Johnson&Johnson Medical’s major strategic adjustment has caused a huge wave in the field of cardiovascular intervention

In 2015, Johnson&Johnson sold its vascular medical device manufacturing division Cordis and announced its withdrawal from the cardiovascular stent business. This business transformation became a landmark event in the medical device industry, and Johnson&Johnson missed out on the “golden decade” of vascular medical device development thereafter.

Recently, there has been a sudden personnel change at medical giant Johnson&Johnson. Will Song, a veteran who has been working for the company for over 20 years, as well as the chairman of Johnson&Johnson China and the president of Johnson&Johnson Medical Technology China, has requested his resignation. This news shook the medical community.

The personnel upheaval at the top of a company often becomes a “watershed” in the direction of its business development. The departure of Song Weiqun coincided with Johnson&Johnson announcing a series of major strategic adjustments. The company’s future strategic implementation in China is also full of uncertainty.

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There is currently no consensus on the whereabouts of Song Weiqun. The first financial reporter was unable to contact Song Weiqun himself to respond.

As of the time of publication, Johnson&Johnson Medical Technology headquarters has not yet replied to First Financial reporters regarding the relevant personnel arrangement plan.

“With the departure of Song Weiqun, Johnson&Johnson’s future strategic implementation in China will also be somewhat affected.” A former executive of Johnson&Johnson China told First Financial reporters that it is still a huge mystery who will take over Song Weiqun’s position, let alone whether the next successor will have the ability to promote Chinese projects in Johnson&Johnson’s large institution. Therefore, Johnson&Johnson’s future strategic implementation in China is full of uncertainty.

Even before Song Weiqun requested his resignation, Johnson&Johnson had already undergone significant personnel changes globally and in China. A former executive at Johnson&Johnson China told First Financial reporters, “Johnson&Johnson’s personnel have undergone significant changes in recent years, with the global leader, Asia Pacific leader, and R&D leader in medical technology all being replaced.”

Last October, Johnson&Johnson Medical Technology announced the resignation of former Global Chairman and Executive Vice President (Ashley McEvoy) and appointed former Asia Pacific Chairman of Johnson&Johnson Medical Technology, Tim Schmid, as the new Global Chairman of Johnson&Johnson Medical Technology.

In Johnson&Johnson China, the heads of several important business departments have almost changed throughout the past year. Just before Song Weiqun resigned, in March of this year, Johnson&Johnson Medical Technology announced a new candidate for the position of General Manager of the Surgery Division in China, to be held by Tulio Oliveira, former Global Head of Advanced Surgical Stapler Business at Johnson&Johnson Medical Technology.

Last March, Johnson&Johnson China announced internally that Chen Xi, the General Manager of the Cardiovascular and Professional Solutions Division (CSS) in China, and Chen Min, the General Manager of the Orthopedics Division in China, had resigned from the company and decided to seek external development opportunities. Afterwards, Johnson&Johnson Medical Technology appointed Chen Chuhui and Han Wei respectively to replace the positions of General Manager of CSS and Orthopedics departments.

In April of the same year, Wang Jinhe, Vice President of Operations and Professional Education at Johnson&Johnson Medical Technology in China, resigned and sought external development.

It is worth noting that Chen Min and Wang Jinhe, who resigned last year, have both joined local medical device companies. One has joined Weigao Group as Vice President, and the other has joined Huitai Medical, which has been controlled by Mindray Medical for 6.6 billion yuan.

Behind the major overhaul of Johnson&Johnson’s senior management, the entire Johnson&Johnson company’s strategy is undergoing a major overhaul. In September 2023, Johnson&Johnson Group announced the renaming of its pharmaceutical business, Yangsen, to Johnson&Johnson Innovation Pharmaceuticals, which, together with Johnson&Johnson Medical Technology, formed Johnson&Johnson’s two main businesses. The latter was officially renamed in 2022 and has three major business units: Cardiovascular and Professional Solutions, Orthopedics, and Surgery.

The cardiovascular business, including electrophysiology, is the focus of Johnson&Johnson’s strategic adjustment in this round. Last month, Johnson&Johnson released its first quarter financial report for 2024, which showed that Johnson&Johnson Medical Technology’s cardiovascular business revenue surged by over 20% to $1.8 billion, contributing the most critical driving force for the company’s performance growth, far exceeding the overall 4% growth of Johnson&Johnson Medical Technology.

The cardiovascular track needs to undergo changes

“If you look at the area we have recently strengthened in, it’s cardiovascular disease, which is also the number one killer of diseases, even surpassing cancer,” Johnson&Johnson’s CFO Joseph Wolk told investors during the earnings conference call. “We believe the opportunity is there.”

At present, the cardiovascular business accounts for less than a quarter of Johnson&Johnson Medical Technology’s overall business. In the first quarter of this year, Johnson&Johnson Medical Technology’s sales reached $7.82 billion. But through a series of mergers and acquisitions, Johnson&Johnson is expected to reshape its leadership position in the cardiovascular field.

In the past two years, Johnson&Johnson has invested billions of dollars in two major acquisition cases targeting the field of cardiovascular intervention medical devices. Last month, Johnson&Johnson spent $13.1 billion to acquire heart equipment company Shockwave. Two years ago, Johnson&Johnson also spent $16.6 billion to acquire Abiomed, an interventional artificial heart equipment company.

