07.01.06
$17.7 Billion ($51B Total)
Key Executives:
William C. Weldon, Chairman and CEO
Robert J. Darretta, Vice Chairman and CFO
Michael J. Dormer, Worldwide Chairman, Medical Devices
Thomas M. Gorrie, VP, Government Affairs and Policy
Theodore J. Torphy, VP, Science and Technology
Nicholas J. Valeriani, Worldwide Chairman, Cardiovascular Devices and Diagnostics
No. of Employees: 115,600
World Headquarters: New Brunswick, NJ
For next few years, many will be asking “What if?” or “Why did it happen?” The talk is about Johnson & Johnson’s failure to purchase Indianapolis, IN-based Guidant. The New Brunswick, NJ-based medical device giant courted Guidant for more than a year, only to have Natick, MA-based Boston Scientific swoop in and grab Guidant for $27.2 million.
The company had originally made what was considered an attractive offer to Guidant, putting $25 billion on the table. Then, after Guidant’s lengthy list of problems surfaced (see Guidant’s report on page 78), J&J lowered its offer. However, it eventually had upped the sum to buy Guidant for $24.5 billion once Boston Scientific approached Guidant with its own lucrative offer. For two months, both companies battled back and forth for Guidant before the $80-per-share offer from Boston Scientific was just too enticing for Guidant.
“Unfortunately, a combination of adverse developments in Guidant’s business and competition for the asset forced the price to a ping where we concluded it was no longer in the best interest of our shareholders to pursue this business opportunity,” said J&J CEO William C. Weldon. “Nonetheless, we remain committed to strengthening our business in this important [cardiovascular] therapeutic category.”
Only time will tell what effect—positive or negative—the turn of events will have on both Boston Scientific and J&J. Even months after the ink was dried on the contract to buy Guidant, the cardiovascular product manufacturer is still being plagued with problems with its implantable defibrillators and pacemakers.
In some respect, the move by Boston Scientific might have been a blessing in disguise for J&J, as the company will most likely continue its reign as the largest medical device company in the world and not have to worry about being burdened by Guidant’s past.
If the deal had gone through, it would have placed the medical device sector on equal terms with the pharmaceutical division as the multi-faceted corporation continues to stress the more profitable medical device side.
Not only did J&J battle Boston Scientific in the boardroom, the two companies also faced off in the courtroom regarding several decisions on patent disputes involving J&J’s balloon expandable stents and the Natick, MA-based manufacturer’s Taxus and Liberte stents.
In the most recent move, J&J’s Cordis Corp. unit filed an appeal last month (June) of a federal decision that upheld a previous ruling that its stent product infringed on a Boston Scientific patent. In 2005, the device segment outgrew the multi-faceted corporation with a double-digit rise in revenues at 13%, while the entire corporation as a whole grew a steady 7%.
Johnson and Johnson medical device franchise sales include the following divisions: Vision Care, Cordis, DePuy, Ethinco, Ethicon Endo-Surgery and LifeScan. Most of the divisions realized double-digit sales increases. Cordis led the pack with a robust 24% jump in revenues helped by its circulatory disease management products, driven by the Cypher Sirolimus-eluting Coronary Stent. Cypher is the worldwide leader of drug-eluting stents, which have been used to treat more than two million patients with coronary artery disease. The stent had excellent growth domestically as well as internationally, with the best increases coming from Japan.
Also contributing to the strong performance of the segment were the results from DePuy’s orthopedic joint reconstruction and spinal products, LifeScan’s blood glucose monitoring products, Vistakon’s disposable contact lenses and Ortho-Clinical Diagnostics’ professional diagnostic products.
While the mega-corporation did not capture Guidant, it did complete several other smaller—but significant—acquisitions.
Before the rejection of Guidant, J&J’s unit Cordis purchased Redwood City, CA-based LuMend, a privately held company that makes chronic total occlusion (CTO) devices to treat peripheral vascular disease, in September 2005.
Right after Boston Scientific secured the deal for Guidant, J&J bought three more companies over the next few months. In January 2006, the company announced the acquisition of Hand Innovations of Miami, FL, a privately held manufacturer of implants used for the repair of wrist fractures. In February, J&J acquired West Chester, PA-based Animas Corporation, a leading manufacturer of insulin infusion pumps and related products. And in May, Ethicon, a unit of Johnson & Johnson, purchased privately held, San Juan Capistrano, CA-based Vascular Control Systems, which manufactures devices to control bleeding during obstetric and gynecologic procedures. Ethicon manufactures instruments for general surgery and other surgical procedures.
