Talcum powder cancer claims target J&J’s new consumer carve-out

Johnson & Johnson’s newly formed consumer business has been targeted by claims that its talcum powder can cause cancer, days before it attempts to complete the largest US initial public offering in almost 18 months.

Kenvue, which started its IPO roadshow this week, has been named in at least seven talc lawsuits filed since the start of April, according to regulatory filings and people familiar with the matter.

The consumer carve-out will sell over-the-counter medicines and healthcare brands such as Tylenol and Band-Aid, as well as J&J baby powder products, while some of those that contain talc will be phased out. J&J had attempted to shield Kenvue from most of the tens of thousands of talc claims already filed against the group.

One of the new cases naming Kenvue was filed on behalf of Justin and Kathryn Bergeron, a husband and wife who live in Louisiana. It claims Justin Bergeron contracted mesothelioma as a result of using J&J talc containing asbestos.

The case was filed in Middlesex county, New Jersey, and lawyers working for talc claimants say it could be the first of many claims filed against Kenvue and other J&J divisions not previously named in lawsuits.

J&J faces more than 60,000 claims that its baby talc causes cancer and has proposed a $8.9bn settlement, which relies on the company’s efforts to gain claimants’ support for a controversial bankruptcy scheme.

The company has said its talc is asbestos free and had not caused cancers but argues that settling current and future claims in the bankruptcy system would be preferable to fighting talc claims in the courts for decades.

Kenvue — whose brand combines the word “ken”, a word used in Scotland that means knowledge, and “vue”, referencing sight — warned in an update to its IPO prospectus this week that “various parties” had brought claims against it directly.

J&J has agreed to indemnify the carved out business from any legal costs related to talc sales in the US and Canada, though Kenvue’s filing noted that it could not guarantee this indemnity would be sufficient.

Kenvue was also subject to “a few” separate claims relating to overseas sales, which would not be covered by J&J, the prospectus said.

Last week US bankruptcy judge Michael Kaplan refused a request by J&J lawyers to place a hold on talc cases filed against Kenvue and Janssen, which are both named in the Bergeron lawsuit. Janssen is the pharmaceutical division of J&J.

The legal issues are not expected to derail the IPO but any extra challenges to pricing will be unwelcome for Wall Street bankers, who are watching the Kenvue deal as a test of investor appetite for new listings.

The US IPO market remains mired in one of its longest slowdowns for decades; just $2.3bn has been raised in listings this year, according to Dealogic, down 22 per cent year on year and 96 per cent compared with the same period in 2021.

Les Funtleyder, a healthcare portfolio manager at E Squared Capital Management, said the litigation risk posed by the extension of talc claims to Kenvue could deter some investors from investing in the J&J carve-out.

“There are probably people sitting on the fence on this IPO, a bit like we are. Maybe they are pretty sure about the Kenvue brands but a little wary of the economy and then they see this talc litigation risk. This could cause them to hold fire. After all, the reason you buy a consumer stock as opposed to a healthcare stock is because you don’t want these types of headline risks.”

Jonathan Ruckdeschel, an asbestos trial lawyer, told the Financial Times it was not surprising that Kenvue and Janssen were now being sued by “talc victims” due to corporate restructurings undertaken by J&J to limit its exposure.

“Before J&J’s first bad-faith attempt to hide the assets of its consumer products business in the bankruptcy courts, that business was worth at least $61bn. As it became apparent that the first bad-faith bankruptcy was likely to be rejected, J&J doubled down and tried to hide those assets by moving the assets into new companies,” he said.

J&J and Kenvue said securities laws prevented them from commenting on the lawsuits or IPO plans.

However, on Thursday after the FT published the story J&J issued a statement from Erik Haas, its worldwide vice president of litigation. “As unequivocally and unambiguously stated, Johnson & Johnson has agreed to retain all the talc-related liabilities—and indemnify Kenvue for any and all costs—arising from litigation in the United States and Canada,” he said: “Any suggestion to the contrary is false and misleading.”