J&J quarterly profit falls 20%

Johnson & Johnson said its second-quarter profit dropped 20 percent compared to a year ago because of recalls, restructuring and research investments, among myriad factors affecting the global health care giant.

J&J, which has its headquarters in New Brunswick, and has operations in several Philadelphia suburbs, exceeded reported estimates by Wall Street analysts but the stock finished down 37 cents at $66.72 in trading on the New York Stock Exchange.

J&J's McNeil Consumer Healthcare division is still a problem for the company because the Fort Washington plant has been closed since April 2010 after an FDA investigation. The company signed what is called a "consent decree" that involves meeting FDA requirements for fixing the problems and applying greater scrutiny. Some of the production of over-the-counter medicine was shifted to plants in Lancaster and Puerto Rico, though both of those facilities were also under greater FDA oversight.

An FDA spokeswoman said Tuesday that McNeil Consumer Healthcare has met the terms of the consent decree so far, but is not yet cleared to resume production in Fort Washington.

Recalls of medicine produced in 2009 continued this spring, but company officials said they hope the other facilities can increase production to fill some of the void.

In April, J&J announced that it would spend $21.3 billion to buy Synthes Inc., the medical device maker with five facilities, including its U.S. headquarters, in Chester County.

In a recent SEC filing by J&J, Synthes reported that its spine division performed worse than other units. In online discussion boards involving Synthes, some people suggested the spine division would be a casualty in the merger with J&J's DePuy.

"It's too early to give any results of the integration," said Alex Gorsky, vice chairman of J&J's executive committee, when asked for a merger update.

Gorsky said the Synthes purchase puts J&J in great position to take advantage of the aging population in several large countries.

"In Japan, Germany and Italy, more than 20 percent of the population is already over 65 years old," Gorsky said. "That percentage is rising rapidly in other developed nations, including the U.S. with the first of the approximately 77 million baby boomers turning 65 this year, at the astounding rate of one person every eight seconds."

Gorsky noted those older citizens account for seven times the health care costs of those younger than 65. But he also is aware that job fears make elective surgery less common.

"In the U.S., patients are reluctant to step away from their jobs at a time of persistently high unemployment," Gorsky said, "and when they often can't afford the high co-pays they are being asked to pay."