J&J’s (NYSE: JNJ) Former Talc Supplier Intends to File for Bankruptcy

Summary

  • Imerys Talc America talc supplier of J&J is seeking bankruptcy to evade mass litigation matters
  • J&J is awaiting phase 3 trial of its Covid-19 vaccine shortly, which would help in determining the efficacy and safety of the vaccine

American multinational, Johnson & Johnson (NYSE: JNJ) seems to be in a tight spot as Imerys Talc America Inc, which supplied talc for Johnson’s Baby Powder, is pressing ahead in an effort to get out of the lawsuits over its talc mining operations in the United States.

The talc supplier of J&J has been alleged of selling products that cause cancer. In 2018, more than 20 women claimed that the talc was tainted with asbestos. Eventually, Imerys agreed to pay $5.5 million prior to trial. However, the jury asked J&J to pay $4.7 billion in damages in the same case.

Also read: Study suggests Pfizer-BioNTech vaccine is effective against new Covid-19 strain

The talc miner, Imerys SA had agreed to resolve more than 14 thousand lawsuits by turning over its North American operations. The company was sold for $223 million in 2020, and these proceeds were earmarked to settle claims related to cancer. The former talc company is now seeking immunity against cancer claims and intends to file bankruptcy. Companies are using bankruptcy law to evade mass litigation matters. This shall cause more trouble for Johnson & Johnson as it would be easier for people to target the medical device company.

Meanwhile, in a separate development, Johnson & Johnson is expected to report interim data from the phase 3 trial of its Covid-19 vaccine shortly. These results would help in determining the efficacy and safety of the vaccine. Favourable results could lead to FDA approval for Johnson & Johnson. The company has underpinned hopes for further growth on the Covid-19 vaccine. Most importantly, an effective Covid-19 vaccine from J&J could boost the brand image of the company that has been tarnished due to its endorsement on cancer-causing products.

In its last trading session on Tuesday, shares of Johnson & Johnson were marginally down by 0.78 per cent from the previous price close and stood at $158.13. Till yesterday, the shares of the world's biggest maker of health care products have outperformed the sector as it gained nearly 7 per cent in the last one month.

The investors are expecting the company to do well in its upcoming earnings release, which is due on 26 January 2021. In terms of valuation ratios, J&J has been trading at a premium for a while in contrast to the industry average; the Forward P/E ratio of the company stood at 17.93 while the Industry’s Forward P/E stood at 14.25.

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