Johnson & Johnson's talc settlement of ovarian cancer litigation helped lift the stock to fresh record highs Tuesday. This deal, however, is not the sole — or even the best — reason investors should own it. Shares of J&J traded as high as nearly $275 earlier, a move Jim Cramer called "excessive to the point" where he questioned whether it would hold. Eventually, the stock lost some steam. The rally followed J&J's announcement Monday evening that it reached a deal aimed at ending about 15 years of litigation over claims that its talc-based baby powder and other talc products led to ovarian cancer. "It's a major landmark victory for J&J," Jim Cramer said earlier on CNBC. "This may be the high watermark of class actions against the company." The Club has a buy-equivalent 1 rating on the stock.
As part of the $5.5 billion settlement, J&J will pay $3 billion in 2027, with no further payments before 2028. The deal, covering roughly 76,000 cases, is contingent on participation from at least 95% of the claimants. Two years ago, J&J offered $8 billion to settle the ovarian cancer cases as part of a bankruptcy proposal that was rejected by the judge. "We view the news positively, because the $5.5 billion amount is less than the 2024 proposed settlement," Leerink analysts wrote late Monday.
Monday evening's announcement follows J&J's previous settlement of most of the cases alleging its talc products contained asbestos and caused mesothelioma. According to J&J, the ovarian cancer and mesothelioma claims were "meritless" and unsupported by science or reliable expertise.
Still, J&J stopped selling talc-based baby powder in North America in 2020 and worldwide by 2023.
