Johnson & Johnson talc settlement sends JNJ to record high

The Johnson & Johnson talc settlement gave JNJ stock a fresh lift Tuesday, sending shares to record levels as investors reacted to a possible end to a long-running legal risk. For everyday investors, the deal matters because it could remove uncertainty that has followed one of the market’s biggest health care companies for years.

Johnson & Johnson said Monday evening that it had reached a $5.5 billion agreement aimed at resolving ovarian cancer claims tied to its talc-based baby powder and other talc products. CNBC’s Jim Cramer called the development a “major landmark victory for J&J” and said it may mark the “high watermark of class actions against the company.”

JNJ traded as high as nearly $275 earlier Tuesday, according to CNBC, before giving back part of the move. The stock is up nearly 30% this year, compared with about an 8.5% gain for the S&P 500.

What is in the Johnson & Johnson talc settlement?

The proposed settlement covers about 76,000 ovarian cancer cases, according to CNBC. Johnson & Johnson would pay $3 billion in 2027, with no additional payments due before 2028. The deal depends on at least 95% of claimants taking part.

A legal overhang is a risk that can weigh on a stock because investors do not know how costly a dispute may become. A settlement can help investors put a clearer number on that risk, although it does not erase every legal or reputational concern.

Leerink analysts viewed the announcement favorably, writing late Monday that the $5.5 billion figure was below Johnson & Johnson’s 2024 proposed settlement. Two years ago, the company offered $8 billion to settle ovarian cancer claims through a bankruptcy plan, but a judge rejected that proposal. Leerink has a buy-equivalent rating on JNJ, according to CNBC.

Johnson & Johnson has disputed the allegations. The company said the ovarian cancer and mesothelioma claims were “meritless” and not backed by science or reliable expert evidence. In its release, Johnson & Johnson said, “Studies show talc is safe, does not contain asbestos, and does not cause cancer.” The company stopped selling talc-based baby powder in North America in 2020 and ended worldwide sales by 2023.

Why did JNJ stock rise beyond the talc deal?

Cramer said the fading talc risk is positive, but he pointed to Johnson & Johnson’s drug and medical technology businesses as stronger reasons behind the stock’s appeal. CNBC said Cramer’s Charitable Trust is long JNJ and that the CNBC Investing Club has a buy-equivalent rating on the stock.

Johnson & Johnson’s oncology franchise has been a key part of the case. In the second quarter, multiple myeloma treatment Darzalex generated more than $4.2 billion in sales, up nearly 19% from a year earlier. Other multiple myeloma drugs also grew quickly: Carvykti sales rose nearly 50%, while Tecvayli sales climbed 57%, according to the company’s quarterly results cited by CNBC.

Chief Executive Joaquin Duato said on the company’s second-quarter earnings call that Johnson & Johnson is “on track to be the number one oncology company by 2030,” with projected sales above $50 billion.

Beyond cancer drugs, Johnson & Johnson won FDA approval in March for Icotyde, described by CNBC as the first oral IL-23 inhibitor for moderate-to-severe plaque psoriasis. The company also highlighted Ottava, its robotic surgical system, before the FDA approved it for several general surgery procedures, including gastric bypass, gastric sleeve, appendectomy and hiatal hernia repair.

That medtech opportunity could help a division that missed estimates in the second quarter, even as sales grew 4.5% to $8.93 billion. Cramer also noted a broader shift into defensive stocks such as health care as the artificial intelligence trade weakened. CNBC reported that the S&P 500 health care sector is up more than 5% month to date, while the information technology sector is down more than 5% and the broader S&P 500 has slipped almost 1% in July.

This story draws on original reporting from CNBC.