J&J ( JNJ Quick Quote JNJ - Free Report) announced its decision to discontinue the global sales of its talc-based Johnson’s baby powder in 2023 amid multiple ongoing litigations and safety concerns. Instead, the company will transition to an all-cornstarch-based baby powder portfolio.
J&J faces more than 40,000 lawsuits for its talc-based products, primarily its baby powders, which allege that its talc products contain asbestos that causes cancer.
Per management, this is a commercial decision taken to benefit the company’s business in the long term and restore investor confidence in the company. Despite the decision to stop selling the product, management still maintains that the talc-based products are safe for use and do not cause cancer.
This decision to stop selling talc-based baby powder comes two years after J&J had permanently stopped selling the product in the United States and Canada over safety concerns in 2020.
There have been verdicts against J&J in its talc lawsuits. J&J has been ordered to pay hefty fines in this regard. In this regard, J&J was ordered by a Missouri court in 2018 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 subsequently reduced by an appeals court to $2.1 billion in 2020, it still rejected J&J’s appeal to overturn the 2018 jury verdict.
Shares of J&J have lost 2.3% in the year so far against the
industry’s 0.7% rise. Image Source: Zacks Investment Research
For better operational efficiency, J&J established a new subsidiary, named LTL Management LLC, last year in October, assigning its talc litigation claims. Post creation, this new subsidiary was immediately placed into bankruptcy, hence pausing the pending litigations.
As part of the measures to resolve these claims, J&J agreed to provide funding to LTL Management and even established a $2 billion trust in this regard. In addition, the pharma giant also allocated royalty revenue streams carrying a present value of over $350 million to the subsidiary.
Zacks Rank & Stock to Consider
J&J currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the overall healthcare sector include
Geron ( GERN Quick Quote GERN - Free Report) , Merck ( MRK Quick Quote MRK - Free Report) and Morphic ( MORF Quick Quote MORF - Free Report) . While Morphic sports a Zacks Rank #1 (Strong Buy) at present, Geron and Merck each carry a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here
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