Johnson & Johnson has a multi-billion dollar problem with its talc and just admitted that the best solution is also multi-billion dollars. The pharmaceutical giant, J&J for short, has proposed a new way to settle thousands of pending lawsuits that allege its talc products, including one older one. baby powder formula, contained asbestos and caused ovarian cancer: an investment of $6.475 billion over the next 25 years.
The new regulation would be a financial blow to J&J, which maintains its products do not contain asbestos and do not cause cancer. However, when you consider the size of the company, this doesn’t seem so extreme. The $6.475 billion, which will again be paid out over several decades, represents only 7.8% of the $85.2 billion in sales Johnson & Johnson made last year, 18.3% of its 35. $2 billion in net income, or 42.8% of its $15.1 billion in net income. research and development expenses, SEC deposits to show.
Even considering the face value of the latest potential talc settlement – approximately $8.4 billion, which is then discounted at a rate of 4.4%: the payment represents less than 10% of J&J’s 2023 revenue. And investors clearly viewed the settlement as good news, with J&J stock jumping 5% on Wednesday.
Costly history of talc-related lawsuits
J&J’s proposed settlement, if approved by the plaintiffs by a 75% majority, would resolve 99.75% of the talc product lawsuits that have plagued J&J for more than a decade, while preventing new claims. This is critical, given the high cost of some talc-based lawsuits to the company.
In 2021, a Missouri jury ordered J&J to pay approximately $2.1 billion to a group of just 22 women who said asbestos in the company’s talc products caused their ovarian cancer. This was scary for investors, given that there are more than 50,000 total claimants for ovarian cancer. J&J also agreed to pay $700 million to 42 states and Washington, D.C., to settle an investigation into the marketing of its talc products. Wall Street Journal reported in January, demonstrating the financial impact of talc-related lawsuits and investigations.
J&J did not immediately respond to Fortunerequest for comments on the proposed regulations.
New attempt at subsidiary bankruptcy
If J&J’s new deal is approved by the plaintiffs, it would also allow the company to settle its talc-related ovarian cancer cases through the bankruptcy of a subsidiary, LTL Management.
J&J is two previous attempts The courts refused to use Chapter 11 bankruptcy proceedings to resolve its talc-related affairs, finding that the J&J subsidiary was not in sufficient “financial distress” to merit bankruptcy. But now the company hopes to get the green light from the plaintiffs for the new deal before going to court to attempt a different, so-called “prepackaged” bankruptcy proceeding.
And although J&J’s new deal has not yet been approved by the plaintiffs, it has the support of the “overwhelming majority” of them, J&J management said during the company’s earnings conference call. the company on Wednesday.
Erik Haas, J&J’s global vice president of litigation, told analysts that he believed the settlement was in the best interests of the plaintiffs and should be upheld by the bankruptcy court, noting that J&J won approximately 95% of ovarian cancer cases ruled this way. so far, and the New Jersey judge recently ruled to allow the plaintiffs’ expert opinions on the alleged carcinogenic properties of J&J’s talc products to be reevaluated.
“If plaintiffs’ views fail this test, then all ovarian claims should be dismissed.” We expect this to be the case because the plaintiffs’ expert opinions are irreconcilable with research conducted for decades by independent experts, as well as government and regulatory agencies,” Haas said.
“Johnson & Johnson’s talc products are safe, do not contain asbestos, and do not cause cancer, and none of the talc-related claims against the company have any merit,” he said. added.
J&J recorded a $2.7 billion charge in the first quarter related to the new deal, bringing its reserve for talc-related claims to about $11 billion.
Mesothelioma and other state-specific consumer protection claims were not addressed in the $6.475 billion settlement. Last month, J&J and two subsidiaries were held responsible for the asbestos-related deaths of a mother and grandmother and were forced to pay $45 million. But J&J management also discussed the hundreds of mesothelioma-related lawsuits that have dogged the company during the earnings conference call, noting that it has settled all but 153 of them to date and concluded “in principle” agreements to resolve state-specific claims.
