New J&J CEO must fix sullied image, integrate Synthes

Fri Feb 24, 2012 5:17pm EST
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By Debra Sherman and Ransdell Pierson

CHICAGO/NEW YORK (Reuters) - Johnson & Johnson's (JNJ.N: Quote) new CEO will need to take bold steps to help the giant healthcare company repair its reputation following costly product recalls and oversee its biggest acquisition ever.

Alex Gorsky, 51, vice chairman of the Medical Device and Diagnostics Group, rose through the ranks of J&J from his start as a salesman in 1988. He will be J&J's ninth top executive, all of them chosen from inside the company.

Some investors say his expertise in medical devices helped secure the top job, but question whether yet another top executive groomed within the 125-year-old company's ranks will be able to make needed changes.

"It will help to bring someone in for a fresh start," said David Heupel, portfolio manager at Thrivent Investment Management, which owns J&J shares. "I'm not sure it'll make a vast difference, but a new face probably will be viewed favorably."

Gorsky will take the helm in April at a critical time for J&J as it tries to rectify a series of massive, embarrassing recalls of products ranging from artificial hips to infant Tylenol.

No less of a challenge would be integrating the company's planned $23.1 billion purchase of Swiss medical device maker Synthes Inc SYST.VX.

Chris Velis, chairman and CEO of Medical Capital Group, which invests in medical technology ventures, noted J&J's lackluster stock performance -- the shares have risen less than 2 percent during outgoing Chief Executive Officer William Weldon's 10-year tenure -- and said Gorsky should make some material changes.

"He needs to send a clear message and develop a strategy and explain where he is going to take the company," Velis said. One of the most pressing changes would be to centralize quality control at the nearly 250 companies under the J&J umbrella.   Continued...