Intuitive Surgical Posts Strong Financial and Operational Results for the 4th Quarter Intuitive Surgical (NYSE:ISRG) announced fourth quarter results on January 23 of this year. Revenues rose 25% over the fourth quarter of 2023 to $2.4 billion. Earnings were up 13% on a GAAP basis. Perhaps of greater interest are the operational statistics Intuitive provides with the financial data. The Company placed 493 systems in the quarter vs. 415 in the same quarter in 2023. Of these placements, 174 were of the da Vinci 5 system. Analysis Little analysis is needed. Intuitive continues to dominate the soft-tissue RAS market. Of greater interest is how its challengers, most notably Medtronic and J&J, intend to challenge this moat. For more information please see Intuitive’s press release here. Questions of comments? Please contact Tony Freeman at tfreeman@asfreeman.com.
Market Alert
Sales up but only in certain segments, J&J Surgery off slightly Johnson & Johnson J&J reported on Wednesday a 4.3% increase in 2024 over 2023 revenues. Looking deeper, the Medtech segment reported a 4.8% increase to $31.9 billion. Breaking out the Medtech businesses, Cardiovascular represented almost of all of the gain, rising 21.4% in the year. Orthopedics rose 2.4%, Vision rose 1.5%. Surgery declined 1.9%. Most of the surgical decline appears to be around endocutters and energy devices but we are still working to verify this information. Abbott Abbott, also reporting on Wednesday, announced their Medical Device unit saw a 13.7% increase in revenues with Diabetes Care and Structural Heart showing particularly strong growth. All product groups grew during the year. Electrophysiology, Rhythm, Heart Failure, Vascular, and Neuromod all grew over 5%. Diagnostics dropped 6.5% due to lower demand for Covid 19 test kits. Summary These two medtech Top 5 companies showed strength in CV and Diabetes. J&J’s decline in its Surgery franchise (second largest globally after Medtronic) is a topic worth following as we move through 2025. Please contact Tony Freeman attfreeman@asfreeman.com with questions and comments.
In an April 21 press release Medtronic plc (NYSE:MDT) announced sharp revenue drops in comparison to 2019’s March and April results: Revenues in the United States declined 60% “over the last few weeks” with the exception of customer bulk purchases. The US represented 53% of Medtronic’s pre-COVID-19 sales. Western Europe has seen a 20 to 30% contraction vs. the same weeks last year. Western Europe represented 20% of Medtronic’s pre-COVID sales. China has seen a modest recovery. Mid-March revenues declined as much as 50% from the same period last year. Sales are up but still lag 20 to 40% below last year’s numbers. Medtronic also reports customers tightly managing inventories to conserve cash. To read the press release please visit http://newsroom.medtronic.com/news-releases/news-release-details/medtronic-provides-update-covid-19-pandemic-response-and-impact Please contact me at (917) 868-0772 or tfreeman@asfreeman.com with questions or comments. Stay well.
Market Alert: Johnson & Johnson 1st Quarter 2020 results show 4.8% Decline in Medical Device Revenues J&J reported growth in consumer products and pharmaceuticals while noting a 4.8% decline in sales in their Medical Device unit vs. the first quarter of 2019. The Company attributed the drop to delays in general surgical, orthopedic, interventional medicine, and vision procedures due to COVID-19. For more details please visit https://johnsonandjohnson.gcs-web.com/news-releases/news-release-details/johnson-johnson-reports-2020-first-quarter-results. Please contact tfreeman@asfreeman.com with questions and comments.
ThomasNet reports CNC machining sourcing through their online service has grown by over 33% in last five weeks. The scramble to find qualified machinists pervades every corner of American manufacturing. Options remain fixed at either hire, buy a company with machinists, or take the long view with apprentice and training programs. To learn more about what supply chain companies are doing please feel free to contact Tony Freeman at tfreeman@asfreeman.com.
Recent news stories on the possibility of tariffs on Chinese products imported to the United States have focused on industries tangential to medical devices. However, on April 6th the New York Times published a thought-provoking piece on the impact of these kinds of tariffs on medical device pricing. The article suggests that tariffs will likely raise the price of devices in the U.S., although few details or specifics are given. At A.S. Freeman Advisors, our take is more nuanced. Because of its competitive nature, the North American market would be able to absorb much of the fabrication side of the tariff impact, ultimately leaving prices only modestly higher, if at all. More work would flow to non-Chinese facilities, including those in the United States. This will mean that demand for the work of supply chain companies is likely to increase sharply. Of greater concern to domestic manufacturers should be the effect of tariffs on the cost of raw materials sourced from China. It may prove difficult to switch to domestic steel and aluminum, forcing U.S. manufacturers to deal with higher materials prices. Please contact Tony Freeman at tfreeman@asfreeman.com with comments and questions.
Johnson & Johnson released its Q4 2017 results on January 23, 2018. The company’s Medical Device division reported 6.5% year-on-year growth. Adjusted for acquisitions, worldwide global growth was 2% over the same quarter in 2016 with near-flat results in the United States. Cardiovascular, vision care, and advanced surgical products showed solid revenue gains with orthopedic products and diabetes care sales declining. Alex Gorsky, J&J’s CEO stressed 2018 initiatives include robotic surgery systems and digital devices. Our analysis is that J&J remains committed to revive its substantial but slow-growth Medical Device division via two strategies. The first is to move away from markets where it lacks a strong competitive advantage. Examples include the divestiture of its Cordis cardiovascular products to Cardinal Health and of Codman Neuro to Integra LifeSciences. The second strategy is to bring J&J’s tremendous technical and financial resources to bear in desirable evolving markets where it already has strength such as surgical products. The next two to three years should reveal a realigned J&J product offering. For the complete Q4 2017 J&J Earnings Presentation please visit: http://www.investor.jnj.com/events.cfm
On January 16, 2018 Boeing announced a joint venture with automotive seat manufacturer Adient to supply aircraft seats to Boeing customers. The new company, Adient Aerospace, will be based near Frankfurt, Germany. The action places Boeing in direct competition with suppliers Zodiac and Rockwell Collins. Given Boeing’s historic role in outsourcing key systems of aircraft to Tier 1 manufacturers it seems surprising that it would reverse its strategy during an aerospace supercycle. Boeing lists multiple reasons for the action but one stands out as more immediate than any other – plane sales are being held up by lack of seats. Aircraft seats, particularly profit-generating first and business class seats, are complex, precision assemblies. Recent aircraft deliveries have been held up for lack of seats, and the impact on Boeing’s revenues are significant to say nothing of the stress for its customers. By venturing with Adient, Boeing is taking a half step back on a multi-decade outsourcing strategy. With its supply chain unable to keep pace, Boeing has elected to essentially “in-source” seat manufacturing. For more information on the Boeing-Adient joint venture please visit: https://www.bloomberg.com/news/articles/2018-01-16/boeing-creates-seat-making-venture-to-cope-with-tardy-suppliers