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Johnson & Johnson, in its latest attempt to draw a line under long-running litigation, has offered an improved $6.5 billion settlement to thousands of plaintiffs claiming that its talcum powder products cause ovarian cancer. .
The world’s largest drugmaker by revenue said in an update on Wednesday that it would introduce the plan, which would pay out about $6.48 billion over the next 25 years, to more than 50,000 ovarian cancer patients later this year. Voting will be done by the claimants. If 75 percent of plaintiffs vote in favor, the deal would allow J&J to resolve all current and future claims related to ovarian cancer through the bankruptcy filing of a subsidiary.
The latest proposal would bring the total payout across all cases to $11 billion, an increase of $2.1 billion over the previous proposal, and marks the third attempt by J&J to resolve ovarian cancer claims through bankruptcy proceedings.
The drugmaker’s two previous Chapter 11 bankruptcy petitions were rejected by courts. In both cases J&J attempted to use a controversial maneuver called the “Texas two-step”, in which a subsidiary facing legal claims is spun out of the main company, and filed for bankruptcy to facilitate the settlement. Is filed for.
On this occasion, J&J is trying to get approval from claimants before going to court, using a “pre-packaged” bankruptcy process, which allows for a quick resolution if the companies have received enough support from creditors. allows for. J&J will give claimants the opportunity to vote on the plan over a three-month period before its subsidiary LLT management goes through a pre-packaged process.
J&J, which has repeatedly denied that its talc-based products cause cancer, said the new plan is “significantly different” from its previous efforts. “This is the culmination of our consensual settlement strategy that we announced last October,” said Eric Haas, the company’s worldwide vice president of litigation.
Haas said, “Unlike previous cases, it is the vote of the claimants – not the conflicting financial incentives of a small minority of plaintiff lawyers who stand to receive exorbitant legal fees outside of the restructuring – that decides whether the plan moves forward. It may increase or not.” ,
A judge rejected J&J’s second bankruptcy attempt last July after concluding that the subsidiary was not in sufficient “financial distress” to undergo the Chapter 11 process. The first bankruptcy case was dismissed for the same reason.
J&J announced plans for a third attempt in the bankruptcy process last October. On Wednesday, J&J said it would pursue alternative avenues to resolve the lawsuit while awaiting approval from the claimants. These include appealing the dismissal of its previous bankruptcy plan, “aggressively prosecuting” plaintiffs who refuse to settle, and people who make false and defamatory claims about its products and the law firms that assist them. This included taking legal action against.
More than 99 percent of the lawsuits J&J faces relate to ovarian cancer. However it is also facing some personal injury lawsuits over claims that its products cause mesothelioma, a different form of cancer linked to asbestos exposure, which the company also denies.
J&J said it has already resolved 95 percent of those cases, and has reached agreements in principle to resolve claims brought by U.S. states and talcum suppliers.
Shagun Singh, an analyst at RBC Capital Markets, said in a note that she was “encouraged” by J&J’s proposed plan “which removes one aspect of the overhang on the stock”. Singh said that after talks with industry experts “we believe the plan should move forward and be a catalyst for JNJ’s stock”.
In December last year, J&J moved the subsidiary’s registered headquarters from an address in North Carolina to an address in Texas as part of the process, changing the name of the subsidiary from LTL to LLT.
J&J’s share price was up 3.6 percent in morning trading Wednesday in New York.
