Johnson & Johnson announced Friday it will split off its $15-billion-a-year consumer health division to form two independent companies in 2022.
Why it matters: The move will create a slower-growing health care vendor that sells consumer brands like Band-Aid bandages, Tylenol medicines and Johnson’s Baby Powder and a high-margin but riskier advanced research pharmaceutical and medical device company.
What they're saying: “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," J&J CEO Alex 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," he added.
The big picture: Gorsky told the Wall Street Journal that J&J decided to make the break because the businesses, their customers and markets have diverged in recent years.
- He added that what the new company will be called and who will lead it have yet to be worked out, but the pharmaceutical and medical device company will keep the J&J name.
Worth noting: J&J currently faces more than 34,000 lawsuits claiming that its baby powder was contaminated with cancer-causing asbestos.
- The new consumer-oriented business will assume the payouts from those lawsuits if it is found liable.
- Gorsky told WSJ that the lawsuits were not considered in the decision to break up the company.
Go deeper: General Electric to break up into 3 independent companies
