Teva Pharmaceutical agrees to opioid settlement, and forecasts return to growth

Teva Pharmaceutical (NYSE:TEVA) agreed to a settlement in a major lawsuit for its role in the opioid crisis — sending its stock up 28%.

Opioids — used as painkillers — were initially prescribed in extreme cases, but over the past few decades, companies began pushing usage in more applications.

Tsunami of lawsuits

Big pharma made billions in profits which may have cost thousands of lives. Between 1999-2020, 564,000 Americans have died from opioid use — rising by 80,000 in 2021 alone.

Since 2014, thousands of lawsuits have racked up against big pharma companies.

• They were accused of profiting from the opioid crisis with misleading marketing tactics.
• Docs showed that companies knew addiction and abuse were higher than portrayed.

Several drugmakers and pharmacy chains, including Johnson & Johnson, McKesson and Walgreens, have settled cases in recent years — amounting to over $26B — leaving Teva as the last holding out until yesterday.

Teva wants to put lawsuits behind them

Teva — the largest manufacturer of generic drugs — announced a $4.25B proposed settlement paid over 13 years to state, local and tribal governments. The settlement isn’t finalized and Teva will pay out a portion in donated drugs.

Although Teva’s opioid drugs are a small portion of its business, the lawsuits placed significant pressure on Teva — who’s trading at a substantial discount to other pharma companies.

In 2015, $TEVA fell over 90% in the following four years over a range of issues, including:

• Drug pricing: Politicians focused in on rising drug prices by introducing legislation to reduce prices.
• Opioid in focus: In 2014, U.S. life expectancy began declining after decades of growth — with opioids linked to the decline.

Investors: Return to growth

Teva makes cheaper generics for original drugs whose 20-year patents have expired. According to its CEO, nearly $400B in drugs are coming off patent in the next decade — and Teva has over a thousand projects that can cover 80% of those drugs.

• Teva expects to return to growth after sales steadily declined from $21.9B to $15.9B over the past five years.
• But Teva’s $20B debt balance — which has fallen from $34B in 2017 — prevents it from making big moves, per its CEO.

The lawsuit could be a long-awaited turning point for Teva.