Johnson & Johnson (JNJ) shares continue to plunge on Monday morning as the market continues to deal with with the risks stemming from the company's recent scandal related to asbestos in their baby powder products.
The issue arises from a Reuters investigation published Friday which revealed the company's level of culpability.
"From at least 1971 to the early 2000s, the company's raw talc and finished powders sometimes tested positive for small amounts of asbestos, and that company executives, mine managers, scientists, doctors and lawyers fretted over the problem and how to address it while failing to disclose it to regulators or the public," the incendiary report stated.
The investigation also highlighted that the company was ordered to pay $4.69 billion to 22 women and their families for risks related to this cancer-causing agent in their talc.
Analysts, while noting that the issue seems overblown given the massive share reaction, advised that it may take time for the marker to regain rationality on the long-term view for the iconic company.
"Talc does not seem to be an issue that is going to resolve quickly for JNJ and we would expect shares to trade at a lower multiple pending further clarity on the company's exposure to this issue, which could be an extended period of time," J.P Morgan analyst Chris Schott wrote following the report.
There are currently about 12,000 talc cases pending, up from about 9,000 earlier this year and about 5,000 a year ago. Such a trend coupled with a much publicized report could add to that trend-line risk.
Attempting to add clarity and nip the issue in the bud, the company has come out in force against the Reuters report, decrying its inaccuracy and faulty science.
"Johnson & Johnson's baby powder is safe and asbestos-free," the company said in a statement. "Studies of more than 100,000 men and women show that talc does not cause cancer or asbestos-related disease."
Additionally, the company highlighted its long history of testing and regulation that has worked to cement the company's reputation for safety.
"Thousands of independent tests by regulators and the world's leading labs prove our baby powder has never contained asbestos," the statement added, linking to an entire company website outlining a defense of its talc products.
The market appears to still be spooked on the risk as shares are set to open at their lowest level since July amid the Reuters article fallout.