William Weldon, who last year stepped down at Johnson & Johnson after running the company for years, has again added the title of chairman to his resume. In what The Wall Street Journal characterized as a stealth move, Weldon has replaced James Dimon in that role. Weldon was already a top director on the Chase board.
Posts Tagged ‘Bill Weldon’
Citing various ‘disappointments’ and a ‘mixed’ overall performance, Johnson & Johnson lowered the bonuses given to ceo Alex Gorsky and other top execs by 10 percent. The move comes after three years of scandals, manufacturing gaffes, an FDA consent decree, shareholder lawsuits and, in particular, criticism that the compensation given to Gorksy’s predecessor, Bill Weldon, failed to reflect strategic setbacks and miscues.
Specifically, the J&J (JNJ) board cites three items for its decision. First, total sales did not meet goals when excluding the addition of the Synthes unit that was acquired; consumer healthcare products did not return to shelves as quickly as planned and “reputational standings” may have improved in some areas, but “not at the level to which we aspire,” according to a filing made with the US Securities and Exchange Commission (see page 33).
Gorsky “generally met expectations of the board, however, the company’s performance was mixed in 2012 and it was the primary driver of Mr. Gorsky’s assessment,” the proxy states, while also adding that “we worked to address several reputational challenges and continue to strive toward regaining the reputational standings that we expect of ourselves and our customers and shareholders expect of us.”
What has this meant for the 52-year-old Gorksy? His final bonus for 2012 amounted to $1.5 million, which was below the nearly $1.7 million he would have received if he had been given 100 percent of the targeted amount. On the other hand, his total compensation was valued at about $11 million, which increased more than 60 percent from 2011. Of course, this also reflects his promotion last April to ceo.
As for Weldon, his compensation last year amounted to nearly $29.8 million, which was up 11 percent from 2011, and he is expected to receive more than $157 million in pension benefits and non-qualified deferred compensation. He relinquished the chairman role this past December, but has been serving as a special advisor since then. There were no details in the proxy about the advice he offered.
J&J has recalled countless products over the past three years, including such venerable over-the-counter staples as Tylenol, Motrin, Rolaids, Sudafed and Benadryl; Acuvue contact lenses; syringes; hip replacement devices; the Topamax epilepsy drug and K-Y Jelly. J&J has since sold the Rolaids brand to Sanofi as part of portfolio pruning (read here).
The OTC product recalls reflected serious manufacturing issues. A congressional investigation revealed J&J (JNJ) surreptitiously conducted recalls of some products after discovering problems at its plants and hired outside contracts to work as ‘mystery shoppers’ to remove items from stores. A key plant is now being retooled and operating under a consent decree. Meanwhile, 300 jobs were cut and hundreds of millions of dollars in sales were lost.
The J&J Ethicon unit last year halted marketing of four vaginal mesh implants that have been the subject of lawsuits filed by approximately 1,000 women who claim the products have caused serious internal injuries (read here). The healthcare giant also had difficulty stocking Tampons and the Nizoral anti-fungal shampoo, the only over-the-counter shampoo that is a salve for dandruff and psoriasis.
As we have noted previously, two of the most contentious scandals have taken place in business units on his watch. One involved defective hip implants. An internal J&J analysis that was conducted in 2011 had estimated that the all-metal device would fail within four to six years in 37 percent of patients. The recall took place in mid-2010 and those subsequent estimates were never released. But at the same time its analysis was under way, J&J publicly downplayed similar findings from a UK registry showing an early failure rate of as high.
In announcing its recall, J&J cited unpublished UK data showing that, within five years, 12 percent to 13 percent of two different ASR devices would fail. Gorsky was named worldwide chairman of the J&J Medical Devices and Diagnostics Group in 2009. As we wrote in a prior report, he presided over the division, known as DePuy Orthopaedics, that was responsible for ensuring that the hip implants performed properly, and that regulators and physicians were fully informed of the product performance.
