FDA takeover: Cost to Tylenol maker

NEW YORK (CNNMoney) -- The government takeover of Johnson & Johnson's Tylenol-making factories is a serious step that could further hurt sales of the company's well-known over-the-counter medicines.

On Thursday, the Food and Drug Administration and the Justice Department announced an agreement with J&J (JNJ, Fortune 500)'s McNeil PPC division that put its plants -- one in Las Piedras, Puerto Rico, one in Fort Washington, Pa., and one in Lancaster, Pa. -- under FDA supervision.

The agreement, known as a consent decree, is a very serious development for J&J.

How serious? Industry watchers said the recalls -- and now the government's intervention -- have dented J&J's reputation and credibility with consumers and its bottom line.

Larry Biegelsen, senior analyst with Wells Fargo Securities, wrote in a note Thursday that he estimates the cost could be in the $50 million to $100 million range during the remediation plan.

That's on top of the $900 million J&J has already lost in sales last year because it yanked drugs off store shelves and hasn't been able to replace them.

McNeil recalled more than 130 million units of Tylenol, Motrin and other OTC drugs for quality concerns and small metal particles in 2010.

Given that the FDA's agreement with J&J could be in place for five years, Biegelsen said the total magnitude of the financial hit on the company's business "is hard to quantify."

Regardless, the hit represents a more serious reputational blow than a financial one. Financially, the impact is a drop in the bucket of J&J's sales last year of $64 billion.

Biegelsen said that while the agreement is an "onerous remediation plan" that could slow down production of McNeil's non-prescription drugs it could also be an opportunity for the company to finally put the recall mess behind it.

With the FDA's supervision, McNeil may be able to fix its problems on a specific timetable.

"The consent decree removes much of the uncertainty regarding next steps for McNeil's recovery plan, without paying any upfront fine," Biegelsen said.

"In our view, it also significantly reduces, but does not eliminate entirely, the risk of a worst-case scenario of plant shut down in Puerto Rico."