Wells sees J&J talc settlement reaching a 'manageable' $10B

Wells Fargo analyst Larry Biegelsen expects the cost for Johnson & Johnson to settle its talc litigation could reach up to $10B after a federal appeals court rejected the company's use of Chapter 11 bankruptcy to settle for $2B about 40,000 lawsuits. J&J will appeal the ruling but Wells Fargo's legal consultant does not expect the company to be successful, the analyst tells investors in a research note. The firm, however, sees the $10B as a manageable amount for a company that generated cash flow in 2022 of $17B and had approximately $24B of cash and cash equivalents at the end of the year. If J&J were to settle the 40,000 talc claims for $250,000 per claim, the total cost would be $10B, which is likely the upper end of the cost, Wells contends. Many product liability settlements also pay out over a period of time, it adds. Importantly, the number of talc claims has not increased much since the beginning of 2022, suggesting the number of claims filed has started to plateau, the analyst writes. Wells has an Overweight rating on Johnson & Johnson with a $195 price target.