Johnson & Johnson announces split
Johnson & Johnson has announced it will split into two companies, breaking off its troubled consumer health unit that sells band-aids, over-the-counter products and baby powder from its pharmaceuticals division.
In a statement on Friday, the company said the separation would create “two global leaders” that will be “better positioned to deliver improved health outcomes” for consumers. The firm is yet to announce a name for the new consumer-centric company or identify its potential heads.
The pharmaceutical business unit, which manufactures a Covid-19 vaccine, medical devices and prescription drugs, will retain the Johnson & Johnson name. According to the statement, the company’s current senior leadership will move to new roles within this firm. The transition period will reportedly be between 18 and 24 months.
In an interview with the Wall Street Journal, CEO Alex Gorsky revealed that the Covid-19 pandemic had showcased the differences in the potential of its two divisions – and intensified board member discussions about possibly separating them.
“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,” Gorsky said.
Last month, Johnson & Johnson was criticized for a “brazen” and “unconscionable abuse of the legal system” over a “bankruptcy gimmick” that offloaded tens of thousands of legal claims – that allege its talc-based products, including the popular baby powder, cause cancer – into a newly formed subsidiary.
According to this new company’s bankruptcy filing, Johnson & Johnson has spent close to $1 billion defending against nearly 40,000 cases. Future settlements and verdicts – which were halted by the bankruptcy claim – were expected to cost the firm about $3.5 billion more, a Reuters report noted.
However, Gorsky told WSJ that the lawsuits did not play a role in Friday’s split – which comes after rivals, including Pfizer and Merck, also decided to shed their consumer businesses and focus on the faster-growing pharmaceuticals sector.
Last month, the EU’s medicines regulator issued a warning that linked the Johnson & Johnson vaccine to a rare form of spinal inflammation.
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