified healthcare firm, it spends a considerable amount of time in the courtroom fending off legal challenges from rivals, defending its integrity and protecting its proprietary technology. A summary of the more notable cases in 2014 follows:

• Baxter International lodged a patent infringement complaint against JNJ in January 2014, accusing its rival of violating six patents protecting Baxter’s biosurgery products, including Floseal, used to control bleeding during surgery. The suit contends JNJ’s hemostasis delivery devices, including its SurgiFlo product line, directly compete with Baxter’s biosurgery products. Floseal and SurgiFlo are indicated for use in surgical procedures as an adjunct to hemostasis when control of bleeding by ligature or other conventional methods is ineffective or impractical, according to the suit.

• The rivalry between Stryker Corp. and DePuy Synthes reached a boiling point last summer, when the former accused the latter (and five former sales team employees) of breach of contract. A complaint filed in a New Jersey federal court alleged the five Stryker sales reps resigned en masse in April (2014) and immediately began soliciting customers in North Carolina, and promoting DePuy products among area doctors, moves that reportedly cost the firm roughly $3.4 million. The five accused were key members of the Stryker Howmedica team assigned to promote and sell orthopedic reconstructive and trauma products to physicians and surgeons in the Fresno and Bakersfield, CA areas, according to the complaint. Stryker claims their illegal actions will cost the company up to 90 percent of its reconstructive devices sales and between 60 and 70 percent of its trauma parts sales in the region. The suit alleges that the five company defectors submitted almost identical resignation letters simultaneously in April and did not respond to phone calls, emails, or text messages.

• In August, Stryker extended an olive branch (of sorts) to DePuy Synthes, dismissing the company from a patent infringement lawsuit over its hip implant acetabular cup, which features a “dual-locking mechanism and is capable of accommodating a plurality of bearings with different characteristics.”

• Bonutti Skeletal Innovations LLC rang in a merry holiday season with its federal lawsuit (in December) claiming DePuy Synthes’ product line of spinal devices infringes six patents owned by Bonutti, generally covering wedge implants and their methods of implantation.

$9.5 Billion
NO. OF EMPLOYEES: 23,000

If everyone is moving forward together, then success takes care of itself.

—Henry Ford

Automotive pioneer, industrialist and mass production innovator Henry Ford knew a few things about steering a sizeable organization. With a company as large and diverse as Johnson & Johnson (JNJ), getting all of its varied moving parts, products and people to move forward together certainly is no easy task.

Along the same lines, Ford also said: “Before everything else, getting ready is the secret of success.”

Alex Gorsky, chairman and CEO of JNJ must have listened to the advice. Within the first few weeks of fiscal 2013 he hit the ground running, preparing for the year ahead by outlining the course ahead for his company’s Medical Device & Diagnostics business unit—JNJ’s largest revenue generator, edging out pharmaceuticals by a couple of hundred million in FY13 (though pharma’s growth percentages were a little stronger). Gorsky discussed market-leading products, plans for global expansion, and meaningful innovations in MD&D that position the company well for long-term growth.

The feather in the company’s cap, you ask? Orthopedics, of course—in particular, the strong results from the company’s relatively recent acquisition and integration of Synthes’ product line.

“Our Medical Device & Diagnostics business is the largest medical technology business in the world with sales of $27.4 billion (in fiscal 2012), which grew 8.7 percent operationally with the inclusion of Synthes,” Gorsky said at the start of the year. “We’re building on our market leadership positions, having sustained or grown share in the majority of our key platforms, and hold number one or number two positions in over 80 percent of them today. We’re also expanding in emerging markets, and with Synthes, generated strong double-digit growth there last year.”

According to Gorsky, in 2011 and 2012, JNJ invested nearly $3.5 billion in research and development for its medical device segment, advancing its pipelines and developing new technologies and solutions across its businesses. His plan for 2013 was the same.

“As we look to the future we’re advancing innovative new products in our pipeline, continuing to take a disciplined approach to managing our portfolio and adapting our business to the changing marketplace,” Gorsky added.

Company leadership outlined a plan for “creating value through innovation.”

“The Global Medical Solutions portfolio plays in separate and distinct markets but what we have in common is the opportunity to bring more value to the healthcare system by leveraging our leading product positions and connecting them inside and outside of Johnson & Johnson to offer solutions that focus on the most critical clinical and economic needs of our customers,” said Karen Licitra, worldwide chairman, Global Medical Solutions Group.

Gorsky also outlined the importance of emerging markets. For the DePuy Synthes companies, for example, accelerating growth in Asia-Pacific and emerging markets will be fueled by customizing its product portfolio, developing simpler and affordable systems, sourcing manufacturing and R&D locally and enhanced training and professional education for practitioners, officials noted.

New Products

What would a review of FY13 be without a look at new product introductions? As usual, DePuy Synthes had quite a few. Here are some of the more notable additions to the company’s deep stable of technologies.

• • Without a doubt, one of the most noteworthy products to come from JNJ’s orthopedics business in FY13 was the Attune total knee replacement system. Tim Czartoski, director of marketing at DePuy Orthopaedics, told ODT following the launch, that the effort to create Attune “mobilized the best talent in the organization and partnered with outstanding outside research organizations” to solve problems highlighted by research teams, patients and doctors. As part of the Attune research and development, DePuy Synthes Joint Reconstruction also developed the Intuition line of instruments.

“Given that studies show 10 to 20 percent of knee replacement patients aren’t completely satisfied with their knee replacement, we dedicated a significant amount of resources to designing a knee that would help to address these concerns. The Attune knee is the result of our largest research and development project ever,” said Hannah McEwen, worldwide director for Knee Product Development, DePuy Synthes Joint Reconstruction. Additional updates have been launched since the product originally was introduced in March last year.

The project took more than six years and carried a price tag of approximately $200 million. The goal, according to McEwen and others, was to address unmet patient and surgeon needs. The new knee is designed to provide better range of motion and address the “unstable” or “wobbly” feeling some patients report during everyday activities, such as bending, going down stairs, or even something as routine as getting out of a car, officials said.

To achieve an improved feeling of stability for patients, the team at DePuy had to throw out convention and come up with a new implant that might at first glance appear to be the same as other knee replacement technology, but upon closer inspection differs from previous generations of devices in shape, form and function. Through research collaboration with the University of Denver in Colorado and University College Dublin (Ireland), researchers evaluated current knee designs to assess how implant geometry aids in maintaining stability through patients’ daily activities. An implant with a new shape employing what the company calls the “Gradius Curve” was the result.

The research—with a team of surgeons and industry experts from around the world working on the project—led to more than 19 patents for Attune as well as its related instrument technology. For example, the research and design teams spent more than 10,000 hours working with surgeons in different settings to get feedback and record data, McEwen said. That included ethnological research with doctors—filming them, studying movements and behaviors, and even looking for operating room (O.R.) efficiencies. Other research activities included X-rays of patient movement, extensive tests with cadaver knees and computer simulations.

A number of patented technologies resulted from the research into the Attune knee. Attune’s Gradius Curve is described as a “gradually reducing radius” that is designed for improved conformity throughout the range of motion, providing better anterior/posterior stability. The Sofcam Contact is an S-curve designed to provide smooth engagement for stability through flexion, while reducing stresses placed on the implant. The Logiclock tibial base is a locking design intended to improve kinematics while reducing wear to what the company claims is “the lowest reported levels in the industry.” The Logiclock feature also gives surgeons the options to choose the best size and fit for each patient from a range of sizes, according to DePuy Synthes. The system’s Glideright Articulation is designed to accommodate patient variation and soft tissue interaction, while optimizing patella tracking.

As part of its many hours of Attune research and development, DePuy Synthes also developed a line of instruments branded Intuition. Like the knee itself, the design of the instruments also went back to the drawing board to make them—as the name suggests—more intuitive. The tools include lighter weight composite materials, color-coded technology, and easier-to-see gauges and measurements. Single-layer instrument cases are lightweight with fewer instruments, reducing weight by 51 percent as compared to previously available instruments. The instruments also minimize the number of cases in the operating room while maintaining durability.

• • During FY13 Johnson & Johnson’s DePuy Synthes Trauma division launched a new Radial Head Prosthesis System for primary and revision joint replacement of the radial head to restore joint function of the elbow. “This system is a comprehensive solution for the radial head replacement that permits the surgeon to choose whether a long or short stem is best for the proximal radius,” said Harry Hoyen, M.D., Department of Orthopedic Surgery, MetroHealth Medical Center, Cleveland, Ohio. “With the system, a novel surface etching permits on-growth and stability, the head element can be placed onto either stem and is designed to take into account the PRUJ (proximal radioulnar joint) and radiocapitellar articulation for each respective size. There also is a side-loading option for intraoperative assembly.” The modularity of the system—24 heads and 10 stems allowing for 240 possible implant combinations—enables surgeons to restore the appropriate height, which may aid in elbow stability, according to the company. The side-loading capability facilitates in-situ insertion and assembly, which may allow for a smaller incision than a top-loading device, while the stem texture ensures a uniform press fit in the radial canal. The system also provides an integrated connection screw to facilitate assembly, along with simple instrumentation. West Chester, Pa.-based DePuy Synthes Trauma makes fixation products, including screws, plates, nails and other implants, that are used to treat fractures, deformities, and tumors related to the shoulder, hand, arms, legs, hip, pelvis, condyles and feet.