These two heavyweight acquisitions will complement Johnson&Johnson’s cardiovascular intervention device field beyond electrophysiology. Volcker pointed out that by acquiring Abiomed and Shockwave, Johnson&Johnson is investing in businesses that have become profit drivers.

At the beginning of 2023, Johnson&Johnson stated that the company plans to focus on transactions that add value to its cardiovascular product portfolio. In the future, it is not ruled out that the company will invest more in cardiovascular medical equipment. In December 2023, Johnson&Johnson reiterated at an investor conference that it will continue to expand its business into high growth areas such as cardiovascular intervention.

An industry insider who has served as a senior executive at multiple multinational medical device companies such as Johnson&Johnson revealed to First Financial reporters that Johnson&Johnson has a significant market share in China’s electrophysiology business. “The electrophysiology market in China is mainly dominated by Johnson&Johnson and Abbott,” he told a reporter from First Financial News. “Now Johnson&Johnson is targeting a broader market.”

Currently, Johnson&Johnson ranks first among medical device companies with a market value of approximately $360 billion. However, in terms of revenue from its medical technology business, Medtronic, with a market value of approximately $100 billion, has surpassed Johnson&Johnson Medical Technology to become the world’s largest medical device enterprise. In 2023, Medtronic’s revenue was $31.2 billion, while Johnson&Johnson Medical Technology’s revenue was $30.4 billion, ranking second.

But Volcker expressed satisfaction with Johnson&Johnson Medical Technology’s growth in recent years. He stated that the growth rate of the medical device business in 2017 was only 1.5%, which was very slow, but it had already experienced significant growth by last year. The latest financial report shows that Johnson&Johnson Medical Technology achieved a 10.8% growth in revenue in 2023.

Johnson&Johnson’s several major acquisitions in recent years have also attracted high attention from practitioners in the field of cardiovascular medical devices. Some industry insiders believe that the entry of giants may increase industry monopolies, making it difficult for smaller startups to survive and hindering industry innovation.

There are also some views that suggest that small companies with innovative capabilities may become “difficult to let go” and unable to flexibly implement innovative ideas after being acquired by large enterprises.

“Johnson&Johnson’s ambition to enter the cardiovascular field is already evident, especially in the field of intervention.” The head of a globally renowned cardiac intervention device research and development team told First Financial reporters, “Johnson&Johnson is definitely an interesting case, and it may once again become one of the most powerful participants in the future cardiovascular field. This has also sparked industry thinking, which may accelerate the integration of the future market.”

Missed “Golden Decade”

In the history of medical device development, Johnson&Johnson, which started with surgery, once held an important position. Until around 2010, Johnson&Johnson underwent a significant strategic shift, focusing more on its pharmaceutical business.

In 2015, Johnson&Johnson sold its vascular medical device manufacturing division Cordis and announced its withdrawal from the cardiovascular stent business. This business transformation became a landmark event in the medical device industry, and Johnson&Johnson missed out on the “golden decade” of vascular medical device development thereafter.

A cardiovascular expert told First Financial reporters, “Johnson&Johnson’s exit from the heart stent business and sale of Cordis was a major investment decision mistake in the company’s development process.”

Volcker also mentioned at the latest financial report meeting, “Medical technology used to be Johnson&Johnson’s stronger investment portfolio, leading the company’s performance for many years. The turning point occurred around 2010 when it was announced that the focus would be more on the pharmaceutical business.”

In fact, in the past decade, medical devices have been a stagnant area for Johnson&Johnson, and due to slow business growth, Johnson&Johnson’s revenue from medical devices has lagged behind pharmaceutical revenue quarter by quarter.

Until now, Johnson&Johnson’s performance is still mainly driven by drugs. Among the $21.4 billion sales reported by Johnson&Johnson in the first quarter, drug sales reached $13.6 billion, accounting for over 60%. This includes the heavyweight self exemption drug Stelara, but the patent for the drug is set to expire next year and will face fierce competition from generic drugs.

Johnson&Johnson spends billions of dollars annually on drug acquisitions. Last year, Johnson&Johnson spent approximately $3 billion to complete about 50 smaller transactions. At the beginning of this year, Johnson&Johnson spent $2 billion to acquire ADC pharmaceutical manufacturer Ambrx.

Volcker stated that Johnson&Johnson is seeking a balance in the development of its pharmaceutical and medical device businesses. “If years ago, the development trend in the field of medical technology was still a bit unpredictable or unreliable, then now let’s take a look at where our opportunities lie. I think you have to say it’s in the field of medical technology.” he said.

Now, through a massive acquisition of over 10 billion US dollars in the device end, Johnson&Johnson Medical Technology hopes to return to its market leader position in the field of cardiovascular intervention. But the market competition pattern has undergone earth shaking changes compared to more than a decade ago. Not only have cross-border competitors become stronger, but local competitors have also grown rapidly.

Over the past decade, the stock prices of Boston Scientific and Edward Life Sciences, both of which are in the same cardiovascular equipment industry, have risen by about seven times. Boston Scientific has achieved consecutive double-digit growth in recent years. After the recent financial report was released, Boston Scientific’s stock price reached a new high, and its current market value is approaching that of Medtronic.