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$66 billion wipeout: Johnson & Johnson shares plunge after asbestos report

Johnson & Johnson's drop of 11 per cent in Friday's (US time) trading may bring on deja vu for some investors after a Reuters report said the company knew for decades that asbestos was sometimes present in its baby powder.

Bloomberg News reported in September 2017 that documents unsealed in a lawsuit showed that J&J has known for decades that its talc products include asbestos fibers and that the exposure to those fibers can cause ovarian cancer.

The last time shares of the New Brunswick, New Jersey-based drugmaker came under this much pressure was due to asbestos concerns back in February, after traders circulated a blog post focused on worries about what might be uncovered during litigation.

The shares fell as much as 11 per cent that day, even as Wells Fargo called the concerns overblown.

Analyst Lawrence Biegelsen reiterated that call Friday and said the drugmaker's liability would be just US$6.5 billion ($9.5b) if the current number of cases were to double.

Fast forward to Friday, where the intraday move wiped out as much as US$45b ($66.1b) in market value. Susquehanna litigation analyst Tom Claps said in an email that "today's Reuters story about JNJ's talc litigation is not 'new news."'

In July, a jury ordered the company to pay US$4.69b to women who claimed asbestos in the products caused them to develop ovarian cancer.

J&J is facing other legal pressures as well. It has started settling thousands of claims that allegedly defective artificial hips sold by the company hurt patients.

Bloomberg reported earlier this week that the company was willing to pay more than US$400 million to settle about 3,300 of the 10,000 suits targeting its Pinnacle line of hip-replacement devices, citing people familiar with the matter.

Shares of J&J fell 10 per cent to $132.95 at 11:54 a.m. in New York after earlier touching as low as $130.20.

"JNJ has been facing talc/asbestos litigation for years," Claps wrote in response to questions. He said there have been a number of trials where plaintiffs showed evidence suggesting the company knew and concealed the risks. "Interestingly," he said, "JNJ's stock has taken a bigger hit today than it did after that US$4.7b verdict."

Bloomberg Intelligence litigation analysts Aude Gerspacher and Holly Froum estimate that the New Brunswick, New Jersey-based company could be on the hook for as much as US$10b to US$20b in settlements from an estimated 11,000 pending talc cases.

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