On November 19th, an insider from Johnson&Johnson told 21st Century Business Herald that Johnson&Johnson China has started a new round of layoffs, mainly in the surgical department.
At present, the surgical business has been greatly impacted by the market, not only by enterprises, but also by the clinical end of hospitals
Another former employee of Johnson&Johnson also pointed out to 21st Century Business Herald reporters that there have been layoffs within the company recently. Johnson&Johnson has been struggling since last year, mainly due to centralized procurement. I also resigned last year
The reporter verified the information with the relevant person in charge of Johnson&Johnson Surgery, who stated that it was "not convenient to respond".
According to relevant media reports, the scale of Johnson&Johnson China's layoffs this time is 20%, mainly in the surgical department, involving structural adjustments with a wider impact. Compensation is divided by years, with a maximum of N+3.
The new round of layoffs started last week and has affected multiple business units. Moreover, some former employees of Qiang have stated that they have been laying off employees gradually, but have not made any public announcements. The layoffs in China are part of Johnson&Johnson's global layoffs.
Surgical ultrasonic knife: 'Myth no longer'
According to reports, after this adjustment, from January 1, 2025, Johnson&Johnson China's surgical division will be reorganized into six major departments: Minimally Invasive and Energy Surgery, Wound Closure, Biosurgery, Surgical Product Expansion (i.e. Wide Area Market), Strategic Marketing, and Robotics and Digitalization.
The layoffs and adjustments in Johnson&Johnson's surgical department may not be surprising.
A medical device industry insider said in an interview with 21st Century Business Herald that Johnson&Johnson's current round of layoffs is actually normal. For example, its ultrasound knife business has fallen from 95% market share more than a decade ago to less than 30% now and is still declining.
It is reported that Johnson&Johnson's ultrasonic knife market share once exceeded 90%.
According to data, Johnson&Johnson has the highest market share in the global ultrasound knife market, with a market share of 92% in the United States, 94% in Europe, 83% in Japan, and 93% in China.
This product has also driven the rapid growth of Johnson&Johnson's performance. According to annual reports and related reports, Johnson&Johnson's surgical business revenue increased from $2.854 billion in 2004 to $9.501 billion in 2019, relying on ultrasound knife products.
Moreover, Johnson&Johnson's ultrasonic knife products have always been considered the industry's "gold standard", and the vast majority of products in the market are based on this set of gold standards for imitation and innovation.
However, after the centralized procurement, Johnson&Johnson's market share of ultrasonic knives began to decline significantly.
In 2021, 16 provinces including Guangdong completed centralized procurement of ultrasonic cutting heads, covering all mainstream products in the market, with an average decrease of 70.11% in Guangdong Province.
Even some companies have reduced the price of ultrasonic knives by 93%, from 7730 yuan to 545 yuan; The average price of 7mm and 5mm ultrasonic knives, which belong to high-end demand, has decreased from 5734 yuan to 1800 yuan, a decrease of 68.6%.
Domestic enterprises have also been rapidly seizing the market since this period.
According to medical equipment data, by quantity, Johnson&Johnson's market share of ultrasound knife heads has declined to around 30% in 2024, while Mindray Medical's market share of ultrasound knife heads has seen a significant increase.
For example, in the first half of 2024, based on the procurement of ultrasound hemostatic knives from domestic tertiary hospitals, Mindray Medical accounted for 34.26% of the market share, while Johnson&Johnson accounted for 20.24%.
In addition to ultrasonic knives, Johnson&Johnson's surgical robot business also seems to be facing challenges.
The industry insiders mentioned above pointed out that Johnson&Johnson is entering the surgical robot market with a lot of investment and launching several robots, but it seems that they are not doing very well.
During the 6th CIIE in 2023, Johnson&Johnson announced that MONARCH has become the first approved natural cavity diagnosis and treatment robot in China.
However, according to reports, Chen Xiaoming, Senior Director of the MONARCH Surgery Division at Johnson&Johnson Medical Technology China, has announced his resignation. MONARCH surgical robot products still face challenges in admission and other processes, and have not yet been effectively promoted.
And Johnson&Johnson also faces the risk of huge compensation due to MONARCH.
In February 2019, Johnson&Johnson acquired surgical robot company Auris Health for $3.4 billion, acquiring its star product MONARCH surgical robot.
However, on September 4, 2024, it was reported that a Delaware court ruled that Johnson&Johnson had to pay more than $1 billion in compensation to AurisHealth shareholders for violating the acquisition agreement with AurisHealth.
The 'turn' of the giant ship
In fact, Johnson&Johnson's business and personnel adjustments have been ongoing.
