07.22.14
$28.49 Billion ($71.3 B total)
Key Executives:
Alex Gorsky, CEO & Chairman
Dominic J. Caruso, VP, Finance & CFO
Michel Orsinger, Worldwide Chairman, DePuy Synthes Companies
Karen A. Licitra, Chairman, Global Medical Solutions Group
Gary J. Pruden, Chairman, Global Surgery Group
Kathryn Wengel, VP, Johnson & Johnson Supply Chain
No. of Employees: 128,100 (total)
Global Headquarters: New Brunswick, N.J.
“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, beating out pharmaceuticals by a couple of hundred million dollars 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. Johnson & Johnson last highlighted its device business in 2010.
“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, JNJ had quite a few. Here are some notable additions to the company’s deep stable of technologies:
By the close of FY13 (ended Dec. 29, 2013), 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.
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.
Sales for the Surgical Care business were $6.3 billion in 2013, a decrease of 3.3 percent from 2012. The decline primarily was due to lower sales of mechanical surgery, breast care and pelvic floor products. Outside the United States, increased sales of sutures and endoscopy products were offset by the negative impact from currency.
The Vision Care franchise achieved sales of $2.9 billion in 2013, a decrease of 2 percent from the prior year. The decline primarily was due to sales in Japan, which were impacted by the devaluation of the yen. The decline was partially offset by growth of Acuvue TruEye contact lenses and 1-Day Acuvue Moist for astigmatism.
The Specialty Surgery franchise achieved sales of $2.6 billion in 2013, a 2.6 percent increase compared to 2012. Contributors to the growth were strong sales from biosurgical products, sales of energy products outside the United States and Acclarent ear, nose and throat products in the United States.
The Diabetes Care franchise sales were $2.3 billion, a decrease of 11.7 percent compared to 2012. Sales slumped due to the impact of lower prices primarily related to competitive bidding in the United States as well as pricing pressures in international markets.
Revenues for JNJ’s Cardiovascular Care franchise sales were $2.1 billion, a 4.6 percent increase from the prior year. The bump was driven by strong growth in Biosense Webster’s electrophysiology business primarily due to the success of a number of catheter launches.
Diagnostics franchise sales were $1.9 billion, a decline of 8.9 percent compared to the prior year. The decline was primarily due to the divestiture of the Therakos business and a sales decline in clinical laboratories. In January 2013, the company announced it was exploring strategic alternatives for the Ortho-Clinical Diagnostics business, including a possible sale. In January 2014 JNJ found a buyer—an offer from the Carlyle Group to acquire the Ortho-Clinical Diagnostics business for $4.15 billion.
Pre-tax profit for the 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 2012 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.
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.
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, in 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. Among its first projects, the office has established a research alliance with The Icahn School of Medicine at Mount Sinai to research next-generation therapies for inflammatory bowel disease; invested in Rodin Therapeutics, a biotechnology company focused on applying insights of epigenetics to advance novel therapeutics for neurological disorders such as Alzheimer’s disease; invested in Vedanta Biosciences in order to advance a new class of therapies that modulate pathways of interaction between the human microbiome and the host immune system; and expanded Janssen Labs to Cambridge, Mass., which marks the first East Coast expansion for the JNJ pharmaceutical lab headquartered in San Diego, Calif.
But there’s always innovation through acquisition.
JNJ’s Cordis division purchased Flexible Stenting Solutions Inc., a developer of flexible peripheral arterial, venous and biliary stents. Terms of the deal were not disclosed.
Currently, Cordis markets the S.M.A.R.T. vascular stent worldwide. The addition of Flexible Stenting Solutions’ FlexStent self-expanding stent provides Cordis with the opportunity to evolve the S.M.A.R.T. platform to address unmet needs in the treatment of peripheral artery disease (PAD), officials said. It also extends the company’s potential to expand therapeutic applications into below-the-knee and venous interventions. An estimated 27 million people in Europe and North America alone suffer from PAD.
Cordis received superficial femoral artery (SFA) and proximal popliteal artery (PPA) indications for the S.M.A.R.T. stent, the only stent approved in the United States for iliac, SFA and PPA vascular indications. SFA and PPA are in the upper leg.
The FlexStent system received European CE mark for the treatment of vascular disease (iliac, SFA and popliteal) in January 2009. In the U.S., the device received FDA 510(k) clearance for the palliative treatment of biliary strictures associated with malignant tumors in September 2009. FlexStent also is being evaluated in an investigational device exemption study to evaluate its safety and efficacy in the treatment of patients with atherosclerosis (hardening and narrowing of the arteries) in the SFA. Data from the trial is expected to support a premarket approval application requesting an expanded indication to treat SFA disease in the United States.
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 accuse 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. It 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, citing three sources familiar with the deal.
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 are still 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, 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.
Hips weren’t the only legal headache for the company.
