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J&J New CEO: Top Job Is Fixing Over-The-Counter Drug Business

By Jonathan D. Rockoff and Peter Loftus NEW BRUNSWICK, N.J. -(Dow Jones)- 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voiced confidence that the health-care giant has taken the steps needed to revive the business and reintroduce withdrawn products while upgrading manufacturing.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

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