• • DePuy Synthes expanded its collaboration with Brainlab through the worldwide launch of navigation-ready instrumentation for its spine systems, and an exclusive global agreement to co-market the Airo Mobile Intraoperative CT by Brainlab. Following 510(k) clearance from the U.S. Food and Drug Administration (FDA), Brainlab is moving forward with the sale of the Airo Mobile Intraoperative CT. The FDA clearance was received on Sept. 26, 2013, by Mobius Imaging LLC, the developer and manufacturer of Airo Mobile Intraoperative CT. Brainlab develops software-driven medical technology designed for less-invasive treatment. Core products are image-guided systems and software that provide real-time information used for surgical navigation and radiosurgical planning and delivery. Founded in 2008, Ayer, Mass.-based Mobius Imaging develops and manufactures advanced imaging technologies. The Airo Mobile Intraoperative CT System is the company’s first commercial product and is distributed under an exclusive sales and service agreement with Brainlab. Along with the Airo Mobile Intraoperative CT, the company released navigation-ready instrumentation for its Viper 2 and Expendium Spine Systems. The instrumentation was designed to be pre-calibrated for use with Brainlab Navigation Systems. “The broader collaboration between DePuy Synthes Spine and Brainlab will enable us to provide a seamlessly integrated solution of implants, instrumentation and navigation systems that have the potential to improve patient outcomes, inform decision-making during surgery, increase efficiency of spinal procedures and reduce O.R. time,” said Max Reinhardt, worldwide president, DePuy Synthes Spine. DePuy Synthes Spine and Germany-based Brainlab plan continued collaboration.

• • DePuy Synthes Spine also introduced the Synflate vertebral balloon as part of its portfolio of procedural solutions for the treatment of painful vertebral compression fractures, internal breaks in spinal bones that commonly occur in people with osteoporosis. According to the American Academy of Orthopaedic Surgeons, more than 700,000 people suffer these types of fractures each year. The Synflate balloon is semi-elastic with material stiffness that, according to the company, has been optimized to enhance the structural stability of the balloon during inflation, enabling controlled and predictable cavity creation. At maximum inflation volume, the balloon is nearly double the strength of standard elastic balloons currently available on the market, company officials claim. Synflate is available in 10, 15 and 20 millimeters, is offered with mono or bilateral access kits, multiple access trocars, and can be used with bone fillers including DePuy’s Vertecem II and Confidence line of cements. Vertebral body balloon procedures are used to reduce pain and strengthen and restore the shape and height of collapsed vertebra. In the procedure, the balloon is inserted into the vertebra and inflated in an attempt to restore normal bone height. The balloon then is removed and the space or cavity that was created by the inflation of the balloon is filled with special bone cement to strengthen and stabilize the bone.

• • DePuy Synthes’ Mitek Sports Medicine division launched the Milagro Advance interference screw, a biocomposite screw designed to offer easier and faster insertion when compared to traditional interference screws. According to Mitek officials, the screw’s unique distal tip has been shown to reduce bone engagement load by more than 80 percent, which enables easier insertion into hard bone. The unique thread design reduces torque transmission to soft tissue. The screw’s larger thread pitch, the distance between grooves, enables insertion in half the time compared to traditional interference screws. “I’ve used Milagro BR screws in my practice for years. The screws provide excellent fixation and promote bony ingrowth over time. We have seen no complications in use of the screw,” said Bert Mandelbaum, M.D., of the Santa Monica (Calif.) Orthopaedic and Sports Medicine Group. “This latest generation Milagro Advance screw addresses the need for a biocomposite screw with better screw engagement and faster insertion.” The Milagro interference screw was introduced in 2004, when it became the first implant made of Biocryl Rapide, a biocomposite material exclusive to Mitek Sports Medicine. Milagro Advance also uses Biocryl Rapide, which, according to Arthroscopy Journal, has been shown to absorb and to allow for ossification of the implant site in as little as three years after anterior cruciate ligament repair.

• • DePuy Synthes Joint Reconstruction introduced the Global Unite Platform shoulder arthroplasty system. Global Unite is a modular system that allows 72 different sizing configurations to better address the need of the patient. A unique suture collar allows secure anatomic reconstruction of the tuberosities and helps return the shoulder to a natural anatomical position. The system also offers the option to convert from a fracture system to a reverse total shoulder without compromising recognized biomechanical principles while maintaining a well-fixed humeral stem. “Shoulder pathology is exceptionally varied, and with the Global Unite system surgeons have a comprehensive and fully interchangeable system that affords flexibility and versatility designed to address patients’ needs,” said Joseph Iannotti, M.D., Ph.D., chairman, Orthopaedic and Rheumatologic Institute, Cleveland Clinic, Cleveland, Ohio. “My personal experience with the Global Unite system has been very positive. Having a system where the implant is easily convertible gives you confidence that you can restore your patient’s shoulder to a natural anatomical position.”

• • DePuy Synthes’ CMF (cranio-maxillofacial) division, which makes skeletal and soft-tissue repair and reconstruction technology, launched new instrumentation for what company officials say is less-invasive surgical fixation and stabilization of rib fractures with the firm’s MatrixRIB system of pre-contoured, low-profile titanium plates, locking screws and intramedullary splints. MatrixRIB Minimally Invasive Plate Osteosynthesis (MIPO) instrumentation was designed to provide surgeons with improved access, through small incisions, to rib fractures including difficult to reach sub-scapula rib fractures. The new instruments include a trocar, threaded reduction tool with self-drilling tip, and 90-degree screwdriver with drilling capability.

“Surgical fixation and stabilization of painful rib fractures is a growing procedure and the introduction of new MIPO instrumentation should help make it an even more attractive option for both surgeons and patients,” said Adam Shiroff, M.D., chief of trauma at the Jersey Shore University Medical System and assistant professor of surgery at Rutgers Robert Wood Medical School. “The instrumentation facilitates a less invasive rib fixation procedure, and a less-invasive procedure may result in less pain, quicker recovery and reduced hospitalization.”

The potential benefits of surgical stabilization (osteosynthesis) of severe rib fractures compared to non-surgical treatments include reduced duration of mechanical ventilation support, shortened intensive-care unit stays and hospitalization, better secretion management through efficient cough, and minimized chest wall deformities resulting from trauma, the company reports.

It is estimated that more than 350,000 people are affected by rib fractures each year in the United States. These fractures are associated with respiratory complications, prolonged hospitalization, prolonged pain, long-term disability and mortality.

More than 5,000 patients worldwide have received MatrixRIB implants since the system was launched in 2009. The MatrixRIB system is indicated for the fixation and stabilization of rib fractures, fusions and osteotomies of normal and osteoporotic bone. According to the company, MatrixRIB is the only rib fixation system that is approved by the AO Foundation, a medically guided nonprofit organization led by an international group of surgeons specialized in the treatment of trauma and disorders of the musculoskeletal system.

Making Good Progress

By the close FY13 (ended Dec. 29), JNJ’s device and diagnostics businesses reached revenue of $28.5 billion, representing an increase of 3.9 percent compared to 2012, with operational growth of 6.1 percent and a negative currency impact of 2.2 percent. U.S. sales were $12.8 billion, an increase of 3.5 percent. International sales were $15.7 billion, an increase of 4.2 percent, with operational growth of 8.3 percent and a negative currency impact of 4.1 percent.

Primary contributors to operational growth were sales from the acquisition of Synthes and DePuy Synthes joint reconstruction products in the orthopedics business, Biosense Webster’s electrophysiology products in the Cardiovascular Care division, JNJ’s Vision Care business, as well as biosurgicals and international sales of energy products in the Specialty Surgery business, officials said.

“Integrating Synthes has been our priority, and we’ve made good progress,” JNJ officials noted. Based on FY13’s performance, they’re not exaggerating.

Products from JNJ’s orthopedics businesses generated sales of $9.5 billion in 2013, a 21.9 percent increase over the prior year—catapulting the company to the top of the orthopedic heap (and this year’s Orthopedic Design & Technology list of leading ortho firms). Growth was primarily due to a full year of sales recorded from the acquisition of Synthes and sales of joint reconstruction products. Sales were impacted by the divestiture of certain rights and assets related to the DePuy trauma business. The positive impact on the orthopedics franchise total sales growth and operational growth due to the newly acquired products from Synthes net of the related trauma business divestiture was 21.2 and 34.7 percent in 2013 and 2012, respectively. Without Synthes, JNJ’s orthopedic-related business grew just shy of 1 percent.

Pre-tax profit for JNJ’s medical devices business as a percent to sales was 18.5 percent ($5.3 billion) compared to 26.2 percent in 2012. Pre-tax profit took a hit from higher costs of $1.4 billion for litigation expense and $100 million related to the DePuy ASR hip program as well as the medical device excise tax. In addition, 2012 included higher gains of $400 million on divestitures partially offset by higher write-downs of intangible assets and in-process research and development of $100 million and higher costs of $100 million related to the Synthes acquisition.

The FY13 impact of the 2.3 medical device excise tax that was enacted at the beginning of 2013 as part of the Affordable Care Act was approximately $200 million.

For JNJ overall, sales were $71.3 billion, up 6.1 percent. Net earnings and diluted earnings per share for the full-year 2013 were $13.8 billion and $4.81, respectively.

In July of this year, DePuy Synthes announced that it would eliminate approximately 400 jobs, or less than 2 percent of the global DePuy workforce of 23,000 employees. Michael Orsinger, worldwide chairman of JNJ’s orthopedics group, said the reorganization is being made as “the external healthcare environment undergoes seismic shifts.”

R & Deep Pockets

In the medical device sector, a lot of new products are the result of acquisition. But for a company like Johnson & Johnson, deep pockets for extensive R&D funding are the primary driver for new technology introductions year after year. For FY13, R&D spending for JNJ’s device businesses rose to $1.78 billion from $1.68 billion in 2012. There was no precise breakdown by medtech sector.

Also driving research and development activities is a network of regional innovation hotspots to advance healthcare by starting collaborations in science and technology between regional innovators and the JNJ family of companies across a diverse spectrum of startup opportunities. The first of four innovation centers opened its doors in London, the United Kingdom, in March 2013. The second was a center in Menlo Park, Calif., that opened in early June. Later in June, the third center opened in Boston, Mass. A fourth is planned to open in Shanghai, China, by the end of 2014 (Shanghai also is home to a JNJ R&D center that opened in 2009). Each city was selected for its robust life-sciences community, which according to JNJ, provides a rich environment for identifying investment, in-licensing and collaboration opportunities. The center in Boston, for example, is home to a team of business, science and transaction experts who are focused on identifying and building novel collaborations with emerging companies, entrepreneurs and academic centers across eastern North America.

