Johnson & Johnson announced Tuesday its intention to spin off its orthopedics business into a standalone company called DePuy Synthes, marking the healthcare giant's latest strategic move to refocus its portfolio on higher-growth markets. The separation is expected to complete within 18 to 24 months and will create what CEO Joaquin Duato claims will be "the largest, most comprehensive orthopedics company in the medical device space."
Strategic Refocus on Higher-Growth Markets
The decision represents J&J's continued effort to streamline its medtech portfolio toward areas with greater growth potential and higher margins. "This decision further sharpens our focus as a healthcare innovation leader and accelerates the shift of our medtech portfolio to areas of greatest unmet need and higher growth, which includes cardiovascular and robotic surgery," Duato said during an earnings call.
Tim Schmid, J&J's worldwide chairman of medtech, emphasized the strategic rationale behind the move: "We've been on a journey over the last several years to really aggressively move our portfolio into higher-growth markets, and adding attractive assets such as Abiomed and [Shockwave Medical] in high-growth markets like cardiovascular are good examples. This decision to separate ortho is the next major step in that direction. Ortho is a great business but, frankly, one that participates … in lower-growth markets. This is all about shrinking to grow faster for medtech."
Financial Performance and Market Position
The orthopedics unit generated approximately $9.2 billion in sales during fiscal year 2024. Through the first nine months of 2025, the business produced $6.82 billion in revenue, representing a year-over-year decline of 0.3%. However, the unit showed signs of recovery in the third quarter, with sales growing 3.8% year-over-year to $2.27 billion after experiencing a slight decline in the second quarter.
The spinout will position DePuy Synthes to compete directly with established orthopedics companies including Stryker and Zimmer Biomet. Duato noted that the business will benefit from "a more focused strategy and increased flexibility that would be obtained through a separation."
Leadership and Timeline
Namal Nawana, former CEO of medical technology company Smith & Nephew, has been appointed as the worldwide president of DePuy Synthes, effective immediately. Nawana will lead the business through the separation process and beyond. Smith & Nephew specializes in orthopedics, sports medicine, and wound management, providing Nawana with relevant industry experience for the new role.
CFO Joe Wolk indicated that investors should expect regular updates throughout the separation process, though he noted there would be nothing "newsworthy" to convey until mid-2026.
Portfolio Transformation Continues
This spinout represents the second major business separation for J&J in recent years, following the 2021 creation of Kenvue, which oversees the company's consumer health products including Band-Aids, Listerine, and Tylenol. The orthopedics separation also follows a broader trend in the medical device industry, with Medtronic announcing in May its plans to spin out its diabetes business into a separate standalone company.
After the orthopedics separation, J&J's medtech unit will focus on its cardiovascular, surgery, and vision businesses. This streamlined portfolio aligns with the company's strategy of concentrating resources on segments with higher growth potential and greater unmet medical needs.
Market Response
Following the announcement, J&J shares declined slightly to $188.74, though the stock has gained more than 30% year-to-date. The company simultaneously reported strong third-quarter earnings that exceeded expectations, demonstrating the overall health of its remaining business segments.
