Conference Transcript - JNJ 2026-03-10

Hani Abulhalka, Chairman

All right.

Matt Meksik, Analyst — Barclays

It's still morning, so good morning, everybody. Very happy to have with us this year from J&J, Hani Abulhalka, Group Chairman of Surgery, otherwise known as the man behind the robot. And my name is Matt Meksik. I cover med tech here at Barclays. So, you know, exciting times at Johnson & Johnson and surgery. After a bunch of years, we won't go backwards. We'll go forwards. But it's been a long path with lots of, you know, lots of twists and turns. But now kind of a final stretch of potentially getting this robot to market. So maybe with that kind of perspective, we get a lot of questions sometimes on why does J&J want to have a robot? Why do they need to have a robot? What can the robot add? I know that not everything you put together was in response to the marketplace, but at a high level, maybe frame the sort of objectives of the project and the strategy behind the project.

Hani Abulhalka, Chairman

as you're currently executing it well good morning everyone thank you matt for the invite i'm incredibly honored to be here representing jnj and the many thousands of people working on surgery it's an incredible conference and we're glad to be part of it so thank you for people that don't know maybe i'll spend a few minutes about talking about jnj medtech surgery our company was founded actually in surgery more than 140 years ago and i'll it's an anecdote that actually will resonate here. Our founder, Robert Wood Johnson, was attending a centennial expo to celebrate the 100th anniversary of the independence of the U.S., which is this year's 250 years. He walked in and Sir Joseph Lister was talking about antiseptic techniques for surgery. And our founder found an incredible opportunity to go back to New Jersey and years later, found J&J with incredible technologies that changed surgeries since then. Our first catalog had antiseptic gauze, had antiseptic-style sutures, which back then, if you walked into OR, it was 50-50 if you survived. And that was the first moment where actually surgery changed. And we've been at the forefront of surgeries changing ever since, whether it's open laparoscopic, whether open safe surgery across the world, whether it's laparoscopic surgery in the 80s and 90s, Today, we're super excited to be working on bringing robotic surgery to the market. Why the excitement? It starts off by taking a step back and looking at the last 25 plus years. Incredible progress has happened in robotic surgery, but when we talk to surgeons, surgical teams, hospital CEOs, they tell us a lot still needs to happen. There's still a lot of unmet needs, and it starts off really a basic premise from a design perspective. the world of robotics globally across all companies is stuck in two worlds either booms or carts and we think there is different approach to this we believe there is a unique approach to this and that's why one of our big bets and choices have been around design and that's why when we look at otava we're bringing a robot that is actually the table the arms are integrated We believe that design, other than, and you remember, Matt, you saw it, it's beautiful, but other than it's being beautiful, it also has incredible implications on workflow, on reducing the tension and friction between the chirurgical team and the robot. And we believe we've addressed that with our design philosophy and principles. Other than that, we're also excited to be the leaders to really take this forward from here across all surgery. And that's why this means instruments. It means our digital ecosystem with Polyphonic. We were the company that disrupted and changed surgery over the last 140 years. We believe we're at the moment we will take this forward from here also.

Matt Meksik, Analyst — Barclays

So, you know, a couple of follow-ups. You know, there's been kind of an evolution of thought in the last 10 years about what the next robot should look like. With Intuitive in the marketplace, it's big. you know maybe you know there was a time when maybe there still is a time when folks will say well you know robots should be smaller maybe smaller for an ASC um you know there's a number of those you know filtering through different levels of commercial strategy now from other competitors like separate arms and single arms or you know more limited footprint um you took the strategy of retractable arms and essentially a bed that can be used for laparoscopy or for robotics. So maybe talk a little bit about why that was important. Yeah, and first I have to

