Jim Cramer: J&J talc settlement is good for a stock that has so much going for it already
Johnson & Johnson ‘s talc settlement of ovarian cancer litigation helped lift the stock to fresh record highs Tuesday. This deal, however, is not the sole — or even the best — reason investors should own it. Shares of J & J traded as high as nearly $275 earlier, a move Jim Cramer called “excessive to the point” where he questioned whether it would hold. Eventually, the stock lost some steam. The rally followed J & J’s announcement Monday evening that it reached a deal aimed at ending about 15 years of litigation over claims that its talc-based baby powder and other talc products led to ovarian cancer. “It’s a major landmark victory for J & J,” Jim Cramer said earlier on CNBC. “This may be the high watermark of class actions against the company.” The Club has a buy-equivalent 1 rating on the stock. As part of the $5.5 billion settlement, J & J will pay $3 billion in 2027, with no further payments before 2028. The deal, covering roughly 76,000 cases, is contingent on participation from at least 95% of the claimants. Two years ago, J & J offered $8 billion to settle the ovarian cancer cases as part of a bankruptcy proposal that was rejected by the judge. “We view the news positively, because the $5.5 billion amount is less than the 2024 proposed settlement,” Leerink analysts wrote late Monday. Leerink maintains a buy-equivalent rating on J & J. Monday evening’s announcement follows J & J’s previous settlement of most of the cases alleging its talc products contained asbestos and caused mesothelioma. According to J & J, the ovarian cancer and mesothelioma claims were “meritless” and unsupported by science or reliable expertise. The company said in a press release: “Studies show talc is safe, does not contain asbestos, and does not cause cancer.” Still, J & J stopped selling talc-based baby powder in North America in 2020 and worldwide by 2023. JNJ YTD mountain Johnson & Johnson YTD While pleased to see J & J’s talc overhang fading away, Jim said there are many other, more compelling reasons to own the stock, which is up nearly 30% this year versus the S & P 500 ‘s year-to-date gain of about 8.5%. He cited the company’s strong products in pharmaceuticals and medical technology, which was a major reason the Club exited Bristol Myers Squibb back in April and replaced it with J & J . J & J has a robust line-up of drugs, including multiple myeloma treatment Darzalex. In the second quarter, reported about two weeks ago, Darzalex sales topped $4.2 billion, up nearly 19% year over year. Other drugs in J & J’s multiple myeloma franchise are Carvykti and Tecvayli, which continued to deliver strong growth — up nearly 50% and 57%, respectively, in Q2. “We are on track to be the number one oncology company by 2030, with sales projected to exceed $50 billion,” J & J CEO Joaquin Duato said during the company’s second quarter earnings call. Outside of oncology, J & J has Icotyde , which gained FDA approval in March. The drug is the first oral IL-23 inhibitor aimed at treating moderate-to-severe plaque psoriasis. The company thinks that Icotyde could be one of its biggest-selling drugs ever. On the second-quarter call, Duato also touted J & J’s robotic surgical system Ottava ahead of approval a week later from the Food and Drug Administration for multiple general surgery procedures, including a type of gastric bypass, gastric sleeve, appendectomy, and hiatal hernia repair. The ramp-up of Ottava will help J & J’s medtech unit, which missed estimates on sales growth of 4.5% to $8.93 billion in the second quarter. On Monday morning, Jim said the trading action on Wall Street could be best described as a “J & J market,” noting the recent rotation into more defensive stocks like healthcare names and out of the volatile artificial intelligence trade. Month to date, the S & P 500 healthcare sector index has gained more than 5%, while the information technology sector index has lost over 5%. For comparison, the overall S & P 500 index has lost almost 1% in July. (Jim Cramer’s Charitable Trust is long JNJ. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
