For more than a year, we have spent considerable time tracking the ongoing and rather impressive number of recalls by Johnson & Johnson which, you may recall, blundered into a series of manufacturing gaffes and questionable coping strategies that generated an FDA probe; congressional hearings; lost sales; a closed plant; managerial changes; eroded consumer confidence; lawsuits; a consent decree and calls for ceo Bill Weldon to resign.
Now, though, J&J appears to be ever-so-gingerly regaining its battered footing and will soon resume shipments of Tylenol Cold & Flu Severe caplets, according to The Wall Street Journal, which came across an internal message to employees that notes production was shifted to a plant in Italy.
Assuming J&J can follow through on its target, the resumption would occur "within weeks," which would be just about when flu season begins. Such a move is critical to J&J's McNeil Consumer Healthcare unit, which has seen its long-standing and treasured positioning on store shelves evaporate over the past year.
Regaining shelf space, however, may not be a slam dunk. The protracted production problems and subsequent product shortages have allowed rivals, notably those manufacturers that make store brands, to supplant J&J over-the-counter meds. To reclaim its positioning, J&J may find itself offering deals and concessions that were previously unnecessary.
The other piece to this corporate puzzle is the extent to which consumers will return to the venerable brand name, especially after rounds of publicity over musty smells and metallic flecks that were blamed for the flood of recalls. Moreover, the ongoing shortages may have prompted some consumers to decide to stick with other brands and such behavior may continue, especially if price wars break out.
Last year, the problems cost J&J about $900 million in lost sales and Wells Fargo Securities analyst Larry Biegelsen has estimated in his investor notes that J&J may lose more than $1 billion in sales this year from the manufacturing difficulties. The problems, by the way, are not expected to be resolved for months, suggesting J&J will continue to struggle to regain lost shelf space for quite some time.
Just the same, the Journal notes that J&J cfo Dominic Caruso tried to rally Wall Street recently by declaring that "products are coming back on the market. The business is recovering." In fact, the paper points out that a grape-flavored version of children's Tylenol, recently showed up in stores and Pepcid Complete tablets should begin shipping later this year. But whether production resume fast enough is unclear, given that the consent decree requires independent certification.
4 Comments
So is J&J skirting the requirements of the consent decree by manufacturing this product in Italy instead of Fort Washington?
Actually not, Scott; it will be a (one would expect) fully qualified process on a new line. If you prefer, argue that they tore down Ft Washington to 'skirt the requirements' since a consent decree allows you to remain in production while you remediate.
No plant - no production - 'no problem' with compliance ... ok, not exactly but you get the idea.
The FDA was openly discussing pediatric OTC drug manufacturing issues in a general way as far back as Summer of 2007. Assuming they were talking about JNJ, it's only taken a minimum of over 4 years to resolve it. Who knows how long it was going on before that.
Anon - 4 years would mean they just took action now; the actions started in Spring 2010, so less than 3 years. Less than sterling but also 30% quicker than your math implies.