Johnson & Johnson to Split Consumer from Pharma
Another US healthcare business is being split into separate parts or separated from other parts of a diverse group. First General Electric, with its health segment, went on the chopping block. This time the axe will hit the venerable Johnson & Johnson, founded in 1886 a maker of surgical dressings.
New Jersey-based J&J announced on Nov. 12 that it plans to carve out its consumer products activities (bandages, beauty products and headache tablets) into a separate publicly traded entity. The remaining businesses will continue to produce and sell pharmaceuticals and medical devices, which represent the more profitable end.
No new name has been revealed for the consumer company, nor did J&J say whether it might be up for sale.
Following a comprehensive review, Johnson & Johnson said its board and management team believe the planned spilt is “the best way to accelerate its efforts to serve patients, consumers and healthcare professionals, create opportunities its global teams and drive profitable growth.”
The pharmaceutical and medical devices division of the largest US healthcare company – and by some calculations the world’s largest – expects to report $77 billion in sales revenue this year, with the consumer health business bringing in $15 billion.
J&J plans to complete the breakup within two years as it hones its focus on each of the two very different types of businesses. “We must continually be evolving our business to provide value today, tomorrow and in the decades ahead,” CEO Alex Gorsky said. With the split, he said the pharma and medical device arm will continue to concentrate on “bringing new solutions to market for patients and healthcare systems, while creating sustainable value for shareholders.”
Separately, the two independent business will be able to “more effectively allocate resources to deliver for patients and consumers, drive growth and unlock significant value,” said Joachin Duato, who currently heads the pharmaceutical division and will succeed Gorsky as CEO at the beginning of next year. Both would remain “mission driven companies with exceptional brands.”
The still integrated healthcare group has faced challenges to face on multiple fronts in recent years. The consumer business has been hit with thousands of lawsuits charging that its talc-based baby powder caused their cancer, and its pharma side has been caught up in the wide-sweeping US opioid crisis. While J&J’s Covid-19 vaccine has not lived up to its efficacy promise, and, moreover, has faced production setbacks, this business accounts for only about $2.5 billion in annual sales.
Last month, Johnson & Johnson took the baby powder business into US Chapter 11 bankruptcy proceedings, under a holding company called LTL. Lawyers representing more than 30,000 women who have claim that the powder caused their cancer, have vowed to fight the company’s action.
J&J did see a ray of light last week, however. After the group agreed last July to pay $5 billion over nine years to settle lawsuits in the ongoing US opioid trials, the supreme court of the state of Oklahoma threw out a 2019 ruling that would have required the manufacturer to pay the state $465 million for its role in the epidemic.
Author: Dede Williams, Freelance Journalist
