Johnson & Johnson plans to separate its pharmaceutical and consumer products business operations

Johnson & Johnson (NYSE: JNJ) announced that it was planning to separate its medical devices and pharma operations from its consumer products segment. This move will essentially create two separates publicly trading companies. The news of this saw the company’s shares go up by 1%.

The separation of these two segments will sheer of J&J’s household products units, such as Aveeno and Listerine, from its fast-growing but riskier division that both sells and manufactures medical devices and prescription pills. 

How senior management feels

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Alex Gorsky, Johnson & Johnson’s outgoing Chief Executive Officer, said:

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.

Mr. Gorsky continued and claimed that it’d also help them drive profitable growth and improve healthcare solutions for individuals all across the globe. 

Details of the move 

Johnson & Johnson said that it intends on completing this transaction in the next two years. The medical device and pharmaceuticals division, which also features advanced tech such as AI and robotics, would keep the Johnson & Johnson brand and be run by the J&J’s incoming Chief Executive Officer, Mr. Joaquin Duato. 

Mr. Duato is set to occupy the CEO role by January 2022. The segments mentioned above are predicted to generate revenue of approximately $77 billion. On the other hand, the consumer products segment is expected to bring in $15 billion in sales. 

This consumer products company still doesn’t have an official name just yet. However, it’ll still inherit all the litigation stemming from legal proceedings over claims that the company’s Baby Powder product causes cancer. 

The company was already going through a major shake-up after the current CEO announced his departure. With that said, Mr. Gorsky won’t be leaving entirely because he will be the new company’s executive chairman. In addition, Johnson & Johnson said it intended to retain all its total dividends.