In 1982, Johnson & Johnson's (NYSE:JNJ) Tylenol was recalled because of cyanide poisoning. Now the company is recalling some lots of the Children's and Infants formula of the drug because of the potential for bacterial contamination. The new recall should have about the same long-term effect on sales as the old one: not much at all.
No one has been hurt this time. In fact, the company hasn't found any bacteria in the finished product. The bacteria were discovered in a raw material that wasn't used in the production. Still, Johnson & Johnson decided to be extra-cautious and recall products that used any of the raw material produced at the same time.
If Johnson & Johnson does this right, it'll come out looking like an overprotective parent -- in short, exactly the type of company from which parents would want to buy drugs for their children. That's how it won back customers last time: By recalling more than $100 million worth of product and developing triple tamper-resistant packaging, the company was able to show customers that it was serious about safety.
Even if the recall does hurt sales a little, Tylenol isn't a giant contributor to the health-care conglomerate's revenue -- J&J doesn't even break out those sales. After all, it has to compete with generic acetaminophen, not to mention other pain relievers such as Wyeth's (NYSE:WYE) Advil and Novartis' (NYSE:NVS) Excedrin.
Johnson & Johnson's sales of over-the-counter products increased substantially when J&J bought Pfizer's (NYSE:PFE) consumer health division in 2006. That purchase brought with it consumer sentiment that can change faster than the views of prescription drugs -- remember J&J's Motrin Moms debacle last year? However, in this case, it looks like the issues may be minimal.
