Johnson & Johnson's Decisive "Amputation Surgery" and "Facelift" Restructuring: $14.5 Billion Cost-Cutting Self-Rescue

China Business Times Reporter Guo Yilin and Na Beijing Report

Johnson & Johnson once reached the top of the global orthopedics industry through aggressive acquisitions, but now it is eager to sell its foundational business.

Recently, sources revealed that healthcare giant Johnson & Johnson (JNJ.N) is reevaluating its divestiture plan for the orthopedics division DePuy Synthes, considering a direct sale for over $20 billion (approximately 14.5 billion RMB), rather than the previously planned spin-off.

14.5 billion RMB is not only a figure currently leading the global medical M&A market in 2026 but also a strategic statement filled with “decisive intent.” For Johnson & Johnson, the decision to give up a nearly $10 billion revenue “cash cow” reflects a global transformation sweeping the healthcare industry.

From “spin-off” to “sale,” a single word makes a world of difference. Why is Johnson & Johnson so urgent? Who will take over this billion-dollar “giant ship”? What industry signals are hidden behind this move? In an interview with Huajun Consulting’s Pharmaceutical and Medical Division, analyst Shi Tianyi explained, “Johnson & Johnson’s shift from a spin-off to a direct sale of DePuy Synthes mainly aims to optimize transaction certainty and improve capital efficiency. This move is intended to avoid valuation fluctuations and discounts in the IPO market, quickly recoup funds through block trades, and support its high-growth sectors like cardiovascular. Potential buyers are expected to be large private equity or M&A funds. If the deal goes through, it will mark a shift for traditional healthcare giants from pursuing scale expansion to focusing on core business value creation.”

Cutting Off to Survive

The prelude to the sale was laid months ago. In October 2025, Johnson & Johnson first announced plans to spin off its orthopedics business into an independent publicly listed company within 18 to 24 months. At that time, the official reason was “strategic optimization”: to focus on core businesses and achieve higher growth.

However, less than 120 days later, the script was completely rewritten. Sources said Johnson & Johnson is now actively preparing financial documents for DePuy Synthes and plans to meet potential buyers in the coming weeks. The lead is no longer an investment bank-led IPO roadshow but a bidding invitation targeting large private equity firms (such as Blackstone, KKR) and medical device competitors (such as Medtronic, Stryker).

What caused Johnson & Johnson to change its mind from an independent listing to an urgent sale? “The fundamental reason is that ‘patience’ is running out,” said Wang Qiang, a long-time observer of the healthcare industry, in an interview. “For a giant like Johnson & Johnson, the capital market’s patience for management has a limit. While a spin-off can achieve asset separation, it’s a long process, and the independent company still exists, meaning Johnson & Johnson as the parent may need to support it during the transition. A direct sale, on the other hand, means a complete cut, cash in hand, and quick reinvestment into new markets.”

Wang Qiang emphasized that a deeper reason lies in the awkward positioning of the orthopedics business—“a burden.” Public data shows that DePuy Synthes is a leader in global orthopedics, mainly producing hip and knee implants, trauma, and spinal products, with sales reaching $9.258 billion in 2025. For any small to medium-sized device company, this is an almost unreachable gold mountain. But within Johnson & Johnson’s “medical empire,” it has become the only underperforming segment.

Financial reports show that in 2025, Johnson & Johnson’s overall revenue grew 6% year-over-year, with innovative pharmaceuticals up 6%, and medical technology up 6.1%. Among them, cardiovascular business surged 15.8%, driven by strong performances from Abiomed and Shockwave Medical; surgical business grew steadily by 3%. Only orthopedics lagged with a growth rate of just 1.1%.

Shi Tianyi believes, “A 1.1% growth rate is unacceptable within Johnson & Johnson’s system. Especially when neighboring sectors like cardiovascular are growing at double digits, this gap intensifies management’s anxiety. The orthopedics segment not only lacks growth elasticity but also drags down the valuation of the entire medical technology sector.”

When a once-profitable core becomes a burden dragging down overall valuation, divestment becomes the only and correct choice.

Slow Growth

The 2025 financial results reveal the helplessness and decisiveness behind this sale.

In 2025, Johnson & Johnson’s total revenue was $94.193 billion. The driving force was the innovative pharmaceuticals sector. The oncology division, dubbed a “money-printing machine,” generated $28.308 billion, up 20.1%. The CAR-T therapy Carvykti, developed in partnership with Legend Biotech, saw sales soar 95.9% to $1.887 billion, becoming the fastest-growing star product; the blood cancer drug Darzalex sold $14.351 billion, up 21%.

In the medical technology sector, cardiovascular business is the “new favorite.” Johnson & Johnson has acquired nearly $30 billion worth of companies, including Abiomed (heart pumps) and Shockwave Medical (vascular lithotripsy). In 2025, both divisions surpassed $1 billion in sales, fueling the entire cardiovascular segment to grow at 15.8%.

In contrast, the situation of the orthopedics business is increasingly bleak. With $9.258 billion in revenue and only 1.1% growth, it starkly contrasts with the rapid growth of the cardiovascular sector. What’s more alarming for management is the collapse of the orthopedics market in China.

“A former growth engine for Johnson & Johnson’s orthopedics in China has now become a major bleeding area,” said a senior industry insider. As domestic procurement of orthopedic consumables deepens, the pricing system for imported brands has been thoroughly broken. Data shows that due to volume-based procurement and intense competition, Johnson & Johnson’s spinal business in China has plummeted from a peak market share of 16% to less than 5%.

To cope with cost pressures, Johnson & Johnson has accelerated local production at its Suzhou factory and plans to cut 20% of its staff. This “misfit” has made Johnson & Johnson realize that relying on high-end imported products in a saturated market emphasizing cost-effectiveness and channel penetration is no longer sustainable.

“On one hand, high-growth sectors like oncology and cardiovascular are like stars in the sky; on the other, orthopedics in emerging markets like China is sinking into a quagmire. It’s like a gardener facing tall trees and slow-growing old woods in the garden. To give the big trees more sunlight and nutrients, he must ruthlessly cut down the old trees that are no longer sprouting new shoots,” the insider further explained.

Who Will Take Over?

If the deal goes through, it will be one of the largest medical business sales in recent years. The asking price of up to $20 billion (about 14.5 billion RMB) means only a few players will participate.

Current market rumors mainly point to two types of buyers: large private equity firms and strategic competitors such as Medtronic, Stryker, and J&J’s peers.

Sources say several large PE firms are considering joint acquisitions. For PE, DePuy Synthes, despite slowing growth, offers a mature brand, stable cash flow, and a global sales network. After acquiring, they can optimize costs, incentivize management, and integrate through M&A, operating it as an independent platform, and seek IPO or resale after valuation recovery.

In terms of competitors, the global orthopedics market is currently dominated by four major players: Johnson & Johnson, Stryker, Zimmer Biomet, and Medtronic, holding most of the market share. If Stryker or Medtronic acquires DePuy Synthes, it could drastically reshape the industry landscape. “This could face significant antitrust scrutiny,” warned the insider. Especially if Stryker acquires Johnson & Johnson’s orthopedics, it could monopolize segments like joints and trauma, making it difficult to pass regulatory approval in the US and Europe. Conversely, private equity is more likely to be the buyer, making the deal easier to close.

Regardless of who ultimately takes over, this potential transaction will trigger seismic shifts in the orthopedics industry. For the acquirer, revitalizing this billion-dollar, yet sluggish asset will be a huge challenge. For Johnson & Johnson, the sale not only means receiving $20 billion in cash but also a thorough financial cleanup.