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Johnson & Johnson Takes a Nearly $1 Billion Charge, Delays Robotic Surgery Platform Two Years
The digital robotics platform J&J acquired for billions is not ready to be used on humans.
October 30, 2021
Litigation has dominated the headlines for Johnson & Johnson (JNJ) recently; the company placed thousands of claims related to the safety of its Baby Powder into bankruptcy, it settled a Texas opioid case for $297 million, and it paid $800 million to settle most cases involving its anti-psychotic drug Risperdal.
Less attention has been given to a significant setback in the company’s robotic surgery program. In 2019, J&J acquired Auris Health, a developer of robotic surgery technologies, for $3.4 billion plus an additional $2.35 million if certain milestones are met. The acquisition was hailed as helping J&J create “the next frontier of surgery” but now we know that frontier is farther away than previously thought.
In its latest 10-Q, J&J recorded a partial in-process research and development (IPR&D) charge of $900 million primarily related to development delays in the general surgery digital robotics platform Ottava it acquired from Auris:
“The impairment charge was calculated based on revisions to the discounted cash flow valuation model reflecting a delay of first in human procedures of approximately two years from the initial acquisition model assumption of the second half of 2022. The Company will continue to monitor the remaining $1.5 billion Ottava platform intangible asset as development program activities continue.”
Calling it a “temporary setback” on its earnings call, Johnson and Johnson blamed the delay on “technical development challenges and COVID-19-related disruption...”. With tongue firmly in cheek, Ashley McEvoy, J&J’s Medical Device EVP, explained:
“Transformational innovation is all kinds of fun, I will tell you. It's highly complex, but sometimes, we do experience technical challenges. But we are absolutely committed to resolving our challenges, continuing to invest and bringing to market a competitive, differentiated offering as soon as possible.”
The setback puts Johnson & Johnson behind Medtronic in challenging robotic surgery leader Intuitive Surgical, which recently began offering more affordable purchase options designed to further extend its market leading position.
Related: MDT, ZBH, EW, BSX, BAX, NUVA, SYK
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