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Johnson & Johnson is splitting in 2

MARY LOUISE KELLY, HOST:

Big change is coming to an American household name.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED ACTOR #1: (As character) My daughter uses my shampoo.

UNIDENTIFIED ACTOR #2: (As character) Johnson's Baby Shampoo.

UNIDENTIFIED ACTOR #1: (As character) Johnson's cleans gently.

UNIDENTIFIED ACTOR #2: (As character) No more tears.

KELLY: Now Johnson & Johnson is splitting in two. It's the biggest shake-up in its 130-year history. NPR's Brian Mann is here. And, Brian, why break up such a familiar name brand company?

BRIAN MANN, BYLINE: Yeah. Johnson & Johnson CEO Alex Gorsky talked about this today on a call with investors, and he said the old structure, this big sort of sprawling conglomerate with lots of different products, he said it's just outdated.

(SOUNDBITE OF ARCHIVED RECORDING)

ALEX GORSKY: While this approach has historically served us well, addressing the complexity of today's global health care and consumer environments now demands unprecedented focus, innovation and agility.

MANN: So now J&J will focus on pharmaceuticals and medical equipment, that's one chunk, and then the new separate company will focus on consumer products. Executives say it could take a couple of years to untangle all those pieces.

KELLY: I'm thinking this is - it's a business story, obviously, but also a cultural story. I mean, speak to the role that the company and its products have played so many years in American life.

MANN: Yeah, right. This is a $400 billion company. Its products are everywhere, and a lot of them, as you say, have been with us for decades - Band-Aids for our cuts, baby shampoo that doesn't make you cry, Tylenol. And then, of course, J&J is one of the companies that moved fast to develop a COVID vaccine during the pandemic. Millions of us have received the company's one-dose jab.

KELLY: I will note this comes at a moment when Johnson & Johnson has seen a lot of trouble, that we've had lawsuits linked to opioid pain pills sold by the company. We've seen these claims that Johnson's baby powder contained asbestos. Any of that factor into this decision?

MANN: It really appears today's decision to break up this company was not directly linked to those controversies. This seems to be about developing more specialized companies that might bring better shareholder value. But it is a fact, Mary Louise, that J&J has gotten a ton of bad press lately. The firm agreed to a $5 billion national settlement for its role making and selling all those prescription pain pills as the opioid epidemic exploded. And then 38,000 people have filed lawsuits claiming their cancers were caused by asbestos in the company's baby powder, which was taken off the market in the U.S. last year. J&J executives have denied any responsibility for the opioid epidemic on the one hand, and they also say the company's baby powder was safe.

KELLY: I'm also wondering if this is part of a moment of big companies breaking up. General Electric is being split up, Toshiba, Pfizer. Is there a pattern here?

MANN: I asked Erik Gordon about this. He's a professor at the University of Michigan Ross School of Business.

ERIK GORDON: There are these long cycles where we put together big conglomerate companies, and then we go into this cycle where we take them apart, and then we put them back together. But these iconic companies like J&J and GE, they'll never be put back together again.

MANN: And really, what Gordon believes is that consumers, Mary Louise, just aren't loyal to these big brands the way they used to be. So, you know, keeping lots of these products under one big corporate umbrella, he thinks it stopped making sense.

KELLY: Real quick, Brian, any word on the new name, Johnson or Johnson?

(LAUGHTER)

MANN: One part will stay Johnson & Johnson; the other company, no name announced as of yet.

KELLY: NPR's Brian Mann talking about today's decision to breakup Johnson & Johnson.

Thank you, Brian.

MANN: Thank you. Transcript provided by NPR, Copyright NPR.