J&J CEO Choice Keeps Consumer Business At Low Priority
This article was originally published in The Rose Sheet
Executive Summary
Alex Gorsky will replace William Weldon as J&J CEO in April. Like his predecessor, who has led during a time of extensive OTC recalls, Gorsky’s experience with J&J comprises management of Rx pharmaceutical and medical device businesses, with no consumer background.
Johnson & Johnson’s selection of Alex Gorsky as its seventh chief executive suggests the pharma company will not make its consumer business a higher priority.
Gorsky will succeed CEO William Weldon in April. Like Weldon, the 51-year-old Gorsky’s experience comprises management of Rx pharmaceutical and medical-device businesses. The incoming chief executive began at J&J as a sales representative and since early 2011 has served as vice chairman of J&J’s executive committee with oversight of devices and diagnostics.
Fellow vice chairman Sheri McCoy, Gorsky’s primary rival in the CEO selection process, has been involved in J&J’s consumer business the majority of her career with the company.
While the New Brunswick, N.J., firm has changed many aspects of its consumer business organization and quality control processes since the extensive McNeil Consumer Healthcare recalls of 2009 and 2010, Gorsky’s lack of consumer background could leave him open to the same criticism that dogged Weldon at times – that he did not sufficiently understand or prioritize the OTC business.
Johnson & Johnson CEO-Elect Alex Gorsky
Photo Courtesy of Johnson & Johnson
In 2011, J&J consumer tallied sales of $3.67 billion – 22.6% of the overall business. This was down slightly from 23% in 2010.
The McNeil recalls represent a dark period in Weldon’s 10-year tenure as CEO. Some of the liquid pediatric Benadryl, Motrin, Tylenol and Zyrtec stock-keeping units recalled in April 2010 still have not returned to market, and the company this month recalled a product that had been recently reintroduced – Infants’ Tylenol liquid with a dosing device problem (Also see "McNeil Recalls Liquid Infants’ Tylenol With Dosing Device Problem" - Pink Sheet, 20 Feb, 2012.).
J&J appears in the process of turning the corner, with consumer sales back to modest growth thanks in part to substantial contributions from new Listerine mouthwash products and Neutrogena skin-care line extensions in 2011. The strength of ListerineZero mouthwash and Total Care alcohol-free mouthwash helped grow the firm’s Q4 sales in the U.S. by 16.1% to $173 million, while Neutrogena Naturals boosted fourth-quarter skin-care sales 6.2% to $944 million (Also see "J&J Consumer Division Boosted By Skin, Oral Care In Q4" - HBW Insight, 30 Jan, 2012.).
Morningstar analyst Damien Conover said in a Feb. 22 note that Weldon delivered solid growth numbers as CEO, but “his legacy has been marred by the recent string of product recalls in the [DePuy Inc. hip implant] and consumer health business units.”
According to Conover, Gorsky is “a natural fit for the job” and the appointment does not seem to portend any major change in J&J’s strategy.
Consumer Candidate Passed Over
In selecting Gorsky, J&J’s directors passed over McCoy, an executive with decades of experience in the consumer businesses, as well as time spent leading pharma and medical device units.
The December 2010 promotion of Gorsky and McCoy to vice chairmen offered the two company veterans an audition to succeed the now-63-year-old Weldon (Also see "J&J Fills Consumer Chief Post, Promotes Likely CEO Candidates" - Pink Sheet, 20 Dec, 2010.).
McCoy will remain in her vice chairman role and report to Gorsky. She will continue to supervise the pharmaceutical and consumer groups, as well as J&J’s information technology.
"This succession decision involved a rigorous, thorough and formal multi-year process, which included consideration of two superbly qualified internal candidates, as well as outside candidates,” Weldon said in a Feb. 21 release.
McCoy began at J&J in 1982 as a research and development scientist for the consumer women’s health business. Her career advanced within the consumer organization, in which she eventually became head of R&D and then global president of the baby and wound care franchises.
In 2005, J&J shifted McCoy to the device side of the business, appointing her Ethicon group chairman. She subsequently became worldwide chairman of the pharmaceuticals group.
To Novartis And Back
Gorsky began at J&J’s Janssen Pharmaceutica Inc. subsidiary in 1988, later becoming its president. After serving as group chairman of J&J’s Europe, Middle East and Africa pharma business, Gorsky left in 2004 to head up the North American pharma division of Novartis AG.
Four years later, he returned to J&J to run its Ethicon Inc. surgical care unit; the following year, he became worldwide chairman of the surgical care group.
As J&J’s vice chairman, Gorsky led the medical devices and diagnostics group, global supply chain, health care and compliance and privacy strategy, and the government affairs and policy division.
A graduate of the U.S. Military Academy, Gorsky holds a master’s degree in business administration from the University of Pennsylvania’s Wharton School. His base salary will increase to $1.2 million annually when the transition occurs on April 26, according to a regulatory filing.
Weldon, who joined J&J in 1971 and was promoted to CEO in 2002, is expected to remain chairman of the board. Gorsky will be nominated for a seat on the board at J&J’s 2012 annual meeting.