Johnson & Johnson is sending in a former Army Ranger to clean up several big messes that have hurt its reputation, earnings and share price in the past three years. Alex Gorsky said in an interview his biggest priority is to complete a revamping of the company's factories and manufacturing processes to fix quality control lapses that sparked huge recalls of Tylenol, Motrin and dozens of other consumer medicines over the past three years.
"Mission No 1, 2 and 3 is getting these products back on the shelves," said the 51-year old who becomes chief executive at J&J's annual shareholders meeting on April 26.
The company is working overtime, under close federal supervision, to revamp a big factory in Fort Washington, Pennsylvania, where most of the Tylenol brands were manufactured.
The company had hoped to solve the problems by 2011, but now expects the task to stretch into 2013. Some analysts fret it could take until 2014, costing billions of dollars of additional lost sales and further jeopardising consumers' brand loyalty.
"We are all disappointed but we are absolutely committed to getting these fixed, and moving on. And we're in the throes of that as we speak," Gorsky said, "with a lot of changes in place ... a lot of new processes, investments, new auditing procedures."
Gorsky has climbed the ladder at the diversified healthcare company from his start as a salesman in 1988, with senior management roles in the company's pharmaceuticals and medical device businesses.
The new CEO will also have to grapple with costly recall of approximately 93,000 metal-on-metal artificial hips made by J&J's DePuy orthopedics unit. The company recently took a $3 billion charge for the August 2010 recall of the defective ASR products.
J&J is expected to offer settlements to the patients who received the ASR devices, which have a failure rate approaching 30 percent three times the typical rate of similar rival devices. The devices were recalled about a year after Gorsky was named global chairman of J&J's medical devices group.
And federal investigators have asked Gorsky to personally testify in a lawsuit involving allegations the company improperly marketed its Risperdal schizophrenia drug for unapproved uses in children and the elderly.
An Arkansas judge earlier this month ordered J&J to pay a $1.1 billion penalty for alleged fraudulent marketing of the former blockbuster product. Similar lawsuits are pending in a number of other states, and the federal government is investigating the allegations.
Gorsky declined to comment on the hips and Risperdal litigation, citing the ongoing investigations and lawsuits.
He said his other biggest priorities are to successfully integrate J&J's biggest planned acquisition, of Swiss medical device maker Synthes, once the $21 billion deal is approved by US regulators, and to steer a promising array of experimental drugs successfully through clinical trials. "Where I see tremendous growth opportunity is continuing launches of our pharmaceutical brands," he said, following introductions of five new drugs in the past two years - including promising treatments for melanoma, prostate cancer and hepatitis C.
J&J, whose hundreds of healthcare units have considerable autonomy, has generated reliable double-digit annual profit growth for most of the past century, largely through acquisitions.
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