Johnson & Johnson And Bayer Agree To Settle Xarelto Lawsuits For $775 Million

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Johnson & Johnson (NYSE:JNJ) and Bayer recently agreed to settle all Xarelto related cases in federal court for $775 million. Earlier in 2017, the companies were ordered by a Philadelphia court to pay $28 million in damages to an Indiana couple, related to internal bleeding about which the companies did not sufficiently warn patients, but the ruling was eventually overturned by a Pennsylvania judge. Xarelto is an anti-coagulant (blood thinner), which was launched in 2011 in the U.S. and its revenues for J&J stood at nearly $2.5 billion in 2018. J&J has marketing rights for the drug in the U.S. Xarelto’s performance so far has been strong, considering that the drug has broken into a crowded and competitive therapeutic area of cardiovascular diseases.

Xarelto is the brand name for the drug rivaroxaban, which is used for the treatment and prevention of blood clots, and prevention of strokes in people with irregular heartbeats. There were around 25,000 Xarelto cases pending in the federal court, alleging patients were not adequately warned about the risks of life threatening complications. The agreed settlement amount will be split equally between Bayer and J&J, translating into a little under $390 million in litigation charges for J&J. Note that both the companies did not admit to liability, rather agreed to settle because of complexity of the litigation, and the resources and time required to address the same.

The settlement amount isn’t high for the companies, when compared to some other such cases historically. For instance, German pharma company Boehringer Ingelheim paid $650 million in 2014 to settle around 4,000 cases in state and federal courts over its blood thinner Pradaxa. If we were to apply the same rate to settle all Xarelto cases, the amount for J&J and Bayer could be north of $4 billion.

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J&J’s litigation expenses have been fairly high over the past few years. The company spent $675 million in 2016, $955 million in 2017, and $1.72 billion in 2018. However, some of these expenses were related to the company’s non-pharmaceuticals segment. It will be interesting to see how this figure trends in the coming years given the pile of lawsuits related to some of its products, including talc (Also See ~ Did The Market Overreact Following Reports That J&J Knew Its Baby Powder Was Tainted By Asbestos).

Overall, the incremental litigation expenses of under $390 million will have minimal impact on the company’s near term earnings, which we forecast to be $8.50 per share on an adjusted basis in 2019. We have created an interactive dashboard analysis ~ A Quick Snapshot of Johnson & Johnson’s Q4 Performance And Trefis Estimates For The Full Year 2019. You can adjust the various drivers to see the impact on the company’s adjusted  earnings and price estimate. Also, here’s more Healthcare Data.

 

 

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