Shortly after Environment Canada issued a warning against the use of Johnson & Johnson’s talc-based baby powder, citing health concerns, the publication of a Reuters special report claiming that the company knew for decades that there could be traces of asbestos in baby powder has rattled the market further.

J&J shares initially fell 9% on the news. The company called the Reuters report "one-sided, false and inflammatory” as well as accusing the writers of promoting a “conspiracy theory.”

Reuters, which based its story on what it said was “a review of documents and testimony,” asserted that from 1971 to the early 2000s J&J executives and its mine managers, doctors and lawyers were aware that the company's raw talc and finished powders sometimes tested positive for small amounts of asbestos.

While stressing that most of the company’s internal reports it reviewed did not find asbestos, the news agency said that, despite improvements in testing methods over time, the tests have consistently had limitations that allow trace contaminants to go undetected.

“Only a tiny fraction” of the talc is actually tested, Reuters contended, saying also that those who discussed the problem internally did not disclose it to regulators or to the public.

In a statement, the largest US consumer health care company said Reuters had ignored the fact that “thousands of tests by J&J, regulators, leading independent labs and academic institutions have repeatedly shown that our talc does not contain asbestos.”

J&J claimed also that the journalists ignored the fact that the company “has “cooperated fully and openly with the US Food and Drug Administration (FDA) and other global regulators, providing them with all the information they requested over decades.”

What’s more, J&J said it has made its cosmetic talc mines and processed talc  products available for testing by regulators, “who have always found our talc to be asbestos-free.”

According to a regulatory filing, the New Jersey-based healthcare giant is currently facing 11,700 lawsuits related to the powder – many of them from women or families of women who claim it caused their ovarian cancer. Among other legal challenges, J&J has suggested it will appeal a US jury’s award of nearly $4.7 billion to 22 women in a class action suit last July.

At least one analyst called the stock plunge an “overreaction,” especially as the company’s financial exposure to the talc legal risk probably would not come close to the roughly $40 billion in market capitalization J&J lost in a single day on Dec. 14.

In a note to clients, J.P. Morgan analyst Chris Schott acknowledged, however, that the share is likely to trade at a lower multiple over an extended period of time, pending further clarity on the company's exposure to the issue.

According to reports, J&J has also faced nearly 54,000 lawsuits against its pelvic mesh for allegedly causing injuries and complications. Analysts have estimated its total liability here at around $5 billion.