Tags: US | J&J | CEO | Interview

CEO: J&J Learned Lessons, Improved after Recalls

Wednesday, 27 April 2011 03:08 PM EDT

Johnson & Johnson's CEO said Wednesday he'll tell shareholders at their annual meeting Thursday that he hopes most of the company's product recalls are behind it, but he can't promise that.

William Weldon, who has run the healthcare giant since 2002, said J&J has learned some lessons, invested heavily in improving quality and will work to regain consumer confidence.

"We're going to make sure ... people have confidence in the quality of the products" as recalled nonprescription drugs come back on the market, Weldon told The Associated Press in an interview. "We have very high standards now."

Since September 2009, the company has had about two dozen recalls of prescription and nonprescription medicines, replacement hips, contact lenses and diabetes test strips. Among the recalls were tens of millions of bottles of children's and adult Tylenol and Motrin, plus Benadryl, Zyrtec, Rolaids and Simply Sleep pills.

One of the consumer health products factories involved is still being upgraded a year after it was closed, and two others are under close scrutiny by federal regulators. Even Congress has been investigating J&J's handling of recalls.

Weldon will face shareholders Thursday in New Brunswick, N.J., where the 125-year old company is headquartered.

He'll be hoping to assuage any anger over the recalls and the damage to Johnson & Johnson's finances and once-stellar reputation with news of the biggest deal the company has ever made.

Earlier Wednesday, J&J announced an agreement to buy U.S.-Swiss medical device maker Synthes Inc. for $21.3 billion. The deal, which should close next year, would give J&J a much bigger share of the market for surgical trauma equipment and orthopedic implants.

That's a lucrative, fast-growing area, given the aging worldwide population, the wear and tear that obesity puts on bones and increasing health spending by governments and the rising middle class in emerging markets.

Weldon also will discuss some innovative products that could come to market soon, and plans to lure back consumers with a marketing campaign stressing the quality of its products and some innovations, such as a new dose-measuring cap on liquid children's medicines.

Still, many consumers had defected to cheaper store brands of nonprescription medicines when the recession hit and may be further put off by the continuing recalls. The most recent one was announced on April 14.

It's unclear whether Weldon's explanations and promises of innovative new products to come will satisfy stockholders who have seen J&J shares rise and fall over Weldon's tenure, after a steady rise through the prior three decades. Shares are now just below their level of about $65 when he took over. After falling $1.55 early Wednesday after news of the Synthes deal, J&J shares were down 2 cents at $64.93 in midday trading.

In the interview, Weldon said J&J has gutted its shuttered consumer health products factory in Fort Washington, Pa., and is investing $100 million in upgrades there. The company has made many leadership changes at its McNeil consumer health division and has trained more than 30,000 people there on quality, he said.

Weldon said the product recalls were "not an endemic problem across J&J. It was limited to a few specific sites."

However, the recalls involve not just J&J's consumer healthcare division but its prescription drug and medical device divisions. Those recalls included two different prescription drugs, one for schizophrenia and one for epilepsy, plus replacement hips, Acuvue contact lenses sold in Japan and Europe, and blood sugar test strips. Those products were manufactured at different factories than the three involved in the consumer product recalls, at sites in California, Indiana, Florida, Puerto Rico and possibly other locations.

Weldon himself noted that only "50 percent of our recalls last year came from McNeil."

And while J&J states none of the recalls have involved serious risk to patients, many patients who received its DePuy hip replacements had such pain and difficulty walking that they need corrective surgery and are suing J&J.

Weldon plans to make sure all the problems are fixed and said he has no plans to retire early. He's now 62 and has spent his entire career at J&J, starting in sales and working his way up.

And despite all of the problems and bad press over the recalls, many analysts still have "Buy" recommendations on Johnson & Johnson's stock.

That's because the company has such a diverse product line as the world's biggest maker of health products, generates strong cash flow, has leading market positions for the majority of its products and has some innovative drugs and other products likely to come to market soon.

Over the past five years, J&J's share price movement has mostly tracked that of the New York Stock Exchange Health Care index. From 2001 through 2010, J&J's 4 percent total shareholder return — share price appreciation plus dividends — is slightly better than the S&P 500 and the S&P healthcare equipment indices. But over last year, J&J's total shareholder return was a 0.6 percent decline, far worse than the S&P 500 and S&P pharmaceutical indices, but better than S&P's healthcare equipment index.

© Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Johnson Johnson's CEO said Wednesday he'll tell shareholders at their annual meeting Thursday that he hopes most of the company's product recalls are behind it, but he can't promise that. William Weldon, who has run the healthcare giant since 2002, said J J has learned...
Wednesday, 27 April 2011 03:08 PM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved