J&J pays $3.4 billion for robotics firm Auris

Johnson & Johnson’s rumoured interest in Auris Health has been confirmed with a $3.3 billion buyout deal that boosts the group’s position in the fast-growing surgical robotics market.

Redwood City, California-based Auris, which is led by surgical robotics pioneer Fred Moll, will become part of J&J’s Ethicon division when the cash deal closes, with another $2.35 billion in the offing for Auris shareholders if various milestones are reached.

Privately-held Auris already has an FDA-approved system called Monarch that is currently used for diagnostic and therapeutic bronchoscopic procedures, such as for the diagnosis of lung cancer. The system has a video game-like controller that allows endoscopes and biopsy tools to delve into the deepest reaches of the body, much farther than traditional devices.

Lung cancer has been the primary focus of Monarch’s development to date because it has the potential to diagnose the disease at an earlier stage than current methods, potentially allowing earlier treatment and a better clinical outcome.

J&J is seeking to increase its share of the surgical robotics market, which some predict could reach a value of around $12 billion by 2025. The company is jostling for market share with other big players including Medtronic and Intuitive Surgical. Shares in the latter company slipped a little on the news of J&J’s takeover.

J&J has been selling off some of its medical device units – most recently sterilisation products and its blood glucose monitoring business LifeScan – in order to increase its investment on faster-growing categories such as advanced and general surgery, vision and interventional solutions such as ablation equipment and catheters.

CEO Alex Gorsky said during the company’s fourth-quarter results call that “digital surgery including robotics…is a critical element to our future success, not just in the near term, but as we look to the next decade and beyond.”

J&J’s medical device unit was in the doldrums for some years but a restructuring drive started in 2016 is starting to pay dividends, with sales starting to creep back into growth towards the end of last year if the LifeScan business was excluded.

Its current interests in surgical robotics stem from Verb, a joint venture with Alphabet’s Verily unit (formerly Google Lie Sciences) that has said it plans to introduce a better, cheaper surgical robot into the market in 2020, and other recent acquisitions such as the takeover of orthopaedic surgery business Orthotaxy last year.

“Collectively, these technologies, together with our…medical implants and solutions, create the foundation of a comprehensive digital ecosystem to help support the surgeon and patient before, during and after surgery,” said Ashley McEvoy, J&J’s head of medical devices.