J&J plant overhaul turning into 4-year project
Johnson & Johnson ($JNJ) Chairman and former CEO William Weldon really is a piece of work. In January, he told analysts the consumer products plant in Fort Washington, PA, would open in 2013. He said its total revamp was "at least a year away."
Three months later, the new CEO Alex Gorsky and his financial team are telling investors that the McNeil Consumer Healthcare plant won't be ready for FDA inspections until the end of next year, suggesting it can't be pumping out product for nearly two more years. Maybe when Weldon said the manufacturing facility would reopen in 2013, he meant to FDA inspectors on Dec. 31, 2013. The investment community clearly didn't see it that way, as evidenced by a comment by Michael Weinstein of JPMorgan, during Tuesday's investor call.
"That sounded like it was a longer time period recovery for McNeil than we've been previously thinking about," Weinstein remarked.
CFO Dominic J. Caruso parried that observation by saying that "operating under the Consent Decree in close cooperation with our third-party consultant who is there with us, it is difficult to accurately predict to the speed of recovery. As such, we are in fact behind where we thought we might be at this point, and we expect a slower recovery throughout the year than we previously thought at the tail end of last year."
That means close to a four-year interruption in production at the company's main OTC manufacturing facility, which made such products as Tylenol, Benadryl, Motrin and Zyrtec.The plant closed immediately after the April 30, 2010, recall of more than 136 million children's and infants' products, one in a long string of recalls. Products were chipped and smelled musty, and the plant was a mess.
McNeil entered into a consent decree with the FDA in March 2011 covering plants in Lancaster, PA, and Las Piedras, Puerto Rico, in addition to the Fort Washington facility. In April 2011, Weldon said the plant was being gutted and the company would invest more than $100 million for its renovation.
J&J Tuesday reported a 12.5% jump in net earnings for its first quarter to $3.91 billion but that was dampened by consumer product sales of just $3.6 billion, a decline of 2.4%. It attributed the decline to the manufacturing problems that have kept it from getting many of its most popular brands onto pharmacy shelves and will apparently continue to be an issue for close to another two years.
- here's a transcript of Tuesday's investor call
- read the analyst Q&A
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