And last year, the feds tried unsuccessfully to compel him to provide a deposition in a widely publicized kickback case involving the Omnicare nursing home pharmacy. At issue were charges Omnicare received kickbacks – in the form of rebates, educational grants and payments for marketing data – so that the J&J Risperdal antipsychotic would be prescribed more often.
As we wrote last year, from October 1998 to October 2001, Gorsky was vp of marketing at the Janssen unit that sold the drug. And while he was Janssen president, he was responsible for selling Risperdal, and Omnicare was the biggest Risperdal customer. His resume stated that he instituted a compliance program for regulatory and legal issues, and regularly received reports that had details about Omnicare efforts to promote Risperdal prescribing. And he met repeatedly with senior Omnicare execs to discuss those efforts (back story).
These episodes surfaced since Gorsky was tapped to succeed Weldon. But even though investors are forgiving – the stock is up about 27 percent over the past year, not including a 3.1 percent dividend yield – Gorksy will have to go out of his way to demonstrate that he is no longer part of the problems that have plagued J&J for the past few years.
Last week was significant for Johnson & Johnson ceo Alex Gorsky in different ways. For one, it was the first time that he presided over a discussion of an annual earnings report as ceo of the healthcare giant. At the same time, J&J made headlines, once again, over a potentially scandalous disclosure of previously unknown data concerning its troubed hip implants.
So it was a good-news-bad-news few days. On one hand, Gorsky had a chance to engage investors and analysts as he outlined his views on remaking the troubled consumer healthcare business, shifting the product portfolio and the resurgent pharmaceutical unit. On the other hand, there were lingering questions about the extent to which J&J has been living up to its storied credo.
The credo, which is emblazoned at the entrance of J&J headquarters in New Jersey, begins by reiterating a responsibility to ‘doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs, everything we do must be of high quality” (here is the complete credo).
Mindful of the diminished reputation caused by numerous products recalls traced to manufacturing problems at its over-the-counter business and the latest controversy surrounding hip implant data, Gorsky was careful to mention the J&J credo during the earnings calls last week before delving into results and strategy.
“Now, on a personal note I want to say how fortunate I am to be working alongside the many great people of Johnson & Johnson, and as always I want to start with the comment on our credo. Together, there are more than a 128,000 of us around the world with wide ranging responsibilities and capabilities and we’re united by a common purpose. At Johnson & Johnson we’re committed to caring for the world one person at a time,” he said (here are his remarks).
There is irony in this, however. Two of the most contentious scandals have taken place in business units on his watch. Take the case of the hip implants. The New York Times last week reported that an internal J&J analysis that was conducted in 2011 had estimated that the all-metal device would fail within four to six years in 37 percent of patients.
The recall took place in mid-2010 and those subsequent estimates were never released. But at the same time its analysis was under way, J&J publicly downplayed similar findings from a UK registry showing an early failure rate of as high as 49 percent. In announcing its recall, J&J cited unpublished UK data showing that, within five years, 12 percent to 13 percent of two different ASR devices would fail. The internal estimate was made public last week, along with numerous other documents, as the first in some 10,000 lawsuits headed to trial in California court.
As for Gorsky, he was named worldwide chairman of the J&J Medical Devices and Diagnostics Group in 2009. In other words, he presided over the division, known as DePuy Orthopaedics, that was responsible for ensuring that the hip implants performed properly, and that regulators and physicians were fully informed of the product performance.
This is not the only instance in which Gorsky and his executive role have been linked to a scandal. Last year, the feds tried unsuccessfully to compel him to provide a deposition in a widely publicized kickback case involving the Omnicare nursing home pharmacy. At issue were charges Omnicare received kickbacks – in the form of rebates, educational grants and payments for marketing data – so that the J&J Risperdal antipsychotic would be prescribed more often.
As we wrote last year, from October 1998 to October 2001, Gorsky was vp of marketing at the Janssen unit that sold the drug, and from October 2001 to early 2003 he was the Janssen president. During that time, he was responsible for selling Risperdal, and Omnicare was the biggest Risperdal customer.
