Soon-To-Be J&J Spinoff, Kenvue Files for $100 Million IPO

After announcing its plan to split its consumer health unit into its own company in November 2021, Johnson & Johnson’s (J&J) recently named Kenvue filed with the Securities and Exchange Commission (SEC) for a $100 million initial public offering (IPO) on Wednesday. The move, expected to complete in the mid to late stages of this year, would leave Kenvue responsible for household names like Band-Aid, Listerine, and Nicorette, allowing J&J to focus on pharmaceuticals and devices.

Consolidating Companies to Streamline Operations

J&J’s consumer healthcare unit reported over $15 billion in sales in 2021, with profits amounting to $2 billion. Ten of its brands generated over $400 million in net sales that year. Some of the most commonly-known brands include Neutrogena, Tylenol, and Benadryl. 

With such staggering numbers, transitioning J&J’s consumer health unit to its own company makes sense, following the trend of other companies doing the same. In July last year, fellow pharma giant GSK split off its consumer healthcare unit to form Haleon, valued at $36.4 billion upon market debut.

Kenvue’s IPO filing indicates that the company aims to raise $100 million, but Renaissance Capital said this figure is probably a placeholder and indicated that the company could raise as much as $5 billion. The estimate puts Kenvue as the largest company in the IPO pipeline at the moment and one of the biggest biotech IPOs in recent years. In 2020, Royalty Pharma raised $2.2 billion during its IPO funding. 

The IPO filing comes at the beginning of 2023, following a slow year for biotech IPOs in 2022. Last year saw only 22 biotech IPOs compared to 104 in 2021. 

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Another Reason to Separate Units

Besides providing autonomy for J&J’s development unit and Kenvue’s consumer healthcare unit, another key reason for the separation may be the overwhelming number of lawsuits the consumer health unit faces. Following reports of J&J’s baby powder and other talc products containing asbestos linked to mesothelioma and ovarian cancer, the company faces over 40,000 lawsuits. 

With the lawsuits directed at consumer healthcare products, Kenvue would likely bring all the cases with it during the transition to an independent company. The move may provide some breathing room for J&J’s development operations, allowing it to focus on pharmaceuticals and devices without the distraction of mounting lawsuits. 

Despite the suspected reasoning behind Kenvue’s eventual IPO, it is building up to be one of the biggest biotech IPOs in recent history and one of the first in 2023. Kenvue will assume responsibility for J&J’s consumer healthcare products that dominate the market, like Aveeno, Clean & Clear, and Acuvue. J&J will receive all proceeds from Kenvue’s IPO and maintain 80% of the voting power in Kenvue’s common stock. 

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Author

Reed Slater