Hani Abulhalka, Chairman

tell you the physics and engineering behind it is incredible. Our people worked really hard to solve for something that we felt is important. Other than the design principles that I do believe is important. We felt that having an ability to create space and give back to hospitals and to surgical teams is incredibly powerful. Think about it this way. Right now, if you go to a hospital, robotic ORs have to be dedicated robotic ORs. We believe that ORs should be ORs to serve all surgery, whether it's open lab and robotics. Our solution, Otava, the arms are integrated on the table. When you don't need them, they're stored invisibly. You don't see them. When you need them, you can deploy one or multiple arms based on the need of the surgery. We think that's a very powerful choice, and that's incredibly powerful for surgeons to be able to do that. But we didn't stop there. We believe that the ability to have the arms integrated also allows surgeons to use gravity to do manipulation of organs. That's something that's native with our design. You don't need to unlock or re-lock. You don't need software. The architecture of it allows using gravity, which is something surgeons use comfortably in a laparoscopic millimilarase setting. But the other things also we're excited about from OTAVA, and that's why we're excited about going forward, is also we're bringing our instruments, our technologies that are trusted across open and lab exclusively on OTAVA. Recently, we launched in the U.S. last year and this year across the world. Our Ethicon 4000, it's our most secure staple line ever. That is important from surgeons and their teams, because think about it. There are surgeons today, 25 years into robotic surgery, that they choose to go to the table and do a manual firing using one of our instruments because they trust that staple line. We believe having that consistency of experience across open lap and robotics is very powerful from a surgeon, surgical team perspective, but also from a hospital perspective, you know when complications happen in surgery, and unfortunately, still 25% of surgeries come with post-surgery complications. Having a trusted staple, secure staple line is something that will be different and important, not clinically, but also economically. We believe that's something that Otava will also bring. Last but not least, we also believe that an area of where we looked at where it is today and what needs to go is digital surgery. And we believe that by creating polyphonic from the ground up, it's something that allows us to connect surgery across agnostic from the technologies, our technologies. It's what hospitals and surgeons need and expect. And we can talk

Matt Meksik, Analyst — Barclays

about that a bit later also. Sure. And then, you know, maybe you mentioned the ability to keep the OR flexible. You know, from a hospital's perspective, if they're performing a certain number of laparoscopy procedures and a certain number of robotic procedures. They're already using your instruments in laparoscopy and elsewhere. You know, what does the introduction of the robot into that, you know, platform, let's say a typical platform that has a mixture of those technologies, you know, what's value add for a hospital? Yeah, so if you look at the instrument

Hani Abulhalka, Chairman

side, I think having that consistency and experience across all modalities, we believe and we know it will be differentiated for surgical teams and hospital administrators from outcomes and procurement, all of that. So that's one lens. The second lens, if you think about how important a minute in an OR is, having your ORs work efficiently across all modalities is important. So there is the lens of we believe that the table being the robot gives flexibility to ORs across the world where a robot can work natively if you want. But the second piece in many hospitals what we hear is that robotic ORs don't work as efficiently as open or lap ORs. So we believe instead of, quote-unquote, having ORs that are dedicated to robotics, and if a case is canceled or postponed, that OR is idle, we believe having that OR being an OR for all surgery is quite powerful. Then the third pillar of this is also, So this also gives the surgeons flexibility to deploy different arms at different times based on the needs they need. So not only we're bringing robotic arms, robotic ORs to be ORs, which is something we believe will work to improve workflow, will improve efficiencies, and that's something surgeons and their teams tell us is important, but most definitely hospital administrators and COs, this is an incredibly important asset for them. and have it be working efficiently with less friction, with less special cases, is quite powerful.

Matt Meksik, Analyst — Barclays

Okay. That makes sense. And then the natural question, any time someone comes out with a less obstructive, smaller footprint robot, everyone looks at that and says, well, that's got to be great for the ASC because it's smaller. So I'm assuming there's some amount of ASC benefit that you're thinking about and maybe clinicians are thinking about with Otava. One of the other elements, of course, is what it's going to take to get this in the door. And so maybe, you know, that's changed. You know, the market leader has changed the way they bring their products to their additional systems to hospitals, you know, more leasing, more contracting. Maybe talk a little bit about what you're anticipating that way.

Hani Abulhalka, Chairman

Matt, we're not going to, as you would expect, we're not going to share specifics around our commercial launch. there'll be more to share as we come, but I'll say a few things. If you look at our history, when we bring innovation and technology, we bring it with the sole purpose that's in our credo to serve patients and nurses and surgeons, and we do it across the world. We do it everywhere we are. We're present and more ours than any other surgery company out there. So that's something that's deeply rooted in who we are and what we do. So our intention, like we've done in our past, is to be there to serve surgeons and patients where they are across surgery, across the globe. We intend to win in surgical robotics, which means we need to be everywhere. Now, the design choices we've made gives us some benefits, but not only in site of care, but even, I can tell you, I've worked with gene-geometic surgery across the world. The certain OR designs across different geographies and different regions are different. So even in hospitals that are entrenched and tertiary centers, ORs don't look the same everywhere. We believe the flexibility of our design and how it fits will be a benefit regardless. But our intention is to serve and be where surgeons are everywhere and be leaders in that space everywhere.

Matt Meksik, Analyst — Barclays

Okay. So to drive utilization and benefit to the clinical team and the patient and so on. That makes sense. So, you know, other folks have, we've come back to the ecosystem in a second, but other folks have looked at this market and said, well, we don't want to go head to head against this market leader in maybe their, you know, power alleys or, you know, ways in which we think, you know, it's hard for us to make an argument that you should be using our technology. You know, you mentioned a couple in terms of usability, flexibility, OR commitment. You know, what in terms of the types of procedures, again, this is a, you know, different companies are coming at this differently. You know, let's go where the most procedures are done in robotics, or maybe let's go to a place in robotic surgery where our design is particularly well-suited to perform this procedure, may be as well or better than the leader. Talk about your procedure strategy.

