Yahoo Finance J&J (JNJ) Offers $8.9B Settlement for Talc Cancer Lawsuits
Johnson & Johnson JNJ subsidiary, LTL Management, which was established to manage claims in the cosmetic talc litigation, has filed for voluntary bankruptcy for the second time to equitably resolve all present and future talc-related claims. LTL Management filed for bankruptcy in New Jersey
J&J faces thousands of lawsuits, which allege that its baby powder and other talc products contain asbestos that causes cancer, mainly ovarian cancer and mesothelioma. There have been verdicts against J&J in its talc lawsuits. J&J has consistently denied allegations and insisted that talc-based products are safe and do not cause cancer. J&J permanently discontinued the sale of its talc-based Johnson’s Baby Powder in the United States and Canada in 2020 and globally from this year.
This year so far, J&J’s shares have declined 10.3% compared with the industry’s 2% decrease.
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To completely resolve its cosmetic talc litigation, J&J has agreed to pay $8.9 billion over a period of 25 years. This amount is much higher than the $2 billion that the company had committed alongside LTL’s first bankruptcy filing in October 2021. In January this year, an appeals court rejected J&J’s first bankruptcy filing via LTL Management LLC. The J&J subsidiary was prevented from transferring over 38,000 claims for its talc-based products out of trial courts and into a bankruptcy court. The appeals court believed that LTL Management was solely created to file for Chapter 11 (bankruptcy) protection. The court stated that only a debtor in financial distress could seek protection under bankruptcy laws.
Per the precedent passed by the appeals court, LTL Management is backed by J&J, an entity with a triple-A-rated payment obligation and held billions in cash reserves. It therefore had ample financial resources to fulfill such claims.
However, despite filing for a second bankruptcy, J&J maintains that its bankruptcy filings are not an admission of wrongdoing and it continues to argue that its talc products are safe and the talc lawsuits lack merit. J&J believes that resolving the claims via the civil law system would take years and incur significant costs for the company. The talc lawsuits have also hurt the company’s goodwill and reputation. It believes that resolving the litigation through this proposed reorganization plan would be more efficient and would compensate claimants on time. J&J said in its press release that about 60,000 talc claimants had agreed to the proposed resolution.
It is to be seen whether the claimants accept J&J’s settlement offer or this second bankruptcy is dismissed just like the first one.
Several juries have ruled against J&J in talc lawsuits over the years. In one such ruling, in 2018, J&J was ordered by a Missouri court to pay $4.7 billion in damages to 22 women who made such allegations, affirming a St. Louis court jury’s verdict given earlier. Though the verdict was reduced to $2.1 billion by an appeals court in June 2020, it still rejected J&J’s appeal to overturn the 2018 jury verdict. J&J paid the award, which, including interest, totaled approximately $2.5 billion.
Zacks Rank and Stocks to Consider
J&J currently has a Zacks Rank #3 (Hold).
Some better-ranked drugmakers/biotech companies are Novo Nordisk NVO Innoviva INVA and Roche RHHBY. While Novo Nordisk has a Zacks Rank of 1 (Strong Buy), Innoviva and Roche have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for Novo Nordisk’s 2023 earnings per share have increased from $4.20 to $4.48. Estimates for 2024 have jumped from $4.90 per share to $5.26 in the past 60 days. Novo Nordisk’s stock has surged 35.4% in the past year.
Novo Nordisk beat earnings expectations in three of the trailing four quarters. The company delivered a four-quarter earnings surprise of 3.00%, on average.
Estimates for Roche’s earnings per share have remained stable for both 2023 and 2024 at $2.59 and $2.82 per share, respectively, in the past 60 days. Roche’s stock has declined 31.3% in the past year.
Estimates for Innoviva’s 2023 earnings per share have increased from $1.04 to $1.37. Estimates for 2024 have jumped from 52 cents per share to $1.25 in the past 60 days. Innoviva’s stock has declined 40.6% in the past year.
Innoviva missed earnings expectations in three of the trailing four quarters. The company delivered a four-quarter negative earnings surprise of 50.78%, on average.
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