Johnson & Johnson CEO: No Asbestos In Our Baby Powder

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The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Johnson & Johnson (NYSE:JNJ) Chairman and CEO Alex Gorsky, and CNBC’s Jim Cramer on CNBC’s “Mad Money w/ Jim Cramer” (M-F 6PM – 7PM) today, Monday, December 17th. 

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'We unequivocally believe' our baby powder does not contain asbestos: Johnson & Johnson CEO from CNBC.

JIM CRAMER: On a downright ugly day for the averages, we have to take a closer look at a company that's facing a huge amount of negativity right now: Johnson & Johnson. Friday J&J stock sold off after investors reacted negativity to a Reuters investigation that reported some stunning allegations that J&J had known about the presence of asbestos in its baby powder for decades, and intentionally hid evidence. Since asbestos tends to cause cancer, that's really the last place you wanna find it. Stock lost 10% of its value Friday. Then it plunged another $3.86, or 2.9% today, maybe because of a New York Times article that came out this Saturday that was negative, too. All told, J&J has lost most than $50 billion in market capitalization since the story broke. So is this a $50 billion problem or has this story been blown way out of proportion? We know J&J's been adamant that the talc in their baby powder is perfectly safe, but we need to know more, including whether this issue can ever be put behind them. So let's take a closer look with Alex Gorsky, the Chairman and CEO of Johnson & Johnson, came here today to share the company side to this story. Mr. Gorsky, welcome back to Mad Money. Thank you, Alex.

ALEX GORSKY: Thank you, Jim.

JIM CRAMER: Have a seat. Okay, Alex, so I pick up a Reuters investigation. It says, "Special report: J&J knew for decades that asbestos lurked in its baby powder." And I gulped and I said, "Boy, I wanna know whether this thing's gonna last forever."

ALEX GORSKY: Well, Jim, thank you very much for having us here today, and-- and look, given all the allegations and some of the reports in the media, I think it's important as the CEO of Johnson & Johnson to be here to not only talk with your viewers, but actually all of our stakeholders.

JIM CRAMER: Well, thank you. And I give you the floor, because--

ALEX GORSKY: Well--

JIM CRAMER: -- I've just read in the last 72 hours pretty much some things about J&J that I actually don't wanna believe.

ALEX GORSKY: Well, I think it's good that I'm here to be able to clarify that and basically clear the record. What I'd first say is there's at least a couple of issues that have been alleged. The first one concerning baby powder and talc and asbestos, and is it related to cancer. And the second relates really to the actions of the company.

JIM CRAMER: Right.

ALEX GORSKY: If I take a few minutes on the first –

JIM CRAMER: You’ve got it.

ALEX GORSKY: Look, I would start by saying that we unequivocally believe that our talc, our baby powder, does not contain asbestos. And that's demonstrated in thousands of studies, studies not only conducted by Johnson & Johnson, but studies conducted by independent authorities, well-respected authorities, where we work closely with regulators who are overlooking the methodology. And, by the way, throughout this process we also not only used the best testing methodologies that were available, but we continued to improve them through the years. So that's really important to keep in mind. Now, the other important aspect is not only what are you doing to try to prevent things from getting into the talc or baby powder and ensure that it's pure, but also what actually happened when it was used by consumers. And here too, what the studies show-- and these studies, Jim, are independent. They're conducted by places like the Harvard Medical School and other bodies. Nearly 100,000 patients involving both men and women over decades. And what these clearly show is that there's no causation between talc, baby powder and ovarian cancer or any type of asbestos-related disease. Now, these studies, especially the-- some of the testing that was conducted by Johnson & Johnson employees, I can tell you not only are these scientists, engineers who studied this and have been trained on it, but these are also moms and dads. These are brothers and sisters that—I have to believe are looking out for what's in the best interests of patients that they serve each and every day. Now, the other portion, of course, is what were the company's actions like? And there's some allegations that maybe we weren't as forthcoming as we should have been.

JIM CRAMER: Right. Right--

ALEX GORSKY: Well, what's important to remember here, Jim, is that things-- these things go back to the 1960s, the 1970s, the 1980s. Even the Reuters author herself stated that over the past 15 years that there have been no issues related to asbestos and talc or baby powder that's being used. But even if we go back from the very beginning when we've had internal and external teams look at all the documents, what we have found is that they were transparent, they were open, they exchanged information with regulators. And if you remember, back in the '70s there was a pretty significant debate about asbestos and talc and baby--

JIM CRAMER: Right.

ALEX GORSKY: --powder. And the F.D.A. at that time confirmed that not only was the methodology and the testing that we were using the correct one, but they also agreed that our talc, our baby powder, did not contain asbestos.

JIM CRAMER: But Alex, the Reuters investigation says it didn't tell the agency that at least three tests from three different labs from 1972 to 1975 had found asbestos in its talc, including in one case at levels reported as rather high.

