J&J Revises Earnings To Incorporate Proposed Opioid Deal

Josh Nathan-Kazis Sector Focus Health ABC CAH JNJ MCK TEVA.TV AmerisourceBergen Cardinal Health McKesson Johnson & Johnson Teva Pharmaceutical Industries Pharmaceuticals Health Care/Life Sciences AmerisourceBergen Matt Miksic North America United States Financial Performance Earnings Corporate/Industrial News Content Types Factiva Filters C&E Industry News Filter ABC CAH CS CSGN.EB I/DRG I/XFFX JNJ M/HCR N/CNW N/DJN N/ERN N/PFM N/WER R/NME R/US TEVA TEVA.TV Barrons.com Barrons Blogs Wires Fortune 500 CODES_REVIEWED Companies Health Sector Focus author Josh Nathan-Kazis author|Josh Nathan-Kazis topicid 8583 name Josh Nathan-Kazis extractedtext Josh Nathan-Kazis rank 1 codetype author code josh_nathan_kazis nameformat surname_first author Josh Nathan-Kazis id Josh Nathan-Kazis barrons_display_brand BARSECFOCUS barrons_display_brand|BARSECFOCUS codetype BARRONS_DISPLAY_BRAND canbedisplaybrand true value BARSECFOCUS source MANUAL status modified name Sector Focus code BARSECFOCUS 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Here’s Why. Johnson & Johnson Cut Its Earnings in a Late-Night Filing. Here’s Why. Johnson & Johnson (JNJ) Cuts Earnings in Late-Night Filing on Opioid Settlement

The drug company Johnson & Johnson confirmed in an SEC filing on Wednesday night that it had reached an agreement in principle with four state attorneys general to settle all opioid claims against the company for $4 billion, and cut its previously-reported third quarter earnings to reflect the possible deal.

J&J Revises Earnings To Incorporate Proposed Opioid Deal

The drug company Johnson & Johnson confirmed in an SEC filing on Wednesday night that it had reached an agreement in principle with four state attorneys general to settle all opioid claims against the company for $4 billion, and cut its previously-reported third quarter earnings to reflect the possible deal.

https://johnsonandjohnson.gcs-web.com/node/45566/html https://www.barrons.com/articles/johnson-johnson-stock-gains-as-earnings-sales-top-estimates-51571142345 https://www.barrons.com/articles/why-johnson-johnson-stock-can-weather-legal-awards-against-it-51570832221?mod=article_inline https://www.barrons.com/articles/johnson-johnson-stock-falls-on-baby-powder-recall-51571417990 https://www.barrons.com/articles/j-j-offers-4-billion-opioid-litigation-settlement-51571254116 https://www.barrons.com/articles/opioid-trial-ohio-drug-distributors-deal-multidistrict-51571661524 https://ncdoj.gov/wp-content/uploads/2019/10/OpioidFrameworkFactSheetv3.pdf mailto:josh.nathan-kazis@barrons.com Johnson & Johnson Cut Its Earnings in a Late-Night Filing. Here’s Why. By Josh Nathan-Kazis Photograph by Scott Eells/Bloomberg

The drug company Johnson & Johnson confirmed in an SEC filing on Wednesday night that it had reached an agreement in principle with four state attorneys general to settle all opioid claims against the company for $4 billion, and cut its previously-reported third quarter earnings to reflect the possible deal.

In an SEC filing Wednesday night, Johnson & Johnson said it was cutting its third quarter GAAP net earnings to reflect the possible deal, to $1.8 billion from $4.8 billion, and earnings per share to $0.66, from $1.8. It said there was no change to the previously reported adjusted earnings, adjusted EPS, or adjusted operational EPS.

“Johnson & Johnson and its U.S.-based Janssen Pharmaceutical Companies confirm an agreement in principle to settle opioid litigation as publicly announced and outlined by a committee of State Attorneys General on October 21, 2019,” the company said. “The Company would contribute $4 billion, subject to various conditions and an agreement being finalized. The agreement in principle is intended to provide certainty for involved parties and critical assistance for families and communities in need.”

Johnson & Johnson faces personal injury lawsuits from more than 100,000 plaintiffs, and thousands more opioid cases. The truckload of litigation has weighed on the stock. The tentative deal for a $4 billion settlement of the opioid cases was first reported last week. The state attorneys general announced the proposed deal on Monday. Johnson & Johnson was up 0.1% at $130.02 at 10:18 a.m. Thursday, while the Dow Jones Industrial Average had dropped 52.84 points, or 0.2%.

Credit Suisse analyst Matt Miksic reacted positively to the news, increasing his target price Johnson & Johnson (ticker: JNJ) shares to $163 from $158, and writing that the agreement in principle reduces uncertainty and “may potentially help investors begin to price in a narrower range of potential liability for the company.”

Johnson and Johnson said it could not predict if or when the deal would be finalized. In his note, Credit Suisse’s Miksic said that the filing “does ratchet down the uncertainty.” He rates the stock Outperform.

Yet there is little indication that other plaintiffs are on board with the proposed deal. Last-minute negotiations to reach a global settlement before the start of a benchmark opioid trial this past Monday failed, though the companies averted a trial anyway by reaching narrow settlements with the two Ohio counties that were the plaintiffs in the trial. It’s unclear how the parties will move forward.

As a result, the potential opioid deal, which also includes Cardinal Health (CAH), AmerisourceBergen (ABC), McKesson (MCK), and Teva Pharmaceutical Industries (TEVA), is far from a sure thing. The deal, which includes $22 billion in cash and products that the deal values at $26 billion, only includes four state attorneys general. Johnson & Johnson and the other companies face more than 2,000 lawsuits brought by dozens of states and hundreds of cities and counties.

Asked specifically about the Teva portion of the deal on Monday, the executive committee of three attorneys that manages the federal opioid multidistrict litigation on behalf of the cities and counties said: “This appears to be the same proposal that 17 municipalities rejected on Friday and we don’t see that changing.”

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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