A closely watched talc trial in California goes against Johnson & Johnson (JNJ), adding uncertainty around whether tens of 1000’s of other plaintiffs suing the corporate will sign on to J & J’s proposed $8.9 billion settlement offer or seek to get their very own days in court. Jim Cramer believes the biopharmaceutical company was “too hopeful” about winning. “The plaintiff system is stacked against them,” Jim said. Still, he added, “I feel J & J is a terrific American company, I feel they’ll see through this. … They should be a bit more realistic about what they are saying.” Jim’s conversations with J & J’s legal team led him to imagine there could possibly be a path to victory in what we expect is a pivotal case . But on Tuesday, J & J was ordered to pay $18.8 million after jurors present in favor of 24-year-old Emory Hernandez Valadez who claimed in his lawsuit that he developed mesothelioma, a deadly cancer linked to asbestos, from exposure to J & J talc products. Ultimately, we’re undecided how this decision will impact J & J’s separate case in federal court in search of bankruptcy for a latest subsidiary, LTL Management, where the corporate has siloed its talc litigation exposure. Often times in bankruptcy proceedings, there is a pause on latest cases going to trial. However the Valadez claim was allowed to proceed as a consequence of his failing health. JNJ YTD mountain Johnson & Johnson YTD performance The decision is “very significant,” based on Moshe Maimon, partner at Levy Konigsberg LLP, who has won significant judgments in talc suits against J & J brought on behalf of his clients. “Verdicts just like the Valadez case advance the reason behind resolving the talc liability rather more than bankruptcy filings,” Maimon said. J & J has said that over 60,000 claimants support its latest $8.9 billion settlement to be paid out over 25 years. Nevertheless, there are some 40,000 others who object. Support from a 75% supermajority of claimants would set a transparent path to victory within the LTL case. Johnson & Johnson issued an official statement following the decision in favor of Valdez, meaning to appeal. “We thank the jurors for his or her efforts but intend to pursue an appeal based on erroneous rulings by the trial judge,” J & J said Wednesday. J & J has staunchly denied its now-discontinued talc products ever contained asbestos or ever caused cancer. The following step on this years-long legal saga is prone to come by in early August from the court of U.S. Chief Bankruptcy Judge Michael Kaplan within the LTL bankruptcy proceedings. If Kaplan dismisses the bankruptcy proposal, J & J will return into the tort system. In that case, the corporate intends to “fight the claims aggressively,” based on Erik Haas, worldwide vp of litigation at J & J, who spoke during Thursday’s second-quarter post-earnings call. “We feel very confident in our ability to prevail within the overwhelming majority of claims as we now have done up to now within the tort system,” he added. J & J reported strong second-quarter profit and revenue Thursday. While the stock popped on positive financial results — and added to those gains Friday — the talc issue continues to be an overhang. Even so, J & J got just a few of price goal increases on Wall Street on Friday. One was from Stifel, which raised its PT to $175 per share from $165 and kept its hold rating. One other one was from Credit Suisse, which went to $175 from $170 and maintained its neutral rating. SVB Leerink increased its PT to $190 from $186 and reiterated its outperform buy-equivilant rating. Just hours after Thursday’s Q2 release, we reaffirmed our 1 rating and $195 price goal on the stock. While encouraged by the corporate’s strong operating results and management’s update on its Kenvue (KVUE) separation, we remain cautious as a consequence of the talc situation. “We do not anticipate additional individual actions” outside the bankruptcy beyond the Valadez case, Haas added in the course of the call. Nevertheless, Maimon expects there to be more litigation ahead: “There will probably be claimants and plaintiffs who want their day in court and who will push their cases to trial.” On this scenario, J & J will likely go down the road of settling the talc legal disputes, which is historically how a majority of such cases end, he explained. The J & J subsidiary LTL Management filed for Chapter 11 bankruptcy to guard against talc litigation while resolving the 1000’s of lawsuits filed against the corporate. The entity, which was created to carry the talc liabilities, proposed the $8.9 billion settlement to be paid out in segments over 25 years to claimants as a way to finish continued talc litigation. Looking ahead, there’s concern that Tuesday’s verdict in California could sway other plaintiffs to opt out of the settlement. We imagine there’ll only be pressure off the corporate and a greater path forward for what investors should do next when there’s more clarity across the proposed talc compensation plan. Bottom line The uncertainty across the fate of the bankruptcy is making us hold off on adding to our J & J position. Nevertheless, Jim said this can be a problem “for the stock, not for the corporate.” Outside of the talc saga, J & J’s business fundamentals are very strong. Jim likes fast-growing J & J for its AAA balance sheet and its great product pipeline, which he believes are long-term catalysts for the stock. The split-off of J & J’s consumer health division into Kenvue, which went public in May, also needs to create more value for shareholders over time. The upper growth pharmaceuticals and medical technology businesses are remaining as the brand new J & J. The Kenvue separation is predicted to be accomplished before the tip of the yr. (Jim Cramer’s Charitable Trust is long JNJ. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked a few stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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On this photo illustration, a container of Johnson and Johnson baby powder is displayed on April 05, 2023 in San Anselmo, California.
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A closely watched talc trial in California goes against Johnson & Johnson (JNJ), adding uncertainty around whether tens of 1000’s of other plaintiffs suing the corporate will sign on to J&J’s proposed $8.9 billion settlement offer or seek to get their very own days in court.