Johnson & Johnson Exits Consumer Health Completely with Full Kenvue Stake Sale

May 14, 2024 18:59 CST Updated 18:59

Johnson & Johnson

Medical Device R&D and Manufacturer

Yesterday (May 13），Johnson & JohnsonPlans to sell its 9.5% stake nearly a year after spinning off and listing its consumer health business, Kenvue.

This is Johnson & Johnson's entire remaining stake in Kenvue.

KenvueJohnson & Johnson will exchange its debt held with Goldman Sachs and JPMorgan Securities. Goldman Sachs, JPMorgan, and Bank of America Securities are the joint lead bookrunners.

According to calculations by Reuters, based on the last closing price of Kenvue's stock, the value of the 182 million shares issued in this offering is approximately$3.75 billion。

Thus, the largest restructuring in Johnson & Johnson's 137-year history has come to an end. The pharmaceutical and medical device businesses, which have been the focus of much attention, are leading Johnson & Johnson to unprecedented new heights with growth that exceeds expectations.

▲Since its listing, Kenvue's stock price has dropped by approximately 23%, falling 0.88% to $20.36 per share in yesterday's trading.

Completely Exit Consumer Health

As early as November 2021, Johnson & Johnson announced that it would spin off its consumer health division from its pharmaceuticals and medical devices businesses. In September 2022, the spun-off division was planned to go public as an independent company, named Kenvue.

Kenvue inherits Johnson & Johnson's century-long accumulation in the consumer sector, owning many well-known consumer health brands such as Band-Aid adhesive bandages, Tylenol medicines, Listerine mouthwash, and four other billion-dollar brands, along with 20 brands each exceeding 150 million dollars in value. The total annual business scale is nearly 15 billion dollars.

It is the support of these well-known brands,Kenvue Becomes One of the Largest U.S. IPOs in 2023, Market Value Surpasses $50 Billion at One Point, Creating a Miracle in the History of "Spin-off" Listings.

▲Last September, Johnson & Johnson replaced its iconic cursive logo, which had been in use for 135 years, with a modernized font and a brighter shade of red — assigning the new logo to its medical device and pharmaceutical businesses, while retaining the original logo for its consumer health division.

Of course, there are also growing pains.

Since the beginning of this year, Kenvue has appeared in multiple layoff-related news stories. In February this year, it laid off 51 employees in New Jersey. Prior to that, it had announced layoffs of 84 people in California.

On May 7, according to Bloomberg,Kenvue to Cut 4% of Global Workforce, Affecting Approximately 920 Employees, Due to End of Johnson & Johnson’s Transition Service Agreement (TSA)

As part of its cost-reduction plan, Kenvue is expected to achieve total pre-tax cost savings of $350 million annually by 2026, which will be used for reinvestment and other purposes.

Behind the New Company's Intensive Layoffs, the "Boundary" Between Johnson & Johnson Group and Kenvue Becomes Increasingly Clear.

Kenvue once stated that after the completion of the listing, Johnson & Johnson would hold at least 80.1% of the company's voting rights. However, in August last year, Johnson & Johnson significantly reduced its stake in this new company, retaining only 9.5% of the shares.

Nowadays, as Johnson & Johnson is set to divest its holdings inKenvueThe remaining shares were exchanged with Goldman Sachs and J.P. Morgan Securities for their debt.This means that Johnson & Johnson has completely exited the consumer health business it operated for a century. Aside from the continued appearance of the original Johnson & Johnson logo on familiar products like band-aids and body wash, the two companies will become entirely independent entities.

A Win-Win from the Spin-Off

In fact, for the world's large pharmaceutical enterprises, this wave of divestitures in consumer health divisions has been going on for nearly a decade.The common choice of global pharmaceutical giants such as Pfizer, GSK, Merck, and Sanofi.

In 2021, when the decision to split was made, Johnson & Johnson's total revenue was $93.8 billion, with consumer health business revenue at $15.1 billion, accounting for nearly one-sixth of the group's total revenue, showing a year-on-year decreasing trend.

Joaquin Duato, Chairman of the Board and Chief Executive Officer of Johnson & Johnson, previously stated,The spin-off of the consumer health business is to further strengthen Johnson & Johnson's focus on transformation and innovation in pharmaceuticals and medical technology.

The ideal is naturally beautiful.Looking back, the two parties have "broken up" for nearly two years, how is the reality?

From the financial report data of the past four years,Johnson & Johnson's performance did indeed achieve faster growth after completing the spin-off of its consumer health business.

Revenue year-over-year growth in 2020 and 2021 was +0.64%,-4.65%; After splitting,+1.59% year-on-year in 2022;Year-on-year 2023+6.46%, CampShou Da$85.159 billion。

In February this year, Kenvue released its first annual report after the spin-off: net sales of the company in the 2023 fiscal year were $15.4 billion,Up +3.3% year-over-year,Personal care, basic health, skin health and beauty – all three major businesses achieved full-line growth. In comparison,Revenue in 2022 was 14.95 billion, a year-on-year decrease of -0.69%.

The results are commendable, and to some extent, Johnson & Johnson's split and reorganization has indeed achieved a win-win situation.

To "Double Champion"Sprint

According to statistics from Fiercepharma,In 2023, Johnson & Johnson reported revenue of $85.2 billion, a year-on-year increase of 6.5%, making it the highest-revenue healthcare company globally.Among them

Pharmaceutical revenue of $54.759 billion, up 4% year-over-year
Medical device revenue of $30.4 billion, up 10.8% year-over-year

For Johnson & Johnson, this is a familiar position, having topped the pharmaceutical and medical device companies' revenue rankings for ten consecutive years from 2012 to 2021. In 2022, Pfizer, which reaped the benefits of the COVID-19 pandemic, took the top spot, but last year Johnson & Johnson reclaimed the top position, surpassing Roche, which ranked second, by nearly 20 billion U.S. dollars.

