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JNJ sheds light on why its settling some opioid cases instead of fighting in court

Anjalee Khemlani
Senior Reporter

Johnson & Johnson (JNJ) is feeling the heat on all sides, as it fends off lawsuits related to its involvement in the opioid crisis and ongoing controversies over its iconic baby powder.

On Friday, the stock tumbled after the company issued a partial voluntary recall, after traces of asbestos were found in a “single lot” of baby powder. The news momentarily stole the shine from a third quarter earnings report that defied expectations, even as mega-sized opioid settlements proliferate around the country.

However, JNJ is mostly unfazed by these developments, at least publicly. In this week’s Q3 earnings call, CFO Joseph Wolk shed some light on the company’s surprise decision to settle with two Ohio counties, rather than fighting it in court.

“In Ohio you saw something different,” Wolk said, explaining a “divergent paths” approach that may hint at JNJ’s future strategy.

“We saw a reasonable amount in proportion to other companies that were involved as defendants,” he said. “We were particularly pleased to see that the funds were going to victims of opioid addiction and so for many reasons there we though the best path for all stakeholders was settlement.”

Settling cases is “something we will always take into account in terms of what is the best solution for all stakeholders, including investors who obviously want certainty,” Wolk added.

The $20.4 million combined settlement last week took some JNJ watchers by surprise, given that the health care giant has typically been unafraid of taking its chances in front of a jury — a luxury it has given its hefty balance sheet.

Recently, S&P analyst David Kaplan told Yahoo Finance that a landmark $572 million Oklahoma opioid verdict may be playing a role in JNJ’s thinking.

“My sense is that in the Oklahoma case, they were the last ones standing and they kind of bore the burden for everybody,” he said.

“I think that they don’t want to stand there alone. It was a little bit of a surprise to me,” according to Kaplan.

Meanwhile, JNJ is reportedly working on a $4 billion settlement to avoid more than 2,500 opioid lawsuits, according to the Wall Street Journal. That sum is significantly less than the $50 billion experts conservatively estimated.

JNJ is one of several pharmaceutical defendants in the cases, along with OxyContin maker Purdue Pharma, Endo International, Mallinkrodt and Teva Pharmacueticals, which is also said to be working on a settlement.

Endo and Mallinkrodt have settled some cases, and drug distributors AmeriSource Bergen, McKesson and Cardinal Health are in talks to settle all cases for $18 billion.

Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem

Read the latest financial and business news from Yahoo Finance

Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem

Read the latest financial and business news from Yahoo Finance