By Chelsey Dulaney
A Philadelphia-area Johnson & Johnson factory at the center
of dozens of product recalls in recent years is getting close to
reopening after a long overhaul, the company said Tuesday, a big
step in J&J's efforts to revive its non-prescription-medicines
business.
The Fort Washington, Pa., plant was closed in 2010 when J&J
recalled more than 135 million medicine bottles after customers
found, for instance, tiny metal particles floating in children's
Tylenol. Since then, J&J has been spending tens of millions of
dollars upgrading the plant, which J&J said recently underwent
the Food and Drug Administration inspections needed to get an OK to
reopen.
The recalls tarnished J&J's image and prompted the company
to upgrade its supply chain, rework its portfolio of
over-the-counter medicines and agree in 2011 to tough FDA
oversight. The company lost billions of dollars in sales after
pulling products from retail shelves.
"We think we've made a lot of progress" turning around the
company's consumer-health business, J&J CEO Alex Gorsky said. A
J&J spokesman said there was no timetable for the FDA to decide
on allowing the plant to reopen.
Executives gave an update as J&J reported second-quarter
profit of $4.5 billion, or $1.61 a share, up from $4.3 billion, or
$1.51 a share, a year earlier. Excluding certain items, per-share
earnings were $1.71 in the latest quarter.
Revenue fell 8.8% to $17.79 billion, in part due to the impact
of a stronger dollar, which J&J said had a negative impact of
7.9% in the quarter. Another big factor was competition for
J&J's Olysio hepatitis C treatment, which had surprisingly
large sales last year until a rival pill from Gilead Sciences Inc.
hit the market.
Quality problems began surfacing at J&J's McNeil
consumer-health business in 2009. Now 80% of the recalled brands
have returned to the market, according to Sandra Peterson, the
J&J executive overseeing the consumer-health business's
turnaround. Ms. Peterson indicated the company was gaining market
share after rejiggering the product portfolio and taking steps to
build up key brands.
FDA certification of the Fort Washington plant would allow
J&J to resume manufacturing there. Ms. Peterson said the FDA
has already signed off on two other manufacturing plants--in Las
Piedras, Puerto Rico, and Lancaster, Pa.--that were also under
agency oversight with the Fort Washington facility. Products made
in those two plants will no longer be subject to regular
inspections by a third party, but there will be spot inspections, a
J&J spokesman said.
For the quarter, sales at the consumer-health unit fell 7% to
$3.5 billion, largely due to a 9.3% currency hit.
In its prescription drug unit, meanwhile, J&J is preparing
for the threat of lower-priced competition in the U.S. from
"biosimilar" versions of its blockbuster anti-inflammatory drug
Remicade. Mr. Gorsky said J&J planned to vigorously defend a
patent expiring in 2018, and the company expected doctors to
refrain from switching the 70 % of Remicade patients
well-controlled by the therapy.
"Biosimilars are not generics, and we expect the biosimilar
market to behave quite differently," Mr. Gorsky said on a
conference call with analysts and investors.
Prescription pharmaceuticals remained the New Brunswick, N.J.,
company's bright spot. The $7.9 billion in quarterly sales were
helped by new prescription drugs including the blood thinner
Xarelto and diabetes medicine Invokana and cancer therapy
Imbruvica. Executives indicated the business was poised for further
growth, saying seven recently launched drugs should each surpass $1
billion in annual sales.
Yet J&J's medical-device business continued to struggle,
posting a sales decline of 12.2% to $6.36 billion, reflecting an
operational decrease of 4.7% and a negative currency impact of
7.5%. Mr. Gorsky said increasing hospital surgery rates in the U.S.
and around the world augured well for medical devices, and sales of
hip and knee parts were already increasing in the mid-single
digits.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com and
Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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