The stock of Johnson & Johnson (NYSE: JNJ) hogged the market’s attention on Wednesday after the company accepted to shell out $8.90 billion over a period of 25 years to settle accusations of cancer caused by its talc products, including baby powder. The stock closed at $165.15, almost unchanged from its prior close.
The New Brunswick, New Jersey-based company revealed the planned settlement through a securities filing. Interestingly, between 2020 and 2021, JnJ paid $7.40 billion in legal expenses, as disclosed in an annual filing.
Notably, JnJ’s associate firm, LTL Management, also reapplied for Chapter 11 (bankruptcy protection) following the failure of its first attempt.
As per the filing, over 60,000 petitioners have already agreed to support the aforesaid settlement, which has yet to be approved by the bankruptcy court.
Commenting on the settlement, Erik Haas, J&J’s worldwide vice president of litigation, stated that “fixing the issue through the suggested reorganization scheme is both fairer and more effective because it lets claimants be covered expeditiously and allows the organization to maintain its dedication to significantly and constructively affect the well-being of society.”
Despite the settlement, the company denies the allegations. Haas pointed out that JnJ believes that the claims are purely speculative and not backed by scientific evidence.
JnJ, which filed for bankruptcy after getting slapped with thousands of lawsuits accusing the company’s talc products of causing cancer, terminated the sales of its baby powder worldwide this year.
Also, the company spun out LTL Management in October 2021 in an attempt to minimize its losses from settlements and additional lawsuits. JnJ filed for bankruptcy protection after completing the spin-off.
In February 2022, a US court allowed the company to make use of Chapter 11 tactics to protect itself. However, the US Court of Appeals for the 3rd Circuit squashed the ruling in January 2023 and stated that both JnJ and LTL do not have a need for bankruptcy protection as they are not facing any kind of financial adversity.
At that time, Leigh O’Dell, a prominent attorney representing the claimants, stated that the court’s decree ensured that JnJ did not exploit the bankruptcy filing mechanism.
O’Dell also criticized JnJ’s settlement deal, stating that the company is seeking a steep bargain on justice while continuing to present only bankruptcy and postponements. In a scathing criticism, she stated that the latest settlement-related filing is a disgraceful effort to stretch out the time limit on cancer patients and persuade some attorneys to close the file.
However, Mikal Watts, another claimant’s lawyer involved in finalizing the aforesaid settlement, stated that the company has pledged to “fairly cover these entitled women” who have fought cancer as a result of talc-containing merchandise.
The litigation settlement is expected to keep the stock of JnJ slightly bullish in the short term.
The historical price chart indicates that the stock of JnJ is ascending after bouncing off the support level at 150. The next resistance is anticipated only near 180. Additionally, the stock is trading above its 50-day moving average while the stochastic oscillator is rising toward the bullish zone. Therefore, we anticipate the stock of JnJ to remain in an uptrend in the days ahead.
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