Dive Brief:

• Alex Gorsky, CEO of Johnson & Johnson for almost a decade, will step down from the position early next year, the company announced Thursday.
• Citing family health reasons, Gorsky will pass the reins to Joaquin Duato, currently vice chairman of the company's executive committee, on Jan. 3, 2022. Gorsky isn't leaving J&J, though, as the plan is to transition him to the role of executive chairman. Once transitions are complete, Duato will also become a member of J&J's board of directors.
• Gorsky is set to leave J&J as the company is starting to see its device unit return to growth, with sales reaching pre-pandemic levels in the second quarter as the COVID-19 impact waned. However, as procedure volumes normalize, delta variant cases are surging worldwide and hospitals are having to, once again, shut down procedures.

Dive Insight:

During the CEO transition, J&J will have to navigate its medical device business through the pandemic as the delta variant is sparking surges in multiple countries.

After the company's medical device business was battered by the pandemic throughout 2020 due to the shutdown of elective care, the segment has bounced back in 2021. Medical device sales totaled nearly $7 billion in the second quarter, up about 63% on a reported basis from the same period of 2020.

"We are seeing light at the end of the COVID-19 tunnel," Ashley McEvoy, executive vice president and worldwide chairman of J&J's medical devices business, said during a July 21 earnings call. "But this remains, as we all know, a very fluid situation."

Many medtechs made it out of the second quarter without a substantial hit from the delta variant; however, an impact in the third quarter is still hanging over the industry. J&J's medical device sales totaled about $23 billion in the pandemic-stressed 2020 and $26 billion in 2019.

Like many of its peers, the company has been engrossed in responding to the coronavirus pandemic. Along with Moderna and partners Pfizer and BioNTech, J&J developed an effective vaccine against the virus in an extraordinarily short period of time. The Food and Drug Administration authorized J&J's shot for emergency use in late February, a few months after doing the same for Pfizer's and Moderna's vaccines.

J&J, though, has run into multiple setbacks with its shot. In early April, a Baltimore plant tasked with manufacturing the vaccine made mistakes that ultimately led the FDA to conclude about 60 million doses could not be used due to contamination risks.

Later in April, reports of a rare but potentially serious blood-clotting syndrome prompted U.S. health authorities to call for a pause using J&J's shot. While vaccinations have since resumed, another safety warning was tacked onto the shot following reports of very rare cases of a neurological condition called Guillain-Barré.

To date, a little over 14 million doses of J&J's vaccine have been administered, relegating it to a small role in the country's immunization campaign. 

As J&J works through these challenges, having Duato, who's been with the company for 30 years, become the new CEO could seem fitting. In his role as vice chairman of the executive committee, Duato oversees teams focused on technology, health and wellness, and the global supply chain. And over the last year or so, he's been the point-person for J&J's response to the pandemic.

"Mr. Duato is the right person to take on the CEO role," Louise Chen, an analyst at Cantor Fitzgerald, wrote in a note to clients.

Duato "helped guide [J&J's] enterprise strategic planning process, encompassing all three of the company’s business segments, and was responsible for spearheading a significant technology transformation across the enterprise over the past year," Chen added. "Notably, he also oversaw the company's rapid response to the COVID-19 pandemic."

"We are confident that Joaquin is uniquely qualified and the right person to lead Johnson & Johnson into the future," said Anne Mulcahy, the company's lead independent director, in a statement.

Coronavirus won't be the only obstacle for Duato to navigate, though.

J&J is still in the throes of litigation regarding its talcum powder. Reporting from Reuters and The New York Times depicts how the company for years kept information from regulators and the public about carcinogenic contaminants in the talc. J&J has fought back against these reports.

In its most recent earnings report, J&J said it's contending with 34,600 lawsuits with respect to body powders containing talc.

While litigation will remain an overhang, other parts of J&J's business are performing more positively.

Under Gorsky, the company heavily invested in cancer drug development, an area that now accounts for the lion's share of J&J's pharmaceutical sales. In 2013, the FDA approved Imbruvica for the treatment of mantle cell lymphoma. Two years later, the agency cleared another J&J drug, called Darzalex, for multiple myeloma. Both drugs have since received many more approvals, and by the end of 2020, each had sales surpassing $4 billion.

Gorsky also watched over J&J's $30 billion acquisition of Actelion in 2017, a deal which gave the company a foothold in rare disease research. Actelion's work centered around an uncommon blood pressure disorder known as pulmonary arterial hypertension. Two Actelion drugs, Uptravi and Opsumit, surpassed $1 billion in sales last year.

"The past decade alone has been transformational for Johnson & Johnson as we dramatically increased investment in R&D, drove some of the most important global advances in healthcare, made significant strategic shifts across the business and delivered record performance," Gorsky said in a statement.

J&J shares traded at $179 Friday, almost triple the value from when Gorsky stepped into the CEO spot in April 2012. Since the start of this year, the company's share price has grown about 15%.