A New Chapter for J&J’s Orthopedics Division
Johnson & Johnson (J&J) has announced plans to separate its orthopedics division into an independent company named DePuy Synthes, marking its second major spinoff in two years. The move follows the 2023 separation of its $15 billion consumer health unit, Kenvue. The company expects to complete the new separation within 18 to 24 months.
Strategic Shift to High-Growth Areas
J&J’s orthopedics business, which manufactures implants for hip, knee, and shoulder replacements, as well as surgical instruments and related products, generated $9.2 billion in sales last year. This accounted for about 10% of Johnson & Johnson’s overall revenue and 29% of the sales within its Medtech segment. The decision to separate the orthopedics business is part of J&J’s strategy to concentrate on higher-growth areas, including cardiovascular and robotic surgery.
“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,” said J&J CEO Joaquin Duato during the company’s third-quarter conference call.
The New Entity: DePuy Synthes
The new company, DePuy Synthes, takes its name from two businesses J&J previously acquired—DePuy in 1998 for $3.5 billion and Synthes in 2011 for $21 billion, the latter being J&J’s largest acquisition at the time. According to Duato, the separation will make DePuy Synthes the largest company in the $50 billion orthopedics market. It will be led by industry veteran Namal Nawana, who has served as chairman of diagnostics developer Sapphiros and medical device investment firm Neoenta Design.
Financial Implications and Market Reaction
Johnson & Johnson’s Medtech unit has shifted focus in recent years through acquisitions in cardiovascular technology, including Abiomed for $16.6 billion and Shockwave Medical for $13.1 billion. Duato said the company continually reviews its business structure to remain positioned for long-term growth, emphasizing ongoing investment in innovation while divesting operations that may perform better independently.
Johnson & Johnson Chief Financial Officer Joe Wolk stated that the company is evaluating multiple approaches for the separation, with a primary focus on a tax-free spinoff. He added that while the separation process has begun, no significant updates are expected until mid-2026. Wolk also said that while the orthopedics unit is profitable, J&J believes the next phase of innovation in that field “was beyond our scope and probably in better hands somewhere else.”
Johnson & Johnson reported that it expects total revenue growth to exceed 5% next year, surpassing current analyst estimates of 4.6%, with adjusted earnings projected to top Wall Street expectations by up to five cents per share. The company also raised its 2025 revenue forecast to between $93.5 billion and $93.9 billion, around $300 million higher than its previous estimate.
Tim Schmid, head of J&J’s Medtech division, said the restructuring aims to enhance performance and focus. He explained that the company is prioritizing faster-growing markets, adding, “This is all about shrinking to grow faster for Medtech.”
Broader Industry Trends
Shares of Johnson & Johnson were down 1.8% following the announcement but have risen 32% so far this year, compared to a 3% increase in the broader S&P Healthcare Index. Analysts noted that the orthopedics spinoff aligns with broader industry trends, as companies including Novartis, Sanofi, GSK, Merck, and Pfizer have separated non-core divisions to emphasize high-growth areas in medicine and technology.
Meanwhile, Johnson & Johnson (minus the orthopedics arm) will likely double down on high-potential therapeutic areas like immunology, oncology, neuroscience, and cardiovascular technologies.
Freed from the burden of a slower-growth device business, J&J may accelerate its acquisitions, R&D investment, and strategic partnerships in these core segments. The spinoff also offers J&J a chance to optimize capital allocation—reducing internal resource competition and enabling sharper focus.
