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J&J’s $40 Billion Split-Off Sets Stage for Pharma, Medical Tech Expansion 


Johnson & Johnson’s growth stems from a 50-50 split between organic, in-house development and expansion through acquisitions and partnerships, according to its finance chief.
Photo: Agence France-Presse/Getty Image

Johnson & Johnson
plans to tap billions in proceeds from the recent split-off of its consumer-health business to fuel growth in pharmaceuticals and medical technology through capital allocation, which could include new acquisitions and investments in product offerings and robotics.

The New Brunswick, N.J.-based healthcare giant in May sold shares in Kenvue, which owns brands such as Band-Aid and Tylenol, through an initial public offering that netted J&J $13.2 billion in cash. In August J&J shed about 80% of its
shares through a roughly $40 billion split-off, whereby some investors chose to trade in their shares of J&J for Kenvue ones.  

The moves marked the conclusion of a multiyear effort, a plan decided upon in 2019 and put into action in 2021 when J&J embarked on untangling its finances and operations for such a split. 

Joseph Wolk, chief financial officer at Johnson & Johnson.
Photo: Johnson & Johnson

The split allows J&J’s executives to focus more on developing innovations and expanding the businesses of medical technologies and pharmaceuticals. “We need to be a top-tier medical tech company and a top-tier pharmaceutical company, first and foremost,” Chief Financial Officer

Joseph Wolk
said. “That is what’s going to carry us for the medium term.” 

J&J’s targets for acquisitions are businesses with scientific expertise and commercial capabilities that could benefit from J&J’s global reach, Wolk said. The company’s growth will continue to stem from a 50-50 split between organic, in-house development and expansion through acquisitions and partnerships, as it has historically, he said.

“It’s got to make good strategic sense. That’s where we’ve been successful,” Wolk said.

The company could acquire a mix of firms with already approved drugs and those with a late-stage pipeline that could launch a drug by the time a similar drug loses J&J exclusivity, said Damien Conover, director of healthcare equity research at financial-services firm
research arm. 

“They could put together a puzzle that enables pretty steady earnings growth over the next decade,” Conover said. 

J&J on Wednesday offered a first glimpse of its expected sales and earnings as a stand-alone business. The company is forecasting full-year sales of $83.2 billion to $84 billion, up 7% to 8% compared with the previous outlook, that included Kenvue, of sales of $98.8 billion to $99.8 billion, with year-over-year growth of 6.5% to 7.5%. The company said it expects adjusted earnings of $10 to $10.10 per share, down from a previous estimate of $10.70 to $10.80, but plans to maintain its quarterly dividend at $1.19 per share. 

J&J accepted about 191 million shares in exchange for roughly 1.5 billion shares of Kenvue common stock owned by J&J, amounting to a $33 billion share repurchase. It will save more than $900 million annually in dividend payments due to the completed exchange, Wolk said. 

“That’s a billion dollars to think about us doing something else, whether that be acquisitions or investing in our internal program or raising our dividend even a little bit more,” he said. 

The company would reap roughly $4.2 billion in cash from selling the 9.5% equity stake in Kenvue that it holds, based on the value of Kenvue’s shares as of Aug. 28, Wolk said. The company is considering selling the stake over the next year, in part because the profits would be tax-free if the deal closed in that time frame, he said.

J&J’s post-split cleanup is not entirely over, however. The company is still eliminating stranded costs, referring to certain corporate overhead costs that were previously absorbed by some of its consumer sales, Wolk said. That process is expected to be completed by the middle of next year, ahead of schedule, he said. “When you separate companies, you’re going to have some de-synergies.”

The recent exchange offer, the continuing removal of stranded costs and the loss of its slowest-growing business line collectively will eventually result in higher margins for the remaining company, he said. 

“Certainly we’ve lost the consumer income, but by being able to retire those shares, we were able to keep our income pretty close,” Wolk said. 

Write to Mark Maurer at

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