In addition, DePuy Synthes announced plans at the end of 2013 to spend more than $36 million to build a research-and-development operation in Ireland. The operation should create 38 research level positions at the company’s plant in Ringaskiddy, and will focus on development work across the division, according to the economic development agency IDA Ireland.

Legal Matters

In November 2013, JNJ announced it would pay $2.5 billion to settle the thousands of lawsuits brought by hip replacement patients who have accused the company of selling faulty implants that led to injuries and additional surgeries.

The agreement presented in U.S. District Court in Toledo, Ohio, is one of the largest for the medical device industry. The pact resolves an estimated 8,000 cases of patients who had to have the company’s metal ball-and-socket hip implant removed or replaced.

“We are committed to the well-being of ASR patients, as demonstrated by the voluntary recall and the program providing support for recall-related care,” said Andrew Ekdahl, worldwide president, DePuy Synthes joint reconstruction. “The U.S. settlement program provides compensation for eligible patients without the delay and uncertainty of protracted litigation. DePuy remains committed to our purpose of advancing innovative treatment options to serve those who need joint replacement surgery.”

Prior to confirmation of the settlement, rumors were swirling about the amount the company would have to pay.

Early reports said the company was willing to pay more than $4 billion to settle thousands of lawsuits over its faulty ASR hip implants, according to Bloomberg news, which cited three sources familiar with the deal.

The settlement resolved more than 7,500 lawsuits filed against JNJ’s DePuy Orthopaedics unit in state and federal courts by patients who have had the defective replacement joints removed.

The company spent months preparing for the first federal trial involving its recalled ASR implants but the case was postponed three times due to difficulties scheduling expert witnesses and depositions. The judge assigned to the case consolidated the 7,860 lawsuits pending against DePuy into one bellwether trial to advance the litigation in a timely manner.

Thousands of ASR lawsuits still are pending in state courts. Some already have been settled. A California jury awarded $8.3 million to a retired Montana prison guard (DePuy, naturally, is appealing the verdict) and an Illinois jury sided with the company in April, rejecting claims that DePuy’s ASR XL hip implant was defectively designed and causes debilitating injuries.

Joint replacement registries in both Australia and the United Kingdom have recorded higher than expected complications with DePuy’s ASR hip resurfacing system and ASR XL acetabular system total hip replacement, including a loosening of the implant within the body, bone fractures near the implant, dislocation and a condition called metallosis, which occurs from the rubbing of metal parts.

The growing number of patients needing a second hip replacement prompted Johnson & Johnson to recall 93,000 of its ASR XL acetabular system, a hip socket used in traditional replacement surgery, and the ASR resurfacing system, a partial hip replacement that involves placing a metal cap on the ball of the femur in order to preserve more bone. The company announced the recall on Aug. 26, 2010, admitting that 12 percent of the implants failed within five years. Internal JNJ documents show 37 percent of ASR hips failed after 4.6 years; in Australia, the failure rate climbed to 44 percent within seven years.

Besides compensating affected patients, JNJ also will reimburse Medicare and other insurers for claims paid on behalf of hip implant patients, a condition that could add hundreds of millions of dollars to the reported settlement value.

DePuy Synthes did come out on top of a smaller legal scuffle, however. The company won $16 million in its patent infringement lawsuit against Audubon, Pa.-based Globus Medical Inc., part of an ongoing battle between the companies regarding spinal implants. The royalty represented a 15 percent cut of Globus’ calculated sales related to three intervertebral implant patents, which the jury decided the implant manufacturer violated with three of its products, according to the verdict. The Wilmington, Del.-based jury delivered the verdict following a two-week trial over a 2011 lawsuit. The three products at issue in the case—Independence anterior lumbar interbody fusion system, Coalition anterior cervical discectomy and fusion system and InterContinental plate-spacer products—no longer were part of Globus’ product lineup at the time of the lawsuit, so Globus would not have to pay royalties to DePuy Synthes based on sales.

The two companies are caught up in other litigation. Globus is suing DePuy Synthes over allegations the company’s Zero-P VA intervertebral fusion implant product willfully infringes on Globus’ spinal device patent. The suit is ongoing. Late in FY13, DePuy Synthes filed a lawsuit against Globus Medical, accusing three former DePuy sales representatives of breaking contract agreements by working for Globus. DePuy Synthes alleged that Texas-based reps were hired by Globus even though the company knew the employees were subject to confidentiality and non-compete clauses with DePuy Synthes. It was not the first time the companies have crossed swords about sales reps, with other cases dating back to 2011.

People News

Mark B. McClellan, M.D., Ph.D., senior fellow in economic studies, and director of the Initiative on Value and Innovation in Health Care, Brookings Institution, joined JNJ’s board of directors last October. He will serve on the Regulatory, Compliance & Government Affairs Committee and the Science, Technology & Sustainability Committee of the Board. McClellan served as FDA commissioner from 2002 to 2004, and as administrator of the Centers for Medicare & Medicaid Services for the U.S. Department of Health and Human Services from 2004 to 2006. From 2001 to 2002, he served as a member of the President’s Council of Economic Advisers and senior director for healthcare policy at the White House. During President Clinton’s administration, McClellan held the position of deputy assistant secretary of the Treasury for economic policy.

“Dr. McClellan has a distinguished record in the public sector as well as a deep understanding and vision for the future of healthcare,” said Gorsky. “Mark shares our aspiration to help people live longer, healthier and happier lives and personally is committed to improving health care across the globe. He will be a valued leader on our Board.”

McClellan previously served as an associate professor of economics and medicine with tenure at Stanford University, where he also directed the Program on Health Outcomes Research.

A 1985 graduate of the University of Texas at Austin, McClellan earned his M.D. degree at the Harvard University—Massachusetts Institute of Technology (MIT) Division of Health Science and Technology, and his master’s of public administration degree at the Kennedy School of Government at Harvard. He earned his Ph.D. in economics at MIT and completed his residency in internal medicine at Brigham and Women’s Hospital in Boston.

$7.8 Billion
NO. OF EMPLOYEES: 6,500

It’s safe to say that for the Medical Devices and Diagnostics division of global healthcare powerhouse Johnson & Johnson—which is responsible for approximately 41 percent of the company’s sales, the big news in fiscal 2012 (ended Dec. 31)—was the completion of the long-awaited purchase of Switzerland’s Synthes Inc., a boon for the company’s DePuy orthopedic division. The deal was announced in April 2011 and was closed in June last year.

By the time all the antitrust requirements were settled on both sides of the Atlantic, the final price for the company was $19.7 billion in cash and stock—the largest in the JNJ’s history. European Union authorities had worried that the deal would make JNJ untouchable in the already concentrated $5.5 billion trauma device market. To make regulators happy, JNJ sold DePuy’s trauma holdings. In April 2012, Biomet Inc. stepped up as the buyer—to the tune of $280 million.

Even after divesting it’s trauma business to Biomet, JNJ’s blockbuster Synthes deal, which created the DePuy Synthes Companies of Johnson & Johnson, will have the majority share of the trauma market. Before the buyout, Synthes already had cornered 50 percent of the market for screws, plates, bone grafts and other products to treat skeletal injuries. Analysts claimed that JNJ’s primary interest in Synthes was the company’s spinal technology. Like many other large companies, Johnson & Johnson has been looking for key acquisitions to bolster sales and expand in new markets. Since the start of 2010, JNJ has had more than 50 drug and devices recalls. The recalls have cost the company around $900 million in annual sales, which resulted in pressure to find new revenue drivers and earnings growth.

“The completion of the Synthes acquisition creates the world’s most innovative and comprehensive orthopedics business and reflects our long-standing strategy of leadership within attractive health care markets,” said Alex Gorsky, JNJ’s CEO, only in his job a few months at the time. “The combination of these two leaders—Synthes and DePuy—will enable us to better serve clinicians and patients worldwide, bring new innovations to the marketplace in orthopedics and neurologics, and strengthen our ability to compete in developing markets.”

Gorsky was named JNJ’s CEO in February 2012.

With a number of recall and quality issues plaguing the New Brunswick, N.J.-based healthcare conglomerate across all of its businesses, few analysts were surprised to learn that the company appointed a new chief executive. Gorsky, a former army captain and endurance athlete has spent two decades at JNJ, most recently leading the Medical Devices and Diagnostics Group.

Former CEO William Weldon had been blamed for much of JNJ’s troubles. He became CEO in 2002 after spending his entire career at the company. Critics accused Weldon of allowing JNJ’s once-staunch attention to quality erode through the years, resulting in, among other things, metal-on-metal hips that wore out and failed long before they should have. At the time of his departure, JNJ’s DePuy unit faced more than 4,500 lawsuits over the ASR XL Acetabular System, a hip socket used in traditional replacement surgery, and the ASR Hip Resurfacing System, a partial hip replacement that involves placing a metal cap on the ball of the femur to preserve more bone. Both products were recalled in August 2010. As of early 2012, JNJ had recalled 93,000 hips worldwide, including 37,000 in the United States, warning that more than 12 percent failed within five years.

After taking the reins of the venerable firm, Gorsky became only the ninth CEO in JNJ’s 126-year history. He joined JNJ’s Janssen Pharmaceuticals unit in 1988 as a sales representative and then worked in various positions in sales, marketing and management during the next 15 years. In 2001, Gorsky became president of Janssen and was promoted two years later to company group chairman of JNJ’s pharmaceuticals business in Europe, the Middle East and Africa. Gorsky left JNJ in 2004 to become head of North American pharmaceuticals for Basel, Switzerland-based Novartis AG. He returned four years later, however, as company group chairman and worldwide franchise chairman for Ethicon in the medical devices business. In 2009, Gorsky was appointed worldwide chairman of the surgical care group and to JNJ’s executive committee.

