In a recent turn of events, a Philadelphia court ordered multinational company Johnson & Johnson to pay an Indiana couple $28 million for damages related to their blood thinning drug Xarelto. This was in relation to internal bleeding problems that were caused by the drug for which the J&J didn’t warn its customers. However, the company will not be footing the bill alone, as Bayer was also partially responsible for the internal bleeding issue caused by the drug.
As mentioned, Xarelto is an anticoagulant drug by Bayer, which J&J has marketing rights to. While J&J initially launched the drug in 2011, the company cashed in a reported $2.3 billion from its sale by 2016, and just nine months later, in September 2017, it made an additional $1.8 billion for the company. Although the drug was launched into an already saturated market filled with similar drugs, it still managed to make up 7% of J&J’s revenue on pharma products. However, the judgment from this recent lawsuit has bearing on the company’s whole pharma portfolio moving forward.
What about the other Xarelto Lawsuit Cases?
Apart from the $28 million payout from this lawsuit, the Philadelphia court is waiting to hear an additional 1, 500 Xarelto cases which are currently pending. Not only that, but there are also 18,500 additional cases pending in federal court, whose outcome will have huge implications on the future of both companies. Although J&J and Bayer have won the previous three cases related to Xarelto, it’s unclear what will become of the pending cases, because after all the drug is FDA-approved. That said, both companies are bound to feel some type of financial pinch from these lawsuits, the possibility of which is what we’ll be exploring in this article.
Below we’ve got a chart that shows the worst case scenario of what would happen if the companies were to lose a certain percentage of these cases, and we’ve divided it into four possible categories; 10%, 15%, 25% and 35%.
For our calculation of the possible financial impact of these lawsuits, we used figures from the most recent ruling as an example, which means that we calculated the figures according to $26 million in punitive damages, and $1.8 million in compensatory damages. The chart demonstrates that a 10% loss could lead to a $3.6 billion cost for both companies. However, these figures are based on the recent ruling and are not necessarily indicative of what will actually happen.
In fact, J&J and Bayer may decide to emulate Boehringer Ingelheim’s example with its defective blood thinner Pradaxa. This German pharmaceutical behemoth paid a reported $650 million as an umbrella settlement for over 4,000 cases that were pending against the company in both federal and state courts in 2014. Following the same route, J&J and Bayer would end up paying out a combined umbrella settlement of $3.2 billion give or take to settle all outstanding cases.
Interesting note about J&J Xarelto Lawsuit Litigation
It’s interesting to note that J&J has had quite a tough time with litigation expenses in the last couple of years, as the company has reportedly paid out a whopping $806 million in 2016 alone, while they had paid out $141 million the previous year, and $1.25 billion the year before that. That said, these costs were associated with the medical devices division of the company only, so it still remains to be seen how the company will fair in light of the lawsuits it has piled up against its pharma product, Xarelto.
Generally, no one expects J&J’s valuation to suffer due to the Xarelto-related expenses and instead, both J&J and Bayer are set to request an appeal against the court’s recent ruling. Their chances may be favorable as well, seeing that the companies won the first three cases. Then there’s the fact that only 1,500 cases will be heard in Philadelphia, while the rest of the 20,000 plus cases are spread out in different jurisdictions and will be heard by different judges.