J&J’s talc litigation persists, business strength and financial flexibility soften impact - Moody’s

Investing.com -- Moody’s Ratings (Moody’s) has stated that despite the ongoing talc litigation, Johnson & Johnson (NYSE:JNJ)’s (J&J) robust business profile and financial flexibility are helping to alleviate legal pressures. The ratings agency has made no changes to J&J’s ratings, which include the Aaa long-term issuer rating, Prime-1 commercial paper rating, or the stable outlook.

On March 31, 2025, J&J revealed that its proposed prepackaged bankruptcy plan for Red River Talc LLC was not approved by the U.S. Bankruptcy Court for the Southern District of Texas. Instead of appealing, J&J plans to use the U.S. tort system to fight talc claims associated with ovarian cancer. Concurrently, J&J will reverse about $7 billion of previous litigation reserves.

Even though J&J lost a 2018 verdict in Missouri, resulting in a payout of over $2 billion to plaintiffs, the company has been successful in nearly all talc cases related to ovarian cancer that have gone to trial. In fact, J&J has won 16 of 17 ovarian talc cases tried in the last 11 years, strengthening its track record in defending against talc litigation. Moody’s expects future liabilities to remain manageable.

The talc litigation risks are expected to continue for an extended period. However, J&J’s cash of over $24 billion as of December 31, 2024, coupled with its excellent projected free cash flow over the next few years, should provide ample capacity to cover any future talc liabilities. Moody’s noted that the potential subsidiary bankruptcy settlement, estimated at $11.6 billion in present value as of December 31, 2024, might have surpassed the litigation payouts that J&J will now face with individual claims in the tort system.

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Moody’s also emphasized that J&J’s ratings are bolstered by its strong business profile, which includes a large scale and market presence, product and geographic diversity, and high margins. The company’s Innovative Medicine segment, featuring blockbusters like Darzalex and Tremfya, is expected to drive growth despite increasing competition and patent exposures. The MedTech segment is also anticipated to maintain a strong market presence and steady growth. Moody’s anticipates that J&J’s conservative financial policies will keep the debt/EBITDA ratio below 1.5x, even after a temporary and modest increase due to the Intra-Cellular acquisition.

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