Johnson & Johnson To Separate Its Orthopedic Business

Johnson & Johnson (JNJ) on Tuesday announced its intent to separate its Orthopedic business.

The company said that it will explore multiple paths to separate the business and is targeting a completion in 18 to 24 months. There can be no assurance regarding the absolute timing or structure of the proposed separation, the company stated, while adding that there can be no assurance that the transaction will be completed.

The transaction, if completed, would establish a standalone orthopedics business, operating as DePuy Synthes. The company expects the transaction to increase its top-line growth and operating margins by focusing on other growth areas, such as oncology and immunology.

JNJ stock traded nearly 1% higher in the pre-market session at the time of writing. On Stocktwits, retail sentiment around JNJ stock rose from ‘bullish’ to ‘extremely bullish’ territory over the past 24 hours, while message volume rose from ‘normal’ to ‘high’ levels.

“The planned separation reflects our long-standing commitment to portfolio optimization and value creation. We are confident that our Orthopedics business will be better positioned to improve top-line growth and operating margins as a standalone business,” CEO Joaquin Duato said. For fiscal year 2024, the Orthopedics business generated approximately $9.2 billion in sales.

Johnson also appointed Namal Nawana as Worldwide President of DePuy Synthes to lead the business through the separation process. Nawana will report directly to the CEO and is expected to lead DePuy Synthes following the completion of the separation. Nawana was previously Executive Chairman and Founder of privately-held Sapphiros.

Until separation, Johnson said that it will continue to operate the business in alignment with its current strategy, including continued investments.

The announcement comes on the heels of the company reporting a third-quarter (Q3) reported sales growth of 6.8% to $23.99 billion, beating an analyst estimate of $23.73 billion. The firm also reported an adjusted and diluted earnings per share (EPS) of $2.80, above the expected $2.76.

Johnson & Johnson also raised its full-year estimated reported sales guidance to a range of $93.0 billion to $93.4 billion, up from its previous guidance of $92.7 billion to $93.1 billion, and reaffirmed its full-year adjusted EPS guidance of $10.80 to $10.90.

JNJ stock is up by 32% this week and by about 18% over the past 12 months. 

Read also: Wells Fargo Appoints CEO Charlie Scharf As Chairman After Q3 Earnings Beat Estimates

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