American pharmaceutical giant Johnson & Johnson (JNJ) has once again faced rejection on its $10 billion plan to settle thousands of lawsuits alleging its baby powder and other talc products cause ovarian cancer. A U.S. bankruptcy judge rejected the company’s proposal on Monday, marking the third time its bankruptcy strategy has been blocked in court. Following the ruling, JNJ stock fell over 2% in pre-market trading on Tuesday.
JNJ’s Talc Lawsuit Struggles Continue
This decision marks another setback in Johnson & Johnson’s ongoing legal battle to settle its talc-related lawsuits. The company has been attempting to resolve thousands of cancer lawsuits by filing for bankruptcy through one of its subsidiaries. The strategy behind this is that the company could use the bankruptcy process to create a settlement fund, which would allow it to pay out a lump sum to claimants and resolve the lawsuits efficiently. However, this approach has faced legal obstacles.
The company had already tried this strategy twice before, both of which were unsuccessful in different courts. Now, in the latest attempt, U.S. Bankruptcy Judge Christopher Lopez ruled that J&J’s subsidiary wasn’t truly in financial distress and hence did not belong in bankruptcy court for this matter.
Meanwhile, Andy Birchfield, an attorney representing plaintiffs against the bankruptcy settlement, stated that J&J’s bankruptcy approach was simply a bad-faith attempt to dodge full responsibility. He added that with the decision, the plaintiffs are now moving forward directly to trial, where they will finally have the opportunity to present their cases to a jury and pursue the justice they rightfully deserve.
Is Johnson & Johnson a Risky Stock?
As J&J navigates these complex legal challenges, its stock performance remains sensitive to developments in the litigation. Investors and stakeholders will be closely monitoring the company’s next steps in addressing the ongoing talc-related lawsuits and their potential financial implications.
According to the TipRanks Risk Analysis tool, JNJ’s legal and regulatory risks account for 35% of its overall risks, much higher than the sector average of 23.7%.
Is JNJ a Buy or Sell?
According to TipRanks, JNJ stock has received a Moderate Buy consensus rating, with five Buys and eight Holds assigned in the last three months. The average share price target for JNJ is $167.36, which is almost similar to the current level.
Year-to-date, JNJ stock has gained nearly 15%.