Moreover, according to the feds, his resume noted that Gorsky instituted a Janssen compliance program for regulatory and legal issues. He also regularly received monthly reports on J&J’s Long Term Care Group, including reports which had details about Omnicare efforts to promote Risperdal prescribing of Risperdal. And Gorsky met repeatedly with senior Omnicare execs to discuss those efforts (back story).
In other words, Gorsky has had direct supevisory responsibility for J&J (JNJ) businesses that purportedly strayed far afield from the credo. There is nothing to suggest that Gorsky committed any wrongdoing, but as a West Point graduate and six-year veteran of the US Army, he most likely understands the notion of the chain of command and taking ultimate responsbility for events on his watch.
The episodes have surfaced since Gorsky was tapped to succeed the embattled Bill Weldon, who presided over the manufacturing blunders that led to a consent decree. Prior to the announcement, there were growing calls for Weldon to step aside. However, the move to promote Gorsky, ostensibly after an internal horse race, signaled to some that the J&J board failed to recognize the need to infuse the healthcare giant with fresh leadership from the outside (see the comment from University of Michigan business school professor Erik Gordon here).
Gorsky, however, is unlikely to be jeopardized by these events, if only because investors have largely been pleased lately with the J&J performance. Since hitting a 52-week low in late May last year, when J&J execs conceded that manufacturing problems would take longer to fix than originally thought (see this), J&J shares have climbed more than 20 percent and the dividend yield is 3.3 percent. In particular, the pharma business has scored some successes with growing sales for the Zytiga prostate cancer treatment and Xarelto bloodthinner, for instance.
This explains why Wall Street remains bullish. “As we look ahead to 2013, we believe J&J will see improving trends,” wrote Deutsche Bank analyst Kristin Stewart in a research note. “We expect recent and new drugs to continue to drive pharma sales. A slight improvement in utilization and new products should benefit (medical devices and diagnostics group). For (the) consumer (business), J&J should continue to work through the McNeil Consent Decree and return products to market.”
Nonetheless, the scandals continue to take their toll on the J&J corporate reputation and renew questions about the leadership at the healthcare giant. If the J&J board wants to reinforce confidence not only in the stock price, but also the credo, the directors may want to ensure that the credo is not only mouthed at the appropriate times, but that executives themselves are doing their utmost to uphold those principles.
The transfer of power takes place at the end of next month. Gorsky took over as CEO in April but Weldon hung on for awhile to let his successor adjust to his surroundings. Gorsky inherited from Weldon a mess in the company's over-the-counter division and a bunch of Risperdal litigation in which lawyers were itching to put the CEO in front of a jury.
In his first conference call in July, Gorsky had to report worldwide sales of the over-the-counter (OTC) products and nutritionals were down 4.7% to $1.03 billion, compared with last year's second quarter. As a reminder, the company had to pull and destroy tens of millions of OTC products during a series of more than two dozen recalls starting in 2009, when it became clear that J&J had serious issues with quality control in its McNeil Consumer Healthcare division. The mess in that division was believed to have led J&J to finally move Weldon out of the leadership role.
Things have been smoothing out a bit recently. J&J's net profit came in at about $3 billion for the third quarter, beating Wall Street estimates but still presenting a 7% drop from a year earlier. In October, he got to take some credit for closing the $21.3 billion acquisition of medical device maker Synthes.
And it is not all bad for Weldon. Always a top pharma earner, he got a $3.1 million bonus last year despite the company's ongoing problems with recalls, lawsuits and manufacturing. He had taken a bonus cut the previous year because of sales lost to consumer-drug recalls.
- read the Reuters story
Judge lets Gorsky off the hook in Risperdal case
J&J ramping up OTC production as 'decree' work allows
J&J medical device sales soar on Synthes buy
J&J chief gets stepped-up bonus for 2011
Hired someone new and exciting? Promoted a rising star? Finally solved that hard-to-fill spot? Share the news with us and we’ll share with it others. That’s right. Send us your announcements and we’ll find a home for them. Don’t be shy. Everyone wants to know who is coming and going, especially with all the layoffs. Despite the downsizing, there is movement. Here are some of the latest changes. Recognize anyone?
