Ethicon, Inc. History

Address:

P.O. Box 151
Somerville, New Jersey 08876
U.S.A.

Telephone: (908) 218-0707
Fax: (908) 218-3373

Wholly Owned Subsidiary of Johnson & Johnson Co.
Incorporated: 1921 as Johnson Suture Corp.
Employees: 4,000
Sales: $1.3 billion (1996 est.)
SICs: 3841 Surgical and Medical Instruments and Apparatus

Company History:

Ethicon, Inc. is the subsidiary of the giant healthcare products firm Johnson & Johnson Co. that principally develops, manufactures, and markets sutures, ligatures, staplers, and other wound-closing products. Hospitals are its chief clients. The company's clinical and business services offer seminars, programs, and educational materials for the professional education of healthcare personnel and the financial concerns of management personnel.

The First Half-Century: 1921-71

The company was founded in 1921 as Johnson Suture Corp. The line of sutures called Ethicon grew out of this subsidiary. Commonly used "catgut" sutures were actually made from the muscular tissue of sheep intestines. They were first soaked in alkaline solutions that "plumped" them to several times normal thickness, then split into half-inch-thick ribbons that were next scraped to remove all tissue except the innermost layer. When the ribbons were as thin as tissue paper, several were twisted into a single strand. The strands were then strung under tension on poles 20 feet apart and dried, the natural glue of the ribbons binding them together in the strand. The next step was polishing and smoothing by hand. The strands were then tested for tensile strength and other desired properties.

With the advent of World War II, Johnson and other suture makers were asked to produce scores of millions more sutures than they had ever done before. Women made up the swelling number of production workers, because the operations of manufacture were 90 percent handwork and called for great dexterity and accuracy--qualities that women had been found to possess to a far greater degree than men.

Johnson Suture was renamed Ethicon in 1949. In collaboration with High Voltage Engineering Corp. of Cambridge, Massachusetts, Ethicon conducted research on sterilizing its sutures, and it purchased a linear electron accelerator for its own research in 1953. In 1956 Ethicon began what it believed to be the first major commercial application of radiation, bombarding packaged sutures with electronics from an accelerator. The electrons killed any bacteria or other microorganisms lingering in the sutures. Since no heating was involved in the process, the sutures remained more pliable and 10 to 15 percent stronger than those sterilized by heat.

By the end of 1958 almost all Ethicon's output of sutures was passing under this atom smasher--not only the ones made from animal intestine but also those made of silk. Bursts of electrons were fired into a powerful radar-wave beam and then hurled into the target area at nearly the speed of light, with these bursts fired at the rate of 800 per second. Each suture was in a tray traveling under the electron gun and was sprayed for around two seconds.

Ethicon was accounting for perhaps 75 percent of the total U.S. suture production in 1964. It also was sterilizing by radiation some other Johnson & Johnson products and from time to time doing such jobs for other clients, such as 125 mink pelts infected with anthrax, an especially tough and virulent germ. By this time Ethicon was thinking of converting to new machines employing gamma rays from cobalt-60. Unlike the accelerators, cobalt machines were said to have greater capacity with less likelihood of breakdown. Moreover, they could irradiate large boxes, even shipping cartons, while accelerators required the products to be run through in relatively thin layers because of the limited penetrating power of electrons.

Progress in the 1970s and 1980s

Ethicon was the world's leading producer of ligatures and sutures in 1971 and was also making other wound-closing surgical instruments. In that year an estimated seven percent of Johnson & Johnson's income was coming from sutures and an estimated 11 percent from surgical products. Ethicon had three U.S. manufacturing plants in 1972, covering 800,000 square feet of space. In 1978 Ethicon's revenues were estimated at $120 million. Its gross profits--the profits on its goods sold without deducting selling and general administrative expenses and taxes--were estimated at $85 million, indicating that its gross profit margin was an astonishing 70 percent--higher than any other Johnson & Johnson division or subsidiary in what was a high-profit-margin industry.

By 1980 Ethicon's sutures were being used in more than 7,500 U.S. hospitals. Its product list included more than 2,500 suture-needle combinations. They ranged from suture needles for microsurgery or ophthalmic surgery that could barely be seen by the naked eye to extremely large steel-wire suture needles for orthopedic surgery. The 11 basic suture materials included gut, silk, cotton, steel, and various plastics in 11 diameters, with lengths ranging from three to 60 inches. That year Ethicon introduced a newly redesigned suture packaging system for efficient use in the operating room. When the outer pouch was peeled back, an inner, color-coded pouch made of foil laminate was exposed. This pouch was then torn open, exposing a paper folder that held the suture. The suture's needle was then placed in a needle holder and presented to the surgeon.

