Johnson & Johnson CEO predicts that the next decade will bring more transformative changes to healthcare than the past century.

• Joaquin Duato, Johnson & Johnson CEO, predicts that the next decade will see more healthcare innovation than the past century in an interview with CNBC's Healthy Returns.
• Johnson & Johnson is separating its consumer health business from its biotech and medical technology divisions to create two separate companies.
• Despite Covid restrictions limiting procedures, the medtech industry experienced a 16% growth in 2021. The new CEO is placing bets on advancements in surgical procedures using AI as a key breakthrough.

Joaquin Duato, the newly appointed CEO of the 135-year-old company, confidently predicts that the next decade will bring more health-care transformation than the past century during his first interview just a few months into the job.

J&J's CEO, Duato, who is the first non-U.S. born CEO and holds dual citizenship (Spain and U.S.), has been with the company for three decades and previously served as its chief information officer, providing valuable insights into the role of technology in healthcare.

According to Duato, there is a chance to make more advancements in health in the current decade than in the past century.

Duato stated that separating consumer brands such as Band-Aid, Tylenol, Neutrogena, and Listerine from medical technology and pharmaceuticals will enable J&J to be at the forefront of surgical techniques that transform healthcare.

The consumer health company will have an opportunity to strengthen its relationships with consumers, attract new investors, motivate employees, and have a suitable capital location priorities. Meanwhile, Johnson & Johnson will benefit from being more focused, competitive, and delivering growth.

Despite Covid negatively impacting the overall business of Johnson & Johnson, which is a leader in the health-care sector for hospital surgeries and procedures, the CEO stated that the medical device business experienced strong growth of nearly 16% in 2021, despite the pandemic's impact on activity and elective procedures.

Duato stated that the company is experiencing growth in its key medtech platforms and anticipates a successful year.

In 2021, the company invested more than $2 billion in innovation, an increase of 23% amidst the pandemic. This demonstrates our commitment to the potential of integrating science and technology to enhance patient care, as Duato stated.

The drug development pipeline is expanding rapidly, with 14 new medicines expected to be filed by 2025. These drugs are expected to significantly improve the standard of care and have a potential value of over $1 billion each.

Duato expressed his optimism about the treatment modalities that the company is bringing, including cell therapy, which has shown promising results in treating multiple myeloma. In a recent study, 98% of patients who were otherwise likely to be headed for hospice care were able to receive treatment with CARVYKTI, an antigen receptor T-cell therapy. This success has given Duato hope that cell therapy could be used to cure diseases that were previously thought to be incurable.

AI and real-time surgical data

In 2019, Duato, who served as interim CIO at Johnson and Johnson, stated that his experience in the role provided him with insights into how artificial intelligence and automation can enhance surgical procedures. He envisions a future where all medical devices are connected to the cloud and can provide surgeons with real-time data, allowing them to deliver better surgical outcomes.

The combination of machine learning and genetics is speeding up the discovery and development of new drugs.

Genomic sequencing and large data sets can be used with AI and machine learning to identify patterns that correlate diseases with genomic profiling, allowing us to discover the underlying causes of diseases and potential targets for treatment.

Technology can be used to measure new compounds against a single cell to quickly identify pharmacological activity, such as expected toxicities, and accelerate the development of new medicines. This allows for better planning of clinical trials, the creation of synthetic control groups instead of placebo groups, and the identification of difficult-to-find patients in rare diseases using algorithms. The potential of technology in accelerating discovery and developing new medicines is promising, according to the speaker.

Inflation and consumer demand

According to Duato, the current economic climate is "volatile," with inflationary pressures affecting the supply chain and the availability of crucial raw materials and components. However, he noted that the company's size as the largest healthcare provider and the guidance it provided to the market earlier in the year showed a positive growth rate in revenue and earnings per share.

Although some inflationary pressures may ease this year, others will persist, according to Duato. The consumer market is more concerned about the impact of inflation on their purchasing decisions, with many opting for "off brand" products when they have the choice.

Duato stated that although there has been volatility in consumer demand, the company continues to see strong consumer business and is committed to delivering the best for consumers while mitigating cost increases through improved efficiency and, in some cases, price increases. Despite these challenges, Duato expressed optimism about the potential of the consumer health business and the company's ability to navigate inflationary pressures in the best interests of consumers.

Johnson & Johnson has been involved in numerous lawsuits related to their products and medical devices, including talc, hip replacements, and opioids, resulting in substantial financial settlements without any admission of guilt, while also facing ongoing legal battles.

Duato did not provide legal details. We understand our reputation and the high expectations society has for us. Although we face challenges in litigation, our ultimate goal is to achieve a fair and equitable resolution so we can focus on our core business of improving consumer lives and meeting patients' needs.