Two years after spinning off its $15 billion consumer health unit as Kenvue, Johnson & Johnson is slimming down again by unveiling a plan to separate its orthopedics business, transforming it into a standalone company.
J&J expects to complete the separation within 18 to 24 months, with the new company dubbed DePuy Synthes. News of the spinoff comes 14 years after J&J revealed a $21 billion buyout of Synthes, which was then its largest-ever acquisition, and 27 years after it picked up DePuy in a $3.5 billion purchase.
Last year, J&J’s orthopedics business generated sales of $9.2 billion, accounting for more than 10% of the company’s revenue and 29% of the sales in its Medtech sector. The orthopedics unit produces implants for hip, knee and shoulder replacement, along with surgical instruments and other products.
“This decision further sharpens our focus as a healthcare innovation leader and accelerates the shift of our Medtech portfolio to areas of greatest unmet need and higher growth, which includes cardiovascular and robotic surgery,” J&J CEO Joaquin Duato said during the company’s third-quarter conference call Tuesday.
The focus of J&J’s Medtech business away from its orthopedics unit has been illustrated by recent acquisitions of cardiovascular device makers Abiomed for $16.6 billion and Shockwave Medical for $13.1 billion.
“The healthcare industry continues to evolve rapidly and we are constantly evaluating our overall business and portfolio to ensure Johnson & Johnson remains best positioned to truly lead where healthcare is going,” Duato said. “We continue to invest at industry-leading levels in our pipeline and portfolio while making disciplined decisions to exit businesses that we believe will be better able to thrive outside of Johnson & Johnson.”
Duato added that upon its separation, DePuy Synthes will be the largest company in the $50 billion orthopedics market. Other competitors include Stryker, which generated revenue of $22.6 billion in 2024, including $9 billion from its orthopedics sector, and Zimmer Biomet, an orthopedics specialist that reported revenue of $7.7 billion last year.
J&J has selected Namal Nawana to head up DePuy Synthes. For the last several years, Nawana has been the chairman of two companies he founded, diagnostics developer Sapphiros and medical device investment firm Neoenta Design.
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“We expect DePuy Synthes to benefit from a more focused business model, with greater flexibility to extend its market leadership, invest in its commercial capabilities and capitalize on profitable growth opportunities,” Duato said.
“Ortho is a great business, but frankly one that participates in lower-growth markets,” J&J Medtech chief Tim Schmid added. “This is all about shrinking to grow faster for Medtech. Last time I looked, you’re not rewarding size but really, rather best-in-class performance and that’s the path that we’re on.”
J&J’s move reflects an industry trend as several other biopharma companies—including Novartis, Sanofi, GSK, Merck and Pfizer—have spun off non-core business units over the last several years to become pure-play medicine innovators.
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In response to the news and the company’s quarterly report, Johnson & Johnson’s shares fell by 2% on Tuesday morning.
Edward Jones analyst John Boylan sees the separation as a plus for the company
“We think spinning off slower-growing DePuy should allow J&J to focus more of its attention on its attractive and growing cardiovascular businesses within its MedTech unit,” Boylan wrote. “DePuy could place more resources on innovation and penetration of its surgical robot as a stand-alone business.”
