July 15 (Bloomberg) -- Johnson & Johnson, the health-products company under U.S. congressional investigation for a recall of children’s medicines, said it will reorganize the plant where the withdrawn drugs were made and cut 300 positions.
That’s about 75 percent of the jobs at the Fort Washington, Pennsylvania, manufacturing facility, J&J said today in a statement. The plant will be closed until “at least the middle of next year,” Bonnie Jacobs, a spokeswoman for the New Brunswick, New Jersey-based drugmaker, said in a telephone interview. The moves are part of a plan J&J submitted today to the U.S. Food and Drug Administration on quality improvement.
J&J’s McNeil Consumer Healthcare unit suspended operations at the Pennsylvania plant in April after recalling more than 40 types of over-the-counter pediatric medications because their quality and potency didn’t meet internal requirements. Most of the products involved in the recall, such as some forms of Tylenol, Motrin and Benadryl, aren’t likely to become available again before the end of this year, the company said.
“You don’t close a plant for a long time and make redundant a lot of people unless you absolutely have to,” Les Funtleyder, an analyst with Miller Tabak & Co., said today in a telephone interview. “This isn’t a minor problem.”
J&J fell 36 cents, or less than 1 percent, to $60.26 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have fallen 6.4 percent this year.
The company said it will make a “significant” investment to renovate the plant with new equipment. Jacobs declined to comment on costs of the reorganization, including the job cuts.
Workers who lose their positions will continue to receive regular pay and benefits through at least mid-September, then will get a severance package based on the number of years they worked at the company, J&J said. Employees will be able to bid for jobs throughout J&J as internal candidates, Jacobs said.
Products made at the facility generated average annual revenue of about $650 million, the company said last month. The McNeil unit is trying to speed up production of those medicines by using other plants.
Lawmakers on the House Oversight and Government Reform Committee are investigating J&J’s actions in connection with the April recall and subsequent allegations that the company tried to hide a recall of defective Motrin tablets.
Funtleyder, who is based in New York, recommends buying J&J shares and doesn’t own any himself. While he said he likes the company because it’s a “consistent performer,” he expressed concern that J&J’s manufacturing troubles had reached such a high level.
“How on Earth did we get this bad, to the point where you have to shut down a plant?” Funtleyder said. “Who was minding this door looking at the yellow flags before we reached this point where we have to take drastic action?”
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