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. The stock closed at $26.90 per share, up about 22 percent in its first day of trade.
"We just listed Kenvue for the first time, bringing it to life as the world's largest pure-play consumer health company," said CEO Thibaut Mongon.
Mongon, formerly the head of J&J's consumer health segment, spoke to Yahoo Finance from the floor of the New York Stock Exchange, where he rang the opening bell earlier Thursday.
Kenvue's early trading came in 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 $45 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.
"We are the only company of our size covering all of consumer health," Mongon said.
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 spending on research and development would not decrease as a result of the spinoff.
"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.
Meghan Fitzgerald, Columbia University professor of healthcare policy, previously told Yahoo Finance that the Kenvue spinoff is more of a corporate carveout than an IPO because it is a well-established business with strong branding.
"Kenvue has some of the greatest brands in the world. This will certainly be a beacon and a bellwether for others that are doing corporate spinouts," she said.
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. Mongon reinforced that the new company will not be impacted by the litigation, as it stays with legacy J&J to resolve.
"At Kenvue we are laser-focused on what we do best, building brands that have strong trust and leadership position with consumers," Mongon said.
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.
Follow Anjalee on Twitter @AnjKhem
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