Johnson & Johnson (NYSE:JNJ) stated on Wednesday that it plans to settle nearly all lawsuits in the U.S. that claimed its talc-based products cause ovarian cancer, pending approval from claimants. As part of this settlement, JNJ will pay the claimants a total of over $6.5 billion over a period of 25 years.
These cases have troubled JNJ financially and in terms of public perception for decades. However, the pharmaceutical and medical technologies company has always maintained that its now-discontinued talc products are safe for consumers, despite 99% of lawsuits alleging ovarian cancer from its talc products.
The company recorded a charge of $2.7 billion in the first quarter and raised its reserve for talc claims to around $11 billion.
JNJ’s Plan to Resolve the Lawsuit
If the settlement deal is approved by claimants, JNJ will be able to resolve the lawsuits through a bankruptcy filing of a subsidiary, LTL Management. However, courts have twice rejected JNJ’s efforts to resolve the lawsuits through the bankruptcy of this subsidiary. Johnson & Johnson had created this subsidiary to manage talc-related liabilities.
In order to resolve this lawsuit, the company will initiate a three-month voting period for claimants to achieve 75% approval for a bankruptcy settlement that would conclude the litigation and bar future lawsuits. JNJ’s management stated that previously, claimants did not have voting rights in LTL Management’s bankruptcy filings.
The company’s management added that this plan had “significant support from the overwhelming majority of the claimants.”
Is JNJ a Good Stock to Buy?
Analysts remain cautiously optimistic about JNJ stock, with a Moderate Buy consensus rating based on six Buys and seven Holds. Year-to-date, JNJ has declined by more than 6%, and the average JNJ price target of $174.62 implies an upside potential of 20.7% from current levels.
