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J&J leans toward spinning off orthopaedics as medtech lags, pharma powers guidance raise

Published Oct 13, 2026
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Summary:
  • Medtech grew 2.5% in Q3 and missed estimates, with international medtech sales largely flat and surgical devices down 3.4%.
  • CFO Joe Wolk: "Medtech needs to improve quite frankly," and management is "leaning toward a straight spin" of the orthopaedics unit.
  • Full-year adjusted EPS outlook lifted to $11.05 to $11.15 from $10.96 to $11.11 as newer drugs outperformed; overall revenue barely topped forecasts.

Quarter highlights and the medtech picture

Johnson & Johnson's device business inched ahead 2.5% in the third quarter, trailing its larger pharmaceuticals arm and coming up shy of expectations. International medtech sales were largely flat, and surgical devices slipped 3.4%. According to Joe Wolk, the company's finance chief, demand outside the US has been dampened by worldwide headwinds such as the war in the Middle East and budget-tightening in some European countries.

Wolk put it plainly: "Medtech needs to improve quite frankly." Analysts agreed the showing left something to be desired. RBC Capital Markets' Trung Huynh wrote, "This quarter did not materially advance the growth narrative," calling it "another lackluster Medtech quarter." Mizuho's Jared Holz said device performance looked weak "really across the board" and flagged it as "the area of most scrutiny today."

Orthopaedics review and deal talks

J&J is moving toward separating its orthopaedics unit via a spin rather than a sale. As Wolk put it, management is "leaning toward a straight spin" because "we think that's the greatest way to create value, and that's likely the path going forward."

Last month, Bloomberg said Apollo Global Management Inc. had been in talks about buying the division at close to a $20 billion valuation, with the caveat that negotiations might end without a deal. Orthopaedics has been a slower-growing slice of J&J's medtech business.

Spin-offs reveal which divisions a conglomerate no longer wants to fund. Market Briefs covers these breakups free every morning.

Pharma strength and company-level results

J&J's drug unit, which generates about twice the revenue of medtech, grew 7.7% from a year earlier. Standouts included Tremfya, up 68% and ahead of estimates; Caplyta, up 66% as prescriptions expanded to newer uses such as add-on therapy for depression; and Tecvayli, higher by nearly 77%. Darzalex increased at a double-digit rate but missed analyst projections. While sales for new psoriasis pill Icotyde are not yet broken out, Wolk said 20,000 people have received prescriptions.

Total revenue landed roughly in line with expectations, topping estimates by the slimmest margin in years. The company raised its full-year adjusted EPS outlook to $11.05 to $11.15 from $10.96 to $11.11, with the midpoint above analyst projections. As the first big pharma name to report each quarter, J&J often sets the tone, and Tuesday's results indicate drugmakers are adapting to federal policy shifts and recent leadership changes at the US Food and Drug Administration.

What investors should watch next

Inside devices, J&J is steering toward faster-growing niches. In July, the company secured FDA clearance for Ottava, its soft-tissue robotic surgical system, marking a step into the high-growth robotics category. Shares fell 3.7% at 9:32 a.m.

Tuesday in New York after the update, though through Monday's close they were up 38% over the prior year, versus a 19% rise for the S&P 500 Index. Also in the background: last quarter's device miss, tied partly to Abiomed's heart pump business, has investors watching the turnaround timeline.

Separating a unit usually unlocks value for one side only. Get the free Market Briefs daily newsletter and follow it.

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