Hani Abulhalka, Chairman

Yeah, and I would love to talk about that because we're very confident and excited about our strategy from an expansion and geographic indication, so I'll talk about that. But also, I think it's important just to take a step back and understand what a defining moment this is because we believe this is the right time, based on where we are, to bring something that's unique, differentiated, and innovative in the U.S. and globally going forward. And I say that because a lot has changed and improved and good progress over the last 25 years, and we're thankful for that, and any progress in health care is something we cheer on. But also we believe that listening and talking to surgeons, surgical teams, and hospital administrators, there's still unmet needs we need to solve for, and we believe bringing this forward will do that. I've been in medtech for 26 years. It's incredibly inspiring to see you on the market, cheering for more competition to cheering for you to come in. I think that's something we cherish, and it's a responsibility and accountability we take seriously, and doing it right will be something of the utmost importance. It takes me to our choices around expansion geographically and procedures. I'll start in geography. We chose to come to the U.S. first. That was by design. As you know, the U.S. is the largest market. It's a very sophisticated market, and that's a sign of confidence in our program, but also a sign of excitement to bring an incredibly innovative technology to the U.S. market. But also, our approach there is to follow it as a close second in key robotic markets like Japan, like countries in Europe and East and Africa. So that's our lens from a geographic perspective. And what excites me there is being the leader in surgery across the world, We have incredible teams in commercial and education across the world today. And that's something that will help us do that with precision, with incredible partnerships with our partners across the world. From the procedure expansion, we also, what we did share is first, we're going in first for an umbrella indication. And that's what our submission was for upper GI. And that's an umbrella procedure that covers key procedure in the upper abdomen. That's exciting and different. And the second, we also announced earlier this year that we got our IDE to go for inguinal hernia, which is one of the largest procedures in the U.S. and globally. We're not going to stop there, clearly. We have an incredibly strong regulatory team with our clinical team that's working on a rapid expansion from a procedure perspective after that. Our intent is to be a surgical leader of robotics, which means we need a platform that works across different specialties, and that's what we believe we have with Otava. And I don't want to miss also the fact that this is a double exciting year because we talk robotics specialty expansion, and this is with a lens of social tissue robotics, but I don't want to miss also something really exciting happening for us in endoluminal percutaneous robotics, which is MONARCH. It was the first robot in the market for robotic endoscopy. And this year, we shared that we're also in plan to launch it in urology for kidney stones, talking about a new specialty, new indication. This will be the first and only robotic endoluminal and percutaneous access for treating something that all of us know someone, friends or family, who've dealt with kidney stones, we think we're bringing meaningful innovation from a specialty procedure. So we're in it for the long term. We're in it to be leaders in a very exciting space for the future.

Matt Meksik, Analyst — Barclays

So maybe back to the ecosystem. So, you know, Intuitive has been building case history, put out case insights a couple of years ago. I think we're still, as much as we hear about AI, I think we're still in the, you know, kind of like loading up Google Earth with data to figure out, okay, how are we going to use those, which I think for Google Maps was a bit more obvious, right? But, you know, where are you in terms of, you know, aggregating your data, which is considerable on the laparoscopy side, and then thinking about where the combination of that, as you described, and robotic will help starting building a, you know, and I don't know if it's a best route for the patient or, you know, other kinds of features and data-driven value that you can give to clinicians in hospitals.

Hani Abulhalka, Chairman

And this is an area that excites us, inspires us, because first, we're bringing it from scratch. Two, we have access and reach, and we know surgery across the world better than anyone, and that's incredibly powerful. We have the trust of our partners and our surgeons to work with them on solving for this. And third, and not least, by margin, we also have the humility to understand that this is not a problem for one company to solve for. This is going to require a coalition of the willing, if you like, to come in and do something that's incredibly meaningful for surgeons, for patients, for outcomes. And we're building it from the ground up. And we made some choices that are very different than what's available today. Most solutions today are either siloed or directly linked to certain technologies or certain robots. I'll give you an example. In ORs on average, there's seven plus software solutions. There's five plus data streams. There's 97% of surgeons that tell you they don't have ender teams, they don't have the right data at the right time to make meaningful difference, whether it's for workflows or for clinical decision support. And they say something needs to be better and has to be better, and we believe that. So we made a bet on building Polyphonic. We created it with this approach of being open, secure, agnostic to whatever the data stream from. Yes, clearly, it works seamlessly more with our products and technologies, but it's open to data from wherever it comes. And we're working with incredible tech partners, working with academia, working with hospitals. to create the foundations where they're on building the data sets that need to be de-identified, structured in a manner that allows companies, academia, hospitals, surgeons, to build AI algorithms and automation to bring value that we have not seen yet in this industry. I can tell you everyone we talk to, they tell us this is what is needed, and we believe what's available right now does not solve for this. We believe this is the right approach, and everyone I talk to, Whether it's CEOs of hospitals, nurses or surgeons, whether it's our tech partners, whether it's academic hospitals, whether it's two or three company setups, startups, this is what is needed. And I urge and ask everybody to come work with us on this journey. It's incredibly rewarding.

