A seismic event in the global healthcare landscape occurred in late 2021 when Johnson & Johnson (JNJ), an established leader in the industry, unveiled plans that could fundamentally restructure its business model and potentially influence its stock’s trajectory in the future. JNJ declared its strategy to bifurcate into two independent publicly listed entities, which could significantly alter the dynamics within the healthcare and consumer goods sectors.
Unpacking the Stock Split
JNJ’s planned division will lead to two separate entities specializing in different segments of the current JNJ operations. One of the resulting firms will assume control of JNJ’s wide-ranging portfolio of popular consumer products. At the same time, the other will focus on the innovation, manufacturing, and delivery of pharmaceuticals, medical devices, and medical technology. The division is projected to be finalized within 18 to 24 months, during which the company engaged in pills and medical technology will continue to operate under the established Johnson & Johnson name.
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Financial Market’s Response to the News
The financial market’s initial reaction to this groundbreaking news was largely optimistic. On the day when the news broke, JNJ’s stock saw an uptick of approximately 1.3%. However, despite this growth, the shares continued to trade 8.2% lower than their 52-week peak, achieved in August 2021.
Prospects for the Two Emerging Entities?
The yet-to-be-named consumer products company will be responsible for a suite of household brands, including Band-Aid, Aveeno, Neutrogena, Tylenol, Johnson’s Baby Care products, and Listerine. Meanwhile, the company devoted to pharmaceuticals, medical devices, and medical technology, keeping the Johnson & Johnson name, will progress with its single-dose COVID-19 vaccine and many innovative medical technologies, such as robotics and AI1.
Views from the Executive Suite
The outgoing CEO of JNJ, Alex Gorsky, shed light on the rationale behind this decision, expressing that the division is the “optimal path to expedite our commitments to patients, consumers, and healthcare professionals, unlock opportunities for our skilled global team, propel profitable growth, and above all, enhance healthcare outcomes worldwide.” Gorsky conveyed his belief that the consumer division will gain from enhanced agility and outstanding opportunities for capital allocation as an independent company, painting a promising outlook for the two forthcoming companies.
FAQs
What is the timeline for Johnson & Johnson’s planned split?
The transaction is expected to occur sometime over the next 18 to 24 months from the announcement date on Nov. 12, 2021.
Which businesses will each new company focus on after the split?
J&J’s vast collection of consumer products will be passed on to one company, while the other will concentrate on pharmaceuticals, medical devices, and medical technology.
What is the estimated revenue for each new company?
In terms of revenue, the consumer division is estimated to bring in approximately $15 billion per year. On the other hand, the pharmaceuticals, medical devices, and medical technology unit is anticipated to generate around $77 billion in revenue.
Who will be the CEO of the new Johnson & Johnson (pharmaceuticals, medical devices, and medical technology)?
Joaquin Duato, the incoming CEO of J&J, will be responsible for leading the pharmaceuticals, medical devices, and medical technology company after the split.
What are the critical risks for the new consumer products company?
The Consumer Products Company faces a significant risk due to ongoing litigation claiming that Johnson’s Baby Powder is carcinogenic. J&J has consistently denied these claims.
