J&J: Plant Fixes Taking Longer Than Expected

Philadelphia Inquirer

April 18, 2012

Consumers wanting Tylenol and Motrin medicines will need to search farther and wait longer, while investors hoping that Johnson & Johnson will show greater profits from those products will need to wait, too.

J&J said Tuesday that first-quarter profit rose 12.5% but that there was a slight decrease in total sales. It also said it has experienced increased costs and delays in fixing the problems at the McNeil Consumer Healthcare facility in Fort Washington, PA.

CFO Dominic Caruso had said previously that the over-the-counter cold and pain medicines wouldn’t be produced in Fort Washington until 2013, but he said Tuesday that repairs might run through the end of 2013.

“We’re obviously disappointed that it is taking a little longer to get back into the market,” Caruso said on a conference call with stock market analysts, adding that company surveys showed the brands were still trusted by consumers. “That gives us great confidence that the significant legacy that has been built over the years still remains with consumers and they will accept the products once we get them back on the shelves in a continuous way.”

The Fort Washington plant ceased production in April 2010. McNeil plants in Lancaster and Puerto Rico are operating, but under greater government scrutiny as part of a court-ordered consent decree that followed negotiations with the U.S. Food and Drug Administration.

Consumers complained that products had a musty smell, and they found tiny metal particles in some liquids. The company later attributed the musty smell to chemicals used to treat wooden pallets. McNeil has shifted production to other plants, but well-known products are frequently missing from store shelves.

In the legal arena, J&J, which had $16.1 billion in revenues for the latest quarter, was penalized $1.2 billion last week by an Arkansas judge after a jury found the company illegally marketed the antipsychotic drug Risperdal through that state’s Medicaid program. That was the third loss in state cases.

The U.S. attorney in Boston asked a judge to compel incoming CEO Alex Gorsky to give a deposition in a federal case because Gorsky was in charge of Janssen Pharmaceuticals, the subsidiary that sold Risperdal.

J&J spokesman Louise Mehrotra said Tuesday the company was seeking a new trial in Arkansas and, if denied, it would appeal last week’s decision. She was not asked by analysts about Gorsky, and she did not comment on that matter.