Johnson & Johnson won't restart Montco Tylenol plant until at least 2013

Posted: January 25, 2012

The McNeil Consumer Healthcare plant in Fort Washington, Montgomery County, will not resume production until at least 2013, Johnson & Johnson's chief executive officer, Bill Weldon, said Tuesday as the company reported 2011 full-year and fourth-quarter financial results.

Recalls, repairs, litigation, and costs related to the acquisition of Synthes Inc. played a big part in J&J's profit dropping 88.8 percent in the fourth quarter of 2011 compared with the same period a year earlier.

Companies like to dismiss so-called one-time charges, even when they amount to an after-tax figure of $2.9 billion, as it did in this case, and they refer instead to happier numbers. Helped in part by currency valuations, J&J revenue increased from $15.64 billion to $16.26 billion in the quarter ended Dec. 31.

"In the last five years," Weldon said, "I've never felt better about our business coming out of one year and going into the next."

McNeil is a division of J&J, which has its headquarters in New Brunswick, N.J., and other operations in the Philadelphia area.

Even with the problems, Weldon can be optimistic because of the size of the company, which includes more than 250 divisions, and the aging populations that will need health care in most of the world that J&J serves.

"They do cause valuation concerns," Morningstar analyst Damien Conover said of the problems, "but overall the company is so big that it can digest what might seem like tremendous hits."

J&J stock closed unchanged Tuesday at $65 per share on the New York Stock Exchange.

The $2.9 billion after-tax charge included amounts set aside for recalls and litigation related to the metal-on-metal replacement hips made by J&J's DePuy medical-device division.

Also pending is litigation related to the antipsychotic drug Risperdal. J&J and its Janssen Pharmaceuticals subsidiary settled a trial with the state of Texas for $158 million, but J&J has other state cases pending and is reportedly in talks with the Justice Department over federal charges.

J&J's purchase of Synthes, which has facilities in Chester County, will cost $21.3 billion, the largest acquisition in company history, and part of the bill must be paid in Swiss francs because Synthes' roots are in Switzerland.

J&J had a 6.7 percent decrease in domestic over-the-counter sales for all of 2011, reflecting the general absence from store shelves of McNeil products, such as some forms of Tylenol and Motrin.

The Fort Washington plant halted production in April of 2010 after the U.S. Food and Drug Administration intervened following several manufacturing problems. There were complaints of musty odors, later attributed to disinfectants used on shipping pallets, and tiny metal particles in some products.

Plants in Lancaster and Las Piedras, Puerto Rico, are operating, but all three must work under heightened scrutiny as part of a court-approved consent decree, which lets the FDA decide when Fort Washington can resume shipping medicines. McNeil shifted production to other plants and is getting more products on to shelves.

"We've achieved all major commitments to date under our consent decree with the FDA and we are working closely with FDA officials to ensure we can get high-quality products back to our loyal customers who need them," Weldon said during the meeting with Wall Street analysts in New York. "We are in the process of rebuilding Fort Washington into a state-of-the-art manufacturing facility, which we anticipate opening next year."

An FDA spokeswoman said Johnson & Johnson had met all its deadlines and had incurred no fines as part of its repairs at the plant.

Weldon, who made about $28 million in 2010, was asked about a succession plan for his eventual departure.

"I'm doing my job," Weldon said. "There will be a point in time when I'm ready to leave and the board will feel I'm ready to leave, and I'll let you know."


Contact staff writer David Sell at dsell@phillynews.com or 215-854-4506. Read his blog at www.philly.com/phillypharma and on Twitter @phillypharma.

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