J&J bolts higher after verdict in Oklahoma opioid case

Business

Judge Thad Balkman enters the courtroom before he delivers his decision in the opioid trial at the Cleveland County Courthouse in Norman, Okla., Monday, Aug. 26, 2019. Balkman ruled in favor of the state of Oklahoma and ordered Johnson and Johnson to pay $572 million to a plan to abate the opioid crisis. (Chris Landsberger/The Oklahoman via AP, Pool)

Johnson & Johnson investors exhaled in relief Tuesday, pushing up the company’s shares after an Oklahoma judge imposed a $572 million verdict for the health care giant’s role in the nation’s opioid crisis.

During the seven week trial, state prosecutors who sought up to $17 billion described J&J as a “kingpin” in an epidemic that’s killed more than 400,000 Americans since 2000.

The monetary award announced Monday, and J&J’s vow to appeal, reassured investors — at least for now.

“The risk of a loss was already baked into the stock price,” noted Erik Gordon, an analyst and professor at University of Michigan’s Ross School of Business.

The verdict would do little damage to J&J, which recorded profits of $22.3 billion last year.

And it set no precedent outside Oklahoma, said Gordon, as it’s based on a novel legal theory that J&J created a public nuisance in marketing its painkillers.

J&J appears to have multiple grounds for appeal, arguing it only had a 1% share of opioid sales in Oklahoma and the country as a whole, and that the state didn’t prove it caused a public nuisance, “which traditionally has been applied to resolve property disputes.”

J&J subsidiaries sell Duragesic, a pain patch containing the powerful opioid fentanyl, and Nucynta pills. Both carry the U.S. Food and Drug Administration’s strongest warnings about risks of addiction, abuse and life-threatening respiratory depression. J&J says it marketed the drugs accordingly and didn’t mislead doctors about risks.

Two companies that sold far more opioids — Teva and Purdue Pharma, the maker of OxyContin — have already reached settlements to pay Oklahoma $85 million and $270 million, respectively.

Raymond James analyst Jason Bedford told clients that it’s likely an appellate court will reduce the $572 million verdict.

Still, J&J says it’s been named in more than 2,000 lawsuits brought by state and local governments related to the marketing of opioids.

“This is not a battle. This is a war,” said analyst Steve Brozak, president of WBB Securities.

J&J can’t take a victory lap until the lawsuits play out or the parties reach settlements, Brozak said.

Shares of J&J rose 2% Tuesday.

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Follow Linda A. Johnson on Twitter: LindaJ_onPharma

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