After posting some strong earnings last week, Johnson & Johnson got even more good news this week. On Monday, CNN reported that two judges overturned verdicts that would have cost the company a combined $489 million. The plaintiffs were suing the company because they believed:
the company’s Baby Powder and Shower to Shower powder products caused their ovarian cancer. – via CNN
Johnson & Johnson aren’t out of the clear just yet. According to Reuters, Superior Court Judge Maren Nelson only “reversed the jury verdict and granted J&J’s request for a new trial.” This prolongs the ordeal for the company but has given them a brand new opportunity to defend themselves against these crippling allegations.
The outcome of this trial has a lot riding on it. Aside from the obvious financial implications, the company’s reputation would be severely damaged if the plaintiffs were proved correct.
The company is also in the midst of pursuing an aggressive drug plan which could also be threatened by a loss of credibility. This could be particularly dangerous since big pharma stocks often ride on the approval of their major drugs to drive their stock and sales forward. If this new trial has any effect on Johnson & Johnson’s reputation, those plans could be on shaky ground.
Investors should be relieved that Johnson & Johnson dodged this legal bullet, but should not be under any false pretences; the company has only prolonged their battle. However, this extension may give them the breathing room to move the company forward in the meantime and could result in a favourable outcome when all is said and done.
To read CNN’s article on the Johnson & Johnson baby powder verdict reversal, click here.
To read Reuters’ article on Johnson & Johnson’s legal victory, click here.
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