CORRECTION – – UPDATE 4-J&J ortho unit recalls hip replacement systems

* DePuy Orthopaedics recalls two hip replacement systems

* ASR XL Acetabular, Hip Resurfacing systems recalled

* More damage to J&J’s reputation seen

* J&J shares slightly lower
(Adds more analyst’s comment, updates stock prices)

By Debra Sherman

CHICAGO, Aug 26 (BestGrowthStock) – Johnson & Johnson (JNJ.N: ),
whose consumer unit has been plagued by massive recalls over
the past year, said on Thursday its orthopedic unit was
voluntarily recalling two hip replacement systems.

J&J’s DePuy Orthopaedics said it was recalling its ASR XL
Acetabular System and ASR Hip Resurfacing System — both used
in hip replacement surgery — due to the number of patients
requiring a second hip replacement procedure, or a revision.
Some 93,000 people around the world have the ASR hip implant.

A spokeswoman said management is evaluating how much of a
financial impact, if any, the recall will have.

The recall comes just days after the U.S. Food and Drug
Administration warned DePuy to stop marketing its Corail Hip
System for unapproved use and about a week after J&J’s Vision
Care recalled some 100,000 boxes of 1-Day Acuvue TruEye lenses
overseas. [ID:nN24248395] [ID:nN23191042]

Over the past year, J&J’s reputation has been tarnished by
recalls of Tylenol, Motrin and other nonprescription drugs
brands.

Previous recalls were related to manufacturing issues, but
the recall of the hip replacement systems “seems to be more of
a design issue,” said Noble Financial Group analyst Jan Wald.
“Perhaps it points to an issue at the company that relates to
the quality of design within orthopedics.

“If I were going to get a hip right now, I’m not sure I’d
want a J&J hip.”

In a news release, DePuy said new, unpublished 2010 data
from the National Joint Registry of England and Wales show a
five-year revision rate of about 12 percent for the ASR Hip
Resurfacing System and about 13 percent for the ASR XL
Acetabular System.

“That 12 percent rate is pretty high,” Wald said.

He noted that, since these are older products, the company
probably does not sell a lot of them, so the financial impact
of the recall will likely be limited.

HARM TO REPUTATION

“It’s probably not going to affect (DePuy’s) overall
business much — it’s the overall reputational harm that’s
concerning,” the analyst said.

Jeff Jonas, an analyst with Gabelli & Co, said he did not
think the recall would have a material effect on DePuy. “It’s
just bad timing, given the problems in the consumer unit, the
lenses and now this. There’s just too much of this lately.”

Earlier this month, a senior J&J pharmaceutical executive
was put in charge of overseeing manufacturing at the company’s
consumer healthcare unit, as well as plants making medical
devices. The move was seen as a response to quality-control
lapses that led to recalls. [ID:nN18207640]

J&J has more than 250 operating companies making products
ranging from heart devices to baby shampoo.

Warsaw, Indiana-based DePuy said it intends to cover
“reasonable and customary costs” of monitoring and treatment
for services, including revision surgeries, associated with the
ASR System recall.

It said it was providing hospitals, surgeons and patients
with information about the recall to help them determine what
steps to take.

The ASR Hip Resurfacing System was introduced in 2003 and
is only approved for use outside the United States. The ASR XL
Acetabular System was launched in 2004 and has been available
worldwide.

In 2009, DePuy decided to discontinue the ASR System
because of declining demand and so it could focus on developing
the next generation of hip replacement and resurfacing
technologies.

Piper Jaffray analyst Matt Miksic called the recall “old
news,” noting that the company had been phasing out the product
since December because of performance problems. He said the
impact of the product withdrawal was evident in the company’s
second-quarter results, showing soft sales of hip implants, and
will likely continue to drag on hip implant numbers in the
second half of the year.

J&J shares fell 11 cents to $57.87 on the New York Stock
Exchange at mid-afternoon.

The shares of Stryker Corp (SYK.N: ) and Zimmer Holdings
Inc(ZMH.N: ), the other big manufacturers of hip implants, were
also slightly lower, as was Britain’s Smith & Nephew Plc (SN.L: )
(SNN.N: ), another big implant maker.
(Reporting by Debra Sherman; Editing by John Wallace, Andre
Grenon and Richard Chang)

CORRECTION – – UPDATE 4-J&J ortho unit recalls hip replacement systems