Johnson & Johnson Readies to Spin Off Business Units As COVID Effects Linger in 2022

Johnson & Johnson

Moving to split its consumer health and medical device/pharma units into two separate public companies, the Johnson & Johnson (JNJ) version of “divide and conquer” revolves around increased ability to funnel research and investment into these new centers of excellence.

Incoming CEO Joaquin Duato said separation of the consumer health, pharmaceutical and medical device businesses will occur in 2023, and “will advance more targeted business strategies, accelerate growth, and deliver improved health outcomes for both patients and consumers.”

JNJ announced plans to split the company in November 2021. Then-CEO Alex Gorsky said in a statement that “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.”

Some of the groundwork for the two new companies is already underway, with Duato noting on a Q4 and full-year 2021 earnings call Tuesday (Jan. 25), that JNJ “launched over 20 new products during 2021 including the VELYS robotic assisted solution in orthopedics and two new interocular lenses in surgical vision,” adding that the company plans to “build upon our promising pharmaceutical pipeline” into a $60 billion business by 2025.

The pandemic continues playing its part, with JNJ saying medical devices “continued to be impacted by COVID-19, with the Omicron variant contributing to a softening of recovery trends in medical and surgical procedures, especially late in the quarter.”

Medical device sales grew 4.5% for full-year 2021 “building on the pre-COVID growth momentum in interventional solutions.”

Pointing to ongoing supply chain issues, Executive Vice President and Chief Financial Officer Joseph Wolk said, “We estimate that the majority of that impact will be experienced in the first half of the year, primarily in the first quarter, and primarily in skin, health, beauty. We therefore expect the second half performance to outperform the first half.”

Similarly, Wolk said JNJ can “expect some COVID-19 headwinds and hospital staffing shortages to continue to 2022 but anticipates market recovery as global health systems treat new patients and work through procedure backlogs” for its Medical Device business.

He added, however, that the firm is “monitoring reports surfaced by large insurers that recent office visits are slightly down in both primary care and specialists.”

JNJ reported Q4 2021 worldwide topline revenue of $24.8 billion, up 10.4% year-over-year. U.S. sales rose 3%, while regions outside the U.S. reported sales growth of 18.5%. Full-year 2021 sales were $93.8 billion, led by 16.8% growth in medical devices, 13.6% in pharmaceuticals, and 3.8% in consumer health, growth of which “was partially offset by external supply constraints mainly impacting Skin Health / Beauty” according to the earnings statement.

Sales of JNJ’s COVID-19 vaccine came in slightly under expectations at just south of $3 billion for full-year 2021 with most of those sales generated outside the U.S., with the company’s COVID vaccine generating worldwide sales of $1.6 billion in Q4.

Looking ahead, Duato anticipates “sales growth of between 5.5% and 7.0% or 6.2% at the midpoint compared to 2021, representing a range of $98.9 billion to $100.4 billion for 2022.”

See also: Johnson & Johnson Spinoff Plans Point to Rise of Direct-to-Consumer Commerce