Health care giant Johnson & Johnson will be hoping to take some of the focus off the manufacturing problems that have led to 11 product recalls, multiple government probes and public embarrassment when it reports its third-quarter results before the stock market opens Tuesday.
WHAT TO WATCH FOR: Company executives are expected to give a brief update on efforts to resolve manufacturing problems that have led to nine recalls of nonprescription medicines, a factory shutdown and the loss of about $600 million in 2010 revenue, on top of recalls of some contact lenses and hip implants. Congress, the Food and Drug Administration and multiple attorneys general all are probing the company's handling of the recalls.
The 56-year-old executive who ran the consumer products division, Colleen Goggins, is suddenly retiring, but CEO William Weldon has a long way to go to restore confidence in the once-iconic company. It has resumed limited shipments of one of the recalled medicines, grape-flavored children's Tylenol, and management likely will discuss how shipments of multiple nonprescription medicines still off the market will be ramped up.
J&J likely will discuss its pending acquisition of Dutch biotech company Crucell NV for $2.4 billion, J&J's latest effort to gain a big foothold in the coveted vaccine business. It already owned an 18 percent stake in Crucell, a major vaccine supplier to UNICEF and poor countries that also develops medicines that use antibodies to zero in on organisms causing infectious diseases. The deal, set to close in early 2011, faces some shareholder opposition in Holland and is going through multiple regulatory clearances.
The company may discuss prospects for its latest acquisition, Micrus Endovascular. In late September, J&J paid $480 million for the San Jose, Calif., maker of medical devices aimed at treating stroke and aneurysms.
Analysts also expect J&J to give an update on its pharmaceutical business, particularly progress on drugs in late-stage testing. Those include cancer drug abiraterone, hepatitis C treatment telaprevir, Xarelto for preventing blood clots. The company also is awaiting U.S. and European approval of what could be the company's third HIV medicine, TMC278.
WHY IT MATTERS: The FDA has held up decisions on two experimental J&J drugs this year. With revenue down slightly due to the recalls and last year's loss of patent protection for blockbusters Topamax for epilepsy and Risperdal for schizophrenia, J&J needs some new products to hit the market soon.
Investors also are looking for reassurance that J&J can soon resolve the manufacturing problems, which drove down J&J's share price all summer, although it has mostly recovered. Stocks of some, but not all, other major U.S. drugmakers performed better this year.
And Credit Suisse analyst Catherine Arnold writes: "The company's performance and commentary may be able to provide us with significant insight into how currency (rates), pricing and other sector-wide issues will affect the results of its peers that report later."
WHAT'S EXPECTED: Analysts polled by Thomson Reuters expect earnings per share of $1.15 and revenue of $15.18 billion.
LAST YEAR'S QUARTER: Johnson & Johnson reported a flat profit of $1.20 per share and a 5 percent drop in revenue to $15.08 billion from the 2008 period.