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J&J to Split Up Consumer Health and Medtech, Pharma Businesses

Just days after GE announced that it would break up into three businesses, including a healthcare unit, another iconic US brand is planning to split up. Johnson & Johnson, the world’s largest healthcare company by sales, announced today that it will separate its consumer products business from its pharmaceutical and medical device operations.

The new publicly traded consumer health business, as yet unnamed, will include such household brands as Neutrogena, Tylenol, Listerine, and Band-Aid, and J&J will “remain the world’s largest and most diverse healthcare company,” said the news release.

The pharmaceutical and medical device segments are forecast to generate approximately $77 billion in revenue in 2021. The new consumer health segment, which includes four $1-billion megabrands, is expected to generate approximately $15 billion in revenue in the current year.

An evolving business

The new J&J will be better positioned to combine skills and expertise to bring integrated, comprehensive care to patients, said the company. Its far-reaching technologies affect everything from oncology to eye care and span surgical, interventional, and pharmaceutical treatments.

“Throughout our storied history, Johnson & Johnson has demonstrated that we can deliver results that benefit all our stakeholders, and we must continually be evolving our business to provide value today, tomorrow, and in the decades ahead,” said outgoing CEO Alex Gorsky in a prepared statement. “Following a comprehensive review, the board and management team believe that the planned separation of the consumer health business is the best way to accelerate our efforts to serve patients, consumers, and healthcare professionals; create opportunities for our talented global team; drive profitable growth; and — most importantly — improve healthcare outcomes for people around the world.” 

Gorsky will serve as J&J Executive Chairman and transition the CEO role to Joaquin Duato, currently Vice Chairman of the company’s Executive Committee, effective January 3, 2022. Duato will continue to lead the new Johnson & Johnson following completion of the planned separation, which is expected within the next 18 to 24 months.

Announcement’s timing surprises analyst

“The firm’s timing is surprising, as we don’t see any major catalyst for the move,” Morningstar analyst Damien Conover said in a research note, as reported by Reuters. “However, if the consumer division no longer holds the deep pockets of the combined company, the risk of future consumer product litigation — such as the large talc settlement — may decrease.” 

Johnson & Johnson’s consumer division has faced a spate of lawsuits alleging its talcum powder for babies causes cancer, which the company has denied, noted Reuters in its reporting.

The company’s medical device and pharma units also have been plagued with lawsuits, and issues related to J&J’s COVID-19 vaccine made headlines not too long ago.

J&J Chief Financial Officer Joseph Wolk stated categorically, however, that “today’s announcement is separate and distinct from the talc liability and bankruptcy proceedings that were announced a few weeks ago.”

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