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J&J (JNJ) to Separate Consumer Unit Into New Company, Stock Up
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Shares of Johnson & Johnson (JNJ - Free Report) were up 1.2% on Friday after it announced plans to separate its Consumer Health segment into a new publicly-traded company, leaving behind a new J&J with its Pharmaceuticals and Medical Device units.
J&J’s Pharmaceutical and Medical Devices units are expected to generate revenues of $77 billion in 2021 and remain one of the strongest drugmakers in the world.
J&J’s Consumer Health includes a broad range of products covering the areas of baby care, beauty/skin health, oral care, wound care and women’s health care, as well as over-the-counter (OTC) pharmaceutical products. Some iconic consumer brands of J&J are Neutrogena, Aveeno, Tylenol, Listerine and Band-Aid. The Consumer Health segment is expected to generate approximately $15 billion in sales in 2021.
J&J believes the Consumer Health unit’s separation would drive growth and unlock significant value as its Pharmaceutical and Medical Devices units are relatively higher growth, higher-margin businesses.
The separation of the Consumer Health unit is expected to be completed in the next 18 to 24 months, pending necessary board and regulatory approval. The remaining Pharmaceutical and Medical Devices company will continue to use the name Johnson & Johnson and will be led by the new chief executive officer (CEO) Joaquin Duato. Duato will be replacing present chairman and CEO Alex Gorsky, effective Jan 3, 2022. J&J will later announce the new Consumer Health publicly-traded company’s name.
J&J’s stock price increase on Friday suggests that investors, in general, are optimistic about J&J’s decision to split. However, a group of analysts believes that J&J’s talc liabilities spurred the decision to separate the Consumer division. Some analysts have criticized the move on the grounds that it will reduce the company’s scale and diversity, considered by some as J&J’s biggest competitive advantage. This year so far, J&J’s shares have risen 4.8% compared with the industry’s 16.2% increase.
Image Source: Zacks Investment Research
Another large drugmaker, GlaxoSmithKline (GSK - Free Report) is also due to separate its Consumer Healthcare segment into a standalone company in 2022. Glaxo will split into two UK-based global companies — one dealing in prescription drugs and vaccines, the other focused on consumer healthcare/over-the-counter (OTC) drugs.
In 2019, Glaxo and Pfizer (PFE - Free Report) merged their consumer healthcare unit into a new joint venture (JV) to create the world’s largest consumer healthcare business. While Glaxo owns a controlling stake of 68% in the JV, Pfizer owns 32%.
The JV operates globally as GSK Consumer Healthcare. Pfizer deconsolidated Pfizer Consumer Healthcare from its financial statements following the closure of the transaction.
The deal brought together some popular OTC brands like Glaxo’s Sensodyne, Voltaren and Panadol and Pfizer’s Advil, Centrum and Caltrate. Back in 2019, Glaxo had announced its intention to separate GSK Consumer Healthcare into an independent company within three years of transaction closing.
A few years back, another large drugmaker, Merck (MRK - Free Report) sold off its Consumer Care business to Bayer for $14.2 billion in October 2014 so that it could focus on its core areas of expertise, which was pharmaceuticals and vaccines.
Merck’s Consumer Care unit comprised a portfolio of well-established product brands, such as Claritin, Afrin and Coppertone.
Image: Bigstock
J&J (JNJ) to Separate Consumer Unit Into New Company, Stock Up
Shares of Johnson & Johnson (JNJ - Free Report) were up 1.2% on Friday after it announced plans to separate its Consumer Health segment into a new publicly-traded company, leaving behind a new J&J with its Pharmaceuticals and Medical Device units.
J&J’s Pharmaceutical and Medical Devices units are expected to generate revenues of $77 billion in 2021 and remain one of the strongest drugmakers in the world.
J&J’s Consumer Health includes a broad range of products covering the areas of baby care, beauty/skin health, oral care, wound care and women’s health care, as well as over-the-counter (OTC) pharmaceutical products. Some iconic consumer brands of J&J are Neutrogena, Aveeno, Tylenol, Listerine and Band-Aid. The Consumer Health segment is expected to generate approximately $15 billion in sales in 2021.
J&J believes the Consumer Health unit’s separation would drive growth and unlock significant value as its Pharmaceutical and Medical Devices units are relatively higher growth, higher-margin businesses.
The separation of the Consumer Health unit is expected to be completed in the next 18 to 24 months, pending necessary board and regulatory approval. The remaining Pharmaceutical and Medical Devices company will continue to use the name Johnson & Johnson and will be led by the new chief executive officer (CEO) Joaquin Duato. Duato will be replacing present chairman and CEO Alex Gorsky, effective Jan 3, 2022. J&J will later announce the new Consumer Health publicly-traded company’s name.
J&J’s stock price increase on Friday suggests that investors, in general, are optimistic about J&J’s decision to split. However, a group of analysts believes that J&J’s talc liabilities spurred the decision to separate the Consumer division. Some analysts have criticized the move on the grounds that it will reduce the company’s scale and diversity, considered by some as J&J’s biggest competitive advantage. This year so far, J&J’s shares have risen 4.8% compared with the industry’s 16.2% increase.
Another large drugmaker, GlaxoSmithKline (GSK - Free Report) is also due to separate its Consumer Healthcare segment into a standalone company in 2022. Glaxo will split into two UK-based global companies — one dealing in prescription drugs and vaccines, the other focused on consumer healthcare/over-the-counter (OTC) drugs.
In 2019, Glaxo and Pfizer (PFE - Free Report) merged their consumer healthcare unit into a new joint venture (JV) to create the world’s largest consumer healthcare business. While Glaxo owns a controlling stake of 68% in the JV, Pfizer owns 32%.
The JV operates globally as GSK Consumer Healthcare. Pfizer deconsolidated Pfizer Consumer Healthcare from its financial statements following the closure of the transaction.
The deal brought together some popular OTC brands like Glaxo’s Sensodyne, Voltaren and Panadol and Pfizer’s Advil, Centrum and Caltrate. Back in 2019, Glaxo had announced its intention to separate GSK Consumer Healthcare into an independent company within three years of transaction closing.
A few years back, another large drugmaker, Merck (MRK - Free Report) sold off its Consumer Care business to Bayer for $14.2 billion in October 2014 so that it could focus on its core areas of expertise, which was pharmaceuticals and vaccines.
Merck’s Consumer Care unit comprised a portfolio of well-established product brands, such as Claritin, Afrin and Coppertone.
J&J currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.