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>>> Teva and J&J Stocks Were Hit by Opioid Worries. What Could Come Next.


Barrons

By Josh Nathan-Kazis

June 7, 2019


https://www.barrons.com/articles/how-the-opioid-litigation-against-drug-companies-could-play-out-51559914560?siteid=yhoof2&yptr=yahoo


Shareholders of Teva Pharmaceutical Industries (ticker: TEVA) and Johnson & Johnson (JNJ) recently received a jolt on news from an opioid case in Oklahoma.

Teva agreed to pay $85 million to a settle a lawsuit brought by the state that accused the company of helping fuel the opioid crisis. In the same case, Johnson & Johnson is now on trial. Shares of the two companies tumbled.

With the Oklahoma case, investors are beginning to weigh the likelihood of large-scale payouts from health care companies over the opioid epidemic. Teva has denied any wrongdoing; J&J says that its marketing and promotion of opioid medications were “appropriate and responsible” and that the allegations against it are baseless.

The one to watch is U.S. District Judge Dan Polster in Ohio. He is pushing for a settlement, possibly in the next few months, that could sweep in more than a thousand separate opioid lawsuits. Experts say that Polster hopes to reach a settlement before the fall, and some think he just might succeed.

The judge “made very clear from the beginning this is a national public health emergency, trials are not the answer, the legislatures have punted to him, and they’ve got to settle,” says Abbe Gluck, a professor of law at Yale Law School and the faculty director of the Solomon Center for Health Law and Policy.

State, local, and tribal governments, along with some individual plaintiffs, have brought roughly 2,000 cases against companies that have produced, sold, and distributed opioids in recent years. “These defendants cannot litigate 2,000 cases,” Gluck notes. “It can’t happen in anybody’s lifetime.”

Instead, federal courts have embarked on a complex process known as a multidistrict litigation, which combined more than a thousand cases in an effort to reach an overarching settlement. The settlement could even sweep in the hundreds of cases still in the state courts that have not been consolidated in the multidistrict litigation.

With the parties so far unable to reach an agreement, Polster also set in motion a handful of trials, the first of which is set to begin in October. These are known as “bellwether” trials; designed to gauge the strengths of the parties’ arguments as they continue to work toward settlements.

Exactly how a global opioid settlement will shake out is a harder, if not impossible, question. “You’re dealing here with multiple layers of causation and liability,” says Andrew Pollis, a professor of law at Case Western University.

Still, some analysts have made their own guesses about liabilities. UBS analyst Navin Jacob wrote on May 28 that Teva could be on the hook for anywhere from $154 million to $4.25 billion, and downgraded the company to Neutral from Buy.

Oppenheimer analyst Esther Rajavelu has estimated that Teva would end up paying $500 million to $700 million nationally. But she argues that the recent selloff “creates an opportunity for a long-term holder to get into the stock.”

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