Some critics feel JNJ should have looked outside for its leadership.

Michael A. Kelly, a San Francisco, Calif.-based attorney suing the company, said he was shocked by JNJ’s change in leadership.

“It’s clear that the medical device division was not being well supervised, managed or run, certainly from 2006 through 2010, when the entire ASR debate was going forward,” Kelly, of Walkup, Melodia, Kelly & Shoenberger, noted to Bloomberg reporters. “I would think somebody would say at what cost are we making the profits and what message does it send that we promote the person who was in charge of this division to an even higher job, given the way that the entire ASR issue was handled.”

Gorsky holds a Bachelor of Science degree from the U.S. Military Academy at West Point, N.Y., and spent six years in the U.S. Army. In 1996, he earned a Master of Business Administration from the Wharton School of the University of Pennsylvania. In addition to his role as CEO, Gorsky was named company chairman in November 2012.

Given the size and scope of the DePuy Synthes product line, a long list of new product rollouts is business as usual. FY12 was no exception.

DePuy Orthopaedics Inc., prior to the Synthes merger, received U.S. Food and Drug Administration (FDA) premarket approval for its Trumatch Personalized Solutions with DePuy’s Sigma RP knee system. TruMatch for use with DePuy’s Sigma Fixed Bearing knee previously was cleared in August 2011. TruMatch is a surgical instrumentation and computer software system that is designed to aid knee implant positioning and procedure efficiency. It uses CT scans and computer software to guide the development and production of femoral and tibial cutting blocks that are individually prepared to match the actual bone surfaces of each patient. CT scans, rather than MRIs, are used for improved bone imaging, less scanning time and lower costs. Later, in November 2012, the company received FDA 510(k) clearance for its TruMatch Pin Guide, which is designed to give surgeons the option of choosing a pin guide or a cutting guide in their procedures. According to the company, it offers surgeons intra-operative flexibility; a smaller, lower profile jig for less invasive procedures; an integrated alignment guide to improve ease of use; and reusable, re-sterilizable metal guides for pin drilling. TruMatch Personalized Solutions originally launched in 2009.

In October, DePuy Synthes Spine rolled out new image-guided instrumentation for two of its spine systems as part of a partnership agreement with Brainlab for surgical navigation and imaging solutions. The new system is designed to be used with the Viper 2 Pedicle Screw Fixation System for minimally invasive surgery and Expedium Spine System for open surgical procedures. The instrumentation, which includes awls, probes, taps, screw inserters and Jamshidi needles, has been integrated with Brainlab’s computer software. Additional image guided and surgical navigation systems are expected over the next several months. Based in Germany, Brainlab develops, manufactures and markets software-driven medical technology.

Also in October, during the annual meeting of the North American Spine Society, the company released its ACIS Anterior Cervical Interbody Spacer System, a set of spacers and instrumentation for anterior cervical discectomy and fusion. The company also launched the Spotlight PL Access System, which the firm claims is the first access system designed specifically for minimally invasive posterior-lateral fusion. ACIS System spacers are offered in three axial footprints (12.5, 14 or 16 millimeter widths), eight heights (5-12 millimeters) and three sagittal profiles (lordotic, parallel or convex) to accommodate individual patient anatomy and surgical techniques. The spacers are made of PEEK Optima (polyetheretherketone) radiolucent material and feature a large axial lumen to maximize the area for packing autogenous bone graft and enable fusion to occur through the spacer, according to the company. The ACIS system is intended for use with supplemental fixation.

The Spotlight system includes a set of retractors of various lengths with integrated fiber optic lighting and decortication instruments, all of which are designed for use with the company’s Viper 3D MIS Correction Set.

“This new retractor delivers the benefits of a minimally invasive approach to posterior lateral fusion. Spotlight PL System provides excellent visibility and allows me to perform up to a four-level posterior lateral fusion through only one incision,” according to Amer Samdani, M.D., a physician at Shriners Hospitals for Children in Philadelphia, Pa., and also a paid consultant to the company.

Posterior-lateral fusion, a procedure where surgeons place graft material along the sides of the vertebrae to stimulate bone growth and promote fusion, is used to treat conditions including degenerative disc disease, spinal stenosis, scoliosis and other complex spinal deformities.

In yet another October rollout, DePuy Orthopaedics Inc. made the Sigma high-performance revision instruments available for use with its Sigma fixed-bearing total knee implants. The instruments are designed for increased efficiency in the operating room. According to the company, the revision instruments can reduce the average number of instrument cases required during surgery by 40 percent versus leading competitive systems, combined with a 70 percent reduction in tibial preparation steps versus other systems. The system reportedly also incorporates visual cues and easy adjustments on the cutting blocks and a simplified trialing system to allow surgeons to increase efficiency throughout the procedure.

“The number of sets and trays traditionally needed for revision knee procedures can lead to inefficiency and additional costs in the operating room,” said Andrew Ekdahl, worldwide president of DePuy Orthopaedics. “Reducing the number of instrument cases by nearly half and the number of steps required to prep the tibia by 70 percent could lead to a more efficient surgery—and that’s better for the patient and better for the healthcare system.”

The top reasons revision knee implants fail are loosening and instability. DePuy has attempted to address these problems with its revision instruments, which include the Sigma rotating platform knee and the Sigma metaphyseal sleeves. The rotating platform features a mobile bearing option for every constraint level. Revision knees using rotating platform technology diffuse shear and torsional forces typically produced at the implant bone interface, DePuy officials claim. Metaphyseal sleeves are stepped sleeves designed to compensate for substantial type 2 and 3 cavitary defects, while bringing the implant into contact with strong, supportive bone. The sleeve is stepped to compressively load the bone and form a stronger foundation for implant stability, potentially avoiding excessive bone resection and restoring the joint line.

DePuy’s prolific October kicked off with its Mitek division—manufacturer of orthopedic sports medicine products and soft tissue repair devices—releasing the Healix Advance family of suture anchors, a comprehensive new system of rotator cuff anchor and instrumentation solutions.

According to the American Academy of Orthopaedic Surgeons, each year approximately 200,000 Americans require rotator cuff repair surgery and another 400,000 undergo procedures to fix rotator cuff tendonitis or partial tears.

The Healix Advance Anchor includes the dual-thread fixation technology of previous versions, but adds a new multi-thread design that reportedly enables faster insertion into hard bone and an awl only bone preparation, in most cases. Dual thread technology is designed to independently engage both cancellous (spongy) and cortical (compact) bone to maximize fixation and pull-out strength.

According to the company, Healix Advance Anchors have a newly designed and fully supported distal tip across the radial plane, and also provide high torsional strength across the entire length of the anchor. The anchors are available either in Biocryl Rapide, a biocomposite material intended to allow absorption and bone formation at the implant site, or radiolucent PEEK. The 4.5 mm, 5.5 mm and 6.5 mm anchors are double- or triple-loaded with the company’s Orthochord High Strength Suture.

The first Healix Anchor was introduced in 2008. Since then the company has added Healix Knotless, Healix Transtend, and now, Healix Advance Anchors.

In August, DePuy Synthes Spine received FDA 510(k) clearance for its Expedium, Viper, and Viper 2 Spine Systems for patients with adolescent idiopathic scoliosis (AIS), an abnormal curvature of the spine that typically affects children between the ages of 10 and 18. This expands the scoliosis indication for the pedicle screw systems, which now are indicated for both adolescents and adults. The Expedium technology first was introduced in 2004. The Viper and Viper 2 Spine Systems have been used in minimally invasive spine surgery for a wide range of pathologies since 2005 and 2008 respectively.

The Expedium system has the lowest profile in the DePuy Synthes’ thoracolumbar portfolio, and therefore is claimed to be a useful option for cases in which the surgeon is challenged with implant protrusion and cosmetic problems, according to the company. It is a rod and screw system for extreme curvatures. The Viper systems comprise a range of instrumentation and implant options, and are based on the Expedium platform.

“AIS is a serious challenge to surgeons, patients, and their families,” said Suken Shah, M.D., spine surgeon at the Alfred I. DuPont Hospital for Children in Wilmington, Del. “New treatment options based on proven technologies provide surgeons with more choices to help more patients.”

Scoliosis can lead to chronic back pain and reduced respiratory function, and impact quality of life by limiting activity and affecting self-esteem. If the curvature of the spine is between 25 to 45 degrees, back bracing is generally recommended in an attempt to stop curve progression. If the curve progresses beyond 45 degrees, spinal fusion surgery is considered to strengthen and straighten the spine. Most patients do not progress to a degree needing surgical intervention. According to the National Scoliosis Foundation, scoliosis patients make more than 600,000 visits to private physician offices, 38,000 children undergo spinal fusion surgeries and about 30,000 children are braced each year in the United States.

Abrupt Departure

In December, DePuy Synthes named Max Reinhardt worldwide president of DePuy Synthes Spine. He has been with the company since 2002, serving as vice president of worldwide marketing prior to his latest appointment, a post he’d held since early 2011. Reinhardt began his career with DePuy Spine in 2002 as director of sales and marketing in the United Kingdom. Four years later he became vice president of sales in the United States. When Johnson & Johnson completed its acquisition of Synthes, Reinhardt was charged with helping to integrate the global spine divisions of both companies. The spine unit’s former chief, Namal Nawana, resigned unexpectedly on Nov. 27. Nawana joined DePuy Spine as president in March 2011. He started his career in 1992 as a research engineer at Royal Adelaide Hospital in Australia, and then moved on to Howmedica International as a product development engineer. He joined JNJ’s orthopedics business in 1997 as a technical support manager in the United Kingdom and worked his way up the management ladder.

