Product details

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Abstract

Towards the end of 2021, the 135-year-old healthcare conglomerate, Johnson & Johnson (J&J), decided to split the consumer health as well as the pharmaceuticals and medical devices businesses into two new independent business units to unlock shareholder value. Between 2016 and 2020, the average operating margin for the J&J's consumer healthcare business was 12.2%, compared to 30.9% for Pharmaceuticals and 20.0% for the Medical Devices business. J&J was not the only pharma company to have restructured the business. Earlier, Pfizer Inc, and Merck & Co, and several others also had undertaken similar exercise. Amidst such development, a section of industry watchers, academia, and analysts, at one end, felt that it was normal for companies to look for alternative ways to create more value, while at the same time, some did not see any major catalysts to make such a move. Lack of detailed future strategy for consumer business, risks of future product litigation were some of the concerns raised. However, a section of analysts and market watchers believed that the conglomerate structure was a relic of a bygone business climate, and several companies were pursuing new paths to please the investors. It would be interesting to witness many conglomerates both Indian and others re-examining their structures to create independent, global public companies that would create more value for all stakeholders.

Teaching and learning

This item is suitable for undergraduate, postgraduate and executive education courses.

Time period

The events covered by this case took place in 2021.

Geographical setting

Region:
Americas
Country:
United States

Featured company

Johnson & Johnson
Type:
Public company
Industry:
Healthcare

Featured protagonists

  • Alex Gorsky (male), Chairman & CEO
  • Joaquin Duato (male), Vice Chairman

About

Abstract

Towards the end of 2021, the 135-year-old healthcare conglomerate, Johnson & Johnson (J&J), decided to split the consumer health as well as the pharmaceuticals and medical devices businesses into two new independent business units to unlock shareholder value. Between 2016 and 2020, the average operating margin for the J&J's consumer healthcare business was 12.2%, compared to 30.9% for Pharmaceuticals and 20.0% for the Medical Devices business. J&J was not the only pharma company to have restructured the business. Earlier, Pfizer Inc, and Merck & Co, and several others also had undertaken similar exercise. Amidst such development, a section of industry watchers, academia, and analysts, at one end, felt that it was normal for companies to look for alternative ways to create more value, while at the same time, some did not see any major catalysts to make such a move. Lack of detailed future strategy for consumer business, risks of future product litigation were some of the concerns raised. However, a section of analysts and market watchers believed that the conglomerate structure was a relic of a bygone business climate, and several companies were pursuing new paths to please the investors. It would be interesting to witness many conglomerates both Indian and others re-examining their structures to create independent, global public companies that would create more value for all stakeholders.

Teaching and learning

This item is suitable for undergraduate, postgraduate and executive education courses.

Settings

Time period

The events covered by this case took place in 2021.

Geographical setting

Region:
Americas
Country:
United States

Featured company

Johnson & Johnson
Type:
Public company
Industry:
Healthcare

Featured protagonists

  • Alex Gorsky (male), Chairman & CEO
  • Joaquin Duato (male), Vice Chairman

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