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New J&J CEO To Discuss $20B Purchase In 2Q Report

Stocks in this article: JNJ MDCO PFE


TRENTON, N.J. (AP) â¿¿ Johnson & Johnson, a Dow component, will focus on a huge acquisition, some experimental drugs awaiting approvals and its ongoing recall and manufacturing quality issues when it reports second-quarter results before the stock market opens Tuesday.

WHAT TO WATCH FOR: Alex Gorsky, who moved up from head of J&J's medical device business to CEO in April, will address analysts on the quarterly conference call for the first time. He's sure to focus on J&J's June acquisition of Synthes, the Swiss surgical trauma equipment and orthopedic implants maker, for $19.7 billion â¿¿ J&J's biggest acquisition ever. The deal is meant to lift J&J to a dominant global position in the growing orthopedic surgery market.

J&J, which makes Band-Aids, prescription drugs and medical devices, will give its usual update of its financial forecast, which could include some impact from integrating Synthes.

Analysts likely will bring up a flurry of litigation hitting the world's biggest maker of health care products. That includes news this week that J&J has a tentative settlement with shareholders who are suing its board and top executives after years of growing legal and manufacturing quality problems. The plaintiffs blame J&J's decentralized management structure for allowing top officials to claim they didn't know about problems. The settlement would put in place new quality and compliance standards, an independent oversight committee and procedures for all problems to be reported quickly to the board.

J&J, based in New Brunswick, N.J., may note that it has taken another $600 million charge for litigation reserves involving ongoing government investigations over alleged illegal marketing of three prescription medicines. The company is reportedly close to a settlement with the Justice Department that would include paying about $2 billion in penalties.

Analysts may ask about a recent estimate by a plaintiff's lawyer that the company could be facing close to $5 billion in liability from about 1,600 pending lawsuits over painful failures of its Pinnacle all-metal hip replacement system. The product remains on the market. J&J says it's reduced pain and given mobility to many patients.

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