By Patrick Wingrove
(Reuters) -Johnson & Johnson said on Tuesday it plans to separate its orthopedics business into a standalone company named DePuy Synthes within the next 18 to 24 months, marking its second major spinoff in two years.
The healthcare conglomerate also raised its 2025 sales forecast after reporting quarterly earnings that topped Wall Street expectations.
The company projected product revenue of $93.5 billion to $93.9 billion, about $300 million higher than its prior forecast and above analysts’ expectations of $93.4 billion, according to LSEG data.
J&J’s orthopedics unit, which makes hip, knee, and shoulder implants, surgical instruments, and other products, generated around $9.2 billion last year, or about 10% of total revenue.
J&J in 2023 announced a two-year restructuring program for its orthopedics business, saying it planned to exit certain markets and stop selling some products, after having recently spun off its $15 billion consumer unit into Kenvue.
J.P. Morgan analysts said the orthopedics division represents about 30% of J&J’s MedTech segment, generating growth below the rest of the portfolio, and the planned spin-off “should create a faster-growing J&J over time”.
The company said the move aligns with its focus on high-growth, high-margin areas such as oncology, immunology, neuroscience, surgery, vision care and cardiovascular products.
J&J Chief Financial Officer Joe Wolk said the company was exploring multiple paths for the separation, with a primary focus on a tax-free spin-off, but remained open to other options.
While the orthopedics business was profitable, Wolk said J&J believes the next phase of innovation in orthopedics was “beyond our scope and probably in better hands somewhere else.”
Guggenheim analysts said investors are likely to welcome the company’s updates, though the stock’s recent rally could limit any further upside.
Shares of the New Jersey-based healthcare giant were marginally up in premarket trading. They gained 32% so far this year, compared with a 3% rise in the broader S&P Healthcare Index.
FORECAST RAISE, PROFIT BEAT
Third-quarter sales of $23.99 billion edged past Wall Street expectations of $23.75 billion, according to LSEG data.
The drugs and medical devicemaker posted adjusted earnings of $2.80 per share versus analyst expectations of $2.76.
The company’s pharmaceuticals sales jumped 6.8% from a year ago to $15.56 billion, slightly outpacing analysts’ estimates of $15.42 billion.
J&J saw gains from its oncology products, including blood cancer treatment Darzalex, which brought in third-quarter sales of $3.67 billion, about in line with forecasts of $3.62 billion.
