Johnson & Johnson (JNJ) appears intent on becoming a dynamo in the growing market for surgical robotics. The diversified health care company’s recent acquisition of privately held robotic technologies developer Auris Health is a big step toward that goal.
The acquisition is fueling speculation that other medtech companies will follow its lead. One of the likely targets is Globus Medical (GMED), the Audobon, Pennsylvania-based spinal implant specialist. The crown jewel in any purchase is probably the company’s ExcelsiusGPS Robotic Navigation platform. Globus says it is the first technology to marry a rigid robotic arm and full navigation capabilities in spine surgery.
Perhaps takeover speculation has fueled the recent upward move of the company’s shares. The stock has traded as high as $58 in the past year, but had been sliding since late October, dipping to $40 by the end of last year. Since then shares are up nearly 18% to more than $47. Of 13 analysts following the company, nearly half rate it a Buy or Strong Buy. It has an average price target of nearly $56.50. The company reports year-end results on Feb. 21, and shares could move higher if it beats estimates.
The interest Johnson & Johnson and others have in enhancing their medical robotics capabilities is understandable given the size of the opportunity. The value of the global medical robot market is expected to grow at a compound rate of more than 12.5%, reaching more than $11 billion in 2023, according to a report from ResarchAndMarkets. The market’s growth is being driven by the ability of robotics to reduce human error and make surgeries more precise.
Johnson & Johnson is paying $3.4 billion for Auris, although added payments of up to $2.35 billion could be made if Auris hits specific targets. The deal is expected to close during the second quarter of 2019.
Auris robotics is focused on lung cancer. The company’s Monarch Platform, which is used in bronchoscopic diagnostic and therapeutic procedures, is expected to play an important role within Johnson & Johnson's Lung Cancer Initiative, according to an article in Medical Device and Diagnostic Industry.
In the article, Roger Smith, Ph.D., the chief technology officer for the Florida Hospital Nicholson Center said the acquisition not only adds another robotic platform, but it increases the company’s platforms from two to five. “Johnson & Johnson previously had the partnership with Verily to create Verb surgical ... and many people may forget that Auris itself acquired Hansen medical in 2016 which gave them the Scentsy and the Magellan robotic platforms," Smith pointed out.
Despite Johnson & Johnson's moves, the world leader in robot-assisted surgery remains Intuitive Surgical (ISRG), best known for its da Vinci surgical systems. The Sunnyvale, California-based company has a market cap of nearly $63 billion. Its shares trade at nearly $550, only $30 off its 52-week high. Of the 18 analysts following the company, 11 rate it a Strong Buy or a Buy.
Other leading surgical robotics companies include Titan Medical Inc. (TMDI), Accurary (ARAY), Smith & Nephew Plc (SNN), Zimmer Biomet Holdings (ZBH), Stryker (SYK), Israel-based Mazor Robortics (MZOR) and Omnicell Inc. (OMCL).
Among the smaller players — and potential acquisitions — are Microbot Medical (MBOT), Corindus (CVRS), Stereotaxis (STXS), TransEnterix Inc. (AMEX: TRXC) and a host of private companies.
Disclosure: The author owns a position in Johnson & Johnson.
