J&J’s tainted-talc risk expands as cancer trials triple in 2019

Bloomberg

Johnson & Johnson paid a steep price this year for claims that its celebrated baby powder was contaminated with asbestos. Problem is, 2019 could be even worse.
A jury ordered the company in July to pay $4.69 billion to 22 women who blamed the talc-based product for causing their ovarian cancer. The prospect of similar judgments helped erase $45 billion in J&J’s market value, with the shares headed for their biggest annual loss in a decade.
Next year, the world’s largest maker of healthcare products is scheduled to face almost three times as many baby-powder trials. Four will be in St. Louis, the same state court where the company lost the July verdict.
Several of the trials involve multiple alleged victims, including one with 38 women set to start in August, according to court filings.
“The increased number of trials, especially in what is considered a plaintiff-friendly venue like St. Louis, doesn’t augur well for J&J,’’ said Elizabeth Burch, a University of Georgia professor who teaches about mass-tort law. “The more they lose, the more cases will be filed. I just don’t see how they are going to get a handle on this litigation.’’
Investor concern over litigation risk has grown following media reports of internal documents showing company officials have known since the 1970s that some of the talc used in baby powder contained asbestos. Thousands of plaintiffs now accuse J&J of hiding the cancer risk to protect a brand that’s been a staple in American homes for more than a century.
Baby powder is mostly talc, a mineral used to keep skin dry and as an astringent to prevent diaper rash. But geological formations that contain talc also yield asbestos, a mineral used in products such as building insulation. Scientists have found links between asbestos and mesothelioma, a rare form of cancer. Plaintiffs’ lawyers claim studies have also shown a link between talc and ovarian cancer.
Women suing J&J contend they got cancer either from exposure to asbestos-laced talc or by using the powdery substance. New Brunswick, New Jersey-based J&J has insisted the
product is safe.
Juries in states including Missouri, California and New Jersey have handed down more than $5 billion in total awards to plaintiffs since suits started going to trial in 2016. However, some of those verdicts have been thrown out by judges.

Committed Defense
“Johnson & Johnson is committed to defending these cases based on the strong scientific
evidence showing that talc does not cause cancer,” Ernie W. Knewitz, a company spokesman, said in an emailed statement.
“Of the last five trials in 2018, two were decided in our favour, and there have been hung-jury three mistrials, reflecting the juries’ appreciation of our argument,” Knewitz said. “Every case that has gone through the appellate process has also been reversed, and we feel confident that the five cases currently on appeal will be reversed as well.”
Still, the risk for the company is significant, according to Bloomberg Intelligence litigation analyst Holly Froum. To resolve almost 12,000 talc cases, J&J may have to cough up as much as $20 billion in settlements, Froum estimates. That would provide an average per-case payout of $1.67 million.
“I don’t believe they did anything wrong, but I think this is going to be a major overhang for a long time,’’ said Jeff Jonas, a portfolio manager at Gabelli Funds, which owns J&J shares. “I could see the number of lawsuits doubling or more, and just the cost to defend them all could reach into the billions.’’
Earlier this month, J&J settled its first baby-powder case, teaming up with talc supplier Imerys America Inc. to pay more than $1.5 million to settle a Manhattan woman’s claims. The company said the move didn’t signal it was open to the idea of a global settlement.