Johnson & Johnson 'spinning out of control'?
Yes, the recalls were damaging, but the big picture at the company isn't nearly as bad as you think.
"It looks like a plane spinning out of control," one former employee told the newspaper. This past year, the Times wrote, could have been called "annus horribilis." The headline was just as dramatic: "Can Johnson & Johnson get its act together?"
Let's push aside the doom and gloom and look at the numbers. Johnson and Johnson shares started last year at around $64.50 and by the end had plunged to the shocking level of . . . $61.85. Hmmm. Are investors missing something here?
How about earnings? A quick scan through the quarters doesn't reveal huge disaster. Third-quarter profit rose 2.2% from the year before, while sales were down 0.7%. The company even raised its full-year guidance in October. The second quarter saw gains in sales and profit. Same with the first quarter.
I don't know about you, but to me that sounds an awful lot like a company that has its act together. So where is the Times getting its drama?
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Ahh, Tylenol. Of course. McNeil Consumer Healthcare, a unit of J&J, recalled nearly 300 million containers of medications last year, including children's Tylenol, Motrin and Benadryl. An investigation found numerous quality issues at the company's factories, causing many parents to swear off of Tylenol completely in favor of generics.
All of this is legitimate and should concern consumers. McNeil's flaws -- and the parental reaction to them -- make for great journalism. J&J is spending more than $100 million to upgrade McNeil's manufacturing facilities.
But here's the rub, and it's something the Times quickly glossed over in its reporting. McNeil is having a tough time, but Johnson & Johnson is doing just fine. Business isn't tanking. Tylenol sales are such a small part of J&J's operations that the entire brand could disappear without making too much of a dent.
J&J's pharmaceutical sales totaled $5.5 billion in the third quarter, up from 4.7% the year before. The company is seeing strong sales of drugs such as Remicade, Prezista and Stelara.
Similarly, J&J's medical device division saw $5.9 billion in sales, an increase of 1.3% helped along by interest in its surgical care and sterilization products.
To be sure, the consumer division (in which the Tylenol business resides) took a sales hit, with a 10.6% decrease from the year-ago quarter to $3.6 billion.
There's no question that J&J needs to fix McNeil and then repair its brand. The company said last week it has sent the government a "comprehensive action plan" to improve its manufacturing network. Executives are working on major fixes.
J&J also has some serious image repair, and articles that simply rehash all the recalls and proclaim the over-the-counter version of the Titanic don't help. Not all is lost at J&J, and last year wasn't quite the annus horribilis that some would have you believe.
i cant believe it-- another johnson & johnson recall! this is getting ridiculous already! after i heard about the tylenol recall it really got me nervous--i wasnt sure where i could find any helpful information b/c i sure wasnt going to trust j&j so i decided to turn to google. the first site i clicked on was drugrecalls.com and it turned out to be the best site discussing and all drug or medical recalls. VERY HELPFUL www.drugrecalls.com
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