The big news this morning is that Big Pharma and Healthcare giant
Johnson & Johnson
JNJ
now plans to split itself into two major companies: its Pharma and Medical Devices division and its Consumer Health division. Shares rose nearly 5% on the news immediately, and have since moderated to around +3% in today’s pre-market. This is news in itself, as the company’s stock price had only gained +4.2% year to date.
Chairman and CEO Alex Gorsky said the process of the breakup will take between 18-24 months, and while the executive does plan to stay on as Executive Chairman, at the start of 2022 he turns over the CEO reins to Exec VP of the Pharma division, Joaquin Duato. Combined, J&J carries a market cap of $432.5 billion; upon the separation, the company expects its Pharma/Devices group will still amount to the largest drug company in the world, with $77 billion in 2021 revenues expected.
The news follows
General Electric’s
GE
announcement earlier in the week that it will split off into three separate companies, after years of struggles to keep the conglomerate functionally profitable. In J&J’s case, its split follows years of litigation for both sides of its corporate business: on the Pharma side, settlements paid out for its role in the U.S. opioid crisis of the past couple decades, and in its Consumer Products division, J&J spun off a company with the sole purpose of dumping its liabilities related to asbestos-laced talcum powder lawsuits. That spin-off declared bankruptcy just last month.
J&J reached all-time highs in the stock market back in late August of this year, but shares have not kept pace with the S&P 500 over the past year: while J&J had posted gains just below +10% from this time last year, the S&P has gained +31.5%. Its unclear whether the Consumer Health business will be spun-off into its own publicly-traded entity, but investors may look to
Pfizer’s
PFE
recent hiving off of its businesses to garner healthy gains on its pharma side: PFE shares are +36% year to date.
After today’s opening bell, we will see some economic metrics market participants may take interest in: September Job Openings will likely report a lower number than the previous month’s 10.4 million — the question is: how much lower? Last week’s jobs report tallied roughly half that number of job openings for the month of October. Also, preliminary reads on the University of Michigan Consumer Sentiment index and 5-Year Inflation Expectations will be released roughly around the same time.
At this hour, markets are pretty solidly in the green — led by the +130 points on the Dow (largely related to this morning’s J&J news), +10 on the S&P 500 and +40 on the Nasdaq. While the latter two indexes posted closing numbers in the green yesterday, the Dow is trying to snap a three-session losing streak.
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