Opioid settlement hopes spur rally

Relief seemed to be the main response to reports yesterday that producers of opioid drugs were close to settling claims against them. The sums involved are huge, with Johnson & Johnson alone reportedly agreeing to pay $4bn, but at least the saga could be coming to an end. That appeared to be the feeling on the markets yesterday at least, with J&J’s stock closing up 2%; other opioid makers including Mallinckrodt and Endo also rose. The news looks particularly good for Teva, which is said to have agreed to give away $15bn of generic drugs over 15 years. Bernstein analysts, who estimated such a deal would cost Teva $550m per year, argued that anything that could help the debt-ridden company avoid bankruptcy would represent a success; Purdue filed for bankruptcy last month. Teva's stock climbed 7% today although the company, which has set aside $646m for legal settlements, still has to contend with price-fixing allegations. But the rest of the industry will hope that it can draw a line under the opioid crisis and focus on the next big issue – drug pricing – ahead of next year’s US elections.

Stock moves in response to opioid settlement reports
Company Share price move
Endo 19%
Mallinckrodt 8%
Mckesson 5%
Amerisource Bergen 3%
Johnson & Johnson 2%
Cardinal Health 2%
Note: all calculated using closing price on Oct 16 vs Oct 15, 2019.

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