Johnson & Johnson's ($JNJ) manufacturing overhaul has hit some unexpected roadblocks. During yesterday's earnings call, CFO Dominic Caruso admitted J&J is behind schedule on fixing production flaws that led to an FDA consent decree. So, it's also behind schedule on reintroducing consumer drugs made at its troubled plants.
"It is difficult to accurately predict the speed of recovery, and as such we are in fact behind where we thought we might be at this point," Caruso said (as quoted by The New York Times). The fixes are also proving more costly than expected, he said.
A major consumer-drug plant in Fort Washington, PA--shut down in 2010 after FDA inspection failures--probably won't reopen until the end of next year, Caruso said. And even though some consumer brands could come back to stores this year--as J&J had predicted--others probably won't until 2013. "That was the biggest surprise because they had said one thing, and it's not necessarily clear why there is a change," said Miller Tabak portfolio manager Les Funtleyder, as quoted by the NYT.
The consumer unit's production problems have had a lasting effect on sales; for the first quarter, those products fell off by 2.4% compared with last year. And the longer J&J's products stay off the market, the longer those sales are likely to suffer. Plus, consumers have more opportunity to transfer their loyalties to other brands.
- read the NYT story