Sometime in the future, Johnson & Johnson ($JNJ) expects it will not have to talk about the ugly fallout from its once-troubled Fort Washington, PA, OTC plant at every earnings report. With the steps it has taken, the company expects that sometime to be relatively soon.
The drugmaker this week agreed to settle a shareholder lawsuit that stemmed from the recalls tied to the plant. Execs also said the $100 million retooling of the facility is about done and it should be ready for a crucial FDA reinspection by year's end. When the FDA and a federal judge agree that improvements and changed operations meet the dictates of a 2011 consent decree, it will be reopened. J&J's popular consumer products like Motrin and Tylenol will then flow from the facility and hopefully recapture the market shares they once enjoyed.
"The Fort Washington facility is just about ready for regulatory inspection in the back half of this year. As soon as the inspection is completed, we'll be ready to put that facility back on line," CFO Dominic Caruso said in an update this week, according to The Philadelphia Inquirer. "But even without the facility, we're already seeing 20% growth in the U.S. [over-the-counter] business this quarter." He said in an earnings call that 75% of its OTC brands will be returned to retailers later this year.
The company closed the plant in 2010 after recalling tens of millions of consumer products, including its popular Tylenol and Motrin products. J&J's McNeil Consumer Healthcare signed a consent decree a year later, and the company has gutted the plant and spent more than $100 million to retool it. Shareholders blamed J&J managers for letting problems reach that level and filed lawsuits.
The lawsuit claimed J&J bungled the handling of recalls so badly that Congress was prompted to investigate, consumers fled its brands and the value of shares fell. The company successfully defended against an earlier derivative shareholder lawsuit that had made similar allegations but decided to settle this one to get the episode behind it. J&J did not admit any wrongdoing but agreed to pay $22.9 million. The company also told analysts this week it has spent the last three years making sure all of the 120 plants in its network meet its stringent quality standards.