In February last year, Johnson & Johnson also faced a verdict on a lawsuit brought against it over a vaginal mesh implant. The company was ordered to pay a South Dakota woman $3.35 million for inadequate warning on its brochures. The implant is made by JNJ’s subsidiary, Ethicon Endo-Surgery Inc., which makes suture and wound closure devices. The company is based in Somerville, N.J.
This verdict is the first in approximately 1,800 vaginal mesh cases pending in New Jersey against JNJ and Ethicon.
The lawsuit, in state Superior Court in Atlantic City, N.J., was brought by Linda Gross, 47, of Watertown, S.D., in November 2008. It alleged the Gyncare Prolift vaginal mesh was not safe and that JNJ and Ethicon were liable, among other things, for “their defective design, manufacture, warnings and instructions.”
The device was designed to treat pelvic organ collapse, which can occur when the tissue that holds the pelvic organs together is weakened or stretched and bulges into the vagina. This can happen after menopause, childbirth or a hysterectomy. Surgeons also used the device to treat stress incontinence, a severe form of urinary incontinence.
The FDA told JNJ, C.R. Bard Inc. and 31 other manufacturers in January 2012 to study rates of organ damage and complications linked to vaginal mesh implants. Physicians implanted more than 70,000 such devices in U.S. women in 2010.
This April, Johnson & Johnson was ordered by a Texas jury to pay $1.2 million to a woman who alleged one of the company’s lines of vaginal-mesh implants was defectively designed.
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 William J. 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 health care,” said Gorsky. “Mark shares our aspiration to help people live longer, healthier and happier lives and personally is committed to improving healthcare 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.
Key Executives:
Alex Gorsky, CEO & Chairman
Dominic J. Caruso, VP, Finance & CFO
Michel Orsinger, Worldwide Chairman, DePuy Synthes Companies
Karen A. Licitra, Chairman, Global Medical Solutions Group
Gary J. Pruden, Chairman, Global Surgery Group
Kathryn Wengel, VP, Johnson & Johnson Supply Chain
No. of Employees: 128,100 (total)
Global Headquarters: New Brunswick, N.J.
“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, beating out pharmaceuticals by a couple of hundred million dollars 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. Johnson & Johnson last highlighted its device business in 2010.
“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, JNJ had quite a few. Here are some notable additions to the company’s deep stable of technologies:
- The U.S. Food and Drug Administration (FDA) granted Ethicon Endo-Surgery Inc. 510(k) clearance for its Harmonic Focus+ shears with adaptive tissue technology, a next-generation ultrasonic surgical device that responds “intelligently” to varying tissue conditions by regulating energy delivery. The new Harmonic Focus+ leverages the company’s adaptive tissue technology first introduced in Harmonic Ace+, also introduced in 2013. The technology enables the system to actively sense and adapt to changing tissue conditions and intelligently deliver energy resulting in improved performance with superior precision. A slimmer profile is designed to increase speed and visibility, as well as improved dissection.
- The FDA granted 510(k) clearance to JNJ’s Ethicon Endo-Surgery division for the Enseal G2 Articulating Tissue Sealer, which the company claims is the first articulating advanced energy device designed to allow surgeons to take a perpendicular approach to seal vessels up to 7 millimeters in diameter and lymphatics through a 5-millimeter port. Vessels sealed perpendicularly are stronger than those sealed at oblique angles, surgeons say. Stronger sealing helps reduce the likelihood of internal bleeding and post-surgery complications. One of the big challenges surgeons face when performing colorectal, gynecological and general surgeries is operating in challenging anatomy. The new tool will help surgeons maneuver around corners and behind structures in the body, and provide better access to tissue in deep or tight spaces for greater control of the angle of approach to vessels.
- Without a doubt, one of the most noteworthy products to come from JNJ in FY13 was in the orthopedic sector from DePuy Synthes—the Attune total knee replacement system. Tim Czartoski, director of marketing at DePuy Orthopaedics, told MPO 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.
By the close of FY13 (ended Dec. 29, 2013), 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.
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.
Sales for the Surgical Care business were $6.3 billion in 2013, a decrease of 3.3 percent from 2012. The decline primarily was due to lower sales of mechanical surgery, breast care and pelvic floor products. Outside the United States, increased sales of sutures and endoscopy products were offset by the negative impact from currency.
The Vision Care franchise achieved sales of $2.9 billion in 2013, a decrease of 2 percent from the prior year. The decline primarily was due to sales in Japan, which were impacted by the devaluation of the yen. The decline was partially offset by growth of Acuvue TruEye contact lenses and 1-Day Acuvue Moist for astigmatism.
The Specialty Surgery franchise achieved sales of $2.6 billion in 2013, a 2.6 percent increase compared to 2012. Contributors to the growth were strong sales from biosurgical products, sales of energy products outside the United States and Acclarent ear, nose and throat products in the United States.
