J&J to Spin Off Orthopaedics Business, Raises 2025 Revenue Forecast to $93.9 Billion

The orthopaedic business manufactures implants for hips, knees, and shoulders, as well as surgical instruments. It generated approximately $9.2 billion last year, accounting for around 10% of total revenue.

Johnson & Johnson plans to separate its orthopaedic business into an independent company within the next 18 to 24 months. This is the company’s second major spinoff in two years, as it focuses on fast-growing segments within the healthcare industry. J&J also shared that it expects to fasten its growth through 2026 with new drug launches and a stronger lineup of medical devices.

For the next year, the company expects revenue growth of over 5%, which exceeds current analyst forecasts of 4.6%. Additionally, adjusted earnings are expected to exceed the Wall Street estimate of $11.39 per share by up to 5 cents per share.

The orthopaedic business manufactures implants for hips, knees, and shoulders, as well as surgical instruments. It generated approximately $9.2 billion last year, accounting for around 10% of total revenue.

Following the spinoff, the new company, to be called DePuy Synthes, will be led by industry veteran Namal Nawana, according to the company.

The shares of the New Jersey-based healthcare company fell 1.8% after the announcement. The stock was up 32% so far this year, compared to 3% gain for the broader S&P Healthcare Index.

Analyst at Guggenheim noted that the stock’s recent rally may limit further upside. Brian Mulberry, a portfolio manager at Zacks Investment Management, which holds the company’s shares, stated that there are some valid concerns about separating the orthopaedics unit.

As it represents 10% of revenue, which is a significant share of income, it is a major strategic shift. He also suggested that concerns about trade and tariffs with China could have a broad impact on the market.

In 2023, the company started a two-year restructuring program for its orthopaedics business, stating that it planned to exit certain markets and discontinue the sale of specific products after the recent separation of its $15 billion consumer health unit into Kenvue.

According to J.P. Morgan, orthopaedics makes up approximately 30% of J&J’s MedTech segment, but it has been lagging behind in terms of growth compared to the rest of the portfolio. The analysts believe that the spin-off will help J&J to grow faster over time.

The company stated that it aims to align with its goal of focusing on high-growth and high-margin fields, including oncology, immunology, neuroscience, surgery, vision care, and cardiovascular products.

Chief Financial Officer Joe Wolk stated that the company is exploring multiple paths to spin off, with a primary consideration being a tax-free spin-off for its orthopaedic unit. Wolk added that the orthopaedic business was profitable, but the company believes that the next phase of innovation for orthopaedics was better handled outside the company.

While he was on the call with investors and analysts, he stated that the separation process has already begun, but the company does not expect any significant updates before mid-2026.

The company increased its 2025 sales outlook after seeing that it had exceeded Wall Street expectations in its quarterly results. The company now forecasts 2025 product revenue between $93.5 billion and $93.9 billion, which is $300 million higher than its previous estimate and above analysts’ projections. Third-quarter sales reached $23.99 billion, just ahead of expectations, with adjusted earnings per share of $2.80, beating estimates by 4 cents.

Pharmaceutical sales rose 6.8% year-over-year to $15.56 billion, slightly ahead of forecasts, while medical device sales also grew 6.8% to $8.43 billion, driven mainly by electrophysiology products. Blood cancer treatment Darzalex generated $3.67 billion in third-quarter sales, closely matching predictions.

J.P. Morgan analysts described J&J as one of the more stable large healthcare companies, successfully navigating the end of exclusivity for its blockbuster drug Stelara and maintaining steady growth across its core business lines.

Separately, CEO Joaquin Duato declined to comment on reports that the company is planning to buy Protagonist Therapeutics. He stated that J&J already holds most of the assets in Protagonist through its 2017 global licensing agreement and expressed satisfaction with the current partnership they have with the company.