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J&J, plowing ahead with talc bankruptcy strategy, faces investor push to pull product worldwide

Johnson & Johnson has asked U.S. officials to cut in after an activist investor sought to halt sales of the company’s talc-based baby powder abroad. Separately, the New Jersey-based drugmaker butted heads with Reuters over a story on the “Texas two-step” strategy it employed to pawn talc liabilities off on a new company late last year.

First, the shareholder concerns: Activist investor platform Tulipshare wants to leverage a vote to stop J&J from selling its talc-based powder around the world. J&J currently faces nearly 40,000 lawsuits related to talc safety concerns, which hinge on the product’s potential to cause cancer.

Not content to play sitting duck, J&J has asked the U.S. Securities and Exchange Commission (SEC) to exclude Tulipshare’s proposal from an upcoming proxy filing.

Tulipshare is an investment platform that allows people to pool shares in a bid to promote changes at companies.

“We want Johnson & Johnson to stop the sale of its talc-based powder globally,” Tulisphare says on its talc campaign page. “Shockingly, Johnson & Johnson continues to say that their product is ‘safe’ even though long-term use of talcum powder has been linked to multiple cancers including ovarian cancer and mesothelioma,” the investor platform continues.

Johnson & Johnson, for its part, maintains that its talc products are safe. “We stand behind the safety of Johnson’s Baby Powder, which is safe, does not contain asbestos and does not cause cancer,” a company spokesperson told Fierce Pharma.

In a letter to the SEC, lawyers for J&J asked officials to not require the company to bring the issue to a vote at its annual meeting. The proposal would weigh on J&J’s litigation strategy and “intrude upon management’s exercise of its day-to-day business judgment with respect to pending litigation in the ordinary course of business operations,” the J&J lawyers wrote.

In October, J&J created the company LTL Management to absorb liabilities associated with its talc litigation. It leveraged a strategy known as the “Texas two-step,” under which the subsidiary immediately filed for bankruptcy protection.

The goal was to halt litigation and transfer the cases to bankruptcy court, where plaintiffs would vie for compensation from a limited pool of money, Reuters reported late last week.

Prior to the LTL bankruptcy filing, J&J faced about $3.5 billion in talc verdict and settlement costs, Reuters noted. Now, J&J plans to give its subsidiary $2 billion to put into a trust to compensate all 38,000 current plaintiffs, plus future plaintiffs, the publication said.

J&J started sizing up the maneuver as early as April, Reuters pointed out. It created a covert “Project Plato” to evaluate the strategy, the news service reports.

Late Thursday, J&J and LTL lawyers sought a temporary restraining order to block the publication of Reuter’s Project Plato story, the news outlet says. The lawyer accused attorneys for the plaintiffs of sharing confidential information with Reuters in a bid to try the case in the press. A Reuters spokesperson says J&J’s claims are meritless.

J&J stopped selling its talc-based powders in the U.S. and Canada in May 2020. At the time, the company blamed lagging demand on “changes in consumer habits fueled by misinformation around the safety of the product and a constant barrage of litigation advertising.”

J&J has remained stalwart in the defense of its baby powder products.

“We stand behind the ingredients we use in our products, and Johnson & Johnson has a rigorous testing standard in place to ensure our cosmetic talc is safe,” a company spokesperson told The Guardian. “Not only is our talc routinely tested to ensure it does not contain asbestos, but our talc has also been tested and confirmed to be asbestos-free by a range of independent laboratories, universities, and global health authorities.”