J&J shares tumble as judge rejects $10bn talc settlement

Shares of Johnson & Johnson (J&J) fell more than 5% on Tuesday after a US bankruptcy judge rejected its $10bn (R185.53bn) proposal to end tens of thousands of lawsuits alleging its baby powder and other talc products cause ovarian cancer.

This is third time the health-care conglomerate's bankruptcy strategy has failed in court. It faces lawsuits from more than 60,000 claimants alleging its baby powder and other talc products contained asbestos and caused the cancer.

The settlement would have ended the lawsuits and prevented such instances in the future. J&J plans to “return to the tort system to litigate and defeat these meritless talc claims”, and does not plan to appeal the ruling.

The company on Tuesday told investors and analysts plaintiffs were “sorely mistaken” if they thought they could quickly do a similar deal outside bankruptcy.

Opponents of the deal, including attorneys for some cancer victims and a government bankruptcy watchdog, have argued the third bankruptcy, like the first two, should be dismissed as J&J is not in “financial distress”.

“Considering this was our best and final offer, we are reversing $7bn in the reserve previously held for the bankruptcy plan,” said J&J CFO Joe Wolk.

The company has claimed its products are safe, do not contain asbestos and do not cause cancer. J&J stopped selling talc-based baby powder in the US in 2020, switching to a cornstarch product.

Its shares fell 5.4% to $156.82 in early trading. They trade at 15.51 times of its expected earnings over the next 12 months, according to LSEG data, compared to 14.9 times for rival Amgen and 9.7 times for Merck.

So far this year, J&J's shares have gained about 14.7% up to Monday's close, giving it a market capitalisation of roughly $400bn (R7.42-trillion).

J&J also said it was confident in its 2025 financial guidance and long-term outlook.

Reuters