Devices & Diagnostics

Johnson & Johnson takes $3 billion charge in 4Q over litigation, recalls

Johnson & Johnson’s (NYSE:JNJ) product recalls, litigation and patent battles have taken a toll on the company’s profits in the fourth quarter of 2011. The medical device and pharmaceutical giant, based in New Brunswick, New Jersey, reported one-time charges of $3 billion that include settlements associated with off-marketing allegations over its anti-psychotic drug Risperdal and […]

Johnson & Johnson’s (NYSE:JNJ) product recalls, litigation and patent battles have taken a toll on the company’s profits in the fourth quarter of 2011.

The medical device and pharmaceutical giant, based in New Brunswick, New Jersey, reported one-time charges of $3 billion that include settlements associated with off-marketing allegations over its anti-psychotic drug Risperdal and recalls for subsidiary DePuy’s hip implants and over-the-counter drugs such as Motrin due to problems at its McNeill Consumer Healthcare plant in Fort Washington, Pennsylvania.

In a conference call with analysts Tuesday, the CEO said its McNeill Consumer Healthcare plant that has been a source of product recalls will not reopen until 2013.

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The company had only $218 million in profits on sales of $16.2 billion.

Last year, the company exited the stent business  amidst tougher battles for market share and costly patent litigation.

Les Funtleyder, a portfolio manager with Miller Tabak & Co., suggested there was little surprise in the company’s earnings in an interview with Bloomberg:

“There’s nothing here that’s frightening, though we’d love to see a little bit more oomph in the revenue line.”

The company is waiting to hear from the U.S. Food and Drug Administration on new drug applications submitted for Xarelto, an oral anticoagulant to lower the risk of thrombotic cardiovascular events for patients with acute coronary syndrome, and for Nucynta extended-release tablets, an oral analgesic for neuropathic pain associated with diabetic peripheral neuropathy in adults.

Damian Conover of Seeking Alpha believes that this makes him think the company is “turning the corner”:

“In looking at 2012, J&J is turning the corner on all its major segments. The pharmaceutical segment will annualize the majority of its patent losses and continue to launch new potential blockbuster drugs, including cardiovascular drug Xarelto, hepatitis C treatment Incivo, and oncology medicine Zytiga. In the fourth quarter, the drug segment posted operational growth of 6% versus the prior-year period, despite increased generic competition on anti-infective Levaquin and neuroscience drug Concerta. As the company annualizes the generic launches of these drugs in mid-2012 and new drugs ramp, we expect an acceleration of growth in this segment.”