Johnson & Johnson announced on Wednesday its intention to allocate $6.5 billion over a span of 25 years to settle the majority of lawsuits in the United States alleging that its talc-based products were responsible for causing ovarian cancer, subject to approval by the claimants.
For decades, these lawsuits have posed both financial and public relations challenges for J&J, which maintains the safety of its talc baby powder and other talc products. Approximately 99% of the lawsuits related to talc filed against J&J and its subsidiaries are linked to ovarian cancer.
The company took a charge of roughly $2.7 billion in the first quarter to bolster its reserve for talc-related claims to around $11 billion.
Pending claimant approval, the proposed settlement would enable J&J to resolve the lawsuits through the third bankruptcy filing of a subsidiary, LTL Management.
Prior attempts by J&J to resolve the lawsuits via the bankruptcy of this subsidiary were rejected by courts. LTL Management was established to absorb the company’s talc liabilities.
J&J will initiate a three-month voting period for claimants, aiming to secure a 75% support threshold necessary for a bankruptcy settlement that would conclude the litigation entirely and prevent future lawsuits.
Unlike in previous bankruptcy cases involving LTL Management, claimants will have the opportunity to vote in this instance, as per J&J executives during a call with investors.
“We firmly believe this plan is in the best interest of claimants and should receive a favorable and immediate confirmation from the bankruptcy court,” stated Erik Haas, J&J’s worldwide vice president of litigation.
Haas asserted that the settlement offers claimants a significantly better recovery than what would be achievable through trial, emphasizing that the majority of claimants have not received or are not anticipated to ever receive compensation through litigation.
Nevertheless, some substantial verdicts have been awarded to claimants through litigation, including a roughly $2 billion award to 22 women attributing their ovarian cancer to asbestos in J&J’s talc products.
J&J’s shares surged more than 2% in premarket trading following the announcement.
The company clarified that the remaining pending lawsuits pertain to mesothelioma, a rare cancer, and will be addressed separately from the new settlement plan. It has already settled 95% of the mesothelioma lawsuits filed thus far.
Additionally, J&J revealed that it has reached comprehensive settlements to resolve an investigation by a coalition of over 40 states regarding allegations of misleading patients about the safety of its talc products.
Furthermore, an agreement in principle has been reached to settle claims brought by suppliers of its talc, including Imerys Talc America and Cyprus Mines Corporation, and their affiliates.