And here is our regular feature. Send us a photo and we will spotlight a different person each week. This time around, we note that Astellas US hired Jeffrey Bloss as vp of scientific and medical affairs. Previously, he was vp and head of global medical affairs at the GlaxoSmithKline oncology unit and worked at Eli Lilly as a senior clinical research physician. He also held management positions at Genentech, Onyx Pharmaceuticals and Xenocor.
Johnson & Johnson named Alex Gorsky as chairman;
Johnson & Johnson says Bill Weldon is retiring as chairman;
FDA named Howard Sklamberg as director of CDER’s Office of Compliance;
Zogenix hired R. Scott Shively as exec vp and chief commercial officer;
Ampio Pharmaceuticals hired Josh Disbrow as chief operating officer:
Regulus Therapeutics named Victor Knopov vp of pharma development;
Cipla hired Subhanu Saxena as ceo;
Dr. Reddy’s named Uhrang Vohra as exec vp & head of No. America generics;
Dr. Reddy’s named Saumen Chakraborty as cfo;
Aurobindo Pharma hired Arvind Vasudeva to head its formulations division;
ImmunoGen hired Charles Morris as exec vp and chief develoment officer;
Aptar Pharma named Jean-Marc Pardonge to head its prescription unit;
Takeda Pharmaceutical named Tetsuo Miwa as sr vp of pharma production;
Emergent BioSolutions named Robert Kramer as cfo;
Emergent BioSolutions say R. Don Elsey resigned as cfo for another position;
Onyx Scientific named Dan Brisard biz dev director for US East Coast;
ProTrials hired Diane Wong as director of quality assurance;
Peptides International says that Bryce Johnson will retire as ceo;
Peptides International promoted Michael Pennington to ceo;
Valeant Pharmaceuticals named Ryan Weldon as exec vp;
Valeant Pharmaceuticals named Jason Hanson as exec vp;
Valeant Pharmaceuticals named Vince Ippolito as sr vp, gen’l mgr, aesthetics;
Valeant Pharmaceuticals named Justin Smith sr vp, gen’l mgr US Rx dermatology;
CombiMatrix added Jeremy Jones to its board;
Verastem added Allison Lawton and Michael Kaufman to its board;
IntelliCell BioSciences added Michael Hershman to its board;
Alliqua named Jerome Zeldis chairman of the board;
Cadila Pharmaceuticals says chairman Indravadan Modi passed away;
BioTime says director Abraham (Barry) Cohen passed away.
ladder pic thx to RobertCB on flickr
Hello, everyone, and how are you today? Another pleasant morning is unfolding over the Pharmalot corporate campus, where the short people are sleeping in, the mascots are fertilizing the weeds and a cup of stimulation is brewing in the coffee kettle. An encouraging start to what is expected to be another busy day. We trust you can relate. After all, not everyone is on vacation, so time to get started. Here are a few tidbits to help you along. Hope your day goes well and do stay in touch…
Stem Cell Therapy For Autism To Be Tested In First Trial (Bloomberg News)
Analysis Questions Data For WHO-Endorsed Bleeding Drug (Pharma Times)
Anti-Doping Agency Praises Pharma Help At Olympics (InPharma Technologist)
Glaxo To Close Indian API Plant (InPharma Technologist)
Halcyon Molecular Shuts Down (San Jose Business Journal)
Boehringer Faces Growing Number Of Lawsuits Over Pradaxa (The Tennessean)
Advocates Push Changes To South African Patent Law (Intellectual Property Watch)
J&J To Pay $600K To Settle First DePuy Hip Implant Suits (Bloomberg News)
Newer Psoriasis Drugs May Lower Heart Attack Risk (Health Day)
J&J’s Weldon To Help Review JP Morgan’s $5.8B Trading Loss (Bloomberg News)
EDITOR’S NOTE: Please check this post for updates during the day
tea kettle thx to mirahartford on flickr
After a string of disappointments capped his recently ended tenure as AstraZeneca ceo, David Brennan is not taking a bonus for his final months running the struggling drugmaker. In a statement today, the AstraZeneca Remuneration Committee was informed that “he did not wish to be considered for a bonus” through June 1, when he formally retired. And additional awarded shares were also forfeited.
