More trouble for the healthcare giant. During the teleconference this morning to discuss earnings, a Johnson & Johnson exec disclosed that the US Attorney's Office in Philadelphia sent a grand jury subpoena about the vast and ongoing recall of millions of bottles of over-the-counter pediatric medicines by J&J's McNeil Consumer Healthcare unit. For the record, a spokeswoman for the US Attorney declined to confirm or deny a subpoena was sent, which is standard practice.
The disclosure is just the latest in a troubling swirl of events surrounding the recalls, which have caused a big hit to J&J's venerable corporate image; an indefinite shutdown of a plant where McNeil execs are themselves located; hundreds of millions of dollars in lost sales; a Congressional investigation (see this), and the loss of 300 out of 400 jobs at the plant (back story).
Meanwhile, the ongoing mess caused J&J execs to lower their profit forecast for the year, which is causing a loss of investor confidence. The recalls hurt quarterly sales by $200 million and the plant closing will likely drain 2010 sales by $600 million, cfo Dominic Caruso told investors on a conference call this morning. In response, some Wall Street analysts, such as Standard & Poor's Marc Eiger downgraded J&J stock. One pressing issue - who, if anyone, will be held accountable? (read this).