Inside the OEM: Johnson & Johnson MedTech

In 2024, Johnson & Johnson MedTech faced a few challenges but the medtech giant also saw some great successes. Among its challenges were the underperformance of its vision business and headwinds in China due to volume-based procurement and an ongoing anticorruption campaign. During the year, the company shifted to a decentralized operating model, designed to enhance accountability and responsiveness to local markets, while still leveraging scale in areas like procurement.

Throughout the year, Johnson & Johnson’s M&A strategy focused on cardiovascular growth through acquisitions, as well as maintaining a balanced approach between small tuck-ins and larger acquisitions. Cardiovascular, especially electrophysiology, remains a key focus area and is expected to drive growth. With the launch of the Varipulse catheter in the United States, J&J will compete in the electrophysiology space, leveraging the company’s advanced CARTO mapping system.

In a recent earnings call, Tim Schmid, executive vice president and worldwide chairman of medtech, noted that J&J management has spent the last fi ve years turning the business around to much more positive growth. Schmid has served in his current role for nearly a year, but spent most of his career, almost 31 years, with Johnson & Johnson MedTech across almost all of it regions and businesses.

“As we look at our performance in the first half, our vision business hasn’t performed — at least consistent with historical norms. We’re very confident that will rebound in the back half,” he said. He also noted that the challenges all medtech companies are facing in China “is likely to go on for a little bit longer.”

Growth Strategies

Johnson & Johnson invested $3.1 billion in 2023, focusing on areas such as surgery and orthopedics. “We have invested significantly more than many of our competitors on really increasing our competitiveness in our core business, investing in differentiated innovation in surgery like our Ottava robot and in orthopedics with our VELYS systems, which we now have across multiple specialties,” he said.

Schmid noted that J&J has been very acquisitive, especially in higher-growth spaces. “That’s been through deliberate focus on organic innovation,” he said, including “significant investments we’ve made north of $30 billion over the last couple of years in high-growth spaces.” In cardiovascular, J&J started with the acquisition of Abiomed, which added to its leadership position in electrophysiology, followed by Laminar late last year and most recently Shockwave. He said J&J will continue to focus on shifting that portfolio.

A big focus, he said, will be how such a complex organization can simplify how it works. “Over the last six months, [J&J] has actually moved 40,000 people across our business into our business units. And we’re moving away from a centralized operating model to a decentralized one that gives our business units direct end-to-end accountability for their business.”

Schmid subscribes to the philosophy that accountability is everything. “The buck needs to stop with one business unit. And as you know, across medtech, specialization really matters. And I do think this shift that we’re driving within Johnson & Johnson is going to increase our speed and our ability to adapt to local market conditions,” he said. “By centralizing, we’re going to deliver better outcomes and be able to leverage our scale and its areas that makes sense. For example, we still maintained a central approach to procurement where we can leverage our buying power.”

M&A Strategy: Big Bets

The M&A strategy for J&J MedTech is one that centers on three areas: scientific, strategic, and financial. Meeting these three criteria drives the company’s investment decision-making, providing strength to the balance sheet and high growth in high-margin business areas.

For J&J, Schmid said that size really isn’t a major factor as the company makes M&A decisions. “We really focus on three key factors: Scientific. Is there a really significant unmet need and a technology that creates differentiation for our customers? Strategic. Does it fit with our strategy, and does it align to the capabilities we currently have? And then, of course, financial. Does it deliver the returns we need to ensure we meet our commitments to all of our stakeholders? That’s the way we look at it.”

J&J has made some big acquisitions, most notably in Abiomed and Shockwave. But, Schmid said, the company has also made some nice “tuck-ins” in both Laminar, which gets J&J into left atrial appendage, and then more recently, V-Wave. “When you look back over the last 20 years, not just for our medtech business, but also for our innovative medicine businesses, over 90 percent of our deals tend to be south of $1 billion. We like those. But as you’ve seen, we’re certainly willing to make bigger bets. This is where the strength of our balance sheet at Johnson & Johnson is very beneficial to all of our businesses. And for the right reasons, we’ll continue to make big bets,” he said.

“What helps me in the job that I have is that I have a CEO who has declared that we will continue to build a best-in-class medtech company,” Schmid said. “And certainly, when you look at the investments we’ve made across the corporation, we’ve been the beneficiaries of some tremendous investments in medtech.”

