Johnson & Johnson: Updated Strategy to Resolve Talc Litigation Should Resolve Risk Overhang

We are holding firm to our fair value estimate for Johnson & Johnson after the firm laid out an updated strategy to resolve the vast majority of outstanding talc litigation tied to cancer side effects. The firm plans another attempt to move the talc litigation into a subsidiary with a total payout reserve of close to $11 billion, which is approximately 20% higher than what has already been established by the firm and slightly higher than our expectations. However, the slightly higher costs don't have a material impact on J&J's fair value or wide moat. Importantly, the plan will likely result in the removal of the talc litigation risk overhang.