Kenvue's Evolving Risk Profile: Legal and Regulatory Challenges and Their Impact on Shareholder Value

The evolving risk profile of Kenvue Inc. (KVUE) has become a focal point for investors, as the company navigates a complex web of legal and regulatory challenges that threaten its long-term shareholder value. These risks, spanning securities fraud allegations, product liability lawsuits, and reputational damage, underscore the fragility of its business model in an increasingly litigious and scrutinized environment.

Securities Fraud and Regulatory Scrutiny: A Looming Shadow

Kenvue's legal troubles began to crystallize in 2023 with the U.S. Food and Drug Administration's (FDA) advisory panel ruling that orally administered phenylephrine-a key ingredient in nasal decongestants-was ineffective. This decision triggered a 4.5% drop in Kenvue's stock price and, according to a Monexa analysis, laid the groundwork for subsequent securities fraud claims. A federal court recently denied Kenvue and its former parent, Johnson & Johnson, a motion to dismiss a class-action lawsuit alleging that the company omitted material risks about the phenylephrine issue in its 2023 IPO documents. Analysts estimate that such legal liabilities could range from $500 million to $1.5 billion, representing a 1% to 3% reduction in Kenvue's market value of $41.16 billion, the Monexa analysis finds.

This regulatory uncertainty has compounded investor skepticism. An Invezz article notes that the FDA's nonbinding but influential advisory panels often shape market perceptions, even when final agency decisions remain pending. For Kenvue, the reputational damage from the phenylephrine controversy has been compounded by broader questions about its corporate governance, particularly during its spin-off from Johnson & Johnson.

Product Liability and Reputational Risks: The Tylenol Controversy

Kenvue's flagship Tylenol brand has also become a lightning rod for legal and reputational risks. In July 2025, former U.S. President Donald Trump publicly warned against using Tylenol during pregnancy, linking it to autism-a claim the FDA and global health agencies have since dismissed as lacking scientific evidence, according to the Monexa analysis. Despite these reassurances, the controversy sparked a wave of lawsuits from parents alleging that Tylenol caused neurodevelopmental disorders in their children. While analysts suggest the legal exposure is limited, the reputational fallout has been significant. Kenvue's stock plummeted by over 7% in the immediate aftermath of Trump's remarks before partially recovering in September 2025, as noted in industry coverage and market data.

The company's response has been defensive but measured. Kenvue has emphasized that independent studies have not established a causal link between acetaminophen (Tylenol's active ingredient) and autism, a point highlighted in the Monexa analysis. However, the incident highlights a broader vulnerability: consumer trust in over-the-counter (OTC) medications is increasingly fragile, and high-profile claims-regardless of scientific validity-can trigger market volatility.

Strategic Reforms and Shareholder Value: A Path Forward?

In an effort to stabilize its position, Kenvue has undertaken several strategic initiatives. In July 2025, the company announced the appointment of Kirk Perry as interim CEO, replacing Thibaut Mongon, and initiated a review of strategic alternatives, including portfolio divestitures, steps detailed in the Monexa analysis. These moves reflect a recognition that operational simplification and leadership continuity are critical to restoring investor confidence. Additionally, Kenvue has increased its quarterly dividend by 2.5% in Q3 2025, signaling a commitment to returning capital to shareholders, according to the Monexa analysis.

The board has also strengthened governance by adding five new independent directors, a step aimed at addressing concerns about oversight during the spin-off process noted in the Monexa analysis. However, these measures may not fully offset the financial and reputational costs of ongoing litigation. Goldman Sachs estimates that Kenvue's legal liabilities could erode between 1% and 3% of its market value over the next 12 months, a range the Monexa analysis echoes and that could widen if regulatory scrutiny intensifies or new lawsuits emerge.

Conclusion: Balancing Risks and Resilience

Kenvue's current risk profile is a testament to the challenges facing OTC drug manufacturers in an era of heightened regulatory and legal scrutiny. While the company has taken steps to address governance gaps and operational inefficiencies, the unresolved legal battles and reputational damage pose a significant threat to its long-term value. Investors must weigh these risks against Kenvue's strategic reforms and its ability to adapt to a shifting regulatory landscape. For now, the path to value creation remains uncertain, with the stock's volatility serving as a barometer of investor sentiment in the face of evolving challenges.