Matt Meksik, Analyst — Barclays

Well, that's exciting. And, I mean, the first, you know, it's hard to pin down exactly where and when the benefit is going to come from, you know, sort of this seemingly obvious collection of all this historical wisdom and data and doing something with it. But what do you think will be some of the first?

Hani Abulhalka, Chairman

Yeah, I mean, I'll give you a couple of examples. There are very, quote-unquote, basic chapters that are unfolding as we speak that are big unmet needs today. whether it's an education, whether it's using some of the capabilities to dynamically collaborate across centers, across hospitals. It's around integrating what's hours and hours of surgical video to use them in ways that you can train, whether it's performance analytics. These are very powerful use cases today that makes a difference. But where the future is headed and what's needed, there's a lot of similarities that happen in other industries. Take, for example, the automotive industry. We understand that to get on a journey where, whether it's decision support, whether it's intelligence-guided support, whether it's orchestration, you need to create data sets that are structured, that are de-identified, that are built on very secure privacy standard regulatory enterprise level where you can make them available to bring the best of the minds of whether it's AI engineers, whether it's software engineers across the world to build something that not only will help that hospital, that OR, but they can actually, because it's built with scale in mind, that can actually be shared globally. And the first use cases are exciting. What's possible from surgical video and data science and data engineering and data surgery of these Horizon 2 and 3, I can tell you in the next 5-10 years we'll see stuff we've never seen possible. We've seen help in our industry. I go back, this is the right time to do it in surgery again, and I don't know any better company to do it than us with the help and support of our partners.

Matt Meksik, Analyst — Barclays

So maybe if we roll forward a year or two, you know, what do you think investors will see from the surgical business? What will be the signs of success for Otava as you get to the market and start rolling it out?

Hani Abulhalka, Chairman

Yeah, I mean, I start by our credo saying when we serve our patients and our surgeons and our surgical teams, we take it very personal. We're very proud and inspired by that. We never lose sight of that. Two, we talk about J&J being an innovation powerhouse. Some of the most exciting innovation is in surgery, is in J&J, and I think that's something to be really proud of, and we have the responsibility to bring it forward. But also, I start where it matters most, which is, if you think about it, we have incredible businesses today that's making a difference in bleeding, in leaks, in solving big issues. 25% of surgeries have complications today. We have a long way to solve for this. What I want to make everyone know is when we bring all our technologies across all of surgery, we will partner with surgeons, hospitals, and CEOs to make sure that we're the company that will take it from here and solve for what's next. And the biggest intent starts in robotics specifically with Yasabad, is to lead in that space. And the best measure of success, other than serving patients, bringing incredible innovation, how competitive we are in our placements going forward. And when we do all of this, we feel incredibly proud and that people are working on something that once again, like we've done in our past, we'll change surgery once again. Okay.

Matt Meksik, Analyst — Barclays

We're down to just about at the bottom here, but I'd say automation. I'll leave it on this sort of, this is a future topic. It feels like a future topic, but I think we've been talking to surgeons about it for 10 years. When does surgery start to take some element of automation? And so you're just about to begin to launch your robotic platform. Is that three years away? Is it five years away? And what do you think the demand is for that kind of?

Hani Abulhalka, Chairman

Yeah, and I'll end what I started. It's super important to realize when you're in a moment of history where you really believe it's a defining moment. We've seen in other industries, I think the acceleration and the intersection of science and technology. Healthcare will always be driven by incredible science, will always be driven with incredible surgeons and nurses who are dedicated to make a difference for patients. I think we're entering this moment where bringing the best of both worlds. We're going to see innovation in the next five years like we've never seen in the last 50 years. And someone with the resources we have, the talent that we have, the engineers that we have, the scientists we have, the educators that we have, the commercial folks that we have, we just want to partner with our surgeons and whoever is interested in this journey to create what's next. And that's why the future is super exciting. And I can't wait to share with you more and with everyone here what's coming in the coming weeks and months.

Matt Meksik, Analyst — Barclays

All right. Well, I look forward to hearing about it.

Hani Abulhalka, Chairman

Matt, thank you so much for the time. Thank you, everyone, for your time.