J&J rallies after Oklahoma verdict as opioid liability fears ease

Anjalee Khemlani
·Senior Reporter
Updated

Johnson & Johnson (JNJ) stock rallied on Tuesday as investors considered whether the company’s liability in the opioid crisis may be lower than anticipated.

On Monday, an Oklahoma judge ruled that the drug giant and its subsidiaries were responsible for fueling the state’s opioid crisis — ordering J&J to pay $572 million.

Separately, Teva (TVA) and Purdue — which is reportedly offering to settle all opioid claims for $10 billion to $12 billion — previously settled the case against them for $85 million and $270 million, respectively.

Yet analysts pointed out that the Oklahoma verdict was far below a liability that could have been as high as $17 billion — and a drop in the bucket for J&J, which has a market cap of $345 billion.

J&J’s stock, traded on the New York Stock Exchange, rallied by over 2% to trade at $130.62 in Tuesday’s dealings.

Stocks for other pharma defendants in the Oklahoma and Ohio initially rose in sympathy after the verdict. In Tuesday afternoon dealings, however, most generic companies like Teva, Mallinckrodt (MNK) and Endo Pharmaceuticals (ENDP) were all down sharply.

Purdue

Judge Thad Balkman reads a summary of his decision to a full courtroom during the opioid trial at the Cleveland County Courthouse in Norman, Okla., Monday, Aug. 26, 2019. Balkman ruled in favor of the state of Oklahoma and ordered Johnson and Johnson to pay $572 million to a plan to abate the opioid crisis. (Chris Landsberger/The Oklahoman via AP, Pool)

Experts say that the company, even after the battering it took over allegations of tainted baby powder, can withstand the blow of its opioid litigation risk. J&J is one of the world’s most recognizable consumer brands.

UBS analyst Navin Jacob said in a note Tuesday that the opioid ruling doesn’t change the outlook the firm has on Johnson & Johnson or Teva, though the exposure for the latter could increase compared to previous estimates.

Teva has estimated $650 million as its exposure to the lawsuits, according to Jacob. Using Oklahoma as a baseline, total damages for all 50 states are likely to range between $3.9 billion and $16.8 billion, he said.

However, other defendants in the more than 2,000 lawsuits filed by states, counties and cities across the country remain an open question. J&J, along with other defendants, faces a multi-district lawsuit in October in Ohio.

In a statement Monday, Johnson & Johnson said it was going to appeal the lawsuit, which could extend the case to 2021.

Analysts say the J&J verdict focused on the marketing and distribution of the active ingredient in opioids, rather than the manufacturing of the pills themselves, which may turn out to be a positive for the company.

Meanwhile, distributors such as AmerisourceBergen (ABC), McKesson Corp. (MCK) and Cardinal Health (CAH) all fell following the verdict.

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Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem

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