Yet another company has been bitten by the recall bug. Amgen (AMGN) and Johnson & Johnson (JNJ) announced that they have recalled certain lots of Epogen and Procrit due to the possible presence of thin glass flakes in the vials. The products are approved for the treatment of anemia related to HIV therapy, chronic renal failure, and chemotherapy.
Although Epogen is a major contributor to Amgen’s top-line, with 2009 sales coming in at $2.6 billion, we do not expect the product recall to have a major impact on revenues. Amgen said that it has yet to receive any complaints or reports which could be connected to the presence of the glass flakes. The company is conducting the product recall in cooperation with the US Food and Drug Administration (FDA).
Amgen is the latest company to recall products from the market. Last week, Abbott Labs (ABT) recalled its powder infant formula Similac in the US, Puerto Rico, Guam and some countries in the Caribbean.
Meanwhile, Johnson & Johnson is no stranger to product recalls with the company having pulled several products in 2010 alone. Johnson & Johnson’s consumer healthcare segment took a hit in the first half of 2010 with the company recalling medicines including Benadryl, Tylenol (including children’s Tylenol) and Motrin. Consumer segment sales declined 5.4% in the second quarter to $3.6 billion with over-the-counter (OTC) pharmaceutical and nutritional sales declining 13.4%.
Then, in August 2010, Johnson & Johnson announced the voluntary recall of two hip replacement systems — the ASR XL Acetabular System and DePuy ASR Hip Resurfacing System. The company decided to issue the product recall as it was observed that several patients using the products required a second hip replacement procedure or a revision surgery. The company also recalled contact lenses from several countries in Asia and Europe.
We currently have Neutral recommendations on both Amgen and Johnson & Johnson. Although we expect the OTC product recall and EU pricing pressure to impact Johnson & Johnson’s performance in the next few quarters, we believe the company’s diversified business model, lack of cyclicality, strong financial position will help the company pave its way through tough situations.
As far as Amgen is concerned, we expect investor focus to remain on the successful commercialization of recently launched product, Prolia, which represents the future for Amgen. With several key products expected to lose patent protection in the next few years, Prolia’s successful commercialization and approval for additional indications are important events for the company.
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