So how much money is not being sent his way? “As final payouts are dependent on different performance criteria it is impossible to accurately calculate the total of the bonuses and share awards David has given up at this stage, but it will be somewhere between zero and approximately $5.4 million, at today’s exchange rate,” an AstraZeneca spokeswoman writes us.
Despite the cloud under which he departed, Brennan still has reason to feel upbeat. He will receive pay and keep share awards that, together, are worth about $6.9 million, at today’s exchange rate. And he has a fully accrued pension with a transfer value of approximately $23 million, although the eventual value has yet to be calculated. The spokeswoman called previous reports about the value of his exit package “speculation – some fairly exaggerated or misleading.”
Clearly, the move to forgo the bonus is designed to appease critics and avoid a debate about ceo compensation, which is such a hot-button issue these days, especially when companies have generated disappointments. Whether AstraZeneca and Brennan will escape criticism remains to be seen. A recent example that generated outrage was Bill Weldon, who this spring stepped down as ceo at Johnson & Johnson, but will remain chairman for an unspecified period of time.
The embattled Weldon will receive $143.5 million in retirement (read here), although his tenure has been pockmarked by repeated quality control lapses that led to embarrassing manufacturing gaffes, product recalls and a consent decree, which contributed to declining sales and a loss of standing among consumers.
These may be trying times in pharma, but even at every big drugmaker, Halloween can be a special time. And some chief executives are so inventive as they walk the floors, knocking on doors, asking their minions for tricks and treats. Remember, though, it’s not polite to give rocks. Now, do you recognize the dashing devil? Name this person and you win a free subscription to Pharmalot. (Here’s a hint: this is what may happen when ingesting musty smelling Tylenol).
Hat tip to Pharmagossip
There is nothing like a list to engage people. And a favorite sport, of course, is tracking the extent to which this or that ceo is doing a good or lousy job – and then making a list. That is what 24/7 Wall Street has done by comparing total compensation with stock performance. The list focuses on the highest paid ceo’s in 2010 whose stocks performed the worst, and had the largest price drops.
So who showed up? Three are from drugmakers. Coming in at No. 8 was Amgen ceo Kevin Sharer, whose total compensation was $21.2 million. The biotech suffered a 3 percent decline in share price. The drop reflected concerns about the vulnerability of the flagship Epogen and Aranesp anemia meds. To appease investors, Amgen declared its first-ever dividend earlier this year and is now restructuring (see here and here). More details of the reorganization, in fact, are expected later today. But will this be enough?
At No. 7 is Bill Weldon. The Johnson & Johnson ceo suffered a bad year in 2010 – a seemingly endless list of product recalls due to manufacturing blunders that closed a plant for retooling; prompted Congressional hearings and government probes; layoffs; an FDA consent decree; a loss of valuable shelf space and lost sales. His total 2010 compensation was $28.7 million while J&J stock fell 4 percent. More recently, J&J fended off a derivative shareholder lawsuit (read this) and seems to have regained Wall Street confidence. But how long will it take for J&J to fully recover?
And placing fourth is Miles White, the Abbott Laboratories ceo. Last year, his total compensation was $25.6 million while the stock sank 11.3 percent. The drug and device maker was hurt by a lack of big, new products and a study showing its Niaspan pill failed to reduce the risk of cardiovascular events (look here). Meanwhile, revenue rose to $35.2 billion last year from $30.8 billion, but net income fell to $4.6 billion from $5.7. Last week, White announced plans to split the company in half, since the drug biz seemed to drag down overall valuation.