The Bottom Line

JNJ’s worldwide medical device and diagnostics sales were $27.4 billion for 2012—an increase of 6.4 percent compared with 2011, factoring an operational increase of 8.7 percent and a decrease from currency of 2.3 percent. Domestic sales increased 8.7 percent; international sales increased 4.5 percent, which reflected an operational increase of 8.6 percent and a negative currency effect of 4.1 percent. Sales, of course, included the impact of the recently completed acquisition of Synthes, which contributed 7.9 percent to worldwide operational sales growth, including the divestiture of the DePuy trauma business.

The orthopedics franchise achieved sales of $7.8 billion in 2012, a 34.3 percent increase from 2011. Growth primarily was due to sales of newly acquired products from Synthes, and sales of joint reconstruction and Mitek sports medicine products. The positive impact on the orthopedics franchise total sales growth and operational growth due to the newly acquired products from Synthes, including the trauma business sale, was 34.7 percent.

Pre-tax profits for the medical device businesses were roughly $7.2 billion, an increase of 37 percent—once again, the Synthes deal helped to substantially grow that number. For JNJ overall, sales were $67.2 billion, up from $65 billion in 2011. Net earnings were $10.5 billion, up from $9.7 billion the year before. U.S. and international sales both increased.

$5.8 Billion
NO. OF EMPLOYEES: 6,400

No profession has mastered the art of the comeback quite like the business world. Some of the most inspirational entrepreneurial rebirths have been hatched by the likes of Frederick W. Smith, the founder, president, chairman and CEO of FedEx, who bounced back from a failed 1984 attempt at electronic mail distribution to grow his core delivery business into a $40 billion empire, and Donald Trump, the outspoken, big-thinking real estate mogul who climbed out of a $4.4 billion bankruptcy hole in the early 1990s to reclaim his spot among the planet’s richest inhabitants (Forbes recently estimated his worth to be nearly $3 billion). Of course, these and other corporate comeback tales pale in comparison to perhaps the greatest reincarnation in business history: that of Steve Jobs, the cold, often controlling Apple Computer visionary who was fired from his own struggling company in 1985 only to resurrect it more than a decade later through creative thinking, savvy business moves (that $150 million investment from rival Microsoft was pure genius) and cornering the market on all gadgets named “i.”

Though it has none of the fairy tale-like attributes of Jobs’ return to glory, the comeback fable penned last year by healthcare conglomerate Johnson & Johnson is nonetheless impressive, particularly in light of the company’s recent series of costly missteps.

Worldwide sales at the New Brunswick, N.J.-based firm reached $65 million last year, a 5.6 percent increase compared with the $61.5 billion J&J generated in 2010. Adjusted earnings rose 4.4 percent to $13.9 billion, while adjusted earnings per share climbed 5 percent to $5, according to the company’s 2011 annual report.

“Several years ago, we set out to build on our strong foundation and sustain our track record of growth, even as we prepared to address a daunting challenge: the patent expirations for two of our major drugs, Risperdal (risperidone) and Topamax (topiramate). We also prepared ourselves for other market issues to which we had a good line of sight,” former Board Chairman/CEO William C. Weldon told shareholders in a farewell letter published within the company’s 2011 annual report. The 63-year-old retired in April 2012 after spending a decade as chief executive; he was succeeded by Alex Gorsky, a former army captain and endurance athlete who had led the firm’s Medical Devices & Diagnostics (MD&D) business unit since 2009.

“Additional developments could not be as easily foreseen: the severe economic decline; the tightening of consumer spending and healthcare budgets; over-the-counter (OTC) product quality issues at McNeil Consumer Healthcare and the recall of the DePuy ASR Hip System,” Weldon’s letter continued. “Our company was severely tested. As 2011 came to a close, we moved through a turning point. The headwinds from patent expirations, tough portfolio choices, litigation matters and OTC product quality issues had been, or were being addressed…We have turned the corner on a particularly difficult period.”

J&J may indeed have turned a corner on a difficult past, but its future is far from trouble-free. The 2010 ASR recall promises to haunt the company for quite some time, thanks to thousands of civil lawsuits that eventually could cost the firm billions of dollars in legal settlements. Lawsuits also are piling up over the Pinnacle Acetabular Cup System, an ASR model predecessor that was approved by the U.S. Food and Drug Administration (FDA) in 2000. The Pinnacle was designed to have more flexibility and range of motion than previous hip implants, but studies have shown it to be prone to early failure. In fact, studies have proven that all-metal implants such as the Pinnacle, the ASR XL Acetabular and the ASR Hip Resurfacing systems can cause severe pain and lead to implant dislocation, which ultimately necessitates revision surgery.

J&J’s DePuy Orthopaedics Inc. franchise has acknowledged a 13 percent failure rate with its ASR implants, more than quadruple the average 0.5-3 percent failure rate found in most implants currently on the market. Such high failure ratios, as well as the ASR recall and those of other defective metal implants, prompted the FDA to conduct a two-day expert advisory panel meeting in June 2012 to evaluate the overall safety of metal-on-metal devices.

Despite two 12-hour sessions, the advisory panel reached no formulative conclusions. “Metal-on-metal, ceramic-on-ceramic and metal-on-ceramic are unforgiving couples,” Michael B. Mayor, M.D., of Dartmouth Medical School’s Thayer School of Engineering, told his fellow panel members. “They all show evidence of impact loads delivered by the edge of the acetabular component onto the surface of the head in the form of edge stops and gouges. Those are fairly severe alterations of articular surface.”

Still, all the brouhaha over the ASR recall (93,000 worldwide, including 37,000 in the United States) and controversy over the efficacy of all-metal implants affected DePuy’s 2011 revenue. J&J reported a 4 percent rise in DePuy franchise sales last year to $5.8 billion but acknowledged the unit was buoyed by sales from its Mitek sports medicine and trauma product lines as well as newly-acquired merchandise from its $480 million acquisition of Micrus Endovascular Corporation in 2010. DePuy folded Micrus Endovascular into its Codman & Shertleff Inc. business to compliment its existing line of neuro devices, which includes bare platinum coils, vascular reconstruction products and access devices.

DePuy tried to soften the blow of the still-virulent ASR recall with several new product launches in 2011. The first debuts occurred in February during the American Academy of Orthopaedic Surgeons annual meeting in San Diego, Calif., where its subsidiary, DePuy Mitek Inc., introduced the industry to its Healix Transtend Implant System and the Vapr Vue System with Coolpuse technology.

The FDA approved DePuy’s Gription TF titanium foam implants last year. Made from commercially pure titanium, the products are specifically designed for complex joint replacement procedures. Image courtesy of DePuy Orthopaedics Inc.

The Healix Transtend system, with its 4-millimeter percutaneous cannula and mix of titanium, PEEK (polyetheretherketone) or Biocryl Rapide anchors, provides surgeons with a new minimally invasive alternative to partially torn rotator cuff repair (known clinically as Partial Articular-Sided Tendon Avulsion, or PASTA). The Healix system gives doctors a better view of the surgery and minimizes instrument passes through the tendon to reduce the damage surrounding cuff tissue can incur during the procedure. The dual-thread anchors are preloaded with the Orthocord suture, a high-strength, partially-absorbable orthopedic stitch that maintains potency and knot security.

DePuy Mitek’s Vapr Vue System uses radiofrequency technology to target ablation and minimize charring or damage to healthy tissue. In-vitro testing indicated the system is 20.4 times faster at ablation than Arthrocare’s Super TurboVac suction wand, which reputedly removes bubbles and “free-floating, wispy tissue” from surgeons’ field of view.

In late March, DePuy Orthopaedics Inc. unveiled its Global Advantage instrument set for shoulder replacement surgery. Used with the company’s Global Advantage shoulder replacement implant, the brand-name instrument set is comprised of new 1-millimeter increment humeral reamers for a more precise implant fit and a resection guide for greater accuracy.

DePuy Spine contributed two new products to the roster in 2011, releasing the Viper 3D MIS Correction Set in mid-September and the Expedium Neuromuscular System in early December. Executives touted the Viper Set as the “first surgical instrumentation system designed specifically for the minimally invasive three-dimensional correction of complex spinal deformities.”

Used either with the Viper MIS Spine System or Expedium Spine System, the Viper 3D set consists of instruments and devices for various correction maneuvers and techniques. The set includes the MIS Rod Inserter/Rotator for 360 degree correction, a spondy reduction lever to control sagittal alignment, derotation and correction frames, a multi-level compression and distraction device to control orientation at individual levels and approximation tools for seamless rod reduction.

The Expedium Neuromuscular System, according to executives, helps surgeons treat spinal and pelvic deformities in patients with such neuromuscular disorders as cerebral palsy and muscular dystrophy. The modular system—a blend of pro-contoured rods and proximal connectors, open and closed iliac screw designs and wires—simplifies the surgical procedure and streamlines OR time.

“We heard from surgeons that treating neuromuscular scoliosis is a challenging part of their practice and that they needed a system designed specifically for this type of patient,” Namal Nawana, worldwide president of DePuy Spine, said when the System debuted on the market. “The Expedium Neuromuscular System is that system. It provides a procedural solution that simplifies the correction procedure and optimizes time in the operating room.”

The FDA did its part to rouse DePuy from its ASR recall nightmare last year, approving devices for hip, knee and foot repair.

In February, the franchise received FDA approval for its Reclaim Revision Femoral Hip System and Gription TF titanium foam implants.

The Reclaim system features various sizing options and a modular design that can help restore function. The product, according to DePuy, combines advances in strength, fixation and instrumentation to optimize both the surgical and clinical experience during moderate to complex hip revision surgery.

The Reclaim Revision Femoral Hip System, approved by the FDA in 2011, features various sizing options and a modular design to help restore hip function. Image courtesy of DePuy Orthopaedics Inc.

The company’s highly porous Gription implants are made from commercially pure titanium, a strong, corrosion-resistant metal with high surface roughness and a similar elasticity to bone. The Gription TF Acetabular Augment System fills gaps between the acetabulum (hip bone) and cup in patients with severe bone defects, while the Universal Gription Cones are used in knee replacement surgery to enhance missing bone in the tibial or femoral areas.

