Johnson & Johnson announces appointment of new CEO

Johnson & Johnson on Tuesday announced that Alex Gorsky will take over from William Weldon as CEO, effective April 26, the date of the drugmaker’s next board meeting. Weldon, who became CEO in 2002, will remain as chairman for an unspecified transition period, but isn’t expected to continue in that role for very long, according to a person with knowledge of the matter.

“Gorsky is inheriting a company with a better pharmaceutical pipeline than it had 5 or 6 years ago,” remarked Morgan, Keegan & Co analyst Jan Wald said. However, Wald noted that he is also “inheriting a consumer division that’s still embroiled in problems… He’s got a lot of work to do and it is going to be very hard to affect anything in the short-term.”

In December 2010, Johnson & Johnson promoted Gorsky and colleague Sheri McCoy to the role of vice chairman in an expanded Office of the Chairman role. Under the new roles, McCoy took charge of the consumer and pharmaceutical businesses, while Gorsky gained oversight of a new manufacturing and supply group created to make sure all plants meet quality standards. As part of Gorsky’s expanded role, he also had responsibility for the medical devices & diagnostics group, global supply chain, health care compliance & privacy and government affairs & policy.

Commenting on the news, Weldon said “our success at developing outstanding leaders from within is reflected in the selection of [Gorsky] to lead our great company forward,” adding that “the future of Johnson & Johnson is in very capable hands.”

Edward Jones analyst Linda Bannister remarked that “while I am sure the board was not happy with the recalls that have plagued [the company], I am not convinced Mr. Weldon was pushed out due to the latest recall.” Meanwhile, Miller Tabak & Co. analyst Les Funtleyder said “the way I read it is, he wouldn’t have left on his own if he didn’t think the company was on its way to recovery.”

Wells Fargo Securities analyst Lawrence Biegelsen noted that “we do not anticipate significant changes in J&J’s strategic direction under [Gorsky’s] leadership.” Jeff Jonas, an analyst with Gabelli & Co. called Gorsky “the natural choice. I don’t think there’s going to be a huge change; he’s been involved in a lot of their recent decisions anyway.” Jonas noted that Johnson & Johnson has a promising pipeline of drugs including anticoagulant Xarelto, developed with Bayer, and prostate cancer therapy Zytiga.

Piper Jaffray analyst Matt Miksic commented “any time you change the hand at the tiller, it’s liable to liven things up a bit.” Miksic said he does not expect to see great rapid changes at Johnson & Johnson, but added, “resolution of the succession question and an energised new CEO rising to the challenge is a good thing for the company.”