J&J shareholders learn to live with questions

The risk to the firm run by Alex Gorsky from opioid litigation was considerable

  
Vials labelled "COVID-19 Coronavirus Vaccine" and sryinge are seen in front of displayed Johnson&Johnson logo in this illustration taken, February 9, 2021. Image used for illustrative purpose

Vials labelled "COVID-19 Coronavirus Vaccine" and sryinge are seen in front of displayed Johnson&Johnson logo in this illustration taken, February 9, 2021. Image used for illustrative purpose

REUTERS/Dado Ruvic/Illustration

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

NEW YORK - Johnson & Johnson took a big step Wednesday to putting its opioid problems in its past. The pharmaceutical firm joined three big drug distributors in a tentative $26 billion settlement, provided sufficient state and local governments sign on. The stock, however, hardly budged. With issues over talc and sunscreen looming, good and bad news will continue to be met with a ho-hum response.

The risk to the firm run by Alex Gorsky from opioid litigation was considerable. J&J was one of the larger suppliers of ingredients to make pills, and the overall threat of damages seemed gigantic. Over 3,000 lawsuits were filed, mostly by state and local governments. In 2019, an Oklahoma judge ordered J&J to pay $572 million in that state alone, which represents about 1% of the U.S. population.

The woes aren’t completely over. The overwhelming majority of local governments need to agree to the deal, among others. Still some hard-to-please parties including attorneys general from New York and Connecticut are on board, according to the Wall Street Journal. And J&J, for its part, will pay just $5 billion over nine years. That’s hardly a blip considering the tobacco settlement in 1998 has resulted in $145 billion of payments, according to the National Association of Attorneys General.

Still the news on Wednesday didn’t do much to relieve shareholders’ nerves: The stock was up less than 1%. Solid news that distracted from opioids this past year, also, has underwhelmed them. Analysts are expecting a 10% jump in its top line for 2021, according to estimates from Refinitiv, thanks somewhat to a vaccine against Covid-19. And yet J&J’s stock price performance, up 12% in the past year, has lagged Pfizer’s shares, which have increased 18%.

That’s partly because J&J’s woes are hardly over. The company faces over 30,000 plaintiffs claiming its baby powder and other talc products contained asbestos and were dangerous. It is mulling a plan to put related liabilities into a newly created business that would file for bankruptcy. Last week it pulled some sunscreens after finding they contained a carcinogen. Investors have plenty to feel relieved about, but just as many worries that follow. For now, they need to learn to live with anxiety.

CONTEXT NEWS

- Three drug distribution firms and Johnson & Johnson have announced a tentative $26 billion settlement with state attorneys general over claims they fueled an opioid epidemic. Under the settlement, AmerisourceBergen, Cardinal Health and McKesson will pay $21 billion between them over the next 18 years. J&J will pay $5 billion over nine years.

- The maximum payout requires that at least 48 states, 98% of litigating local governments and 97% of jurisdictions yet to sue sign on, according to a Reuters article, citing a person familiar with the settlement. More than 3,000 opioid lawsuits mostly by state and local governments have been filed, according to the article.

- States have 30 days to decide whether to agree.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Lauren Silva Laughlin, Amanda Gomez and Marjorie Backman) ((SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))


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