Clearances for the company’s A.L.P.S. Total Foot System, Affixus Hip Fracture Nail System and the Pinnacle CoMplete Acetabular Hip System occurred throughout the spring, while regulatory blessing for the Trumatch Personalized Solutions instruments and computer software system for the Sigma Fixed-Bearing Knee system came about in late summer.

The company’s Trumatch technology uses the software and computed tomography scans to create customized femoral and tibial cutting blocks that better match patients’ bone surfaces. The Trumatch system also reduces the amount of time it takes to conduct knee replacement procedures, company executives claim.

The A.L.P.S. Total Foot System features nine anatomically contoured plates as well as both locking and non-locking screw options for reconstructive and trauma procedures of the forefoot, midfoot and hindfoot. The plates can be custom-fit to patients, and some contain locking holes that fit up to five different screws.

The Affixus Hip Fracture System has various neck and shaft angles, distal diameters, nail lengths and locking options to help surgeons better customize procedures to address disparities in patient anatomy. The system is used with a single set of instruments and combines the principles of a compression hip screw with the biomechanical advantages of an intramedullary nail.

J&J’s critics were leery of the Pinnacle CoMplete Acetabular Hip System approval in June. One blog questioned whether the product—billed as the first ceramic-on-metal hip implant available in the United States—would become the next “DePuy disaster in the making.”

Despite its litany of challenges last year, DePuy was the top revenue-generating franchise in Johnson & Johnson’s MD&D unit, one of three operated by the multinational firm. With $25.8 billion in sales, the MD&D unit is the world’s largest medical device business, permeating dozens of sectors within the comprehensive market. Sales for the year ended Dec. 31 grew 4.8 percent, though operational sales growth came in at 1.7 percent and operating profit fell 36.4 percent to $5.2 billion, according to the company. Executives attributed the sharp dropoff in profit to the ASR recall, restructuring expenses, increased investment spending and costs associated with the historic $19.7 billion buyout of Synthes Inc., a move that is likely to reinvigorate J&J’s struggling orthopedics business and is consistent with the company’s strategy of acquiring businesses with leading positions in promising markets.

The deal, first announced in April 2011, is J&J’s largest acquisition to date, easily surpassing the $16.6 billion merger with the consumer health arm of Pfizer Inc. in 2006.

West Chester, Pa.-based Synthes, which manufactures spine and bone-replacement products, is expected to help J&J significantly expand its presence in the $5.5 billion global orthopedic reconstruction industry as well as in emerging markets, an area the firm particularly is targeting for growth. Last year, Synthes reported $424.4 million in sales in the Asia Pacific region, up 19 percent compared with 2010.

To receive regulatory approval of the deal in Europe, J&J agreed to sell DePuy’s trauma segment to Warsaw, Ind.-based Biomet Inc. for $280 million.

J&J completed the acquisition in mid-June and shortly thereafter integrated Synthes into its corporate structure, creating the DePuy Synthes Cos. of Johnson & Johnson. A pop-up message on Synthes’ website enlightened visitors to the new entity: “Introducing the new DePuy Synthes Companies,” the electronic note read. “Inspired by listening carefully to what patients and healthcare professionals have to say. United for greater ingenuity. Committed to superior quality. Driven to make a sizable impact on orthopedic and neurological care. We are the new DePuy Synthes Companies and we are ready to advance patient care by delivering total solutions that go beyond the products themselves to help improve people’s lives.”

J&J bigwigs expect the Synthes merger to slightly boost company profit this year and significantly improve 2013 earnings by 10 cents to 15 cents per share (excluding special items). The company estimates the deal to cost $1.1 billion in after-tax charges for the remainder of 2012, including restructuring and integration expenses.

$5.4 Billion
NO. OF EMPLOYEES: 5,300

It goes without saying that fiscal 2009 was a tough year for most. The world’s largest medical device company—Johnson & Johnson (J&J)—certainly was no exception. However, a broad range of product categories helped to balance the global healthcare firm’s losses in some sectors with gains (hopefully) in others.

One of the sectors that helped to deliver positive results for the company was its DePuy division, which includes DePuy Orthopaedics, DePuy Spine, DePuy Mitek and Codman & Shurtleff, Inc.

William Weldon, CEO of J&J, noted that it was a year of “tremendous challenge,” given the worldwide economic downturn. Weldon’s tone, however, during a conference call with investors and journalists at the end of the fiscal year was that things could have been a lot worse.

“We maintained our long-term focus while delivering solid results,” Weldon said. “We made important investments in acquisitions, strategic partnerships and launches of recently approved innovative products while preserving our financial flexibility to continue to invest in innovation.”

J&J’s worldwide sales for 2009 were $61.9 billion across the company’s multiple business units, a decrease of 2.9 percent. Overall domestic sales declined 4.4 percent, while international sales declined 1.4 percent, reflecting operational growth of 3.9 percent and a negative currency impact of 5.3 percent.

Net earnings and diluted earnings per share for 2009 were $12.3 billion and $4.40, respectively, down from fiscal 2008’s level of $12.9 billion. Full-year earnings results included an after-tax restructuring charge of $852 million and an after-tax gain of $212 million due to settled litigation matters. Excluding these special items, net earnings for the full-year 2009 were $12.9 billion, flat compared with last year.

Worldwide revenues for the company’s Medical Devices and Diagnostics unit, however, experienced modest growth. Sales were $23.6 billion for 2009, a gain of 1.9 percent. Domestic sales increased 4.5 percent, while international sales decreased 0.2 percent, including an operational increase of 4 percent and a negative currency impact of 4.2 percent. The company has spent $3.6 billion on research and development during the last two years and closed $2.7 billion worth of acquisitions. The medical device division accounted for 38 percent of J&J’s total sales last year and 43 percent of total operating profit (excluding special items).

DePuy’s orthopedic joint reconstruction, spine and sports medicine businesses continued to deliver strong results. DePuy companies achieved sales of $5.4 billion in 2009, a 4.6 percent gain compared with fiscal 2008.The company attributed the increase to growth in the spine, hip and knee product lines, in addition to new product launches in the Mitek sports medicine product line.

Part of the company’s growth strategy to keep it competitive in a tough market has been through aggressive new product development—organically and, more often, through acquisition.

In December last year, the company also completed the acquisitions of Finsbury Orthopaedics Limited, a privately held, United Kingdom-based manufacturer and global distributor of orthopedic implants. Financial terms of the transaction were not disclosed.

With the acquisition of Finsbury Orthopaedics, DePuy gained several key products, including the DeltaMotion ceramic-on-ceramic hip system, the Adept metal-on-metal hip resurfacing and total hip system, as well as the Medial Rotation Knee system, the Dual Bearing Knee system, the BOX total ankle replacement, Tuke Saw and multiple small-joint reconstructive implant lines. Finsbury Orthopaedics pioneered advanced high-performance, large-diameter hip bearings that feature proprietary ceramic-on-ceramic and metal-on-metal bearing technologies designed to address the unmet needs of active patients.

Throughout the year, there also were a number of new product introductions and approvals worth noting.

In February, DePuy Orthopaedics launched the aSphere M-Spec Femoral Head, a new metal hip bearing that company officials claim potentially could reduce cumulative wear by 80 percent and associated ion release by 77 percent compared with conventional metal-on-metal technology. The aSphere head, combined with DePuy’s TrueGlide technology, facilitates a more fluid range of natural motion and up to 159 degrees range of motion, according to the company. The aSphere head was cleared for marketing by the U.S. Food and Drug Administration (FDA) in December 2008, adding another advanced option to DePuy’s Pinnacle Hip Solutions bearing system. According to one study cited by DePuy, since the Pinnacle Hip originally was approved in 2002, an estimated 99.9 percent of Pinnacle Hip components remain in use.

In August, an FDA panel unanimously recommended approval of DePuy’s Pinnacle CoMplete Acetabular Hip System, the first ceramic-on-metal hip bearing to be considered for approval in the United States. The company is still waiting for a final OK from the FDA. The panel’s recommendation was based in part on results from a two-year clinical study that compared the safety and effectiveness of the Pinnacle CoMplete System to a commonly used DePuy metal-on-metal implant. The study showed no significant difference in adverse events, revision rates and survivorship after two years, and patients experienced similar pain relief, improved function and range of motion. Laboratory testing on the Pinnacle CoMplete System showed a greater than 90 percent reduction in wear compared with the metal-on-metal system under normal gait conditions and a more than 80 percent reduction in wear under adverse conditions.

If approved by the FDA, the Pinnacle CoMplete System would be used in adult patients who suffer from severe pain and disability due to osteoarthritis or post-traumatic arthritis. Conditions for approval recommended by the panel included refinements to the proposed product labeling and a post-approval study. The device remains an investigational device in the United States. Since 2007, the ceramic-on-metal bearing has been marketed in 40 countries.

According to the American Academy of Orthopaedic Surgeons, about 33 million Americans are affected by osteoarthritis, a degenerative joint disease, and more than 193,000 total hip replacements are performed each year in the United States, mostly due to some form of degenerative arthritis.

In addition, in 2009, DePuy launched the Silent Hip, a minimally invasive hip stem available outside the United States only. The Silent stem, which is inserted into the femur, is more bone-preserving than traditional stems, according to J&J.

New product rollouts clearly are part of the company’s strategy to take on the competition.

This summer, J&J’s leadership told analysts that the company would roll out 80 new products from its medical devices and diagnostics unit through 2012 and expand in markets including biosurgicals and electrophysiology. The division has received more than a dozen regulatory approvals so far in 2010. Overall, Johnson & Johnson claims to account for roughly 62 percent of the $350 billion worldwide medical device and diagnostics market. J&J expects medical device sales to grow an average of 6 percent each year through 2014.