As early as 2021, Johnson&Johnson embarked on the path of splitting and restructuring its three major businesses - the merger of its pharmaceutical and medical device businesses, and the independence of its consumer healthcare business, with plans to establish two listed companies.
In August 2023, Johnson&Johnson significantly reduced its holdings of consumer goods company Kenvue and began divesting. In May 2024, Kenvue announced again that Johnson&Johnson would sell its remaining shares and clear its holdings of Kenvue stock.
With the completion of the consumer healthcare business spin off, Johnson&Johnson believes it has entered a "new era", with medical technology and innovative pharmaceuticals becoming its two major businesses, with medical technology focusing on surgery, cardiovascular and cerebrovascular diseases, orthopedics, and eye health.
During this period, Yang Sen's "disappearance" and the "departure" of the Chinese leader followed.
On September 14, 2023, Johnson&Johnson announced a brand update, in which its two major businesses, Medical Technology and Pharmaceuticals, will be integrated under Johnson&Johnson, with its pharmaceutical division, Janssen, renamed Johnson&Johnson Innovative Pharmaceuticals.
In April 2024, Song Weiqun, the first locally born chairman of Johnson&Johnson's China region, submitted his resignation to Johnson&Johnson. Three months later, Zhou Mintao became the president of Johnson&Johnson Medical Technology China. A few months later, Johnson&Johnson China began a new round of adjustments.
From the perspective of performance, Johnson&Johnson's adjustments seem to have achieved certain results.
In the 2023 fiscal year, Johnson&Johnson disclosed its performance for the first time as a company focused on medical technology and pharmaceuticals, with total sales of $85.2 billion, a year-on-year increase of 6.5%.
The sales revenue of the innovative pharmaceutical department was 54.76 billion US dollars, a year-on-year increase of 4.2%, while the sales revenue of the medical technology department was 30.4 billion US dollars, a year-on-year increase of 10.8%.
In contrast, Johnson&Johnson's total revenue for 2022 was $94.943 billion, a year-on-year increase of 1.3%.
Although the growth rate has increased, the profits of the two years mentioned above have been declining - Johnson&Johnson's net profit in 2022 was $17.941 billion, a decrease of 14.1%; Net profit of 13.3 billion US dollars in 2023, a decrease of 18.6%.
And by 2024, the pressure of revenue growth seems to have returned, and the decline in profits will increase.
According to Johnson&Johnson's Q3 2024 financial report, the cumulative revenue for the first three quarters was $66.301 billion, a year-on-year increase of 3.98%, and the cumulative net profit was $10.635 billion, a year-on-year decrease of 65.81%.
Moreover, with business adjustments, layoffs are inevitable.
According to incomplete statistics, Johnson&Johnson's layoffs worldwide have involved at least 1000 employees since mid-2022.
According to the Warning Notice file from New Jersey, Johnson&Johnson plans to cut 231 employees in New Brunswick, New Jersey, which is the location of Johnson&Johnson's headquarters.
Although this notification file did not disclose the specific business involved, according to relevant reports in September 2024, Johnson&Johnson is gradually closing its cardiovascular and metabolic departments in its pharmaceutical division.
The core product of this department is the anticoagulant drug Bayer (rivaroxaban), developed in collaboration with Johnson&Johnson and Bayer. It was once one of the best-selling drugs in the world, but the patent for the original compound of rivaroxaban expired in 2020.
In addition, from the perspective of orthopedic business, in the 2023 fiscal year, Johnson&Johnson launched a restructuring plan for its orthopedic business, which will streamline the business by exiting certain markets, product lines, and distribution network arrangements.
Under the comprehensive coverage of spine, joint, trauma, and sports medicine in China, Johnson&Johnson's domestic orthopedic business seems to be facing difficulties.
The industry insiders mentioned above told 21st Century Business Herald reporters that Johnson&Johnson's orthopedic business is also facing difficulties, and many agents in provinces are no longer producing Johnson&Johnson products, making little money and little profit.
The reasons behind it are centralized procurement, DRG/DIP, intensified domestic competition, and medical anti-corruption
However, while making adjustments, it should also be noted that Johnson&Johnson is making significant acquisitions and layouts, mainly in the field of cardiovascular intervention.
In April 2024, Johnson&Johnson acquired Shockwave, a company specializing in intracoronary lithotripsy (IVL), for approximately $13.1 billion, making it the highest total acquisition by a foreign medical device company since 2024.
By October, Johnson&Johnson announced the completion of its acquisition of V-Wave, a company that develops treatment plans for cardiovascular diseases such as heart failure, for a total of $1.7 billion.