Johnson & Johnson plans to split into two public companies

Johnson & Johnson sign in front of office
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Johnson & Johnson, the world’s largest health-products company by sales, will separate into two companies. It will split off its consumer division that sells Band-Aid bandages, Tylenol medicines and Johnson’s baby powder from its prescription-drug and medical-device business in 18 to 24 months.

The company has been under scrutiny for several years for its handling of allegations that its talc-based baby powder caused ovarian cancer and mesothelioma in thousands of women. Current CEO Alex Gorsky, who will serve as executive chairman of Johnson & Johnson, told the Wall Street Journal those lawsuits didn’t play a role in the decision to split.

“For the new Johnson & Johnson, this planned separation underscores our focus on delivering industry-leading biopharmaceutical and medical device innovation and technology with the goal of bringing new solutions to market for patients and healthcare systems, while creating sustainable value for shareholders,” Gorsky said in a statement.

“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,” the statement continued. “We are committed to the success of each organization, as well as our company’s more than 136,000 employees around the globe, who will remain the backbone of these businesses.”

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Joaquin Duato, who is currently vice chairman of the company’s executive committee, will take on the role of Chief Executive Officer. Duato said that the transaction will create two financially strong businesses that are leaders in their respective industries.

“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,” Duato said in a statement. “Importantly, the new Johnson & Johnson and the New Consumer Health Company would remain mission driven companies with exceptional brands, commitments to innovation, and remarkable talent. Each company would carry on the Johnson & Johnson legacy of putting the needs and well-being of the people we serve first.”

Rivals, including Merck, Sanofi, GlaxoSmithKline and Pfizer — which, like Johnson & Johnson, developed one of the three COVID-19 vaccines authorized in the U.S. — have also separated their consumer health products to concentrate on the highly profitable pharmaceutical business. These parts of the business do demand a different approach from consumer products: pharmaceuticals and medical devices are tightly regulated and require major investments in research and development.

The separation will initiate the most significant change in direction in Johnson & Johnson’s 135-year history.

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