Johnson & Johnson
Investors are somewhat right: The difference between seven versus eight recalls isn't that big a deal. And the new recall isn't due to quality control issues -- metal particles or too much active ingredient -- as seen with the children's medicines recalled previously. Instead, yesterday's recall of 21 lots is due to a musty odor that's believed to be caused by a chemical in the pallets used for shipping. The company has stopped using the treated pallets because of an earlier recall, but these lots were manufactured before the change.
For a company that set the gold standard for damage control with how it handled Tylenol tampering in the 1980s, it sure has botched this one pretty badly. Why weren't the lots just recalled during the earlier recall instead of dragging this out for months?
The worry here is that the constant supply of bad news jeopardizes the long-term sales of Johnson & Johnson's products. Contrary to the popular saying, there is such a thing as bad press and if you're getting it month after month, it's even worse.
If Johnson & Johnson can't overcome the negative image quickly, consumers will head to competing brand-name drugs from Bayer, Pfizer
Johnson & Johnson could be a good turn-around candidate, but cautious investors will want to wait until management proves it has a handle on the situation and can manage at least a couple of months in a row without a recall.
Johnson & Johnson is a Motley Fool Income Investor selection and Motley Fool Options has recommended buying calls on its shares. Pfizer is an Inside Value selection. Try any of our Foolish newsletters today, free for 30 days.