“This represents a strong strategic fit with our gynecologic business,” said Sheri McCoy, a J&J executive responsible for the Ethicon business, about the purchase of Vascular Control Systems. “The technology and knowledge we’ll gain will enable us to expand our ability to create new therapies for women.”
One area that J&J is expected to make a splash in during the next few years is the artificial spine market. The company received a big boost from Medicare this May after it agreed to pay for artificial spinal disks implanted in beneficiaries under the age of 60.
In addition, J&J is expected to launch the Synthes disc in the United States in the second half of 2006.
DePuy, the company’s segment for joint reconstruction and other important orthopedic areas, is focusing on less invasive and more durable, motion-saving solutions.
As part of its Cordis franchise, Biosense Webster saw double-digit growth in 2005 and is expected to gain more in 2006 as it received FDA approval for the use of Celsius RMT diagnostic abalation steerable tip catheter.
While the revenues have grown for Cordis, the segment continues to work with the FDA (since April 2004) on warning letters regarding cGMP regulations and Good Clinical Practice regulations. J&J was hoping to get clearance this year after follow-up inspections in the first half of 2006.
After the Cordis segment showed the largest growth in 2005, DePuy and Lifescan reported 13% and 12% jumps in sales, respectively. Vision Care and Ethicon demonstrated 11% and 9% revenue increases, respectively, in fiscal 2005. Ethicon Endo-Surgery had a 9% rise in sales for 2005.
For LifeScan, the Onetouch Ultra product line boosted its sales to $1.9 billion. The continued success of the Acuvue Advance Brand contact lenses also helped boost the Vision Care franchise to $1.7 billion in revenue.
In the first quarter of 2006, medical devices and diagnostics sales rose 5% to $5 billion, with Cordis circulatory disease management products being a key contributor to the segment (the prime driver was the Cypher Sirolimus-eluting coronary stent). Also contributing to the sector were DePuy’s orthopedic joint reconstruction, sports medicine and trauma businesses, along with Ethicon Endo-Surgery’s minimally invasive products.
Key Executives:
William C. Weldon, Chairman and CEO
Robert J. Darretta, Vice Chairman and CFO
Michael J. Dormer, Worldwide Chairman, Medical Devices
Thomas M. Gorrie, VP, Government Affairs and Policy
Theodore J. Torphy, VP, Science and Technology
Nicholas J. Valeriani, Worldwide Chairman, Cardiovascular Devices and Diagnostics
No. of Employees: 115,600
World Headquarters: New Brunswick, NJ
For next few years, many will be asking “What if?” or “Why did it happen?” The talk is about Johnson & Johnson’s failure to purchase Indianapolis, IN-based Guidant. The New Brunswick, NJ-based medical device giant courted Guidant for more than a year, only to have Natick, MA-based Boston Scientific swoop in and grab Guidant for $27.2 million.
The company had originally made what was considered an attractive offer to Guidant, putting $25 billion on the table. Then, after Guidant’s lengthy list of problems surfaced (see Guidant’s report on page 78), J&J lowered its offer. However, it eventually had upped the sum to buy Guidant for $24.5 billion once Boston Scientific approached Guidant with its own lucrative offer. For two months, both companies battled back and forth for Guidant before the $80-per-share offer from Boston Scientific was just too enticing for Guidant.
“Unfortunately, a combination of adverse developments in Guidant’s business and competition for the asset forced the price to a ping where we concluded it was no longer in the best interest of our shareholders to pursue this business opportunity,” said J&J CEO William C. Weldon. “Nonetheless, we remain committed to strengthening our business in this important [cardiovascular] therapeutic category.”
Only time will tell what effect—positive or negative—the turn of events will have on both Boston Scientific and J&J. Even months after the ink was dried on the contract to buy Guidant, the cardiovascular product manufacturer is still being plagued with problems with its implantable defibrillators and pacemakers.
In some respect, the move by Boston Scientific might have been a blessing in disguise for J&J, as the company will most likely continue its reign as the largest medical device company in the world and not have to worry about being burdened by Guidant’s past.
If the deal had gone through, it would have placed the medical device sector on equal terms with the pharmaceutical division as the multi-faceted corporation continues to stress the more profitable medical device side.
