Having acquired Synthes last month, Johnson & Johnson (NYSE:JNJ)’s combined DePuy Synthes division has received its first regulatory approval for expanded usage of Expedium, Viper and Viper2 spine systems for patients with adolescent idiopathic scoliosis (an abnormal curvature of the spine which can cause chronic back pain). While these devices were already approved for use in adults, they can now be used for adolescents between the ages 10 and 18. 
The news comes at a time when the company is grappling with declining sales in its Medical Devices & Diagnostics division. A strong outlook for the U.S. dollar amid the global economic slowdown and pricing pressure following the healthcare reforms continue to pose concerns for the company in the short term. Further, the company is trying hard to revive its DePuy franchise, whose brand was affected following the metal hip implants recall and related lawsuits.
However, with the $21 billion acquisition of Synthes, it seems Johnson & Johnson is back on track to recover from these headwinds. With a wide portfolio of medical devices for the orthopedics market, including trauma and spine, the Synthes merger could give a boost to JNJ’s orthopedic division. The combined division now has the broadest orthopedic portfolio globally.
We believe the acquisition will lend support to the company’s efforts to tap growth opportunities in the orthopedics market. Further, the acquisition also brings Synthes’ vast exposure to the fast-growing emerging countries including China, India and Russia. The merger synergies will also help Johnson & Johnson improve its margins, going forward.
We are in process of updating our $74 price estimate for JNJ to reflect the earnings and recent developments.