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 as it sharpens focus on higher-growth healthcare segments.
J&J also outlined expectations for faster growth into 2026, driven by new drug launches and a strengthened medical devices portfolio, and raised its 2025 sales forecast after reporting quarterly earnings that topped Wall Street expectations.
The company said it expects total revenue growth to exceed 5% next year, above current analysts’ estimates of 4.6%, and adjusted earnings to top Wall Street estimates of $11.39 per share by as much as 5 cents.
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.
Post spinoff, the business will be led by industry veteran Namal Nawana, the company said.
Shares of the New Jersey-based healthcare company were down 1.2% in early trading. They are up 32% so far this year, compared with a 3% rise in the broader S&P Healthcare Index.
Guggenheim analysts said the stock’s recent rally could limit any further upside.
The company tweaked its 2025 product revenue forecast and now expects $93.5 billion to $93.9 billion, about $300 million higher than its prior view and above analysts’ expectations of $93.4 billion, according to LSEG data.
RESTRUCTURING BECOMES SPINOFF PLAN
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 spinoff, 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.”
