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Nov. 26, 2019, 7:09 a.m. EST

Shares of generic drugmakers rise on hope that legal issues are nearing an end

Mallinckrodt’s stock rallied 15% in morning trading, while shares of Teva Pharmaceutical Industries rose 5%

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By Jaimy Lee


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Shares of generic drugmakers jumped Monday as speculation mounted about a series of legal settlements potentially nearing a resolution.

Mallinckrodt’s /zigman2/quotes/209283217/lastsale MNK -6.74%  stock rallied 15%, while shares of Teva Pharmaceutical Industries Ltd. /zigman2/quotes/205657894/lastsale TEVA -4.13%  rose 5%. Mylan /zigman2/quotes/209413137/lastsale MYL -2.38%  and Endo International /zigman2/quotes/207745412/lastsale ENDP +0.65%  were up 4%.

Read: Stocks of generic drug companies fall after more than 40 states file suit alleging price fixing

Bloomberg reported that sources have said Teva and other drugmakers, including Sun Pharmaceutical Industries, are in talks with the Department of Justice to resolve allegations of price-fixing in the generics sector. In May, the Justice Department amended a civil antitrust complaint to include 20 manufacturers for allegedly coordinating pricing for 100 generic drugs. This follows a 2016 suit in which Heritage Pharmaceuticals was charged with conspiring with other generic drugmakers to fix prices. A deferred prosecution agreement resolved that charge.

Separately, drugmakers like Johnson & Johnson /zigman2/quotes/201724570/lastsale JNJ +3.37% and Teva and drug wholesalers including AmersourceBergen /zigman2/quotes/201066379/lastsale ABC -2.71% , Cardinal Health /zigman2/quotes/206646342/lastsale CAH -2.70% , and McKesson /zigman2/quotes/206975466/lastsale MCK -2.90% that marketed or distributed opioids are watching to see how a proposed global settlement to resolve pending and future allegations plays out. Attorneys general in four states announced the settlement framework in October. It’s unclear whether or not other states that are also suing these companies will join the settlement.

See also: Teva shares rise as company offers reassurance on former flagship drug Copaxone

Analysts have largely viewed the settlement in principle as a positive, despite concerns about not having the full picture. “If the existing framework does get adopted, that will be major relief for Teva,” Evercore ISI analyst Umer Raffat wrote earlier this month.

“While shares have been battered by excessive likelihood assigned to headline litigation events, predominantly opioid-related liabilities at this juncture, additional clarity emerged during the quarter around global settlement framework (that) alludes that more than $10 billion decline in equity value over the past six months is perhaps overdone,” Raymond James’ Elliot Wilbur wrote, about Teva.

Read: Prescription drug prices aren’t rising — they’re falling for the first time in 47 years

But there are still some concerns. On Mallinckrodt, “we are maintaining our Hold rating given uncertainly with respect to potential opioid liability,” SunTrust Robinson Humphrey’s Gregg Gilbert wrote Nov. 11.

SVB Leerink analysts predict the global settlement will be reached within the next four months. “We could also see read-through for other opioid-levered names like Endo and Mallinckrodt,” the analysts wrote in a Nov. 24 note.

/zigman2/quotes/209283217/lastsale
US : U.S.: NYSE
$ 1.80
-0.13 -6.74%
Volume: 4.67M
April 2, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$162.52 million
Rev. per Employee
$869,081
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/zigman2/quotes/205657894/lastsale
US : U.S.: NYSE
$ 8.12
-0.35 -4.13%
Volume: 20.33M
April 2, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$9.25 billion
Rev. per Employee
$441,818
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/zigman2/quotes/209413137/lastsale
US : U.S.: Nasdaq
$ 13.92
-0.34 -2.38%
Volume: 7.66M
April 2, 2020 4:00p
P/E Ratio
508.03
Dividend Yield
N/A
Market Cap
$7.36 billion
Rev. per Employee
$326,506
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/zigman2/quotes/207745412/lastsale
US : U.S.: Nasdaq
$ 3.09
+0.02 +0.65%
Volume: 2.88M
April 2, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$696.38 million
Rev. per Employee
$1.01M
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/zigman2/quotes/201724570/lastsale
US : U.S.: NYSE
$ 133.15
+4.34 +3.37%
Volume: 11.59M
April 2, 2020 6:30p
P/E Ratio
23.65
Dividend Yield
2.85%
Market Cap
$339.59 billion
Rev. per Employee
$603,509
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/zigman2/quotes/201066379/lastsale
US : U.S.: NYSE
$ 83.89
-2.34 -2.71%
Volume: 2.57M
April 2, 2020 6:30p
P/E Ratio
27.09
Dividend Yield
2.00%
Market Cap
$17.75 billion
Rev. per Employee
$8.23M
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/zigman2/quotes/206646342/lastsale
US : U.S.: NYSE
$ 46.42
-1.29 -2.70%
Volume: 3.27M
April 2, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
4.14%
Market Cap
$13.92 billion
Rev. per Employee
$2.83M
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/zigman2/quotes/206975466/lastsale
US : U.S.: NYSE
$ 129.20
-3.86 -2.90%
Volume: 2.93M
April 2, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
1.27%
Market Cap
$23.56 billion
Rev. per Employee
$2.74M
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Jaimy Lee is a health-care reporter for MarketWatch. She is based in New York.

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