Kenvue's (KVUE) stocks are recovering some ground following a more than 7% loss in anticipation of US President Donald Trump's comments linking Tylenol, one of its main products, and autism. Despite stating that taking Tylenol during pregnancy is "not good," the administration clarified that there is no definitive causality between acetaminophen, the active compound in Tylenol, and autism. By Tuesday midday, Kenvue shares had reclaimed nearly 60% of their losses since the close of Friday. The rise could be due to investors anticipating stricter regulation of Tylenol in future.
Indeed, there are suggestions that investor's actions reflected a "buy the rumor, sell the news" strategy. Investors initially sold off stocks, causing the price to drop, but then bought in as the feared regulation of Tylenol failed to materialize in the way some feared. Some investors had been expecting an outright ban on Tylenol or tighter sales restrictions.
According to Citi, Tylenol contributes approximately 10% to Kenvue’s sales and brings in 12% to 15% of its operating profit. The self-care segment of Kenvue, which includes products like Tylenol, Motrin, and Benadryl, made up about 42% of the company’s total sales last fiscal year.
The administration has since stated they will update Tylenol's caution labels and run a public service campaign recommending pregnant women take the "lowest effective dose for the shortest duration" if they have a fever. On Tuesday, the Department of Health and Human Services confirmed the initiation of a "nationwide campaign." However, they have not released specific details of the planned label changes or the content of the public service push.
Kenvue voiced concern over the potential confusion caused by the administration's comments and the subsequent effect on pregnant women. They have pledged to reaffirm that expectant mothers consult with healthcare professionals before taking any over-the-counter medication.
Despite the recommendations from Health and Human Secretary or a push for reduced Tylenol consumption, Citi analysts see limited judicial risk. A 10% drop in Tylenol sales could, however, reduce Kenvue's profit by $40 million to $50 million. Overall, the controversy failed to make a significant impact on shares of pharmaceutical giant GSK PLC, despite the White House stating it would take steps to include one of GSK's drugs, leucovorin, in state Medicaid programs for those with autism.