Intuitive Surgical, Inc. (ISRG): Should Johnson & Johnson (JNJ) Be Looking for a Cougar in Devices?

Page 1 of 2

Several years ago, Johnson & Johnson (NYSE:JNJ) realized it had a problem with its drug business. This wasn’t a particularly poignant revelation, as the struggles of the business from around 2004 to 2010 were pretty easy to see, but the company went and did something about it. Licensing agreements with Bayer and Mitsubishi Tanabe brought in drugs like Xarelto and Invokana, while the billion-dollar acquisition of Cougar Biotechnology ultimately turned into the blockbuster prostate cancer drug Zytiga.

Johnson & Johnson (JNJ)I mention this because other parts of Johnson & Johnson (NYSE:JNJ) could use some TLC. Not only is the consumer/over-the-counter business still on a slow path to recovery from repeated product quality and recall issues, but the device business has turned into a perpetual disappointment with low organic sales growth. While the large acquisition of Synthes (announced in 2011, completed in 2012) has spiffed up the orthopedics business, I think it’s worth asking whether Johnson & Johnson (NYSE:JNJ) should think about going Cougar-hunting in the device space.

First, a word (or a hundred) against…
Let me start off by saying that, although the growth hasn’t been great lately, Johnson & Johnson (NYSE:JNJ) still has a pretty good device business. There aren’t many large med-tech companies showing all that much growth today, so it’s not as though Johnson & Johnson (NYSE:JNJ) is alone in reporting weak organic growth. What’s more, between areas like orthopedics and minimally invasive surgery, the company does have some areas of real strength.

It’s also worth noting that the device business isn’t like the drug business. You just don’t see multibillion-dollar “blockbuster” devices very often; even much-ballyhooed Intuitive Surgical, Inc. (NASDAQ:ISRG) generates about half the revenue that Boehringer Ingelheim‘s Spiriva generated in 2012, and that was the No. 15 drug in 2012. Likewise, Medtronic‘s entire market-leading cardiac rhythm management franchise generates only about 6% more in revenue than Spiriva did in 2012.

Even so, where could Johnson & Johnson (NYSE:JNJ) look for acquired growth in the med-tech world?

Surgical
With Johnson & Johnson’s strong Ethicon Endo-Surgery business, acquisitions here could be highly leverageable. Intuitive Surgical, Inc. (NASDAQ:ISRG) has always been a popular rumored target, as its da Vinci surgical robot is seen as both a competitor to the minimally invasive surgery businesses of J&J and Covidien , but also an avenue to converting more open surgeries to a minimally invasive approach. Unfortunately, while the growth is appealing, the price tag would be quite steep.

A smaller name, though, could make sense. Novadaq Technologies Inc. (NASDAQ:NVDQ) has developed some innovative imaging platforms that allow surgeons to better assess perfusion (blood flow) while they’re performing surgeries, leading to fewer complications.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!