J&J consumer brand spinoff Kenvue debuts on NYSE

Kenvue (KVUE), the new spinoff of Johnson & Johnson's (JNJ) consumer brand segment, debuted on the New York Stock Exchange Thursday at $25.53 per share.

That's higher than the upsized pricing of $22 per share J&J announced late Wednesday, along with increased shares of 172.8 million that raised about $3.8 billion for the new company, and provides a valuation above $40 billion. J&J remains a majority stakeholder with more than 90% of shares.

Kenvue, which will be headquartered in Summit, N.J., will be the new home of brands such as Tylenol, Band-Aid, Motrin, Sudafed, and Neutrogena. The company, which was previously one of J&J's three business segments, will now operate with three different business segments of its own to house all the brands. Those are self care, skin health, and beauty and essential health.

Thibaut Mongon, CEO of Kenvue Inc. a Johnson & Johnson's consumer-health business, rings the opening bell to celebrate it's IPO at the New York Stock Exchange (NYSE) in New York City, U.S., May 4, 2023. REUTERS/Brendan McDermidThibaut Mongon, who was head of consumer health at J&J, assumes the role of CEO of Kenvue. He rang the opening bell at the NYSE Thursday. Mongon joined J&J in 2000 as director of marketing for the Vision Care group in France, and joined Consumer Health in 2014 as Asia group chairman.

The IPO came a bit earlier than some analysts expected, with many looking at September or later in 2023 for a launch date. Still, expectations are high for Kenvue.

The consumer segment has traditionally delivered strong and consistent results for legacy J&J, and hovers around 20% of total sales every quarter. Historically, the segment has brought in between $13 billion to $14 billion annually in the past decade. In 2022, the consumer segment brought in $15 billion for J&J.

Jessica Moore, J&J's vice president of investor relations, told investors in March that the company currently has 30 billion-dollar products, and after the Kenvue separation that would reduce to 26 products.

J&J' CFO Joe Wolk added that spend on research and development would not decrease as a result of the spinoff.

This content is not available due to your privacy preferences.Update your settings here to see it."I do think it unleashes the potential that they have with that iconic portfolio of brands," Wolk said.

"From a strategic perspective, you think about how MedTech and pharmaceuticals are a professional sell, heavy R&D investment, regulatory environment that they have to contend with. Contrast that with consumer where certainly, science is going to matter to Johnson & Johnson products, but you have to be much more agile to the consumer sell now, right?" he said.

The J&J legacy name is among the strongest brands in the industry. From the highs of creating innovative consumer products, and setting the standard for product recall as it did in the 1980s with Tylenol, to the lows of the ongoing talc powder case, J&J has remained a household staple.

The talc case will remain with legacy J&J to resolve, even as the baby powder products will become a part of Kenvue.

J&J isn't alone in spinning out its consumer or over-the-counter (OTC) products. GlaxoSmithKline (GSK) recently spun off its consumer brands into Haleon (HLN), which has proven to be a strong entity on its own.

Expectations are similar for Kenvue, according to Wall Street. IQVIA Consumer Health's vice president Amit Shukla notes that the move provides more room for growth when consumer segments spin off.

In part, Shukla said, it's because pharmaceutical companies are more focused on the drug pipelines.

"Strategically, firms have been focusing on investing in the pharma pipeline and thus leaving little space to invest adequately in consumer health business opportunities," he said.

In addition, the current inflationary environment is giving the sector a boost, and consumer health is predicted to grow at about 6% per year, Shukla said.

Pfizer (PFE) recently reported it is also slowly offloading its 32% stake in Haleon, further validating the trend.

Follow Anjalee on Twitter @AnjKhem

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