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Next decade will transform health care more than past century: J&J CEO


Andrew Harrer | Bloomberg | Getty Images

Joaquin Duato is the new CEO Johnson & JohnsonHe is happy enough at his 135-year old company that he made bold claims during his first interview. His prediction was that the next decade would see greater health-care reform than the previous century.

Duato, the first non-U.S. born CEO for the company, and first to hold dual citizenship (Spain and U.S.), has been with J&J for three decades and was the chief information officer of its pharmaceuticals business, giving him key insights into the role of technology in health care.

Priority number 1. Priority No. 1. Duato said to CNBC’s Meg Tirrell, at Healthy Returns, that this is the chance “to make more progress in our health in the next decade than we have in the past 100 years.”

As J&J prepares to split into two companies, Duato said that separating the consumer brands like Band-Aids, Tylenol, Neutrogena and Listerine from medical technology and pharmaceuticals will help the company be at the forefront of surgical techniques that transform health care.

For the consumer health business, it will provide an opportunity for deepening relationships with consumers in order to attract investors and employees to the company. They can also have their capital allocation priorities and a model that is fit-for-purpose. Johnson and Johnson’s new venture, Johnson and Johnson, will offer a chance to become more focussed, competitive and generate greater growth.

Johnson & Johnson, which is a bellwether in the health-care sector for hospital surgeries and procedures, has seen Covid pressure the overall business, but the CEO noted ahead of the upcoming earnings season that it did see good performance in its medical device business in 2021, with close to 16% growth, even as Covid weighed on activity and in particular, elective procedures.

Duato stated that the company has been gaining market share on its priority medtech platforms, and expects to have “good” results this year.

Innovation for patients is one area that should be emphasized. It can help improve surgical outcomes. Duato explained that AI will be more intelligent as medical technology becomes digitalized and connected to the cloud. Duato stated that this will allow surgeons to achieve better outcomes.

The company spent more than $2B in innovation in 2021. This is a 23% increase in investment in the middle the pandemic. Duato stated, “That’s an indication of how strongly we believe in that opportunity…of combining science with technology to improve patient care.”

The pace of drug research is also increasing, he stated, noting that 14 more medicines are in pipeline to file before 2025. He said that all the medicines are making significant improvements to the quality of healthcare and have a potential of more than one billion dollars.

CARVYKTI was approved for treatment of multiple myeloma. It is an antigen receptor-T-cell therapy that treats multiple myeloma. This helped 98% patients, who otherwise would have been headed to hospice. Duato stated that he is optimistic about new treatment options, such as cell therapy. He hopes to one day cure certain diseases once considered incurable.

Real-time surgical data and AI

Duato was the interim CIO at Johnson and Johnson for nearly a year, and said this role provided him with insights on how automation and artificial intelligence can improve surgery. “I envision a future when all medical devices are smarter, connected with the cloud and able provide data to surgeons in real-time.”

Combining machine learning with genetics can accelerate the development and discovery of new drugs.

Duato explained, “We are able do genome sequencing while at the time using large data sets, use AI/machine learning to create patterns that allow us to correlate diseases and genomic profiling to identify which are the underpinnings of disease that are going be triggers or targets that can be used in our discovery.”

To quickly identify potential toxicities and pharmacological activity of new compounds, one cell can be tested for them. This allows the rapid development of novel medicines. His statement was that “we can better plan clinical trials. Instead of using placebo groups, synthetic control group are created. Additionally, algorithms are used to help us identify rare disease patients. I believe technology has the potential to accelerate discovery and develop new drugs.

Consumer Demand and Inflation 

Duato stated that the current economic environment is volatile. He cited inflationary headwinds and shortages of key raw materials. However, he noted that the company’s size as the biggest health-care provider helps and the guidance provided earlier this year to the market showed healthy growth rates in both revenue and earnings per share.

Duato stated that inflation will continue to be a problem, even though some of the pressures are lessening this year, while others persist for longer periods. Inflationary pressures are more severe for the consumer industry, and it is more worrying that people will start to purchase “off-brand” products in the future.

Duato explained that “Overall we have seen volatility in consumer demand” and “but, we continue see very solid consumer businesses coming through. He also stated, “But we continue the try to deliver the best for consumers. We continue to strive to minimize our cost increases and to improve our efficiency in order to reduce our costs. But overall, we remain bullish about the potential for our consumer health business, as well as our ability to handle inflationary pressures in an optimal way for consumers.”

Johnson & Johnson has faced multiple lawsuits over products and medical devices, from talc to hip replacement and opioids, which have resulted in significant financial settlements, without any admission of wrongdoing, as well as ongoing litigation.

Duato did not want to enter into details. We are aware of our reputation. We know that society has high standards and high expectations ….Yes. There are challenges with the litigation. … In the end, we strive to find fair and equitable solutions so that we can concentrate on what is most important. We do what we love best: continue developing medicines, medical devices and consumer products that can improve the lives of consumers while also addressing patients’ concerns.