Johnson & Johnson reportedly selling its biggest plant in India over low demand

After facing lawsuits from 40,000 patients who allege that Johnson & Johnson’s talc-based baby powder causes cancer, the pharma giant announced plans to stop selling the product globally. This might hit its numbers in India, where J&J controls a 70 per cent market share in the baby powder segment. A month after losing its license to manufacture the talc in Maharashtra, Johnson & Johnson has sold its largest factory in India.

Selling off an unused asset?

The decision to sell the unit follows lower demand for its Johnson & Johson’s consumer products in the country, according to an Economic Times report. It has been acquired by Hetero in a slump sale, and the company will now spend Rs 600 crore on upgrading the plant to create 2000 jobs. The plant was hailed as a major foreign investment which would employ 1500 people when construction started in 2014, but had been lying dormant ever since it was completed in 2016.

What is a slump sale, and why is it done?

The transfer of business via slump sale is done without mentioning the value of individual assets and equipment, and payment is done as a lump sum. It’s usually done either to get rid of negative assets or to gain tax or compliance benefits. The financial details of the Telangana plant’s slump sale between Johnson & Johnson and Hetero aren’t available yet, although the payment in such cases is done in cash or via exchange of sharesand and bonds.

Controversy not a first for Johnson & Johnson

Although J&J maintains that its products are asbestos free, it will stop sourcing talc since the chemical may be found around mines. Instead the pharma giant will now be selling baby power which uses cornstarch as a base. Thousands of cancer patients who have sued Johnson & Johnson are currently demanding billions in compensation.

Apart from the baby powder, Johnson & Johnson has also been accused of fuelling the opioid crisis which kills one lakh people in US every year. It recently agreed to settle the matter by paying $26 billion.