Johnson & Johnson announced yesterday that it will be cutting approximately 3,000 jobs in its medical devices division, specifically within its orthopedics, surgery and cardiovascular businesses, which could reportedly save the company anywhere from $800 million to $1 billion by 2018.
In the past, J&J’s has had fast-growing sales of artery-opening stents, knee-replacement parts and other surgical tools, more prominent than its prescription-drugs and consumer-health businesses. But growth of the market for medical devices has undoubtedly slowed down in general.
As The Wall Street Journal reported:
The $320 billion market for medical devices world-wide is growing 4% a year now, down from a double-digit rate in the early 2000s, according to Venkat Rajan, a medical-device industry analyst at research and consulting firm Frost & Sullivan. J&J’s medical-device sales have slowed even more than the overall market’s the past few years, growing just 1% operationally in the third quarter, according to Wells Fargo Securities.
Part of the changes moving forward for J&J could include a more acute focus on high-growth categories, like surgical robotics and staplers, and a narrowing geographically, looking mostly at markets in the U.S., Japan and China.
In an email, Johnson & Johnson Innovation spokesperson, Meghan Marschall, responded to questions about future innovation and investments with this statement:
“The recently announced Johnson & Johnson Medical Devices restructuring is designed to fuel innovation and accelerate growth by reallocating and increasing our overall investment in R&D and accelerating our pace of innovation. For JJDC, that includes our focus on continuing to source innovation through deals and investments in external opportunities.”
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Is this restructuring a demonstration that the growth in certain areas of medical device development are indefinitely slowing down, or does it suggest that companies, especially monster corporations like J&J, really will do more good if they narrow their focus and try not to spread too thin with investments?
Here are some FAQs that J&J provided about the restructuring.
Photo: Flickr user Images Money
