A string of victories in talc litigation seems like a good sign for
Johnson & Johnson stock,
but the real test is coming soon.
On Friday, a jury in a state court in Missouri decided in Johnson & Johnson’s (ticker: JNJ) favor in a lawsuit brought by a woman who claimed that asbestos in Johnson & Johnson’s baby powder had caused her ovarian cancer.
The company faces lawsuits by more than 15,000 plaintiffs who say they were injured by the company’s body powders. Despite a Food & Drug Administration warning in the fall that the agency had found trace amounts of asbestos in a bottle of Johnson & Johnson’s baby powder—a finding the company later claimed was based on flawed tests—Johnson & Johnson has had a string of recent successes defending itself in court.
“This is the fourth consecutive verdict in favor of Johnson & Johnson in these cases and the eighth defense verdict this year,” said Johnson & Johnson spokesperson Kimberly Montagnino in a statement. “The jury carefully considered the decades of independent clinical evidence, which show Johnson’s Baby Powder is safe, does not contain asbestos, and does not cause cancer.”
analyst Kristen Stewart wrote Monday that the verdict was particularly noteworthy because Missouri state courts have handed major defeats to the company in the past, including a $4.7 billion talc verdict last July, which is currently under appeal.
“We view the recent news flow on J&J’s talc litigation to be favorable,” Stewart wrote.
Yet the biggest test is expected soon. A large number of talcum powder cases have been collected in a single federal proceeding in New Jersey, where a key evidentiary ruling could be handed down any day by the presiding judge.
The back story. Shares of Johnson & Johnson are up 13.2% so far this year. Litigation over talc, opioids, and other products have weighed on the stock. The company has said it faces personal injury litigation from 100,000 plaintiffs. Yet analysts are increasingly bullish on Johnson & Johnson stock. On December 17, Morgan Stanley analyst David R. Lewisupgraded shares to Overweight from Equal-weight, and on December 19 Barclays’ Stewart did the same.
What’s new. Johnson & Johnson’s victory in Missouri was the second win for the company in a talcum powder case that week. According to a Bloomberg report, company lawyers argued that the ovarian cancer suffered by the plaintiff, Vickie Forrest, was caused by endometriosis, not baby powder. Forrest had said she had used the powder for more than 30 years, and had undergone surgery and chemotherapy.
“It’s disappointing that J&J is going to see this as approval of their continued sale of talc-based baby powder that harms women,” said one of Forrest’s attorneys, Ted Meadows, according to the Bloomberg News report.
Johnson & Johnson has argued strongly for years that their baby powder doesn’t cause cancer. The stock dropped in the fall, after the FDA said it had found trace amounts of asbestos in a single bottle of baby powder, and Johnson & Johnson recalled the lot with which the bottle had been sold. In December, the company blamed the FDA’s finding on sample contamination or analyst error. The FDA stood by its findings.
Looking forward. Over the summer, the federal judge in New Jersey overseeing the combined proceeding for certain talc cases, called a multidistrict litigation, held a so-called Daubert hearing to determine which experts will be allowed to testify during coming trials. The parties submitted briefings in the fall. An order from the judge could come any day.
“We continue to await the Daubert Ruling in the Multi-District Litigation cases in the U.S. District Court for the District of New Jersey, due any day but it could also be weeks,” wrote Stewart. “This determines which experts present in the bellwether cases. Our view in sitting in on the hearings in July is that J&J’s experts were very credible; the Plaintiffs’, less so.”
Shares of Johnson & Johnson were flat on Monday morning.
Write to Josh Nathan-Kazis at firstname.lastname@example.org