Johnson & Johnson sees its medical device sales growing faster than the industry through 2014 and plans about 80 significant regulatory submissions for its largest unit in the next two years.
J&J outlined its growth plans for the medical device business -- its top product category with annual sales of $25 billion -- as it tries to overcome a manufacturing crisis at its consumer unit that makes Tylenol and other products.
Many analysts gathered at company headquarters in New Brunswick, New Jersey, on Thursday also hoped for an update about J&J's series of recalls of Children's Tylenol and dozens of other over-the-counter medications.
But it was not clear whether management would discuss anything tied to the recalls, now under investigation by the U.S. Food and Drug Administration.
If it were me, I would segregate that because it would be a tremendous distraction, said Matt Duffy, an analyst BDR Research in Manhattan. Duffy said he was looking for signs that J&J is keeping its edge in devices and diagnostics against the likes of Abbott Laboratories Inc .
There are a lot of questions about devices and diagnostics. The stent business has been unbelievably competitive with (Abbott's) Xience taking over the world, Duffy said.
J&J said it already has received more than a dozen regulatory approvals so far in 2010. Additional submissions will be rolled out across its seven franchises, including its DePuy orthopedics unit, its Cordis cardiovascular business, and Ethicon, which makes surgical instruments.
The maker of Band-Aids and Motrin told analysts it expects medical device sales to grow by an average of 6 percent per year between 2009 and 2014, outpacing industry growth, which it forecast at 5 percent. In 2009, total company sales were $61.9 billion.
Shares of J&J rose 0.5 percent on Thursday, outpacing a 0.1 percent rise for the wider Standard & Poor's 500 Index <.SPX>.
DISINTEGRATING STENTS, NEW CONTACT LENSES
The company said it still expects to seek approval in the United States and Japan by 2012 for its experimental bioabsorbable drug-coated heart stent, called Nevo. It is made of a polymer that disintegrates soon after being implanted to help open a diseased artery. The product has already been submitted for approval in Europe.
The device would likely compete at some point with a similar bioabsorbable stent being developed by Abbott, underscoring the competitiveness of the stent market.
J&J also expects the number of users of its Acuvue contact lenses to grow by more than 30 percent by 2014.
Consumers are feeling more confident...We are expecting nice growth over the next five years in J&J's contact lens business, said Michael Sneed, group chairman of Vision Care.
In particular, an anti-allergy lens represents a great market expansion opportunity because many people who suffer from allergies are unable to tolerate contact lenses, Sneed said.
J&J's prescription drugs account for about $22 billion in sales, while consumer products, including Tylenol, approach $16 billion. Some industry experts say J&J's consumer unit problems could spill over into its other, more profitable, businesses if the FDA begins to scrutinize those divisions as well.
If regulators start to distrust management, then they start being strict with everything, and checking and inspecting everything, Fred Hassan, former chief executive of Schering-Plough, told Reuters. Hassan was hired by the company in 2003 to clean up a quality control disaster.
J&J's latest recall on April 30 involved more than 40 over-the-counter products for children and infants made by its McNeil healthcare unit, including Tylenol, antihistamines Benadryl and Zyrtec and painkiller Motrin.
Problems ranged from excessive amounts of active ingredients, inactive ingredients that did not meet testing requirements, and tiny metallic particles left as a residue from manufacturing. J&J has shut the Pennsylvania plant that made the contaminated products.
How well they can contain the political fall-out is a tough call. There's definitely a downside, BDR's Duffy said. J&J is so well diversified, you're not going to get too dependent on any one product. That mitigates the risk, he said.
(Additional reporting by Debra Sherman; Editing by Michele Gershberg, Lisa Von Ahn, Dave Zimmerman)