Johnson & Johnson JNJ is awaiting the verdict of an Oklahoma court, which is slated to provide a ruling on Aug 26 in a lawsuit filed by the state against the company. The state claims that J&J is primarily responsible for the opioid epidemic in the state through aggressive marketing of its opioid-based drugs. The state has demanded $17 billion to be paid by J&J over 30 years to support the state’s initiatives for opioid addiction treatment and prevention programs.
We note that J&J has been indicted in more than 2,000 litigation filed by various state and local governments in the United States related to the marketing of its opioid drugs including Duragesic, Nucynta and Nucynta ER. Such litigation have also been filed against other pharma companies in several states.
Per a Reuters article, lawyers for the Oklahoma state stated that J&J, through its marketing campaigns, had made opioid analgesics the first-line treatment option for any pain since mid-90s. They also stated that it has created an opioid crisis leading to 6,000 deaths in the state so far. Moreover, data from the U.S. Centers for Disease Control and Prevention shows that opioid overdose resulted in 400,000 deaths countrywide from 1999 to 2017.
J&J has accepted opioid abuse as a real problem but denies its role in the widespread use of opioid-based drugs in the Oklahoma state. The company stated that its opioid analgesics were a tiny fraction of total sales from this class of drugs in Oklahoma.
Investors will be eagerly awaiting the ruling scheduled next week as the Oklahama litigation is a key overhang on the stock. A win for the state will likely increase pressure on the pharma companies involved in opioid litigation cases in several states. Settlements may run into billions of dollars. A potential loss for J&J would increase litigation costs significantly.
Please note that two other companies — Teva Pharmaceutical TEVA and privately-held Purdue Pharma — were also accused by the state of Oklahoma for their involvement in opioid abuse. However, both the companies settled with the state of Oklahoma outside court earlier this year. While Purdue Pharma had to pay $270 million, Teva paid $85 million. However, both the companies have denied any wrongdoing in the opioid abuse case.
Meanwhile, another opioid maker Endo International ENDP reached settlements with the state of Ohio and certain other U.S. Districts, earlier this month, in lawsuits related to abuse of branded and generic opioid medications. Allergan AGN too has reportedly settled cases related to its branded opioid drugs.
Other than the opioid litigation, litigation related to talc-based products are also a major overhang on J&J. A Missouri court ruled against the company last year in one of the pending cases related to its talc powder. However, J&J intends to appeal the case. Meanwhile, the ruling on Monday will provide insight into the company’s position in opioid cases and its litigation liabilities. Any negative update on the pending litigation will pull down the company’s stock.
Shares of J&J have increased 1.7% so far this year against the industry’s decline of 2.1%.
J&J currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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