He also explained why cardiovascular is an amazing focus for J&J. “In most industries, the largest category tends to be the slow growth categories. It’s exactly the opposite in medtech. And if you look at the size of the cardiovascular category, it’s upwards of $60 billion. It’s growing 8 percent. That’s an extra $5 billion that part of the business is adding to the industry. And so, it’s very attractive.”

J&J already had very strong established leadership position with its electrophysiology business, but the company hadn’t participated in interventional cardiology where many of its competitors did. The move into Abiomed, he said, was a deliberate move to start shifting into that area. Shockwave, he said, was a fast follower to give J&J a foothold into coronary artery disease and peripheral. “Our expectation is we will continue to invest both organically and inorganically where it makes sense,” he said, noting that J&J’s positions in cardiovascular are all high-growth and higher-margin businesses. “As long as it meets those sort of criteria, we’ll continue to grow in that area.”

Portfolio Performance

Schmid pointed to some of the headwinds that drove the less-than-expected performance. He said that these are being addressed, but also noted that some of them are out of the company’s control, primarily stocking dynamics in the United States. “We had some supply challenges last year on the back of COVID. We saw a reduction in distributor inventory, which bled both first and second quarter,” he said. “We are seeing a sequential improvement in the second half. And thankfully, that has continued. And so, our contact lens business, I feel very confident will continue to improve.”

The other surprise, he said, was doing business in China because it will be a headwind, not just for this year, but for next year.

“But when I look at the momentum we have in the other businesses, that’s what gives me confidence. It’s the cardiovascular portfolio we have. Even with the competition that we’re seeing in electrophysiology, that is upwards of $5 billion business that will once again grow double digit this year. And then, of course, all of the new assets we have in the Cardiovascular space. And so, all those together, we feel very confident that we’ll continue to meet that commitment that we made to grow in that 5–7 percent range.”

Schmid said that J&J remains very bullish. “We’ve been fortunate to receive the investment we have in our segment.” He said all investments, including Abiomed and Shockwave are all performing on par with expectations.

J&J is also eagerly awaiting the approval of Varipulse, which will be its entry into the pulse field ablation (PFA) market in the United States. Varipulse is already approved in Europe and Japan. Schmid said that if everything goes to plan, J&J should have approval of Varipulse by the end of this year or early next year.

“As we prepare for Varipulse, we’re learning a lot through our early launches in Japan and in Europe. The feedback from our customers has been exceptional and very similar to the feedback our competitors are getting. Our customers obviously love the safety profile. It gives them a sense of security that they didn’t necessarily have before. We’re seeing significant reduction in procedure times, which allows them to do more procedures. Everyone wins, both patients and our industry.”

“Electrophysiology isn’t just about catheters,” he said. “It really is the full workflow. And one of the benefits we have — and a big proponent of establishing the leadership position we have today — is the importance of mapping. When you are navigating through a heart, knowing where you are is really important. And with our eighth generation CARTO mapping system, it allows physicians to know exactly where they are and to pinpoint with precision their procedures.”

CARTO Integration. Even with J&J not having a PFA product yet in the United States, Schmid said that 50 percent of U.S. PFA procedures are mapped with J&J’s mapping system. “It’s not just the technology, it’s also the sophisticated nature of our highly trained mappers. We have CARTO established in 5,500 sites across the world in almost every single cath lab here in the U.S. Once we have that technology, we have no doubt that we will regain some of the share that we are seeing move to some of our competitors in the short term.”

Shockwave Acquisition. While specialization matters in all parts of medtech, Schmid said that this is especially true in the case of cardiovascular. For acquisitions like Abiomed and Shockwave, he said that those businesses will retain their independence, and it’s all about investing for growth. “Those are going to be long-term gems for Johnson & Johnson in the same way that our EP business is.”

Vision Care Business. J&J supplies the eye care needs of almost 40 million people globally, Schmid said. And, he added that he expects that strong leadership position in contact lenses is well established and will continue. However, he noted that surgical vision has been a challenge here in the U.S.

