DePuy (JNJ) Reports 2Q:06 Earnings
BY ARIELLA P. GOLOMB, MD, JULY 18, 2006
Today Johnson & Johnson announced record sales of $13.4 billion for 2Q:06, an increase of 4.7% compared to 2Q:05, and slightly higher than analysts' $13.13 billion expectations. DePuy, Inc., one of the overall family of J&J companies, experienced a reported 2Q:06 earnings of $1.068 billion, or 6% operational growth (sales growth excluding currency effect) over 2Q:06. The 6% was broken down as 4% joint reconstruction, 20% Mitex/Sports medicine, and >50% trauma (due to the recent acquisition of Hand Innovations and growth in the base business).
The Breakdown among DePuy's divisions for the quarter is as follows:
The company stated that DePuy's growth slowed in each of the last 2 quarters (see accompanying graph), and claimed this growth was consistent with a slow down in the overall growth of the industry. The company theorized that last year's higher growth rates were driven by a bolus of patients who were no longer given access to Cox-2 inhibitors and were instead electing to have surgery. (In our opinion, not a very strong explanation given the fact there are a good number of patients without gastrointestinal complications who could have been switched to other NSAIDs). The company reported seeing a potential to return to high single digit growth, but not the double digit growth experienced during a more liberal pricing environment. However, contrary to these statements, HealthpointCapital estimates that taking constant currency consideration into account, the orthopedic device market will be growing 12% for the remainder of the year. And as we commented earlier, the total hip arthroplasty market has slowed down, but we believe the slow down is more moderate than the rest of industry experts and believe an increase in right around the corner.
Of note for Orthopedic surgeons, J&J is currently co-developing and marketing with Bayer HealthCare, Rivaroxaban, a first in class, oral direct Factor Xa inhibitor, for the prevention of Venous Thromboemoblism (among other potential indications). This antithrombosis drug is expected to compete with warfarin and Lovenox, currently on the market, while the comparison to other Factor Xa products in development and potential liver toxicity is still to be demonstrated. According to Bayer, RECORD (REgulation of Coagulation in major Orthopaedic surgery reducing the Risk of DVT and PE) study program began in December 2005 and recruitment is on track and progressing well.
