On this photo, a bottle of Johnson & Johnson baby powder is on display on a table on November 12, 2021 in San Anselmo, California.
Justin Sullivan | Getty’s paintings
Johnson & Johnson shares rose Wednesday after the corporate offered to pay $8.9 billion to settle 1000’s of claims that its baby powder and other talc-containing products cause cancer.
Greater than 60,000 applicants have pledged to support a proposed resolution that might require bankruptcy court approval, the corporate announced in submission of securities late Tuesday.
J&J shares closed nearly 4.5% higher on Wednesday. The corporate’s market value is over $430 billion.
The pharmaceutical giant also said its subsidiary LTL Management had filed for Chapter 11 bankruptcy protection after its first attempt bumped into legal trouble. The subsidiary is taking tens of 1000’s of lawsuits to cut back J&J’s litigation and settlement losses.
Some attorneys representing plaintiffs within the talk lawsuits called J&J’s proposal a “significant victory” in a legal battle that lasted greater than a decade.
On Wall Street, some analysts were also encouraged by J&J’s move despite uncertainty over the ultimate consequence of the proposal.
JPMorgan analyst Chris Schott on Thursday called the proposed settlement positive for the corporate in a note. He said the bank sees the present talc headlines as a “larger overhang” for the corporate in comparison with the actual value of the settlement.
The proposed $8.9 billion settlement can also be according to JPMorgan’s estimate of $8 billion to $10 billion, Schott noted.
A Thursday note from Morgan Stanley analyst Terence Flynn shared a similarly positive tackle the J&J movement. But Flynn said he’s waiting for clarification on how 60,000 reasons ties in with the 40,300 reasons cited in J&J’s recent 10-K filing, and roughly 37,500 pending actions on branded talc packs.
It is also unclear whether the proposed settlement will probably be approved by the bankruptcy court, Bank of America analyst Geoff Meacham noted on Thursday. Meacham pointed to J&J’s legal problems with LTL Management’s application for bankruptcy protection.
Judge he confirmed J&J’s ability to make use of its Chapter 11 strategy in February 2022. Nevertheless, the U.S. Court of Appeals for the third Circuit overturned the ruling in January this yr, finding that neither LTL nor J&J had a legitimate need for bankruptcy protection because they weren’t in ” financial difficulties”.
Bernstein analyst Lee Hambright acknowledged there are “many issues” to be resolved as J&J settles talc liability in bankruptcy court. Nevertheless, he added that the corporate believes “this can be a creative approach that may actually work.”