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Dow member Johnson & Johnson (JNJ) is expanding its voluntary recall of Tylenol Arthritis Pain Caplets, due to consumer reports of an unusual moldy odor emanating from the pill bottles. J&J previously recalled five lots of the over-the-counter painkiller, but the recall has now been expanded to all product lots of the Arthritis Pain Caplet 100-count bottles with the red EZ-Open cap.
The musty odor, according to Johnson & Johnson, can be traced back to a chemical known as 2,4,6-tribromoanisole, which results from the breakdown of a different chemical in wooden pallets used in transporting and storage. J&J will resume production of the 100-count Arthritis Pain Caplets in January, after relocating production to a new facility.
The Food and Drug Administration (FDA) has reported several side effects from the tainted Tylenol, including nausea, vomiting and diarrhea, all of which are considered "temporary and non-serious." Consumers are advised to stop using the pills and contact McNeil Consumer Healthcare for a refund or replacement product.
JNJ is shrugging off the Tylenol recall in today's trading, with the stock fractionally higher at last check. (Of course, the pharmaceutical giant has certainly faced more serious Tylenol issues than a mildewy stench.) In fact, the blue chip is locked in a steady uptrend on the charts, buoyed by support at its 10-day and 20-day moving averages.
However, the shares have lost a bit of momentum near $65.50 during the month of December. The stock's struggles are likely being exacerbated by an uptick in short-selling activity; during the previous two reporting periods, short interest on JNJ has swelled by more than 18%.
During the short term, major call open interest could also slow the stock's ascent. JNJ's January 65 strike is home to peak call open interest of 55,207 contracts, with another notable accumulation of 22,726 contracts at the January 70 call. As expiration draws closer, this heavy call open interest could keep the shares under pressure.
Elizabeth Harrow is a senior equities analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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