J&J was ordered to pay $572 million for helping fuel the opioid epidemic. The company's market cap increased $15 billion in response.

Reuters
  • An Oklahoma judge ruled against Johnson & Johnson Monday afternoon in a case accusing the drugmaker of fuelling the US opioid epidemic.
  • He ordered the company to pay the state $US572 million, well under the more than $US17 billion sum sought by the state of Oklahoma. It also fell short of the $US1 billion consensus estimate expected by experts surveyed by Bloomberg.
  • J&J stock rose more than 5% in aftermarket trading following the ruling. The company’s market cap increased roughly $US15 billion on the news as the penalty came in far lower than anticipated.
  • The Oklahoma case was the first state lawsuit to reach trial, and will likely set a precedent for several opioid-related cases to follow.
  • Watch Johnson & Johnson trade live here.

An Oklahoma judge ruled against Johnson & Johnson in the state’s case accusing the pharmaceutical giant of sustaining the US opioid crisis.

The pharmaceutical company’s stock rose more than 5% in aftermarket trading following the ruling. District Judge Thad Balkman ordered J&J to pay Oklahoma $US572 million, enough to fund the state’s plan against the epidemic for one year. The state had previously requested more than $US17 billion in damages, while experts expected a ruling closer to the $US1 billion mark.

Despite the judge’s decision against J&J, the company’s market cap jumped by as much as $US15 billion Monday afternoon. J&J’s June regulatory filings revealed nearly $US15 billion in cash reserves, signalling the company can easily pay the judge’s fine.

J&J has previously denied wrongdoing, and announced Monday it will appeal the decision. It issued the following statement with regard to its Janssen Pharmaceutical subsidiaries:

“Janssen did not cause the opioid crisis in Oklahoma, and neither the facts nor the law support this outcome,” said Michael Ullmann, executive vice president and general counsel of J&J. “We recognise the opioid crisis is a tremendously complex public health issue and we have deep sympathy for everyone affected. We are working with partners to find ways to help those in need.”

Oklahoma’s attorney general Mike Hunter already led other pharma giants to settle with the state. Purdue Pharma – producer of OxyContin and a primary target for the US opioid crisis – settled with the office for $US270 million in March. An Oklahoma judge approved a $US85 million settlement with Teva Pharmaceutical Industries in June. Both companies denied wrongdoing.

State officials claimed Oklahoma’s opioid epidemic caused more than 6,000 fatalities over nearly two decades. More than 70,000 people died from drug overdoses in 2017, according to the USCentres for Disease Control and Prevention, with 68% of those deaths involving prescription or illegal opioids.

The company said its products were highly regulated by government agencies, and that Oklahoma didn’t have adequate evidence proving J&J’s painkillers played a significant role in the epidemic.



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The ruling could serve as an indicator for how a federal judge in the Northern District of Ohio will rule on an upcoming trial that combines nearly 2,000 separate cases. The trial is set to begin in October, and includes claims from cities, tribal lands, counties, and communities accusing pharmaceutical companies of fuelling the opioid epidemic.

Opioid distributors McKesson, Cardinal Health, and AmerisourceBergen all fell as much as 7% in early August after Bloomberg reported their $US10 billion settlement offer was met with a $US45 billion counter from the National Association of Attorneys General. The lawsuits claim the three companies fuelled the US opioid epidemic and, and the NAAG is officiating talks for more than 35 states.

Johnson & Johnson closed at $US127.80 per share Monday, down roughly 1% year-to-date.

The company has 12 “buy” ratings, 11 “hold” ratings, and one “sell” rating from analysts, with a price target of $US148.44, according to Bloomberg data.


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