Posts Tagged ‘Johnson & Johnson’

J&J Needs To Fix It’s Problems Fast

J&J Needs To Fix It’s Problems Fast

Courtesy of YCharts

The announced departure of a top Johnson & Johnson executive last week, Colleen Goggins, who oversaw consumer products, could signal that J&J is moving to put its regulatory problems behind it. That would be welcome news for investors who admire J&J’s business but have been troubled by a recent series of lapses.

J&J has suffered product recalls affecting three of its businesses – over-the-counter medicines, including those sold for children; contact lenses; and hip replacement implants. J&J is accustomed to appearing in Fortune magazine as one of the most admired corporations (#4 this year), but finds itself in the September 6 issue of Fortune as the subject of an investigative story about deterioration of its quality-control operation.

That followed months of coverage of the product problems and recalls in the New York Times and other papers.

So far, despite the problems J&J shares have been moving with other pharmaceutical stocks.

JNJ, PFE, MRK, ABT, LLY Chart

And the worst of the immediate financial impact seems to be the loss of about $600 million in sales after J&J was forced to temporarily shut down an over-the-counter drug manufacturing plant at Fort Washington, Pa. That’s only 1% of J&J’s annual revenue of roughly $60 billion.

JNJ Stock Chart

The recalled over-the-counter products include forms of Motrin, Tylenol, Benadryl, Rolaids and St. Joseph Aspirin, all brands that have commanded a premium price and helped provide to J&J’s consumer business a lush profit margin (operating profits of about 17% of sales vs. about 31% for the pharma and device lines). Here are margins overall for J&J:

JNJ Stock Chart

The impact from the contact lens and hip implant recalls is less clear; in coming years J&J could end up paying for thousands of patients to have new implants installed. But the bigger threat is that J&J ceases to receive the benefit of the doubt from consumers; why buy St. Joseph Aspirin or Tylenol instead of generic brands if the J&J reputation is tarnished? And, just as importantly, will it lose the trust of regulators?

The Food and Drug Administration not only regulates the Fort Washington plant, but also oversees J&J’s efforts to license new drugs and sell medical devices. It’s not a good idea to embarrass an agency that holds that much sway over your business.

J&J is unusual…
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The Big Apple

The Big Apple

Apple Introduces Video iPod Nano

Courtesy of Joshua M Brown, The Reformed Broker 

Apple ($AAPL) now has a market cap of around $215 billion.  Incredible, and it couldn’t have happened to a more deserving company – they’ve changed the world.

More astonishing than the number itself is the list of companies whose market caps have been eclipsed by the tech king…

Apple is now bigger than Berkshire Hathaway, General Electric, Proctor & Gamble, Johnson & Johnson, Google and JPMorgan Chase

The only companies larger right now are Microsoft, ExxonMobil and Wal-Mart.

One other thing to consider – it all started with a device shaped like a deck of cards that was created to compete with the Sony Walkman - The iPod.  Think of how many millions of devices sold as a direct consequence of the triumph and mass adoption of iTunes and the iPod.  The dollar value created on the back of that product pairing is absolutely mindboggling.

For the details of who stands where by market cap, click the link below.

Source:

The Most Valuable Companies in America (Fortune)


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