In Person: Former salesman Gorsky must tend to J&J's bruised image
Johnson & Johnson has been tarnished by recalls and manufacturing lapses — leading some to question whether a new CEO so immersed in the culture is the right person for the job.
New York Times News Service
Alex GorskyStarting in April, the one-time sales rep will lead the world's second-biggest seller of health-care products after a tumultuous period.
Background: The West Point graduate, former Army captain and endurance athlete has spent all but four of the last 24 years at J&J. He now leads its medical device and diagnostics business units.
Salary: He'll be paid $1.2 million as CEO.
Company: J&J, maker of everything from Band-Aids to cancer drugs, generated $65 billion in 2011 sales. This month it recalled more than half-million bottles of infants' Tylenol because of complaints with the dosing system, the latest in a string of recalls involving consumer items such as Motrin and Benadryl. Gorsky led its DePuy unit when it pulled from the market artificial hips that were failing.
Source: Bloomberg, NYT
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Alex Gorsky, the newly named chief executive of Johnson & Johnson, shares a crucial biographical detail with William C. Weldon, the man he is succeeding. Both got their starts as pharmaceutical sales representatives, a notoriously grueling job that — because it demands stamina, charisma and a near devotion to making the sale — has become a crucible for future drug-company executives in recent years.
Also like Weldon, Gorsky is a Johnson & Johnson insider who served during one of the most tumultuous periods in the company's history, when there were manufacturing lapses, government inquiries and recalls affecting popular over-the-counter consumer products.
Gorsky was head of the company's medical device and diagnostics group at the same time when critical decisions were made about an artificial-hip implant that has failed in thousands of patients, crippling some of them.
Their shared history has led some to speculate not much will change when Gorsky takes over in April.
"As somebody steeped in J&J culture, I would be very surprised to see big changes," said Les Funtleyder, a portfolio manager at Miller Tabak & Co. who owns the stock. And even if Gorsky plans such changes, "It's so big that it would take a very long time to move a big battleship like that."
Gorsky declined to be interviewed. But in a statement he said: "I'm honored that the board has placed such confidence in me, and I am also aware of the serious responsibilities that come with this office. Johnson & Johnson is a strong and extraordinary company with enormous opportunities to advance health and well being."
Gorsky, 51, fits the mold of someone who once "carried the bag" — industry slang for working as a sales representative. He is known as a polished speaker and an intense yet likable manager who is a quick study when it comes to learning new topics. That skill may serve him well at Johnson & Johnson, which sells things as diverse as baby shampoo, Band-Aids and antipsychotic drugs.
"It's the school of hard knocks," said Nona Footz, who leads the health-care practice at RSR Partners, an executive search firm. "You're out there. You're knocking on doors. You have very tough sales targets. You get a lot of exposure. You learn the business and then you're promoted."
But the ethos of the sales representative may not be what Johnson & Johnson needs right now, said Erik Gordon, who teaches business at the University of Michigan. "That culture was very much the Weldon culture writ large — we will make our numbers for the analysts, period," he said. "And if that means we have to cut costs on things that affect quality, then by God, we're going to make those numbers."
By contrast, Gorsky's main competitor for the chief executive job, Sheri S. McCoy, got her start at the company as a scientist in research and development.
As is typical for rising stars at large corporations, Gorsky held many jobs after starting with the company in 1988, including running Johnson & Johnson's pharmaceutical businesses in Europe, Africa and the Middle East.
In 2004, Gorsky left the company to head the North American pharmaceuticals business at Novartis. He returned to Johnson & Johnson in 2008. In September 2009, he took over the medical device and diagnostic group.
It was a particularly tumultuous time for the company's orthopedic unit, DePuy. Just a few weeks earlier, the Food and Drug Administration refused to let it sell one of its hip implants in this country because it had failed to meet regulatory standards. Meanwhile, complaints about that device and a companion version that was used in this country were mounting from doctors here and regulators abroad.
It is not known what role, if any, Gorsky played in DePuy's decision not to disclose the FDA action. But at the start of his tenure, DePuy decided to phase out the implants marketed as the ASR and shut a factory in England that made them.
DePuy recalled the ASR in August 2010, amid rising failure rates. But before then, DePuy executives repeatedly insisted the ASR was safe. And Gorsky stated publicly in 2010 that the company had decided to drop it for business reasons, not safety concerns.
In a recently disclosed DePuy email, a top executive wrote that the FDA had refused to approve the device after seeing data showing it failing prematurely in significant numbers during company studies in patients.
Johnson & Johnson did not answer questions about whether Gorsky had known about the problems associated with the artificial hips. But his promotion to chief executive surprised Dr. Robert Hauser, a cardiologist and an advocate for improved safety of medical devices.
"I mean, come on. What is this?" Hauser said. "He's been overseeing one of the major J&J quality issues, and the board of J&J sees fit to name him the new CEO."
Others dismissed the issue, saying it was unclear what knowledge Gorsky had had of the trouble with the hips. "It came out under his watch, but it had nothing to do with his watch," said Lewis C. Pell, a medical-devices entrepreneur who does business with the company.
Funtleyder, the portfolio manager, said Gorsky would face three challenges: fixing the problems at the plants that make over-the-counter products, ensuring that there are lucrative prescription drugs in development, and addressing a global dip in consumer use of medical services. The company also must close its deal to buy Synthes, a medical-device maker. Gorsky negotiated the acquisition.
Despite its troubles, the company has several new prescription drugs that have been selling well, including Zytiga, a prostate-cancer drug. The company earned $218 million, or 8 cents a share, in the fourth quarter of 2011, an 89 percent drop from $1.9 billion, or 70 cents, a year earlier. The drop was largely caused by a $3 billion charge related to the recall of its artificial hips.
Barry Meier and Reed Abelson contributed to this report