Financial analyst questions J&J’s adherence to Credo

talc justice Financial analyst questions J&Js adherence to CredoAnalysts at Investment website Seeking Alpha, which features stock market insights and financial analysis provided by investors and industry experts, have been asking questions about the cost of talc litigation and Johnson and Johnson’s reputation. One recently wrote an in-depth piece highlighting the vast number of products that J&J has faced liability claims over in the recent past, specifically calling attention to the company’s “criminal admissions.” DoctoRx says that the will list, “several legal issues which both challenge the company’s adherence to its highly promoted ‘Credo’ and may challenge its finances.”

The following quote is posted on the company’s “Our Credo” web page, says DoctoRx in his introduction:

“The values that guide our decision-making are spelled out in Our Credo. Put simply, Our Credo challenges us to put the needs and well-being of the people we serve first.”

The site goes on to say, “Robert Wood Johnson, former chairman from 1932 to 1963 and a member of the Company’s founding family, crafted Our Credo himself in 1943, just before Johnson & Johnson became a publicly traded company. This was long before anyone ever heard the term ‘corporate social responsibility.’ Our Credo is more than just a moral compass. We believe it’s a recipe for business success.”

As he begins to lay out his skepticism about the company’s adherence to this credo, DoctoRx begins by noting guilty pleas and settlements with the government in 2013 over Risperdal and other drugs, with J&J paying more than $2.2 billion over kickback allegations. According to the Department of Justice (DOJ), the company had been repeatedly advised that it was misleading to market Risperdal as safe and effective for the elderly and J&J was aware of the serious health risks the drug posed for the elderly but it continued to illegally market the drug to that at-risk population.

In 2015 the company again settled with the DOJ for $25 million over metal particles contaminating hundreds of millions of bottles of liquid over-the-counter medicines such as Tylenol, Motrin and Benadryl. Again the company was warned years before but neglected to make the appropriate safety changes.

DoctoRx then went on to address the current product liability suits that Johnson and Johnson is facing, starting with Risperdal gynecomastia suits, which allege that the antipsychotic drug causes young boys to develop breasts. The company has lost five consecutive verdicts ranging from $500,000 to $2.5 million in the litigation and it faces a total of more than 12,000 claims.

There are nearly 55,000 claims over pelvic pesh injuries filed across the country. Many have been consolidated into a mass tort litigation in Pennsylvania where four juries awarded plaintiffs verdicts of $2.16 million, $12.5 million, $13.5 million and $20 million. J&J paid $2.5 billion to settle more than 7,000 lawsuits over faulty hip implants. There are nearly 8,400 lawsuits consolidated in Texas federal court. Lastly, the company faces 4,800 claims from women alleging its Baby Powder and other talc-containing products caused their ovarian cancer. So far talc verdicts have reached $724 million.

DoctoRx also addressed J&J’s response to the U.S. Food and Drug Administration (FDA) not approving arthritis drug sirukumab, saying that the company publicly argued with the regulatory agency over reported deaths, even after co-developer GlaxoSmithKline (GSK) had already dropped out of the project, instead of backing up its belief that the drug was safe with more data. “The whole sirukumab story leaves me unsure about the quality of what is going on at JNJ these days,” DoctoRx wrote.

“Johnson & Johnson has become an expensive stock with limited growth prospects. Its appeal has centered around dividend growth prospects (aka bond substitute) anchored by an AAA credit rating and a squeaky clean image. However, repeated guilty pleas for corporate misbehavior challenge that image; several large or even massive punitive judgments in product liability suits may put the credit rating at risk,” he said.

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