The combination of pharmaceuticals and medical devices solidifies Johnson & Johnson's position as the global leader, which remains unshakable.However, with such a high base, maintaining this growth rate is inseparable from recent mergers and acquisitions strategies.

In the field of medical devices, isThe field where Johnson & Johnson has placed the most "bets" in recent years, particularlyThe cardiovascular sector is particularly favored, especially in the past two years,Johnson & Johnson Medical Technology Cumulatively Bets on the Cardiovascular TrackOver 30 billion US dollars。

In November 2022, Johnson & Johnson announced the acquisition of Abiomed, a leader in the artificial heart field, for $16.6 billion.
In November 2023, the acquisition of Laminar, a left atrial appendage closure device company, was completed for $400 million.
Last month, Johnson & JohnsonJohnson & Johnson makes another stunning move, announcing a 4.7% premium acquisition for $13.1 billion in cash.Purchase of Shockwave, a Coronary Intravascular Lithotripsy (IVL) company, marks the long-awaited large acquisition in the medical device industry.

M&A requires passion, but integration takes time. From the current data, these bets seem to have started to pay off in terms of return on investment.

According toJohnson & Johnson2024 Q1 Financial Report,Among themCardiovascular Sector Surges 20% in a Single Quarter, driving the overall growth of the medical device business (+2.3%）。

In 2023,Shockwave CampRevenue of $7.3 billion, year-over-yearAn increase of nearly 50%.At the same time, as the world's second-largest medical device company, Johnson & Johnson Medical's revenue reached $30.4 billion in 2023. Combined, the annual revenue surged to $31.13 billion, which is only about $100 million behind Medtronic, the world's largest medical device company.

In other words, under the high growth rate, it is entirely possible for Johnson & Johnson Medical to make a push for the top position in the global medical device industry in 2024.

▲Top 2 Global Medical Device Companies' Revenue Data for Fiscal Year 2023

In terms of pharmaceuticals,Johnson & Johnson has been relatively cautious in its moves over the past two years, only entering the fiercely competitive market in January this year.ADC Track,$2 Billion AcquisitionAmbrx Biopharma。

However, its veteran innovative drug products remain "as vigorous as ever." According to the financial report, in 2023, Johnson & JohnsonThe overall growth of the oncology business was 10.5%, reaching 17.66 billion USD.Best-selling autoimmune drug Stelara achieved sales of $10.86 billion (+11.7%) last year.

By 2030, Johnson & Johnson is expected to launch more than 20 new drugs and expand over 50 indications.Driving Future GrowthThe focus will be on 10 or more innovative drugs with peak sales potential reaching or exceeding 5 billion US dollars.。

Last September, Johnson & JohnsonA well-known brand with deep industry accumulationJanssen RenamedJohnson & Johnson Innovative Pharmaceuticals，In line with business integration,Overall inclusionUnder Johnson & Johnson Innovation.

In 2023, Johnson & Johnson Innovative Pharmaceuticals outperformed strong competitors like AbbVie and Merck to rank among the global TOP 2, just behind Pfizer, which was boosted by the COVID-19 dividend.

▲Top 2 Global Pharmaceutical Companies Revenue Data for Fiscal Year 2023

This is not the end of Johnson & Johnson Medical's frenzied "buying spree."Joaquin Duato once stated that Johnson & Johnson's acquisition strategy has not changed, and mergers and acquisitions will remain a top priority. "When we consider mergers and acquisitions, we think in terms of decades, not in an opportunistic way."

It is evident that in the strides towards a "New Johnson & Johnson," the company has undergone a significant and sweeping revolution, extending beyond just its consumer products.

It is not easy for an elephant to dance, but among a group of reorganized multinational enterprises, Johnson & Johnson seems to have achieved particularly remarkable results. Although it currently ranks second in individual rankings, it is full of momentum and potential to strive for the top position in both pharmaceuticals and medical devices.

A New Era for Johnson & Johnson in China

Johnson & Johnson was one of the first multinational companies to enter China after the reform and opening up.

On April 23, Johnson & Johnson announced in an internal email,Song Weiqun, Chairman of Johnson & Johnson China and President of Johnson & Johnson Medical Technology ChinaAfter careful consideration, I have submitted my resignation to the company and am seeking external development opportunities.

Song Weiqun, as the first China-born chairman of Johnson & Johnson in over a hundred years, his departure to some extent signifies the end of an era for Johnson & Johnson China.

China is the only market outside the United States where Johnson & Johnson has established R&D centers or departments across all its businesses, and Johnson & Johnson was also the first Fortune 500 company to strategically deploy its innovation capabilities in the Chinese market.

Under the impact of centralized procurement and medical insurance negotiations, Johnson & Johnson has been forced to continuously transform into a new model that is more agile and efficient.

In 2024, Johnson & Johnson will enter its 39th year of accelerated development in China.InUnder the new course of this giant ship's global steering,ExpectationsThe Debut and Surprises of the New Johnson & Johnson, the New Johnson & Johnson China, and the New Leader of Johnson & Johnson China.

References:

1、https://www.reuters.com/markets/deals/jj-sell-all-shares-spun-off-unit-kenvue-2024-05-13/

2. The cover image is from Reuters.

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