Health and Healthcare

Johnson & Johnson May Have Just Dodged a Big Opioid Bullet

Chris Lange

Published: October 2, 2019 10:50 am

Last Updated: January 30, 2020 3:09 pm

Johnson & Johnson (NYSE: JNJ) surprised investors on Wednesday morning by announcing a $10 million settlement with two Ohio counties ahead of an upcoming opioid trial. While this in and of itself is not big news, it could have huge implications for how investors and analysts now view the stock. In fact, one analyst issued a fairly bullish report in response to this settlement.

Credit Suisse reiterated an Outperform rating with a $156 price target, implying upside of 20% from the most recent closing price of $129.99. While this isn’t the highest price target on the street, it is above the consensus.

According to Credit Suisse, Johnson & Johnson’s settlement ahead of the bellwether Federal MDL trial scheduled to begin October 21 likely will catch investors off-guard. While this does not clear the company of all potential opioid-related litigation liability, the brokerage firm expects the settlement to be viewed favorably by investors because it continues to believe increased clarity on litigation-related liability should shift focus on fundamentals, and this news is a solid step in this direction.

The firm’s recently updated analysis of intra-quarter pharma trends for July and August (two months of sales and two months of prescriptions) points to about $570 million upside to its U.S. pharmaceuticals estimates for the third quarter.

In the report, Credit Suisse detailed:

Johnson & Johnson announced a settlement agreement with Ohio counties of Cuyahoga and Summit, resolving all of the counties’ claims with no admission of liability and removing Johnson & Johnson from the federal opioid trial scheduled to begin Oct 21. In addition to the $10 million settlement payment to the two counties, Johnson & Johnson will also reimburse $5 million of the counties’ legal fees and direct $5.4 million of its charitable contributions to non-profit organizations in connection with opioid-related programs in these two counties.

Shares of Johnson & Johnson traded up 2% at $132.67 on Wednesday, in a 52-week range of $121.00 to $148.99. The consensus price target is $149.35.