Johnson & Johnson’s stock (NYSE: JNJ) fell $5.81 or 4.15% to close Friday’s trading session at 134.30 following news reports that the US Department of Justice is conducting a criminal investigation into whether the firm was lying about the potential cancer hazards of its talcum powder brands.
The investigation has begun at a time when civil claims by numerous cancer patients blame the company’s talcum products for causing illness. Over 14,000 cases have been filed against the FMCG giant alleging that the talcum products contain asbestos, which is blamable for causing ovarian cancer (mesothelioma). The stock has appreciated about 4% in 2019. JnJ is scheduled to publish its quarterly results on July 16th.
As per Bloomberg, a grand jury in Washington is reviewing records about what the New Jersey-based firm found out about any carcinogenic substances in their goods. J&J has made clear in response to the allegations that the assumption of new development in the subject is incorrect. In February, J&J reported receiving subpoenas.
Regarding news reports, J&J spokesman Jake Sargent responded as follows: “The implication that there has been a new development in this matter is flatly wrong. As we previously disclosed in our February 2019 SEC filing, we have received a subpoena from the US Department of Justice. We are fully cooperating with the DOJ investigation.”
Lawsuits concerning the existence of carcinogens in its talc powder have exposed private memos that date back to the 1960s. The notes caution that asbestos found in JnJ’s powder was a significant health hazard and also presents a legal threat.
Notably, the stock plunged nearly 17% in December following reports that JnJ executives were aware of the contamination issue as early as 1970. JnJ, which manufactures a vast range of healthcare products, including Tylenol and Aveeno lotions, is staring at over 13,000 lawsuits related to its talc powder.
JnJ has rejected claims that its face powder causes cancer. The company asserted that several trials conducted by regulators across the globe have proven that its face powder is asbestos-free and safe to use.
In June, a California judge passed a decree in favor of a petitioner who blamed the talcum powder manufactured by JnJ and Colgate-Palmolive for her cancer. The judgment came only two weeks after JnJ was directed to pay $300 million in disciplinary damages to a New York-based woman who blamed her cancer on the company’s products.
Nearly a dozen legal cases have determined that JnJ was aware that some of their products have at least traces of asbestos, but didn’t reveal the health hazards to consumers. Judges have already awarded over $5 billion to those who condemn the talc powders for their cancers.
Even though JnJ maintains that it is not culpable as its products do not pose any health risks, Bloomberg Intelligence has estimated that civil settlements linked to talc products could reach as high as $15 billion.
In addition to the civil cases filed by consumers, numerous JnJ investors have complained that the company has cheated them, claiming that share prices were falsely boosted as it deliberately avoided disclosing dangers of its talcum products.
Recently, JnJ reintroduced its namesake baby product range last summer to revive the company’s baby care division. Unfortunately, the 124-year-old iconic brand has lost touch with consumers, mainly present generation moms, who are progressively looking to use new brands with a natural and trendier image.
Reports of an investigation by the US Department of Justice are expected to keep the stock weak in the short-term.
Technically, the stock has closed below its 50-day moving average. Furthermore, the stochastic oscillator has started declining towards the bearish zone. The next major support exists only at 135. As a result, we can expect the share price to decline in the days ahead.
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