Johnson & Johnson (JNJ) recently announced the voluntary recall of one lot of Tylenol 8 Hour Extended Release Caplets 150 count bottles. The product was distributed in the US.
The product was manufactured at the company’s McNeil Consumer Healthcare manufacturing facility in Fort Washington prior to the suspension of production at the facility. The company also said that it is adding ten more lots of products to a recall from January 14, 2011.
Earlier this month, Johnson & Johnson recalled several lots of Blake Silicone Drains, Blake Silicone Drain Kits, Blake Cardio Connectors, J-VAC Reservoirs and J-VAC Drain Adapters. In February, the company had announced the voluntary recall of certain lots of its schizophrenia product, Invega Sustenna (234 mg).
Other products that were recalled over the past few quarters include Tylenol, Benadryl, Motrin, Rolaids, Invega Sustenna, Simponi and Sudafed Pe among others.
Frequent product recalls adversely affected the sales of Johnson & Johnson’s Consumer Healthcare segment in 2010. In fact, Consumer segment sales declined 7.7% in 2010 to $14.6 billion with OTC/nutritional sales declining 19.2%. The product recalls and the suspension of manufacturing at McNeil’s Fort Washington plant resulted in a $900 million negative impact on 2010 revenues.
Johnson & Johnson had submitted a Comprehensive Action Plan (CAP) in July 2010 to the US Food and Drug Administration (FDA) for the improvement of quality systems at its US manufacturing plants.
In March 2011, the FDA imposed a consent decree on a subsidiary of Johnson & Johnson. The agency imposed restrictions on the manufacturing facilities of the Consumer Healthcare Division of McNeil-PPC, Inc. Three manufacturing plants will be affected by the decree. The affected plants include the Las Piedras facility in Puerto Rico, the Fort Washington and Lancaster facilities in Pennsylvania.
The consent decree did not come as a major surprise considering the deluge of product recalls at Johnson & Johnson in the past several quarters. Another company that recently announced a product recall is Pfizer (PFE).
Neutral on Johnson & Johnson
We currently have a Neutral recommendation on Johnson & Johnson. We believe Johnson & Johnson’s diversified business model, lack of cyclicality and strong financial position are helping it pave its way through tough situations.
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