JnJ Fined $572mln. in Oklahoma Opioid Crisis

JnJ Fined $572mln. in Oklahoma Opioid Crisis
August 28, 2019


Johnson & Johnson (JNJ) was slapped with a fine of $572 million by an Oklahoma judge after finding the medical devices and pharmaceutical company responsible for fueling the opioid drug epidemic. It is the first decree in the US against a drug manufacturer in the opioid epidemic case. Notably, the stock rallied $1.84 or 1.44% to close at $129.64 as the market felt that the fine was significantly lower than the penalties requested by Oklahoma. J&J has stated that it intends to appeal the judgment.

The judgment issued by Cleveland County District Judge Thad Balkman could affect hundreds of similar cases filed by state and tribal governments. In particular, the lawsuit is one among 2,000 actions taken by state and local governments alleging drug manufacturers of fueling the opioid epidemic. The drug is found to have links with roughly 47,600 overdose deaths in 2017, as per the data provided by the US Centers for Disease Control and Prevention.

Regarding the impact of the opioid epidemic, Balkman said: “The opioid crisis has ravaged the state of Oklahoma. It must be abated immediately.”

Notably, the state of Oklahoma had arrived at settlements with two more defendants, namely Purdue Pharma and Teva Pharmaceutical Industries Ltd. While OxyContin manufacturer Purdue Pharma agreed to a $270 million deal, Israel-based Teva accepted to shell out $85 million as a one-time settlement to end the legal proceedings. Both companies have denied any wrongdoing.

In its court argument, Oklahoma alleged that JnJ and its subsidiaries resorted to a deceptive marketing campaign at full throttle and fueled the opioid epidemic. The marketing campaign overstated the impact of drugs for chronic pain treatment and toned-down the addiction risk. Mike Hunter, Oklahoma Attorney General, pointed out that opioid overdoses resulted in death of 4,653 people in the state between 2007 and 2017.

According to Elizabeth Anderson, an analyst at Evercore ISI, had anticipated JnJ to be slapped with a fine of $500 million to $5 billion.

JnJ has stated that it will appeal against the $572 million fine as it is sure that the ruling is “flawed.” Furthermore, the company indicated that Oklahoma has “failed to present evidence that the company’s products or actions caused a public nuisance in Oklahoma.”

Michael Ullmann, Executive Vice President, General Counsel, Johnson & Johnson, argued that JnJ’s subsidiary was not responsible for the opioid epidemic. Ullmann said, “Janssen did not cause the opioid crisis in Oklahoma, and neither the facts nor the law supports this outcome. We recognize the opioid crisis is a tremendously complex public health issue and we have deep sympathy for everyone affected. We are working with partners to find ways to help those in need.”

Balkman’s judgment could have a massive impact as other states and communities will attempt to hold JnJ and other drug manufacturers responsible for triggering the opioid epidemic, which has resulted in the loss of 400,000 lives in the US between 1999 and 2017, as per the data provided by the Centers for Disease Control and Prevention.

Commenting on the judgment, Jared Holz, a health-care equity strategist at Jefferies, stated that the ruling “makes owning J&J a little easier. Like others have alluded to, this is [just] one particular state.”

As the fine slapped by the judge was less than the market’s expectation, we can anticipate the stock to remain bullish in the short-term.

The historical price chart indicates that the stock remains range-bound between 129 and 140. Furthermore, the stochastic oscillator is in the oversold zone. As a result, we can expect a bullish reversal in the stock.

jnj - technical analysis - 28th Aug 2019

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Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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