New Delhi: The shares of Johnson & Johnson fell by 10 per cent on Friday in the biggest percentage drop in over 16 years after a report claimed that the pharmaceutical company knew for decades that cancer-causing asbestos was present in its Baby Powder. After the report came to light, the company faced a loss of about $40 billion from market capitalisation, owing to the decline in the shares.
Wells Fargo reacted to the investors who were worried about the impact of talc-related lawsuits on the sales calling it an overstatement. As per reports, the financial services company reaffirmed its belief that J&J’s stock will outperform in spite of the allegation. A report by CNBC quoted analyst Larry Biegelsen as saying, “Even if all 11,700 talc cases settled for $280,000 per case (the highest per case settlement amount among the cases we’ve tracked), the total liability to JNJ would be $3.3 billion. With over $19 billion of cash and marketable securities at the end of the third quarter, we continue to see the talc litigation as manageable for the company.”
J&J knew about the presence of small amounts of asbestos in its baby powder products as early as 1971, stated the report by Reuters which was prepared after careful examination of the company memos, internal reports and other confidential documents. The report also claimed that the company had paid for the studies conducted on its Baby Powder franchise and a ghostwriter was allegedly hired to redraft the article published in a journal that mentioned the findings.
In an e-mailed response to the report, Ernie Knewitz, J&J’s vice president of global media relations reportedly said the report is a calculated attempt to disapprove the fact that the Baby Powder was asbestos free. In 1976, J&J stood firm they did not add any asbestos to their talc produced between December 1972 and October 1973. However, three of the tests conducted by the U.S. Food and Drug Administration showed evidence of asbestos in the talc sample.
(With Agency inputs)