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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 company invoked the so-called Texas two-step maneuver in response to the lawsuits, creating a subsidiary, LTL Management, to be responsible for the payouts if it is found liable.
- It's unclear how the baby powder liabilities will fit into the spinoff in the short term, or if the legal maneuver will be allowed.
- Gorsky told WSJ that the lawsuits were not considered in the decision to break up the company.
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Editor's note: This story has been corrected to note that the new consumer health company will not necessarily assume liability from the baby powder lawsuits.