Announced last week, the move would see the major spin off its consumer health unit, made up of core brands like Neutrogena, Aveeno, Listerine and OGX, into a standalone business. Whilst far smaller than J&J’s pharmaceutical and medical device units, consumer health contained four billion-dollar megabrands and was expected to generate €13.2bn ($15bn) in the full-year 2021, the company said.
The split was expected to be completed by the end of 2022 following various legal requirements, including consultation with works councils and employee representatives and a final nod from J&J’s board of directors.
Pharmaceuticals and consumer health – ‘each financially strong and leaders’
J&J said the split would create “two global leaders” in consumer health and health care, enabling the company to invest in innovation that unlocked value for all its stakeholders in both fields.
“Following a comprehensive review, the board and management team believe that the planned separation of the Consumer Health business is the best way to accelerate our efforts to serve patients, consumers, and health care professionals, create opportunities for our talented global team, drive profitable growth and – most importantly – improve healthcare outcomes for people around the world,” said Alex Gorsky, current CEO and incoming executive chairman of J&J, effective from January 3, 2022.
“…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,” Gorsky said.
The CEO said the split would also allow J&J to deliver “industry-leading” biopharmaceutical and medical device innovation and technology. J&J was amongst a number of leading companies developing and advancing COVID-19 vaccines, for example, along with other pharmaceuticals.
‘Drive growth and unlock significant value’
Joaquin Duato, incoming CEO and current vice chairman of the executive committee at J&J, said: “This planned transaction would create two businesses that are each financially strong and 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.”
According to the company, the split aimed to create value for all stakeholders via increased focus and resources to plug industry trends; further focus on capital allocation; the creation of compelling financial profiles for each business; and alignment of corporate and operational structures.
The consumer health business was expected to benefit from a “strong investment grade profile and balance sheet” following the split, J&J said, enabling the company to build on its long history of innovation across self-care, skin health and essential health.
J&J’s consumer health division had suffered in Q1 2021, with sales dipping 2.3%. Recovery, however, was seen in its Q2 results with sales up 13.3% on the previous year and again in Q3 with sales up 5.3%.
Earlier this year, fellow personal care major Unilever also carved out a new standalone beauty company Elida Beauty in a move executives said would drive growth across this category.