Johnson & Johnson makes stock after asbestos-related baby powder recall

Shares of Johnson & Johnson incurred another blow Friday related to product safety, as consumer product giant's recall of some baby powder – after tests revealed traces of asbestos – comes despite the company's repeated assurances about its safety.

stock

JNJ, -5.89%

fell 5.5% in active afternoon trading, which put it on track to suffer the biggest one-day fall of 10 months. The volume topped 18.2 million shares, well more than double the full-day average of around 7.1[ads1] million shares.

The sale was enough to make the stock the largest loser in the SPDR Health Care Select Sector exchange traded fund

XLV, -0.16%

and the second largest miner in the Dow Jones Industrial Average

DJIA, -0.74%

behind 6.5% sales in Boeing Co.

BA, -6.49%

shares. The $ 7.43 price drop shaved about 50 points off the Dow price, which was down 209 points.

J&J said it recalled a "single batch" of Johnson's Baby Powder, "by a plethora of caution," after a US Food and Drug Administration test found "sub-trace levels" of chrysotile asbestos. The company said the contamination, which was no greater than 0.00002%, was found in samples from a single bottle purchased from an unnamed online store.

"In parallel, [Johnson & Johnson Consumer Inc.] (JJCI) has immediately initiated a rigorous, thorough investigation into this matter, working with the FDA to determine the integrity of the test being tested, and the validity of the test results," said JJCI in a statement. [19659002] The J&J emphasized that "at this early stage" of investigation, JJCI cannot confirm whether the product being tested was authentic or counterfeit, or whether the sample was taken from a sealed bottle or if cross-contamination from another product was causing a false

The company's alleged skepticism about the FDA's findings comes as J&J faces more than 14,000 lawsuits alleging that baby powder and talcum products cause cancer, while the company strongly denies such allegations.

Last year, a St. Louis jury ruled that the new company had to pay $ 4.7 billion to 22 women and their families who said the baby powder gave them ovarian cancer.

And on December 14, J & J's shares dropped 1 0%, and was the largest one-day percentage decline over 18 years, after Reuters reported that the company knew for decades that the baby powder was contaminated with asbestos. The company said at the time that the Reuters report was "fake and inflammatory," and that the baby powder was "safe and asbestos-free."

J&J continues to deny the allegations. On Friday, the company said in a statement:

"JJCI has a rigorous testing standard in place to ensure its cosmetic talcum is safe and many years of testing, including the FDA's own testing on previous occasions – and as late as last year month – No asbestos found. Thousands of tests over the last 40 years repeatedly confirm that our consumer pallets do not contain asbestos. "

Analyst Damien Conover of Morningstar said although the recall increases uncertainty around J & J's product management, it does not change his bullish attitude toward the company as he does not expect baby powder litigation to have a major impact on consumer product brands.

"[M] some of the company's brands are marketed under different names, so any brand damage done to baby powder is unlikely to be transferred to other company brands," Conover wrote in a note to clients. "We also expect J&J to pull out all the stops to support the Baby Powder brand, which should mitigate brand damage as the company has a successful track record of defending brands."

Conover actually raised the stock to fair value at $ 134 from $ 130, citing increased estimates for the company's late-stage medical pipeline drugs.

Meanwhile, the recall is the latest setback for J&J converting product safety, when the company was ordered earlier this month by a Philadelphia jury to pay $ 8 billion to a Maryland man who said using the company's antipsychotic Risperdal as a child enlarged breasts. The company also faces several claims about its role in fueling the opioid crisis.

Don't miss : Major drug distributors in talks to settle $ 18 billion opioid lawsuits.

J & J's shares have gone 0.2% so far, while the healthcare ETF has gained 6.2% and Dow industrials has climbed 15.0%.