Recalls Take A Bite Out of Johnson & Johnson Profits

After an unprecedented 22 product recalls, drug and medical device giant Johnson & Johnson, not unexpectedly, experienced a drop in profits. Johnson & Johnson has seen two years of dropping sales, said The Associated Press (AP).

The seemingly never-ending string of Johnson & Johnson recalls, as of last month, cost the pharmaceutical manufacturer over $900 million in sales in the past year. The string included at least 20 recalls by its McNeil Consumer Healthcare division that involved hundreds of millions of bottles of adult and children’s formulations of Tylenol, Motrin, and other over-the-counter drugs; the Ortho-McNeil-Janssen Pharmaceuticals’ division of its prefilled Invega Sustenna syringe; the Ethicon surgical drainage products; two <"http://www.yourlawyer.com/topics/overview/Johnson-and-Johnson-DePuy-Hip-Implant">DePuy hip replacement implants sold by its DePuy Orthopaedics unit; insulin pump cartridges made by its Animas unit; 1-Day Acuvue TruEye contact lenses; and Simponi injection pens, to name just some.

Profits dropped by 23 percent in the first quarter of this year over increased costs related to recalls and legal actions, said the AP and the manufacturing corrections needed and related to the recalls will take longer than originally believed, delaying full shipments of its products until late next year and that will be ongoing this year.

And, while some analysts believe that the drug and device maker will rebound, Johnson & Johnson doubled its expectations of costs over the recalls and, at least one analyst pointed out that negative publicity, a challenged economy, and a dearth of products have forced loyal customers to other brands, noted the AP.

New products helped, including Stelara, for psoriasis; Invega, an antipsychotic medication; and Simponi, for immune disorders. Litigation; additional recalls for its DePuy unit’s defective hip devices; and increased costs for factory upgrades, research and development, and sales and administration costs have hit Johnson & Johnson hard, said the AP.

Also, the recession has hampered sales and doctor visits and voluntary surgeries have not picked up, the AP noted, citing an interview with Johnson & Johnson’s Chief Financial Officer Dominic Caruso. “People are starting, I guess, to go back and get the procedures they’ve been delaying,” he said, added the AP. Not quickly enough.

The drug and device maker is waiting on approval for four emerging medicines for HIV, hepatitis C, and prostate cancer drugs and one blood thinner, wrote the AP. Although Caruso refused to comment on the deal, the AP mentioned that there is also a potential $20 billion deal to buy Synthes Inc., the Swiss-U.S. bone and tissue repair implant and instruments maker. Synthes confirmed with the AP that it and Johnson & Johnson have been in talks.

Most recently, Johnson & Johnson recalled 57,000 bottles of its controversial epilepsy and migraine medication, Topamax, over complaints of an “uncharacteristic odor” and, just prior, it recalled more Tylenol over complaints about musty smells. Both smells were linked to chemicals applied to wood pallets that transport and store packaging materials. The chemicals were behind other recalls—but were not cited by the drug maker—involving musty-smelling Tylenol in the past. According to the company, it took steps in January to minimize contamination with the chemical involved.

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