Johnson & Johnson is facing not one but two major litigation roundups over sales of its opioids and talcum powder products, leaving its share price “historically cheap.” But even as a pair of massive settlements loom, one analyst sees an opportunity for investors.
J&J could be in line to settle both its opioid and talc cases—as well as knock down an $8 billion Risperdal verdict handed down this week—to a combined $10 billion to $12 billion, Bernstein analyst Lee Hambright wrote in a Friday note to investors.
That total would significantly undershoot J&J’s “worst-case scenario” of $50 billion in liabilities that is factored into the drugmaker’s current $129.06 share price—leaving J&J as a major steal for investors. Hambright said he expected J&J to approach a resolution to all the cases within six to 12 months.
“Based on discussions with legal experts and the facts of the cases, we have a hard time seeing the worst-case scenarios playing out,” Hambright wrote. “We obviously cannot be sure about liability estimates or timelines to resolution, but we do believe JNJ could make progress toward resolution.”
All in all, Hambright forecasts a peak share price for J&J at $155 per share—roughly 20% higher than Thursday’s closing price.
One case where Hambright believes J&J will get off much lighter is with an $8 billion Risperdal verdict it received earlier this week. On Tuesday, a Philadelphia jury knocked the drugmaker over a young man developing breasts while taking J&J's antipsychotic drug. J&J said it would appeal the decision, and Hambright wrote that a likely payout would be about one-tenth the original cost—around $800 million.
J&J could also be showing promise in its nationwide talc cases after a hearing in multidistrict litigation involving thousands of lawsuits in August paved the way for a global settlement that could land at around $5 billion.
That potential deal assumes that J&J will be willing to go to the negotiating table with its talc cases. Earlier this week, the drugmaker scored its seventh jury trial win in a California lawsuit alleging its talc powder baby products caused a schoolteacher to develop mesothelioma. The case had been retried after an earlier jury reached a hung decision.
For every negative talc verdict the drugmaker has received, none have stood up on appeal, J&J said this week.
Most recently, in a separate California verdict earlier this month, a jury leveled a $40 million penalty against J&J. Just weeks before, a New Jersey jury had ordered the drugmaker to pay $37.3 million to four plaintiffs on the same grounds.
J&J could also be in line for a $5 billion settlement around thousands of opioid cases piling up in Cleveland, according to Hambright. The company chose to sidestep a bellwether trial in the case with a $20 million deal.
The drugmaker agreed earlier this month to pay $10 million in cash, $5.4 million in charitable contributions and $5 million for the legal expenses of Summit and Cuyahoga counties in Ohio. The company maintained it marketed its opioids responsibly, and it said in a statement that it's "open to identifying an appropriate, comprehensive resolution of the overall opioid litigation."
A $5 billion payout would be a bargain compared with the reported deal Purdue agreed to in September, valued at up to $12 billion.