Investors Will Not Abandon Johnson & Johnson Stock
The DePuy’s badly designed ASR hip replacement devices which led to the hip recall is the least of the worries for parent company Johnson & Johnson. Currently, the pharmaceutical giant is recalling 300 million packages of medicine, including over-the-counter standards such 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. Many other J&J subsidiaries are also performing sub par. According to some patients, there are reported malfunctions with Cordis’s heart devices, as well as leaking insulin cartridges sold by the company Animas. All these events put together may do serious damage to 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.Surely, investors would not be able to ignore 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, there are some investors who are convinced that now is the time to buy up Johnson & Johnson, and even go so far as to estimate 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. Investors are optimistic that J&J will change from its decentralized business model, in which 250 subsidiaries will cease operating independently. Instead, J&J will exercise more control in the future, leading to safer products. These investors also believe that the catastrophic recalls are just minor mistakes that will be eventually corrected, and that the company will still be profitable for them.
With all this optimism for J&J, it seems that these investors are not taking the severity of the DePuy recall seriously.Just a few months ago, Johnson & Johnson set aside nearly one billion dollars for the DePuy lawsuits that will continue to accumulate. All over the world, approximately 93,000 patients have received DePuy hip replacements, and reports now 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.
There are other issues with Johnson & Johnson than just the DePuy hip replacement recall. Patients affected by defective hip replacements should seek an experienced attorney to get the punitive damages they deserve.
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