In this photo, a bottle of Johnson & Johnson baby powder is displayed on a table on November 12, 2021 in San Anselmo, California.
Justin Sullivan | Getty Images
Johnson & Johnson Shares soared on Wednesday after the company offered to pay $8.9 billion to settle thousands of claims that its baby powder and other talc-based products caused cancer.
More than 60,000 plaintiffs have pledged support for the proposed resolution, which would require bankruptcy court approval, the company said in a statement. securities deposit late Tuesday.
J&J stock rose more than 3% on Wednesday morning. The market value of the company stands at around $426.24 billion.
The pharmaceutical giant also said its subsidiary LTL Management had filed for new Chapter 11 bankruptcy after its first attempt faced legal challenges. The subsidiary is taking on tens of thousands of lawsuits against talc in an effort to reduce J&J’s losses from litigation and settlements.
Some attorneys representing plaintiffs in the talc lawsuits called J&J’s proposal a “significant victory” in a legal battle that has spanned more than a decade.
On Wall Street, some analysts were also encouraged by J&J’s decision despite the uncertainty surrounding the final outcome of the proposal.
JPMorgan analyst Chris Schott on Thursday called the proposed settlement positive for the company in a note. He said the bank sees the ongoing talc headlines as the “most important overhang” for the company over an actual settlement value.
The proposed $8.9 billion settlement is also in line with JPMorgan’s $8-10 billion estimate, Schott noted.
A Thursday note from Morgan Stanley analyst Terence Flynn shared a similar positive view of J&J’s decision. But Flynn said he was waiting for clarification on how the 60,000 plaintiffs relate to the 40,300 plaintiffs named in J&J’s recent 10-K filing and roughly 37,500 actions in progress on the company’s cases of talc.
It’s also unclear whether the proposed settlement will be approved by the bankruptcy court, Bank of America analyst Geoff Meacham noted Thursday. Meacham pointed to J&J’s legal woes regarding LTL Management’s bankruptcy protection filing.
A judge affirmed J&J’s ability to use the Chapter 11 strategy in February 2022. But the United States Court of Appeals for the 3rd Circuit overturned the ruling in January of this year, saying neither LTL nor J&J had a need legitimate bankruptcy protection because they were not in “financial distress”. .”
Bernstein analyst Lee Hambright acknowledged there were “numerous issues” to work out with J&J to settle the talc’s liability in bankruptcy court. But he added that the company thinks “this is a creative approach that could actually work”.