Johnson & Johnson knew for decades asbestos lurked in baby powder

On Friday, shares of Johnson & Johnson (J&J) fell 10 percent and were on track to post their biggest percentage drop in more than 16 years, after Reuters reported that the pharma company was aware for decades that cancer-causing asbestos lurked in its Baby Powder.

Apparently, the decline in shares erased about $40 billion from the company’s market capitalisation, with investors worrying about the impact of the report as it faces thousands of talc-related lawsuits.

On the broader Dow Jones Industrial Average and S&P 500 indexes, the stock was the biggest drag and was among the most traded on US exchanges. Almost 28 million shares exchanged hands by 1830 GMT, more than three times its 25-day moving average.

According to Reuters examination of company memos, internal reports and other confidential documents showed that J&J was found to have known about the presence of small amounts of asbestos in its products from as early as 1971.

The report also mentioned that 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.

Apparently, in response to the report, the company said “Any suggestion that Johnson & Johnson knew or hid information about the safety of talc is false.”

Vice president Ernie Knewitz- J&J’s global media relations, wrote in an emailed response to the report, “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.”

The company also clarified that Baby Powder was asbestos-free and added it would continue to defend the safety of its product.

In 1976, J&J had assured the US Food and Drug Administration that no asbestos was ‘detected in any sample’ of talc produced between December 1972 and October 1973. On the contrary, three tests by three different labs from 1972 to 1975 had found asbestos in its talc.

Since then, the company has been battling more than 10,000 cases claiming its Baby Powder and Shower to Shower products cause ovarian cancer. J&J products have also been linked with mesothelioma, a rare and deadly form of cancer that affects the delicate tissue that lines body cavities.

JP Morgan analysts commented, “We believe it is highly unlikely the company’s exposure to this talc issue will even come close to the $40 billion in lost market cap today.”

They also added that talc was not an issue that would resolve quickly for J&J and expect shares to trade at a lower multiple pending further clarity on the company’s exposure to the issue.

Also read: Sri Lanka: PM Mahinda Rajapaksa resigns, Wickremesinghe to be reinstated