Will this be sufficient? One analyst, Larry Biegelsen of Wells Fargo Securities, offered some caution in an investor note today. The split, he writes, would help the pharma pipeline gain visibility, but the research-based pharma biz, which will feature a portfolio of existing meds, will be heavily dependent on the Humira arthritis med; it will account for 60 percent of sales and 73 percent of operating income in 2015. He adds that the drug pipeline has meds “just entering” Phase III, suggesting risk remains and Abbott, he adds, has a recent track record in developing drugs that has been “poor.” Moreover, there are no major launches until at least 2014. And he also thinks that Abbott set “unrealistically high growth expectations” for the device biz.
A federal court judge has tossed a so-called derivate lawsuit in which a group of Johnson & Johnson shareholders charged that the health care giant’s board of directors breached their fiduciary duty, despite a series of red flags in the form of FDA warning letters; government subpoenas; a criminal plea to kickback charges; whistleblower lawsuits; product recalls and off-label marketing.
In arguing their case, the shareholders alleged that J&J directors “had substantial knowledge relating to the allegations…and knowingly permitted the company to continue to pursue its unlawful and unethical business practices and strategies” (look here for the back story, where you can read the original lawsuit, as well).
The lawsuit attempted to string together a series of gaffes, blunders and bad behavior that have kept J&J in the headlines for the past couple of years and eroded its venerable image among consumers, doctors and investors. Amid the chaos, jobs were eliminated; sales were lost; a plant is being retooled, and ceo Bill Weldon (see photo) was often urged to resign.
A derivative suit, by the way, is brought on behalf of a corporation against an insider – in this case, the J&J directors – and the shareholders argued that liability prevented a majority of board members from being disinterested and complying with their demand to pursue litigation. In other words, they were unable or unwilling to exercise independent judgment.
A J&J special committee last July had already concluded that there were no red flags or indications of systemic failure that were overlooked by the board or executive team and, for that reason, declined to proceed with the litigation. The lawyers for the shareholders seized on this rejection as yet another reason why the J&J board was not independent (back story).
However, US District Court Judge Freda Wolfson picked apart the “troubling and pervasive” charges and determined that the plaintiffs “failed to allege that the directors acted in bad faith to violate their fiduciary duties.” She also ruled the lawsuit did not include enough specific information to meet a higher standard of scrutiny required, because concerns were not first brought to the J&J board.
And in response to charges that too many J&J directors were conflicted by liability, Wolfson wrote that she “does not find a sufficient basis for inferring that a majority of the directors faced a substantial likelihood of personal liability in connection with what appears to be serious corporate misconduct on J&J’s part.” She also chastised the shareholders for confusing directors with officers, which she called a “grave error.”
She then took 67 pages to pick apart the arguments made by the shareholders (here is the opinion). As one example, Wolfson pointed to subpoenas issued in 2005 in connection with a government investigation into alleged kickbacks involving the Omnicare nursing home operator. The shareholders claim the board knew about the subpoenas because two directors also sat on a policy committee. But she maintained the entire board would not have necessarily known about alleged misconduct.
“…there are no allegations regarding meeting dates, who was actually present at the meetings, or what subjects were discussed. Without this sort of factual detail, the court cannot infer that a majority of the board knew about the substance of the 2005 subpoenas, or any other subpoenas or government investigations disclosed in the 10-Ks, for that matter.”
She goes on to write that “as to this red flag, the pertinent question is not whether the board knew about the subpoena, but whether the subpoena is a determination of wrongdoing. At least one court has suggested that subpoenas, and other forms of preliminary matters in an investigation of corporate misconduct, do not shed light on whether the corporation actually engaged in misconduct.
“I find this reasoning persuasive because such red flags do not suggest that a board was aware of corporate misconduct – they suggest only that the board was aware that the company was under investigation.” She acknowledged that a director’s knowledge of a subpoena may be considered, but “…it is insufficient on its own to demonstrate that the directors were not independent and disinterested.”
