{"id":144550,"date":"2021-11-12T18:30:48","date_gmt":"2021-11-12T18:30:48","guid":{"rendered":"https:\/\/precoinnews.com\/?p=144550"},"modified":"2021-11-12T18:30:48","modified_gmt":"2021-11-12T18:30:48","slug":"jj-to-spin-off-consumer-products-and-focus-on-drugs","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/markets\/jj-to-spin-off-consumer-products-and-focus-on-drugs\/","title":{"rendered":"J&J to spin off consumer products and focus on drugs"},"content":{"rendered":"

(Reuters) – Johnson & Johnson plans to spin off its consumer health division that sells Listerine and Baby Powder to focus on pharmaceuticals and medical devices in the biggest shake-up in the U.S. company\u2019s 135-year history.<\/p>

FILE PHOTO: The U.S. flag is seen over the company logo for Johnson & Johnson to celebrate the 75th anniversary of the company’s listing at the New York Stock Exchange (NYSE) in New York, U.S., September 17, 2019. REUTERS\/Brendan McDermid\/File Photo<\/figcaption>

The move by the world\u2019s largest health products company follows similar announcements by conglomerates Toshiba and General Electric and underscores how big, diversified corporations are under pressure to simplify their structures.<\/p>\n

This has particularly been the case in healthcare, where the slow-and-steady business of selling products such as shampoos and moisturizers has increasingly diverged from the high-risk, high-reward work of developing and marketing blockbuster drugs.<\/p>\n

\u201cWe think these have evolved as fundamentally different businesses,\u201d J&J Chief Executive Alex Gorsky said. He said the differences in the businesses had become particularly clear during the COVID-19 pandemic as consumers bought more products online.<\/p>\n

The company said it was aiming to complete the separation in 18 to 24 months at a cost of $500 million to $1 billion. J&J shares, part of the Dow Jones Industrial Average, were up 1.5%.<\/p>\n

\u201cThis is just an example of delivering value to shareholders by specializing the businesses,\u201d said Shannon Saccocia, chief investment officer at Boston Private, which holds J&J stock and is part of SVB Financial Group.<\/p>\n

Johnson & Johnson\u2019s Band-Aids baby shampoo and cough remedies have long been the face of the company.<\/p>\n

But its pharmaceutical and medical equipment business, which makes cancer treatments, vaccines and surgical tools, is on track for nearly $80 billion in sales this year, way ahead of the $15 billion its consumer products are expected to bring in.<\/p>\n

The higher growth outlook comes despite disappointing sales of Johnson & Johnson\u2019s COVID-19 vaccine following a string of production setbacks and fierce competition from rivals Pfizer Inc and Moderna.<\/p>\n

(GRAPHIC: Consumer health projected to make up about 16% of J&J’s 2021 sales – )<\/p>\n

MONEY FOR DEALS?<\/h2>\n

Johnson & Johnson\u2019s plan to hive off its consumer health business into a publicly traded company echoes a move by GlaxoSmithKline and Pfizer, which also plan to spin off their joint consumer health business next year.<\/p>\n

German drugmaker Merck KGaA sold its consumer health division to Procter & Gamble Co in 2018.<\/p>\n

\u201cThe firm\u2019s timing is surprising, as we don\u2019t see any major catalyst for the move. However, if the consumer division no longer holds the deep pockets of the combined company, the risk of future consumer product litigation – such as the large talc settlement – may decrease,\u201d Morningstar analyst Damien Conover said in a research note.<\/p>\n

Johnson & Johnson\u2019s consumer division has faced a spate of lawsuits alleging its talcum powder for babies causes cancer, which the company has denied.<\/p>\n

It has created a subsidiary to manage the multi-billion-dollar claims and said on Friday the decision to separate the consumer division had nothing to do with the lawsuits.<\/p>\n

J&J stopped selling the baby powder in the United States and Canada last year.<\/p>\n

\u201cIt\u2019s important to state upfront that today\u2019s announcement is separate and distinct from the talc liability and bankruptcy proceedings that were announced a few weeks ago,\u201d said Chief Financial Officer Joseph Wolk.<\/p>\n

J&J\u2019s medical device and pharmaceuticals business has faced tens of thousands of lawsuits for products including DePuy and Pinnacle implants, surgical mesh products and Xarelto blood thinner.<\/p>\n

Jeff Jonas, asset manager at GAMCO Investors, said a spin-off would allow the company to be more acquisitive.<\/p>\n

\u201cUltimately, when they do finish the consumer spin-off, they\u2019ll probably raise a little bit of cash and put a little bit of debt on the consumer business, which would give them more money to do deals,\u201d he said.<\/p>\n

Another analyst suggested the flurry of spin-offs suggested shareholders should be cautious.<\/p>\n

\u201cHistorically, when the market becomes fully valued, we see a great number of spins being announced as companies look for alternate ways of creating more shareholder value,\u201d said Jim Osman, founder of research firm Edge Consulting Group. \u201cIt\u2019s something worth noting for the investor.\u201d<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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