“When we look at our share globally, we’re gaining share but primarily on the back of our performance in Asia-Pac and in EMEA where we are seeing tremendous momentum, especially on our premium [intraocular lens] innovations, specifically in TECNIS Pure-See,” he said. “Where we are focusing on changing the trajectory in the U.S. is that premiumization of our IOL portfolio. We will be broadly launching our TECNIS Odyssey platform later on this year, which we believe will create a tailwind to return that business to more positive performance.”

Surgical Market. “It’s really a tale of two stories within surgery,” said Schmid. “Our wound closure and our biosurgery business — where we have very significant leadership positions — continued to perform well.” However, he noted that these segments were a little soft in the first half of the year, primarily driven by some supply challenges in wound closure, which J&J has since addressed.

“Our challenge has been in the advanced surgery space. Specifically, our endocutter businesses are challenged with the continued penetration of robotic procedures. And so that has been a headwind,” said Schmid. “If you look at our results in the second quarter, we declined 1.2 percent. If you actually neutralize for the impact of the divestiture of our Acclarent business, which we made last year, it was roughly flat. We do see that returning to low single-digit growth as we look through the back half of the year.

He emphasized that this is a business J&J is not giving up on. “One of the biggest investments we are making across all of Johnson & Johnson organically is in our surgical robot in Ottava, and I can confidently communicate that we are very much on track to deliver the IDE, which we said we would achieve by the end of this year.”

“We’re also learning from other competitors who have entered that space on what to do and what not to do,” he said. “We take this launch very seriously, but we’ve got something that we think really differentiates ourselves from our competitors, — the only soft tissue robot with an architecture where the arms are actually built into the table. We have twin motion, which allows the arms and the bed to move simultaneously, which is really important in complex cases. And what surgeons absolutely love about Johnson & Johnson is the quality of our instruments. And so that robot married with our advanced instrumentation, we believe, is going to create competitive advantage in that market.”

Digital and Robotic Strategy

J&J’s success in orthopedics is how the company marries its best-in-class implants with a surgical robot, he said. “We’ve got VELYS, which was launched two and a half years ago. It’s now available in more than 21 markets, with more than 70,000 procedures. And the success we’re enjoying now — 9.4 percent growth on our knees — is a direct result of that marriage of a great robot with a great implant. We’re seeing the same thing on hips. It’s not just our ACTIS implant, it’s ACTIS with KINCISE, and the VELYS-assisted solution for hip replacement.”

J&J announced recently that it will also be entering the spine market with a robot next year. Schmid said that presents an opportunity to bring a differentiated innovation to that space. “But once again, it’s not just the robot by itself. It’s the robot in combination with our thoracolumbar system, especially the launch of TriALTIS. We think that combination is really important. And we think that, frankly, the digitization of medtech is only starting and there is a tremendously positive future in that area.”

He added that J&J is prioritizing its investments within the robotics space with Ottava, VELYS, and MONARCH.

Market: From COVID to the Future

For J&J, the market has normalized. Schmid said J&J’s customers learned a lot about resiliency through the pandemic. “We’ve seen the ability of our customers to actually do more cases. The movement of procedures into the [ambulatory surgery center] environment has also increased capacity,” he said. “We still believe that 5–7 percent market growth, and specifically in orthopedics roughly 3–5 percent, remains true.”

“But from our perspective, the market really returned to more normal levels. I would say we are back to pre-COVID levels.”

Schmid said that the focus for J&J is to grow Abiomed and Shockwave as fast as it can. He said he is also excited about the tuck-in of Laminar, which was announced in the fourth quarter. Getting into left atrial appendage provides a lot of opportunity for competition in a nearly billion-dollar market.

“V-Wave is another good example. This is a company that we started investing in 2017. Initially, we invested in that business behind our electrophysiology portfolio. Now that we have a market leadership position in heart failure, we’re actually aligning that business in V-Wave with Abiomed,” he said. “We’re starting to create these fortresses across our cardiovascular portfolio.”

As for other exciting opportunities, Schmid said, “There’s no shortage of rumors out there. We’ve got our hands full and are very excited about the portfolio we’ve got. We are the only competitor in cardiovascular with high-growth, high-margin businesses, and that’s what we’d like to continue. We’ve gone through a lot of changes of late as we’ve now spun off our consumer business, which is actually creating much more focus in the businesses that we’ve retained in both innovative medicine and medtech.

This article was written by Sherrie Trigg, Editor and Director of Content, Medical Design Briefs. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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