Investors Still Interested In Johnson & Johnson Stock
Johnson & Johnson has a lot more to worry about besides DePuy’s badly designed ASR hip replacement devices that led to the hip recall. The pharmaceutical giant is currently recalling 300 million units of drugs which include known over-the-counter names as Children’s Tylenol, Motrin, Rolaids, and Benadryl. These massive recalls all stem from contamination at the plants where these drugs were manufactured, forcing the U.S. government to step in by supervising three of these plants. There are also other J&J subsidiaries that have not been performing well. Patients have submitted claims against malfunctioning heart devices made by Cordis, as well as leaking insulin cartridges marketed by Animas. The culmination of all these events does not bode well for J&J
The extent as to how these events are affecting the company can be seen by the 19% drop of revenue in 2010, amounting to $900 million. Investors can not turn a blind eye to the fact that J&J’s stock has lost 8% of its value in the last 15 months and is down to about $59 per share.This would provide prime opportunity for the company’s competitors to steal away its customers and increase advertising for their competing products. However, some investors believe that now is the time to buy up Johnson & Johnson, and even go so far as to think that its stock might sell for 30-35% of its current value in the near future.
Facing these ominous facts, investors will not abandon Johnson & Johnson stock because they have faith in the company’s trusted brand name. In consumer opinion surveys, Johnson & Johnson still ranks number one among all pharmaceutical companies. It is believed that these unfortunate events will force J&J to change from its decentralized business model, in which 250 subsidiaries will cease to operate independently.Instead, J&J will exercise more control in the future, leading to safer products. It is a belief of some investors that the current recalls are just minor misunderstandings to be corrected in the future, which will not hinder their ability to continue making a profit from the company.
With all this optimism for J&J, it seems that these investors are not taking the severity of the DePuy recall seriously. Johnson & Johnson is anticipating the DePuy lawsuits that continue to accumulate by setting aside nearly one billion dollars.It is estimated that currently about 93,000 patients have received DePuy hip replacements world wide, and recent reports show about 49% of these devices will fail in 6 years. These estimates could be devastating in terms of the amount of punitive damages that these recipients will claim against the company.
Investors should acknowledge that there are more concerns with Johnson & Johnson than just DePuy’s hip replacement recall.Those that have already been affected by these defective devices should consult with an experienced attorney to obtain the compensation they are entitled to.