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 J&J shares fell more than 6% to close at $127.70.
The move marks the first time the company has recalled its iconic
baby powder for possible asbestos contamination, and the first time
U.S. regulators have announced a finding of asbestos in the product.
Asbestos is a known carcinogen that has been linked to deadly
mesothelioma.
The recall is the latest blow to the more than 130-year-old U.S.
healthcare conglomerate that is facing thousands of lawsuits over a
variety of products, including baby powder, opioids, medical devices
and the antipsychotic Risperdal.
A jury last week ordered the company to pay $8 billion to a
plaintiff in a case claiming J&J downplayed the risks of Risperdal.
That award is not expected to stand, the company and legal experts
have said.
J&J faces more than 15,000 lawsuits from consumers claiming its talc
products, including Johnson's Baby Powder, caused their cancer.
On a conference call with reporters on Friday, Dr. Susan Nicholson,
head of Women’s Health in the company's medical safety organization,
called the asbestos finding "extremely unusual," adding that it was
"inconsistent with our testing to date."
The voluntary recall announced on Friday is limited to one lot of
Johnson's Baby Powder produced and shipped in the United States in
2018, the company said. J&J in a news release said that testing by
the U.S. Food and Drug Administration as recently as a month ago
found no asbestos in their talc.
The FDA said in a statement that the latest sampling took place
during its testing for asbestos in talc-containing cosmetics that it
began reporting this year. A second Johnson’s Baby Powder sample
from a different lot tested negative for asbestos, the agency said.
The FDA said it stands by the quality of its testing and results and
recommended consumers stop using the product if it comes from the
affected lot.
J&J said on the conference call that it received a report from the
FDA on Oct. 17 alerting the company about the asbestos finding. It
said it has started an investigation and is reviewing manufacturing
records and collecting data on the distribution of the lot to
determine where the product was shipped.
J&J added that it is working with the FDA to determine the integrity
of the tested sample as well as the validity of test results.
THOROUGH INVESTIGATION NEEDED
The type of asbestos discovered by FDA testing has not been found in
the mine where the company sources its talc, J&J's Nicholson said.
She described it as an environmental contaminant most commonly found
in building materials and industrial applications.
J&J said it was too early to confirm whether cross-contamination of
the sample had caused a false positive, whether the sample was taken
from a bottle with an intact seal or whether the it was prepared in
a controlled environment. It added that it could not confirm whether
the tested product was authentic or counterfeit.
"It is so critical that we perform a thorough investigation of the
sample to determine the source of contamination," Nicholson said.
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Since 2003, talc in Johnson's Baby Powder sold in the United States
has come from China through supplier Imerys Talc America, a unit of
Paris-based Imerys SA and a co-defendant in much of the talc
litigation. Imerys and J&J said the Chinese talc is safe.
J&J has known for decades that asbestos lurked in its talc, Reuters
reported last year. Internal company records, trial testimony and
other evidence show that from at least 1971 to the early 2000s, the
company’s raw talc and finished powders sometimes tested positive
for small amounts of asbestos. Company executives, mine managers,
scientists, doctors and lawyers fretted over the problem and how to
address it, while failing to disclose it to regulators or the
public, Reuters found.
J&J has repeatedly said that its talc products are safe, and that
decades of studies have shown them to be asbestos-free and that they
do not cause cancer.
The FDA test indicated the presence of no greater than 0.00002% of
chrysotile asbestos in the tested sample, J&J said.
The World Health Organization and other authorities recognize no
safe level of exposure to asbestos. While most people exposed never
develop cancer, for some, even small amounts of asbestos are enough
to trigger the disease years later.
Thousands of the lawsuits against J&J have been consolidated before
a New Jersey federal judge, who is currently weighing company
motions to disqualify plaintiffs’ expert witnesses, including the
head of an asbestos testing lab who has testified in earlier trials
that he found the contaminant in J&J powders.
Leigh O’Dell, one of the lead plaintiff attorneys, on Friday said
the recall "vindicates the position we’ve been taking for months.”
Wells Fargo analyst Larry Biegelsen said in a research note that the
recall could encourage additional lawsuits and prompt the company to
pursue a broader settlement.
Jefferies healthcare strategist Jared Holz said J&J has already lost
close to $10 billion in market value due to the talc issue over the
past year.
He said further downside to J&J stock is likely to be limited
because legal concerns over talc are well known and have already
taken a toll on the share price. "This is one single bottle within
one lot with barely a trace here," he said.
J&J said in February that it had received subpoenas from the U.S.
Justice Department and the Securities and Exchange Commission for
documents related to the asbestos contamination allegations. A
Bloomberg report, which Reuters has confirmed, said those inquiries
include a criminal grand jury investigation into how forthright J&J
has been in its statements about the safety of its powders.
While talc products make up less than 1% of J&J sales expected by
analysts to reach $82 billion in 2019, the New Jersey-based
healthcare-products maker considers its Baby Powder to be an
essential facet of a carefully tended image as a caring company.
(Reporting and writing by Julie Steenhuysen in Chicago, additional
reporting by Lisa Girion and Chad Terhune in Los Angeles; Caroline
Humer in New York, Tamara Mathias and Ankur Banerjee in Bengaluru
and Daniel Levine in San Francisco; Editing by Bill Berkrot)
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