Another example: She pointed out that, while the board may have been aware of whistleblower lawsuits by way of the 10K filings with the US Securities and Exchange Commission, there was no proof the board ever received the lawsuits. “To the extent the existence of the suits is reported in a 10-K form, that does not communicate to the directors anything about the nature of the claims asserted. Without that information, the court cannot discern whether the board knew that (J&J’s) Janssen unit…continued to engage in kickback behavior after the 2005 subpoenas were issued.”
And while Wolfson found allegations about J&J’s DePuy unit “troubling” in connection with a 2007 settlement of kickback charges, “the allegations do not sufficiently demonstrate that the directors knew that DePuy systematically and continuously engaged in illicit conduct.” A 10k disclosed that a Corporate Integrity Agreement and a Deferred Prosecution Agreement were signed, but she found “no basis for inferring from the directors’ signature on the various 10Ks that they were aware of the extent of DePuy’s misconduct and that the directors failed, in bad faith, to act in response to that misconduct.”
Why? The agreement noted that it is “neither an admission of any facts or liability by DePuy nor a concession by the US that its claims are not well founded.” As a result, Wolfson decided that “it is not clear whether the settlement itself suggested to the board that DePuy had engaged in illegal behavior.
Of course, one could argue that the board should have known from the large amount of the settlement – $85 million – that DePuy must have engaged in illicit conduct. But, on the other hand, the board may have reasonably concluded that the settlement reflected nothing more than a business decision on DePuy’s part.”
Wolfson also reasoned taht the CIA did not place a specific obligation on the board to oversee DePuy, which have might suggested that “individual directors could face a substantial likelihood of personal liability for failing to act in accordance with their contractual obligation.
As to manufacturing problems at McNeil Consumer Health, Wolfson determined that the shareholders “have not alleged facts from which the court could conclude that the board had knowledge of the warning letters and, in bad faith, failed to address systemic misconduct.” And she pointed to a statement made last year by Weldon that the recalls “were reported to the board” and that “in 2008, there were adverse events reported that we knew.”
But Wolfson didn’t buy the argument. “The statement that the problems ‘were reported to the board’ does not detail when, or to which directors, the problems were reported. Similarly, Weldon’s alleged statement that ‘we knew’ of the problems does not specify whether ‘we’ refers to his colleagues on the board, officers of the corporation, or upper management generally. Nor does that statement name specific directors. To the extent this allegation implicates Weldon’s own knowledge, it is insufficient to suggest that a majority of the board members had knowledge.”
From there, Wolfson argues that Weldon appeared to be focusing on corporate behavior, rather than board behavior. She maintains that the shareholder insistence on citing actions taken or not taken by J&J do not “reveal anything about what the board knew or did not know.”
And so, under the analysis she applied, shareholders should have alleged the directors knew or should have known that laws were violated and, in either event, that directors took no steps in good faith to prevent or fix the problems. “Because plaintiffs fail to allege that each specific director knew or should have known that the manufacturing defects at the various plants, or the problems with the orthopedic devices, constituted actual violations of law, plaintiffs fail to satisfy” the legal standard she cited.
One more example involved the Risperdal antipsychotic, which was is the subject of off-label marketing allegations in various lawsuits. Again, Wolfson maintained the shareholders failed to show that J&J directors were disinterested or acted in bad faith. “The FDA warning letters and subpoenas do not, alone, provide sufficient basis for this court to infer director knowledge and acquiescence.
“In addition, existence of internal J&J reports do not provide a sufficient basis for inferring knowledge and acquiescence unless (the) allegations state, with particularity, that the reports were provided to the board, and that the directors had ‘actual or constructive knowledge’ that their conduct was legally improper…again, as with other allegations that Weldon may have known about the off-label marketing does not speak to whether a majority of the board knew and consciously chose to disregard their duty of oversight.”