Walking Away From JNJ

Graphic, cover, JNJ 150%Graphic, STOCKjAW banne, Quality View

Looking

for trouble is unneeded. Plenty exists.  We’ve warned against one since August 29th.  It’s glowed right before us, everyday. JNJ, and it proved that trouble, clinically. On October 11, Bernstein analyst Lee Hambright lit-up JNJ with an upgrade to “Outperform,” and a price target of $155. Seven days later shares dropped -6.22% on greater than triple volume. Why? FDA testing revealed asbestos contamination in its’ baby powder. That came right on the heels of the massive judgment against the company for it’s antipsychotic Risperdal, creating a new nightmarish third legal front. That judgment was for $8 billion, for one individual.


Meanwhile, the company suggested it was “open” to a collective settlement of thousands of looming lawsuits relating to its’ part in the opioids plague. And in the foreground Purdue Pharma is being eviscerated on the very same charges. This month comes the start in Ohio of the first federal-level opioids case.


New Brunswick-based Johnson & Johnson has for decades been viewed as a cozy haven of stability and payouts to investors in all markets. Besides the Bernstein upgrade, eight days ago Barron’s named it as one of its’ five best dividend plays. For now JNJ is more known as a defendant, on multiple fronts. Their payouts in the future will look very different. “Walking Away From JNJ.”
 

 

_Google search JNJ_

jnj baby powder
It’s never good when Google looks like this for you. All of these are ads. Two are for law firms assembling class action lawsuits. JNJ is the target. And just last week Bernstein upgraded JNJ to “overweight.”

On

Tuesday October 8th a Philadelphia jury ruled that JNJ pay $8 billion in punitive damages to a single individual.  The punitive damages come on top of a $680,000 judgement in this case.  The successful case argued that JNJ failed to inform consumers of side effects from the use of the company’s antipsychotic Risperdal.  Below, Jim Cramer weighs in on JNJ:

 

“What you have here is the ultimate headline driven stock.  It’s been a very bad stock to own.  Why?  Litigation.” -Jim Cramer, 10-11-19 “Squawk on the Street” CNBC.

 

Johnson & Johnson JNJ: NYSE 10-18-19 Close.

Chart, JNJ, 10-18-19
A very choppy year gets worse for a grand company. Being a dividend “aristocrat” will not help when your products are linked with disease. Figure 1. documents JNJ’ s share price plummet 6.22% on 3.5x volume following the release of reports that the company recalled 33,000 bottles of baby powder after FDA testing discovered “trace” amounts of asbestos in the batch. JNJ is starkly underpreforming the SPDR Dow ETF, displayed on top in blue(SJChart.)

Subsequent

market commentary, and legal precedent, both indicate the likelihood of the court setting aside this out-sized judgement.  JNJ’s loss in this case, and the size of the punitive damages, highlight the following points:  JNJ’s legal battles over Risperdal have just began.  Currently the company faces more than 13,000 Risperdal cases.  The company is now battling waves of lawsuits on three fronts–suits from individuals, cites, counties, and stares.

 

JNJ faces more than 100,000 lawsuits on three fronts, talcum powder, opioids, and their antipsychotic Risperdal.  It seems questionable that anything like this can be accurately quantified, and thus labeled “manageable.”  The recent Bernstein upgrade of the stock reads as ill-fated, in light of the judgment awarded for just one Risperdal case just ended.  Total punitive damages were set at $8 billion, for a single individual.

 

 

pharma, mortar and pestle
Mashing up trouble. What kind would you prefer? We have four. It would seem impossible now for Johnson & Johnson to increase its’ troubles. Big pharma is by far the most hated industry in America. JNJ is now fighting on all sides, and the assault from Washington concerning drug pricing may be just beginning.

JNJ’s

battles will create “headline” risk for years if not decades, and could prove extraordinarily expensive.  Think the March 24, 1989 Exxon Valdez oil spill in the once pristine Prince William Sound.  JNJ’s vulnerability is massive, totaling over 100,000 cases.  Their problems are exacerbated by what many feel is a public “hatred” for price-gouging pharmaceutical firms.

 

As a healthcare conglomerate, JNJ has long been viewed by investors as a “defensive” position.  Currently it pays 2.94% dividend.  Including that dividend, JNJ has returned -4.6% over one year, 17.4% over three, and 45% over five.  During those three and five year periods, the company was not facing lawsuits involving talcum power, opioids, or Risperdal.  Now it is, and it’s early days on all.  Johnson & Johnson is the definition of legal trouble.  JNJ stock is a sell.  No dividend is worth all that, even from an aristocrat.

      

JNJ, Risperdal

Antipsychotic Risperdal and it’s maker on the firing line. Side effects can include breast enlargement in men/boys. Risperdal M- TABS 1mg disintegrating. Constant price increases have created “hate” by many Americans for pharmaceutical makers. Tuesday’s a$8 billion dollar judgement seems to demonstrate said.

 

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