Johnson Unit Plans Alliance With Japanese
In a bid to expand market share in the booming business of miniature equipment for less-invasive surgical procedures, a Johnson & Johnson subsidiary Wednesday announced a joint research and marketing alliance with Tokyo-based Olympus Optical Co.
Both companies now make equipment used in endoscopic surgery, a fast-growing field that allows doctors to examine internal organs and perform some surgeries through small incisions in the body.
Olympus, best known as a maker of cameras for professional and amateur photographers, is the leading designer and maker of the tiny, tube-like, video camera-equipped endoscopes that surgeons use to see internal organs. Johnson & Johnson’s Ethicon Endo-Surgery unit makes miniature surgical scissors and staplers used with endoscopes in surgical procedures ranging from the removal of gallbladders to hernia repair.
The new alliance will allow surgeons to work jointly with both companies to develop new techniques, said Robert Andrews, a spokesman for New Brunswick, N.J.-based Johnson & Johnson. Olympus will use its 460-member sales force in Japan to market Johnson & Johnson equipment there, and the companies will do joint advertising in a number of countries. In the U.S., the two companies will continue to maintain separate sales forces, he said.
The agreement represents a challenge to market-leader U.S. Surgical Corp., which has about 70% of the market. Andrews said analysts estimate Ethicon’s current market share in endoscopic equipment “in the low 20s” and said the company’s goal is to capture 50% of the market by 1995.
Expectations that Johnson & Johnson was gaining market share had hurt shares of Norwalk, Conn.-based U.S. Surgical. But Johnson & Johnson’s announcement was not as dramatic as some analysts had expected. U.S. Surgical shares rebounded in New York Stock Exchange trading after Wednesday’s announcement, closing at $75.375, up $3. In Big Board trading, Johnson & Johnson shares fell 50 cents, closing at $52.
Still, analysts said the agreement gives Johnson & Johnson an important advantage in Japan.
“Endoscopy is one of the fastest-growing markets in the medical industry,” said David Anast, publisher of Costa Mesa-based Biomedical Market Newsletter. The U.S. market for endoscopic equipment has grown from $276 million in 1988 to $418 million last year, according to the Market Intelligence Research Corp. of Mountain View, Calif.
Andrews of Johnson & Johnson said the worldwide market for endoscopic equipment is expected to grow to $2.5 billion by 1995.
Endoscopy is gaining favor among some insurers because it can save money by reducing hospital stays.
It is also popular among patients because the small punctures used to introduce the lenses and instruments through tiny tubes heal faster and cause less discomfort than the large incisions of conventional surgery.
The biggest barrier to the spread of endoscopic surgery is the need to train surgeons, Anast said. But as more surgeons learn the techniques and apply them to new procedures, demand for the equipment will grow, he said.
Endoscopes were developed by Olympus in 1950, according to the company, which today claims 80% of the world market for the devices. While best known for its cameras, about half of the Tokyo-based company’s $2 billion in worldwide revenue comes from endoscopic equipment.
