J&J Split To Have Limited China Business Impact?
With Conglomerate Model Outdated, US Health Care Giant Pivots To Agility
China is a major emerging market for J&J’s pharma, medical and consumer health businesses and the planned spinout of the consumer business is likely to allow the US giant to focus on key new drugs in a fast-changing and competitive market while retaining medtech growth. But the consumer sector will continue to face challenges and might learn from similar moves by other multinationals in China.
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Analysts say the pharma’s plan would separate out a unit with less growth and lower margins – and some predict a further breakup of the pharma and medical device units.
JP Morgan analysts had questions and J&J CEO Alex Gorsky and CFO Joseph Wolk had answers about liability suits alleging that use of the Johnson's brand talcum powder has caused mesothelioma or ovarian cancer. On the Johnson's brand outlook following its relaunch as a natural product line, Gorsky says sales were a key driver in the firm's consumer health sales in the 2018 third quarter. China, meanwhile, is a model for growing sales online, he says.
Merging Shanghai Johnson & Johnson and Xian Janssen business divisions makes ONE China OTC the largest consumer health care product company in China. The move “is part of a broader Johnson & Johnson strategic initiative to leverage the company’s breadth and scale in China,” says Mike Hsu, ONE China OTC general manager.