Shares of Johnson & Johnson (J&J) on Friday fell 10 percent and were on track to post their biggest percentage drop in more than 16 years, after Reuters reported that the pharma giant knew for decades that cancer-causing asbestos lurked in its Baby Powder.
The decline in shares erased about US$40 billion from J&J’s market capitalization, with investors worrying about the effect of the report as the company faces thousands of talc-related lawsuits.
The stock was the biggest drag on the broader Dow Jones Industrial Average and S&P 500 indices and was among the most traded on US exchanges. About 28 million shares exchanged hands by 1:30pm in New York trading, more than three times its 25-day moving average.
J&J was found to have known about the presence of small amounts of asbestos in its products from as early as 1971, a Reuters examination of company memos, internal reports and other confidential documents showed.
The report also said the company had commissioned and paid for studies conducted on its Baby Powder franchise and hired a ghostwriter to redraft the article that presented the findings in a journal.
In response to the report, the company said “any suggestion that Johnson & Johnson knew or hid information about the safety of talc is false.”
“This is all a calculated attempt to distract from the fact that thousands of independent tests prove our talc does not contain asbestos or cause cancer,” J&J global media relations vice president Ernie Knewitz wrote in an e-mailed response to the report.
Baby Powder is asbestos-free, the company said, adding that it would continue to defend the safety of its product.
J&J had in 1976 assured the US Food and Drug Administration that no asbestos was “detected in any sample” of talc produced from December 1972 to October 1973, while at least three tests by various labs from 1972 to 1975 found asbestos in J&J talc.
The company has been battling more than 10,000 cases claiming its Baby Powder and Shower to Shower products cause ovarian cancer. The products have also been linked with mesothelioma, a rare and deadly form of cancer that affects the delicate tissue that lines body cavities.
While J&J has dominated the talc powder market for more than 100 years, the products contributed to a mere 0.5 percent of its revenue of US$76.5 billion last year. Talc cases make up fewer than 10 percent of all personal injury lawsuits pending against the company.
However, Baby Powder is considered essential to J&J’s image as a caring company — a “sacred cow,” as one 2003 internal e-mail put it.
“We see today’s news potentially impacting sales of everything from baby shampoo to prosthetic hips,” CFRA Research analyst Colin Sarcola said. “Given these elevated risks, we no longer feel J&J shares are attractive at recent prices.”
Shares were last down 8 percent at US$135.85, also pulling down the broader S&P 500 healthcare index.
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