The bad news stops with Israeli basic medicine producer Teva Pharmaceutical Industries (ticker: TEVA). Shares in the company were lower on Thursday after an analyst from Bank of America Merrill Lynch downgraded the company to Underperform from Buy and cited risks surrounding ongoing opioid lawsuits.
Teva had announced on the weekend that it would pay a $ 85 million settlement to the state of Oklahoma for an opioid trial, while not giving any offense. Since then, stock prices have fallen sharply. The Teva stock closed at $ 9.70 on May 29, down 10.8% from last Friday's closing.
"Opioid disputes have a broad timeline range, but many cases may be at 2021+," Bank of America Merrill Lynch analyst Jason Gerberry wrote in his note out Thursday. "Potential damage / settlement is difficult, if not impossible, to quantify as a very complex mass violation (about 2,000 lawsuits). While we see the recent Oklahoma settlement as potentially an outlier, TEVA will probably need several lawsuits to overcome investors' concerns . "
Teva did not immediately respond to a request for comment on the downgrade.
The background. Teva is one of the primary goals of a wave of legal claims directed at companies involved in the sale and distribution of opioids. The company said in a Form 10-K filed in February that it and its subsidiaries account for over 1,500 litigation related to opioid sales. Teva's Oklahoma settlement has raised concerns among some investors that the company could end up paying billions for legal matters.
The company stated in a settlement statement that it does not contribute to opioid abuse in Oklahoma and that settlement "does not create any offense on the part of the company."
On Wednesday, shares in
Johnson & Johnson
(JNJ) fell sharply over concerns about the company's opioid responsibility.
What's new. On Thursday, Gerberry joined the choir by analysts who were cold at Teva. In addition to dropping its rating two steps to underperforming Gerberry's price target of $ 9 from $ 19.
"Although we are not legal advisers, we believe TEVA has credible defenses in the opioid suits, but financial disadvantage is difficult to seize," he wrote.
He estimated Teva's potential total opioid exposure in billions of dollars. "We assume $ 4.5 billion in gross opioid trial exposure paid over 20 years (tobacco-like structure) that translates to $ 3 billion in present value," Gerberry wrote. "The ultimate size of the trial's exposure can be very significant, but we note that [Oklahoma] settlement provides the only estimate to anchor any projections."
Gerberry also expressed a lack of enthusiasm for Teva's key specialist brands and worried about authorizations for certain drugs in its generic pipeline.
Looking ahead. Attention is now directed to the ongoing opioid acts, where investors will gather more traces on how the trial will shake off. In Oklahoma this week, Johnson & Johnson is in court in the first major opioid case to go to court. Then, focus will fall on Ohio, where a federal judge monitors a wealth of combined opioid cases.
Meanwhile, Teva & # 39; s stock continues to slip. Stocks were down 28 cents, or 2.87% to $ 9.42, in the morning trading Thursday.
Write to Josh Nathan-Kazis at email@example.com