J&J’s New Insider CEO Brings Expertise From Crucial Pharma Post
(Bloomberg) -- Johnson & Johnson went to another insider to lead the health-care giant through the pandemic, naming Joaquin Duato to replace longtime veteran Alex Gorsky, and edging up the stock to a record high.
Now vice chairman of the executive committee, Duato will take the reins effective Jan. 3 and take a seat on the company’s board, J&J said in a statement late Thursday. Gorsky, who’s been at the helm for nine years, will become executive chairman.
Duato, 59, is a three-decade veteran of J&J, as is Gorsky. He has served in his current role since 2018, guiding the drug and consumer product divisions, and overseeing supply-chain and technology operations.
A dual citizen of Spain and the U.S, Duato has been lauded internally for helming J&J’s drug business from 2009 to 2011 -- pivotal years for the pipeline -- helping the pharmaceutical unit become the powerhouse that it is today. J&J’s drug business generated $45.6 billion in sales in 2020, accounting for more than half the company’s revenue.
Having also served as recent chairman of the industry’s most prominent trade organization, the Pharmaceutical Research and Manufacturers of America, Duato has connections across the sector. He currently sits on the boards of UNICEF USA, Tsinghua University School of Pharmaceutical Sciences and Hess Corp.
Shares of New Brunswick, New Jersey-based company set a record Friday morning, buoyed by its portfolio of cancer and immunology drugs as patients return to hospitals after lockdown. The stock rose to an intraday record of $179.92 at 10:06 a.m. in New York.
With a 134-year history and 136,000 employees, J&J is known for tapping internal candidates. Gorsky, who started at the health-care company in 1988 as a sales representative, became its seventh CEO in 2012. J&J declined to make Gorsky and Duato available for comment.
Meanwhile, Wall Street and Washington have long awaited Gorsky’s next move. The former army captain and endurance athlete who takes spin classes alongside his employees has long been speculated to one day seek political office. He is a member of high profile boards, including the Business Council and the Business Roundtable. But the 61-year-old cited family health reasons as partially motivating his departure.
“The decision to step aside was one of the most difficult of my career,” Gorsky said in the statement. “This is the right time for the company as our organization is delivering strong performance across all three segments and is positioned for continued success, in addition to this being the right time for me personally as I focus more on my family due to family health reasons.”
Anne Mulcahy, J&J’s lead independent director, said the board “engaged in thoughtful long-term succession planning.” She described Duato as an effective and committed leader who has been critical to the company’s growth.
“We are confident that Joaquin is uniquely qualified and the right person to lead Johnson & Johnson into the future,” Mulcahy said in a statement.
Morningstar Inc. analyst Damien Conover said he was surprised by the timing of the announcement and he doesn’t expect Duato to stay in the role as long as Gorsky and other J&J chiefs remembered for their “extralong tenure.”
Conover pointed to strong leadership in the upper ranks of J&J, suggesting the company’s head of pharma Jennifer Taubert, head of medical devices Ashley McEvoy, and Chief Financial Officer Joseph Wolk could ultimately succeed Duato.
What’s Left Behind
Gorsky is leaving his successor with a pile of lawsuits and controversy on the desk: The company recently reached a landmark settlement over its alleged role in the epidemic of opioid overdoses, but additional suits remain related to its talcum-based baby powder, as well as other drugs and devices. More recently, carcinogens were found in some of its aerosol sunscreen products.
Once highly anticipated because it requires just a single dose, J&J’s Covid vaccine has been sparsely used relative to competitors from the Pfizer Inc.-BioNTech SE partnership and Moderna Inc. after challenges at a contract manufacturer. The shot is still seen as important to fighting the pandemic, and J&J is working to ramp up supply through the end of the year.
J&J ranks No. 72 in the Axios Harris Poll 100’s 2021 Corporate Reputation Rankings. Nonetheless, investor goodwill remains strong in the company. Along with its drugs unit, its medical devices and consumer products divisions have rebounded sharply from the pandemic. Even with a massive dip during last year’s market crash, the shares have gained 22% since the beginning of 2020.
J&J shares, including reinvested dividends, more than tripled under Gorsky’s tenure. They averaged a 15% annual return, in line with the S&P 500 Index. That was a better performance than rival drugmakers Pfizer Inc. and Merck & Co., though health-care investors who opted for high-flying biotech stocks did better -- the Nasdaq Biotechnology Index quadrupled in that span.
Gorsky joins a parade of blue-chip executives who are moving on after long careers punctuated by the pandemic. Procter & Gamble Co.’s David Taylor is stepping down in November, and Walt Disney Co. Chairman Bob Iger is leaving at the end of the year. Kenneth Frazier, Gorsky’s longtime counterpart at Merck, gave up his CEO role just weeks ago. In March, the two executives clinched a deal in which Merck would manufacture J&J’s Covid-19 vaccine.
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