Johnson & Johnson (NYSE:JNJ) is facing a significant setback as its shares experienced a 4.1% drop on Monday, marking the most substantial one-day percentage loss since June 2020. This decline came after a U.S. judge rejected the company’s second attempt to resolve a multitude of talc-related lawsuits, dealing a blow to their efforts to address the mounting legal challenges.
The lawsuits against Johnson & Johnson center around allegations that its baby powder and other talc products contained traces of asbestos, leading to the development of mesothelioma, ovarian cancer, and other forms of cancer. Despite the mounting legal pressure, the company has consistently maintained that its talc products are safe and asbestos-free.
The recent dismissal of their attempt to shift the talc-related liabilities to a new company and place it into bankruptcy represents the second failure in their legal strategy. This decision jeopardizes an $8.9 billion proposed settlement aimed at resolving the existing lawsuits and preventing new ones from emerging.
This is not the first time Johnson & Johnson has faced opposition to their bankruptcy-based approach to tackle talc-related lawsuits. In January, a U.S. appeals court rejected their earlier attempt, signaling a major challenge to an emerging legal strategy that could have significant implications for U.S. corporate liability law.
Following the latest ruling, Morgan Stanley analyst Terence Flynn expressed concern about the talc litigation’s impact on the company’s stock. He stated that it remains an overhang on the stock, suggesting potential uncertainty and negative implications for investors.
As of the recent trading session, Johnson & Johnson’s stock reached $167.33, reaching its lowest level since July 20, reflecting the seriousness of the talc setback. Terence Flynn, who rates J&J stock as ‘equal-weight,’ has a price target of $187 on the stock, differing slightly from the median Wall Street price target of $180, according to Refinitiv, which tracks 23 analysts covering J&J.
Adding to the challenges, in August 2022, Johnson & Johnson announced its decision to halt the global sale of talc-based baby powder starting in 2023, following the termination of U.S. sales of the product over two years earlier. The discontinuation of this product further complicates the company’s position amid the ongoing legal battles.
As Johnson & Johnson faces these legal setbacks and market uncertainties, it remains to be seen how the company will navigate these challenges in the coming months and beyond. Investors and industry analysts continue to closely monitor developments in this high-stakes legal battle, anticipating their potential impact on the company’s financial standing and reputation.
Featured Image: Megapixl
Author Faith Yakubu 
