Teva Pharmaceutical Industries
stock were down Monday morning after a Morgan Stanley analyst downgraded them both, citing the ongoing litigation over prescription opioid sales.
The analyst, David Risinger, singled out Teva (ticker: TEVA) and Endo (ENDP) as most exposed to risk from the opioid litigation among similar generic drugmakers, because both marketed branded opioids, and carry significant debt.
“TEVA and ENDP face both generic and branded opioid litigation risk, and the exposure to promoting branded opioids could potentially yield greater litigation risk than generic pure-plays,” Risinger wrote.
Risinger downgraded Endo to Underweight from Equal-weight, slashing his price target to $3 from $8. The analyst also lowered the rating on Teva to Underweight from Equal-weight, dropping his price target to $6 from $16.
Neither Teva nor Endo immediately responded to requests for comment about the downgrades.
The back story. Teva and Endo are among the drugmakers and pharmaceutical suppliers targeted by thousands of lawsuits related to the opioid crisis. Endo stopped promoting opioids to doctors in 2016, and stopped selling its branded opioid, Opana ER. Teva in May agreed to pay $85 million to settle a lawsuit from the state of Oklahoma. Both companies are defendants in the federal mutli-district litigation ongoing in Ohio.
What’s new. In his note out Monday, Risinger laid out the challenges facing Endo, Teva, and their rivals. In addition to the opioid litigation, Risinger highlighted low generic-drug prices, a trend that seems to not be reversing, despite hopes earlier this year that it was.
He noted that Endo and Teva’s past sales of branded opioids now puts them at particular risk in the ongoing opioid litigation. Endo sold Opana ER and Percocent, while Teva sold Fentora and Actiq.
And he wrote that the litigation has, so far, been expensive, citing Reckitt’s $1.4 billion opioid settlement with the federal government last week.
Endo stock jumped on July 1 after the company disclosed it had taken out a $300 million loan. Endo told an analyst that the loan would “provide additional flexibility and strategic optionality,” but the company did not respond to our query if the loan was taken to pay for an opioid settlement.
Looking forward. Endo stock was down 11 cents, or 2.8%, to $3.98 in Monday morning trading while Teva stock was getting the worse of it, sliding 75 cents, or 8.1%, to $8.50.
Opioid litigation could drag on for years, but investors can expect more clarity this fall, after so-called bellwether lawsuits begin in the multidistrict litigation in Ohio, which are intended as a step toward a global settlement of opioid claims.
Write to Josh Nathan-Kazis at firstname.lastname@example.org