Johnson & Johnson Looks To Sell Diagnostics Unit

Johnson & Johnson (NYSE:JNJ) is readying financial information and legal forms in order to sell one of its diagnostics businesses. Dow Jones reported that the diversified healthcare company has JPMorgan Chase & Co (NYSE:JPM) advising it on the sale, and the business could fetch as much as $5 billion.

Johnson & Johnson Looks To Sell Diagnostics Unit

Ortho Clinical Diagnostics, the business in question, works in two primary markets, screening for blood transfusions and clinical laboratories. The company’s guiding focus is the early detection of disease in patients. The company was formed in 1997 after a merger between two members of the Johnson & Johnson (NYSE:JNJ) family, Ortho Diagnostic Systems and Johnson & Johnson Diagnostics. The second firm was once a part of Eastman Kodak Company (OTCMKTS:EKDKQ).

Johnson & Johnson diagnostics

Ortho Clinical Diagnostics earned about $400-$500 million Ebitda last year, according to Reuters. With good growth prospects ahead, the company could sell for as much as $5 billion, people close to the matter told Reuters. The business is part of the wider Johnson & Johnson (NYSE:JNJ) diagnostics and medical devices business.

Johnson & Johnson said back in January that it would look at its options concerning the business. The company has clearly made its decision, and wants to sell Ortho Clinical Diagnostics. Reuters says that private equity firms and healthcare companies are the most likely to be interested in the sale.

Johnson & Johnson stock

Since the start of the year, stock in Johnson & Johnson (NYSE:JNJ) has risen by more than 24 percent, beating the wider market and impressing investors. The company has managed to continue to innovate and take risks in its smaller businesses, as well. Its position as one of the healthcare companies incredibly structurally important to the industry means there is a lot of opportunity for the company and lessened risk.

That doesn’t mean no risk, however. Investors have driven the Johnson & Johnson (NYSE:JNJ) stock up to more than 19 times its 2012 earnings. That means that the market expects a great deal of growth from the company. If it fails to deliver, shareholders could lose big time.