Some big news from Johnson & Johnson was announced this week.
Johnson & Johnson is getting out of the heart stent business.
The diversified healthcare company said Wednesday it no longer will develop its Nevo heart stent and will stop production of its Cypher stent as it pulls back on a segment of its cardiovascular business that has suppressed earnings in recent years.
Analysts believe J&J’s decision to leave the stent market ultimately will benefit the New Brunswick, N.J.-based company by allowing it to focus on higher-growth divisions such as Biosense Webster, which develops and markets electrophysiology navigation systems and ablation therapy devices. Annual Cypher sales had reached $2.6 billion, but the stent was on track to earn merely $400 million this year, according to Gabelli & Co. analyst Jeff Jonas. Its current sales amount to about 1 percent of company profit.
J&J executives said the company’s new focus will revolve around access, diagnostic and therapeutic products for cardiology procedures, products to diagnose, access and treat lower extremity disease, and the Incraft Stent-Graft System, an investigational device for treating abdominal aortic aneuryisms.
“With the removal of a large, ‘troubled’ player from the market, we’re inclined to think industry dynamics—like pricing—might improve on the margin as well,” Leerink Swann LLC analyst Rick Wise wrote in a note to investors. “We also view the news positively for J&J, as the Cordis restructuring…should further drive positive operating leverage and better allow the company to focus on the business’ other, higher-growth divisions like Biosense Webster. All this should set the stage for J&J to drive better sales and operating in 2012 and beyond.”
It will certainly be interesting to see how this development affects Johnson & Johnson as well as its rivals.