The Diabetes Care franchise sales were $2.3 billion, a decrease of 11.7 percent compared to 2012. Sales slumped due to the impact of lower prices primarily related to competitive bidding in the United States as well as pricing pressures in international markets.
Revenues for JNJ’s Cardiovascular Care franchise sales were $2.1 billion, a 4.6 percent increase from the prior year. The bump was driven by strong growth in Biosense Webster’s electrophysiology business primarily due to the success of a number of catheter launches.
Diagnostics franchise sales were $1.9 billion, a decline of 8.9 percent compared to the prior year. The decline was primarily due to the divestiture of the Therakos business and a sales decline in clinical laboratories. In January 2013, the company announced it was exploring strategic alternatives for the Ortho-Clinical Diagnostics business, including a possible sale. In January 2014 JNJ found a buyer—an offer from the Carlyle Group to acquire the Ortho-Clinical Diagnostics business for $4.15 billion.
Pre-tax profit for the 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 2012 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.
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.
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, in 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. Among its first projects, the office has established a research alliance with The Icahn School of Medicine at Mount Sinai to research next-generation therapies for inflammatory bowel disease; invested in Rodin Therapeutics, a biotechnology company focused on applying insights of epigenetics to advance novel therapeutics for neurological disorders such as Alzheimer’s disease; invested in Vedanta Biosciences in order to advance a new class of therapies that modulate pathways of interaction between the human microbiome and the host immune system; and expanded Janssen Labs to Cambridge, Mass., which marks the first East Coast expansion for the JNJ pharmaceutical lab headquartered in San Diego, Calif.
But there’s always innovation through acquisition.
JNJ’s Cordis division purchased Flexible Stenting Solutions Inc., a developer of flexible peripheral arterial, venous and biliary stents. Terms of the deal were not disclosed.
Currently, Cordis markets the S.M.A.R.T. vascular stent worldwide. The addition of Flexible Stenting Solutions’ FlexStent self-expanding stent provides Cordis with the opportunity to evolve the S.M.A.R.T. platform to address unmet needs in the treatment of peripheral artery disease (PAD), officials said. It also extends the company’s potential to expand therapeutic applications into below-the-knee and venous interventions. An estimated 27 million people in Europe and North America alone suffer from PAD.
Cordis received superficial femoral artery (SFA) and proximal popliteal artery (PPA) indications for the S.M.A.R.T. stent, the only stent approved in the United States for iliac, SFA and PPA vascular indications. SFA and PPA are in the upper leg.
The FlexStent system received European CE mark for the treatment of vascular disease (iliac, SFA and popliteal) in January 2009. In the U.S., the device received FDA 510(k) clearance for the palliative treatment of biliary strictures associated with malignant tumors in September 2009. FlexStent also is being evaluated in an investigational device exemption study to evaluate its safety and efficacy in the treatment of patients with atherosclerosis (hardening and narrowing of the arteries) in the SFA. Data from the trial is expected to support a premarket approval application requesting an expanded indication to treat SFA disease in the United States.
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 accuse 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. It 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, citing three sources familiar with the deal.
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 are still 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, 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.
Hips weren’t the only legal headache for the company.
In February last year, Johnson & Johnson also faced a verdict on a lawsuit brought against it over a vaginal mesh implant. The company was ordered to pay a South Dakota woman $3.35 million for inadequate warning on its brochures. The implant is made by JNJ’s subsidiary, Ethicon Endo-Surgery Inc., which makes suture and wound closure devices. The company is based in Somerville, N.J.
This verdict is the first in approximately 1,800 vaginal mesh cases pending in New Jersey against JNJ and Ethicon.
The lawsuit, in state Superior Court in Atlantic City, N.J., was brought by Linda Gross, 47, of Watertown, S.D., in November 2008. It alleged the Gyncare Prolift vaginal mesh was not safe and that JNJ and Ethicon were liable, among other things, for “their defective design, manufacture, warnings and instructions.”
The device was designed to treat pelvic organ collapse, which can occur when the tissue that holds the pelvic organs together is weakened or stretched and bulges into the vagina. This can happen after menopause, childbirth or a hysterectomy. Surgeons also used the device to treat stress incontinence, a severe form of urinary incontinence.
The FDA told JNJ, C.R. Bard Inc. and 31 other manufacturers in January 2012 to study rates of organ damage and complications linked to vaginal mesh implants. Physicians implanted more than 70,000 such devices in U.S. women in 2010.
This April, Johnson & Johnson was ordered by a Texas jury to pay $1.2 million to a woman who alleged one of the company’s lines of vaginal-mesh implants was defectively designed.
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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 William J. 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 health care,” said Gorsky. “Mark shares our aspiration to help people live longer, healthier and happier lives and personally is committed to improving healthcare 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.