J&J quantifies manufacturing woes in financials

Johnson & Johnson took note of its multiple McNeil OTC product recalls and manufacturing consent decree in financial results and guidance yesterday, even as most analysts and investors appeared unconcerned. CFO Dominic Caruso acknowledged the McNeil product recalls hurt first-quarter earnings.

The healthcare giant also did what pharma manufacturers often do after the dust has settled on their consent decree and the real work has begun: announced that remediation will take longer than expected. J&J now projects that it will resume full shipments of McNeil products in late 2012, rather than throughout this year as it had said earlier.

The company doubled its estimate of the recalls' cost, to 12 cents per share. And consumer product sales decreased 14 percent in the U.S. (but just 2.2 percent worldwide), mainly due to the recalls, says BusinessWeek.

However, the vast majority of headlines cited sales growth of 3.5 percent, $3.5 billion in profits and the J&J's increase of its full-year earnings forecast. Many analysts appeared to see the strong financials and upbeat forecast as a sign that the company is back on track.

And some, despite recalls as recent as last week, appear now to be viewing the quality meltdown as an event of the past; a temporary inconvenience: "The story's been delayed for a year and half because of all the consumer recalls, but [J&J] does have a good drug pipeline," says analyst Jeff Jonas of Gabelli & Co, as reported by Bloomberg. "You could potentially see accelerating revenue as they launch their new drugs and recover on the consumer line."

At least one analyst expressed both concern and immediacy about the Tylenol brand's rough ride over the past year and a half, the result of shoddy manufacturing practices at three plants covered by the consent decree. Linda Bannister of Edward Jones & Co. said that investors "are concerned about this damaging the reputation of J&J. The company needs to make it right, to get these things fixed."

- here's the BW article
- see the Bloomberg story
- here's more