Johnson & Johnson announces split into two companies

Johnson & Johnson announced on Friday its plans to split into two public companies, with one centered on drugs and medical devices and another concentrated on consumer products.

The separation marks a monumental change in the health care company’s 135-year history as it divides its slow-and-steady consumer division from its more risky — but more profitable — business researching and developing drugs and medical devices.

Johnson & Johnson expects to finalize the division in 18 to 24 months in which it will keep its pharmaceuticals and medical devices units that sell products such as the COVID-19 vaccine and cancer treatments. 

The other faction will involve consumer health products, including four $1 billion megabrands and 20 brands valued at $150 million or more. These brands range from Tylenol, Motrin and Zyrtec to Band-Aid, Listerine and Neutrogena, among several others. 

“The planned separation would 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,” Johnson & Johnson said in a press release. 

The health care giant forecasts its pharmaceutical and medical devices segment will garner about $77 billion in revenue this year, while its consumer health group is expected to earn about $15 billion.

Alex Gorsky will serve as the executive chairman of Johnson & Johnson and Joaquin Duato will move to be the CEO, starting in January, the company previously announced. The members of the consumer health unit’s board of directors and its executive leadership will be “announced in due course as the planned separation process progresses.”

“This planned transaction would create two businesses that are each financially strong and leaders in their respective industries,” Duato said in a release.

Johnson & Johnson follows in the footsteps of other rivals such as Pfizer, which is launching a joint consumer health business with GlaxoSmithKline in 2022. Fellow pharmaceutical giant Merck also previously shed its consumer health unit.

Earlier this week, General Electric declared it intends to separate into three different companies aimed at aviation, power and health care.  

The consumer health division has recently faced tens of thousands of lawsuits over its talc-based products like baby powder, claiming the products are linked to cancer. A subsidiary created by Johnson & Johnson to hold claims related to the lawsuits filed for bankruptcy earlier this year. 

Gorsky told The Wall Street Journal these lawsuits did not play a role in the decision.