Paxton Blocks Tylenol Maker’s Shareholder Payout

Texas Attorney General Ken Paxton is seeking a legal ruling to prevent Kenvue, the producer of Tylenol, from distributing $400 million in dividends to its shareholders. This request comes in light of ongoing litigation against the company regarding concerns over Tylenol’s potential link to autism when taken during pregnancy.

Context of the Lawsuit

In a lawsuit filed last month, the state of Texas alleged that Kenvue did not adequately inform consumers about the risks associated with Tylenol. Notably, some medical associations assert that Paxton’s claims may overstate the scientific uncertainty surrounding this issue.

Legal Arguments

In a recent court filing, Paxton indicated that the funds intended for dividends might be necessary for covering the company’s potential legal liabilities if the state prevails in its case. Legal experts remark that intervention by the state to block dividend payments, especially at this early stage, is unusual.

State Laws on Dividend Payments

Texas law allows for this type of action in cases where companies face near insolvency, ensuring that funds are available for creditors. This legal approach is rare and typically requires substantial evidence.

Kenvue’s Response

Kenvue’s representatives responded by stating that they would take immediate legal measures to counter the state’s claims, asserting that the allegations are “scientifically unsound.” They highlighted concerns that such legal actions could adversely affect public health.

Recent Developments

This lawsuit emerges after U.S. Health Secretary Robert F. Kennedy Jr. announced impending changes to drug labels, advising against Tylenol use during pregnancy, citing possible autism risks. While some studies suggest a correlation, others argue that genetic factors may not support this link.

Political Implications

Paxton, who is challenging U.S. Senator John Cornyn in the Republican primary, has framed his opposition against pharmaceutical companies as a fight for public safety. He also aims to halt Kenvue’s advertisements promoting Tylenol as safe for pregnant women.

Impact on Kenvue

Kenvue’s stock has decreased by 30% since comments made by Trump and Kennedy regarding the potential risks of Tylenol. The company is also negotiating a $40 billion acquisition with Kimberly-Clark, and any disruption in dividend payments could impact its share price further.

Potential Outcomes

• If the court denies dividend payments, Kenvue may experience stock depreciation.
• Such a scenario could prompt the company to consider settling the lawsuit.

Judicial Considerations

The case will be adjudicated in Panola County, which has a population of about 22,000. The hearings will be presided over by Judge LeAnn Rafferty, a Republican with experience since 2016.

Future Steps

While an expedited hearing has been requested, no court date has been set. The state has engaged attorney Ashley Keller to manage this case and related lawsuits against Kenvue and its parent company, Johnson & Johnson.