To continue to foster innovation and education in patient care, the company opened the DePuy Institute at DePuy’s worldwide headquarters in Raynham, Mass., in August. The new facility provides education, training and research on non-surgical early interventions to complex surgery in the areas of orthopedics, spinal care, sports medicine, soft tissue repair, trauma and neurosciences. The goal is to help healthcare professionals enhance their skills and gain new insights on filling unmet clinical needs across a range of conditions, officials said.

“Education, training and research are the cornerstones of success both inside and outside the operating room and are essential to the advancement of care and the improvement of patient outcomes,” said Mike Mahoney, worldwide company group chairman, DePuy. “The DePuy Institute reflects our ongoing commitment to education throughout the continuum of orthopedic and neurological care and creates an environment and sense of community conducive to learning, connecting and sharing knowledge across disciplines.”

The institute will offer year-round educational programs on the latest concepts, techniques and technologies in the areas of minimally invasive surgery, aging spine, deformity, neurological disease, joint replacement and trauma care, featuring faculty from leading teaching institutions and academic centers in the Boston area and throughout the world. Officials hope the center will encourage collaboration between specialties to develop innovative solutions that improve patient care.

“Each surgeon, resident, fellow, hospital administrator, nurse or other healthcare professional who visits the DePuy Institute will engage in a personalized learning experience based on his or her individual skill set, background and interests,” said Diana Bacci-Walsh, worldwide vice president of Professional

Education for DePuy.

Despite overall gains in the device sector for the year, the company was not able to avoid restructuring in the face of increased economic pressures. In 2009, J&J officials said they hoped to save up to $1.7 billion by 2011 (approximately $900 million in 2010). The primary cost savings would come from

layoffs. The firm estimated it would reduce its global workforce by 6-7 percent. Leadership also hopes to simplify business structures and processes for additional savings. The associated savings will provide additional resources to invest in new growth platforms, launch new products, continue to grow core business, and provide flexibility to adjust to the evolving global environment.

$5 Billion
NO. OF EMPLOYEES: 5,300

One of the latest marketing campaigns from DePuy, unveiled in 2008, is called “Never Stop Moving.” If DePuy patients never stop moving, the likely result is that the company’s bottom line also will keep moving—upward.

Despite pricing pressures from hospitals, a more critical political climate and a changing landscape for companies’ interactions with surgeons and researchers, fiscal 2008 still posted gains compared with 2007.

DePuy is a division of Johnson & Johnson and is segmented into four divisions: Codman, DePuy Mitek, DePuy Orthopaedics and DePuy Spine. Codman & Shurtleff, Inc. manufactures neurovascular products. DePuy Mitek develops orthopedic sports medicine products, soft tissue repair devices, joint movement solutions as well as minimally invasive and arthroscopic solutions. DePuy Orthopaedic covers joint-replacement products. As the name implies, DePuy Spine manufactures spinal implants, neurosurgical devices and supplies, and biologics.

During the turbulent economic times of 2008, Johnson & Johnson was the third best-performing stock on the Dow Jones Industrial Average. For the multinational healthcare company, which makes everything from bandages to the advanced joint replacement systems, 2008 was yet another year of revenue growth—though a little more challenging.

J&J’s overall company sales for the fiscal year (ended Dec. 31) were $63.7 billion, an increase of 4.3 percent compared with 2007. Net earnings were $12.9 billion, up 6.8 percent. The company’s worldwide Medical Devices and Diagnostics (MD&D) segment, under which its orthopedic divisions fall, achieved annual sales of $23.1 billion in 2008, representing an increase of 6.4 percent, with operational growth of 3.5 percent and positive currency impact of 2.9 percent. Domestic revenue inched up only slightly by 1 percent, while international sales increased by double digits—11.3 percent (5.8 percent from operations and 5.5 percent from currency). Operating profit for the Medical Devices and Diagnostics business increased 49.1 percent from 2007, reaching $7.2 billion. As a percentage of sales, 2008 operating profit increased to 31.2 percent.

The DePuy orthopedic franchise achieved sales of $5 billion in 2008, an 8.8 percent increase compared with 2007. This growth primarily was due to DePuy’s joint reconstruction products, including hip and knee product lines. Additionally, new product launches in the Mitek sports medicine product line contributed to the growth.

DePuy released more than 20 new products in 2008. Among them, DePuy Orthopaedics Inc. introduced the Tri-Lock, a bone-preserving hip stem with proprietary Gription technology for stability. DuPuy claims a leading position in hip replacement in the U.S. market. According to the American Academy of Orthopaedic Surgeons, the demand for hip replacement is growing rapidly, with the number of primary total hip replacements expected to increase by 174 percent to 572,000 by 2030.

Other new product rollouts included enhancements to the company’s Sigma Knee System, including Sigma High Performance instruments to enhance procedure efficiency, surgical precision and flexibility, and the Sigma PS Femur, for active, high-demand patients. DePuy Orthopaedics also received approval from the U.S. Food and Drug Administration for its LCS Complete RPS Flexion Knee. According to the company, the device is engineered to offer patients optimum function with maximum durability, particularly for patients with an active lifestyle.

In the trauma sector, DePuy Orthopaedics launched the Small Fragment, Large Fragment and Distal Tibia Anatomic Locked Plating Systems (A.L.P.S.). The company recently initiated a three-year plan to become a leader in the orthopedic trauma marketplace. The A.L.P.S. Small Fragment, Large Fragment and Distal Tibia Plating Systems are titanium plate and screw systems that combine the benefits of locking screw technology with conventional plating techniques.

This hybrid plate concept allows surgeons to stabilize fractures with non-locking screws through the plate and then obtain neutralization of the construct with locking screws, the company said.

DePuy Mitek launched the Healix BR Dual Threaded Anchor System, the first suture anchor for arthroscopic rotator cuff repair made with the company’s proprietary Biocryl Rapide biocomposite material, which has been shown in pre-clinical trials to resorb and promote bone formation within the implant profile, according to Mitek officials.

Entering the growing aging-spine market, DePuy Spine introduced the Confidence spinal cement system for vertebral compression fractures.

At the beginning of the year, DePuy sold its orthopedic instrument manufacturing facility in New Bedford, Mass., to Symmetry Medical Inc. for $45 million in cash.

As part of the deal, the companies entered a supply agreement that will require DePuy to make minimum purchases from the New Bedford facility for a four-year period. Warsaw, Ind.-based Symmetry Medical manufactures instruments and cases for the orthopedic device industry. The company also produces instruments and cases for other segments of the medical device market, including arthroscopy, dental, laparoscopy, osteobiologic and endoscopy.

DePuy’s management is preparing for even tougher economic results for fiscal year 2009.

According to Dominic Caruso, J&J’s chief financial officer, over the past few years, the overall market for orthopedics has grown at roughly 8 percent or 9 percent. Now, the company estimates approximately 4 percent to 5 percent in terms of overall market growth.

“We’re seeing hospitals basically putting some pressure on the price for the products that they are willing to buy from us and that of course has been offset by some newer products that we have launched,” he said during a recent conference call with analysts. “So I would say [the market is] a little softer in terms of the ability to gain price with the current market conditions.”

For DePuy’s second quarter of 2009, hip growth on a worldwide basis was approximately 5 percent operationally, with U.S. growth at approximately 6 percent and international growth at 3 percent on an operational basis, the company reported. On an operational basis, worldwide knee growth was approximately 4 percent, with the United States up 5 percent and outside U.S. sales up 2 percent. Spine achieved strong operational growth of approximately 11 percent due to the successful launch of a number of products, company officials reported. DePuy Mitek sales grew approximately 10 percent operationally with the U.S. growth at 11 percent and international sales increasing 9 percent. Overall sales for DePuy were unchanged for the first six months of the year ($1.3 billion total) compared with last year.

$ 4.6 Billion
NO. OF EMPLOYEES: 5,500

During a June 2008 meeting with members of the investment community, various officials from Johnson & Johnson outlined their growth expectations from the company’s medical device units during the next several years, with orthopedic products projected to get a 9% annual boost to $48 billion.

Orthopedic products are sold under the DePuy brand name, which is segmented further into the Codman, DePuy Mitek, DePuy Orthopaedics and DePuy Spine brands.

Michael Mahoney, the group chairman of J&J’s DePuy orthopedic division, said the overall unit gets more than 40% of its revenue from outside the United States and claims the No. 2 spot in the global market, while retaining the top spot in the domestic market. Brazil, Russia, India and China had record growth in 2007, and the company is making investments to build on that momentum.

“We recognize the potential of the marketplace and see the opportunity to gain share,” Mahoney told analysts. The company has been introducing a range of new product platforms that include more durable materials and instruments for minimally invasive surgery. Those are both necessary to stay on top, he said, as patients demand better implants and less-invasive techniques.

The DePuy unit was the largest revenue contributor within J&J’s medical device division last year, accounting for $4.59 billion in sales.

The powers that be at New Brunswick, NJ-based Johnson & Johnson claim their device and diagnostics businesses make up the world’s largest medical technology business. With 2007 revenues in excess of $21 billion (35% of the company’s total sales), there’s no arguing with that boast. In 2007, J&J’s device businesses achieved total growth of 7.2% compared with 2006 (domestic sales increased 3.2% and international sales increased 11.1%—4.6% from operations and 6.5% from currency).

Overall, medical device sales are J&J’s second-largest revenue driver—behind pharmaceutical sales.

One reason for DePuy’s success within J&J’s medical device division is that new products continually roll out every year. In 2007, DePuy launched 24 new products.

The DePuy Orthopaedics division, for example, launched several new hip products. The Ultamet XL and Altrx hip bearings with the Pinnacle Acetabular Cup System are technology used to recreate the hip’s natural ball-and-socket joint and help increase joint stability and range of motion in patients needing total hip replacement. The Peak FX Hip Plate System is used to stabilize hip fractures while sparing surrounding tissue (to help promote faster recovery). Further up the body, the Delta Xtend Reverse Shoulder System reverses the shoulder’s anatomy to use the healthy deltoid muscle to restore shoulder function.

