J&J New CEO: Top Job Is Fixing Over-The-Counter Drug Business
April 25 2012 - 05:16PM
Dow Jones News
Alex Gorsky, Johnson & Johnson's (JNJ) incoming chief
executive, said his No. 1 priority was fixing the problems in the
company's over-the-counter medicine business, which has been hurt
by recalls that have dimmed sales and damaged the health-care
giant's reputation.
Mr. Gorsky, who takes the helm of J&J from William Weldon on
Thursday, voiced confidence that the health-care giant has taken
the steps needed to revive the business and reintroduce withdrawn
products while upgrading manufacturing.
"No. 1, we've got to get product on the shelves, and I'm very
confident our teams can rebuild a lot of these brands," Mr. Gorsky
said in an interview Wednesday.
Starting in late 2009, J&J began recalling iconic medicines
like children's Tylenol after finding metal shavings were found in
some bottles, as well as excessive concentrations of active
ingredients and bad odors. Earlier this year, the company was
forced to recall some Tylenol that it had put back on store shelves
because of a design flaw in a new bottle cap.
As a result of the recalls, J&J has lost $1.5 billion in
sales, is operating under a federal consent decree that gives
regulators tighter oversight of some manufacturing plants, and seen
its reputation among consumers dim. The company is reintroducing
some of the recalled products this year and expects to continue
into next year.
Mr. Gorsky, 51 years old, is a former U.S. Army Ranger and a
J&J veteran who rose from pharmaceutical sales representative
to head of the health-care giant's medical devices businesses. He
edged out Sheri McCoy in the race to succeed Mr. Weldon, 63.
Revenue at the New Brunswick, N.J., company rose 5.6% last year,
to $65 billion. And the company has launched some new drugs with
blockbuster sales potential, such as Zytiga for prostate cancer and
Incivo hepatitis C treatment.
Yet sales have been squeezed in recent years by generic
competition in the U.S. for drugs like Concerta and Leviquin that
have lost patent protection; pricing pressures in Europe; and the
weak economy, which has caused a drop in demand for hip and knee
implants, for instance.
Mr. Gorsky said he wants to continue the "great momentum" in
J&J's pharmaceutical business. He said J&J hopes to
maintain its recent success getting new drugs approved by focusing
on its key therapeutic areas, including neuroscience and infectious
diseases. He also wants to make sure new medicines have data that
supports reimbursement.
"Our mission is not only to help more patients but not to find
ourselves in a position like before where you face a massive cliff"
of drugs losing patent protection, he said.
Another priority, Mr. Gorsky said, was closing and then
integrating J&J's planned $21 billion acquisition of
medical-device maker Synthes Inc., maker of orthopedic products
such as parts used to repair bone injuries that he described as an
attractive market because it is insulated from the economy's ups
and downs.
He said the acquisition also would help because J&J could
market to orthopedic doctors a full range of products, from hip and
knee replacements to trauma surgery parts.
J&J expects the Synthes deal to close by mid-year, pending
antitrust clearance. The company recently took steps aimed at
satisfying antitrust regulators, including the planned divestiture
of its DePuy trauma business.
Mr. Gorsky signaled a willingness to be more aggressive in
deal-making in emerging-market countries. So far, J&J has
chosen not to aggressively acquire generic-drug businesses in
emerging markets, as some of its rivals have done, but "our teams
are looking at that opportunity." He said J&J can do more to
serve patients in emerging markets.
The incoming CEO said J&J also would consider pursuing
external transactions to build up its pharmaceutical pipeline in
core areas like rheumatology and infectious disease, and to expand
certain consumer-product franchises, such as skin-care
products.
Also confronting Mr. Gorsky is litigation around J&J's past
marketing practices for products like the antipsychotic Risperdal,
the company's top-selling drug before its U.S. patent expired. An
Arkansas judge earlier this month ordered J&J to pay $1.2
billion after a trial jury found the company's marketing violated
state laws. J&J has called the penalty excessive, and it plans
to appeal if its request for a new trial isn't granted.
Earlier this month, the Justice Department also asked a federal
judge in Boston to compel Mr. Gorsky to undergo questioning as part
of the government's civil lawsuit accusing J&J of paying
kickbacks to induce nursing-home pharmacy operator Omnicare Inc.
(OCR) to encourage use of Risperdal and other J&J drugs.
Mr. Gorsky said he could not discuss ongoing litigation.
-By Jonathan D. Rockoff and Peter Loftus, The Wall Street
Journal; jonathan.rockoff@wsj.com