J&J's Q2 Results Suggest a Mixed Pace for Procedure Volume Recovery

Johnson & Johnson's second-quarter earnings indicates that procedure volumes disrupted by COVID-19 are recovering nicely, for the most part. There are some procedure types, however, (knees, spine, vision) where the pace of recovery has been slower than others. J&J's results would also suggest that the pace of procedure volume recovery varies by geography as well.

Needham & Co. medtech analysts said in a report Wednesday that J&J's medical devices' growth signals a broader market recovery.

"All four of [J&J's] major categories within the medical devices business had sales growth over 2Q19," reported analysts Mike Matson, David Saxon, and Joseph Conway. "Management noted growth was primarily driven by the recovery of procedure volumes and secondarily by new products and commercial execution. They were cautiously optimistic about further improvement in 2H21, but noted that this will depend on factors including vaccination rates, hospital capacity, and patients willingness to be treated."

Chris DelOrefice, vice president of investor relations at J&J, said during the earnings call that eight of the company's billion-dolloar platforms showed growth during the quarter compared to the second quarter of 2019. They also said, however, that the pace of market recovery in knees, spine, and vision-surgical has been slower than the other markets in which J&J competes as these procedures are perceived to be more deferrable by patients.

"Knees returned to growth this quarter, increasing 94.6% globally, primarily due to market recovery," DelOrefice said. "Results reflect continued COVID-19 challenges and the related impact on procedures in markets like India, Japan, and Australia, and other dynamics, including faster recovery trends in primary knee procedures compared to revisions."

During the earnings call Wednesday, J&J management focused on recent product launches in the medical device business, as well as promising devices in the pipeline.

"This quarter, we expanded our market-leading portfolio of products with the launch of a next-generation variable angle clavicle plate system, designed to enhance plate-to-bone fit on a broad range of patients and simplify implant selection for the surgeon," DelOrefice said. "And we launched an advanced tibial nailing system, designed to provide a more stable implant solution and create efficiency within the healthcare system by streamlining instrumentation across our portfolio."

They also touted the recent U.S. commercialization of J&J's Velys robotic-assisted solution for total knee procedures, and the upcoming launch of the Attune cementless fixed bearing knee with Affixium 3D-printed technology, which DelOrefice said is expected to enhance the company's knee portfolio and competitiveness as procedures continue to recover. And in spine, they noted a positive impact from recently launched products like Symphony, Conduit, and Fibergraft, as well as strategic partnerships intended to further enhance the company's offerings in that space.

"We have an exciting pipeline, and we've achieved some truly amazing results in the first half of this year which position us well to continue our growth momentum," said Ashley McEvoy, executive vice president, and worldwide chairman for J&J's medical devices business. "We've launched 17 major products in the first half of 2021. This is the highest number of first-half of the year launches in five years for our business."