January 26th, 2010

Chairman and CEO Bill Weldon Provides Additional Context on the McNeil Recall

During the earnings call earlier today, Chairman and Chief Executive Officer Bill Weldon provided some further context around the recent recall announcement by McNeil Consumer Healthcare. In his remarks to financial analysts Bill provided a more detailed account of what the investigation entailed and the complexities of identifying the source of the odor, which I have reprinted here for those who are interested:

“We’re very conscious of the bar we set for ourselves and that consumers expect more from us than from others because of our history and reputation. Our recent consumer product recall and FDA warning letter were important reminders of this expectation and the vigilance it requires. I want to assure you we take these matters very seriously and nothing is more important to us than the health and safety of the people who use our products.

We are undertaking a thorough review of our procedures to ensure that we identify potential improvements we could make moving forward. We believe these and other actions we are taking will address the concerns that the FDA raised in its warning letter, and we are working in close consultation with them.

When McNeil Consumer Healthcare first received some complaints on a “musty” odor associated with our products in 2008, the company conducted a microbiological investigation to check for the presence of bacteria and mold, which would be consistent with the presence of the odor. No bacteria or mold was found and it was believed that the complaints were likely an isolated issue.

When similar complaint trends were identified in 2009, the company initiated further investigation and novel forensic testing. McNeil determined that the reported uncharacteristic odor was caused by trace amounts of a chemical byproduct originating from the treatment of wood pallets used to transport and store product packaging materials.

Subsequently, we initiated a voluntary product recall based on broad precautionary criteria, recalling numerous product lots that had not been the subject of any consumer complaints.

Even as we continue our investigation, we have taken additional actions beyond the recall to assure product quality. We have required suppliers who ship materials to our plants to discontinue the use of the type of wood shipping pallets associated with the recall. We are conducting full inspections of all materials coming into our facilities and have had outside experts evaluate our plants. We are confident in moving forward with production and we will continue to monitor and evaluate the situation and consult with the FDA.”


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