Johnson & Johnson (NYSE:JNJ) is a muscle car. The question is, can new CEO Alex Gorsky turn the keys and get the engine humming again? If so, this double-barreled company (and its stock that’s gone nowhere since 2005) could once again burn up the highway for investors.
But that’s a big “if.”
A Whole Slew of Problems
No need to mince words here — J&J is in a pretty good mess right now for a handful of reasons, all of which are putting the kibosh on earnings.
For starters, the company discontinued a key hip replacement product after the FDA failed to approve it for U.S. use — a decision that followed complaints about it in the European market, where it had been approved.
More recently, manufacturing at Johnson & Johnson’s McNeil Consumer Healthcare facility was suspended after a lengthening list of product recalls finally forced the action. The McNeil plant makes Tylenol and Motrin, which are clearly pieces of the product pie J&J can’t afford to have off the shelf. Now there’s a Doxil drug shortage, and it looks like the company delayed reporting problems with some of its insulin pumps.
And that’s hardly the whole list. It all begs the question: What the heck is going on with this former American health care icon? Perhaps a more important question to ask is: Why would anyone want to own this tainted name now?
I have answers to both.
Not Your Typical CEO
Whether incoming CEO Alex Gorsky is the right man for the job is irrelevant — he’s got the job now. Gorsky certainly has his work cut out for him when he starts April 26, though. Then again, he’s got some great experience to bring to the task.
Gorsky started as a sales rep for J&J-owned Janssen Pharmaceuticals, and by 2003 he had worked his way into the president’s role. He’s also the former head of the J&J’s medical device and diagnostic group, and he has served as the chairman of Johnson & Johnson’s pharmaceuticals business in Europe, the Middle East and Africa. In other words, he’s got as much experience as anyone needs to take on the job. That’s not the most interesting thing about Alex Gorsky, however.
No, what’s more than a little unusual about Gorsky (compared to most other American CEOs) is that he’s also a retired U.S. Army Ranger — one of the military’s elite soldiers.
It’s a training and background that is said to show in the way Gorsky conducts himself every day. More directly, the buzz is he’s a “get it done no matter how you have to do it” kind of guy.
Most investors should love it, assuming Gorsky will indeed “get it done.” And they also should like the fact that he’s got a salesman’s experience as well as a salesman’s mentality; revenue cures a lot of ills.
All well and good, though there’s a bit of a problem with this mind-set. In the military, there’s not a call for public disclosure of how you’ve completed the mission, or what the end result was. And in sales, representatives don’t face legal or liability issues; they simply market the product. Point being, if Gorsky really is going to revive this previously great brand name, it’s going to take more than a military-like, sales-based approach. It’s going to take a ton of finesse and humility to get back in investors’ — as well as the FDA’s — good graces. And so far, that’s a reality Gorsky hasn’t seemed to embrace.
All that being said, given J&J’s current situation, the company might be better off right now with a drill sergeant at the helm rather than a scientist.