Johnson & Johnson to Separate Consumer Health Business into New Company

Johnson & Johnson (JNJ) plans to separate its Consumer Health business into a new publicly-traded company. With this move, JNJ aims to better position the companies to offer improved healthcare through innovation, boost growth and pursue targeted business strategies.

The New Jersey-based healthcare giant’s shares closed 1.2% up on Friday at $165.01. The stock opened in green during the pre-market trading session on Monday.

Plan Details

Following the separation, Alex Gorsky will serve as Executive Chairman of Johnson & Johnson, while Joaquin Duato, the Vice-Chairman of the company’s Executive Committee, will become the CEO, effective January 3, 2022.

The organizational design for the New Consumer Health Company is likely to be completed by the end of next year, subject to legal requirements. (See Insiders’ Hot Stocks on TipRanks)

Management Comments

Duato said, “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.”

Gorsky said, “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.”

Projections for 2021

While the Pharmaceutical and Medical Devices segments are expected to generate revenue of nearly $77 billion in 2021, the Consumer Health segment is anticipated to generate $15 billion in revenue.

Furthermore, after the separation, the New Consumer Health Company is likely to generate sales in more than 100 nations.

Analyst Recommendation

Overall, the stock has a Strong Buy consensus rating based on 5 Buys and 1 Hold. The average Johnson & Johnson price target of $196 implies 18.8% upside potential. Shares have gained 9.4% over the past year.

Smart Score

According to TipRanks’ Smart Score rating system, JNJ scores a “Perfect 10,” suggesting that the stock is likely to outperform market averages.

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