JNJ Update: Hip Implant Phase Out & Lawsuit Over Anti-Psychotic Drug Risperdal

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Johnson & Johnson

Johnson & Johnson (NYSE:JNJ) has finally decided to phase out hip implant device ASR which has encountered high failure rates because of high concentration of metal ions in patients who received those devices during hip replacement surgeries. The company is also going to face a trial related to a anti-psychotic drug Risperdal because it was illegally marketed in Arkansas. Johnson & Johnson is a $179 billion company with operations in the research & development and manufacturing of pharmaceuticals, diagnostics and consumer healthcare, which includes women health, skin care and baby care. Key competitors to Johnson & Johnson are Pfizer (NYSE:PFE), Merck (NYSE:MRK) and Abbott Labs (NYSE:ABT).

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DePuy to Phase-out ASR Hip Implant

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DePuy Orthopedics and Spine is a segment in JNJ’s Diagnostics division which manufactures hip, knee and shoulder replacements and neurosurgery devices. It contributes nearly 11% to the $72 Trefis price estimate for JNJ. Because of declining sales of ASR hip implant lately and repeated concerns over product safety for patients by FDA, JNJ has finally decided to cease the production for these equipments.

This is a major segment for JNJ and with this development the company’s DePuy revenues will decline. The emphasis now should be to streamline the R&D activities appropriately for the diagnostics division so that the impact of ASR hip implants could be mitigated. Lets look at how DePuy orthopedics and spine division can affect the JNJ price estimate.

Risperdal Lawsuit

Arkansas Attorney General Dustin McDaniel filed a lawsuit claiming that JNJ concealed the potential health risks of the drug Risperdal. This could lead to a $1 billion fine if the claim is proved and would impact company’s cash balance. Risperdal is the most widely prescribed antipsychotic medication of its kind and formed nearly 40% of Central nervous system drugs revenues for JNJ in FY2011. Central Nervous system contributes nearly 6% to the JNJ’s value.

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