Johnson & Johnson (J&J), the global healthcare industry bellwether, announced on Tuesday its plan to separate its orthopaedics division from the main company within the next 18 to 24 months. This major organisational shift was revealed as the pharmaceutical and medical technology firm reported third quarter results that surpassed Wall Street expectations.
The orthopaedics business, which focuses on products such as hip and knee replacements and spinal equipment, is currently known as DePuy Synthes and generated approximately $9.2 billion in sales in 2024.
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J&J Chief Financial Officer Joseph Wolk explained that whilst DePuy Synthes is “still a great business,” it is not as fast-growing or as profitable as J&J’s other core operations.
The separation would allow the orthopaedics unit, which J&J claims would become the largest in the world, to benefit from operating as a standalone entity.
For J&J, the move is strategic, enabling the company to shift its portfolio towards higher-growth, higher-margin markets.
J&J is currently evaluating the mechanics of the separation, with preparations being made for the most complex option: a spinoff, which is the most time-consuming and resource-intensive approach.
To lead the unit, J&J has immediately appointed Namal Nawana, a veteran medical technology executive and former J&J employee, who has previously served as Chief Executive Officer of Alere Inc. and Smith & Nephew Plc.
J&J shares fell 1% at 10:28 AM in New York on Tuesday.
Strong Financial Results and Outlook
The announcement came on the heels of robust third quarter results:
Q3 Revenue: J&J, based in New Brunswick, New Jersey, reported quarterly revenue of $24 billion, which beat the average Wall Street analyst estimate of $23.7 billion.
Full-year Guidance Raised: Following the strong quarter, J&J raised the midpoint of its estimated 2025 reported sales guidance by $300 million, bringing the new figure to $93.7 billion.
Earnings Intact: Despite absorbing higher taxes, the company maintained its adjusted earnings guidance for 2025.
Tariff Pressures
The healthcare sector is currently facing uncertainty due to the threat of tariffs from President Donald Trump, who has made lowering US medical costs a priority for his second term.
Rival drugmakers, including Pfizer Inc. and AstraZeneca Plc, have pre-emptively agreed to offer some of their medicines at steep discounts and align prices with other wealthy countries in exchange for a three-year tariff exemption.
In March, it pledged to invest $55 billion over the next four years in US manufacturing, research and development, and technology. This was followed in August by an announcement of a $2 billion investment over the next ten years in a manufacturing site in Holly Springs, North Carolina, which is expected to create around 120 new jobs.
