By MICHELLE CHAPMAN and TOMMURPHY

Johnson & Johnson is separating the consumer health business that helped it become the world’s largest manufacturer of healthcare products.

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The company announced on Friday that it will separate its over-the-counter drug sales segment, including Band-Aid, Listerine and Tylenol, from its pharmaceutical and medical device businesses.

Corporate leaders told analysts that splitting into two publicly traded companies would increase the agility of each business to adapt to its market. It also allows for more accurate allocation of capital.

CEO Alex Gorsky said the company’s broad focus had worked in the past, but the split corresponds to a segment that “evolved as a radically different business.”

“We have seen significant evolution in these markets, especially on the consumer side,” said Gorsky, who noted some of the accelerated transition to online shopping during the COVID-19 pandemic.

J & J’s two major businesses, the segment selling prescription drugs and medical devices, retain the Johnson & Johnson name. Its products include Darzalex for cancer treatment, COVID-19 vaccine, orthopedic and surgical medical devices.

The new consumer health company has not yet been named. It houses brands such as Neutrogena, Aveno, and the iconic Band-Aid created by company employees over 100 years ago.

Pharmaceuticals and medical devices generated total revenue of $ 19.6 billion in the company’s recently completed third quarter. This is better than analysts expected. Consumer health has brought $ 3.7 billion.

Gorsky says there are more than 20 brands in the consumer health business, each with annual sales of over $ 150 million. He added that the portfolio includes well-known names such as Tylenol for children and Tylenol for children, which have reached record highs in market share.

Analysts asked company leaders on Friday why they are making changes now when they advertised J & J’s diversity in the past as a way to offset or balance the recession in a particular segment.

“I think we consistently had the belief that a diversified portfolio was rooted in strategy,” Gorsky said. “But it’s not fixed in strategy.”

Founded in 1886, Johnson & Johnson said the split would occur over the next two years if approved by the company’s board of directors.

J & J is also in the process of transitioning leadership and is starting to split. The company announced in August that Gorsky would take a step forward and replace long-time executive Joaquin Duato in January.

The split also occurs when J & J addresses criticism from some Democrats in Congress about the move of another company. J & J faces thousands of proceedings alleging that talc-based baby powder, which has been discontinued in the United States and Canada, caused ovarian cancer.

Senator Dick Durbin of Illinois and Senator Elizabeth Warren of Massachusetts recently sent a letter to the company asking for more information about the newly established subsidiary that filed for Chapter 11 Bankruptcy Protection.

In a letter on November 10, Senator called the move a “corporate shell game” and protected the company from liability in such cases.

A company official said the split announced on Friday was “separate and different” from the baby powder situation.

J & J’s announcement will come a few days after General Electric announces plans to split into three separate companies.

It also follows similar moves by rivals Pfizer and Merck, which spun off the consumer health products business in 2019.

New Brunswick, NJ-based Johnson & Johnson shares rose less than 2% to $ 165.28 in midnight trading, while the Dow Jones Industrial Average rose slightly.

The Dow has surged about 17%, while J & J shares have already risen about 4% so far this year.

J & J has been a component of the Dow Jones Industrial Average since 1997.

Source link Johnson & Johnson splits in two for faster growth – thereporteronline



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