The product recall story continues at Johnson & Johnson (JNJ) with the company announcing the recall of certain lots of Tylenol 8 Hour, Tylenol Arthritis Pain, Tylenol upper respiratory products, Benadryl, Sudafed Pe and Sinutab in the US, the Caribbean and Brazil.

The products were recalled in consultation with the US Food and Drug Administration (FDA). Johnson & Johnson said that the recalled products were manufactured at the company’s plant in Fort Washington before production was suspended at the plant.

Johnson & Johnson decided to conduct the recall following an extensive review of production records which showed instances of insufficient equipment cleaning procedures or inadequate documentation of cleaning.

The company also recalled certain lots of Rolaids Multi-Symptom Berry Tablets in the US. The products were recalled for the purpose of label updation.

Update on Comprehensive Action Plan

Johnson & Johnson has implemented a Comprehensive Action Plan to help improve the quality systems process in the McNeil Consumer Healthcare division. The company had submitted the plan to the FDA in July 2010.

As part of the plan, the company investigated past records from 2007 for products sold in the US and manufactured within the McNeil Consumer Healthcare network. Johnson & Johnson reported that it has finished the assessment process, and has identified several areas for improvement.

Product Recalls Hit OTC Segment Performance

We note that back-to-back product recalls over the course of 2010 adversely affected sales of Johnson & Johnson’s consumer healthcare segment. Third quarter Consumer segment sales declined 10.6% to $3.6 billion, with over-the-counter (OTC) pharmaceutical and nutritional sales declining 19.4%. The product recall and the suspension of manufacturing at the Fort Washington, Pennsylvania plant resulted in a $240 million negative impact on revenues.

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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