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Johnson & Johnson to split into two publicly traded firms

By Yashasvini on Nov 12, 2021 | 04:32 AM IST

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  • • Johnson and Johnson will be splitting its consumer health division from its prescription drugs and medical devices business.
  • • The split will ideally be completed within 18-24 months, said Chief Executive Alex Gorsky

Johnson and Johnson will be splitting its prescription drug and medical-device business from its consumer group, creating two publicly traded companies.

The consumer health division of J&J, which earns nearly $15 billion annually, selling Johnson’s baby powder and Tylenol medicines, will be shed in 18-24 months, Chief Executive Alex Gorsky said.

“The best path forward to ensure sustainable growth over the long term and better meet patient and consumer demands are to have our consumer business operate as a separate healthcare company,” said Gorsky, reported Wall Street Journal.

Gorsky told WSJ that the details of the separation, the name of the new company, and who will lead it haven’t been figured out. He said that J&J planned to structure the transaction to be tax-free.

Stringing lawsuits

J&J has been burdened with a string of lawsuits including an allegation that its baby powder causes cancer, which has been refuted by the company. The company created a subsidiary to manage the billion-dollar claims and placed it in bankruptcy to hasten the process. 

READ MORE: J&J puts talc liabilities into bankruptcy

It has stopped selling baby powder in the U.S. and Canada.

On Friday, Gorsky said that the decision to split the consumer division had nothing to do with the lawsuits.

Weighing numbers

J&J has long been known for its cough remedies. Despite that, the consumer division has contributed the least to the profit of J&J’s three main divisions in recent years. The contribution is less than that from prescription-drug sales or medical-device sales.

The recall of its popular products including talcum powder, and Tylenol, which was recalled due to “manufacturing defects” has impacted the profits of its consumer division.

On the other hand, its pharmaceutical and medical equipment business, which makes cancer treatments, vaccines, and surgical tools, is on the course of recording nearly $80 billion in sales in 2021, way ahead of the $15 billion of its consumer products are expected to bring in.

READ MORE: J&J reports upbeat sales and raises its 2021 profit forecast

Fierce competition from other vaccine manufacturers such as Pfizer and Moderna has failed to lower J&J’s growth outlook.

Breaking away

Johnson and Johnson isn’t the only company that has decided to segregate its divisions. Earlier this week, industrial conglomerates Toshiba and General Electric also announced their plans to split into three companies each.

J&J’s rivals including Pfizer Inc. and Merck & Co. have also decided to separate their consumer businesses and double down on faster-growing pharmaceuticals. Merck KGaA sold its consumer health division to Procter & Gamble in 2018.

(With inputs from Wall Street Journal) 

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