Johnson and Johnson to split in two, creating separate consumer business

The prescription drugs and medical devices side of the business will retain the name Johnson and Johnson whilst a new entity will be created continuing to sell consumer products such as bandages and Johnson’s Baby Powder. A name for the consumer section has not yet been revealed. Even with the separation the new slimmer Johnson and Johnson would still remain the world’s largest and most diverse healthcare company. CEO Alex Gorsky said: “Throughout our storied history, Johnson & Johnson 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.”

He continued: “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.”

In recent years the consumer division has generally contributed the smallest profits whilst pharmaceutical sales have soared.

It notably developed one of only three Covid-19 vaccines authorised in the US.

Last year pharmaceutical sales grew 8 percent while the consumer side saw only a 1.1 percent rise.

Meanwhile, the consumer side has experienced a number of product recalls and lawsuits.

In the US lawsuits have alleged its Baby Powder and other talcum powder products contained asbestos and caused cancer, a claim the company denies.

In the last few months, Johnson and Johnson carried out a legal manoeuvre known as a Texas two-step bankruptcy by splitting off a separate entity called LTL Management containing the talcum powder liabilities.

LTL then filed for bankruptcy.

Speaking to the Wall Street Journal though Mr Gorsky denied the lawsuits were a factor in the latest decision to split the company.

He explained the two areas of the business had diverged considerably during the pandemic adding: “The best path forward to ensure sustainable growth over the long term and better meet patient and consumer demands is to have our consumer business operate as a separate healthcare company.”

The move echoes changes made by rivals GSK and Pfizer which both split their consumer sides.

Under the plans current CEO Alex Gorsky will move to serve as Executive Chairman of Johnson and Johnson whilst Joaquin Duato will become CEO.

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Leadership of the still to be named consumer division is yet to be announced.

Mr Duato commented: “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.”

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