J&J to spin off orthopaedics unit after strong Q3 results, stock falls 1%

Global healthcare pioneer Johnson & Johnson (J&J) announced Tuesday its plan to separate its orthopedics division from the parent company within the next 18 to 24 months. The major organizational shift comes as the pharmaceutical and medical technology company reported third-quarter results that beat Wall Street expectations.

The orthopedics business, which focuses on products such as hip and knee replacements and spine equipment, is now known as DePuy Synthes and has sales of approximately $9.2 billion in 2024.

J&J Chief Financial Officer Joseph Wolk explained that while DePuy Synthes is “still a great business,” it is not as fast-growing or profitable as J&J’s other core operations.

The separation would allow J&J’s orthopedics unit, which it claims will be the world’s largest, to take advantage of operating as an independent entity.

For J&J, the move is strategic and allows the company to shift its portfolio into higher-growth, higher-margin markets.

J&J is currently evaluating the mechanics of this separation as preparations are made for a spinoff, which is the most complex option and the most time-consuming and resource-intensive approach.

J&J, formerly Alere Inc., to lead the unit. and quickly appointed Namal Nawana, a veteran medical technology executive and former J&J employee who served as Chief Executive Officer of Smith & Nephew Plc.

J&J shares were down 1% at 10:28 a.m. in New York on Tuesday.

Strong Financial Results and Outlook

The announcement follows strong third quarter results:

3rd Quarter Revenue: J&J, headquartered in New Brunswick, New Jersey, reported quarterly revenue of $24 billion; This beat Wall Street analysts’ average estimate of $23.7 billion.

Full Year Guidance Upgraded: After the strong quarter, J&J raised the midpoint of its estimated 2025 reported sales forecast by $300 million, bringing the new figure to $93.7 billion.

Earnings are Solid: The company maintained its adjusted earnings forecast for 2025 despite taking on higher taxes.

Tariff Pressures

The healthcare industry is currently facing uncertainty due to the tariff threat from President Donald Trump, who has made lowering US medical costs a priority in his second term.

Among them Pfizer Inc. Rival drugmakers including U.S. and AstraZeneca Plc previously agreed to offer some of their drugs at deep discounts and bring prices in line with other rich countries in exchange for three-year tariff exemptions.

In March, he pledged to invest $55 billion in U.S. manufacturing, research and development and technology over the next four years. This was followed in August by the announcement of a $2 billion investment in a manufacturing facility in Holly Springs, North Carolina, expected to create approximately 120 new jobs over the next decade.