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Kenvue Inc. (NYSE: KVUE) is down over 25% from its debut earlier this year in May 2023. Formed from the separation of Johnson & Johnson’s Consumer Health business, the company was billed as the world’s largest pure-play consumer health company with annual revenues of over $15 billion from brands such as Tylenol, Neutrogena, Listerine, Aveeno, and Nicorette. While for many the investment thesis has yet to pan out, investors with losses stand to benefit from recent class action litigation seeking to recover investment losses.
In November 2021, Johnson & Johnson announced its plan to spin-off its Consumer Health business. Eighteen months later, Kevnue completed its initial public offering and began trading on the New York Stock Exchange under the ticker symbol “KVUE”. The initial public offering generated net proceeds of $4.2 billion and resulted in over 1.9 billion publicly-listed Kenvue shares. Johnson & Johnson, however, retained ownership of approximately 90% of those shares for several months. In August 2023, Johnson & Johnson released the shares to its shareholders through an exchange offer.
Kenvue’s initial public offering was underwritten by the largest banks on Wall Street, including the likes of Goldman Sachs, J.P. Morgan, Deutsche Bank, Citigroup, UBS, and so on. Analysts at many of these firms initiated coverage with enthusiasm. J.P. Morgan, for example, initiated at “overweight” with a price target of $29/share (i.e., $7/share over the $22/share initial public offering price). Their support for the stock was based primarily on an investment thesis that included top-line growth, expanding margins, strong cash flow, and experienced management.
Absent from the fanfare was any discussion of phenylephrine and the risks it posed to Kenvue in terms of adverse regulatory action. Phenylephrine is an active ingredient in many over-the-counter decongestant medications. Kenvue uses phenylephrine in a number of its products, including Sudafed PE, Benadryl Allergy Plus Congestion, and Tylenol Sinus + Headache. On September 12, 2023, the Nonprescription Drugs Advisory Committee of the U.S. Food and Drug Administration voted unanimously that phenylephrine was ineffective as a nasal decongestant when taken orally. This finding could result in the removal of several of Kenvue’s products from store shelves and, in turn, a substantial loss of revenue they would have otherwise generated for the company and its shareholders.
News of the FDA’s decision prompted an immediate sell-off in Kenvue shares adding to downward pressure already in the market from ongoing acetaminophen litigation. Investors who suffered investment losses because of the announcement are questioning why management did not provide more information in Kenvue’s initial public offering documents about the risks its reliance on phenylephrine had on company revenues. While the FDA has been evaluating the efficacy of phenylephrine for some years, Johnson & Johnson and Kenvue said nothing of it in the registration statement or prospectus they used to take the company public.
Kenvue now faces class action litigation for alleged violations of the federal securities laws. The class action complaint alleges that Kenvue and its management neglected to disclose material information concerning the risks arising from phenylephrine and the potential for adverse regulatory action. If the lawsuit is successful, investors could recover investment losses they incurred from their Kenvue shares. For those that paid top-dollar for the stock during the initial public offering, recovering these losses would undoubtedly improve their overall position given where the stock currently trades.
Kenvue shareholders that suffered losses are encouraged to learn more about how the class action lawsuit may benefit them and whether to seek to become a lead plaintiff representing the class of Kenvue shareholders.
Levi & Korsinsky, LLP is a leading plaintiffs’ law firm that has recovered billions of dollars for defrauded investors in global securities litigation. The firm is exclusively dedicated to fighting for aggrieved shareholders and consumers, and obtaining redress from those who have harmed them. With over 80 years of combined partner experience litigating complex securities actions and over 30 lawyers in five offices. The firm has a successful track record of protecting shareholder rights while setting ground-breaking precedent by tackling cases that require substantial resources, time and tenacity, thus resulting in greater investor recoveries.
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Joseph Levi
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