J&J MedTech pitches Shockwave as its next billion-dollar company in Q2 earnings

J&J MedTech pitches Shockwave as its next billion-dollar company in Q2 earnings

After welcoming Shockwave Medical to its stable of medtech businesses earlier this year, Johnson & Johnson reported that its new acquisition had slightly bumped up its sales growth for the quarter.

J&J MedTech put up $7.96 billion in revenue, below analysts’ expectations for the division, to equal a 2.2% reported gain compared to the second quarter of last year. Operationally, when accounting for international currency exchanges, that rate increased to 4.4%—and the company said the 0.4% of that figure could be attributed to its recent $13.1 billion buy of Shockwave and its tools for busting open clogged arteries.

The companies officially sealed their deal on May 31; over the remaining 30 days in the quarter, Shockwave added $77 million in sales toward J&J’s bottom line. On a call with investors, Chief Financial Officer Joseph Wolk said they expect the acquisition to add $500 million by the end of the year.

“We closed that transaction in record timing, and we are really excited to shortly announce that they will be the 13th business with sales in excess of $1 billion annually,” added J&J MedTech’s worldwide chairman, Tim Schmid.

More broadly across J&J MedTech’s cardiovascular sales—which saw double-digit increases in its electrophysiology portfolio as well as its previous marquee acquisition, the heart pump maker Abiomed—the division posted 18% total operational growth for $1.87 billion in revenue. That includes gains from the commercial launch of its Varipulse pulsed field ablation system this year in the European Union and Japan.

Orthopedics, meanwhile, listed $2.31 billion in sales for a 3.3% gain; driven in part by pull-through revenue among knee replacement implants linked to its Velys robotic assistant.

Surgical revenues fell 1.2% operationally, to $2.49 billion, due in part to volume-based procurement in China and the country’s ongoing anti-corruption campaign, as well as a contracting market among bariatric procedures following the rise of GLP-1 medications.

In vision, $1.29 billion in sales represented a reported drop of 1.7% but an operational gain of 0.8%—as gains from the recent launch of its new Acuvue OASYS MAX one-day contact lens were offset by last year’s divestiture of certain eye drops to Bausch + Lomb, and while eye surgery sales saw the same pressures as J&J’s broader surgical catalog. At the same time, the company said distributors were reducing their stocking purchases of contact lenses overall.

In pharmaceuticals, J&J brought in $14.49 billion, for a company grand total of $22.45 billion and 6.6% operational growth.

During the remainder of the year, the company said it expects medtech revenues to climb back in line with previous projections, with recoveries in contact lens distribution and a lift from Shockwave after it clears the one-time costs related to the acquisition.

On the call with investors, Schmid also described the second quarter of 2023 as a tough comparator, with it being one of the company’s fastest-growing quarters following last year’s reopening of the market in China.

“There have been two areas of our business that have performed below expectations: number one is vision, and secondly our performance in China, which right now is a very volatile market,” Schmid said.

“In vision, we initially announced in the first quarter some challenges with distributor-stocking dynamics in the U.S., as well as some macroeconomic challenges in Japan,” he said.

“What gives me confidence in the turnaround of that business is that we actually saw sequential improvement through the second quarter. Some of those stocking dynamics bled into April, but month-on-month, we saw a strong rebound of that business. In fact, by the end of the quarter, it was back to historical levels.”

Company-wide, J&J upped its projections of total operational sales for the full year, from about $88.9 billion to $89.4 billion—but lowered its forecasted earnings-per-share, from about $10.68 to $10.05.

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