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Highlights

  • Settlement Rejected: A Texas bankruptcy judge dismissed J&J's $10 billion settlement proposal for talc-related cancer claims.

  • Stock Drops: J&J shares fell 7.6%, closing at $153.25, marking a sharp reversal from its recent breakout.

  • Legal Battle Continues: The company now plans to fight the lawsuits in civil court, facing over 60,000 claimants.

 

Johnson & Johnson (NYSE:JNJ) suffered a significant legal blow on Tuesday, as a Texas bankruptcy judge rejected its $10 billion proposal to resolve thousands of lawsuits alleging its talc-based baby powder caused cancer. The ruling sent J&J’s stock tumbling 7.6%, closing at $153.25.

Bankruptcy Strategy Fails Again

This marks the third time J&J’s bankruptcy strategy has been rejected. The company had sought to offload its talc-related liabilities into a subsidiary, which would then declare bankruptcy—a controversial tactic aimed at managing mass litigation.

Judge Christopher Lopez ruled that J&J improperly solicited votes from claimants and failed to allow sufficient time for responses. He determined that at least half of the votes “cannot count”, effectively invalidating the company’s argument that it had enough support for the settlement.

J&J Responds, Vows to Fight Lawsuits

Following the ruling, J&J announced that it will return to the civil court system to fight the claims, maintaining that its talc products are safe and asbestos-free. The company stopped selling its talc-based baby powder in the U.S. in 2020, replacing it with a cornstarch-based version, though it continues to sell the product overseas.

J&J faces more than 60,000 lawsuits from claimants alleging that asbestos in its talc products led to ovarian cancer and mesothelioma. The company has consistently denied these allegations.

Stock Reaction and Investor Sentiment

J&J’s stock had broken out of a cup base pattern on March 4, but Tuesday’s plunge put it 9% below its breakout level. Analysts caution that when a stock falls 7% to 8% below a buy point.