Not only did J&J battle Boston Scientific in the boardroom, the two companies also faced off in the courtroom regarding several decisions on patent disputes involving J&J’s balloon expandable stents and the Natick, MA-based manufacturer’s Taxus and Liberte stents.
In the most recent move, J&J’s Cordis Corp. unit filed an appeal last month (June) of a federal decision that upheld a previous ruling that its stent product infringed on a Boston Scientific patent. In 2005, the device segment outgrew the multi-faceted corporation with a double-digit rise in revenues at 13%, while the entire corporation as a whole grew a steady 7%.
Johnson and Johnson medical device franchise sales include the following divisions: Vision Care, Cordis, DePuy, Ethinco, Ethicon Endo-Surgery and LifeScan. Most of the divisions realized double-digit sales increases. Cordis led the pack with a robust 24% jump in revenues helped by its circulatory disease management products, driven by the Cypher Sirolimus-eluting Coronary Stent. Cypher is the worldwide leader of drug-eluting stents, which have been used to treat more than two million patients with coronary artery disease. The stent had excellent growth domestically as well as internationally, with the best increases coming from Japan.
Also contributing to the strong performance of the segment were the results from DePuy’s orthopedic joint reconstruction and spinal products, LifeScan’s blood glucose monitoring products, Vistakon’s disposable contact lenses and Ortho-Clinical Diagnostics’ professional diagnostic products.
While the mega-corporation did not capture Guidant, it did complete several other smaller—but significant—acquisitions.
Before the rejection of Guidant, J&J’s unit Cordis purchased Redwood City, CA-based LuMend, a privately held company that makes chronic total occlusion (CTO) devices to treat peripheral vascular disease, in September 2005.
Right after Boston Scientific secured the deal for Guidant, J&J bought three more companies over the next few months. In January 2006, the company announced the acquisition of Hand Innovations of Miami, FL, a privately held manufacturer of implants used for the repair of wrist fractures. In February, J&J acquired West Chester, PA-based Animas Corporation, a leading manufacturer of insulin infusion pumps and related products. And in May, Ethicon, a unit of Johnson & Johnson, purchased privately held, San Juan Capistrano, CA-based Vascular Control Systems, which manufactures devices to control bleeding during obstetric and gynecologic procedures. Ethicon manufactures instruments for general surgery and other surgical procedures.
“This represents a strong strategic fit with our gynecologic business,” said Sheri McCoy, a J&J executive responsible for the Ethicon business, about the purchase of Vascular Control Systems. “The technology and knowledge we’ll gain will enable us to expand our ability to create new therapies for women.”
One area that J&J is expected to make a splash in during the next few years is the artificial spine market. The company received a big boost from Medicare this May after it agreed to pay for artificial spinal disks implanted in beneficiaries under the age of 60.
In addition, J&J is expected to launch the Synthes disc in the United States in the second half of 2006.
DePuy, the company’s segment for joint reconstruction and other important orthopedic areas, is focusing on less invasive and more durable, motion-saving solutions.
As part of its Cordis franchise, Biosense Webster saw double-digit growth in 2005 and is expected to gain more in 2006 as it received FDA approval for the use of Celsius RMT diagnostic abalation steerable tip catheter.
While the revenues have grown for Cordis, the segment continues to work with the FDA (since April 2004) on warning letters regarding cGMP regulations and Good Clinical Practice regulations. J&J was hoping to get clearance this year after follow-up inspections in the first half of 2006.
After the Cordis segment showed the largest growth in 2005, DePuy and Lifescan reported 13% and 12% jumps in sales, respectively. Vision Care and Ethicon demonstrated 11% and 9% revenue increases, respectively, in fiscal 2005. Ethicon Endo-Surgery had a 9% rise in sales for 2005.
For LifeScan, the Onetouch Ultra product line boosted its sales to $1.9 billion. The continued success of the Acuvue Advance Brand contact lenses also helped boost the Vision Care franchise to $1.7 billion in revenue.
In the first quarter of 2006, medical devices and diagnostics sales rose 5% to $5 billion, with Cordis circulatory disease management products being a key contributor to the segment (the prime driver was the Cypher Sirolimus-eluting coronary stent). Also contributing to the sector were DePuy’s orthopedic joint reconstruction, sports medicine and trauma businesses, along with Ethicon Endo-Surgery’s minimally invasive products.