Last week a California jury dropped a talc bombshell on Johnson & Johnson (JNJ), awarding $417 million to a 63-year old woman who claimed she suffered ovarian cancer after using JNJ’s talc-based baby powder. Over the past two years Johnson & Johnson had lost four other talc-related verdicts totaling about $307 million. Johnson & Johnson had dismissed those claims since they occurred in the state of Missouri where plaintiffs were supposedly “venue shopping” for friendly courts for their cases. The $417 million verdict made headlines for its sheer size, and the fact that it was rendered in a state other than Missouri.
JNJ’s 5 talc verdicts have a mid-point of $72MM. It faces 4,800 claims altogether. VRX faces 80 talc claims for the Shower to Shower product it acquired from JNJ in 2012. Shocking The Street, a premium service in conjunction with Seeking Alpha, believes Valeant’s ovarian cancer exposures could spell major trouble.
The Lawsuits Keep Piling Up
Many believe Valeant could fold under its $28 billion debt load at junk levels or its massive legal exposures. Its pending insider trading case pursuant to its failed bid for Allergan (NYSE:AGN) could result in more legal fees or a disgorgement of profits from Bill Ackman’s Allergan trade; such disgorgement could be in the hundreds of millions of dollars.
The most damning exposure could be a federal probe into the aggressive sales practices at former specialty pharma, Philidor. I previously estimated such exposure could be more than $500 million. I am also of the understanding that RICO allows (i) for members of a criminal organization to be penalized. Specifically, RICO addresses racketeering and (ii) individuals to be tried for crimes they ordered others to do or assisted them in doing. In the past Valeant has been accused of engaging in aggressive sales practices through Philidor; alleged aggressive sales practices included steering customers into Valeant-branded drugs and away from generics that might have resulted in clients paying exorbitant prices.
Take Away
Valeant has grown through by being a serial acquirer of pharmaceutical companies. It is difficult to properly value companies or perform proper due diligence when a company makes that many acquisitions in such a short span. Eventually one of these deals had to blow up.
Shocking The Street could have the last word on Valeant. They comb through tons of public financial statements so you will not have to. For deep, thorough research that Wall Street overlooks, investors should subscribe to Shocking The Street.
On Shock Exchange
Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead explains the stock market and U.S. economy through the eyes of the New York Shock Exchange, a financial literacy program Ralph Baker started in 2006 to share his passion for investing and basketball with his 11-year-old son and other boys his age. The book predicts the “pain ahead” for the U.S. economy, the demise of China, the pending stock market crash and social unrest.
Shock Exchange has been trumpeted by President Obama, the Senate Finance Committee and House Ways and Means Committee. However, they conveniently forgot to cite the source. Critics try to make and unmake authors, but the market always decides. The book was also recently added to Trump Syllabus K12, crafted by Dr. Kaye Wise Whitehead of Loyola University Maryland. Shock Exchange is the best book on Wall Street in the past 20 years, and on economics, it may be the most important book since the Great Depression.
