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Johnson & Johnson (JNJ) faces a renewed legal threat following a record-breaking $1.5 bln verdict awarded to a Maryland woman, Cherie Craft, who alleged that the company’s talc-based baby powder caused her mesothelioma. The company has vowed to appeal the decision immediately.

• The $1.5 bln award is the largest individual verdict in the 15-year history of the talc litigation, which JNJ labels "egregious and patently unconstitutional."
• This massive verdict creates a significant stock overhang, as it suggests potential future settlements may far exceed current company reserves.
• Despite over 67,000 active lawsuits, JNJ maintains its talc-based products are safe, asbestos-free, and do not cause cancer.
• JNJ’s "Texas Two-Step" bankruptcy strategy, aimed at a $9 bln global settlement, was dismissed again in March 2025, returning the company to individual court trials.
• Although JNJ spun off its consumer segment into Kenvue (KVUE), JNJ remains financially responsible for nearly all North American talc liabilities.
• Litigation aside, JNJ has had a strong year with shares soaring 42% year-to-date, driven by a robust "Innovative Medicine" segment. Operational strength has been led by key drugs Darzalex and Tremfya, alongside recent FDA approvals for Inlexzo in bladder cancer treatment.
• When JNJ reported Q3 results on October 14, it slightly raised its FY25 revenue outlook to $93.5-93.9 bln, reflecting confidence in the oncology and immunology pipelines.

Briefing.com Analyst Insight:

JNJ is currently a "tale of two companies." On one hand, its pharmaceutical engine is firing on all cylinders, justifying its recent stock rally through high-margin innovation and strong guidance. On the other, the $1.5 bln Maryland verdict represents a significant "asterisk" that cannot be ignored. While JNJ has a history of reducing these awards on appeal, the failure of its bankruptcy settlement plan means the company is now exposed to a "death by a thousand cuts" scenario in state courts. The $1.5 bln award casts an overhang on the stock, as it suggests that future settlements may need to be far higher than the $9 bln J&J has currently reserved. With over 60,000 cases still pending, a loss on appeal here could signal a permanent shift in the company's liability profile. While we are optimistic about the drug pipeline, the legal uncertainty creates a volatility floor that makes us cautious at these current levels.