J&J to Spin Off its Consumer Health Products Business

On Nov 12, 2021

Johnson & Johnson (J&J), New Brunswick, announced today that it will separate its consumer health business, creating a new publicly traded company that will be in charge of iconic brands such as Neutrogena, Aveeno, Tylenol, Listerine, and Band-Aid. Meanwhile, J&J will maintain its pharmaceutical and medical device businesses.

The changes come as current J&J Chairman and CEO Alex Gorsky will pass the role of CEO to Joaquin Duato, currently vice chairman, effective Jan. 3. Duato will lead the new J&J following the completion of the planned separation.

Commenting on the split, Gorsky said, “Throughout our storied history, J&J 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. 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.”

The planned separation is expected to create value for all stakeholders by aiming to achieve the following key goals:

• Increase management focus, resources, agility and speed to effectively address differing industry trends and to better meet the needs of the new J&J and the new consumer health company patients and consumers;
• Further focus capital allocation based on the objectives of each independent company;
• Provide each company with a compelling financial profile that more accurately reflects the strengths and opportunities of each business and, as a result, offers investors a more targeted investment opportunity; and
• Align corporate and operational structures so each company is better able to drive growth and value creation.

Following the planned separation, the new J&J would remain the world’s largest and most diverse healthcare company. By year end, the pharmaceutical and medical technology businesses are expected to reported revenues of $77 billion. Leveraging its long-standing strength in core areas of science, technology, regulatory, supply chain and global commercial reach, the new J&J would continue to build on its offering of life-saving treatments, including Darzalex, Erleada, Imbruvica, Stelara and Tremfya, as well as medical device solutions across interventional solutions, orthopaedics, surgery and vision.

According to Gorsky, “For the new J&J, 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.

“We believe that the new consumer health company would be a global leader across attractive and growing consumer health categories, and a streamlined and targeted corporate structure would provide it with the agility and flexibility to grow its iconic portfolio of brands and innovate new products. 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,” Gorsky said.

Duato commented, “This planned transaction would create two businesses that are each financially strong and leaders in their respective industries. We believe that the new J&J 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.”

The new consumer health company would be a global leader with a powerful portfolio of iconic brands — comprising four $1 billion megabrands and 20 brands over $150 million — and leading positions in Self Care (OTC), Skin Health and Essential Health, which includes baby care, feminine care, wound care and oral health. The consumer health segment is expected to generate revenue of approximately $15 billion in 2021 and, following the planned separation, the new consumer health company would generate sales in over 100 countries.

The planned organizational design for the new consumer health company 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, as required. Planned new consumer health company employees are expected to continue participating in their current J&J pay, benefits and retirement programs through the end of 2022.

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