BITE | Johnson & Johnson: a healthcare giant with a history of success and legal risks
J&J, and response to challenges. Read it now in this new Bite, a short article with the relevant information you need to know.
In this entry:
Get to know its different business segments and its structure.
What will its restructuring look like?
Johnson & Johnson (JNJ) is a multinational healthcare company operating in three main business segments: pharmaceuticals, medical devices and consumer healthcare products. The company was founded in 1886 and is headquartered in New Brunswick, New Jersey. Johnson & Johnson is present in more than 60 countries and employs more than 135,000 people worldwide.
The company's Pharmaceuticals business segment develops and markets drugs for a variety of diseases, including cancer, immunology, infectious diseases and neuroscience. The medical devices segment designs, manufactures and sells surgical equipment, diagnostic tools and orthopedic implants. The Consumer Health Products segment manufactures a variety of over-the-counter products, including Band-Aids, Neutrogena skin care products and the pain reliever Tylenol.
Johnson & Johnson's structure is highly decentralized, with each segment operating as a separate entity. This approach allows each unit to focus on its core business and leverage its expertise to drive innovation and growth. The company's decentralized structure also helps it remain agile and adapt quickly to changes in the healthcare industry. Johnson & Johnson is known for its commitment to ethical business practices and its emphasis on sustainability.
Legal challenges
Despite its strong reputation, the company faces significant legal challenges, particularly in the form of talcum powder lawsuits alleging that the company's baby powder products caused the development of cancer.
To minimize potential liability arising from these lawsuits, J&J created a subsidiary, LTL Management LLC, to shift the talcum powder lawsuits there and bankrupt that subsidiary. However, an appellate court recently dismissed that case, putting the issue back on the table regarding how much these legal claims may cost the company.
Although J&J promised to create a $2 billion trust fund, its liability could far exceed that amount if not capped. One of the big challenges in estimating the potential legal costs of these talc lawsuits is that there are so many of them, making it nearly impossible to predict the impact they could have on the company. Therefore, it makes sense for the company to deploy this strategy to avoid outlaying large amounts of money.
It is important to note that while talc litigation represents a latent risk to the company, it may not be sufficient reason to stay away from the stock. J&J's broad portfolio of products and services, combined with its decentralized structure and principles, has enabled it to remain a key player in driving innovation, improving the health and well-being of people around the world. As the healthcare sector constantly changes, J&J is poised to remain a leading force.
*This is an illustrative example and does not represent an investment recommendation.