Johnson & Johnson, the maker of cancer treatments, mouthwash and Tylenol said it will break itself up into two public companies, one focused on drugs and medical devices, and the other on consumer products.
The healthcare giant will split off its consumer division in 18 to 24 months, the company said in a statement. The consumer unit has been beset by lawsuits involving products such as baby-powder, which has been linked to ovarian cancers in some users.
The company didn’t outline financial terms of the proposed split in detail, though it said the transaction would be tax-free and that it expected to continue to pay dividends at least at current levels.
J&J’s pharmaceutical arm has long been its strongest performer. The drug unit generated 55% of the company’s sales in 2020, with another 28% coming from the medical device unit, and 17% from the consumer arm. Altogether in 2020, J&J made $83 billion in revenue, and analysts estimate $94 billion in 2021 sales.
Though J&J’s consumer unit brings in the smallest piece of the revenue pie, it’s got immense brand recognition. The division boasts over-the-counter medications such as Tylenol, Motrin and Zyrtec, as well as household name brands like Band-Aid, Listerine, Neutrogena, Neosporin, Aveeno, Clean & Clean and Rogaine.
J&J’s decision comes just days after General Electric Co. said it would break itself into three pieces. While conglomerates made up of many disparate businesses were once numerous, many of the old giants that once dominated the global business landscape have broken up into smaller entities that executives say can be nimbler in responding to rapidly shifting economic trends and consumer preferences.
Big European drugmakers are also sharpening their focus on core drug-development efforts. GlaxoSmithKline Plc plans to spin off its consumer business, a joint venture in which Pfizer holds a minority stake. Novartis AG is unwinding its shareholding in Swiss rival Roche Holding AG and has announced a strategic review of the Sandoz generic unit. Novartis previously sold a stake in Glaxo’s consumer health business, which owns brands like Sensodyne toothpaste and Advil painkillers.
J&J, a behemoth that employs more than 136,000 people globally, will soon undergo a leadership overhaul. The company recently announced that Chief Executive Officer Alex Gorsky will be replaced by longtime veteran Joaquin Duato.
On Friday, the companies announced that Duato will serve as chief executive officer of the unit that will be focused on pharmaceuticals and medical devices. J&J has not yet named a replacement for Chief Scientific Officer Paul Stoffels, who also recently announced he would step down.
The new consumer health company, which has yet to be named, does not yet have leadership in place.