An entry sign to the Johnson & Johnson campus in Irvine, California.
Mark Ralston/AFP via Getty Images
Johnson & Johnson said a newly created subsidiary that holds the tens of thousands of lawsuits linked to its talc products was placed into bankruptcy.
J&J (ticker: JNJ) said the subsidiary, LTL Management LLC, filed for chapter 11 protection in the U.S. Bankruptcy Court in Charlotte, N.C.
Healthcare giant Johnson & Johnson itself didn’t file for bankruptcy. The stock was rising 0.59% to $161.06 in premarket trading Friday.
J&J said it would establish a a $2 billion trust to pay amounts the bankruptcy court determines that the LTL subsidiary owes. LTL has been allocated royalty revenue streams of $350 million to help with potential costs, J&J added.
Analysts at Cowen said in a note they “believe the steps potentially position JNJ to efficiently and equitably resolve the talc litigation, supported by precedent cases using the Chapter 11 process.”
“We are initially optimistic that the company can successfully utilize this divisional merger and bankruptcy strategy to permit the discharge of current and future talc liability,” the Cowen analysts added. “A global talc resolution would remove a chronic overhang on JNJ shares.”
Cowen rates the stock at Outperform with a price target of $195. Analysts surveyed by FactSet have an average weighting on the stock of Overweight and an average price target of $186.44.
Johnson & Johnson shares have risen less than 2% so far in 2021. The Dow Jones Industrial Average, of which J&J is a component, has risen 14%.
The Wall Street Journal noted that J&J was just the latest business to use chapter 11 as a way to settle large numbers of lawsuits over defective products or other alleged harms.
J&J has continued to stand by the safety of its talc products.
“We are taking these actions to bring certainty to all parties involved in the cosmetic talc cases,” said Michael Ullmann, executive vice president of Johnson & Johnson, in a statement. “While we continue to stand firmly behind the safety of our cosmetic talc products, we believe resolving this matter as quickly and efficiently as possible is in the best interests of the company and all stakeholders.”
Andy Birchfield, an Alabama-based injury lawyer who represents women alleging the company’s talc-based powders caused their ovarian cancers, strongly disagreed.
“This stinks,” Birchfield said in a statement. “They claim their product is safe and then attempt to hide behind bankruptcy. J&J can run but it can’t hide.”
Johnson & Johnson has fought lawsuits for years over claims that its baby powder caused cancer. In May 2020, the company stopped selling talc-based Johnson’s Baby Powder in the U.S. and Canada, attributing the decision to “changes in consumer habits.”
Write to Joe Woelfel at [email protected]
