J&J 'decree' upgrades cost 200 jobs in Puerto Rico

Improvements being made at a plant in Puerto Rico as Johnson & Johnson ($JNJ) checks off the requirements of a consent decree with the FDA are going to cost nearly 25% of its workers their jobs.

Barbara Montresor, vice president of communications for J&J, tells The Associated Press that automation upgrades at the plant in Las Piedras, Puerto Rico, where Extra Strength and regular Tylenol is made, will result in about 200 job cuts. The Las Piedras plant is one of three in J&Js McNeil Consumer Healthcare division named in the consent decree. It was actually the source of moldy smelling Tylenol products that were recalled. That was one of nearly 30 recalls over a couple of years that led to the destruction of tens of millions of products and the serious bruising of its once vaunted consumer reputation, the Sacramento Bee reminds.

Alex Gorsky, in his first earnings call since taking the CEO spot at J&J, says getting over-the-counter products like Tylenol and Motrin back into the hands of consumers remains his No. 1 "short-term priority." Besides the plant in Las Piedras, it is upgrading a plant in Lancaster, PA, and gutted and is spending $100 million on its plant in Fort Washington, PA. It is also working with the consulting firm The Quantic Group to "validate" procedures. Executives told analysts Tuesday that work will last into next year and that it will be ramping up production of its consumer brands as that work allows.

While progress is reportedly being made, quality issues--not all of its own making--continue to dog the company. Worldwide, sales of the over-the-counter (OTC) products and nutritionals were down 4.7% to $1.03 billion, compared with last year's second quarter. In April it voluntarily recalled 53,000 pain relief patches because a patch was found to have crystals, Dow Jones notes.

Additionally, sales of its cancer drug Doxil were off 90% to just $13 million because its contract manufacturer Ben Venue Labs had to close a plant for upgrades after the FDA found huge problems there. J&J has been working with the FDA on a variety of strategies to keep the drug, or substitutes, available while it looks for new supply options. But the shortage is another area where J&J has fallen short in consumers' eyes.

There was some progress made in its branded drugs sales but not nearly enough to overcome the hits from failures in OTC production and other areas. Its bottom line was off nearly 50%, dragged down by $2.2 billion in one-time costs, which included setting aside additional funds for the settlement it is negotiating with federal authorities over marketing misbehavior.

Analyst Erik Gordon tells the Minneapolis Star Tribune that what J&J needs to do is pretty straightforward

"The challenge for (J&J) is to get new products out to the market, fix their manufacturing operations, and to change their culture so that it doesn't all go for waste because of quality control and illegal practices drains."

- read The Associated Pressstory
- get the transcript of the earnings call
- see the Star Tribune'story
- find more from the Sacramento Bee
see the Dow Jones report

Special Report: Fierce's 2012 Top 10 FDA Red Flags

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