J&J JNJ announced its decision to discontinue the global sales of its talc-based Johnson’s baby powder in 2023 amid multiple ongoing litigations and safety concerns. Instead, the company will transition to an all-cornstarch-based baby powder portfolio.
J&J faces more than 40,000 lawsuits for its talc-based products, primarily its baby powders, which allege that its talc products contain asbestos that causes cancer.
Per management, this is a commercial decision taken to benefit the company’s business in the long term and restore investor confidence in the company. Despite the decision to stop selling the product, management still maintains that the talc-based products are safe for use and do not cause cancer.
This decision to stop selling talc-based baby powder comes two years after J&J had permanently stopped selling the product in the United States and Canada over safety concerns in 2020.
There have been verdicts against J&J in its talc lawsuits. J&J has been ordered to pay hefty fines in this regard. In this regard, J&J was ordered by a Missouri court in 2018 to pay $4.7 billion in damages to 22 women who made such allegations, affirming a St. Louis court jury’s verdict given earlier. Though the verdict was subsequently reduced by an appeals court to $2.1 billion in 2020, it still rejected J&J’s appeal to overturn the 2018 jury verdict.
Shares of J&J have lost 2.3% in the year so far against the industry’s 0.7% rise.
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For better operational efficiency, J&J established a new subsidiary, named LTL Management LLC, last year in October, assigning its talc litigation claims. Post creation, this new subsidiary was immediately placed into bankruptcy, hence pausing the pending litigations.
As part of the measures to resolve these claims, J&J agreed to provide funding to LTL Management and even established a $2 billion trust in this regard. In addition, the pharma giant also allocated royalty revenue streams carrying a present value of over $350 million to the subsidiary.
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Zacks Rank & Stock to Consider
J&J currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the overall healthcare sector include Geron GERN, Merck MRK and Morphic MORF. While Morphic sports a Zacks Rank #1 (Strong Buy) at present, Geron and Merck each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 30 days, estimates for Morphic’s 2022 loss per share have narrowed from $3.47 to $1.75. Loss estimates for 2023 have narrowed from $3.96 to $3.77 during the same period. Shares of Morphic have lost 38.5% in the year-to-date period.
Earnings of Morphic beat estimates in three of the last four quarters and missed the mark just once, witnessing a surprise of 48.29%, on average. In the last reported quarter, MORF delivered an earnings surprise of 183.95%.
In the past 30 days, estimates for Geron’s 2022 loss per share have narrowed from 38 cents to 36 cents. Loss estimates for 2023 have narrowed from 36 cents to 35 cents during the same period. Shares of Geron have surged 68.0% in the year-to-date period.
Earnings of Geron beat estimates in three of the last four quarters and missed the mark just once, witnessing a surprise of 1.07%, on average. In the last reported quarter, GERN delivered an earnings surprise of 18.18%.
Estimates for Merck’s 2022 bottom line have increased from $7.29 to $7.31 in the past 30 days. Earnings estimates for 2023 have increased from $7.16 to $7.19 during the same period.Shares of MRK have risen 16.0% in the year-to-date period.
Earnings of Merck beat estimates in each of the last four quarters, with the average surprise being 16.79%. In the last reported quarter, MRK delivered an earnings surprise of 11.98%.
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