Johnson & Johnson follows GlaxoSmithKline’s plan to split into two companies

OHNSON & Johnson announced today that it plans to follow its peers, for example GlaxoSmithKline And Merck, split their huge healthcare empire into two independent companies.

The American giant will spin off its consumer division, and its mass market products include band-aids and Johnson’s baby powder, which will generate a steady annual income of 15 billion U.S. dollars each year.

The measures in the next two years will make its riskier but more profitable prescription drugs and medical device division—with annual sales of $85 billion—a separate entity.

Chief Executive Alex Gorsky stated that the company’s split-the largest reorganization in its 135-year history-reflects the growing divergence between the two companies and their markets. A trend is accelerated by the pandemic.

He said: “The best way to ensure long-term sustainable growth and better meet the needs of patients and consumers is to let our consumer business operate as an independent healthcare company.”

The final structure of the two companies has not yet been determined, but once the divorce is completed, the consumer sector may be listed as an independent company.

It will join Reckitt Benckiser, Procter & Gamble, Nestlé and L’Oréal to become one of the largest players in the industry.

The company rejected claims that the spin-off was related to potential liability arising from legal claims, which claimed that its infant rights were related to ovarian cancer.

The London-based pharmaceutical giant GlaxoSmithKline is completing a similar move to split its Sensodyne, Nicorette and Panadol manufacturing divisions into a new public company.

Competitor drugmakers, including Pfizer and Merck, have taken similar steps as they doubled their bets on fast-growing drugs.

The two companies hope to strengthen growth by concentrating each business on their core competitiveness, but they may lose the cushion of a diversified business model, that is, weaknesses in one area can be offset by strong sales in another area.

Headquartered in New Jersey, J&J has 135,000 employees and is one of the largest and most valuable companies in the world, with operations in 60 countries.

Johnson & Johnson’s consumer unit sales increased by 1.1% last year to $15 billion, while sales in the pharmaceutical division increased by 8%. Its stock price rose 4% to $170 in pre-market trading in New York.

It is looking for a new base for the remaining 3,500 employees of the nascent new GlaxoSmithKline research department.

Merck is planning to spin off its women’s health department into an independent public company because it focuses on cancer drug and vaccine research.