ALEX GORSKY: Well, Jim, what we found is-- and it's really important in all these cases as you're reviewing the documents is to look at all the information in totality. Especially when you're dealing with matters of science. And while there are documents that will refer to one testing methodology versus another, or an outcome, what we found is the outliers are either incomplete or, frankly, they're refutable based upon the methodology or the particular sample that they used. But if you look at the body of evidence of-- at-- on the whole, it's very clear that this talc was safe, as we-- as we stated. And look, the other--

JIM CRAMER: Right, right.

ALEX GORSKY: --really important dynamic to remember in this. And remember, this was occurring, again, you know, back in the 1970s--

JIM CRAMER: Right.

ALEX GORSKY: --1980s. This was during the same time when Johnson & Johnson has been recognized as removing Tylenol from the market when there was any kind of a safety issue, and that's the same company that was managing through this particular period of time. And I can't believe the company that took that dramatic of an action would allow a product that they felt in any way could be harmful to stay on the market.

JIM CRAMER: Well, is there any way that you should have known that there was something wrong? Or is it-- because what happens is in this, both this and The New York Times, They New York Times says that-- you know, that-- the article, Alex, starts with the concept there were two people in J&J who raised red flags.

ALEX GORSKY: Well, Jim, what take-- what's taken place is, first of all, let's go back to our data.

JIM CRAMER: Sure.

ALEX GORSKY: We believe the talc is safe. Okay? And studies-- that's not only what we believe, but it's what studies have demonstrated. But I think in a company like Johnson & Johnson, and at any company, you'd expect there would be dialogue. You'd expect there to be debate. And I-- and, frankly, that's healthy within an organization. But what's really important to focus is to not just select one document, one piece of evidence, but to look at the body of evidence in totality.

JIM CRAMER: Okay.

AALEX GORSKY: nd when you do that in this case, again, we remain very confident in the safety of our products, and, more importantly, in the actions of our people.

JIM CRAMER: Okay. One last and then we're gonna take a break. The Reuters person asserts that you decline-- your company declined to comment for the art-- for the article. On December 8th you offered to make an expert available, but you had not done so as of Thursday evening. For more than two months you turned down repeated requests for an interview with J&J execs.

ALEX GORSKY: Jim, that's simply not true.

JIM CRAMER: Not true.

ALEX GORSKY: We-- we-- we tried to engage in this. In fact, we provided a large amount of information. And our bigger concern is why wasn't a lot of this information that we talked about provided and talked about in a more open, more balanced and transparent way?

JIM CRAMER: All right. But let's take a break and we're gonna come back and talk about your $5 billion buyback that you announced after the bell, and what that says for where you think you are. That's Alex Gorsky. He’s Chairman and CEO of Johnson & Johnson. Mr. Gorsky will be back.

JIM CRAMER: We're here with Alex Gorsky, the Chairman and CEO of Johnson & Johnson to get his response to these explosive allegations of the presence of asbestos in the talc, or not the presence of asbestos in talc that goes into J&J's baby powder. We've read two critical stories in the last 72 hours, but it's important to learn the full story from the company itself, including how its pharmaceutical business is performing, and how the company's doing. And I'm gonna go right there for a second, Alex. Because after the bell you did something that a company tends not to do if they're really worried about their balance sheet. You announced a $5 billion buyback. Tell me about it.

ALEX GORSKY: Well, Jim, we did. We announced a $5 billion buyback this afternoon, and-- and frankly, it's a reflection of our confidence and our conviction with the company going forward. And while we're managing these issues, we could not be more excited about the future. If you look at the fundamental and underlying strength of our pharmaceutical sector, our medical device sector and our consumer sector, we think we're well positioned for growth going forward.

JIM CRAMER: Okay, now there are people watching at home who know that I have been recommending Johnson & Johnson ever since you became the CEO. I was not-- I-- candidly, I was not-- a big fan previously, but you have an AAA balance sheet. You've announced the buyback. But you did you lose a case in St. Louis for point-- that had $4.6 billion, 22 people, ovarian cancer, terrible disease. How are you confident enough that that AAA balance sheet and the $5 billion are the right thing to do, given the lawsuit?

ALEX GORSKY: Well, Jim, I think if we look and we step back and take a broader look at the more recent cases, really over the last 12, 18 or even 24 months, there's been about 40 in total. And about 35 of those have gone our way, either through decision and appeal-- okay, dismissal—and the five outstanding, those are also under appeal. So look, we are-- we're going-- you know, we're confident in going forward, and we think that, frankly, the science stands behind us. And-- and, you know, we're determined to make sure that we continue to protect the safety of our products.

JIM CRAMER: The-- the natural place, where I spent most of the time today, not the-- not the other stuff. There's been a whole weekend on this. What would-- how at the miners? Miners-- who mine talc would be the most exposed, presumably, to asbestos. Ratio of illness from asbestos, miners versus the rest of the population.

