Johnson & Johnson to spin off consumer health business

By Rachel Arthur contact

- Last updated on GMT

Pic:getty/PMimages
Pic:getty/PMimages

Related tags: J&J, Johnson & johnson

Johnson & Johnson has announced its intent to separate its Consumer Health business into a new publicly traded company: allowing J&J to put a sharpened focus on pharmaceuticals and medical devices.

The separated Consumer Health Company will take a portfolio of brands in categories including baby care, feminine care, wound care and oral health: covering brands such as Neutrogena, Aveeno, Tylenol, Listerine, Johnson’s and Band-Aid.

The new Johnson & Johnson, meanwhile, will be able to focus on its key pharmaceutical areas and thus ‘remain committed to changing the trajectory of human health’.​ It highlights its commitments in key therapeutic areas such as oncology and immunology, as well as pledging to continue advancing new therapeutic modalities such as cell and gene therapies.

Pharma-focused company built on strong portfolio and pipeline

J&J says its new pharma-focused company will remain the world’s largest and most diverse healthcare company: blending its pharmaceutical and medical device capabilities.​ The company will retain treatments such as Darzalex, Erleada, Imbruvica, Stelara, Tremfra and its COVID-19 vaccine. 

These pharmaceutical and medical devices segments are expected to generate revenue of approximately $77bn in FY2021. 

J&J's pharmaceutical business focuses on 6 therapeutic areas: Cardiovascular & Metabolism, Immunology, Infectious Diseases & Vaccines, Neuroscience, Oncology and Pulmonary Hypertension.

J&J highlights the ability of the new company to address diseases in areas such as oncology and eye health that require a combination of surgical, interventional and pharmaceutical treatments.

It also pledges to play leading role in advancing the industry forward by creating novel solutions, bringing together treatments spanning therapeutics, robotics, artificial intelligence and more, to change the way diseases are prevented and intercepted.

“The Pharmaceutical business would continue to generate sustained above market growth by advancing its strong portfolio and pipeline of products, accelerating key therapeutic areas, such as oncology and immunology, while also advancing new therapeutic modalities such as cell and gene therapies,"​ says the company in a statement. 

"At the same time, the Medical Devices business would plan to accelerate its momentum across orthopaedics, interventional solutions, surgery and vision, with an increased cadence of meaningful innovation enabled by a strong digital surgery pipeline and focus on execution across all geographies.”

The separated Consumer Health Company – which is set to generate revenue of around $15bn in 2021 – will consist of four billion-dollar brands and 20 brands over $150m. The organizational design for the new company, which does not yet have a name, is expected to be completed by the end of 2022 and will be subject to legal requirements including consultation with works councils and employee representatives.

J&J says the split will result in a streamlined and targeted corporate structure for the Consumer Health company, giving it the agility and flexibility to grow its big brands and innovate new products.

General Electric, Toshiba, GSK and J&J all look to sharpen focus and streamline businesses 

In June, GSK also announced it would separate its consumer healthcare division: with the new GSK to focus on R&D and commercial investment in vaccines and specialty medicines.

And J&J's decision to split its company into two follows General Electric and Toshiba's announcements this week to break up their mega-businesses.

For J&J, the separation is designed to create ‘two global leaders that are better positioned to deliver improved health outcomes for patients and consumers through innovation, pursue more targeted business strategies and accelerate growth’.

Alex Gorsky, the current CEO of J&J, will continue to serve as executive chairman of the company. “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.

“For the new Johnson & Johnson, this planned separation underscores our focus on delivering industry-leading biopharmaceutical and medical device innovation and technology with the goal of bringing new solutions to market for patients and healthcare systems, while creating sustainable value for shareholders.

“We are committed to the success of each organization, as well as our company’s more than 136,000 employees around the globe, who will remain the backbone of these businesses.”

Joaquin Duato, who is currently vice chair of J&J’s executive committee and will take over the reins as J&J’s CEO in January as previously announced, added: “This planned transaction would create two businesses that are each financially strong and leaders in their respective industries. We believe that the new Johnson & Johnson and the New Consumer Health Company would each be able to more effectively allocate resources to deliver for patients and consumers, drive growth and unlock significant value.

"Importantly, the new Johnson & Johnson and the New Consumer Health Company would remain mission driven companies with exceptional brands, commitments to innovation, and remarkable talent.”

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