JNJ’s stock trades at just about the same price it did a year ago. Many of its peers have done much better in the same timeframe: Merck is up more than 11%. Eli Lilly is up nearly 18%. Novo Nordisk is up more than 35%. And Pfizer is up more than 50%. Why? And despite its lackluster performance, most analysts appear to have buy or hold recommendations on JNJ. Why?
JNJ used a legal process, commonly referred to as a “Texas Two-Step,” to essentially create a “newco” in which it separated its talc (asbestos)-related liabilities. That newco, LTL Management LLC, then filed chapter 11 just about four months ago. A motion to dismiss the LTL chapter 11 as having been filed in bad faith is being heard this week (February 14th through February 18th).
You can read more about this in What’s Past is Prologue. We will also discuss it and whether we think it a stock to buy or sell in tomorrow’s edition of our Distressed Deal Data™ Newsletter. See a recent issue here. Subscribe here.