DePuy’s acquisition of Hand Innovations in 2006 started paying off in 2007, as DePuy Orthopaedics launched less-invasive products for fracture surgery for the hand, wrist, foot and shoulder. At the February 2007 annual meeting of the American Academy of Orthopedic Surgeons, the company unveiled the F3 Fragment Plating System, the S3 Shoulder Nail Plating System and the Multidirectional Threaded Peg for the DVR Anatomic Plating System. (During the meeting, DePuy also launched the Global AP Adjustable Neck Shoulder Replacement System, as well as the Agility LP Total Ankle Replacement.)

The Orthopaedic division also notably launched new software platforms to be used in conjunction with hip and knee surgeries. The Ci Essential Hip System and Ci Essential Knee System were designed to let surgeons visualize parts of the body that aren’t visible through an incision, without the need for computed tomography or fluoroscopy. The company said these advantages could save hundreds of dollars and enhance implant positioning.

DePuy Spine, meanwhile, grew with product launches as well as strategic alliances and acquisitions. In January 2007, it launched the Expedium 6.35, a titanium and stainless steel screw and rod system designed to simplify the correction of spinal deformities and treatment for degenerative disc disease. In February, the Egis Anterior Lumbar Plate System, designed to treat degenerative conditions of the lumbar spine, was rolled out. In May, DePuy launched the Vertigraft VG2 TLIF Allograft, designed to facilitate graft insertion and bone growth during transforaminal lumbar spinal fusion surgery.

In terms of getting ahead via other means, Axial Biotech, Inc. and DePuy are collaborating to develop a gene-based test that would help predict the progression of scoliosis (curvature of the spine). The Spine unit also acquired assets pertaining to the treatment of vertebral compression fractures from Disc-O-Tech Medical Technologies. Furthermore, last fall DePuy and J&J invested $5 million in Series C equity financing for Biomerix Corp., a medtech company that DePuy hopes will help advance development of a new annulus repair implant following lumbar discectomy.

The Mitek unit, focused on sports medicine, notably launched the Versalok knotless anchor system, used in rotator-cuff repair; it allows surgeons to use one implant and a variety of suture-passing configurations for various tear pathologies.

The future of DePuy Orthopaedics domestically now rests in new hands. In late September, David Floyd was named as the unit’s US president. He came to J&J with more than 20 years of experience in orthopedics, especially in the reconstructive joint market, and formerly worked at companies such as Abbott Spine, AxioMed Spine Corp. (where he was president and CEO) and Centerpulse Orthopedics (for which he was US president).

One less worry he’ll have moving forward is the US Attorney’s 2005 investigation related to consulting relationships and other agreements with DePuy’s surgeon customers. DePuy paid $85 million as part of its settlement (see the “Top Companies” introduction on page 38 to learn more about the issue).

The first half of 2008 has shown that DePuy is still posting double-digit gains in a tough economic climate. US growth was only 4.1% compared with the same period in 2007, but international sales grew 20.5%. Overall, DePuy’s total global sales were $2.5 billion for the first six months, a 10.9% increase from the first half of 2007.

$ 4.1 Billion
No. of Employees: 6,000

While 2006 may go down in history as the year Johnson & Johnson (J&J; New Brunswick, NJ) lost the bidding battle for Guidant to rival Boston Scientific, company officials are quick to remind investors and the medtech community—and rightly so—that there’s a lot more going on with the healthcare and medical device giant.

DePuy, J&J’s orthopedic branch, has been contributing very nicely to the company’s overall bottom line. Acquired in 1998 for $3.5 billion, DePuy is part of the J&J’s Medical Devices & Diagnostics group and markets products under the Codman, DePuy Mitek, DePuy Orthopaedics and DePuy Spine brands.

DePuy Orthopaedics specializes in products for reconstructing damaged or diseased joints and for repairing and reconstructing traumatic skeletal injuries. DePuy Spine products facilitate fusion of the spine and correction of spinal deformities, preserving motion of the spine and repairing bone fractures. Codman products provide for the surgical treatment of neurological and central nervous system disorders through products such as hydrocephalic shunt valve systems, implantable drug pumps and micro-surgical instrumentations. DePuy Mitek focuses on devices used in sports medicine for the treatment of soft tissue injuries.

For 2006, orthopedic operations reported $4.1 billion in revenue, an increase of 6.7% from $3.8 billion in 2005. Despite continued growth, DePuy was not immune to the slowdown experienced by the orthopedic sector last year. The company had reported double-digit increases in revenue in 2005 and 2004. But analysts currently see the market rebounding slowly, and long-term market demographics bode well for continued growth for DePuy and its affiliated groups. Company officials remain optimistic.

“Hip replacement surgery isn’t just for seniors anymore,” said Stefano Alfonsi, worldwide vice president of hip marketing for DePuy Orthopaedics. “In fact, the orthopedic patient population is getting younger. Patients are unwilling to accept long-term pain and want to maintain their quality of life. Additionally, treatment options for younger patients are expanding.”

According to J&J’s annual report, 2006 fiscal year sales expansion for the orthopedic division primarily was due to orthopedic joint reconstruction products and Mitek sports medicine products and the trauma business. The company also reported continued growth in the use of its Charité artificial spinal disc, which was approved by the FDA in 2004. According to DePuy Spine, more than 5,000 patients have received the disc in the United States since that time. J&J outwardly remains upbeat, but according to Wall Street analysts, sales of Charité have been disappointing.

In May 2006, DePuy received some good news from the Centers for Medicare & Medicaid Services (CMS). Earlier in the year, the agency had proposed denying coverage of the Charité disc for patients 60 years old and younger. The CMS, however, did an about face and announced it would allow for coverage at the discretion of local Medicare medical directors.

“As we have consistently indicated, this technology is most appropriate for younger patients and this decision allows access to the disabled population who qualify for Medicare—and may benefit from this technology,” said Gary Fischetti, president of DePuy Spine.

The CMS had proposed to deny coverage because of a lack of evidence to indicate that the surgery to implant the device is “reasonable and necessary.” The proposal to deny Medicare coverage could have prompted private health insurers to take similar actions. The agency currently does not cover Charité (nor does it cover the Pro Disc-L from Synthes) for patients older than 60. DePuy does not release sales information on Charité, but according to Merrill Lynch estimates, annual sales of the artificial disc decreased to $21 million in 2006 from $41 million in 2005.

Growth for DePuy in 2006 also came in the form of acquisitions. According to J&J, strategic purchases in 2006 significantly broadened DePuy’s portfolio.

In January 2006, the company completed the acquisition of Hand Innovations, LLC, a privately held manufacturer of widely used fracture fixation products for the upper extremities and technology in plating, which DePuy said is one of the fastest-growing and most under-penetrated segments of the trauma market. In March, the Mitek division of DePuy acquired Future Medical Systems, SA, a privately held company based in France that develops arthroscopic fluid management systems.

For J&J as a whole, the company’s medical device and diagnostics division comprised 38% of company revenue, which totaled $20.3 billion in 2006, a 6.2% increase. DePuy was fourth out of J&J’s seven largest device divisions in terms of revenue growth for 2006. For the year, roughly 40% of J&J’s overall device and diagnostics sales came from products introduced in the past five years.

Starting off 2007, DePuy Orthopaedics used the annual meeting of the American Academy of Orthopaedic Surgeons held in San Diego to announced additions to its product line. DePuy released two new options for restoring hip mobility in patients who require total hip replacement. The Pinnacle Acetabular Cup System Ultamet XL and the Pinnacle Acetabular Cup System AltrX hip bearings are designed to recreate the natural ball and socket joint of the hip to help increase joint stability, range of motion and longevity, the company said. DePuy also unveiled its Agility LP Total Ankle Replacement for the treatment of end-stage ankle disorders. The Agility LP Total Ankle is intended to provide an alternative to ankle fusion surgery as well as advancement in current ankle replacement technology, according to DePuy.

The company also used the meeting to launch three new Hand Innovations products designed for a less-invasive approach to fracture surgery for the hand, wrist, foot and shoulder: the F3 Fragment Plating System, the S3 Shoulder Nail Plating System and the Multi Directional Threaded Peg for the DVR Anatomic Plating System.

According to Jorge Orbay, MD, founder of the Miami Hand Center in Miami, FL, the new products “make a big difference in the way we treat fractures in the hand, wrist, foot and shoulder as they expand our ability to stabilize bone and adapt to the particulars of the patient’s anatomy.”

In June, DePuy Spine received some additional good news with regard to Charité. The US District Court for the Central District of California ruled in favor of DePuy Spine and dismissed virtually all claims of product liability relating to the artificial disc. The plaintiff, a 38-year-old California woman, had claimed that the disc was not designed, tested and labeled properly. Earlier this year, DePuy Spine moved to have the product liability case dismissed on the grounds that a device-specific evaluation and approval by the federal government preempts any state court jury re-determination of the same issues.

DePuy Spine came out on top of yet more legal problems with the announcement earlier this year that rival Medtronic would pay more than $26 million in damages to satisfy a federal appeals court ruling that found Medtronic violated a spinal device patent held by DePuy. In December 2006, the Federal Circuit Court of Appeals upheld a verdict reached by a federal jury in October 2004 that found Medtronic’s MAS screws infringed on the DePuy Spine patent. The screws are used in spinal surgery to correct a variety of spinal defects. A court date also has been set to find if Medtronic’s Vertex screws also infringe on the same DePuy Spine patent. The trial is set to begin on Sept. 4 in the US District Court in Massachusetts.

In addition, February 2007 marked a milestone for DePuy Orthopaedics, with more than one million of the company’s mobile bearing knees having been implanted worldwide, the company said.

For the first quarter of 2007, J&J reported sales of $15 billion, a 15.7% increase, and net earnings were $2.6 billion. Worldwide medical device and diagnostics sales were $5.3 billion for the quarter, a 6.2% increase. Among the primary contributors to the growth, according to J&J, were DePuy’s orthopedic joint reconstruction, sports medicine and trauma businesses.