ALEX GORSKY: Right, Jim, what you're referring to is one of the trials I mentioned earlier that--

JIM CRAMER: Right.

ALEX GORSKY: --contributed to the 100,000. And-- and so in addition to patients who had actually been using talc and women and men that'd been--

JIM CRAMER: Right.

ALEX GORSKY: -- this actually was a cohort of miners and millers that worked in the mines. So they were exposed to a much greater degree of talc than ordinarily would be done. And after several retrospective studies and analyses, including just recently, what those found, again, is that there's no causation between what they're seeing in the talc that they were actually mining and cancer or asbestos-related disease.

JIM CRAMER: Now, if J&J had this happen to them this weekend-- to you, I have to believe that there were many people who read these articles who have ovarian cancer, and they called the lawyers. And you just got-- this was a-- they got a lot of plans from this, I bet. What happens?

ALEX GORSKY: Well, Jim, what I would say is, look, we always have empathy and sympathy for patients that have been diagnosed with cancer. And look, we're in the business of trying to cure cancer.

JIM CRAMER: Right.

ALEX GORSKY: And we-- we're working hard on multiple myeloma, lymphoma and other diseases--

JIM CRAMER: This is one of the reasons--

ALEX GORSKY: --to--

JIM CRAMER: --why I'm recommending you. You have--

ALEX GORSKY: --do just that.

JIM CRAMER: -- a fantastic cancer franchise.

ALEX GORSKY: Exactly. And look, patients, when they get that diagnosis, they're looking for reasons. We can understand that. But that's why it's so important to follow the science. And in this case, the science simply doesn't support some of these correlations that are being drawn.

JIM CRAMER: My friend Jeff Sonnenfeld was on today -- a Yale professor -- and he said, "What's interesting here is that if this scientific issue the company claimed, you would have had millions of cases of people coming down with these diseases, and not these unproven cases." That's Jeff. I mean it does raise the issue-- how many people have used baby powder? And-- it doesn't seem like it's been an explosion of cases.

ALEX GORSKY: Exactly. And the-- again, this is why we keep going back to the data. To these--

JIM CRAMER: Right.

ALEX GORSKY: --large controlled trials that really look at some of these underlying issues. And, frankly, we think we will prevail based upon that science.

JIM CRAMER: Now, at the same time, this is The New York Times. And-- and it is Reuters. The New York Times-- these are institutions that I trust. I trust J&J. How about the trust of J&J? And is it tarnished by these last 72 hours?

ALEX GORSKY: Well, there's nothing more important in our minds than the trust and integrity of Johnson & Johnson. And that's why I'm here today talking to you. What I can tell you is from all of the documents that have been reviewed, internally and externally, what I can tell you is we believe that the employees of Johnson & Johnson acted in a professional and in an appropriate way throughout this period.

JIM CRAMER: Okay. In The New York Times: "In one instance Johnson & Johnson demanded that the government block unfavorable findings from being made public. An executive only wanted assurances from an official at the F.D.A. that the findings would be issued, 'only over my dead body,' a memo summarizing the meeting said." That concerned me.

ALEX GORSKY: Well, Jim, in my over-25 years, almost 30 years in this industry, what I can tell you is I have tremendous respect for the F.D.A. Every day they look out for the health and wellbeing of all of the people in this country. And I don't see them as, you know, someone who's going to roll over easily regarding safety issues. They're truly trying to do what's best, and I'm sure there could be debate and engagement with them, but again, if you look at the records, the F.D.A. consistently approved our testing methodology, as well as the fact that our talc, our baby powder was safe.

JIM CRAMER: We saw in the Reuters article that there was-- a change in the way you worded-- whether you always knew it was safe or whether you knew it was safe. That concerned me too, because it seemed like that maybe you knew something was wrong and you didn't tell us.

ALEX GORSKY: Jim, let me be clear. Throughout the period being discussed in this article, the 1950s, '60s, '70s and '80s, and '90s, we are absolutely certain, based upon the data that we were talking about earlier. If you go earlier than that, okay, remember, this product has been on the market since the late 1800s. Obviously the testing methodologies were different at that time. And so that's why we changed the word “always” based upon-- you know, making sure that we were trying to be as accurate as possible.

JIM CRAMER: Why'd you come on here?

ALEX GORSKY: I came on here because I think it's important for your viewers, but, frankly, all of our stakeholders to ensure that they know every day the 140,000 employees of Johnson & Johnson around the world are doing their best to ensure the safety and high quality of our products and everything that we do. And we wanna make sure that our trust and integrity that we've earned over the last 130 years, is maintained for the next 130 years.

JIM CRAMER: And you volunteered to come on.

ALEX GORSKY: I did.

JIM CRAMER: Okay, fair enough. That's Alex Gorsky, Chairman and CEO of Johnson & Johnson. Mad Money is back after the break.

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