Ethicon's products in 1986 for precise wound closures included mechanical instruments as well as sutures and ligatures. The company had plants in Albuquerque; Cincinnati; Chicago; Cornelia, Georgia; and San Angelo, Texas, with more than 1.3 million square feet of manufacturing space. Somerville, New Jersey, remained the site of its corporate headquarters. Foreign subsidiaries were located in Edinburgh; Rome; Norderstedt, Germany; and Peterborough, Ontario.

In 1989 Ethicon held about 60 percent of the worldwide wound-closure market, whose revenues were rated at $1.28 billion a year. Ethicon's suture products included natural and synthetic and absorbable and nonabsorbable sutures for use by the various surgical specialties. Its mechanical disposable wound-closure products included surgical stapling instruments for skin and internal closures, and absorbable and nonabsorbable clip products for ligation. Its principal trademarks were Ethicon, Vicryl, PDS, Prolene, Ligaclip, and Proximate. The company's products were being sold principally through distributors to hospitals.

Ethicon in the 1990s

By 1991 Ethicon had entered the rapidly growing field of laparascopic surgery. This procedure was revolutionizing traditional surgery by its ability to conduct procedures like gall-bladder removal with tiny disposable devices. United States Surgical Corp. originally dominated the market, but Ethicon introduced its own disposable cutting and grasping tools early in 1991. It followed with a blunt-tipped trocar (a surgical instrument intended to avoid accidental cuts) and a device to fire single staples. By the end of the year Ethicon had introduced no less than 45 products for endoscopic procedures involving gall bladders, hernia repairs, bowel resections, and thoracic and gynecological surgery. Ethicon's sales came to about $1.2 billion in 1991.

Ethicon established a plant in Blue Ash, Ohio, for manufacturing its endoscopic-surgery products and invested more than $40 million during 1990-91 in endoscopic-product development and marketing, tripling its engineering staff to 500 people. The Blue Ash plant was employing about 1,400 people in early 1992, including 560 hourly production workers.

For its manufacture of surgical fasteners at Blue Ash, Ethicon was replacing old computers with a computer-integrated manufacturing system. It also was installing a business-information computer system to help manage processes such as inventory control, accounts payable and procurement, document management, and computer networking, and was upgrading its computer-aided engineering and design system. In all, Ethicon had eight plants in 1991, with the largest in San Angelo, where 1,750 workers were employed. The company was engaged in efforts to make all its workers computer literate and had also instituted a diversity-training program intended to create an environment where ethnic minorities and women could succeed.

This program was in effect not only in the United States but also at Ethicon's facilities in and near Edinburgh, Scotland. In 1996 this subsidiary had increased its direct labor force by some 25 percent since 1992 in response to increasing demand for its products and the transfer of some activities from Johnson & Johnson plants elsewhere in Europe. A great deal of recruiting and training also had become necessary in order to enable a reduced support staff to take on extra responsibilities. The training process there encouraged workers to teach their skills to others, focusing on achieving targets and goals and reinforcing the relationship between behavior and reward.

By this time, however, the Blue Ash plant was no longer part of Ethicon, Inc. Johnson & Johnson announced in February 1992 that the development and marketing of endoscopic products would be spun off into a new subsidiary, Ethicon Endo-Surgery, Inc. Ethicon, Inc. continued in the business of sutures and other wound-closing surgical supplies and held an 80 percent market share in sutures for traditional surgeries.

Ethicon continued to lead the wound-closure sutures market in 1995, accounting for an estimated 75 percent of the U.S. market. Johnson & Johnson's worldwide sutures sales were estimated at nearly $1.3 billion in 1996. A strong marketing effort, including group purchasing contracts, was said to have created a virtual barrier to entry into the sutures market by other firms. Other reasons for Ethicon's continued success included, of course, the high quality of its products and the breadth of its product line. The company provided a 100 percent guarantee on the quality and integrity of every product it sold and claimed a 99.5 percent error-free delivery rate.

The sutures market was accounting for only a little more than half of the total market for wound-closure products in 1997. A chief explanation for the slow growth in sutures could be attributed partly to minimally invasive surgical procedures such as endoscopic surgery and partly to skin-stapling products. U.S. suture shipments peaked in 1992 at 25.5 million units. Several studies in the late 1990s showed that certain wounds closed with glue--sterilized and modified for medical purposes--healed just as well as those closed with stitches, and that the cosmetic results up to a year later were comparable. In one of these studies, doctors predicted that medical glue could replace stitches for about one-third of the 11 million wounds treated in hospital emergency rooms in the United States each year.

Johnson & Johnson announced in August 1997 that it was purchasing Gynecare Inc., a developer of devices to treat uterine bleeding, for about $79 million. Gynecare was scheduled to become part of Ethicon.

Ethicon, Inc. History

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