Johnson & Johnson's (JNJ) talc-motivated turmoil has sparked a scientific debate between J&J and journalists.
Shares continue to fall on Monday after Friday's fast decline, drawing the ire of a market concerned about the company's controls on quality and adherence to scientific risk review.
Reuters, the news service that published the article to kick off the selloff, outlined its issues with Johnson & Johnson by noting the company's efforts to dissuade critical research and prop up positive reports.
"Johnson & Johnson developed a strategy in the 1970s to deal with a growing volume of research showing that talc miners had elevated rates of lung disease and cancer: Promote the positive, challenge the negative," the report reads.
The article goes on to detail seemingly damning evidence that J&J funded studies with the express purpose of defending the safety of its products without disclosing its primary role in the research.
The Reuters report accuses the company of propping up faulty studies about asbestos-tainted talc inhalation by talc miners and downplaying damning reports to quell or outright erase the carcinogenic risk from talc. This was all done while Johnson & Johnson-linked scientists oversaw or reviewed much of the work.
Such accusations add to the headline risk present in the stock at the moment, one that is fueling algorithmic selling and keeping retail traders at arm's length.
Fake News?
Johnson & Johnson's CEO Alex Gorsky made a personal appeal Monday afternoon on the company's website in a bid to tamp down the controversy.
"I want you to hear it directly from me: We know out talc is safe. In fact, for over 100 years Johnson & Johnson has known the talc in our baby powder is the purest, safest, pharmaceutical-grade talc on earth," Gorsky says in the video.
Johnson & Johnson has also not taken the accusations from journalists lying down, quickly issuing press releases that detailed the scientific insufficiencies in the articles.
Have noticed these $JNJ web advertisements this weekend. pic.twitter.com/HMpPPM9SLQ
— Brad Loncar (@bradloncar) December 17, 2018
A J&J spokesman referred Real Money to a detailed report on the company's website that challenged the assertions of both Reuters and The New York Times.
"Reuters misled its readers by printing inaccurate statements, withholding crucial information that otherwise undermines its thesis," the company returned. "Reuters published this story even though it was advised that it had the facts wrong."
"Everything must be taken into account. If the fact will not fit the theory---let the theory go."
― Agatha Christie, The Mysterious Affair at Styles
The company referenced numerous studies, conducted by such prestigious institutions as the Harvard Medical School, Harvard School of Public Health, and the National Institute of Environmental Health Sciences and even highlighted the very studies that Reuters cites as damning.
"Reuters mentions the study of Vermont miners and millers without mentioning that the study found no cases of mesothelioma," the release states. "There is not a single, sound study showing that talc causes mesothelioma. Again, Reuters was informed of this and omitted these facts."
Meanwhile, research related to the risk of ovarian cancer that operated with a sample size of nearly 200,000 women in aggregate indicated "no overall increase in the risk of ovarian cancer."
Such research challenges the grounds of 11,700 complaints against the company outstanding, thus increasing the chances that such cases can be fought by the company effectively.
Reports from the American Cancer Society also indicate that ovarian cancer in particular is subject to faulty testing.
"Many studies in women have looked at the possible link between talcum powder and cancer of the ovary. Many case control studies have found a small increase in risk. But these types of studies can be biased because they often rely on a person's memory of talc use many years earlier," the report states. "One prospective cohort study, which would not have the same type of potential bias, has not found an increased risk."
To be sure, the society was far more non-committal than either Reuters or J&J, noting that research will need to continue on talc to settle the debate once and for all. It also noted one study that did find increased risk for perineal cancer even with talc that did not contain asbestos.
"For any individual woman, if there is an increased risk, the overall increase is likely to very be small," the report accepts. "Still, talc is widely used in many products, so it is important to determine if the increased risk is real. Research in this area continues."
Trading Talk
Given the unclear winner in the debate and the nature of media circulation, Johnson & Johnson's reply might not quell the selloff as quickly as the report sparked it.
As such, it may be best to wait for the debate to progress to at least a preponderance of evidence on one side or the other on both the science and public perception.
Basically, the incendiary report has been met with an equally tenacious defense and the market will need to pick a side. So far, it appears to still be digesting the risks evident in the report with many market minds poring over the available research.
Real Money contributor and former NYSE trader Stephen Guilfoyle summed up the safest place to be for the time being in his column on Monday morning.
"I am not saying that I believe JNJ in their assertion, nor am I saying that I don't believe their defense. What I am saying is that I don't know," he explained. "A trader cannot risk buying the name here outright unless one is certain on a lot of items that are unknowable right now."
Shares continue to fall into afternoon hours despite the company's rebuttal. CEO Alex Gorsky will attempt to stem the selloff on tonight's Mad Money with Jim Cramer after the market closes.
